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Judicial Estoppel: Is It on Your Litigation Checklist?

So, your client has been sued.  Like many defense attorneys, you begin running through your “litigation checklist” in preparing the defense of your client.  Does that checklist include researching for prior bankruptcy filings by plaintiffs?  It should.

In the recent case of Dunn v. Advanced Med. Specialties, Inc., 2014 U.S. App. LEXIS 2433 (11th Cir. Feb. 10, 2014), the Eleventh Circuit affirmed the dismissal of a plaintiff based on her failure to disclose a pending lawsuit in her bankruptcy proceedings.

In Dunn, Florencia Tronge-Knoepffler (“Debtor”) was employed by Advanced Medical Specialties, Inc. (“AMS”) as a corporate recruiter.  Subsequently, Debtor’s employment was terminated by AMS.  During her employment with AMS, Debtor suffered from several physical ailments and upon her termination, Debtor filed suit against AMS alleging that AMS had discriminated against her based on her disability and sex.  Approximately two months after filing the lawsuit against AMS, Debtor filed for bankruptcy protection and failed to disclose her lawsuit against AMS as a potential contingent asset.  Subsequently, the bankruptcy court granted Debtor a discharge from bankruptcy, which released her from all of her debts.

Upon learning of Debtor’s bankruptcy and discharge, AMS filed a motion for summary judgment arguing that Debtor was judicially estopped because she failed to disclose her lawsuit against AMS in her bankruptcy schedules.  The District Court entered judgment in favor of AMS and the matter was appealed to the Eleventh Circuit Court of Appeals.  The Eleventh Circuit was tasked, in part, to determine if the District Court had properly granted summary judgment in favor of AMS based on judicial estoppel.

“Judicial estoppel is an equitable doctrine invoked at a court’s discretion.”[1]  Under judicial estoppel, “a party is precluded from asserting a claim in a legal proceeding that is inconsistent with a claim taken by that party in a previous proceeding.”  Id.  Based on this equitable doctrine, the Eleventh Circuit affirmed the order of the District Court granting summary judgment in favor of AMS holding that the Eleventh Circuit “has recognized that when a debtor fails to disclose a pending lawsuit to the bankruptcy court, while having knowledge of the lawsuit and a motive to conceal it, the doctrine of judicial estoppel bars the undisclosed claim from proceeding.”  Dunn at *6.

In conclusion, the doctrine of judicial estoppel can be a great defense used to prevent a party from asserting claims or positions that are inconsistent with claims or positions held in prior proceedings.  Therefore, investigating prior litigation, including bankruptcy proceedings, of an adverse party should be added to everyone’s “litigation checklist.”

Matthew A. Barley

[1] Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1285 (11th Cir. 2002).