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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 12-15548
________________________
D.C. Docket No. 2:09-cv-01732-KOB
SANDRA SLATER,
Plaintiff - Appellant,
versus
UNITED STATES STEEL CORPORATION,
Defendant - Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Alabama
________________________
ON PETITION FOR REHEARING
(September 18, 2017)
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Before ED CARNES, Chief Judge, TJOFLAT, MARCUS, WILSON, WILLIAM
PRYOR, MARTIN, JORDAN, ROSENBAUM, JULIE CARNES, and JILL
PRYOR, Circuit Judges.∗
JILL PRYOR, Circuit Judge:
When an individual files for bankruptcy, he must file sworn disclosures
listing his debts and his assets, including any pending civil claims, and identifying
any lawsuits he has filed against others. Occasionally, a plaintiff who has a
pending civil lawsuit fails to list the claims or lawsuit in these disclosures. In
omitting this information, the plaintiff effectively takes inconsistent positions in
the two judicial proceedings by asserting in the civil lawsuit that he has a claim
against the defendant while denying under oath in the bankruptcy proceeding that
the claim exists.
The equitable doctrine of judicial estoppel is intended to protect courts
against parties who seek to manipulate the judicial process by changing their legal
positions to suit the exigencies of the moment. Today, we address how this
doctrine should be applied when a plaintiff takes inconsistent positions by pursuing
in district court a civil claim that he failed to disclose as an asset in his bankruptcy
proceedings. We reaffirm our precedent that when presented with this scenario, a
∗
Judge Hull recused herself and did not participate in these en banc proceedings. Judge
Newsom joined the Court on August 4, 2017, and did not participate in these en banc
proceedings.
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district court may apply judicial estoppel to bar the plaintiff’s civil claim if it finds
that the plaintiff intended to make a mockery of the judicial system.
But what suffices for a district court to find that a plaintiff who did not
disclose a civil lawsuit in bankruptcy filings intended to make a mockery of the
judicial system? Our Court has endorsed a rule that the mere fact of the plaintiff’s
nondisclosure is sufficient, even if the plaintiff corrected his bankruptcy
disclosures after the omission was called to his attention and the bankruptcy court
allowed the correction without penalty. See Barger v. City of Cartersville,
348 F.3d 1289 (11th Cir. 2003); Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282
(11th Cir. 2002). We granted en banc review to reconsider this precedent.
We hold today that when determining whether a plaintiff who failed to
disclose a civil lawsuit in bankruptcy filings intended to make a mockery of the
judicial system, a district court should consider all the facts and circumstances of
the case. The court should look to factors such as the plaintiff’s level of
sophistication, his explanation for the omission, whether he subsequently corrected
the disclosures, and any action taken by the bankruptcy court concerning the
nondisclosure. We acknowledge that in this scenario the plaintiff acted
voluntarily, in the sense that he knew of his civil claim when completing the
disclosure forms. But voluntariness alone does not necessarily establish a
calculated attempt to undermine the judicial process. We therefore overrule the
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portions of Burnes and Barger that permit a district court to infer intent to misuse
the courts without considering the individual plaintiff and the circumstances
surrounding the nondisclosure.
Here, the district court applied judicial estoppel to bar plaintiff Sandra
Slater’s discrimination and retaliation claims in a lawsuit against her employer,
U.S. Steel Corporation, because Slater failed to disclose these civil claims as assets
in her bankruptcy. Relying on our precedent in Burnes and Barger, the district
court inferred from Slater’s nondisclosure alone that she intended to manipulate the
judicial process. A panel of our Court affirmed, concluding that the district court
did not abuse its discretion in applying judicial estoppel. Because we announce a
new inquiry for evaluating intent to make a mockery of the judicial system, we
remand to the panel so that it may decide whether the district court abused its
discretion in light of this new standard.
I. Factual Background and Proceedings Below
Slater, a high school graduate, worked for U.S. Steel for more than 10 years
performing general manual labor. Slater sued U.S. Steel for discrimination based
on race and sex in violation of Title VII, 42 U.S.C. § 2000e et seq, and 42 U.S.C.
§ 1981, and for retaliating against her after she complained of race and sex
discrimination, in violation of Title VII and § 1981. U.S. Steel moved for
summary judgment on all of Slater’s claims. The district court granted the motion
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in part and denied it in part. The court denied summary judgment on Slater’s
claims that she suffered discrimination in job assignments based on her sex and
was fired in retaliation for complaining about racial discrimination. Despite
withstanding summary judgment, Slater never had an opportunity to present these
claims to a jury.
About a month after the district court’s summary judgment ruling, Slater—
represented by different counsel than in her discrimination case—filed a petition
for Chapter 7 bankruptcy. She did not disclose her lawsuit against U.S. Steel in
her bankruptcy petition or the schedules filed with her petition. When asked under
penalty of perjury in Schedule B-Personal Property to identify any “contingent and
unliquidated claims,” she answered “none.” Voluntary Pet. at 10, In re Slater, No.
11-02865 (Bankr. N.D. Ala. June 2, 2011), ECF No. 1. And when asked under
penalty of perjury in her Statement of Financial Affairs to identify any “suits and
administrative proceedings to which the debtor is or was a party within one year
immediately preceding the filing of this bankruptcy case,” she again answered
“none.” Id. at 29 (emphasis omitted).
After Slater filed her disclosures, the bankruptcy trustee issued a Report of
No Distribution, finding there was no property available for distribution from the
estate over and above that exempted by law. In the absence of any objections to
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the report, 30 days later the estate became presumptively fully administered. See
Fed. R. Bankr. P. 5009(a).
The next day, U.S. Steel again moved for summary judgment in the
employment discrimination case, this time on the ground that because Slater failed
to disclose her civil claims in the bankruptcy proceeding, the doctrine of judicial
estoppel should bar her from pursuing those claims. In response, Slater testified by
declaration that she did not intentionally misrepresent facts to the bankruptcy
court. She further explained that she misunderstood the question in the Statement
of Financial Affairs regarding “suits and administrative proceedings to which the
debtor is or was a party” as asking only about suits filed against her.
