Cloud v. Northrop Grumman Corp.

• Decision Date: 12 November 1998
• Docket Number: No. B117044,B117044
• Citation: 79 Cal.Rptr.2d 544,67 Cal.App.4th 995
• Court: California Court of Appeals Court of Appeals
• Parties: , 98 Cal. Daily Op. Serv. 8409, 98 Daily Journal D.A.R. 11,653 Tina CLOUD, Plaintiff and Appellant, v. NORTHROP GRUMMAN CORP. et al., Defendants and Respondents.

Page 544

79 Cal.Rptr.2d 544

67 Cal.App.4th 995, 98 Cal. Daily Op. Serv. 8409,

98 Daily Journal D.A.R. 11,653

Tina CLOUD, Plaintiff and Appellant, v. NORTHROP GRUMMAN CORP. et al., Defendants and Respondents.

No. B117044.

Court of Appeal, Second District, Division 2, California.

Nov. 12, 1998.

Law Offices of Barbara Metzger Kay, Barbara Metzger Kay, La Verne, and Judith K. Williams, Berkeley, for Plaintiff and Appellant.

Sheppard, Mullin, Richter & Hampton, Charles F. Barker and Tracey A. Kennedy, Los Angeles, for Defendants and Respondents.

ZEBROWSKI, J.

Plaintiff and appellant Tina Cloud is a former employee of Northrop Grumman Corp. Northrop and plaintiff's former supervisor at Northrop are the defendants and respondents (collectively "Northrop"). In November of 1995, Northrop terminated plaintiff's employment. In June of 1996, plaintiff filed for Chapter 7 (liquidation) bankruptcy protection. (11 U.S.C. § § 701 et seq.) In the schedule of assets she filed with the bankruptcy court, plaintiff did not disclose any claim or potential claim against Northrop.

Several months later, while her bankruptcy action was pending, plaintiff filed a complaint against Northrop with the Department of Fair Employment and Housing. In November of 1996, she received a letter from the Department notifying her of her right to file a lawsuit within one year. In December of 1996 (shortly after she received a bankruptcy discharge, but while her bankruptcy action remained pending), plaintiff filed the instant wrongful termination and sexual harassment action. Several months after her lawsuit was filed, plaintiff's bankruptcy case was closed, while her lawsuit continued.

After these events, Northrop moved for judgment on the pleadings. Northrop requested that the court take judicial notice of plaintiff's bankruptcy filings, which revealed that plaintiff had not scheduled her claims against Northrop as assets of her bankruptcy estate. Northrop's motion was based on two grounds. First, Northrop contended that plaintiff lacked standing to pursue her civil action because, according to bankruptcy law, plaintiff's claim against Northrop was the property of the bankruptcy estate and the bankruptcy trustee was therefore the real party in interest. Second, Northrop contended that plaintiff was "judicially estopped" from pursuing this lawsuit because of her prior failure to schedule the lawsuit as an asset of the bankruptcy estate.

A motion for judgment on the pleadings performs the same function as a general demurrer, and hence attacks only defects disclosed on the face of the pleadings or by matters that can be judicially noticed. (See, e.g., Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 1998) §§ 7:275, 7:322; Lance Camper Manufacturing Corp. v. Republic Indemnity Co. (1996) 44 Cal.App.4th 194, 198, 51 Cal.Rptr.2d 622.) Presentation of extrinsic evidence is therefore not proper on a motion for judgment on the pleadings. (Ibid.) Nevertheless, plaintiff opposed Northrop's motion in part by filing her own declaration. Although not technically proper, the evidence plaintiff presented illustrates important reasons for our ultimate disposition.

Plaintiff's declaration alleged that she suffered emotionally and financially as a result of the wrongful actions of Northrop, and that several months after her termination, she consulted a bankruptcy attorney in order to avoid losing her house. Plaintiff alleged that when she filled out bankruptcy documents as instructed by her bankruptcy attorney, she did not know that valid grounds existed for a lawsuit against Northrop, and hence did not list such a claim. Although she had previously consulted a different (non-bankruptcy) lawyer for advice on whether she had grounds for a claim against Northrop, plaintiff alleged that she was too distraught at that initial meeting to detail the course of events coherently. The nonbankruptcy lawyer consequently advised her that any advice as to whether she had a claim would have to await presentation of the facts in a more meaningful way. This allegedly did not occur until after the filing of the bankruptcy petition. Plaintiff allegedly did not know that the bankruptcy and her wrongful termination, sexual harassment, etc., claims were legally related and, although she testified truthfully to detailed and specific questions from the bankruptcy trustee, he did not ask any questions about such a claim.

