RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 10a0239p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
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BETSY WHITE,
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Plaintiff-Appellant,
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No. 09-5626
v.
,
>
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WYNDHAM VACATION OWNERSHIP, INC.,
Defendants-Appellees. -
FAIRFIELD RESORTS, and GERALD HAYES,
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Appeal from the United States District Court
for the Eastern District of Tennessee at Knoxville.
No. 08-00405—Thomas A. Varlan, District Judge.
Decided and Filed: August 11, 2010
Before: CLAY and McKEAGUE, Circuit Judges; POLSTER, District Judge.*
_________________
COUNSEL
ON BRIEF: Michael S. Shipwash, LAW OFFICE OF MICHAEL S. SHIPWASH,
Knoxville, Tennessee, for Appellant. R. Eddie Wayland, KING & BALLOW, Nashville,
Tennessee, Catherine H. Molloy, WALLER, LANDSDEN, DORTCH & DAVIS,
Nashville, Tennessee, for Appellees. Gerald Hayes, Seviersville, Tennessee, pro se.
McKEAGUE, J., delivered the opinion of the court, in which POLSTER, D. J.,
joined. CLAY, J. (pp. 17-24), delivered a separate dissenting opinion.
_________________
OPINION
_________________
McKEAGUE, Circuit Judge. Plaintiff-Appellant Betsy White appeals the district
court’s grant of summary judgment to Defendants-Appellees Wyndham Vacation
*
The Honorable Dan A. Polster, United States District Judge for the Northern District of Ohio,
sitting by designation.
1
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 2
Ownership, Fairfield Resorts, and Gerald Hayes based on a claim of judicial estoppel.
White did not disclose her sexual harassment claim against Defendants in her initial
bankruptcy filings. Because White’s limited attempts to disclose the harassment claim
before Defendants filed their motion to dismiss were inadequate, we AFFIRM the
district court’s grant of summary judgment.
I. BACKGROUND
Around June of 2001, White was hired to work in the office of Defendants
Wyndham and Fairfield. On November 15, 2006 White filed a complaint with the
Tennessee Human Rights Commission and the Equal Employment Opportunity
Commission (“EEOC”) (“harassment claim”) based on allegations that Defendant Hayes
subjected White to sexually suggestive and derogatory comments as well as to improper
sexual contact at work while she was employed by Defendants Wyndham and Fairfield.
On May 27, 2008, White requested that the EEOC issue her a Notice of Right to Sue,
which the EEOC granted on July 8, 2008.
On August 8, 2008, assisted by counsel, White filed a Chapter 13 Voluntary
Petition and Plan in the United States Bankruptcy Court for the Eastern District of
Tennessee. In her bankruptcy filings, White did not mention her harassment claim
against the Defendants. White should have listed her claims in two sections of the
Voluntary Petition and Plan. First, in the Statement of Financial Affairs, under Section
4, titled “Suits and administrative proceedings, executions, garnishments, and
attachments.” This section required White to list all claims and administrative
proceedings to which she was a party within one year immediately preceding the filing
of her bankruptcy case. Although White failed to list the harassment claim in that
section, she did list another proceeding to which she was a party within the preceding
year. White also failed to list the harassment claim as a personal asset on her bankruptcy
schedules. In particular, Question 21 of “Schedule B – Personal Property” required
White to list “other contingent and unliquidated claims of every nature . . . .” Question
21 also required her to give the estimated value of each claim. White swore, under
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 3
penalty of perjury, that her Statement of Financial Affairs and her answer to Question
21 were both true and accurate.
On August 12, 2008, the bankruptcy court entered an order scheduling the Plan
Confirmation Hearing for October 1, 2008 and also ordered White to make payments to
the trustee and directed her to attend a meeting of creditors on September 11, 2008. On
October 1, 2008 the bankruptcy court conducted the Plan Confirmation Hearing. The
harassment claim was not mentioned in the one page official transcript for the hearing.
On October 2, 2008, White filed her lawsuit against Defendants, seeking
$250,000 in compensatory damages and $1 million in punitive damages. On October
3, 2008, White filed an “Application to Employ Counsel” with the bankruptcy court for
the harassment claim. Her application did not identify whether she was the plaintiff or
the defendant in the claim (although it did state that her attorney would be compensated
through a 20% contingency fee), when the claim would be filed, the underlying facts
giving rise to the claim, or the amount of the claim.1
On November 6, 2008, Defendants Wyndham and Fairfield filed a motion to
dismiss on the grounds of judicial estoppel.2 In response, White partially amended her
“Statement of Financial Affairs” on November 11, 2008, to reflect her harassment claim
under the category of “Suits and administrative proceedings, execution, garnishments
and attachments.” Even after amending that statement, White did not disclose the
amount of the suit.
On November 11, 2008, White filed her response to Defendants’ motion to
dismiss on judicial estoppel grounds. She attached an amendment to her bankruptcy
filings and included an affidavit from her bankruptcy attorney. The affidavit states in
the relevant portion:
1
In contrast, on October 20, 2008 White filed a complaint with the bankruptcy court noting that
a creditor had potentially violated the automatic stay provision. (R. 10, Ex. 11.) This complaint provided
the facts giving rise to the complaint, when those facts took place, and the relief that White was seeking.
2
Pro se Defendant Hayes filed a written motion joining Wyndham’s motion to dismiss on
February 24, 2009.
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 4
5. Betsy White did inform me of her [harassment claim] when I met with
her. At no time did Ms. White attempt to conceal, or otherwise, keep that
information secret.
6. When I appeared in Court on Ms. White’s bankruptcy, this lawsuit
was discussed, as well as, any potential claims thereof.
7. I am unsure why documentation filed in her bankruptcy matter did not
list this action, however we have subsequently filed an Amendment to
cure this oversight.
(R. 12, Ex. A, pp. 1-2.)
II. ANALYSIS
The district court converted the Defendants’ motion for failure to state a claim
pursuant to FED. R. CIV. P. 12(b)(6) into a motion for summary judgment. The district
court then granted summary judgment for the Defendants based on judicial estoppel. See
Salehpour v. Univ. of Tenn., 159 F.3d 199, 203-04 (6th Cir. 1998).