The next business day after U.S. Steel filed the motion, Slater amended her
Statement of Financial Affairs and Schedule B to her bankruptcy petition to
disclose her claims against U.S. Steel. The bankruptcy trustee then filed with the
bankruptcy court a request to employ the lawyers who were representing Slater in
her employment action to continue to pursue the claims against U.S. Steel on
behalf of the estate. The bankruptcy court granted the motion.
The bankruptcy case proceeded: upon Slater’s petition, the court converted
the case from a Chapter 7 to a Chapter 13 proceeding, and Slater filed a proposed
Chapter 13 plan, which the bankruptcy court confirmed. Later, though, when
Slater failed to pay the trustee under the terms of the confirmed plan, the
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bankruptcy court dismissed her case, meaning her debts never were discharged in
bankruptcy.
Slater’s civil action fared no better. The district court granted U.S. Steel’s
motion for summary judgment, applying the doctrine of judicial estoppel to bar her
claims. The court rejected Slater’s arguments that her omission of the civil claims
in the bankruptcy proceeding was inadvertent and that she never intended to thwart
the judicial process. The court explained that under our circuit precedent, a failure
to disclose is “‘inadvertent’ only when . . . the debtor either lacks knowledge of the
undisclosed claims or has no motive for their concealment.” Order at 11 (emphasis
added) (Doc. 89)1 (quoting Barger, 348 F.3d at 1295-96).
The district court found that Slater knew about her civil claims, filed in
2009, when she completed the bankruptcy disclosures in 2011 and that she had a
motive to conceal the claims “to defraud creditors into accepting her [bankruptcy]
case as one involving no assets for distribution despite the real possibility with the
impending trial of the discrimination case that she could soon be receiving a
money settlement or a money judgment in her favor.” Id. at 12. Although Slater
corrected her disclosures immediately after U.S. Steel brought the omissions to
light, the district court found this fact irrelevant because “waiting until after being
caught to rectify the omission is too little, too late.” Id. Following Burnes,
1
Citations to “Doc.” refer to numbered docket entries in the district court record.
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Barger, and their progeny, the court drew an inference that Slater intended to make
a mockery of the judicial system based on its finding that she had knowledge of the
undisclosed claims and a motive to conceal them.
Slater appealed. After oral argument, a panel of this Court affirmed the
district court’s grant of summary judgment to U.S. Steel. In a concurring opinion,
Judge Tjoflat urged the Court to review en banc our precedent permitting the
inference on which the district court relied, that a plaintiff who omitted a civil
claim as an asset in bankruptcy filings necessarily intended to make a mockery of
the judicial system. See Slater v. U.S. Steel Corp., 820 F.3d 1193, 1235 (11th Cir.)
(Tjoflat, J., concurring) (explaining that our precedent validating such an inference
“guarantees the very mockery of justice the doctrine of judicial estoppel was
designed to avoid”), reh’g en banc granted, op. vacated, No. 12-15548 (11th Cir.
Aug. 30, 2016). We agreed to rehear the case en banc and vacated the panel
opinion.
II. Overview of Bankruptcy Principles
Before turning to judicial estoppel, we pause for an overview of the Chapter
7 and Chapter 13 bankruptcy procedures that allow debtors to discharge their
financial obligations and receive a fresh start to explain how a debtor’s pending
civil claim is treated in bankruptcy. See Grogan v. Garner, 498 U.S. 279, 286-87
(1991) (explaining that bankruptcy is designed to give “honest but unfortunate
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debtor[s]” the opportunity to “reorder their affairs, make peace with their creditors,
and enjoy a new opportunity in life with a clear field for future effort, unhampered
by the pressure and discouragement of preexisting debt” (internal quotation marks
omitted)). For our purposes here, the main difference between a Chapter 7 and a
Chapter 13 proceeding is that creditors are paid primarily with the debtor’s
prepetition assets in Chapter 7 and with his postpetition earnings in Chapter 13.
“Chapter 7 allows a debtor to make a clean break from his financial past, but
at a steep price: prompt liquidation of the debtor’s assets.” Harris v. Viegelahn,
135 S. Ct. 1829, 1835 (2015). When a debtor files a Chapter 7 petition, his assets,
subject to certain exemptions, are immediately transferred to a bankruptcy estate.
11 U.S.C. § 541(a)(1). The Chapter 7 trustee is responsible for selling the property
in the estate and distributing the proceeds to creditors.2 Id. §§ 704(a)(1), 726.
Although a Chapter 7 debtor “must forfeit virtually all his prepetition property,”
the bankruptcy laws give the debtor an immediate fresh start and a break from the
financial past “by shielding from creditors his postpetition earnings and
acquisitions.” Harris, 135 S. Ct. at 1835. The debtor may keep any wages earned
or assets acquired after the bankruptcy filing. Id. (citing 11 U.S.C. § 541(a)(1)).
2
When all the debtor’s assets are exempt from the bankruptcy estate, meaning that no
property is available for distribution to creditors, streamlined procedures may apply. See Fed. R.
Bankr. P. 2002(e).
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In contrast, a debtor who proceeds under Chapter 13 may keep his
prepetition property but must repay his creditors over time, generally from what he
earns after filing bankruptcy. The Chapter 13 debtor proposes a plan to repay his
debts over a three- or five-year period; the plan must be confirmed by the
bankruptcy court. Payments under the plan “are usually made from a debtor’s
‘future earnings or other future income.’” Id. (quoting 11 U.S.C. 1322(a)(1)). In
determining the sufficiency of the proposed plan payments, the bankruptcy court
must consider the value of the debtor’s assets because the court may confirm the
plan only if the present value of the proposed repayments is “not less than the
amount that would be paid” to creditors if the debtor’s assets were liquidated under
Chapter 7. See 11 U.S.C. § 1325(a)(4). If the bankruptcy court confirms the plan,
the trustee generally collects a portion of the debtor’s wages through payroll
deduction and then distributes the withheld wages to the creditors at the plan’s
conclusion. See Harris, 135 S. Ct. at 1835. If the debtor completes his payments
under the plan, his debts are discharged. 3 See id.
