Rabidou v. Wachovia Corp.
| Decision Date | 08 April 2015 |
| Docket Number | Case No. 5:14-cv-03684-PSG |
| Court | U.S. District Court — Northern District of California |
| Parties | LAWRENCE RABIDOU, Plaintiff, v. WACHOVIA CORPORATION F/K/A WORLD SAVINGS BANK, FSB; and WELLS FARGO BANK, NATIONAL ASSOCIATION, Defendants. |
(Re: Docket Nos. 28, 34)
On October 29, 2014, the court heard argument on Defendant Wells Fargo Bank Southwest N.A.'s1 first motion to dismiss Plaintiff Lawrence Rabidou's initial complaint. On November 11, 2014, Rabidou amended his bankruptcy schedules to account for his district court claims for the first time.2 On December 18, 2014, the court granted Wells Fargo's first motion to dismiss based on judicial estoppel.3 Rabidou then filed a first amended complaint.4
Rabidou's mid-November amendment does not change the fact that for over two and a half years, Rabidou knew of potential claims, misrepresented his status in bankruptcy court and benefited from this misrepresentation. Because Rabidou's claims remain barred by the doctrine of judicial estoppel, the court GRANTS Wells Fargo's motions to dismiss Rabidou's first amended complaint, to expunge and for attorney's fees.
Judicial estoppel is an "equitable doctrine that precludes a party from gaining advantage by asserting one position, and then later seeking an advantage by taking a clearly inconsistent position."5 "[A] court invokes judicial estoppel not only to prevent a party from gaining an advantage by taking inconsistent positions, but also because of 'general consideration[s] of the orderly administration of justice and regard for the dignity of judicial proceedings,' and to 'protect against a litigant playing fast and loose with the courts.'"6 "The application of judicial estoppel is not limited to bar the assertion of inconsistent positions in the same litigation, but is also appropriate to bar litigants from making incompatible statements in two different cases."7
"In the bankruptcy context, a party is judicially estopped from asserting a cause of action not raised in a reorganization plan or otherwise mentioned in the debtor's schedules or disclosure statements."8 A debtor has a duty to file a schedule of assets and liabilities.9 The debtor mayamend the schedule as a matter of course at any time before the case is closed.10 As such, "the Bankruptcy Code and Rules 'impose upon bankruptcy debtors an express, affirmative duty to disclose all assets, including contingent and unliquidated claims,'"11 or separate actions as assets,12 that "continues for the duration of the bankruptcy proceeding."13 "[J]udicial estoppel will be imposed when the debtor has knowledge of enough facts to know that a potential cause of action exists during the pendency of the bankruptcy, but fails to amend his [or her] schedules or disclosure statements to identify the cause of action as a contingent asset."14 It is not necessary that a plaintiff know "all" facts giving rise to a particular claim.15
Rabidou owned fourteen houses.16 On December 16, 2004, he entered into a consumer credit transaction with Wells Fargo involving a $608,000 mortgage loan.17 A first trust deed onRabidou's principal residence secured the note.18 Over the next ten years, in the face of medical and financial difficulties, Rabidou lost thirteen houses, leaving him with only the residence.19 Rabidou ultimately defaulted on his mortgage loan, and in 2009 Wells Fargo commenced foreclosure proceedings.20 During foreclosure proceedings, Rabidou submitted multiple loan modification applications.21 Wells Fargo initially told Rabidou it would not foreclose, but then began foreclosure proceedings. Wells Fargo later halted the foreclosure.22 In 2012, Rabidou filed for Chapter 13 bankruptcy, a proceeding that is still active.23 Since 2008, Rabidou has made no mortgage payments.24
In 2014, Rabidou filed suit in state court for improper denial of the loan modification applications.25 In that complaint, Rabidou alleges negligence, fraudulent concealment, negligent and fraudulent misrepresentation, fraudulent inducement, unfair business practices under the Business and Professions Code 17200 et seq., violation of § 15 U.S.C. 1641(g) and violation of Cal. Civ. Code § 2924.26 After removing the case to this court, Wells Fargo moved to dismiss each of Rabidou's claims based on judicial estoppel, the statute of limitations and failure to state a claim.27 Rabidou amended his bankruptcy schedule to add the claims as assets28 just after thecourt's hearing on Wells Fargo's first motion to dismiss, about a month before the court granted Wells Fargo's first motion to dismiss.29 Rabidou then filed an amended complaint.30 Wells Fargo now moves to dismiss this latest complaint, once again based on judicial estoppel, the statute of limitations and failure to state a claim.31 Wells Fargo separately moves to expunge Rabidou's lis pendens.32
This court has jurisdiction under 28 U.S.C. §§ 1331, 1332 and 1367. The parties further consented to the jurisdiction of the undersigned under 28 U.S.C. § 636(c) and Fed. R. Civ. P. 72(a).33
Rabidou may be right that he has stated sufficient claims not barred by any statute of limitations. But the court cannot reach those issues because Rabidou is judicially estopped from raising such claims due to his failure to identify the claims on his bankruptcy schedule for over two and a half years.
