Flores-Febus et al v. MVM, Inc. et al

Filing 94

MEMORANDUM AND ORDER re 49 Motion for Summary Judgment; and re 85 Motion to Strike. The Court GRANTS MVM's motion for summary judgment on judicial estoppel grounds; plaintiffs' action is DISMISSED WITH PREJUDICE. Judgment shall be ent ered accordingly. The Pretrial Conference and Evidentiary Hearing scheduled for September 26, 2014 and the trial scheduled to commence on October 14, 2014 are set aside. Because the Court dismisses plaintiffs' complaint on judicial estoppel grounds, it does not consider the exhibits that plaintiffs seek to strike. Accordingly, the motion to strike (Docket No. 85.) is DENIED as moot. Signed by Judge Francisco A. Besosa on 09/23/2014. (brc)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
WANDA FLORES-FEBUS, et al.,
Plaintiffs,
CIVIL NO. 13-1391 (FAB)

v.
MVM, INC., et al.,
Defendants.

MEMORANDUM & ORDER
BESOSA, District Judge.
Before the Court is defendant MVM, Inc. (“MVM”)’s motion for
summary judgment (Docket No. 49), which the Court GRANTS for the
reasons articulated below.1
I.

Summary Judgment Standard
Summary judgment serves to assess the evidence and determine

if there is a genuine need for trial.
895 F.2d 46, 50 (1st Cir. 1990).

Garside v. Osco Drug, Inc.,
The Court may enter summary

judgment “if the movant shows that there is no genuine dispute as
to any material fact and the movant is entitled to judgment as a
matter of law.”

Fed. R. Civ. P. 56(a).

A fact is “material” if it

has the potential to “affect the suit’s outcome.”

Cortes-Irizarry

v. Corporacion Insular de Seguros, 111 F.3d 184, 187 (1st Cir.

1

Also pending before the Court is a motion to strike filed by
plaintiffs Wanda Flores-Febus (“Flores”) and Antonio Polo-Diaz
(“Polo”).
(Docket No. 85.)
Because the Court dismisses
plaintiffs’ complaint on judicial estoppel grounds, it does not
consider the exhibits that plaintiffs seek to strike. Accordingly,
the motion to strike is DENIED as moot.

Civil No. 13-1391 (FAB)
1997).

2

A dispute is “genuine” when it “could be resolved in favor

of either party.”

Calero–Cerezo v. U.S. Dep’t. of Justice, 355

F.3d 6, 19 (1st Cir. 2004).

The party moving for summary judgment

has the initial burden of “demonstrat[ing] the absence of a genuine
issue of material fact” with definite and competent evidence.
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Maldonado-Denis
v. Castillo-Rodriguez, 23 F.3d 576, 581 (1st Cir. 1994).

It must

identify “portions of ‘the pleadings, depositions, answers to
interrogatories,

and

admissions

on

file,

affidavits, if any’” which support its motion.
at 323 (citing Fed. R. Civ. P. 56(c)).

together

with

the

Celotex, 477 U.S.

Once a properly supported

motion has been presented, the burden shifts to the non-moving
party “to demonstrate that a trier of fact reasonably could find in
[its] favor.”

Santiago-Ramos v. Centennial P.R. Wireless Corp.,

217 F.3d 46, 52 (1st Cir. 2000) (internal citation omitted).

In

making this assessment, the Court must construe the entire record
in the light most favorable to the non-moving party and draw all
reasonable inferences in its favor.

Farmers Ins. Exch. v. RNK,

Inc., 632 F.3d 777, 779-80 (1st Cir. 2011).
II.

Material Facts
On April 12, 2013, plaintiffs filed suit against MVM in the

Puerto Rico Court of First Instance alleging gender- and pregnancybased employment discrimination and retaliation in violation of
Puerto Rico Laws 100, 69, 3, and 115 (P.R. Laws Ann. tit. 29

Civil No. 13-1391 (FAB)

3

§§ 147, 1321, 469, & 194), and seeking general damages pursuant to
article 1802 of the Puerto Rico Civil Code (P.R. Laws Ann. tit. 31
§ 5141).

(Docket No. 1-3, translation at Docket No. 7-1.)

MVM

removed the case to this Court on May 17, 2013, based on diversity
jurisdiction, 28 U.S.C. § 1332.

