Quin v. Cnty. of Kauai Dep't of Transp.

• Citation: 733 F.3d 267
• Decision Date: 24 July 2013
• Docket Number: No. 10–16000.,10–16000.
• Parties: Kathleen M. AH QUIN, Plaintiff–Appellant, v. COUNTY OF KAUAI DEPARTMENT OF TRANSPORTATION, Defendant–Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

733 F.3d 267

Kathleen M. AH QUIN, Plaintiff–Appellant,

v.COUNTY OF KAUAI DEPARTMENT OF TRANSPORTATION, Defendant–Appellee.

No. 10–16000.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 12, 2013.

Filed July 24, 2013.

William H. Burgess (argued) and Dominic E. Draye, Kirkland & Ellis LLP, Washington, D.C., for Plaintiff–Appellant.

Barbara A. Petrus (argued), Shannon H. Sagum, and Jordan M. Odo, Goodsill Anderson Quinn & Stifel LLP, Honolulu, HI, for Defendant–Appellee.

Appeal from the United States District Court for the District of Hawaii, Barry M. Kurren, Magistrate Judge, Presiding. D.C. No. 1:08–cv–00507–BMK.

Before: SUSAN P. GRABER, JAY S. BYBEE, and MORGAN CHRISTEN, Circuit Judges.

Opinion by Judge GRABER; Dissent by Judge BYBEE.

OPINION

GRABER, Circuit Judge:

Plaintiff Kathleen M. Ah Quin contends that her employer, Defendant County of Kauai Department of Transportation, discriminated against her because she is a woman. While pursuing this action, however, Plaintiff filed for Chapter 7 bankruptcy protection and initially failed to list this action in her bankruptcy schedules. The district court held that judicial estoppel prohibits her from proceeding and, therefore, granted summary judgment to Defendant. We hold that the district court applied the wrong legal standard in determining whether Plaintiff's bankruptcy omission was “mistaken” or “inadvertent.” Accordingly, we vacate the judgment and remand for further proceedings.

FACTUAL AND PROCEDURAL HISTORY

Plaintiff initiated this employment-discrimination action on November 10, 2008. She alleges that, because of her gender, Defendant reduced her work hours and denied her full-time status, in violation of various discrimination statutes and under the common law. On December 18, 2009, the district court denied Defendant's motion for summary judgment on the merits. The court scheduled the case for a jury trial in April 2010.

Meanwhile, Plaintiff had obtained bankruptcy protection. Represented by a different lawyer than her lawyer in this case, Plaintiff filed for Chapter 7 bankruptcy on April 4, 2009. A debtor must list all pending lawsuits in the bankruptcy schedules, but Plaintiff checked the box “None” next to this line item: “List all suits and administrative proceedings to which the debtor is or was a party within one year immediately preceding the filing of this bankruptcy case.” (Emphasis omitted.) At a bankruptcy hearing, Plaintiff testified that she had listed all of her assets and that the answers in her petition and schedules are “true and correct.” She did not mention this pending action. During a colloquy concerning her husband's losing his job, Plaintiff responded to a question about whether she had a claim by saying: “No. No.” ¹ On September 1, 2009, the bankruptcy court issued an order of discharge and closed the case.

At some point, Plaintiff's lawyer in this case became aware of the potential effect of Plaintiff's bankruptcy proceeding. At a settlement conference on December 21, 2009, Plaintiff's lawyer informed Defendant of Plaintiff's bankruptcy filing.

On December 29, 2009, Defendant wrote a letter to the district court setting forth the position that it could move to dismiss the action under the doctrine of judicial estoppel. The next day, the district court vacated all dates and deadlines, and it scheduled a status conference for January 14, 2010.

On January 13, 2010, Plaintiff moved to reopen her bankruptcy case and to set aside the discharge. The motion, accompanied by declarations from her bankruptcy lawyer's staff and from Plaintiff, explained that Plaintiff had never disclosed the pending lawsuit to her bankruptcy lawyer or his staff and that Plaintiff's failure to list the lawsuit as an asset stemmed from Plaintiff's misunderstanding of what she was required to do. The bankruptcy court reopened the case the same day. Plaintiff amended her bankruptcy schedules to list this pending claim as an asset.

On February 10, 2010, Defendant filed a motion for summary judgment in the discrimination action, on the ground that judicial estoppel prohibits Plaintiff from proceeding. The district court agreed and granted summary judgment in an order dated April 1, 2010. Plaintiff timely appeals.

On June 20, 2010, the bankruptcy trustee filed a report that abandoned the trustee's interest in the pending discrimination action. Plaintiff's unsecured creditors did not object to that action by the trustee. On July 21, 2010, the bankruptcy court closed the reopened case.

