Eastman v. Union Pacific R.Co., No. 05-8106.

• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)
• Writing for the Court: Baldock
• Citation: 493 F.3d 1151
• Parties: James M. EASTMAN, Plaintiff, and R. Michele Russell, as Trustee of the Bankruptcy Estate of Wayne D. Gardner, Plaintiff/Intervenor, and Wayne D. Gardner, Plaintiff-Appellant, v. UNION PACIFIC RAILROAD COMPANY, a Delaware corporation; Renzenberger, Inc., a Kansas corporation; Milton W. Marshall; Ellie T. Taylor; Radel Frye; Wanda Frye; Macy's Truck Repair, Inc., a Wyoming corporation, Defendants-Appellees, and Oleg Pekun; MJ Transportation, Inc., an Illinois corporation, Defendants.
• Decision Date: 06 July 2007
• Docket Number: No. 05-8106.

493 F.3d 1151 James M. EASTMAN, Plaintiff, and
R. Michele Russell, as Trustee of the Bankruptcy Estate of Wayne D. Gardner, Plaintiff/Intervenor, and
Wayne D. Gardner, Plaintiff-Appellant,
v.
UNION PACIFIC RAILROAD COMPANY, a Delaware corporation; Renzenberger, Inc., a Kansas corporation; Milton W. Marshall; Ellie T. Taylor; Radel Frye; Wanda Frye; Macy's Truck Repair, Inc., a Wyoming corporation, Defendants-Appellees, and
Oleg Pekun; MJ Transportation, Inc., an Illinois corporation, Defendants. No. 05-8106. United States Court of Appeals, Tenth Circuit. July 6, 2007.

[493 F.3d 1152]

Donald J. Sullivan, Sullivan Law Offices, P.C., Cheyenne, WY, for Plaintiff-Appellant.

Kevin Scott Taylor, Snell & Wilmer L.L.P. (Holly R. Shilliday, Snell & Wilmer

[493 F.3d 1153]

L.L.P., Denver, CO, George Powers and Isaac Sutphin, Sundalh, Powers, Kapp & Martin, Cheyenne, WY, Richard A. Mincer and Robert C. Jarosh, Hirst & Applegate, Cheyenne, WY, and Marvin L. Tyler and William B. Payne, Bussart, West & Tyler, P.C., Rock Springs, WY, with him on the brief) Denver, CO, for Defendants-Appellees.

Before HENRY and BALDOCK, Circuit Judges, and MARTEN, District Judge.^*

BALDOCK, Circuit Judge.

In this appeal we must decide whether the district court properly exercised its discretion in holding Plaintiff Wayne Gardner is judicially estopped from pursuing his personal injury claims against Defendants because he failed to disclose his pending claims to the bankruptcy court in the context of his chapter 7 bankruptcy. Our jurisdiction arises under 28 U.S.C. § 1291. We conclude the district court properly exercised its discretion, and affirm.

I.

Gardner was injured in an auto accident while in the employ of Defendant Union Pacific Railroad (UPRR). Gardner, represented by a personal injury attorney, filed an action (along with a coworker) in federal district court for damages in September 2003 against UPRR pursuant to the Federal Employers' Liability Act. See 45 U.S.C. §§ 51-60. He alleged Wyoming state law negligence claims against the remaining Defendants pursuant to the supplemental jurisdiction statute. See 28 U.S.C. § 1367. With his personal injury claims pending, Gardner (and his wife) retained a bankruptcy attorney and in May 2004 filed a voluntary chapter 7 bankruptcy petition. Gardner did not notify his personal injury attorney of the bankruptcy.

The bankruptcy petition, which Gardner signed under penalty of perjury, failed to disclose his pending lawsuit as a potential asset of the estate. By signing the petition, Gardner verified he had read the petition, schedules, and statement of financial affairs, and the information contained therein was true and correct. On schedule B relating to personal property, Gardner checked "none" as to item 20. Item 20 required Gardner to disclose "[o]ther contingent and unliquidated claims of every nature[.]" Item 4 on his statement of financial affairs required Gardner to "[l]ist all suits and administrative proceedings to which the debtor is or was a party" within the preceding year. Gardner listed two collection suits. Conspicuously absent from the list was Gardner's pending personal injury lawsuit against Defendants.

At the § 341 meeting of creditors in June 2004, Gardner unequivocally responded "no" when the trustee asked him if he had a personal injury suit pending. When given a second chance to set the record straight, Gardner failed to do so. Instead, Gardner let his bankruptcy attorney do the talking:

Trustee: Do either of you have a personal injury suit pending?

Gardner: No.

Trustee: Have you been in an accident, or anything like that?

Gardner: Ya, I was in an accident.

Attorney: On work?

Gardner: On work.

Trustee: Ok. So, it would be Workers' Comp?

Attorney: It's not Workers' Comp, per se, because its on the railroad and they have a different.

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Trustee: Oh, and they have their own little world.

Attorney: Yes, yes. . . . [My clients] know exactly what you mean when you say their own little world, because it's a real mess. They're not getting him any hearing aids until the whole thing's all completely done. I mean, they won't do medical things for him in the meantime.

