Sparks v. Service Employees International, Inc.

• Decision Date: 12 April 2010
• Docket Number: BRB 09-0649
• Parties: CHRISTY S. SPARKS, Claimant-Petitioner v. SERVICE EMPLOYEES INTERNATIONAL, INCORPORATED and THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, Employer/Carrier-Respondents
• Court: Longshore Complaints Court of Appeals

CHRISTY S. SPARKS, Claimant-Petitioner v. SERVICE EMPLOYEES INTERNATIONAL INCORPORATED and THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA Employer/Carrier-Respondents

BRB No. 09-0649

April 12, 2010

Appeal of the Decision and Order Granting Summary Decision of Larry W. Price, Administrative Law Judge, United States Department of Labor.

Joshua T. Gillelan II, Longshore Claimants' National Law Center Washington, D.C., for claimant.

Monica F. Markovich and James W. Parker, Brown Sims, P.C., Houston Texas, for employer/carrier.

Before: SMITH, McGRANERY, and HALL, Administrative Appeals Judges.

DECISION and ORDER

PER CURIAM:

Claimant appeals the Decision and Order Granting Summary Decision (2008-LDA-0371) of Administrative Law Judge Larry W. Price rendered on a claim filed pursuant to the provisions of the Longshore and Harbor Workers' Compensation Act, as amended, 33 U.S.C. §901 et seq., as extended by the Defense Base Act, 42 U.S.C. §1651 et seq. (the Act). We must affirm the administrative law judge's findings of fact and conclusions of law if they are supported by substantial evidence, are rational, and are in accordance with law. 33 U.S.C. §921(b)(3); O'Keeffe v Smith, Hinchman & Grylls Associates, Inc., 380 U.S. 359 (1965).

On March 3, 2008, claimant filed a claim for benefits under the Defense Base Act (DBA) for an injury allegedly sustained while she was working for employer in Iraq.^[1] While the dispute over disability benefits continued, employer voluntarily paid medical benefits. Emp. Brief at 3; Emp. Motion for Summary Decision exh. 1. On May 16, 2008, claimant and her husband filed a joint bankruptcy petition with the bankruptcy court in the Northern District of Alabama. They filed the required assets and liabilities schedule but did not list the DBA claim as an asset of the estate. Emp. Motion for Summary Decision at exh. 7. In claimant's May 22, 2008, deposition for the DBA claim, employer learned of both the bankruptcy claim and a potential sexual harassment suit against a former employer. Id. at exh. 8. On June 12, 2008, claimant and her husband testified under oath and penalty of perjury in the First Meeting of the Creditors in the bankruptcy proceeding. Claimant disclosed the sexual harassment suit but did not mention the DBA compensation claim. Id. at exh. 9a. On September 15, 2008, without having received any amendments to the initial assets and liabilities schedule, the bankruptcy court discharged claimant and her husband from their debts totaling over $225, 000. Id atexhs. 11-12, 14-15.

Before the administrative law judge, employer argued that claimant is judicially estopped from pursuing the DBA claim because she failed to disclose it to the bankruptcy court; claimant responded that she was not informed she had to disclose the DBA claim to the bankruptcy court. She also stated that, when she informed the bankruptcy trustee of the pending DBA claim after her discharge in bankruptcy, he stated he would not intervene or put a claim on any workers' compensation benefits she might receive, as he anticipated those funds would be exempt from creditors. CI. Reply Brief at exh. 1. The administrative law judge found that claimant did not disclose the pending DBA claim when she initially filed for bankruptcy, when she met with the creditors, or when she was alerted to the omission by employer, and that the bankruptcy court relied on claimant's representations in granting her discharge. Additionally, the administrative law judge found that claimant's belated notice of the DBA claim to the bankruptcy trustee did not remedy her omission. Decision and Order at 3-5 Thus, the administrative law judge concluded that claimant's positions in the bankruptcy court and before him were inconsistent. Decision and Order at 5-6.

In addressing employer's argument that claimant should be barred from pursuing this claim, the administrative law judge found that claimant's omission in bankruptcy court was not inadvertent, as she knew of her DBA claim at the time she filed for bankruptcy and she had motive to conceal it, thereby keeping any recovery for herself instead of potentially exposing it to her creditors. Decision and Order at 5-6. Because the administrative law judge found the judicial estoppel elements outlined by the United States Court of Appeals for the Fifth Circuit in its decisions in Jethroe v. Omnova Solutions, Inc., 412 F.3d 598 (5^th Cir. 2005), and In re Coastal Plains, Inc., 179 F.3d 197 (5^th Cir. 1999), are present, he found that claimant is judicially estopped from pursuing her DBA claim, and he granted employer's motion for summary decision. Decision and Order at 5-6. Claimant appeals the administrative law judge's decision. Employer responds, urging affirmance.