1. Summary Judgment Standard
This court reviews the district court’s decision to grant summary judgment de
novo. Smith v. Henderson, 376 F.3d 529, 553 (6th Cir. 2004). Summary judgment is
appropriate if the pleadings, the discovery and disclosure materials on file, and any
affidavits show that there is no genuine issue as to any material fact and that the movant
is entitled to judgment as a matter of law. FED R. CIV. P. 56(c)(2). A genuine issue of
material fact exists when, “there is sufficient evidence favoring the nonmoving party for
a jury to return a verdict for that party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
249 (1986). In deciding whether this burden has been met by the movant, this court
views the evidence in the light most favorable to the nonmoving party. Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). However, to survive
summary judgment, the plaintiff must present affirmative evidence sufficient to show a
genuine issue for trial. Anderson, 477 U.S. at 249. Therefore, “[i]f the evidence is
merely colorable, or is not significantly probative, summary judgment may be granted.”
Id. at 249-50 (internal citations omitted).
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 5
2. Judicial Estoppel
This court reviews de novo the district court’s application of judicial estoppel.
See Lorillard Tobacco Co. v. Chester, Willcox & Saxbe, LLP, 546 F.3d 752, 757 (6th
Cir. 2008); Eubanks v. CBSK Financial Group, Inc., 385 F.3d 894, 897 (6th Cir. 2004).
The doctrine of judicial estoppel “generally prevents a party from prevailing in
one phase of a case on an argument and then relying on a contradictory argument to
prevail in another phase.” New Hampshire v. Maine, 532 U.S. 742, 749 (2001) (citation
omitted). This doctrine is “utilized in order to preserve ‘the integrity of the courts by
preventing a party from abusing the judicial process through cynical gamesmanship.’”
Browning v. Levy, 283 F.3d 761, 775 (6th Cir. 2002); see also Eubanks, 385 F.3d at 897
(“Judicial estoppel, however, should be applied with caution to ‘avoid impinging on the
truth-seeking function of the court, because the doctrine precludes a contradictory
position without examining the truth of either statement.’”).
In the bankruptcy context, this court has previous noted that “judicial estoppel
bars a party from (1) asserting a position that is contrary to one that the party has
asserted under oath in a prior proceeding, where (2) the prior court adopted the contrary
position ‘either as a preliminary matter or as part of a final disposition.’” Browning, 283
F.3d at 775-76 (citation omitted). Furthermore Browning noted that, “judicial estoppel
is inappropriate in cases of conduct amounting to nothing more than mistake or
inadvertence.” Id. at 776; see also New Hampshire, 532 U.S. at 753. Two circumstances
in which a debtor’s failure to disclose might be deemed inadvertent are: (1) “where the
debtor lacks knowledge of the factual basis of the undisclosed claims,” and (2) where
“the debtor has no motive for concealment.” Browning, 283 F.3d at 776 (finding that
the debtor there had, “no motive for concealment in light of its role as a
debtor-in-possession, having all the rights and duties of a trustee”).
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 6
i. Eubanks: The absence of bad faith prevents the application of judicial
estoppel
In Eubanks, this court examined Browning and noted that the “absence of bad
faith,” was also a factor to consider in determining whether it was appropriate to grant
judicial estoppel. 385 F.3d at 895. In deciding whether the application of judicial
estoppel was appropriate, the court in Eubanks found it particularly significant that the
plaintiffs actually made “numerous attempts” through their counsel to advise the
bankruptcy court and the trustee of their claim and, therefore, that there was no evidence
of “motive or intention” to conceal the potential claim. Id. at 898-99. The court
concluded by noting that judicial estoppel was inappropriate, “[b]ecause this Court has
previously held that evidence of an inadvertent omission of a claim in a previous
bankruptcy proceeding is a reasonable and appropriate factor to consider when analyzing
judicial estoppel’s applicability.” Id. at 899. Eubanks folded the absence of bad faith
in under the inadvertence prong, made the determination of whether there was evidence
of a “motive or intention” to conceal the potential claim critical to a finding of bad faith,
and found that, in the circumstances of that case, the numerous attempts by the plaintiffs
to cure an initial omission indicated that the omission was inadvertent, not intentional.
See Lewis v. Weyerhaeuser Co., 141 F. App’x 420, 426 (6th Cir. July 6, 2005) (“Thus,
under Eubanks, even if the debtor has knowledge of a potential cause of action and a
motive to conceal it, if the plaintiff does not actually conceal it and instead takes
affirmative steps to fully inform the trustee and the bankruptcy court of the action, it is
highly unlikely that the omission in the bankruptcy petition was intentional.”).3
3
Indeed, the facts in Eubanks certainly show that the plaintiffs there made “numerous attempts”
to correct their initial omission of a lender-liability claim from their bankruptcy filings before the defendant
filed a motion to dismiss based on judicial estoppel. In particular, before they filed their lender-liability
lawsuit in state court, the plaintiffs in Eubanks: (1) orally informed the bankruptcy trustee of their claim
during a meeting of the creditors. In response, the trustee instructed (both orally and by a letter sent on
the same day) their counsel to send him all of the documents regarding the claim. The plaintiffs then:
(2) sent the trustee the requested documents concerning the claim two days later; (3) contacted the trustee
on several occasions over the next several months to determine whether he intended to pursue the claim
on behalf of the estate; (4) amended their schedules in the bankruptcy matter to include defendant as a
creditor on Schedule F (although, they failed to amend their schedule B to include the claim under potential
assets); and (5) moved the bankruptcy court for a status conference on the issue of the lender liability
claim. Ultimately, however, a “Report of No Distribution” by the trustee rendered the lender-liability
lawsuit issue moot. See Eubanks, 385 F.3d at 895-96.
Furthermore, after the plaintiffs filed the lender-liability lawsuit and after the defendant filed a
motion to dismiss on the basis of judicial estoppel, the plaintiffs in Eubanks: (1) unsuccessfully moved to
allow the trustee to be substituted for plaintiffs in the lender liability action after the trustee initially refused
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 7
ii. Lewis: Circumstances in which the application of judicial estoppel was
appropriate
We have also recently considered a case where the plaintiff did not make
numerous attempts to correct her prior omission of a lawsuit from her bankruptcy
proceedings and where the application of juridical estoppel was found to be appropriate.
