Clark v. AII Acquisition, LLC

Judicial estoppel requires ‘an effort to game the bankruptcy system.’

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Case Type:
Case Status:
Reversed and Remanded
17-1727-cv (2nd Circuit, Mar 30,2018) Published
(1) Standard for review of district court's invocation of judicial estoppel doctrine is abuse of discretion. (2) District court abused discretion in dismissing personal injury case on the basis of judicial estoppel because balance of equities tipped overwhelmingly in favor of plaintiffs. Moreover, the failure to disclose the diagnosis in the bankruptcy did not give the plaintiffs an unfair advantage over the defendants or have more than a "de minimis effect" on the outcome of the bankruptcy, since all of the creditors were paid in full.
Procedural context:
District court granted defendants' motion to dismiss personal injury action on the basis of judicial estoppel, and plaintiff appealed.
Michelle and John Edward Clark filed a Chapter 13 bankruptcy case and confirmed a plan providing for payment in full of all creditors over a five-year period. Right before the final payment, Mr. Clark was diagnosed with mesothelioma, a cancer caused by the inhalation of asbestos fibers. He (and his wife, after he died) sued more than fifty corporate defendants for causing his cancer. The defendants filed a motion to dismiss on the basis that he had failed to disclose the diagnosis during the bankruptcy.
Jacobs, Calabresi, and Chen

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