When a debtor files for bankruptcy under Chapter 13, his assets are
transferred to the bankruptcy estate. See 11 U.S.C. § 1306(a). But after the
bankruptcy plan is confirmed, the property of the estate returns to the debtor except
3
If the debtor fails to make payments due under a Chapter 13 plan, he may be forced to
convert to a Chapter 7 proceeding or the court may dismiss his bankruptcy case entirely. See
11 U.S.C. § 1307(a)-(c).
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as provided in the plan or order confirming the plan. See id. § 1327(b). A Chapter
13 debtor generally is permitted to retain his assets, such as his home or car. See
Harris, 135 S. Ct. at 1835.
Given these differences, when a debtor’s assets include a civil claim, the
claim will be treated differently depending upon whether the bankruptcy is a
Chapter 7 or a Chapter 13 proceeding. Because a Chapter 7 debtor forfeits his
prepetition assets to the estate, only the Chapter 7 trustee, not the debtor, has
standing to pursue a civil legal claim unless the trustee abandons the asset, which
then returns the claim to the possession and control of the debtor. See Parker v.
Wendy’s Int’l, Inc., 365 F.3d 1268, 1272 (11th Cir. 2004). But a Chapter 13 debtor
retains standing to continue to pursue the civil claim. See 11 U.S.C. § 1303; Fed.
R. Bankr. P. 6009 (“With or without court approval, the . . . debtor in possession
may prosecute . . . any pending action or proceeding by . . . the debtor, or
commence and prosecute any action or proceeding in behalf of the estate before
any tribunal.”). Thus, a Chapter 13 debtor may continue to control the lawsuit and
the terms of any settlement. See Crosby v. Monroe Cty., 394 F.3d 1328, 1331 n.2
(11th Cir. 2004). With these bankruptcy principles and distinctions in mind, we
now turn to the doctrine of judicial estoppel.
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III. Judicial Estoppel Analysis
The precise issue before us is how the doctrine of judicial estoppel should be
applied when a plaintiff fails to identify a pending civil claim as an asset in a
bankruptcy proceeding. To address this issue, we begin by reaffirming that a
district court may apply judicial estoppel when a two-part test is satisfied: the
plaintiff (1) took a position under oath in the bankruptcy proceeding that was
inconsistent with the plaintiff’s pursuit of the civil lawsuit and (2) intended to
make a mockery of the judicial system. 4
We then discuss how a district court should apply the second prong. Our
precedent has, in effect, treated the fact of the plaintiff’s omission as establishing
the requisite intent. Today we clarify that the district court must consider all the
facts and circumstances in determining whether the plaintiff acted with the intent
to make a mockery of the judicial system.
A. To Invoke Judicial Estoppel in the Bankruptcy Scenario, District
Courts Should Continue to Apply Our Two-Part Test.
The equitable doctrine of judicial estoppel is intended to “prevent the
perversion of the judicial process” and “protect [its] integrity . . . by prohibiting
parties from deliberately changing positions according to the exigencies of the
4
Because judicial estoppel is an equitable doctrine, we review the district court’s
decision to apply the doctrine for abuse of discretion. See New Hampshire v. Maine, 532 U.S.
742, 750 (2001); Talavera v. Sch. Bd. of Palm Beach Cty., 129 F.3d 1214, 1216 (11th Cir. 1997).
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moment.” New Hampshire, 532 U.S. at 749-50 (citations and internal quotation
marks omitted); see also 18 James Wm. Moore et al., Moore’s Federal Practice
¶ 131.13[6] (3d ed. 2015) (explaining that doctrine of judicial estoppel is
concerned with “the orderly administration of justice and regard for the dignity of
court proceedings”). When a party does so, the doctrine of judicial estoppel allows
a court to exercise its discretion to dismiss the party’s claims. See New
Hampshire, 532 U.S. at 750. Stated simply, the doctrine of judicial estoppel rests
on the principle that “absent any good explanation, a party should not be allowed
to gain an advantage by litigation on one theory, and then seek an inconsistent
advantage by pursuing an incompatible theory.” Ryan Operations G.P. v. Santiam-
Midwest Lumber Co., 81 F.3d 355, 358 (3d Cir. 1996) (quoting 18 Charles A.
Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure
§ 4477 (1981)).
Our circuit employs a two-part test to guide district courts in applying
judicial estoppel: whether (1) the party took an inconsistent position under oath in
a separate proceeding, and (2) these inconsistent positions were “calculated to
make a mockery of the judicial system.” Burnes, 291 F.3d at 1285 (internal
quotation marks omitted). Under this test, a district court considers both the
plaintiff’s actions—whether he made inconsistent statements—and his motive—
whether he intended to make a mockery of the judicial system. Judicial estoppel
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should not be applied when the inconsistent positions were the result of
“inadvertence[] or mistake” because judicial estoppel “looks towards cold
manipulation and not an unthinking or confused blunder.” Johnson Serv. Co. v.
Transamerica Ins. Co., 485 F.2d 164, 175 (5th Cir. 1973).5
Before we formulated our two-part test in Burnes, the United States
Supreme Court addressed the doctrine of judicial estoppel in New Hampshire v.
Maine, which concerned a boundary dispute between the two states. Availing
itself of the Supreme Court’s original jurisdiction, New Hampshire sought a
declaration that the low water mark of a river on Maine’s shore was the boundary
between the two states. 532 U.S. at 745, 747. Maine moved to dismiss the case,
arguing that judicial estoppel should bar New Hampshire’s action because in
previous litigation between the two states New Hampshire had agreed to a consent
decree that set the boundary at the middle of the river’s main channel of
navigation. Id. at 748. The Supreme Court applied judicial estoppel to bar New
Hampshire’s later attempt to claim more land by arguing for a different boundary.
Id. at 749.
The Court announced a three-part test that “typically inform[s]” the decision
whether to apply the judicial estoppel doctrine: (1) “a party’s later position must
5
Decisions of the former Fifth Circuit handed down before the close of business on
September 30, 1981 are binding on this Court. See Bonner v. City of Prichard, 661 F.2d 1206,
1209 (11th Cir. 1981) (en banc).
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be clearly inconsistent with its earlier position”; (2) the party had to “succeed[] in
persuading a court to accept that party’s earlier position, so that judicial acceptance
of” the party’s later position “would create the perception that either the first or the
second court was misled”; and (3) 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.” Id. at 750-51 (internal quotation marks omitted).