The Ninth Circuit has addressed the applicability of the equitable doctrine of judicial estoppel in the context of bankruptcy proceedings and has laid out three factors a court should consider in determining whether judicial estoppel applies.34 A court must consider (1) whether aparty's later position is clearly inconsistent with its earlier position; (2) whether the party has succeeded in persuading a court to accept that party's earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or second court was misled and (3) whether the party seeking to assert an inconsistent position would cause the opposing party unfair detriment if not estopped.35 Notwithstanding the factors enumerated above, the Ninth Circuit has noted that it does "not establish inflexible prerequisites or an exhaustive formula for determining the applicability of judicial estoppel."36 "Additional considerations may inform the doctrine's application in specific factual contexts."37 Applying the Hamilton factors,38 and bearing in mind the broader considerations of the doctrine, the court finds that judicial estoppel bars Rabidou's claims.39
First, Rabidou took inconsistent positions.40 He filed a Chapter 13 bankruptcy petition and initial schedules without disclosing any claims against Wells Fargo, and amended his schedules to include his claims only two and a half years later, just after the court's hearing on Wells Fargo's first motion to dismiss. Rabidou alleges "this omission was simply an inadvertent oversight based on the discovery of viable claims against Wells Fargo almost two years" after he filed for bankruptcy—not an attempt to defraud creditors.41 Rabidou claims it was only when he convinced a Wells Fargo branch manager to let him see his file and compare notes with his denial letters—in May 2014—that he uncovered his claims.42 Rabidou highlights that there have been no meetings between the creditors between May 2014 and November 2014, suggesting no creditors were harmed by his delay in rescheduling since his discovery.43
Though Rabidou asserts that he learned of viable claims only in May 2014, the misconduct he alleges spans from 2007 to 2012.44 His allegations are those that a reasonable party wouldrecognize as claims at the time they occurred: the bank's assertions of missing documents when Rabidou had sent the documents multiple times, for example, or the commencement of foreclosure after a promise to delay foreclosure proceedings.45 To the extent that Rabidou's allegations are true, he possessed sufficient facts to know that a potential cause of action existed before filing his petition.46 Rabidou's allegations of such obvious misconduct further contradict his claim of good faith, inadvertent oversight.47
Second, the bankruptcy court, the Trustee, and Rabidou's creditors relied on Rabidou's schedules that did not disclose Rabidou's claims against Wells Fargo.48 Rabidou amended his bankruptcy schedules three times without disclosing any such claims, and only amended when the court prompted him to do so.49 For over two and a half years, the Trustee and Rabidou's creditors relied on his misrepresented schedules in conducting meetings, submitting proofs of claim andresponding to Rabidou's proposed plans of reorganization.50 The Trustee, creditors, and bankruptcy court were clearly misled. Rabidou "succeeded in persuading a court to accept [his] earlier position, so that judicial acceptance of an inconsistent position in a later proceeding . . . create[s] the perception that either the first or the second court was misled."51
Third, absent estoppel, Rabidou would derive an unfair benefit by proceeding with this case. Rabidou has received the benefit of the automatic stay and protection from foreclosure without meeting his own obligation to the bankruptcy court or his creditors.52 Rabidou's late disclosure of his claims and this case to the Trustee and his creditors after the court heard Wells Fargo's motion to dismiss does not mitigate his failure to schedule his claims over two and a half years ago. Since filing his original petition for Chapter 13 bankruptcy, Rabidou has filed four proposed plans of reorganization. Rabidou's Trustee and creditors have filed seven objections to Rabidou's proposals. The Trustee eventually filed a motion to dismiss for failure to make plan payments—which she withdrew one day after Rabidou filed his amended Schedule B disclosing his claim. Showing unfair reliance and inefficient use of the courts'...
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