In Lewis, the court considered whether the plaintiff’s actions were the result of
inadvertence or a good-faith mistake. 141 F. App’x at 425. The court in Lewis
considered Eubanks but noted that, “Lewis’s actions in the present case pale in
comparison to the actions taken by the plaintiffs in Eubanks.” Id. at 427. The court
found: (1) that none of Lewis’s evidence suggested that her claim was “revealed to the
bankruptcy court or to the trustee before approval of the bankruptcy plan”; (2) that she
“never sought to amend her bankruptcy schedules, nor did she file a motion or make any
other sort of attempt to inform the bankruptcy court of her discrimination action”; and
(3) that “her only relevant contact with the [bankruptcy] trustee was a conversation with
a woman named ‘Phyllis’ whom Lewis alleges worked for the Trustee” but that “Lewis’s
description of that conversation . . . does not indicate that the conversation took place
before Weyerhaeuser raised the issue of judicial estoppel” and that it does not “establish
that Phyllis was aware that the cause of action had been omitted from the bankruptcy
petition.” Id. The Court in Lewis found that these “minimal alleged effort[s]” did not
serve “to establish that her omissions were inadvertent under Eubanks.” Id.
In finding that “Lewis acted intentionally and in bad faith,” the court also noted
that: (1) “Lewis began the process of filing her discrimination claim with the EEOC only
one month after the bankruptcy plan was approved, which tends to show that she waited
until the plan was approved before pursuing her discrimination action” and (2) while “a
non-attorney may not know the exact nature of ‘[o]ther contingent and unliquidated
claims of every nature’” it was hard to believe that Lewis did not understand the
language requiring her to disclose “the gross amount of income the debtor has received
to abandon the claim in the bankruptcy proceeding (evidentially, the trustee initially took actions to pursue
the claim and then abandoned it); and (2) filed an amendment to their original bankruptcy petition to add
the lender-liability claim to their bankruptcy schedule B. See id. at 896-97.
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 8
from employment” and, consequently, hard to believe that she had unintentionally
omitted altogether her prior employment with Weyerhaeuser. 141 F. App’x at 427.
3. Application of Judicial Estoppel to White’s Harassment Claim
In short, to support a finding of judicial estoppel, we must find that: (1) White
assumed a position that was contrary to the one that she asserted under oath in the
bankruptcy proceedings; (2) the bankruptcy court adopted the contrary position either
as a preliminary matter or as part of a final disposition; and (3) White’s omission did not
result from mistake or inadvertence. In determining whether White’s conduct resulted
from mistake or inadvertence, this court considers whether: (1) she lacked knowledge
of the factual basis of the undisclosed claims; (2) she had a motive for concealment; and
(3) the evidence indicates an absence of bad faith. In determining whether there was an
absence of bad faith, we will look, in particular, at White’s “attempts” to advise the
bankruptcy court of her omitted claim.4 The contrasting facts in Eubanks and Lewis
illuminate this inquiry.
i. Initial inquiries under the test for judicial estoppel
The Defendants have come forward with evidence that shows that: (1) White
assumed a position that was contrary to one that she asserted under oath in the
bankruptcy proceeding and (2) the bankruptcy court adopted the contrary position as a
preliminary matter. When White filed her harassment claim, she asserted a position
before the district court that was contrary (and continued to be contrary) to the position
that she asserted before the bankruptcy court. White omitted from her initial filings
(which she signed and swore were accurate under penalty of perjury) before the
4
White omitted the initial bankruptcy claim from the filings and, as discussed below, as a debtor,
she had a motive to not disclose the harassment claim. While Defendants are seeking summary judgment,
they have provided evidence showing White’s omission, that it resulted in the bankruptcy court adopting
her position (that there was no harassment claim, which was contrary to her later assertion of her
harassment claim), her knowledge of the harassment claim, and her motive for concealment. Since
Defendant’s have come forward with this evidence, White must now point out evidence that shows an
absence of bad faith (in particular, through her attempts to correct her initial omission) and that her
omission resulted from inadvertence or mistake and was not intentional. Indeed, “[t]o survive summary
judgment, the plaintiff must present affirmative evidence sufficient to show a genuine issue for trial.”
Anderson, 477 U.S. at 249 (“If the evidence is merely colorable, or is not significantly probative, summary
judgment may be granted.”).
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 9
bankruptcy court on August 8, 2008 any mention of her harassment claim, despite the
fact that those requirements specifically required her to list the harassment claim. See
11 U.S.C. §§ 521(a)(1), 541(a)(7) (describing the debtor’s affirmative duty to disclose
all of her assets to the bankruptcy court). This omission, which essentially stated that
the harassment claim did not exist, was contrary to White’s later assertion of the
harassment claim before the district court. It also conflicted with the fact that White had
requested and received a Notice of Right to Sue from the EEOC (and hired an attorney),
and with her earlier filing of complaints with the EEOC and the Tennessee Human
Rights Commission.5
Furthermore, on August 12, 2008, the bankruptcy court entered an order
requiring White to make payments to the trustee and directing her to attend a meeting
of the creditors. At this point, the bankruptcy court adopted her position: “[W]hen a
bankruptcy court – which must protect the interests of all creditors – approves a payment
from the bankruptcy estate on the basis of a party’s assertion of a given position, that,
in our view, is sufficient ‘judicial acceptance’ to estop the party from later advancing an
inconsistent position.” Lewis, 141 F. App’x at 425 (quoting Reynolds v. Comm’r, 861
F.2d 469, 473 (6th Cir. 1988)).6
The Defendants have also provided evidence that shows that (1) White had
knowledge of the factual basis of the undisclosed harassment claim, since she had
5
“It goes without saying that the Bankruptcy Code and Rules impose upon bankruptcy debtors
an express, affirmative duty to disclose all assets, including contingent and unliquidated claims.” In re
Costal Plains, Inc., 179 F.3d 197, 207-08 (5th Cir. 1999) (“The duty of disclosure in a bankruptcy
proceeding is a continuing one, and a debtor is required to disclose all potential causes of action.”). White
did not even (partially) amend her initial bankruptcy filings, which she made on August 8, 2009, until
November 11, 2008. She filed her harassment claim on October 3, 2008. Therefore, the filing of her
harassment claim was contrary to the position she had asserted on August 8, 2008 in her bankruptcy
filings. Furthermore, White had filed a complaint related to her harassment claim nearly two years before
she filed for bankruptcy. The EEOC terminated its processing of her harassment claim and issued a Notice
of Right to Sue (at White’s request) on July 8, 2009, a month before White filed her bankruptcy petition.
(See R. 10, Exs. 1-3.)
6
White’s attorney filed an affidavit that stated that: “When I appeared in Court on Ms. White’s
bankruptcy, this lawsuit was discussed, as well as, any potential claims thereof.” (R. 12, Ex. A, pp. 1-2.)
It does not appear, and White has not presented any evidence that, there was any contact between the
attorney and the bankruptcy court (or other communication of White’s harassment claim) until after the
bankruptcy court entered its order on August 12, 2008. Therefore, White’s initial position, which did not
disclose the harassment claim, was accepted by the bankruptcy court.
