Wood v. Household Finance Corp.

• Decision Date: 25 April 2006
• Docket Number: No. C05-0322RSM.,C05-0322RSM.
• Court: U.S. District Court — Western District of Washington
• Parties: Edmund J. WOOD, Chapter 7 Bankruptcy Trustee, Plaintiff, v. HOUSEHOLD FINANCE CORPORATION, et al., Defendants.

Page 770

341 B.R. 770

Edmund J. WOOD, Chapter 7 Bankruptcy Trustee, Plaintiff, v. HOUSEHOLD FINANCE CORPORATION, et al., Defendants.

No. C05-0322RSM.

United States District Court, W.D. Washington, at Seattle.

April 25, 2006.

Alan J. Wenokur, Attorney ar Law, Seattle, WA, Christopher E. Green, Seattle, WA, for Plaintiff.

Ann T. Marshall, Erin McDougal Stines, Bishop White & Marshall, Michael Joseph Crisera, Short Cressman & Burgess, Seattle WA, Angela M. Taylor, Jones Day, Irvine, CA, for Defendants.

MEMORANDUM ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

MARTINEZ, District Judge.

I. INTRODUCTION

This matter comes before the Court on defendants' Motion for Summary Judgment. (Dkts. # 15 and # 17). Defendants base their motion on the sole argument that plaintiff's claims are barred due to the fact that debtors, and former plaintiffs, Andre Floyd and Amy Crowley, obtained a discharge in their Chapter 7 bankruptcy proceeding, and failed to list their claims against defendants as an asset. Plaintiff responds that summary judgment is not appropriate because a bankruptcy trustee, who was unaware of the pending lawsuit during the bankruptcy action, is not bound by the nondisclosures of the debtors, and should not be penalized for the actions of the debtors. (Dkt.# 20). For the reasons set forth below, the Court agrees with plaintiff, and DENIES defendants' motion for summary judgment.

II. DISCUSSION

A. Background

The background set forth below is not in dispute. On February 25, 2005, former plaintiffs Andre Floyd and Amy Crowley filed the instant lawsuit, raising claims under the Fair Credit Reporting Act, 15 U.S.C. §§ 1681, et seq., and alleging that defendants have damaged the joint credit-worthiness of plaintiffs by erroneously reporting mortgage payments as late, and by failing to correct those errors. They also appear to have alleged claims for defamation, invasion of privacy, and breach of duty to prevent foreseeable injuries, arising under Washington State law.

On June 30, 2005, the Floyds filed for Chapter 7 Bankruptcy in the United States Bankruptcy Court for the Western District of Washington in Seattle. The Floyds did not list the instant lawsuit as an asset. This Court notes that the Floyds also failed to notify it of the pending bankruptcy action.

On October 5, 2005, the Bankruptcy Court issued an Order discharging the Floyds from their outstanding liabilities. On October 11, 2005, the bankruptcy action was closed and the Trustee was discharged from his duties.

In January of 2006, the Trustee learned of the existence of this lawsuit. He notified the Office of the United States Trustee, who filed an ex parte motion with the Bankruptcy Court to reopen the case in order to administer the undisclosed asset.¹ The Bankruptcy Court granted the motion, and reopened the bankruptcy action on January 19, 2006. Plaintiff was then reappointed as the Trustee of the estate.

In the meantime, defendants moved for summary judgment in the instant action on the basis that the Floyds had failed to list this action as an asset in their Bankruptcy Petition and are now precluded from pursuing their claims. Plaintiff Trustee opposed the motion, and moved to be substituted as the real party of interest in the instant action. (Dkts. # 20 and # 22). This Court granted plaintiff's motion and substituted him as plaintiff. The Court now turns to defendants motion for summary judgment.

B. Summary Judgment Standard

Summary judgment is proper where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The Court must draw all reasonable inferences in favor of the non-moving party. See F.D.I.C. v. O'Melveny & Myers, 969 F.2d 744, 747 (9th Cir.1992), rev'd on other grounds, 512 U.S. 79, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994). The moving party has the burden of demonstrating the absence of a genuine issue of material fact for trial. See Anderson, 477 U.S. at 257, 106 S.Ct. 2505. Mere disagreement, or the bald assertion that a genuine issue of material fact exists, no longer precludes the use of summary judgment. See California Architectural Bldg. Prods., Inc., v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987).

