Dismissing a bankruptcy where the debtor did not disclose a claim will not prevent a court in the Eleventh Circuit from invoking judicial estoppel.
The facts presented an unassailable case for invoking judicial estoppel.
The debtor amended his schedules six times, but he did not disclose two lawsuits until the seventh amendment had been filed after the defendants in those suits had submitted motions to dismiss based on judicial estoppel.
Evidence pointed toward the debtor’s intent to dupe the court. The debtor had scheduled two other lawsuits, but not the two where he was seeing larger damages, together amounting to $14 million.
The debtor opposed the motion to dismiss in district court, contending that the defendants’ motions were moot because he had voluntarily dismissed his bankruptcy following the seventh amendment to his schedules. First ruling that the dismissal motions were not moot, the district court went on to dismiss the suits based on judicial estoppel.
In a per curiam opinion on June 29, the circuit court agreed and upheld dismissal.
The Eleventh Circuit said that dismissal was proper under the appeals court’s en banc opinion last year in Slater v. U.S. Steel Corp., 871 F.3d 1174 (11th Cir. 2017) (en banc). Overruling its own precedent, the en banc court held in Slater that a court may not “automatically infer a plaintiff’s intent to mislead based solely on the plaintiff’s failure to disclose a civil claim in a bankruptcy proceeding.” To read ABI’s discussion of Slater, click here.
The circuit held that voluntary dismissal of the bankruptcy did not render the dismissal motion moot in district court, because the “judicial estoppel issue presented to us in this appeal is not about what should happen in the bankruptcy proceedings, a case that was not appealed to us.” The debtor did not dismiss either of his two lawsuits, so the “propriety of that dismissal is not moot,” the circuit said.
The appeals court also rejected the notion that dismissal of the bankruptcy made invocation of judicial estoppel an abuse of discretion, because “[j]udicial estoppel serves to ‘prevent the perversion of the judicial process and protect its integrity,’” citing Slater.
The circuit court said that judicial estoppel “cannot serve that purpose . . . if a duplicitous debtor is assured that he can always avoid the doctrine’s bite by dismissing his bankruptcy petition after his duplicity is found out.”