Auday v. Wet Seal Retail, Inc., 1:10-CV-260

• Decision Date: 17 January 2012
• Docket Number: 1:10-CV-260
• Parties: KAREN AUDAY, Plaintiff, v. THE WET SEAL RETAIL, INC., Defendant.
• Court: U.S. District Court — Eastern District of Tennessee

KAREN AUDAY, Plaintiff,

v.THE WET SEAL RETAIL, INC., Defendant.

1:10-CV-260

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TENNESSEE AT CHATTANOOGA

Dated: January 17, 2012

Collier/Lee

MEMORANDUM

Before the Court is Plaintiff Karen Auday's ("Plaintiff") "Motion for Relief from Judgment and/or to Alter or Amend Judgment" (Court File No. 37), seeking relief from the Court's earlier Judgment Order dismissing her employment discrimination action under the doctrine of judicial estoppel. Defendant The Wet Seal Retail, Inc. ("Defendant") has responded (Court File No. 43), and Plaintiff replied (Court File No. 45). For the following reasons, the Court will DENY Plaintiff's motion (Court File No. 37).

I. FACTS & PROCEDURAL HISTORY

The facts of this case are stated in detail in the memorandum accompanying the Judgment Order dismissing the case (Court File No. 35), and the Court will not repeat them at length here. Briefly, Plaintiff's employment was terminated by Defendant on September 17, 2009. At the time of her termination, as now, Plaintiff believed her termination was discriminatory and actionable.¹ On September 21, 2009, Plaintiff and her husband filed a Chapter 7 bankruptcy petition. The petition listed $510,725.63 in liabilities. As part of the bankruptcy petition, Plaintiff filled out an accompanying Schedule of Assets. Under penalty of perjury, Petitioner marked "None" by the entry "Other contingent and unliquidated claims of every nature," omitting her potential lawsuit against Defendant. Throughout the course of her bankruptcy proceedings, Plaintiff never amended the petition and associated schedules to reflect her termination by Defendant and her possession of employment discrimination claims against it, despite amending the petition at one point to alter the unsecured creditor list.

On January 5, 2010, Judge Cook entered an order discharging Plaintiff and her husband. One month after the discharge, on February 8, 2010, the trustee of Plaintiff's bankruptcy estate applied to the bankruptcy court to employ Plaintiff's present counsel as "special counsel" to pursue the employment discrimination claim. According to Plaintiff, Plaintiff's present counsel had notified the trustee of Plaintiff's employment discrimination claim on December 17, 2009.²

On September 15, 2010, Plaintiff's complaint against Defendant was removed to this Court. Defendant moved for judgment on the pleadings on three distinct theories: 1) Plaintiff was judicially estopped from bringing the present claim because she failed to disclose it to the bankruptcy court;2) Plaintiff lacked standing because her claim was part of the bankruptcy estate; and 3) Plaintiff was bound by an arbitration agreement to arbitrate her claim. The Court held Plaintiff was indeed judicially estopped from bringing the present discrimination suit, and so dismissed the case. The Court did not reach the other two independent grounds for dismissal raised by Defendant. Following the dismissal, Defendant filed the present for relief from judgment and/or to amend judgment.

II. STANDARD OF REVIEW

Plaintiff has filed the present motion pursuant to Rules 59(e) and 60(b) of the Federal Rules of Civil Procedure. These rules are quite similar, both substantively and in the formidable challenge they present to litigants who would utilize them. Rule 59(e) provides for the filing of a motion to alter or amend a judgment, but the Rule does not list specific grounds for such a motion. The Sixth Circuit has explained courts may grant a Rule 59(e) motion to alter or amend if there is a clear error of law, newly discovered evidence, an intervening change in controlling law, or a need to prevent manifest injustice. Intera Corp. v. Henderson, 428 F.3d 605, 620 (6th Cir. 2005). Such a motion is proper only if it contains "an argument or controlling authority that was overlooked or disregarded in the original ruling, presents manifest evidence or argument that could not previously have been submitted, or successfully points out a manifest error of fact or law." Davie v. Mitchell, 291 F. Supp.2d 573, 634 (N.D. Ohio 2003). Parties "cannot use a motion for reconsideration to raise new legal arguments that could have been raised before a judgment was issued." Roger Miller Music, Inc. v. Sony/ATV Publ'g, LLC, 477 F.3d 383, 395 (6th Cir. 2007).

Rule 60(b) does list the grounds for a motion for relief from judgment, and they are quite similar to those applied by courts in the Rule 59(e) context:

On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or (6) any other reason that justifies relief.