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 10
already filed a complaint before the EEOC. Indeed, she provided an affidavit from her
bankruptcy attorney stating that “Betsy White did inform me of her [harassment claim]
when I met with her.” (R. 11, Ex. A.) Furthermore, Defendants have provided evidence
showing that (2) White had a motive for concealment: if the harassment claim became
a part of her bankruptcy estate, then the proceeds from it could go towards paying
White’s creditors, rather than simply to paying White. See Lewis, 141 F. App’x at 426
(“It is always in a Chapter 13 petitioner’s interest to minimize income and assets.”).
ii. The absence of bad faith and White’s attempts to correct her initial
omission
After considering the evidence presented by the Defendants, the more difficult
question is whether White can point to evidence showing an absence of bad faith. Based
on Eubanks, she can do this by showing her attempts to correct her initial omission.
Since the bankruptcy system depends on accurate and timely disclosures, the extent of
these efforts, together with their effectiveness, is important.7 Furthermore, since judicial
estoppel seeks to prevent parties from abusing the judicial process through cynical
gamesmanship, the timing of White’s effort is also significant. Consequently, efforts to
correct an omission that came before the Defendants filed their motion to dismiss are
more important than efforts that came after the Defendants filed their motion to dismiss.
White has provided evidence that she made several attempts to correct the
omission of the harassment claim before the bankruptcy court. Viewing the evidence
in the light most favorable to White, two of these efforts – (1) Crawford’s affidavit and
(2) the Application to Employ Counsel – came before the Defendants filed their motion
7
White’s omission of the harassment claim from her initial bankruptcy filings is significant and
must be viewed against the backdrop of bankruptcy law:
“[T]he disclosure obligations of consumer debtors are at the very core of the bankruptcy
process and meeting these obligations is part of the price debtors pay for receiving the
bankruptcy discharge.” In re Colvin, 288 B.R. 477, 481 (Bankr. D. Mich. 2003); In re
Coastal Plains, Inc., 179 F.3d at 208 (citing Oneida Motor Freight, Inc. v. United Jersey
Bank, 848 F.2d 414 (3d Cir. 1988)) (“Viewed against the backdrop of the bankruptcy
system and the ends it seeks to achieve, the importance of this disclosure duty cannot
be overemphasized.”).
Lewis, 141 F. App’x at 424. Only adequate disclosure would give the bankruptcy court, the bankruptcy
trustee, and White’s creditors adequate time and information to respond to her harassment claim.
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 11
to dismiss. A third effort – (3) the amendment to White’s “Statement of Financial
Affairs” – came after the motion to dismiss. These limited and ineffective attempts to
correct her initial misfiling distinguish this case from Eubanks and make the application
of judicial estoppel appropriate.
a. Crawford’s affidavit
First, her bankruptcy attorney, Steven Crawford, filed an affidavit stating that:
“When I appeared in Court on Ms. White’s bankruptcy, this lawsuit was discussed, as
well as, any potential claims thereof.” (R. 12, Ex. A, pp. 1-2.)8 The affidavit is signed
on November 17, 2008 and it does not state when the appearance took place. However,
the docket sheet filed by Defendants states that the only “appearance” took place on
October 1, 2008 and that Seven Crawford (White’s attorney) and the bankruptcy trustee
appeared. (R. 12, Ex. 1, p.3; see also Appellee’s Br. pp. 37-38 (Appellees also seem to
concede this).) Viewing the evidence in the light most favorable to White, her attorney
discussed (to some degree) the harassment claim when he appeared in court on October
1, 2008, which represents an attempt to correct the initial omission.
However, in the affidavit, White has provided no evidence as to what, exactly,
was discussed, whom it was discussed with, or whether the omission from the initial
filings was discussed or emphasized. Indeed, there is no evidence that the timing of the
harassment claim (whether it arose before or after White’s bankruptcy filings) was
discussed. Moreover, the Defendants provided what they claim is the only official
transcript of this appearance before the bankruptcy court (on October 1, 2008), and this
transcript does not show any discussion of the harassment claim. There is no evidence
that either the bankruptcy court or the trustee asked for any additional information, and
White did not update her filings until after Defendants filed their motion to dismiss.
Furthermore, there is no evidence that White’s creditors were made aware of the
harassment claim. Taken together, this evidence does not show that White effectively
or adequately disclosed the harassment claim, which was allegedly worth $1.25 million.
8
White did not provide any affidavit or explanation for her actions.
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 12
This evidence does not show an absence of bad faith or that White’s omission resulted
from mistake or inadvertence.
b. Application to Employ Counsel
Second, on October 3, 2008, White filed an “Application to Employ Counsel”
with the bankruptcy court for the harassment claim. This filing did provide some notice
to the bankruptcy court that White had a harassment claim. However, her application
did not identify whether she was the plaintiff or the defendant in the lawsuit (although
the fact that her lawyer was representing her on a contingency fee suggests that she was
the plaintiff), the amount of the lawsuit, the facts giving rise to the lawsuit, or even when
the actions giving rise to the lawsuit took place. It also did not indicate that the
harassment claim had been omitted from her initial filings and it did not appear to trigger
any request for additional information from the bankruptcy court or the trustee.
Furthermore, it did not cause White to update her inaccurate filing statements.9
Consequently, the application did not adequately inform the court, the trustee, or White’s
creditors of the initial omission and it does not show an absence of bad faith or that
White’s omission resulted from mistake or inadvertence.
c. Amendment to White’s “Statement of Financial Affairs”
Third, after the Defendants filed their motion to dismiss, White partially
amended her “Statement of Financial Affairs” to reflect her harassment claim under the
category of “Suits and administrative proceedings, execution, garnishments and
attachments.” (R. 11, Ex. B (not disclosing the amount of the suit or whether White was
the plaintiff or the defendant).)
We will not consider favorably the fact that White updated her initial filings after
the motion to dismiss was filed. To do so would encourage gamesmanship, since White
only fixed her filings after the opposing party pointed out that those filings were
9
In contrast, when White filed a compliant on October 20, 2008 with the bankruptcy court, noting
that a creditor had potentially violated the automatic stay provisions, she provided specific information to
the bankruptcy court concerning the facts giving rise to the complaint, when those facts took place, and
the relief that she was seeking. (R. 10, Ex. 11 (not mentioning the harassment claim).)
