Failure to disclose a lawsuit as an asset will not result in successful invocation of judicial estoppel if the plaintiff’s chapter 13 case is dismissed before discharge, given how judges interpret Fifth Circuit authority.
A woman confirmed her chapter 13 plan and filed a discrimination lawsuit against her former employer about three years later. About the same time, she stopped paying the trustee, leading to dismissal of her chapter 13 case.
The employer filed a motion to dismiss the discrimination suit based on judicial estoppel and the notion that a chapter 13 debtor has a continuing obligation to disclose lawsuit assets, even those that arise after confirmation. Magistrate Judge Richard L. Bourgeois, Jr. of Baton Rouge, La., denied the motion on May 27.
Since the chapter 13 case was dismissed and the plaintiff never received a discharge, Judge Bourgeois held that judicial estoppel did not apply because the bankruptcy court never “accepted” the debtor’s prior inconsistent position. He relied on the Fifth Circuit 2012 Oparaji opinion for the proposition that dismissal negated the bankruptcy court’s acceptance of the plan.
Judge Bourgeois said that two district judges in the Fifth Circuit denied motions based on judicial estoppel by relying on Oparaji to find no judicial acceptance of the prior position.
Although he did not rule on the issue formally, Judge Bourgeois said that equity would “counsel against” application of judicial estoppel because the debtor obtained no “tangible benefit” from failure to disclose the lawsuit.