Additionally, the Court recognized that judicial estoppel should not be applied
“when a party’s prior position was based on inadvertence or mistake.” Id. at 753
(internal quotation marks omitted). Although the Court announced this three-part
test, it emphasized that it was “not establish[ing] inflexible prerequisites or an
exhaustive formula for determining the applicability of judicial estoppel.” Id. at
751.6
Slater argues that we must abandon our test for applying judicial estoppel in
favor of the New Hampshire test. In New Hampshire, though, the party seeking to
apply judicial estoppel, Maine, was a party to the prior lawsuit in which New
Hampshire had taken an inconsistent position. See id. at 745. The Supreme Court
6
The Supreme Court concluded that all three parts of the test were satisfied: New
Hampshire had taken inconsistent positions by changing its argument about the location of the
boundary, it had succeeded in persuading the Supreme Court to accept its earlier position when
the Court accepted the parties’ agreement about the location of the boundary and entered a
consent decree, and it would gain an unfair advantage at Maine’s expense if permitted to seek to
move the boundary. See New Hampshire, 532 U.S. at 751-55. And “New Hampshire’s position”
could not “be regarded as a product of inadvertence or mistake.” Id. at 753.
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was not presented with—and so did not address—the question of how judicial
estoppel should be applied when the party seeking to invoke the doctrine was not a
party to the other proceeding. Here, because the party seeking to invoke judicial
estoppel, U.S. Steel, was not a party to the bankruptcy case and could not have
been unfairly disadvantaged by any position Slater took in that case, we conclude
that New Hampshire is inapplicable. Consistent with New Hampshire’s
recognition that its test was not exhaustive, we adhere to our two-part test in the
scenario before us.7
B. Under Our Precedent, a Plaintiff Who Omitted a Civil Claim in a
Bankruptcy Filing Is Deemed to Have Intended to Make a
Mockery of the Judicial System.
Turning back to our two-part test for applying judicial estoppel, the first part
is satisfied because Slater took an inconsistent position under oath in her
bankruptcy proceeding. We focus today on the second part: how a court should
determine whether a plaintiff intended make a mockery of the judicial system.
In Burnes and Barger, we endorsed an inference that a plaintiff who failed to
disclose a lawsuit in a Chapter 7 bankruptcy intended to manipulate the judicial
7
We note that other circuits have taken a similar approach in not rigidly adhering to the
New Hampshire test (that is, considering different factors) when the party seeking to invoke
judicial estoppel was not a party to the case in which the other party took an inconsistent
position. See, e.g., Stephenson v. Malloy, 700 F.3d 265, 273 (6th Cir. 2012) (considering
whether debtor who omitted lawsuit in bankruptcy disclosures had acted in bad faith); Krystal
Cadillac-Oldsmobile GMC Truck, Inc. v. Gen. Motors Corp., 337 F.3d 314, 325 (3d Cir. 2003)
(considering, as part of judicial estoppel test, whether a lesser sanction would have remedied the
damage done by the litigant’s misconduct).
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system because the omission was not inadvertent. In effect, we treated the fact that
the plaintiff could potentially benefit from the nondisclosure as sufficient to
establish that the plaintiff, in fact, intended to deceive the court and manipulate the
proceedings. And we subsequently extended that reasoning to cases involving
Chapter 13 debtors as well.8
1. Burnes v. Pemco Aeroplex, Inc.
In Burnes, we held that a district court did not abuse its discretion in
applying judicial estoppel to bar plaintiff Levi Billups’s claims in a civil lawsuit
when he failed to disclose those claims as assets in his bankruptcy filings. See
291 F.3d at 1286-88. After Billups filed for Chapter 13 bankruptcy, he sued his
employer, Pemco, for racial discrimination, but never amended his bankruptcy
disclosures to identify the lawsuit. When Billups later sought to convert the
Chapter 13 petition into a Chapter 7, the bankruptcy court ordered him to update
his schedules to reflect changes since the original filing. He nevertheless failed to
report his pending lawsuit and then received a no-asset discharge of his debts under
Chapter 7. After the bankruptcy was closed, Pemco moved for summary judgment
based on judicial estoppel. Id. The district court granted the motion, and we
affirmed. Id. at 1284, 1289.
8
See Robinson v. Tyson Foods, Inc., 595 F.3d 1269, 1275-76 (11th Cir. 2010); De Leon
v. Comcar Indus., Inc., 321 F.3d 1289, 1291-92 (11th Cir. 2003).
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In reviewing the district court’s application of judicial estoppel, we applied
our two-part test inquiring whether the debtor took an inconsistent position under
oath in another proceeding and whether the inconsistency was calculated to make a
mockery of the judicial system. Id. at 1285. Because it was beyond dispute that
Billups had taken inconsistent positions about the existence of his civil claims, we
characterized the issue on appeal as “one of intent.” Id. at 1286.
Billups argued that he lacked the requisite intent to mislead the court.
Looking to decisions of other circuits, we concluded that the district court
permissibly drew an inference that Billups had engaged in intentional
manipulation. See id. at 1287. Obviously Billups knew about his civil claims,
which he was pursuing in a separate action. And an incentive existed to hide the
lawsuit from his creditors because it was “unlikely he would have received the
benefit of . . . a no asset, complete discharge had his creditors, the trustee, or the
bankruptcy court known of a lawsuit claiming millions of dollars in damages.” Id.
at 1288. We permitted the inferential leap from Billups’s potential motive to hide
the lawsuit to the conclusion that he in fact acted with such a motive and thus
intended to manipulate the proceedings.
Billups also argued that the doctrine of judicial estoppel should not be
applied because he could reopen his bankruptcy case and amend his filings to
disclose the lawsuit. We rejected this argument, explaining that a debtor should
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not be permitted to escape judicial estoppel simply by correcting his nondisclosure
once it has been discovered. Because “[t]he success of our bankruptcy laws
requires a debtor’s full and honest disclosure,” we reasoned, a debtor cannot
“back-up, re-open the bankruptcy case, and amend his bankruptcy filings” after his
adversary raises judicial estoppel. Id. Allowing the debtor to proceed in these
circumstances, we said, would “suggest[] that a debtor should consider disclosing
potential assets only if he is caught concealing them,” which “would only diminish
the necessary incentive to provide the bankruptcy court with a truthful disclosure”
of assets. Id.