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 13
inaccurate. See Barger, 348 F.3d at 1297 (“Allowing [a debtor] to back-up, re-open the
bankruptcy case, and amend his bankruptcy filings, only after his omission has been
challenged by an adversary, suggests that a debtor should consider disclosing potential
assets only if he is caught concealing them.”) (citation omitted).10 Furthermore, she did
not adequately fix those filings but, instead, only updated a part of them (so that they still
did not reflect the estimated value of the lawsuit).
d. Other factors
Several other factors further undermine the sufficiency of White’s attempts to
advise the bankruptcy court of her harassment claim and undermine any evidence
indicating the absence of “motive or intention” to conceal the harassment claim. In
particular, her initial bankruptcy filings, which listed a claim in one of the sections,
should have included the harassment claim in that same section. The inclusion of the
other suit indicates that White (who signed the bankruptcy filings) was aware of this
section of the bankruptcy filings, and of the requirement that she list her claims,
including her harassment claim, in it. (R. 10, Ex. 5, p. 8 (listing a Civil Summons for “Ft
10
The dissent argues that we should – effectively – put White in the position she would have been
in had she properly disclosed her harassment claim in her initial bankruptcy filings. Thus, the harassment
claim should proceed and any proceeds from the harassment claim would go into the bankruptcy estate:
they would go first to White’s creditors and then, if any amount was left over, to White. This would,
effectively, allow White to avoid the consequences of failing to disclose her harassment claim. We do not
believe that this is the proper course of action in this case and that this “so-called remedy would only
diminish the necessary incentive to provide the bankruptcy court with a truthful disclosure of the debtor’s
assets.” Barger, 348 F.3d at 1297 (citation omitted). Furthermore, we note that this court has previously
applied judicial estoppel in similar circumstances, even though the result prevented recovery by bankruptcy
creditors. See generally Lewis, 141 F. App’x at 420-27 (noting that Lewis filed an affidavit (on February
13, 2004) with the district court, stating that she discussed with an employee of the Chapter 13 bankruptcy
trustee, whose office received her ongoing payments, “what [she] should do with any proceeds of this
[discrimination] lawsuit,” and that this employee informed her that, if her discrimination claim was
successful, “some of the proceeds of the [discrimination] lawsuit would have to be paid into the bankruptcy
plan” to which Lewis observed that “[t]hat is exactly what I intend to do”). Similarly, the fact that the final
plan confirmation order appears to have contained an amended modification stating that “[a]ny and all
proceeds from debtor’s pending sexual harassment lawsuit,” does not change our determination. This
language, like White’s amendment to her “Statement of Financial Affairs,” only came after Defendants
filed their motion to dismiss based on judicial estoppel. Furthermore, this language still did not disclose
the amount of White’s harassment claim.
We also disagree with the dissent’s characterization of our opinion. See generally Dissenting Op.
at 17, 19-20, 23 (“The majority’s approach . . . fails to appreciate the absurdity of the result of its erroneous
application of judicial estoppel . . . the majority instead applies it recklessly . . . the majority engages in
speculation and conjecture . . . [t]he majority’s approach constitutes a perversion of justice . . . .”). Instead,
in the circumstances of this case, we analyzed our earlier opinions applying judicial estoppel, White’s
actions, and whether she presented affirmative, significantly probative evidence sufficient to show a
genuine issue for trial. After careful consideration, we found that she did not and, therefore, we affirmed
the district court’s decision.
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 14
Sanders Sevier Med Ctr v. Betsy White”)). In addition, White waited until just after the
plan confirmation hearing to file her harassment claim with the district court.11
In short, the limited and ineffective nature of White’s “attempts” to correct her
initial omission clearly distinguish this case from Eubanks, where the defendant made
numerous, effective attempts to correct the initial omission before (and after) the
defendant in that case filed a motion to dismiss based on a claim of judicial estoppel.
Furthermore, White’s attempts to correct the initial omission do not show an absence of
bad faith or that White’s omission resulted from mistake or inadvertence. Instead, the
limited evidence that White provides, the limited nature of her attempts to correct the
initial omission, the strong financial motivation she had to conceal the claim, and her
inadequate response even after the motion to dismiss was filed, all show that she had
motive and intention to conceal the claim.
4. White’s attorney’s affidavit does not excuse her initial omission
We also find that White’s argument, based on her bankruptcy attorney’s affidavit,
implying that she discussed her harassment claim with her attorney, but that her attorney
failed to include it in the filings, and that her attorney’s mistake should excuse her
omission of her harassment claim, is unpersuasive.12 Lewis examined a similar issue and
found that Lewis’s “assertion that she relied in good faith on the advice of her attorney’s
paralegal” was also “unpersuasive.” 141 F. App’x at 427. Lewis claimed that she had
11
The district court also questioned, “the timing of events in this case,” noting that:
Though Mr. Shipwash represented Plaintiff White [in the harassment claim] as early as
May 27, 2008, when he requested the Notice of Right to Sue on her behalf, the
Bankruptcy Court application to employ him was filed only after the meeting with
creditors and objections to confirmation hearing [on October 1, 2008]. The timing of
events in this matter raises questions as to why Plaintiff White’s discrimination claims
were not included on her original bankruptcy petition or at least timely amended after
the filing of the present lawsuit, all of which further weaken her contention of
inadvertence or mistake in this matter.
(R. 20 p. 14.) It appears that the EEOC’s Notice of a Right to Sue, which was issued on July 8, 2008, gave
White 90 days to file a lawsuit against Defendants (however, the box specifically giving 90 days is not
checked). (R. 10, Ex. 4.) White filed her harassment claim on October 2, 2008, just a few days before the
90 day period for filing that claim expired and just one day after her plan confirmation hearing.
12
Since White hired her attorney as her freely selected agent, the burden of showing, with
significantly probative evidence, that her attorney’s conduct should excuse her mistaken filing is hers.
Anderson, 477 U.S. at 249.
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 15
told a paralegal with her attorney’s law firm that she had a potential discrimination
claim, but that the paralegal or Lewis’s attorney made a “conscious decision” to not
present that information to the bankruptcy court “in contravention of the clear terms of
the bankruptcy petition.” Id. In rejecting Lewis’s arguments, the court in Lewis cited
to a case from the Eleventh Circuit, which noted that even though the “[debtor’s]
attorney failed to list [the debtor’s] discrimination suit on the schedule of assets despite
the fact that [the debtor] specifically told him about the suit,” that this “attorney’s
omission [was] no panacea.” Id. (quoting Barger v. City of Cartersville, Georgia, 348
F.3d 1289, 1295 (11th Cir. 2003) and citing to Link v. Wabash R.R. Co., 370 U.S. 626
(1962)).13 The court found no reason to deviate “from the general rule set forth in Link
that litigants are bound by the actions of their attorneys,” and, therefore, that Lewis’s
attorney’s omission did not excuse her omission. Id.
