Allen v. C & H Distribs., L.L.C.

• Decision Date: 23 December 2015
• Docket Number: No. 15–30330.,15–30330.
• Citation: 813 F.3d 566
• Parties: Helen C. ALLEN; Robert E. Allen, Plaintiffs–Appellants v. C & H Distributors, L.L.C.; KK America Corporation ; Travelers Property Casualty Company of America; Ergocraft Contract Solutions; Great American Insurance Company, Defendants–Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

813 F.3d 566

Helen C. ALLEN; Robert E. Allen, Plaintiffs–Appellants

v.C & H Distributors, L.L.C.; KK America Corporation ; Travelers Property Casualty Company of America; Ergocraft Contract Solutions; Great American Insurance Company, Defendants–Appellees.

No. 15–30330.

United States Court of Appeals, Fifth Circuit.

Dec. 23, 2015.

David Turansky (argued), Law Office of David Turansky, L.L.C., Shreveport, LA, for Plaintiffs–Appellants.

Donald J. Armand, Jr. (argued), Attorney, Pettiette, Armand, Dunkelman, Woodley, Byrd & Cromwell, L.L.P., Kenneth E. Mascagni, Cook, Yancey, King & Galloway, A.P.L.C., Roger Joseph Naus (argued), Michael Allyn Stroud, Wiener, Weiss & Madison, A.P.C., Shreveport, LA, for Defendants–Appellees.

Harvetta Strozier–Colvin, Assistant Attorney General, Shreveport, LA, for Amicus Curiae.

Before STEWART, Chief Judge, and KING and HIGGINSON, Circuit Judges.

KING, Circuit Judge:

Plaintiffs–Appellants Helen and Robert Allen filed a personal injury suit against Defendants for alleged workplace injuries to Helen Allen. Defendants moved for summary judgment, contending that the suit should be barred by judicial estoppel because the Allens failed to disclose the personal injury claim during their concurrent Chapter 13 bankruptcy proceeding. The district court granted the motion for summary judgment, and the Allens appeal. As modified herein, we AFFIRM the judgment of the district court.

I. FACTUAL AND PROCEDURAL BACKGROUND

On July 14, 2009, Robert and Helen Allen filed for Chapter 13 bankruptcy. The bankruptcy court confirmed the original Chapter 13 Plan (the Plan) on September 29, 2009. In the nearly five years that the bankruptcy court administered the Allens' bankruptcy, the Allens amended the Plan three times, first on January 11, 2011, then on December 19, 2011, and finally on January 17, 2013. On April 21, 2014, the bankruptcy court closed the Allens' Chapter 13 bankruptcy case without discharge because the Allens failed to file required documentation showing that they had completed an instructional course on personal financial management.

On October 21, 2010, the Allens filed an unrelated personal injury suit against C & H Distributors, K + K America Corporation, Ergocraft, Inc., and Travelers Property Casualty Company of America (Defendants¹ ) in the United States District Court for the Western District of Louisiana, invoking that court's diversity jurisdiction. The suit alleged that one year earlier, on October 21, 2009, Helen Allen was seriously and permanently injured at her work when the stool she was sitting on broke apart. This incident occurred after the initial confirmation of the Plan but before all three amendments to the Plan. Trial in the personal injury suit was ultimately set for September 15, 2014.

On February 9, 2011, the State of Louisiana moved for leave to intervene in the personal injury suit because it had made workers' compensation payments to Helen Allen. The district court denied the State's motion to intervene, noting that allowing the State to intervene as a party would destroy the court's diversity jurisdiction.² Because the case could not be remanded to state court and dismissal of the case would raise a timeliness issue,³ the district court suggested that the State and the Allens "reach an arrangement by which the State's worker[s'] compensation interest will be protected without the need for the State to formally intervene in this case." On November 15, 2011, the Allens and the State filed a joint stipulation with the district court, detailing how the State would be reimbursed for its workers' compensation payments from any judgment or settlement the Allens' received in the suit.

On September 2, 2014, Defendants moved for leave to file a late supplemental motion for summary judgment in the personal injury suit. Defendants contended that on August 29, 2014, they first learned of the Allens' Chapter 13 bankruptcy proceeding. However, the Allens failed to disclose the existence of the prior bankruptcy in response to interrogatories. The district court granted Defendants leave to file, and Defendants subsequently moved for summary judgment, contending that the Allens' personal injury claim was barred by judicial estoppel because the Allens had never disclosed the personal injury suit to the bankruptcy court. On December 3, 2014, the Allens moved to strike the supplemental motion for summary judgment, contending that counsel for Ergocraft had acknowledged that he knew of the Allens' bankruptcy as early as March 28, 2012, even though Defendants alleged in their motion that they had first learned of the bankruptcy case on August 29, 2014.

