Ricky Hughes v. Wisconsin Central, Ltd.
Eighth Circuit holds that a chapter 13 debtor, not the trustee, has standing to bring personal injury claims.
- Rochelle Quick Take
View Rochelle Summary- Case Type:
- Consumer
- Case Status:
- Affirmed in part and Reversed in part
- Citation:
- 23-1410 (8th Circuit, Jun 25,2024) Published
- Tag(s):
- Ruling:
- The U.S. Court of Appeals for the Eighth Circuit (Circuit) held that Ricky Hughes (DR), a former chapter 13 debtor whose first plan payment dated nearly 10 years earlier, had the standing to prosecute his lawsuit for injuries due to 2 incidents, an undisclosed asset, as all assets had vested in him upon his plan's confirmation per § 1327, which controlled over the general § 554, but found judicial estoppel to bar any lawsuit based on the 1st but not the 2nd incident, for 6 months of plan payments remained after the former, agreeing with the court below only as to estoppel's impact on the 1st.
- Procedural context:
- In a lawsuit commenced in the U.S. District Court for the District of Minnesota (DC) by a DR after his chapter 13 case had been closed and his discharge was granted by the U.S. Bankruptcy Court for the District of Minnesota (BC), the railroads for which the DR was employed before and during his chapter 13 case and who the DR sued for injuries sustained as an employee as a result of two incidents during his case--Wisconsin Central, Ltd.; Portaco, Inc. (Portaco); Racine Railroad Products, Inc. (Racine) (Defendants)--moved for summary judgment in the DC. Their demand was based on two alternative contentions: because the DR had been injured during his case's pendency but had failed to disclose these injuries to the trustee for his estate (TR), (1) the DR lacked standing because any cause of action arising during the bankruptcy belonged to the TR, for him alone to prosecute for the benefit of the bankruptcy estate; and (2) in the alternative, the DR should be judicially estopped from pursuing his lawsuit because he failed to disclose the lawsuit and gained an advantage through the bankruptcy discharge. As to the latter argument, because none of the Defendants claimed to be (or have been) creditors, their identification of an “advantage” focused on the DR's position relative to his creditors rather than his position relative to them. Before the DC ruled, the DR turned to the BC. He applied to reopen his bankruptcy and list the claims as assets of the estate; he further asked the BC to approve an agreement he had entered into with the TR to collect funds received in the present suit and distribute them for the benefit of creditors to the extent of discharged debt. The BC reopened the bankruptcy. Thereafter, one of the three railroads--Portaco, Inc.--objected and filed briefs. The two trial courts now pinponged back and forth. First, the DC the pending motion for summary judgment without prejudice and stayed the present case to allow the DR to obtain rulings from the bankruptcy court. Next, the BC denied the DR's requested relief, even though it also found Portaco to lack standing to object. Essentially, the BC ruled on the basis of an inescapable timeline: because section 1329 permits modification of a chapter 13 plan only if a debtor’s final payment to creditors will occur within five years of the debtor’s first payment, the fact that the DR's first payment had taken place roughly ten years before was dispositive. Subsequently, the DC granted summary judgment, holding that the DR lacked standing and, alternatively, judicial estoppel applied.
- Facts:
- A railroad employee, the DR filed a Chapter 13 bankruptcy petition in May 2012. He commenced payments under an unconfirmed five-year Chapter 13 plan soon after filing his bankruptcy petition. Later, in December 2012, the BC confirmed his plan. The DR made his last required payment in spring 2017, and the BC entered an order in April 2017 recognizing the completion of payments. In February 2018, the BC issued an order discharging approximately $57,000 of unpaid, unsecured debt; in March 2018, it closed the case. Two events that took place before his case's closing and during the pendency of his case led to this appeal. In October 2016, while still making plan payments, the DR was injured at work. In August 2017, he was again injured at work; although he had by then completed his five-year payment plan, this was before he received his discharge order and before his bankruptcy case was closed. Over two years after his last plan payment and approximately 19 months after his bankruptcy closed, the DR filed the present personal injury lawsuit against Wisconsin Central alleging negligence claims pursuant to the Federal Employers’ Liability Act He subsequently filed amended complaints adding Portaco, Inc., and Racine Railroad Products, Inc., as defendants and alleging strict liability and negligence claims pursuant to state law based on product liability. The DR's claims against Portaco and Racine Railroad Products alleged liability related to the second accident only.
- Judge(s):
- Ralph R. Erickson; Michael J. Melloy; and David Stras