Genuine factual issues are those for which the evidence is such that "a reasonable jury could return a verdict for the non-moving party." Anderson, 477 U.S. at 248, 106 S.Ct. 2505. Material facts are those which might affect the outcome of the suit under governing law. See id. In ruling on summary judgment, a court does not weigh evidence to determine the truth of the matter, but "only determine[s] whether there is a genuine issue for trial." Crane v. Conoco, Inc., 41 F.3d 547, 549 (9th Cir.1994) (citing O'Melveny & Myers, 969 F.2d at 747). Furthermore, conclusory or speculative testimony is insufficient to raise a genuine issue of fact to defeat summary judgment. Anheuser-Busch, Inc. v. Natural Beverage Distributors, 69 F.3d 337, 345 (9th Cir.1995). Similarly, hearsay evidence may not be considered in deciding whether material facts are at issue in summary judgment motions. Blair Foods, Inc. v. Ranchers Cotton Oil, 610 F.2d 665, 667 (9th Cir.1980).

C. Plaintiff's Supplemental Response

As a threshold matter, the Court addresses plaintiff's supplemental response. On March 20, 2006, plaintiff filed a supplemental response raising "procedural concerns" about certain issues raised in defendants' reply. (Dkt.# 26). However, that supplemental response does not comply with the Court's Local Rules, and therefore, will not be considered on this motion for summary judgment.

This Court's Local Rules do not allow for the filing of a supplemental response. To the extent that the supplemental response was intended as a sur-reply, the Court notes that the Local Rules do allow for the filing of a sur-reply for the purpose of requesting to strike certain material in the reply brief. See Local Rule CR 7(g). However, the party desiring to file such a sur-reply must inform both this Court and the opposing party that he intends to file a sur-reply, and the sur-reply is limited to three pages in length. Local Rule CR 7(g)(1)-(3). The record in the instant case does not indicate that plaintiff notified either the Court or opposing counsel of his intent to so file. Nor does plaintiff include a declaration to that effect with the supplemental response itself. Moreover, he filed the supplemental response three days after the instant motion had been noted for consideration. Accordingly, the Court STRIKES plaintiff's supplemental response from the record as improper.

D. Defendants' Alternative Request for Partial Summary Judgment

Although plaintiff's supplemental response noting his procedural concerns has been stricken from the record, the Court raises, sua sponte, the fact that defendants assert for the first time in their Reply brief a request for alternative relief on summary judgment. In their reply, defendants request that, if the Court should deny summary judgment on the estoppel argument, it should grant partial summary judgment determining that the debtors are barred from any recovery in this case, and that recovery be limited to the actual amount owed to the debtors' unsecured creditors, and then stay this case for six months so that plaintiff Trustee can pursue the debtors' other claim or asset and determine the actual amount owed to the debtors' unsecured creditors after that asset is administered. (Dkt.# 24).

As this Court has determined on many occasions, it is not appropriate to raise an issue for the first time in a reply brief. See, e.g., Bazuaye v. INS, 79 F.3d 118, 120 (9th Cir.1996) (citing Eberle v. City of Anaheim, 901 F.2d 814, 818 (9th Cir.1990)); Thompson v. Commissioner, 631 F.2d 642, 649 (9th Cir.1980). To do so essentially prevents plaintiff from providing any response. Accordingly, the Court finds the argument for alternative partial summary judgment improper, and will not consider it on this motion for summary judgment.

While nothing prevented defendants from raising the argument in a separate motion at the time they filed their Reply, the parties' dispositive motion deadline has now passed. The parties have apparently stipulated to an extension of that deadline, and the Court awaits their stipulation and proposed Order. Should the dispositive motion deadline indeed be extended, nothing in this Order prevents defendants from raising the issue in a separate motion for partial summary judgment.

E. Judicial Estoppel and Failure to Report Asset in Bankruptcy Proceedings

Defendants ask this Court to dismiss the instant lawsuit based on the theory of judicial estoppel, because the Floyds failed to list this action as an asset in their Bankruptcy petition. "Judicial estoppel is an equitable doctrine that precludes a party from gaining an advantage by asserting one position, then later seeking an advantage by taking a clearly inconsistent position." Hamiliton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir.2001) (citations omitted). It is not only limited to asserting inconsistent positions in the same litigation, but is also appropriate to bar litigants from making incompatible statements in two different cases. Id. at 782-83. The doctrine is intended to protect the integrity of the judicial process; therefore, judicial estoppel "is an equitable doctrine invoked by a court at its discretion." Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir.1990), cert denied, 501 U.S. 1260, 111 S.Ct. 2915, 115 L.Ed.2d 1078 (1991).

In support of their motion, defendants primarily rely on the Ninth Circuit Court of Appeals' decision in Hamilton v. State Farm Fire & Cas. Co., supra. In that case, ...