In this case, the affidavit from White’s bankruptcy attorney does indicate that
White informed her lawyer of her harassment claim when he met her and that she did not
attempt to conceal the information. However, her lawyer was “unsure” why the
information was not included, and there are a number of explanations (e.g., his mistake,
her mistake, a conscious decision). Furthermore, White has not provided any affidavit
(or other information) clarifying her understanding of the situation or explaining what
she discussed with her lawyer, or why the lawsuit was not included in her initial
bankruptcy filings. Therefore, based on the limited evidence that White has provided
13
Lewis discussed Link in the context of judicial estoppel. In approving the district court’s sua
sponte dismissal of a case after plaintiff’s counsel missed a pretrial conference, Link stated that:
Petitioner voluntarily chose this attorney as his representative in the action, and he
cannot now avoid the consequences of the acts or omissions of this freely selected agent.
Any other notion would be wholly inconsistent with our system of representative
litigation, in which each party is deemed bound by the acts of his lawyer-agent and is
considered to have notice of all facts, notice of which can be charged upon the attorney.
370 U.S. at 633-36. However, we have been reluctant to “uphold the dismissal of a case merely to
discipline an attorney.” Coleman v. American Red Cross, 23 F.3d 1091, 1094-95 (6th Cir. 1994)
(numerous citations omitted) (noting, in the context of dismissal for violation of a protective order, that
“dismissal of an action for an attorney’s failure to comply is a harsh sanction which the court should order
only in extreme situations showing ‘a clear record of delay or contumacious conduct by the plaintiff’ . . .
‘[d]ismissal is usually inappropriate where the neglect is solely the fault of the attorney’” (citation omitted;
emphasis in original).).
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 16
and pointed to, it is unclear whether White or her attorney is responsible for the
omission.
In any event, the mistake does not lie solely with White’s attorney. In addition
to choosing her attorney, White signed the bankruptcy petition that omitted the filing.
By signing, she swore, under penalty of perjury, that the filing was accurate. The initial
bankruptcy petition contained one proceeding in it already, which was listed in the
section where the harassment claim should have been listed. (R. 10, Ex. 5, p. 8.) The
fact that one proceeding was listed should have further informed White that other claims
(like the harassment claim) needed to be listed, especially given the apparent importance
(both financially and personally) of the harassment claim. Consequently, we will not
deviate “from the general rule set forth in Link that litigants are bound by the actions of
their attorneys,” and, therefore, find that the ambiguous statements in the affidavit from
White’s bankruptcy attorney (which is the only evidence on this matter that she points
to) do not excuse her omission. Id.
III. CONCLUSION
White asserted a position before the bankruptcy court that was contrary to the
position that she asserted before the district court and the bankruptcy court accepted her
position. She had a motive to conceal and knowledge of the factual basis of her
harassment claim. Furthermore, the evidence White has presented of her attempts to
advise the bankruptcy court and the trustee of her harassment claim does not excuse her
initial omission. Therefore, we AFFIRM the decision of the district court.
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 17
_________________
DISSENT
_________________
CLAY, Circuit Judge, dissenting. The majority’s approach to this case fails to
appreciate the absurdity of the result of its erroneous application of judicial estoppel.
Plaintiff has brought suit based on serious sexual harassment charges, including
improper sexual contact at work. In a normal situation, if Plaintiff could prove the
allegations, she would personally be entitled to damages. The fact that Plaintiff was in
bankruptcy proceedings changes the normal course of events. But because the claim
arose before she filed for bankruptcy, her creditors should be entitled to any proceeds
that could be used to repay Plaintiff’s debts. Therefore, our law permits damages to be
awarded to the bankruptcy estate in order to insure Plaintiff’s creditors receive their fair
share.
It is undisputed that Plaintiff failed to disclose her claim against Wyndham
Vacation Ownership (“Wyndham”) in her initial bankruptcy filings. However, she has
come forward with sufficient evidence to allow a reasonable factfinder to find that she
notified the trustee and the bankruptcy court of her claim before it was filed. The
majority believes that because of Plaintiff’s failure to make the appropriate disclosure
in connection with the initial bankruptcy filing, neither she nor her creditors should be
entitled to any recovery. Instead, the majority finds that Wyndham, the employer who
allegedly employed someone who repeatedly sexually harassed Plaintiff, should be
excused from paying any damages to any party whatsoever.
“Judicial estoppel is an equitable doctrine to be invoked by this court at its
discretion.” Pennycuff v. Fentress County Bd. of Educ., 404 F.3d 447, 453 (6th Cir.
2005) (citing New Hampshire v. Maine, 532 U.S. 742, 750 (2001)). In applying an
equitable doctrine, we need to weigh the benefits involved and the degree of fault of the
parties. The only fault attributed to Plaintiff in the instant case is the contested issue of
whether she concealed her sexual harassment claim from the bankruptcy court.
Plaintiff’s creditors, who would have had a right to recover from any judgment in favor
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 18
of Plaintiff, are blameless in this dispute. See Cannon-Stokes v. Potter, 453 F.3d 446,
448 (7th Cir. 2006) (acknowledging that judicial estoppel “is an equitable doctrine, and
it is not equitable to employ it to injure creditors who are themselves victims of the
debtor’s deceit”). Meanwhile, Defendant stands accused of allowing sexual harassment
in the workplace and would suffer no “unfair detriment” from Plaintiff’s alleged
inconsistent positions, since it had no stake in the bankruptcy proceedings. See New
Hampshire, 532 U.S. at 751.
The majority ignores the fact that Defendant suffered no prejudice from
Plaintiff’s initial failure to disclose her claim and improperly applies in a formulaic
manner the two-part test for judicial estoppel articulated in Browning v. Levy, 283 F.3d
761, 776 (6th Cir. 2002). That test ignores a third consideration that the Supreme Court
has found relevant, namely “whether the party seeking to assert an inconsistent position
would derive an unfair advantage or impose an unfair detriment on the opposing party
if not estopped.” New Hampshire, 532 U.S. at 751.1 Additionally, the Supreme Court
has emphasized that it did not “establish inflexible prerequisites or an exhaustive
formula for determining the applicability of judicial estoppel. Additional considerations
may inform the doctrine’s application in specific factual contexts.” Id.
