Ordonez v. Air Serv
MEMORANDUM DECISION AND ORDER refusing to adopt 134 Report and Recommendations, and granting 95 Defendant Air Serv's Motion for Summary Judgment on judicial estoppel grounds. Plaintiff's claims against Air Serv are dismissed in their entirety. After Magistrate Judge Furse rules on the pending Motion for Reconsideration of Order on Sanction, the court will enter Judgment in favor of Air Serv. Signed by Judge Dale A. Kimball on 10/30/2017. (eat)
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
AIR SERV CORPORATION,
MEMORANDUM DECISION AND
ORDER OVERRULING REPORT &
GRANTING SUMMARY JUDGMENT
Case No. 2:13CV67DAK
Judge Dale A. Kimball
This case was referred to Magistrate Judge Evelyn Furse under 28 U.S.C. § 636(b)(1)(B).
On September 8, 2017, Magistrate Judge Furse issued a Report and Recommendation,
recommending that the court deny Defendant’s Motion for Summary Judgment because the
equities of the matter disfavor a finding that judicial estoppel bars Ordonez’s claims. Magistrate
Judge Furse did not address Air Serv’s remaining claims for summary judgment. On September
22, 2017, Air Serv objected to the Report and Recommendation. Plaintiff did not file a reply.
However, the time for doing so has passed and the court considers the matter fully briefed.
A Magistrate Judge’s Report and Recommendation is subject to de novo review by this
court. See 28 U.S.C. § 636(b)(1)(B); see also Fed. R. Civ. P. 72(b). The court has reviewed the
record de novo with respect to the present motion.
The parties do not dispute that Ordonez failed to disclose her claims against Air Serv in a
personal bankruptcy she filed in 2010 while her administrative charge against Air Serv was
pending with the EEOC. Ordonez’s debts were fully discharged on October 14, 2011, and the
Bankruptcy Court closed Ordonez’s bankruptcy case in 2014. In re: Sonia Ordonez, case 1037596.
Three months after Air Serv filed its motion for summary judgment on judicial estoppel
grounds, Ordonez petitioned to reopen her bankruptcy case. On July 27, 2017, the Bankruptcy
Court reopened the case. Since that time, Ordonez had not amended any of her bankruptcy
filings and has filed a motion to convert her bankruptcy from Chapter 7 to Chapter 13. This
conversion will prevent the Chapter 7 bankruptcy trustee from realizing value through the claims
in this case and from paying the proceeds to creditors.
As Magistrate Judge Furse recognized, judicial estoppel “‘protect[s] the integrity of the
judicial process’ by ‘prohibiting parties from deliberately changing positions according to the
exigencies of the moment’ . . . . [and] ‘prevent[s] improper use of judicial machinery.’” New
Hampshire v. Maine, 532 U.S. 742, 749-50 (2001). The Tenth Circuit has identified three factors
for courts to consider when deciding whether to apply judicial estoppel:
First, a party’s subsequent position must be “clearly inconsistent” with its former
position. Next a court should inquire whether the suspect party succeeded in
persuading a court to accept that party’s former position, “so that judicial
acceptance of an inconsistent position in a later proceeding would create the
perception that either the first or the second court was misled.” Finally the court
should inquire whether the party seeking to assert an inconsistent position would
gain an unfair advantage in the litigation if not estopped.
Eastman v. Union Pac. R. Co., 493 F.3d 1151, 1156 (10th Cir. 2007) (citation omitted). A court
may find inadvertence or mistake when “the debtor either lacks knowledge of the undisclosed
claims or has no motive for their concealment.” Id. at 1157. However, “[w]here a debtor has
both knowledge of the claims and a motive to conceal them, courts routinely, albeit at time sub
silentio, infer deliberate manipulation.” Id.
The court agrees with Magistrate Judge Furse’s findings that Ordonez adopted an
inconsistent position before the bankruptcy court when she represented that she did not have any
administrative claims and that Ordonez succeeded in persuading the bankruptcy Court to adopt
her position when it proceeded to discharge her debts without knowledge of her administrative
claim against Air Serv.
However, the court disagrees with the finding that Ordonez would not gain an unfair
advantage if not estopped from pursuing her action against Air Serv because she has reopened
her bankruptcy. Ordonez filed her EEOC claims and knew of their existence at the time of her
bankruptcy. Even if she did not understand the full import of their legal significance, she knew
of their existence. It is generally recognized that bankruptcy filers, like Ordonez, have a motive
to sweep pending or potential claims under the rug in order to “obtain a discharge free and clear.”
Id. at 1157. “[I]t was to their benefit to conceal the claim so that they could receive a full
discharge in bankruptcy before proceeding with the lawsuit, because this would allow them to
pursue an award for damages without the risk that any of the award would go to their creditors.”
Queen v. TA Operating, LLC, 734 F.3d 1081 (10th Cir. 2013).
Tenth Circuit precedent holds that a party should not be allowed to “back up and benefit
from the reopening of [her] bankruptcy only after [her] omission had been exposed.” Eastman,
493 F.3d at 1160. If a party could do so, it “would suggest  that a debtor should consider
disclosing potential assets only if he is caught concealing them. This so-called remedy would
only diminish the necessary incentive to provide the bankruptcy court with a truthful disclosure
of the debtor’s assets.” Id. The purpose of judicial estoppel in these circumstances is to prevent
“a perception that the bankruptcy court was misled.” Queen, 734 F.3d at 1091.
The Report and Recommendation cites to Hanley v. Trizetto Corp., No. 13-CV-01667KLM, 2014 WL 4212719, at *1 (D. Colo. Aug. 26, 2014) in support of its conclusion that
Ordonez did not have a motive to conceal her EEOC claim, did not have knowledge of her
obligation to disclose her claim to the Bankruptcy Court, and that the equities in the case weigh
against judicial estoppel. However, there are striking difference between this case and Hanley.
In Hanley, the plaintiff sought to reopen her bankruptcy before the defendant raised the issue and
the plaintiff entered into an agreement with the bankruptcy trustee to pay $25,000 into the estate
at the time of the agreement and to forfeit ten percent of her net recovery to the estate in
exchange for the right to pursue the lawsuit.
In this case, Ordonez did not attempt to reopen her bankruptcy until after Air Serv
exposed her misrepresentations, she did not amend her bankruptcy filings, and she moved to
convert her Chapter 7 case to a Chapter 13 case, which will harm rather than help her creditors.
Plaintiff has not done anything like the plaintiff in Hanley to work out an agreement with the
bankruptcy trustee. Rather, Ordonez continues to take actions to receive the maximum potential
benefit. These actions demonstrate her knowledge and understanding of the system as well as
her motives for taking such actions throughout the proceedings. The court cannot excuse such
conduct merely because Ordonez is a pro se litigant. The court concludes that Tenth Circuit
precedent directs the application of judicial estoppel in this type of case.
Based on the above reasoning, the court refuses to adopt the Report and Recommendation
and grants Defendant Air Serv’s motion for summary judgment on judicial estoppel grounds.
Plaintiff’s claims against Air Serv are dismissed in their entirety. After Magistrate Judge Furse
rules on the pending Motion for Reconsideration of Order on Sanction, the court will enter
Judgment in favor of Air Serv.
DATED this 30th day of October, 2017.
BY THE COURT:
DALE A. KIMBALL
United States District Judge
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