After Northrop's motion for judgment on the pleadings was filed, plaintiff allegedly consulted her bankruptcy attorney again, who advised that he could file amendments to her bankruptcy filings to schedule her claim against Northrop. The bankruptcy attorney requested $400 to perform this service, and plaintiff's declaration alleged that she was in the process of making arrangements to obtain these funds. Plaintiff further alleged that she never attempted to hide the existence of the lawsuit from her bankruptcy attorney, nor the existence of the bankruptcy from the nonbankruptcy attorney. Plaintiff alleged that she testified truthfully about her bankruptcy when asked about it by Northrop's attorneys. She further alleged that it was the actions of Northrop, including an alleged "initial denial" of unemployment benefits, which necessitated her bankruptcy filing in the first instance. She concluded that she would be "greatly harmed, emotionally and financially, if [she was] unable to proceed with [her] lawsuit against" Northrop.

The trial court's minute order does not state whether the trial court did or did not consider plaintiff's declaration, but it appears that the trial court did not, since the trial court treated the motion as one for judgment on the pleadings and made no mention of the evidence contained in plaintiff's declaration. The trial court granted the motion without leave to amend on the grounds (1) that plaintiff lacked standing, and (2) that plaintiff was judicially estopped from pursuing her claim. Judgment was entered in favor of Northrop.

We reverse for two reasons. First, as to the standing issue: leave to amend should have been granted either to substitute in the real party in interest (the bankruptcy trustee) or to obtain the trustee's abandonment of the claim. (See, e.g., Klopstock v. Superior Court (1941) 17 Cal.2d 13, 19-22, 108 P.2d 906.) Second, as to the judicial estoppel issue: a defense of judicial estoppel raises factual issues. (See, e.g., Ryan Operations G.P. v. Santiam-Midwest Lumber Co. (3d Cir.1996) 81 F.3d 355.) These factual issues could not be decided solely by reviewing plaintiff's complaint and matters that could be judicially noticed, and hence could not be decided on a motion for judgment on the pleadings. Thus although plaintiff's declaration asserting extrinsic facts was not a proper opposition to a motion for judgment on the pleadings, the facts she alleged highlight the factual nature of the inquiry necessary to determine whether to invoke the doctrine of judicial estoppel.

We will remand with instructions to (1) grant plaintiff leave to amend to substitute in the bankruptcy trustee as the real party in interest or, in the alternative, obtain the trustee's abandonment of her claims, and (2) if again raised, to determine the judicial estoppel issue on the facts, either by way of summary judgment motion or trial by the court.

I. STANDING

a. Plaintiff lacked standing to sue Northrop.

The widely accepted rule is that after a person files for bankruptcy protection, any causes of action previously possessed by that person become the property of the bankrupt estate. (See 11 U.S.C. §§ 541(a)(1) and 323; see also, e.g., United States v. Whiting Pools, Inc. (1983) 462 U.S. 198, 203-204, 205, fn. 9, 103 S.Ct. 2309, 76 L.Ed.2d 515 ["a broad range of property," including causes of action, is included in the bankruptcy estate]; Jones v. Harrell (11th Cir.1988) 858 F.2d 667, 669 ["A trustee in bankruptcy succeeds to all causes of action held by the debtor at the time the bankruptcy petition is filed," the debtor lacks standing to settle a personal injury claim]; Harris v. St. Louis University (E.D.Mo.1990) 114 B.R. 647, 648 [debtor's cause of action for age and sex discrimination in employment became property of bankruptcy estate upon filing of Chapter 7 proceeding]; Cain v. Hyatt (E.D.Pa.1989) 101 B.R. 440, 442 [debtor's cause of action for illegal termination in violation of human rights law became property of bankruptcy estate upon filing of Chapter 7 proceeding].) Complete unanimity has not been reached on this point, however. Some federal Circuits make distinctions among different types of claims, holding some to become property of the bankrupt estate and some not, depending upon their treatment under local state law. As the court noted in In re Lansberry (Bkrtcy.W.D.Pa.1995) 177 B.R. 49, 54 "[t]here is a split among courts of appeals on the method for determining whether a particular pre-petition cause of action becomes property of the estate. [p] The majority have held that all pre-petition causes of action become estate property without regard to state law. See Matter of Geise, 992 F.2d 651, 655 (7th Cir.1993); Cottrell v. Schilling, 876 F.2d 540, 542-43 (6th Cir.1989); Sierra Switchboard Co. v. Westinghouse Electric Co., 789 F.2d 705, 709 (9th Cir.1986); Tignor v. Parkinson, 729 F.2d 977, 980 (4th Cir.1984). [p] The United States Court of Appeals for the Second Circuit has rejected the per se rule adopted by the majority and has held that state law must be consulted. In particular, one must determine whether a given cause of action is transferable under state law or is subject to reach of creditors by judicial process." As the Lansberry court noted by its citation of the Ninth Circuit case of Sierra Switchboard, the Ninth Circuit follows the "per se" rule, by which all causes of action generally become the property of the bankruptcy estate. Since the bankruptcy proceeding...