Fed. R. Civ. P. 60(b).

Motions to reconsider under Rule 60(b) provide opportunities for the Court to "correct manifest errors of law or fact and to review newly discovered evidence or to review a prior decision when there has been a change in the law." Madden v. Chattanooga City Wide Serv. Dep't, No. 1:06-CV-213, 2007 WL 2156705, at *3 (E.D. Tenn. July 25, 2007) (quotation omitted). Such motions seek extraordinary judicial relief and can be granted only upon a showing of exceptional circumstances. McAlpin v. Lexington 76 Auto Truck Stop, Inc., 229 F.3d 491, 502-03 (6th Cir. 2000). "A Rule 60(b) motion is not a substitute for an appeal." Madden, 2007 WL 2156705, at *3 (quotation omitted). With regard to the catch-all provision of Rule 60(b)(6), the Sixth Circuit has stated "Rule 60(b)(6) should apply only in exceptional or extraordinary circumstances which are not addressed by the five numbered clauses of the Rule." Olle v. Henry & Wright Corp., 910 F.2d 357, 365 (6th Cir. 1990) (quotation omitted).

III. DISCUSSION

The basis of Plaintiff's motion, under both Rules 59(e) and 60(b), is her contention the court made "manifest errors of law and fact" in dismissing the case (Court File No. 45, p. 10). Specifically, Plaintiff argues the Court misunderstood the bankruptcy system, most notably the roleof the trustee, when determining Plaintiff was judicially estopped from bringing her employment discrimination claim because she failed to disclose it to the bankruptcy court. According to Plaintiff, her present counsel's December 17, 2009 letter to the trustee was effectively disclosure of the discrimination claim to the bankruptcy court, thus this Court erred in finding she did not disclose the claim to the bankruptcy court.³ As before, the Court disagrees.

In the bankruptcy context, judicial estoppel "bars a party from (1) asserting a position [in a civil suit] that is contrary to one that the party has asserted under oath in a prior [bankruptcy] proceeding, where (2) the [bankruptcy] court adopted the contrary position 'either as a preliminary matter or as part of a final disposition.'" White v. Wyndham Vacation Ownership, Inc., 617 F.3d 472, 476 (quoting Browning v. Levy, 283 F.3d 761, 775 (6th Cir. 2002)). Plaintiff's present "position" - that is, that she has an employment discrimination claim against Defendant - is "contrary to" a position asserted under oath in the prior bankruptcy proceeding, namely, that she did not possess any undisclosed claims. It is undisputed Plaintiff neglected to ever include her potential lawsuit in the bankruptcy petition,⁴ and it is undisputed this petition, including accompanying schedules, was madeunder oath. Plaintiff had a duty to disclose the potential lawsuit to the bankruptcy court, and she neglected this duty, both by her initial omission of the claim from the petition, and by her continuing failure to amend the petition to include the claim. "It is well-settled that a cause of action is an asset that must be scheduled under [11 U.S.C.] § 521. Moreover, the duty of disclosure is a continuing one, and a debtor is required to disclose all potential causes of action." Lewis v. Weyerhaeuser Co., 141 F. App'x 420, 424 (6th Cir. 2005) (quotation omitted).

Despite the conceded omission of her employment discrimination claim from the bankruptcy petition, Plaintiff claims present counsel's disclosure of the claim to the trustee prior to discharge effectively served as notice of the claim to the bankruptcy court, thus she did not, in fact, assert contrary positions in the two cases. Plaintiff suggests the Court's earlier conclusion to the contrary evidenced a misunderstanding of the bankruptcy system and the role of the trustee. However, Plaintiff has proffered no compelling law or precedent for the proposition that writing a letter to the bankruptcy trustee telling him of the existence of a potential unliquidated claim is equivalent to amending the schedule of assets, much less that it was a "manifest error of law" for the Court to find them not equivalent.⁵ Indeed, if writing a letter to the trustee is equivalent to updating one's bankruptcy petition and schedules, it is difficult to see why there should exist a formal mechanism for amendment at all. The Court adheres to its earlier conclusion that, letter to the trustee notwithstanding, Plaintiff did not disclose the existence of her potential discrimination claim to the bankruptcy court prior to discharge. See Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778,784 (9th Cir. 2001) (holding that "notifying the trustee [of a potential claim] by mail or otherwise is insufficient to escape judicial estoppel" and that the plaintiff "[wa]s required to have amended his disclosure statements and schedules to provide...