Cannon-Stokes v. Potter

• Decision Date: 05 July 2006
• Docket Number: No. 05-4605.,05-4605.
• Citation: 453 F.3d 446
• Parties: Traci CANNON-STOKES, Plaintiff-Appellant, v. John E. POTTER, Postmaster General of the United States Postal Service, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

453 F.3d 446

Traci CANNON-STOKES, Plaintiff-Appellant, v. John E. POTTER, Postmaster General of the United States Postal Service, Defendant-Appellee.

No. 05-4605.

United States Court of Appeals, Seventh Circuit.

Submitted June 19, 2006.

Decided July 5, 2006.

Traci Cannon-Stokes (submitted), Chicago, IL, pro se.

Samuel B. Cole, Office of the United States Attorney, Chicago, IL, for Defendant-Appellee.

Before COFFEY, EASTERBROOK, and SYKES, Circuit Judges.

EASTERBROOK, Circuit Judge.

Traci Cannon-Stokes contends that the Postal Service, which hired her as a letter carrier, violated the Rehabilitation Act, 29 U.S.C. § 791, by not accommodating her mental aversion to making residential deliveries and by retaliating against her for asserting her statutory rights. At the same time as Cannon-Stokes was pursuing an administrative claim for $300,000 from the Postal Service, she filed a Chapter 7 bankruptcy petition asserting that she had no assets; her petition expressly denied that she had any valuable legal claims ("contingent and unliquidated claims of every nature", the schedule calls them, leaving no room for quibbles). The bankruptcy court believed that assertion and discharged all of her approximately $98,000 in unsecured debts.

After the bankruptcy was over, Cannon-Stokes filed this suit. Naturally enough, the Postal Service contended that judicial estoppel forecloses the action. Cannon-Stokes had represented that she had no claim against the Postal Service (or anyone else); that representation had prevailed; she had obtained a valuable benefit in the discharge of her debts. Now she wants to assert the opposite in order to win a second time. That satisfies the requirements of judicial estoppel. See, e.g., New Hampshire v. Maine, 532 U.S. 742, 749, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001); Astor Chauffeured Limousine Co. v. Runnfeldt Investment Corp., 910 F.2d 1540, 1547-48 (7th Cir.1990). Cannon-Stokes blamed the false statement on her bankruptcy lawyer; accepting this explanation, the district court declined to dismiss the proceeding but later granted summary judgment to the Postal Service on the merits—which on appeal defends its judgment by relying, once again, on judicial estoppel.

All six appellate courts that have considered this question hold that a debtor in bankruptcy who denies owning an asset, including a chose in action or other legal claim, cannot realize on that concealed asset after the bankruptcy ends. See Payless Wholesale Distributors, Inc. v. Alberto Culver (P.R.) Inc., 989 F.2d 570 (1st Cir. 1993); Krystal Cadillac-Oldsmobile GMC Truck, Inc. v. General Motors Corp., 337 F.3d 314 (3d Cir.2003); Jethroe v. Omnova Solutions, Inc., 412 F.3d 598 (5th Cir. 2005); United States ex rel. Gebert v. Transport Administrative Services, 260 F.3d 909, 917-19 (8th Cir.2001); Hamilton v. State Farm Fire & Casualty Co., 270 F.3d 778 (9th Cir.2001); Barger v. Cartersville, 348 F.3d 1289, 1293-97 (11th Cir. 2003). We reserved that question in Biesek v. Soo Line R.R., 440 F.3d 410 (7th Cir.2006), while holding that judicial estoppel has a proviso; bankruptcy fraud designed to hide an asset from creditors does not prevent the creditors themselves from realizing on the claim after its discovery.

Judicial estoppel is an equitable doctrine, and it is not equitable to employ it to injure creditors who are themselves victims of the debtor's deceit. Moreover, as a technical matter the estate in bankruptcy, not the debtor, owns all pre-bankruptcy claims, and unless the estate itself engages in contradictory litigation tactics the elements of judicial estoppel are not satisfied. But if the estate (through the trustee) abandons the claim, then the creditors no longer have an interest, and with the claim in the debtor's hands the possibility of judicial estoppel comes to the fore. That is what has happened here: the trustee abandoned any interest in this litigation, so the creditors are out of the picture and we must decide whether Cannon-Stokes may pursue the claim for her personal benefit.

The answer is no, as the other circuits (cited above) have concluded. "By making [litigants] choose one position irrevocably, the doctrine of judicial estoppel raises the cost of lying." Chaveriat v. Williams Pipe Line Co., 11 F.3d 1420, 1428 (7th Cir.1993). A doctrine that induces debtors to be truthful in their bankruptcy filings will assist creditors in the long run (though it will do them no good in the particular case)—and it will assist most debtors too, for the few debtors who scam their creditors drive up interest rates and injure the more numerous honest borrowers. Judicial estoppel is designed to ...