This case involves the novel issue of whether a claimant's failure to disclose a pending compensation claim in bankruptcy proceedings can affect her right to pursue her claim under the Act. In determining whether to grant a party's motion for summary decision, the administrative law judge must determine, after viewing the evidence in the light most favorable to the non-moving party, whether there are any genuine issues of material fact and whether the moving party is entitled to summary decision as matter of law. Morgan v. Cascade General, Inc., 40 BRBS 9 (2006); see also O'Hara v. Weeks Marine, Inc., 294 F.3d 55 (2^d Cir. 2002); Brockington v. Certified Electric, Inc., 903 F.2d 1523 (11^th Cir. 1990), cert. denied, 498 U.S. 1026 (1991); Buck v. General Dynamics Corp., 37 BRBS 53 (2003); Hall v. Newport News Shipbuilding & Dry Dock Co., 24 BRBS 1 (1990); 29 C.F.R. §§18.40(c), (d), 18.41(a). In this case, the administrative law judge found that judicial estoppel applies to bar the DBA claim, and, thus, that employer is entitled to summary decision as a matter of law. For the reasons set forth below, we reverse the administrative law judge's decision and remand the case for further proceedings.

Claimant contends Section 16 of the Act, 33 U.S.C. §916, renders any proceeds from her DBA claim exempt from the bankruptcy estate. Therefore, claimant contends that her failure to disclose the DBA claim to the bankruptcy court is insufficient to preclude her pursuit of her claim under the Act as a matter of law, as her bankruptcy discharge was not affected by the non-disclosure of her DBA claim and could not have been affected by full disclosure. Accordingly, claimant contends the doctrine of judicial estoppel is inapplicable. Employer responds, arguing that the administrative law judge acted within his discretion in barring claimant's claim, as claimant's failure to disclose this claim as an asset to the bankruptcy court until after her debts were discharged violated bankruptcy procedures and rendered any proceeds she may obtain from this claim "non-exempt" and, therefore, property of the bankruptcy estate which can be used to repay her creditors. Employer asserts claimant's actions prejudiced her creditors, and that claimant lost her rights under Section 16 by failing to follow bankruptcy procedures.

Section 16 of the Act provides:

No assignment, release, or commutation of compensation or benefits due or payable under this chapter, except as provided by this chapter, shall be valid, and such compensation and benefits shall be exempt from all claims of creditors and from levy, execution, and attachment or other remedy for recovery or collection of a debt, which exemption may not be waived.

33 U.S.C. §916. Therefore, compensation paid under the Act is exempt from all claims of creditors and cannot be attached for the collection of a debt. Thibodeaux v. Thibodeaux, 454 So.2d 813, 16 BRBS 142(CRT) (La. 1984), cert. denied, 469 U.S. 1114 (1985) (wife not permitted to garnish husband's disability benefits for child support); compare In Re Sloma, 43 F.3d 637 (11^th Cir. 1995) (creditors permitted to attach money claimant received via annuity, as payments were not "due and payable under the Act" but were being paid by a third party pursuant to claimant's settlement instructions). In this case, any compensation to which claimant may be entitled for her alleged work injury is due and payable under the Act and exempt from creditors pursuant to Section 16. Significantly, the administrative law judge did not discuss Section 16 in his decision.

We must consider the administrative law judge's finding that claimant's failure to disclose the pending DBA claim to the bankruptcy court estops her from pursuing it in light of this statutory provision. In bankruptcy proceedings, when a debtor files for bankruptcy protection, she must first file a complete and accurate schedule of her assets and liabilities. The list of assets is to include the debtor's interest in all property, even if she believes that the property is worthless or exempt from the bankruptcy estate; that property becomes the property of the bankruptcy estate. 11 U.S.C §§522, 4003; In re Robinson, 292 B.R. 599 (S.D. Ohio 2003). The list of assets must also disclose all potential causes of action, including contingent and unliquidated claims. 11 U.S.C. §521(1); Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1286 (11^th Cir. 2002); Coastal Plains, 179 F.3d at 207-208; In the Matter of Yonikus, 996 F.2d 866 (7^th Cir. 1993); In re Johnson, 345 B.R. 816 (W.D. Mich. 2006). The duty to disclose is a continuing one: a debtor must amend her financial statements if her circumstances change because full disclosure is crucial to the federal bankruptcy system. Burnes, 291 F.3d at 1286. Once an asset has been reported, it may be made exempt from the bankruptcy estate by filing a claim for the exemption. 11 U.S.C. §§522, 4003; United States v. Shadduck, 112 F.3d 523 (1^st Cir. 1997); Yonikus, 996 F.2d at 870. Failure to...