2. Barger v. City of Cartersville
In Barger, a 2-1 decision, the panel majority followed Burnes in holding that
a district court did not abuse its discretion when it found, based solely on the
debtor’s failure to disclose her civil claims in her bankruptcy proceedings, that she
intended to make a mockery of the judicial system. See Barger, 348 F.3d at 1297.
After Barger was demoted, she brought employment discrimination claims against
her employer, the City of Cartersville, seeking money damages and reinstatement
to her earlier position. While her lawsuit was pending, Barger filed for Chapter 7
bankruptcy but omitted her civil claims from her disclosures. Id. at 1291. Barger
had told both her bankruptcy attorney and the trustee that she had a pending
lawsuit against the City, in which she sought reinstatement to her former position,
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but she had failed to mention that she also sought damages. Id. After Barger
received a no-asset discharge of her debts, the City moved for summary judgment
based on judicial estoppel. Barger then asked the bankruptcy court to reopen her
case so that she could disclose her employment discrimination claims. Id. at 1291-
92. After a hearing in which the City participated, the bankruptcy court permitted
Barger to reopen and allowed the trustee to pursue the claims against the City,
finding that Barger had neither intentionally concealed the discrimination claims
nor sought to obtain an advantage for herself by failing to disclose them. Id.
Nonetheless, the district court applied judicial estoppel to bar the claims. Id. at
1292.
The panel majority affirmed the district court’s application of judicial
estoppel and, following Burnes, conflated the inquiry into whether Barger had
acted voluntarily with the inquiry into whether she intended to make a mockery of
the judicial system. See id. at 1294. To determine whether Barger had the
requisite intent, the panel majority considered whether her nondisclosure was
“inadvertent” by looking to whether she knew about the undisclosed claims and
had a motive to conceal them. Id. at 1295-96. As to motive, the panel majority
recognized that a debtor who omitted such a claim would be able to “keep any
proceeds for herself and not have them become part of the bankruptcy estate.” Id.
at 1296.
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The dissent in Barger objected to the panel majority’s analysis of Barger’s
intent to make a mockery of the judicial system. Id. at 1298 (Barkett, J.,
dissenting). The dissent argued that the majority had improperly treated the fact
that Barger’s omission was not “inadvertent” as sufficient to establish that she had
intended to mislead the court. See id. (explaining that the “failure to meet the
specific inadvertence criteria” does not “automatically impl[y] an intent to make a
mockery of the judicial system” (internal quotation marks omitted)). The dissent
urged that courts should look to “all of the circumstances of [the] particular case”
to determine whether the debtor had the requisite intent. Id. at 1297-98 (internal
quotation marks omitted).
3. Cases Post Burnes and Barger
Even though Burnes and Barger both involved Chapter 7 bankruptcies, we
have extended their reasoning to cases involving Chapter 13 debtors. See De Leon
v. Comcar Indus., Inc., 321 F.3d 1289, 1292 (11th Cir. 2003) (holding that because
Chapter 13 debtor “knew about his [civil] claim and possessed a motive to conceal
it[,] . . . we can infer from the record his intent to make a mockery of the judicial
system” (internal quotation marks omitted)). We acknowledged that a Chapter 13
debtor would always have a potential motive to conceal a civil claim from creditors
so as to “keep the proceeds for herself and den[y] the creditors a fair opportunity to
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claim what was rightfully theirs.” See Robinson v. Tyson Foods, Inc., 595 F.3d
1269, 1275-76 (11th Cir. 2010).
It is true that in two panel decisions after Burnes and Barger we applied
judicial estoppel more narrowly, but these decisions cannot be reconciled with our
prior precedent. First, in Parker, we reversed the district court’s application of
judicial estoppel to bar an employment discrimination claim that a debtor failed to
disclose as an asset in his Chapter 7 bankruptcy petition. 365 F.3d at 1269. We
said that judicial estoppel should not be applied in that case because when the
debtor filed Chapter 7 bankruptcy, the trustee, as representative of the bankruptcy
estate, became “the proper party in interest, and . . . the only party with standing to
prosecute causes of action belonging to the estate.” Id. at 1272. We held that
because the trustee was the real party in interest in the civil lawsuit, had never
taken an inconsistent position under oath, and had not abandoned the
discrimination claim, the district court abused its discretion in applying judicial
estoppel. Id. As the panel in the case before us recognized, Parker cannot be
reconciled with our decision in Barger, in which we upheld the application of
judicial estoppel to bar civil claims that the Chapter 7 debtor failed to disclose,
even though we acknowledged that the trustee was the real party in interest.
Second, in Ajaka v. Brooksamerica Mortgage Corp., 453 F.3d 1339 (11th
Cir. 2006), we looked beyond a Chapter 13 debtor’s failure to disclose a civil
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lawsuit to determine whether the debtor actually intended to make a mockery of
judicial proceedings. After filing a Chapter 13 petition, Ajaka filed a Truth in
Lending Act claim against his mortgage lender. Id. at 1342. Ajaka directed his
bankruptcy attorney to amend his bankruptcy schedules to disclose the lawsuit, but
his attorney failed to do. Id. at 1343. Because Ajaka had failed to disclose his
claim to the bankruptcy court, the lender moved for summary judgment based on
judicial estoppel. Even though the record showed that all the creditors were aware
of Ajaka’s civil claims against the lender before the lender raised judicial estoppel,
the district court found that Ajaka intended to make a mockery of the judicial
system. Id. We reversed and held that the district court abused its discretion in
applying judicial estoppel when there was a question of material fact about
whether Ajaka had an intention to conceal his civil claim from his creditors. We
relied in part on the fact that he had subsequently amended his bankruptcy
schedules. Id. at 1346.
Ajaka cannot be squared with Burnes and Barger, which looked solely to
whether the debtor omitted a claim to determine the debtor’s intent. Given the
flaws in our reasoning in Burnes and Barger and the inconsistencies in our
precedent, we now address how district courts should evaluate a debtor’s intent.
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C. Deciding Whether a Plaintiff Intended to Make a Mockery of the
Judicial System Requires Review of the Totality of the Facts and
Circumstances.
