O'Connell v. Marshalls, Inc.

• Decision Date: 11 October 2017
• Docket Number: CIVIL ACTION NO. 17-2438
• Court: U.S. District Court — Eastern District of Pennsylvania
• Parties: VALERIE O'CONNELL & ALBERT KLESCHIK, SR., h/w v. MARSHALLS, INC. & THE TJX COMPANIES, INC.

VALERIE O'CONNELL & ALBERT KLESCHIK, SR., h/w v. MARSHALLS, INC. & THE TJX COMPANIES, INC.

CIVIL ACTION NO. 17-2438

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

October 11, 2017

MEMORANDUM AND ORDER

In this action, Plaintiffs Valerie O'Connell and Albert Kleschick, Sr., wife and husband ("Plaintiffs"), seek damages from Marshall's, Inc., and the TJX Companies, Inc. ("Defendants"),¹ for damages allegedly sustained when Ms. O'Connell slipped and fell in a Marshall's store. Presently before the court are Defendants' motions for leave to amend their Answer to add the affirmative defenses of standing and judicial estoppel, and for summary judgment based on the same affirmative defenses. Docs. 17 & 18. For the reasons that follow, the motion for leave to amend the Answer will be granted, and the motion for summary judgment will be denied.

I. FACTUAL AND PROCEDURAL BACKGROUND

Both of the affirmative defenses that are the subject of Defendants' motions rely on Plaintiffs' Chapter 13 bankruptcy petition. Therefore, I begin by exploring the procedural history of both this lawsuit and the bankruptcy petition. Except where stated, the following facts are not in dispute for purposes of these motions.

On May 16, 2016, Plaintiff O'Connell was injured in a slip-and-fall accident giving rise to the present litigation. Plaintiffs commenced this action in the Philadelphia Court of Common Pleas on May 12, 2017, and Defendants timely removed it to this court on May 30, 2017. Doc. 1. Plaintiff O'Connell states a claim for negligence and Plaintiff Kleschnik states a claim for loss of consortium. Id. at 23 (Complaint). On June 16, 2017, Defendants filed their Answer. Doc. 4.

At some point after this suit was filed, Defendants learned that on November 12, 2015 -- that is, approximately six months prior to the incident giving rise to the present civil action -- Plaintiffs filed for Chapter 13 bankruptcy protection in the Eastern District of Pennsylvania. See Bankr. Pet. 15-18147, Doc. 17-4 (Exh. C); Voluntary Pet. & Summary of Schedules, Doc. 17-7 (Exh. D).² At the time of the filing, Plaintiff Kleschnik had a pending claim in a slip and fall case, and disclosed that claim on the Chapter 13 Schedule B-Personal Property ("Schedule B") form , in the category of "Other contingent and unliquidated claims of every nature . . . ." Schedule B, Doc. 17-7 at 9, item 21 (ECF pagination).

On July 20, 2017, Plaintiffs filed an Amended Schedule B form with the bankruptcy court, providing updated information on Plaintiff Kleschick's previously-disclosed personal injury claim, and adding (without any date information) Plaintiff O'Connell's "Age Discrimination action." Doc. 17-6 (Exh. E) ("Amended Schedule B").However, in the Amended Schedule B, Plaintiffs did not disclose the existence of their negligence action against Defendants in the instant matter.

On August 18, 2017, Defendants filed the present related motions -- first, a motion for leave to amend the Answer to assert the affirmative defenses of standing and judicial estoppel, and second, a motion for summary judgment based on the same affirmative defenses. Docs. 17 & 18. In the motions, Defendants argue that Plaintiffs did not have standing to bring this action because they did not disclose it to the bankruptcy court or bring it on behalf of the bankruptcy estate, and that the action is barred by the doctrine of judicial estoppel because Plaintiffs' position before the bankruptcy court is inconsistent with their position in this lawsuit, and because Plaintiffs' failure to disclose the present negligence action to the bankruptcy court evidenced an intent to conceal it from potential creditors.

On August 25, 2017, Plaintiffs filed a second Amended Schedule B with the bankruptcy court, for the first time disclosing the present lawsuit. See second Amended Schedule B, Doc. 19 Exh. 2 ("Second Amended Schedule B").

On September 1, 2017, Plaintiff filed a response in opposition to Defendants' motion for leave to amend, arguing that the motion should be denied on the grounds of delay and futility. Doc. 19. On September 13, 2017, Plaintiff filed a response in opposition to Defendants' motion for summary judgment, arguing that they were not required to disclose the present lawsuit to the bankruptcy court because it arose several months after they filed for Chapter 13 bankruptcy protection, and that to the extent they were required to do so, they filed the second Amended Schedule B immediately afterDefendants' motions alerted them to the issue. Doc. 21. Defendants thereafter filed reply briefs in support of both motions. Docs. 24 & 25.