Trustee: So, you just continue to hang out there, huh?

Attorney: Ya.

Trustee: Are there any creditors here for the Gardners? I don't see that there is anything to administer. I am going to close this as a "No Asset" case. This 341 is completed.

In August 2004, the bankruptcy court entered an order granting Gardner a discharge under chapter 7 of the bankruptcy code. Neither the district court nor counsel involved in Gardner's personal injury suit had yet to learn of his bankruptcy.

Nearly a year later, Gardner's personal injury attorney became aware of his bankruptcy while performing a routine court search under Gardner's name. Counsel promptly notified the bankruptcy trustee, and in July 2005, the trustee moved to reopen the chapter 7 bankruptcy case and list Gardner's pending lawsuit as an asset of the estate. According to the trustee's motion, "[t]he debtors testified at the § 341 Meeting of Creditors that there was a workers' compensation action for Mr. Gardner that was considered to be exempt." Subsequently, "the Trustee was notified of the pending personal injury action regarding Mr. Gardner that was a Rail Road Workers' Compensation action which is not exempt."¹ The bankruptcy court entered an order reopening the case the next day.

At a pretrial hearing before the district court the next week, Gardner's personal injury attorney informed the court and defense counsel that he recently discovered Gardner had filed for bankruptcy and received a discharge during the pendency of the personal injury action. After the trustee unsuccessfully attempted to sell the lawsuit to Gardner for the benefit of his creditors, the court granted the trustee leave to intervene and substituted the trustee as Plaintiff and real-party-in-interest in the personal injury action. See Fed. R.Civ.P. 17(a). Defendants shortly thereafter moved for summary judgment against both Gardner and the trustee based on the equitable defense of judicial estoppel.

Applying the principles set forth in New Hampshire v. Maine, 532 U.S. 742, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001), the district court concluded Gardner and the trustee were estopped from pursuing personal injury claims against Defendants. In a thorough written order, the district court explained: "Mr. Gardner took an inconsistent position before the Bankruptcy Court. He convinced the Bankruptcy Court to rely on his inconsistent position. And he gained an unfair advantage, or substantial benefit, by obtaining the discharge of his debts in a `no asset' bankruptcy." Eastman v. Union Pacific Railroad Co., No. 03-CV-185-D, order at 14 (D. Wyo., filed Aug. 30, 2005) (unpublished). The court further concluded, based on the undisputed historical facts, that "Gardner had a motive to conceal his personal injury claim from the Bankruptcy Court and that his failure to disclose was not inadvertent:"

What the Court finds most telling . . . is the fact that when given the opportunity at the meeting of creditors to reveal the

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pending litigation, Mr. Gardner did not disclose his personal injury action. First, he explicitly denied having a personal injury action pending. Second, his attorney represented that the claim was not workers' compensation "per se," but indicated that any claim was related to an on-the-job injury, leading the Trustee to believe that the claim was similar in nature to a workers' compensation claim. Third, Mr. Gardner's attorney referred to UPRR's failure to provide hearing aids to Mr. Gardner, misrepresenting the extent of the claims involved. Mr. Gardner had an affirmative duty to speak up and let the trustee know the nature of his lawsuit against UPRR as well as eight other defendants. . . .

Id. at 16-17. Careful not to suggest Gardner or his bankruptcy attorney intentionally lied to the bankruptcy court in an effort to conceal assets, the district court nonetheless refused to "take the benign view that the failure to disclose was inadvertent:"

If the only defendant in the personal injury action had been Mr. Gardner's employer, UPRR, the Court might have been swayed that Mr. Gardner attempted to disclose the lawsuit. Certainly, there was a discussion in the meeting of creditors of a work related injury. As it stands, however, no reference was ever made, however slight, to the eight other defendants involved in the personal injury action, six of whom are not even tangentially related to UPRR. The Bankruptcy Court was misled, and it is incumbent upon this Court to protect the integrity of the judicial process. . . .

Id. at 18. This appeal followed.²

II.

At the outset we note that shortly prior to the district court's decision, the trustee settled the personal injury action with two named Defendants who are not before us on appeal. This ultimately provided the bankruptcy estate with sufficient assets to pay all allowable creditors' claims. With Gardner' debts satisfied, the bankruptcy court entered an order directing the trustee to abandon the estate's interest in this appeal, and the trustee has done so. Accordingly, we grant the parties' pending motions to substitute Plaintiff Gardner in this appeal as the real-party-in-interest in place of the bankruptcy trustee, amend the caption of this appeal to reflect such change, and proceed. See Fed. R.App. P. 43(a).³

This appeal arises in the context of summary judgment, so we view the

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facts and all reasonable inferences to be drawn therefrom in a light most favorable to the nonmoving party, i.e., Gardner. See Roberts v. Barreras, 484 F.3d 1236, 1239 (10th Cir.2007). Assuming the district court has properly characterized the facts in light of the applicable standard, we then review its decision to judicially estop Gardner from pursuing his personal injury claims only...