On March 26, 2015, the district court granted Defendants' supplemental motion for summary judgment, finding that judicial estoppel barred the Allens from pursuing their personal injury claim. Accordingly, the court dismissed the Allens' claims with prejudice. The court noted, however, that the dismissal was without prejudice "to the rights of a Chapter 7 trustee to pursue the claims if the Allens' bankruptcy case is reopened and converted to a Chapter 7 liquidation." The district court also denied the Allens' motion to strike. The Allens timely appealed the district court's final judgment and the denial of their motion to strike.⁴

II. STANDARD OF REVIEW

"We review a grant of summary judgment de novo, applying the same standard as the district court."

Buffalo Marine Servs. Inc. v. United States, 663 F.3d 750, 753 (5th Cir.2011). "But, because ‘judicial estoppel is an equitable doctrine, and the decision whether to invoke it [is] within the court's discretion, we review for abuse of discretion’ the lower court's decision to invoke [this doctrine]." Kane v. Nat'l Union Fire Ins. Co., 535 F.3d 380, 384 (5th Cir.2008) (quoting Browning Mfg. v. Mims (In re Coastal Plains, Inc.), 179 F.3d 197, 205 (5th Cir.1999) ). "A district court abuses its discretion if it: (1) relies on clearly erroneous factual findings; (2) relies on erroneous conclusions of law; or (3) misapplies the law to the facts." McClure v. Ashcroft, 335 F.3d 404, 408 (5th Cir.2003) ; accord Love v. Tyson Foods, Inc., 677 F.3d 258, 262 (5th Cir.2012).

III. JUDICIAL ESTOPPEL

"Judicial estoppel is a common law doctrine that prevents a party from assuming inconsistent positions in litigation." Superior Crewboats Inc. v. Primary P & I Underwriters (In re Superior Crewboats, Inc.), 374 F.3d 330, 334 (5th Cir.2004) ; accord 18 Moore's Federal Practice § 134.30 (3d ed. 2015). The doctrine's purpose "is ‘to protect the integrity of the judicial process', by ‘prevent[ing] parties from playing fast and loose with the courts to suit the exigencies of self interest.’ " In re Coastal Plains, Inc., 179 F.3d at 205 (quoting Brandon v. Interfirst Corp., 858 F.2d 266, 268 (5th Cir.1988) ). "Judicial estoppel has three elements: (1) The party against whom it is sought has asserted a legal position that is plainly inconsistent with a prior position; (2) a court accepted the prior position; and (3) the party did not act inadvertently." Flugence v. Axis Surplus Ins. Co. (In re Flugence), 738 F.3d 126, 129 (5th Cir.2013). We address each of those elements in turn and find that each element is satisfied in this case.

A. Inconsistent Legal Position

The first element of judicial estoppel requires that a party "assert[ ] a legal position that is plainly inconsistent with a prior position." Id. As we have previously recognized, "Chapter 13 debtors have a continuing obligation to disclose post-petition causes of action." Id. Moreover, "debtors have a duty to disclose to the bankruptcy court" whether post-confirmation assets are treated as property of the estate or vested in the debtor. See id. at 130 (noting that this duty is "notwithstanding uncertainty"). This is because "[w]hether a particular asset should be available to satisfy creditors is often a contested issue, and the debtor's duty to disclose assets—even where he has a colorable theory for why those assets should be shielded from creditors—allows that issue to be decided as part of the orderly bankruptcy process." Id. Here, the Allens never disclosed the existence of their personal injury suit to the bankruptcy court, even though they amended the Plan three separate times after filing the personal injury suit. "Because [the Allens] had an affirmative duty to disclose [their] personal-injury claim to the bankruptcy court and did not do so, [they] impliedly represented that [they] had no such claim." Id.; see also In re Superior Crewboats, Inc., 374 F.3d at 335 ("[T]he [debtors'] omission of the personal injury claim from their mandatory bankruptcy filings is tantamount to a representation that no such claim existed."). Thus, "[s]uch blatant inconsistency readily satisfies the first prong of the judicial estoppel inquiry." In re Superior Crewboats, Inc., 374 F.3d at 335.

B. Judicial Acceptance

The second element of judicial estoppel, judicial acceptance, is also satisfied in this case. The judicial acceptance element "ensures that judicial estoppel is only applied in situations where the integrity of the judiciary is jeopardized." Wells Fargo Bank, N.A. v. Oparaji (In re Oparaji), 698 F.3d 231, 237 (5th Cir.2012). "Absent judicial acceptance of the inconsistent position, application of the rule is unwarranted because no risk of inconsistent results exists." Id. (quoting Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 599 (6th Cir.1982) ).⁵ However, judicial acceptance "does not require a formal judgment; rather, it only requires ‘that the first court has adopted the position urged by the party, either as a preliminary matter or as part of a final disposition.’ " In re Superior Crewboats, Inc., 374 F.3d at 335 (quoting In re Coastal Plains, 179 F.3d at 206 ). Accordingly, the Allens' failure to disclose their personal injury claim led to the bankruptcy court accepting the inconsistent position that there was no such claim. See In re Flugence, 738 F.3d at 130 ...