We hold that to determine whether a plaintiff’s inconsistent statements were
calculated to make a mockery of the judicial system, a court should look to all the
facts and circumstances of the particular case. When the plaintiff’s inconsistent
statement comes in the form of an omission in bankruptcy disclosures, the court
may consider such factors as the plaintiff’s level of sophistication, whether and
under what circumstances the plaintiff corrected the disclosures, whether the
plaintiff told his bankruptcy attorney about the civil claims before filing the
bankruptcy disclosures, whether the trustee or creditors were aware of the civil
lawsuit or claims before the plaintiff amended the disclosures, whether the plaintiff
identified other lawsuits to which he was party, and any findings or actions by the
bankruptcy court after the omission was discovered.9 We overrule the portions of
Burnes and Barger that permitted the inference that a plaintiff intended to make a
mockery of the judicial system simply because he failed to disclose a civil claim. 10
9
We emphasize that this list is not exhaustive; the district court is free to consider any
fact or factor it deems relevant to the intent inquiry.
10
We do not overrule these cases entirely. Specifically, our decision today has no effect
on the portion of Burnes holding that judicial estoppel did not apply to bar the debtor’s injunctive
relief claims, 291 F.3d at 1288-89, or the portions of Barger addressing standing, estoppel, and
the application of judicial estoppel to the debtor’s claim for injunctive relief, 348 F.3d at 1292-
93, 1297.
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Three reasons lead us to reject the inference we accepted in Burnes and
Barger in favor of a rule that a district court should look to all the circumstances of
the case. First, such an inquiry ensures that judicial estoppel is applied only when
a party acted with a sufficiently culpable mental state. Second, it allows a district
court to consider any proceedings that occurred in the bankruptcy court after the
omission was discovered, arguably a better way to ensure that the integrity of the
bankruptcy court is protected. Third, limiting judicial estoppel to those cases in
which the facts and circumstances warrant it is more consistent with the equitable
principles that undergird the doctrine. By rejecting a one-size-fits-all approach, we
reduce the risk that the application of judicial estoppel will give the civil defendant
a windfall at the expense of innocent creditors.
First, a district court should look to all the facts and circumstances of the
case to decide whether a plaintiff intended to mislead the court because that
question is separate from and not answered by whether the plaintiff voluntarily, as
opposed to inadvertently, omitted assets. Our decisions in Burnes and Barger
conflated the question of whether the plaintiff’s omission was inadvertent with the
separate question of whether the plaintiff actually intended to manipulate the
judicial system to his advantage.
After all, a plaintiff may have failed to disclose a pending lawsuit because he
did not understand the disclosure obligations. It is not difficult to imagine that
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some debtors, particularly those proceeding pro se,11 may not realize that a
pending lawsuit qualifies as a “contingent and unliquidated claim” that must be
disclosed on a schedule of assets. Although the question asking for a list of “all
suits and administrative proceedings to which the debtor is or was a party” seems
more straightforward, as Slater’s testimony shows, it nevertheless may be
misunderstood.12 So it makes sense that a district court should look beyond a
plaintiff’s omission in determining whether the plaintiff intended to misuse the
judicial process.
Second, a broader inquiry allows a district court to consider any findings or
other actions by the bankruptcy court that might help in determining whether the
debtor purposely intended to mislead the court and creditors. We have justified
applying judicial estoppel after a debtor omitted a claim from his bankruptcy
disclosures as necessary to ensure full and honest disclosure to the bankruptcy
courts and protect “the effective functioning of the federal bankruptcy system.”
Burnes, 291 F.3d at 1286 (internal quotation marks omitted). But we have
overlooked that bankruptcy courts do not necessarily view such omissions as
establishing a debtor’s intent to mislead the bankruptcy court.
11
In 2015, 9.2% of Chapter 7 and 8.5% of Chapter 13 petitions nationwide were filed by
debtors proceeding pro se. Michael B. Joseph, Consumer Pro Se Bankruptcy: Finding Hope in
Hopelessness, 35 Am. Bankr. Inst. J. 32, 32 (May 2016).
12
Of course, the district court may determine that a plaintiff’s testimony that he
misunderstood the disclosure obligations is not credible.
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To the contrary, the Bankruptcy Code and Rules liberally permit debtors to
amend their disclosures when an omission is discovered. Yes, the Bankruptcy
Code requires debtors to disclose all their assets, including contingent and
unliquidated claims. See 11 U.S.C. § 521(a)(1)(B) (requiring debtor to file a
schedule of assets and liabilities). But Bankruptcy Rule 1009, which was proposed
by the Supreme Court and adopted by Congress, permits a debtor to amend a
schedule or statement “as a matter of course at any time before the case is closed.”
Fed. R. Bankr. R. P. 1009(a). Further, the bankruptcy court retains broad
discretion to reopen a closed case on a motion of the debtor or another party in
interest “to administer” an asset that had not previously been scheduled. 11 U.S.C.
§ 350(b). It strikes us as inconsistent with these principles—which recognize that
omissions occur and liberally allow amendment and correction of disclosures—to
infer that a debtor who failed to disclose a lawsuit necessarily meant to manipulate
the bankruptcy proceedings.
We see no good reason why, when determining whether a debtor intended to
manipulate the judicial system, a district court should not consider the bankruptcy
court’s treatment of the nondisclosure. We reject the idea that encouraging a
district court to blind itself to subsequent proceedings in the bankruptcy court,
particularly the bankruptcy court’s decision about whether to allow the debtor to
amend his disclosures or reopen his bankruptcy case, better protects the bankruptcy
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system. Indeed, the bankruptcy court has tools of its own to punish a debtor who it
determines purposefully tried to hide assets. For example, it may revoke the
discharge or deny an exemption for the proceeds from the debtor’s lawsuit, see In
re Barger, 279 B.R. 900, 908 (Bankr. N.D. Ga. 2002); it may even fine or imprison
a debtor for contempt or refer the matter for the United States Attorney’s Office to
consider prosecuting the debtor for perjury. See 18 U.S.C. §§ 401, 1621. 13
Third, considering all the circumstances of the case is more consistent with
the equitable principles that underlie the doctrine of judicial estoppel. “Equity
eschews mechanical rules” and “depends on flexibility.” Holmberg v. Armbrecht,
327 U.S. 392, 396 (1946).14 Requiring the district court to consider all facts and
circumstances in evaluating the plaintiff’s intent is the more flexible, less
mechanical approach that equity demands. In addition, this approach reduces the
likelihood that an otherwise liable civil defendant will receive an unjustified
windfall or that innocent creditors will be harmed.