(Docket No. 1.)

The parties do not dispute the following facts, which the
Court construes in the light most favorable to plaintiffs’ claims.
See Farmers Ins. Exch., 632 F.3d at 779-80.

On August 14, 2012,

Flores filed a charge against MVM before the Equal Employment
Opportunity Commission (“EEOC”). (Docket No. 49-35.) On January 31,
2013, Flores filed for Chapter 13 bankruptcy before the United
States Bankruptcy Court for the District of Puerto Rico.
No. 49-36.)

(Docket

Flores did not include her EEOC claim against MVM in

the schedules attached to her bankruptcy petition. (Docket No. 4937.)

On April 9, 2013, the bankruptcy court confirmed Flores’s

bankruptcy plan.

(Docket No. 49-39.)

Flores submitted an Amended

Statement of Financial Affairs on August 29, 2013, and did not list
her lawsuit against MVM.

(Docket No. 49-38).

III. Discussion
MVM
judgment.

advances

three

arguments

(Docket No. 50.)

in

its

motion

for

summary

Because the Court grants summary

judgment based on MVM’s first argument — judicial estoppel — it
declines to address the remaining grounds.

Civil No. 13-1391 (FAB)
A.

4

Judicial Estoppel and Choice of Law
Because Flores failed to include her claims against MVM

in her bankruptcy schedules, MVM contends that she is judicially
estopped from pursuing the claims here.
10.)

(Docket No. 50 at pp. 7-

Plaintiffs do not contest that Flores did not include her

claims against MVM as part of her bankruptcy estate, nor do they
advance any reasons that would explain her failure to do so.
(Docket No. 70.)

Instead, plaintiffs argue that because the Court

has diversity jurisdiction over this case, and because questions of
judicial estoppel are substantive in nature, the Court must apply
Puerto Rico law to determine whether judicial estoppel applies.
Plaintiffs also argue that judicial estoppel should not be applied
in cases involving Chapter 13, rather than Chapter 7, bankruptcy
proceedings, citing an order of the Puerto Rico Supreme Court. Id.
at p. 15 (citing Corraliza v. Banco de Desarrollo Economico, 153
D.P.R. 161 (2001)).

Civil No. 13-1391 (FAB)

5

The Court is unpersuaded by plaintiffs’ argument for two
reasons.2

First, Corraliza, which plaintiffs rely on, is a Puerto

Rico Supreme Court order, not an opinion.

Puerto Rico Supreme

Court orders carries persuasive, but not precedential, weight. See
Calderon-Ortega v. United States, 753 F.3d 250, 254 n.3 (1st Cir.
2014) (“[E]ven though a judgment of the Puerto Rico Supreme Court
(as opposed to an opinion) does not constitute binding authority,
its rationale nonetheless may have intrinsically persuasive force
and may be relied upon to that extent.”) (citing Rivera Maldonado
v. Estado Libre Asociado, 19 P.R. Offic. Trans. 88, 95 (1987)).
Thus, plaintiffs offer no binding support for their position that
Puerto Rico law governs.
Second, while the First Circuit Court of Appeals has not
ruled specifically on the issue, every other federal appellate

2

To the extent plaintiffs argue that judicial estoppel
applies in Chapter 7 but not Chapter 13 bankruptcies, the Court is
unpersuaded. Rather, the Court adopts the reasoning of federal
appellate courts that have expressly addressed the question,
holding that the doctrine applies equally to Chapter 13
bankruptcies “because the need for complete and honest disclosure
exists in all types of bankruptcies.” De Leon v. Comcar Indus.,
Inc., 321 F.3d 1289, 1291 (11th Cir. 2003). See also Love v. Tyson
Foods, Inc., 677 F.3d 258 (5th Cir. 2012) (affirming dismissal of
suit based on judicial estoppel where Chapter 13 debtor failed to
include EEOC claim in bankruptcy schedules); Robinson v. Tyson
Foods, Inc., 595 F.3d 1269 (11th Cir. 2010) (applying judicial
estoppel to dismiss claims where plaintiff failed to list
previously filed EEOC claim on Chapter 13 bankruptcy schedules);
Lewis v. Weyerhaeuser Co., 141 F. App’x. 420 (6th Cir. 2005)
(judicial estoppel applied to bar former employee from pursuing
Title VII claims against former employer where former employee
failed to disclose cause of action in Chapter 13 bankruptcy case).