The majority’s position is to absolve of all liability a defendant who has not been
injured in any way by Plaintiff’s actions – even though it is factually disputed whether
Plaintiff failed to notify the bankruptcy court of her sexual harassment suit and even
though her creditors are accused of no wrongdoing. The equitable nature of judicial
estoppel means that there is no bar to Plaintiff’s claim unless the Court determines that
barring the suit is the most equitable outcome. The proper outcome is not foretold by
applying some sort of litmus test but is determined in the sound discretion of the Court.
We have often remarked that judicial estoppel “should be applied with caution to ‘avoid
impinging on the truth-seeking function of the court.’” Eubanks v. CBSK Financial
Group, Inc., 385 F.3d 894, 897 (6th Cir. 2004) (quoting Teledyne Indus., Inc. v. NLRB,
1
Browning did not create some sort of separate test to be applied in the bankruptcy setting. For
support of its two-part test, it cites to Teledyne Indus., Inc. v. NLRB, 911 F.2d 1214, 1218 (6th Cir. 1990),
a review of a National Labor Relations Board order that had nothing to do with bankruptcy.
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 19
911 F.2d 1214, 1218 (6th Cir. 1990)). The majority in this case recklessly applies
judicial estoppel, barring a suit to the detriment of Plaintiff and her creditors even though
Plaintiff has come forward with evidence that she informed the bankruptcy court of her
sexual harassment claim. The evidence presented by Plaintiff creates clear factual
disputes which make this case inappropriate for the application of judicial estoppel at the
summary judgment stage.
Judicial estoppel reasonably precludes suits in cases where a plaintiff has failed
to disclose a potential suit to the bankruptcy court because otherwise, potential plaintiffs
would be able to reap a windfall by retaining monetary awards that properly should be
made available to their creditors. Judicial estoppel may be appropriate in a case where
a plaintiff has made no legitimate attempt to inform the bankruptcy court or the
bankruptcy estate of his or her potential claims. See Lewis v. Weyerhaeuser Co., 141 F.
App’x 420, 427 (6th Cir. July 6, 2005) (finding that apart from a phone call to the
trustee’s office on an undisclosed date, the plaintiff did not “make any other sort of
attempt to inform the bankruptcy court of her discrimination action”).2 However, if a
plaintiff has attempted to inform both the bankruptcy court and the trustee in a
meaningful way of a potential suit even before it is filed, then it is hardly equitable to
absolve the defendant of liability. Courts should endeavor to insure that a plaintiff’s
creditors, if possible, have a real chance to recover any damages owed by a defendant.
See Eubanks, 385 F.3d at 898 n.1 (acknowledging that “various courts in other
jurisdictions have held that a trustee’s knowledge of the claim precludes the application
of judicial estoppel since the plaintiff was obviously not trying to defraud the court if
they placed the trustee on notice”).
2
The majority’s characterization of Lewis as representing “similar circumstances” to those
presented in this case is belied by a look at the factual record of each case. In Lewis, we cited with
approval the district court’s opinion that noted that none of Lewis’ evidence suggested that her claims
“were revealed to the bankruptcy court or to the trustee before approval of the bankruptcy plan.” 141 F.
App’x at 427. We emphasized the plaintiff’s “failure to notify the bankruptcy court” and specifically noted
that the plaintiff never established that her contact with an alleged employee of the trustee took place
before the issue of judicial estoppel was raised. In this case, meanwhile, we have a signed affidavit from
Plaintiff’s lawyer swearing that he informed both the bankruptcy court and the trustee of Plaintiff’s sexual
harassment suit. Furthermore, the lawyer filed documents available to any party in the bankruptcy
proceedings requesting an attorney on a contingency fee basis for a sexual harassment suit. Both of these
actions took place before Plaintiff had even filed her sexual harassment suit and before Defendant raised
a defense of judicial estoppel.
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 20
The majority ignores the lesson of Eubanks by focusing on whether the omission
in Plaintiff’s initial bankruptcy filing is attributable “to nothing more than mistake or
inadvertence.” Browning, 283 F.3d at 776. In Lewis, we found that in light of Eubanks,
an “argument that judicial estoppel must apply where a debtor cannot establish ‘mistake
or inadvertence’ under Browning is unpersuasive.” 141 F. App’x at 427. In Lewis, we
acknowledged that Eubanks teaches that “even if the debtor has knowledge of a potential
cause of action and a motive to conceal it, if the plaintiff does not actually conceal it and
instead takes affirmative steps to fully inform the trustee and the bankruptcy court of the
action, it is highly unlikely that the omission in the bankruptcy petition was intentional.”
Id. at 426.
The majority imports a “bad faith” requirement from Eubanks, but it still applies
judicial estoppel in too rigid a fashion. Furthermore, in rushing to foreclose a judicial
remedy to Plaintiff and her creditors, the majority engages in speculation and conjecture
about Plaintiff’s motivations in order to find that she was acting in bad faith rather than
find that the exclusion of her sexual harassment suit was negligent or inadvertent. Even
though this matter is before the Court on summary judgment, under which standard
Plaintiff should be afforded the benefit of the doubt, the majority inexplicably resolves
all disputed issues of material fact in favor of Defendant. The majority places the entire
burden on Plaintiff to show an absence of bad faith and places little or no burden on
Defendant to show the existence of bad faith. In skewing the appropriate standard to the
detriment of Plaintiff, the majority also loses sight of the crucial fact in Eubanks that
“[t]here is record evidence . . . that Plaintiffs made the court, and the Trustee, aware of
the potential civil claim against Defendant before the bankruptcy action closed, although
the claim was omitted from Plaintiffs’ bankruptcy schedule form.” 385 F.3d at 898.
Similar evidence is assuredly present in this case, particularly if, unlike the majority, we
apply the proper summary judgment standard.
Plaintiff presents two facts to support her contention that she notified the
bankruptcy court and the trustee of her sexual harassment claim. First, she provides her
bankruptcy attorney’s signed, sworn statement to the effect that “When I appeared in
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 21
Court on Ms. White’s bankruptcy, this lawsuit was discussed, as well as, any potential
claims thereof.” Notwithstanding the majority’s contention that Plaintiff’s attorney’s
affidavit lacked sufficient specificity, the affidavit clearly states that the lawsuit and
potential claims were discussed in the bankruptcy court. Second, Plaintiff notes that on
October 3, 2008, she filed an “Application to Employ Counsel” with the bankruptcy
court. Viewing the evidence in the light most favorable to the Plaintiff, as we must at
this stage of the proceedings, her counsel informed the bankruptcy court and the trustee
of the sexual harassment suit directly in court and indirectly through the Application to
Employ Counsel. Those facts strongly suggest that she did not attempt to conceal the
sexual harassment claim.