13
U.S Steel argues that judicial estoppel is also necessary to protect the integrity of
district courts from plaintiffs who pursue civil claims that they implicitly admitted in their
bankruptcy proceedings were worthless. It posits that a plaintiff may omit a civil claim from his
bankruptcy disclosures because he knew it was worthless, yet attempt to commit a fraud on the
district court by trying to persuade the court that the claim has value. But under the rule we
adopt today, a district court may apply judicial estoppel if it decides that the plaintiff intended to
manipulate the judicial process in either court; it simply must consider the totality of the facts
and circumstances before making that determination.
14
See also DelCostello v. Int’l Bros. of Teamsters, 462 U.S. 151, 162 (1983) (explaining
that principles of equity are hostile to “mechanical rules” (internal quotation marks omitted));
Baggett v. Bullitt, 377 U.S. 360, 375 (1964) (explaining that whether a court should exercise its
discretionary equitable powers should not depend on an “automatic rule”).
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When a district court applies a judicial estoppel bar based on nondisclosure
in a bankruptcy proceeding without determining that the plaintiff deliberately
intended to mislead, the civil defendant avoids liability on an otherwise potentially
meritorious civil claim while providing no corresponding benefit to the court
system. As an equitable doctrine, judicial estoppel should apply only when the
plaintiff’s conduct is egregious enough that the situation “demand[s] equitable
intervention.” Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 248
(1944). When a plaintiff intended no deception, judicial estoppel may not be
applied. If a court applies judicial estoppel to bar the plaintiff’s claim absent such
intent, it awards the civil defendant an unjustified windfall.15 Just as equity frowns
upon a plaintiff’s pursuit of a claim that he intentionally concealed in bankruptcy
proceedings, equity cannot condone a defendant’s avoidance of liability through a
doctrine premised upon intentional misconduct without establishing such
misconduct. See Coral Springs St. Sys, Inc. v. City of Sunrise, 371 F.3d 1320,
15
U.S. Steel contends that civil defendants receive no “pure windfall” if judicial estoppel
is applied as the district court did here because they receive only the “incidental benefit” of
escaping civil liability in exchange for providing the valuable service of “exposing abuses of the
bankruptcy system.” Appellee’s Br. at 52-53 (internal quotation marks omitted). But only when
the plaintiff intended to mislead is the defendant exposing an abuse of the system.
In a similar vein, U.S. Steel argues that unless courts apply judicial estoppel consistent
with our existing precedent, civil defendants will have no incentive to uncover omissions of civil
lawsuits in bankruptcy filings, and such omissions will go undetected. Not so. Civil defendants
like U.S. Steel will still have an incentive to research and discover whether the plaintiff failed to
disclose a civil claim because the court may apply judicial estoppel if the facts and circumstances
of the case show that the plaintiff had the requisite intent to deceive. In addition, the plaintiff’s
nondisclosure may provide fodder for cross examination and impeachment in the civil suit.
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1340-41 (11th Cir. 2004) (explaining that a court of equity must “promote and
enforce justice, good faith, uprightness, fairness, and conscientiousness” from both
plaintiff and defendant (internal quotation marks omitted)).
What is more in this circumstance, the application of judicial estoppel poses
a potential risk of harm to innocent creditors. When a civil claim is dismissed on
the basis of judicial estoppel, the asset becomes worthless—losing any potential to
increase the value of the bankruptcy estate—which in turn harms creditors. It is
easy to see why in Chapter 7 proceedings: the trustee is responsible for liquidating
the assets in the estate and then distributing the proceeds to creditors. When the
civil claim is dismissed, there can be no proceeds from a recovery or settlement for
distribution to creditors. See 11 U.S.C. §§ 704(a)(1), 726.16
Although not as apparent for Chapter 13 proceedings, a risk remains that the
dismissal will harm creditors. The amount of proceeds that creditors receive in a
Chapter 13 bankruptcy is dictated by the confirmed plan, and a debtor’s payments
under the plan are generally based upon the debtor’s expected future earnings. See
Harris, 135 S. Ct. at 1835. But a plan can be confirmed only if the payments to the
creditors are either equal to or exceed what the creditors would have received in a
16
As we observed above, our holding in Parker that judicial estoppel should not apply
against a Chapter 7 trustee conflicted with Barger. Because we overrule that portion of Barger,
Parker no longer conflicts with prior panel precedent, and so there is no question about its
continued viability.
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Chapter 7 bankruptcy, meaning that the value of a civil claim is taken into account
in formulating and reviewing the plan. See 11 U.S.C. § 1325(a)(4). If the debtor,
trustee, creditors, and bankruptcy court know that a civil claim is likely to be
dismissed based on judicial estoppel, they are likely to treat the claim as worthless,
depriving the bankruptcy estate of what (absent judicial estoppel) might have been
a valuable asset. Because the application of judicial estoppel may harm innocent
creditors, equitable principles dictate that courts proceed with care and consider all
the relevant circumstances.
In the face of these compelling reasons why district courts should consider
the totality of the facts and circumstances of the case to determine whether a
plaintiff intended to make a mockery of the judicial system, U.S. Steel urges us to
adhere to Burnes and Barger. First, U.S. Steel argues that no change to our
precedent is required because even when a district court finds that the plaintiff
intended to manipulate the judicial system, the court remains “entirely free to find
in particular circumstances that a debtor’s omission was inadvertent.” Appellee’s
Br. at 3. But U.S. Steel overlooks that under our case law an omission of a claim is
“‘inadvertent’ only when a [debtor] either lacks knowledge of the undisclosed
claim or has no motive for [its] concealment.” Barger, 348 F.3d at 1295 (emphasis
added). No plaintiff who omitted civil claims from bankruptcy disclosures will be
able to show that he acted inadvertently because, as we explained above, the
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plaintiff always will have knowledge of his pending civil claim and a potential
motive to conceal it due to the very nature of bankruptcy. The Supreme Court has
told us that judicial estoppel must not be applied to an inadvertent inconsistency,
New Hampshire, 532 U.S. at 753, yet under our precedent inadvertence places no
meaningful limit on the doctrine’s application.
