Ah Quin v. County of Kauai Dept of Transportation

Summarized by David Hercher , U.S. Bankruptcy Court, District of Oregon
12 years 7 months ago

Citation:

Ah Quin v. County of Kauai Dep’t of Transp., No. 10-16000 (9th Cir. July 24, 2013)

Tag(s):

Ruling:

Judicial estoppel does not bar a debtor from prosecuting an unscheduled cause of action if, when completing the schedules, the debtor lacked the subjective intent to conceal.

Procedural context:

The Ninth Circuit reversed the district court’s judgment dismissing the debtor’s action and remanded for factual development.

Facts:

The chapter 7 individual debtor brought a prepetition federal-court employment-discrimination action that was pending when the petition was filed, but she did not schedule it as an asset. The debtor’s lawyer in the discrimination action learned of the bankruptcy and disclosed it to the defendant’s lawyer. The debtor moved successfully to reopen the bankruptcy case, and she then scheduled the discrimination action. The defendant successfully moved in the district-court action for summary judgment on the ground that the debtor’s action was barred by judicial estoppel because she did not initially schedule it. During the appeal, the bankruptcy trustee abandoned the discrimination action. The district court held that it was required to apply judicial estoppel to bar the action if the debtor knew of the action when she completed her schedules and she had an incentive to conceal it (to keep the proceeds from her creditors). Reversing, the Ninth Circuit held that a court is not bound to apply judicial estoppel if the debtor’s prior position was based on subjective inadvertence or mistake. A key factor to the Ninth Circuit was that the debtor reopened her case and filed amended schedules to list the omitted action. As a result, the bankruptcy court did not accept the debtor’s initial position, and the debtor did not obtain an unfair advantage. Applying judicial estoppel would perversely injure creditors (in cases where the trustee does not abandon the claim) and benefit only the alleged malefactor whom the debtor sued. The Ninth Circuit acknowledged that its test differs from that of other circuits. The district-court summary-judgment record did not support applying judicial estoppel to bar plaintiff’s claim. A 30-page dissent follows the majority opinion.

Judge(s):

Susan P. Graber, Jay S. Bybee, and Morgan Christen, Circuit Judges. Opinion by Judge Graber; dissent by Judge Bybee.

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