II. DEFENDANTS' MOTION FOR LEAVE TO AMEND

Defendants aver that during discovery in this case, they learned that Plaintiffs had previously filed for Chapter 13 bankruptcy, in a proceeding which entered an automatic stay and remains pending in the bankruptcy court, and without disclosing their claims against Defendants to that court. As a result, Defendants seek to amend their Answer to include the following affirmative defenses:

TWENTIETH AFFIRMATIVE DEFENSE

Plaintiffs' claims are barred by the doctrine of judicial estoppel, which prevents a party from taking inconsistent positions by prosecuting claims not disclosed in a bankruptcy proceeding. Plaintiffs had an affirmative duty to disclose assets including causes of action to the bankruptcy court, failed to do and thereby represented that they had no such claims. Plaintiffs cannot now take the inconsistent and opposite position that they do have a claim by pursuing this lawsuit.

TWENTY-FIRST AFFIRMATIVE DEFENSE

Plaintiffs' claims are barred because they lack[] standing to pursue the claims. Having filed for bankruptcy protection, all of the Plaintiffs' assets, including these claims, are property of the bankruptcy estate, and having failed to disclose the claims, Plaintiffs lack standing to pursue them.

Doc. 17 ¶ 17.³

Defendants are unable to amend their Answer without leave or court or consent of Plaintiffs as too much time has passed after service of their Answer. See Fed. R. Civ. P. 15(a)(1) (allowing 21 days to amend pleading not requiring a response). Therefore, their ability to amend their Answer is governed by Rule 15(a)(2), which provides that "a party may amend its pleadings only with the opposing party's consent or the court's leave. The court should freely give leave when justice so requires." Id. R. 15(a)(2). Leave to amend a pleading is generally granted unless equitable considerations "render it otherwise unjust." Arthur v. Maersk, Inc., 434 F.3d 196, 204 (3d Cir. 2006) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)). "Among the factors that may justify denial of leave to amend are undue delay, bad faith, and futility," although courts have consistently recognized that "prejudice to the non-moving party is the touchstone for the denial of an amendment." Id. (quoting Lorenz v. CSZ Corp., 1 F.3d 1406, 1414 (3d Cir. 1993)) (citations omitted)). Plaintiffs here rely on undue delay and futility to defeat the proposed amendments. Doc. 19.

With respect to delay, delay alone is insufficient to warrant denial of leave to amend. Arthur, 434 F.3d at 204 (citing Adams v. Gould, Inc., 739 F.2d 858, 868 (3d Cir. 1984)). Delay becomes "undue" when it places "an unwarranted burden on the court . . . [and] an unfair burden on the opposing party." Id. (quoting Adams, 739 F.2d at 868). "When a party fails to take advantage of previous opportunities to amend, without adequate explanation, leave to amend is properly denied." Id. (citing Adams, 739 F.2d at 868); see also Cureton v. Nat'l Collegiate Athletic Ass'n, 252 F.3d 267, 273(3d Cir. 2001) ("[T]he question of undue delay requires that we focus on the movant's reasons for not amending sooner.").

As for futility, "[a] determination as to futility does not require a conclusive determination on the merits of a claim or defense; rather, the futility of an amendment may only serve as the basis for denial of leave to amend when the proposed amendment is frivolous or advances a claim that is legally insufficient on its face." Pharmaceutical Sales & Consulting Corp. v. J.W.S. Delavau Co., 106 F.Supp.2d 761, 764 (D.N.J. 2000) (citing Miller v. Beneficial Mgmt. Corp., 844 F. Supp. 990, 1001 (D.N.J. 1993)). As a result, courts place a heavy burden on opponents who argue that a proposed amendment to a pleading is futile. See id. Assertions that amendment to an answer would be futile are reviewed under the motion to dismiss standard, which requires the court to accept as true the allegations in the defendant's proposed affirmative defenses and construe them in the light most favorable to the defendant. Id. at 765; see also In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997) ("'Futility' means that the complaint, as amended, would fail to state a claim upon which relief could be granted."). In making the futility determination, the court looks only to the pleadings. Pharmaceutical Sales, 106 F. Supp.2d at 764.

Plaintiffs first argue that the motion for leave to amend should be denied on grounds of undue delay. Doc. 19 at 15-16 (ECF pagination). According to Plaintiffs, Defendants knew or should have known about Plaintiffs' Chapter 13 bankruptcy proceeding "well before" they filed their Answer, see id. ¶ 5, citing a June 3, 2016 public records report that lists the bankruptcy proceeding, and which was provided byDefendants in their document production. See Accurint Report, Bates Nos. TJX0099-100, Doc. 19 at 19-20 (ECF pagination). As a result, Plaintiffs argue that they are entitled to conduct discovery on the issue of when and how Defendants learned of Plaintiffs' Chapter 13 proceeding, but that such discovery is precluded because the fact discovery deadline in this case has now passed. Doc. 19 ¶ 23.

I disagree with Plaintiffs' position. Adding the two affirmative defenses sought by Defendants would not affect the remaining Scheduling Order...