Second, U.S. Steel argues that by overruling Burnes and Barger, we will
create a circuit split. In fact, a circuit split exists regardless. The approach we
adopt today is consistent with the decisions of at least three other circuits, which
have recognized that whether a plaintiff intended to make a mockery of the judicial
system requires consideration of more than just whether the plaintiff failed to
disclose a claim. 17 Other circuits, consistent with Burnes and Barger, have
endorsed the inference that a plaintiff who omitted a claim necessarily intended to
manipulate the judicial system. 18 For the reasons we have already discussed, we
17
See Spanie v. Cmty. Contacts, Inc., 756 F.3d 542, 548 (7th Cir. 2014) (reversing
application of judicial estoppel because the civil defendant “needed to show more than an initial
nondisclosure on a bankruptcy schedule”); Ah Quin v. Cty. of Kauai Dep’t. of Transp., 733 F.3d
267, 276 (9th Cir. 2013) (rejecting a “presumption of deceit” where “the plaintiff-debtor has
reopened the bankruptcy proceedings and has corrected the initial filing error”); Eubanks v.
CBSK Fin. Grp., Inc., 385 F.3d 894, 899 (6th Cir. 2004) (reversing district court’s application of
judicial estoppel where plaintiffs omitted the claim because defendant “provide[d] no additional
evidence that Plaintiffs demonstrated fraudulent intentions towards the court”).
18
See, e.g., Eastman v. Union Pac. R.R. Co., 493 F.3d 1151, 1157-60 (10th Cir. 2007)
(“Where a debtor has both knowledge of the claims and a motive to conceal them, courts
routinely, albeit at times sub silentio, infer deliberate manipulations.”); In re Superior
Crewboats, Inc., 374 F.3d 330, 335-36 (5th Cir. 2004) (concluding that judicial estoppel applied
because plaintiffs knowingly omitted civil claim from bankruptcy disclosures).
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find the analysis of the Sixth, Seventh, and Ninth Circuits to be more persuasive
and conclude that theirs is the better approach.19
We thus overrule our prior precedent approving the inference that a plaintiff
intended to make a mockery of the judicial system solely because he failed to
disclose his civil claim in his bankruptcy. Instead, district courts should consider
all the facts and circumstances of the case to determine whether the debtor had the
requisite intent.
IV. Conclusion
Having identified the proper standard for determining when judicial estoppel
may be applied, we remand this appeal to the panel to consider whether the district
court abused its discretion in applying judicial estoppel and to resolve any other
remaining issues.
REMANDED.
19
U.S. Steel also argues that stare decisis requires us to adhere to our precedent, but the
en banc court may overrule panel decisions. See McKinney v. Pate, 20 F.3d 1550, 1565 n.21
(11th Cir. 1994) (en banc).
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ED CARNES, Chief Judge, concurring:
I concur in the majority opinion for the Court, especially in light of footnote
12, which acknowledges that a district court is not required to accept the testimony
of the plaintiff that her misstatements in the bankruptcy proceeding were not made
with intent to mislead, even if that testimony is uncontradicted.
This is in keeping with the long-established law of this circuit. See, e.g.,
Burston v. Caldwell, 506 F.2d 24, 26 (5th Cir. 1975) (“The district court, of course,
was not required to accept [the petitioner’s] testimony, even if uncontradicted.”);
Negron v. City of Miami Beach, 113 F.3d 1563, 1570 (11th Cir. 1997) (noting that
the district court as factfinder was free to reject an expert witness’ testimony even
if it was uncontradicted); Murphy v. City of Flagler Beach, 846 F.2d 1306, 1310
(11th Cir. 1988) (explaining that the factfinder “was not bound to accept the
plaintiff’s evidence . . . even if it was not controverted”); see also United States v.
Samples, 897 F.2d 193, 198 (5th Cir. 1990) (“The trier of fact need not credit any
witness’ testimony, even if unimpeached.”).
We have taken the principle even further than that. In criminal cases, “[w]e
have long recognized that a statement by a defendant, if disbelieved by the jury,
may be considered substantive evidence of the defendant’s guilt.” United States v.
Tobin, 676 F.3d 1264, 1287 (11th Cir. 2012) (quotation marks omitted), abrogated
on other grounds by United States v. Davila, 569 U.S. __, 133 S. Ct. 2139 (2013);
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United States v. Martinez, 83 F.3d 371, 374 (11th Cir. 1996) (“But the jury was
entitled to reject Martinez’s testimony and to consider it as substantive evidence of
his guilt.”). And “this rule applies with special force,” we have stressed, “where
the element to be proved is the defendant’s knowledge or intent.” Martinez, 83
F.3d at 374–75; accord United States v. Vazquez, 53 F.3d 1216, 1225 (11th Cir.
1995) (noting that the rule a factfinder, after observing a defendant testify, can
infer that the opposite of her testimony is true “applies with special force where the
elements to be proved for a conviction include highly subjective elements: for
example, the defendant’s intent or knowledge”).
All of those decisions are particularly important in light of our holding today
that judicial estoppel will bar a claim not disclosed by the plaintiff in her
bankruptcy proceeding only if the omission was done with the intent to mislead.
The intent behind an inaccurate or misleading statement or omission is a purely
subjective fact that can seldom be proven by objective facts alone. People who
have defrauded others through misleading bankruptcy schedules, which are signed
under penalty of perjury, have committed a crime. It is a small step from original
perjury to cover-up perjury.
If district courts were required to accept a plaintiff’s testimony that she did
not intend to defraud her creditors by omitting a claim from her bankruptcy
schedules, judicial estoppel never would be applied in these circumstances. The
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possibility that the doctrine could apply to claims not disclosed in bankruptcy
proceedings would be purely academic and serve no deterrent purpose. And if
debtors were freed from any threat of judicial estoppel, the losers would be both
honest creditors and the integrity of the judicial process, which means we all would
lose.
That is why the one sentence contained in footnote 12 is so important. It
means that in deciding whether a plaintiff intended to mislead when she omitted a
claim from her bankruptcy schedules, or failed to update a schedule to include the
claim, the district court is not required to accept the plaintiff’s denial of her intent.
And that is true even if her denial is made under oath and not contradicted by other
evidence. The district court has the authority and responsibility to find the facts
and not to blindly accept testimony.
36