Civil No. 13-1391 (FAB)

6

court to have considered the question has held that the application
of judicial estoppel in diversity cases implicates a “strong
federal policy” warranting reference to federal, rather than state,
principles.

Eastman v. Union Pac. R.R. Co., 493 F.3d 1151, 1156

(10th Cir. 2007) (applying federal principles of judicial estoppel
to plaintiff’s supplemental state law claims); Hall v. GE Plastic
Pac. PTE Ltd., 327 F.3d 391, 395 (5th Cir. 2003) (holding pursuant
to

Erie

R.R.

v.

Tompkins,

304

U.S.

64

(1938),

that

federal

principles of judicial estoppel apply in diversity cases); G-I
Holdings, Inc. v. Reliance Ins. Co., 586 F.3d 247, 261 (3d Cir.
2009) (same); Ogden Martin Sys. of Indianapolis v. Whitting Corp.,
179 F.3d 523, 527 n.1 (7th Cir. 1999) (same); Rissetto v. Plumbers
& Steamfitters Local 343, 94 F.3d 597, 603-04 (9th Cir. 1996)
(same); Guinness PLC v. Ward, 955 F.2d 875, 899 n.20 (4th Cir.
1992) (same); Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 598 n.4
(6th Cir. 1982) (same).

Similarly, the First Circuit Court of

Appeals has assumed, based on the parties’ briefings, that federal
law governs the application of judicial estoppel, see Perry v.
Blum, 629 F.3d 1, 8 (1st Cir. 2010);

Alt. Sys. Concepts, Inc. v.

Synopsys, Inc., 374 F.3d 23, 32 (1st Cir. 2004), and has noted that
the court “would likely reach this same conclusion even without the
parties’ acquiescent behavior.”
at 32.

Alt. Sys. Concepts, 374 F.3d

The court of appeals explained that federal courts have

long been permitted to “bypass conflicting state rules of decision

Civil No. 13-1391 (FAB)

7

in favor of federal standards when positive considerations, such as
the presence of a strong federal policy, militate in favor of
employing federal standards.”

Id. (internal citation omitted).

Those considerations are present in cases, such as this one, where
“both the putatively estopping conduct and the putatively estopped
conduct occur in a federal case.”

Id.

Thus, in keeping with the

weight of federal precedent and dicta on this issue, the Court
holds that federal standards govern the application of judicial
estoppel in diversity cases.
B.

Application
Judicial estoppel is an equitable doctrine that “operates

to prevent a litigant from taking a litigation position that is
inconsistent with a litigation position successfully asserted by
[him or her] in an earlier phase of the same case or in an earlier
court proceeding.”

Perry, 629 F.3d at 8 (citing Global NAPs, Inc.

v. Verizon New Eng., Inc., 603 F.3d 71, 91 (1st Cir. 2010)).

The

doctrine serves to protect the integrity of the judicial process
and prevent

litigants

from playing

“fast

and

loose

with the

courts.” Perry, 629 F.3d at 8 (internal citations omitted). While
there

is

no

applicability,

mechanical
courts

test

widely

for

determining

agree

that,

“at

the
a

doctrine’s

minimum,

two

conditions must be satisfied before judicial estoppel can attach.”
Alt. Sys. Concepts, 374 F.3d at 33.

First, the two positions taken

by the litigant must be directly inconsistent with one another.

Civil No. 13-1391 (FAB)
Id.

8

Second, the party against whom estoppel is sought must have

successfully persuaded a court to accept its earlier position. Id.
(internal citations omitted).
not require, a third factor:

Courts frequently consider, but do
whether the party asserting the

inconsistent positions could derive an unfair advantage if not
estopped.

Id.
Here, both elements of judicial estoppel are met. First,

Flores asserted a position in bankruptcy court — she was not a
party to any lawsuit or administrative proceeding within the year
preceding the filing of her amended financial statement (Docket
No. 49-38 at p. 3) — that is directly inconsistent with the
existence of her current claims against MVM. Pursuant to the rules
governing the bankruptcy proceeding, Flores had an obligation to
disclose all assets, including legal claims and potential claims,
to the bankruptcy court.