STANDARDS OF REVIEW

We review de novo a grant of summary judgment. Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir.2001). We review “the district court's application of the doctrine of judicial estoppel to the facts of [a] case for an abuse of discretion.” Id. “The district court ... necessarily abuses its discretion when it bases its decision on an erroneous legal standard....” Farris v. Seabrook, 677 F.3d 858, 864 (9th Cir.2012) (internal quotation marks omitted).

DISCUSSION

“[J]udicial estoppel is an equitable doctrine invoked by a court at its discretion.” New Hampshire v. Maine, 532 U.S. 742, 750, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001) (internal quotation marks omitted). “[I]ts purpose is to protect the integrity of the judicial process by prohibiting parties from deliberately changing positions according to the exigencies of the moment.” Id. at 749–50, 121 S.Ct. 1808 (citation and internal quotation marks omitted).

Although judicial estoppel is “probably not reducible to any general formulation of principle, ... several factors typically inform the decision whether to apply the doctrine in a particular case.” Id. at 750, 121 S.Ct. 1808 (citations and internal quotation marks omitted). “First, a party's later position must be ‘clearly inconsistent’ with its earlier position.” Id. “Second, courts regularly inquire whether the party has succeeded in persuading a court to accept that party's earlier 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.” Id. (internal quotation marks omitted). “A third consideration is whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.” Id. at 751, 121 S.Ct. 1808. “In enumerating these factors, we do not establish inflexible prerequisites or an exhaustive formula for determining the applicability of judicial estoppel. Additional considerations may inform the doctrine's application in specific factual contexts.” Id.

In the bankruptcy context, the federal courts have developed a basic default rule: If a plaintiff-debtor omits a pending (or soon-to-be-filed) lawsuit from the bankruptcy schedules and obtains a discharge (or plan confirmation), judicial estoppel bars the action. See, e.g., Payless Wholesale Distribs., Inc. v. Alberto Culver (P.R.) Inc., 989 F.2d 570, 571 (1st Cir.1993) (“Conceal your claims; get rid of your creditors on the cheap, and start over with a bundle of rights. This is a palpable fraud that the court will not tolerate, even passively.”); Hay v. First Interstate Bank of Kalispell, N.A., 978 F.2d 555, 557 (9th Cir.1992) (holding that “[f]ailure to give the required notice [to the bankruptcy court] estops [the plaintiff-debtor] and justifies the grant of summary judgment to the defendants”). The reason is that the plaintiff-debtor represented in the bankruptcy case that no claim existed, so he or she is estopped from representing in the lawsuit that a claim does exist. That basic rule comports fully with the Supreme Court's decision in New Hampshire: (1) the positions are clearly inconsistent (“a claim does not exist” vs. “a claim does exist”); (2) the plaintiff-debtor succeeded in getting the first court (the bankruptcy court) to accept the first position; and (3) the plaintiff-debtor obtained an unfair advantage (discharge or plan confirmation without allowing the creditors to learn of the pending lawsuit). The general rule also comports fully with the policy reasons underlying the doctrine of judicial estoppel: to prevent litigants from playing “fast and loose” with the courts and to protect the integrity of the judicial system. New Hampshire, 532 U.S. at 749–50, 121 S.Ct. 1808.

Of particular relevance here, though, the Supreme Court held in New Hampshire, that “it may be appropriate to resist application of judicial estoppel when a party's prior position was based on inadvertence or mistake.” 532 U.S. at 753, 121 S.Ct. 1808 (internal quotation marks omitted). We have not addressed the effect of an inadvertent or mistaken omission from a bankruptcy filing, but several of our sister circuits have. Eastman v. Union Pac. R.R. Co., 493 F.3d 1151, 1157 (10th Cir.2007); Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1286–87 (11th Cir.2002); Browning v. Levy, 283 F.3d 761, 776 (6th Cir.2002); Browning Mfg. v. Mims (In re Coastal Plains, Inc.), 179 F.3d 197, 206 (5th Cir.1999). Those courts generally have interpreted this factor narrowly. The courts have asked not whether the debtor's omission of the pending claim from the bankruptcy schedules was inadvertent or mistaken; instead, they have asked only whether the debtor knew about the claim when he or she filed the bankruptcy schedules and whether the debtor had a motive to conceal the claim. See, e.g., Eastman, 493 F.3d at 1157 (“Where a debtor has both knowledge of the claims and a motive to conceal them, courts routinely, albeit at times sub silentio, infer deliberate manipulation.”). This interpretation of “inadvertence” is narrow in part because the motive to conceal claims from the bankruptcy court is, as several courts have explained, nearly always present. Jethroe v. Omnova Solutions, Inc., 412 F.3d 598, 601 (5th Cir.2005); Coastal Plains, 179 F.3d at 212–13.

Here, the district court applied that...