The time-line on this case is crucial. Plaintiff filed her bankruptcy petition on
August 8, 2008, and the court ordered White to make payments to the trustee on August
12, 2008. The plan confirmation hearing was scheduled for October 1, 2008. At that
hearing, the first in-court hearing in the bankruptcy proceedings, Plaintiff’s bankruptcy
attorney notified the court about the sexual harassment claim. Plaintiff filed her sexual
harassment lawsuit after this hearing – where her attorney notified the trustee and the
bankruptcy court of her claim.3
The majority refuses to admit it, but it is apparent that it does not believe
Plaintiff’s bankruptcy attorney. However, when an officer of the court swears that the
lawsuit was discussed in front of the bankruptcy judge and the trustee, a reasonable
factfinder could certainly believe that such a conversation occurred. See, e.g., United
States v. Hernandez, 31 F.3d 354, 361 (6th Cir. 1994) (holding that when an attorney,
who is an officer of the court, testifies, “absent some indication of misconduct, the court
3
The district court and the majority infer bad motive from the filing of the sexual harassment
complaint after the plan confirmation hearing. Plaintiff had received her right-to-sue letter in July 2008,
but did not file suit until after the plan confirmation hearing on October 1, 2008. Construing the facts most
favorably for Plaintiff, however, the attorney told the bankruptcy court and the trustee about the case at
the plan confirmation hearing. See Martin v. Cincinnati Gas and Elec. Co., 561 F.3d 439, 443 (6th Cir.
2009) (noting that at the summary judgment stage, “the district court must construe the evidence and draw
all reasonable inferences in favor of the nonmoving party”). The proper inference to make on Plaintiff’s
behalf is that the filing of the claim was the result of the fact that the statute of limitations was about to run.
The right-to-sue letter was received on July 8, 2008, meaning the 90-day period would run less than a week
after the sexual harassment suit was filed. Plaintiff would hardly be the first litigant to wait until the statute
of limitations was about to run to file her lawsuit.
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 22
is entitled to accept his representations on the issue”). The majority ignores a core tenet
of summary judgment jurisprudence by failing to make all inferences in favor of Plaintiff
as the non-moving party. The majority inexplicably attributes the lack of record
evidence that the trustee responded with requests for additional information as proof that
the Plaintiff’s bankruptcy attorney failed to inform the court of Plaintiff’s suit. Not only
is it troubling that an absence of evidence could, in the mind of the majority, trump the
sworn statement of an officer of the court, but the majority also ignores the possibility
that the trustee was not overly concerned about the suit because the potential proceeds
were too speculative to worry about in what was a relatively small bankruptcy
proceeding. The bankruptcy estate had allowed claims of less than $17,000, and no
individual creditor had a claim of more than $4,000.
If Plaintiff’s bankruptcy attorney’s sworn statement was insufficient to show that
Plaintiff was not attempting to conceal her suit, two days later, Plaintiff filed an
application to employ counsel on a contingency basis. The majority contends that
Plaintiff failed to state in the application whether she was plaintiff or defendant in the
lawsuit, but that motion was accompanied by an affidavit from her sexual harassment
attorney which stated: “I do not hold nor represent an interest adverse to the Debtor
Betsy Ann White’s sexual harassment lawsuit; I am eligible to serve as counsel to the
Debtor, Betsy Ann White in her sexual harassment lawsuit.” If Plaintiff were attempting
to hide her sexual harassment lawsuit from her creditors, then it was assuredly a bizarre
decision to notify them of her wish to employ counsel seeking to represent her in that
lawsuit.
Plaintiff’s position that a proper resolution of the case would allow Plaintiff an
opportunity to prove her case is bolstered by the fact that Plaintiff’s actual plan
confirmation order, issued on January 14, 2009, called for “Any and all net proceeds
from debtor(s) pending sexual harassment lawsuit claim to be paid into the plan as
additional plan payments, except for Court approved legal fees and expenses.” Thus, the
bankruptcy court reached the appropriate result. If Plaintiff could prove she was
sexually harassed, Defendant should pay damages, and Plaintiff’s creditors should
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 23
receive the money owed to them. Obviously, notification to creditors made after a
defendant’s motion to dismiss may require a different result to avoid providing
incentives for debtors to hide potential claims until those claims are discovered by an
opposing party. However, the record in this case amply supports a determination that
a reasonable jury could find that Plaintiff made the trustee and the bankruptcy court
aware of the sexual harassment claim before it was even filed, and certainly before
Defendant’s motion to dismiss in this action.
The majority therefore attempts to punish Plaintiff for failing to properly disclose
her sexual harassment suit, even though a factfinder could easily determine that she
informed both the trustee and the bankruptcy court of the suit before the possibility of
judicial estoppel was ever raised. Furthermore, the majority simply never comes to
terms with the fact that the real victim of such unorthodox and aggressive use of judicial
estoppel is not the debtor but the bankruptcy estate, and by extension the debtor’s
creditors. Quite simply, if the debtor was not intentionally hiding her suit and in fact
disclosed it to both the bankruptcy judge and the trustee, it is hardly equitable to deprive
the bankruptcy estate of the right to its share of any recovery. On the other hand, the
outcome proposed by Plaintiff is amply supported by our precedents and rulings in other
cases that decline to apply judicial estoppel when subsequent conduct indicates that the
initial omission was inadvertent or not done in bad faith. See, e.g., Eubanks, 385 F.3d
at 899; Browning, 283 F.3d at 776 (holding that “judicial estoppel is inappropriate in
cases of conduct amounting to nothing more than mistake or inadvertence”); Matthews
v. Potter, 316 F. App’x 518, 522 (7th Cir. 2009) (finding judicial estoppel inapplicable
where plaintiff “did not conceal her administrative complaints during the bankruptcy
proceedings”).
The majority’s approach constitutes a perversion of justice because, under its
approach, even if Plaintiff could prevail in her sexual harassment lawsuit, neither she nor
her creditors could receive any damages. Contrary to both our case law and basic
notions of justice, the majority has decided that Defendant, who allegedly employed
someone who repeatedly sexually harassed Plaintiff, should pay no damages and suffer
No. 09-5626 White v. Wyndham Vacation Ownership, et al. Page 24
no consequence for its egregious behavior under any circumstances – even if Plaintiff
could demonstrate to a trier of fact that she did not deliberately conceal her sexual
harassment claim.
I therefore respectfully dissent.