11 U.S.C. §§ 521(a), 541(a)(7). See also

Guay v. Burack, 677 F.3d 10, 17 (1st Cir. 2012) (quoting Moses v.
Howard Univ. Hosp., 606 F.3d 789, 793 (D.C. Cir. 2010) (“[A] debtor
is under a duty both to disclose the existence of pending lawsuits
when [he or she] files a petition in bankruptcy and to amend [his
or her] petition if the circumstances change during the course of
the bankruptcy.”)).

At the time Flores filed for bankruptcy on

January 31, 2013, her EEOC claim against MVM had been pending for
over five months.

Yet Flores did not disclose her claim on her

initial bankruptcy schedules.

(Docket No. 49-37 at p. 2.)

Three

Civil No. 13-1391 (FAB)

9

days after Flores’s bankruptcy plan was confirmed by the bankruptcy
court on April 9, 2013, she filed this action against MVM.

Again,

Flores failed to amend her bankruptcy schedules to reflect the
pending lawsuit.

Flores had a chance to do so on August 29, 2013,

when Flores submitted an Amended Statement of Financial Affairs
that

specifically

administrative

sought

disclosure

proceedings,

of

executions,

all

“[s]uits

garnishments

and
and

attachments” to which she was or had been a party within one year
preceding the filing of the bankruptcy case.
p. 3.)

(Docket No. 49-38 at

Flores included information regarding an eviction and a

debt collection proceeding responsive to that question, but she did
not include her pending lawsuit against MVM.

Id.

To date, Flores

has not amended her bankruptcy schedules to include this pending
lawsuit.

Flores’s bankruptcy schedules are plainly inconsistent

with her current claims against MVM.

Flores represented to the

bankruptcy court that she had no pending or potential legal claims,
while pursuing first administrative and then legal claims against
MVM.

“These

inconsistent.”

actions,

both

taken

under

oath,

are

clearly

Guay, 677 F.3d at 18 (quoting Robinson, 595 F.3d

at 1275).
As to the second element, when a bankruptcy court grants
a debtor relief or adopts a bankruptcy plan, it “accepts” a
litigant’s position “taken in the form of omissions from bankruptcy
schedules.”

Guay, 677 F.3d at 18.

When the bankruptcy court

Civil No. 13-1391 (FAB)
confirmed

Flores’s

plan

10
on

April

9,

2013,

it

accepted

her

disclosures and omissions — namely, that she had no pending or
potential claims against MVM.
Having determined that the two elements required for the
application of judicial estoppel are met here, the Court now turns
to the informal element of unfair advantage.

The Court considers

this factor in light of the advantage the litigant may have gained
in either the bankruptcy court or this Court.
at 19.

See Guay, 677 F.3d

The First Circuit Court of Appeals has noted that “[a]

long-standing tenet of bankruptcy law requires one seeking benefits
under its terms to satisfy a companion duty to schedule, for the
benefit of creditors, all his [or her] interests and property
rights.” Payless Wholesale Distrib., Inc. v. Alberto Culver, Inc.,
989 F.2d 570, 571 (1st Cir. 1993) (quoting Oneida Motor Freight,
Inc. v. United Jersey Bank, 848 F.2d 414, 416 (3d Cir. 1988)).
Flores’s failure to disclose her claims against MVM decreased her
bankruptcy estate and therefore bestowed an unfair advantage upon
her before the bankruptcy court.

As a result, the Court finds that

this last informal element also favors application of judicial
estoppel in this case.
For these reasons, plaintiffs are judicially estopped
from bringing claims against MVM that Flores failed to disclose in
her prior bankruptcy proceeding.

Civil No. 13-1391 (FAB)
IV.

11

Conclusion
For the reasons articulated above, the Court GRANTS MVM’s

motion for summary judgment on judicial estoppel grounds (Docket
No. 49); plaintiffs’ action is DISMISSED WITH PREJUDICE.

Judgment

shall be entered accordingly.
The Pretrial Conference and Evidentiary Hearing scheduled for
September

26,

2014

and

the

trial

scheduled

to

commence

on

October 14, 2014 are set aside.
IT IS SO ORDERED.
San Juan, Puerto Rico, September 23, 2014.
s/ Francisco A. Besosa
FRANCISCO A. BESOSA
UNITED STATES DISTRICT JUDGE