- Case Type:
- Case Status:
- Reversed and Remanded
- 2:09-cv-01732-KOB (11th Circuit, Sep 18,2017) Published
- The Eleventh Circuit revisited its application of the doctrine of equitable estoppel in instances where a debtor fails to disclose claims in connection with a bankruptcy case. Departing from its precedent, the Eleventh Circuit held that all facts and circumstances should be considered in determining whether a plaintiff who failed to disclose a civil lawsuit in bankruptcy filings intended to make a mockery of the judicial system. Courts should assess plaintiff's sophistication, explanation for the omission, whether disclosure was corrected, and action taken by the court as to nondisclosure.
- Procedural context:
- Appeal from the United States District Court for the Northern District of Alabama, reversed and remanded.
- Prior to seeking relief under chapter 7 of the Bankruptcy Code, Slater sued U.S. Steel for discrimination based on race and sex in violation of Title VII. Slater only had a high school education. Slater did not list the lawsuit against U.S. Steel on Schedule B or on her Statement of Financial Affairs. The chapter 7 trustee issued a report of no distribution, and U.S. Steel moved for summary judgment in the employment discrimination case based on Slater's failure to disclose the litigation in her bankruptcy proceeding. Slater contended that she understood the schedules and Statement of Financial Affairs to ask only about suits filed against her. Slater amended her schedules and Statement of Financial Affairs the day after U.S. Steel filed its summary judgment motion. Slater subsequently converted her case from chapter 7 to chapter 13; however, the case was ultimately dismissed as a result of Slater's failure to make payments and Slater's debts were never discharged. The district court concluded 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, and this court affirmed the district court's granting of the summary judgment motion. The Eleventh Circuit agreed to rehear the case en banc and vacated the panel opinion. The Eleventh Circuit previously recognized that judicial estoppel may be applied if the plaintiff (1) took a position under oath in the bankruptcy proceeding that was inconsistent with the pursuit of the lawsuit and (2) intended to make a mockery of the judicial system. The Eleventh Circuit reaffirmed the two part test, but rejected its prior holdings in Burnes and Burger that the mere fact of a plaintiff's nondisclosure is sufficient to make a mockery of the judicial system. Instead, the Eleventh Circuit identified a non-exclusive list of factors that courts may consider in evaluating an inconsistent statement arising from an omission in bankruptcy disclosures, including the plaintiff's level of sophistication, whether the plaintiff corrected the disclosures, whether the plaintiff told his bankruptcy attorney about the claims before filing the schedules and disclosures, whether the trustee and creditors were aware of the claims prior to the debtor's amendment, whether the plaintiff identified other lawsuits to which he was a party, and any findings by the bankruptcy court after the omission was discovered. In receding from Burnes and Burger and adopting the analysis of Sixth, Seventh, and Ninth Circuits, the Eleventh Circuit sought to ensure that judicial estoppel is applied only when a party acts with sufficient culpability and to protect the integrity of the bankruptcy court.
- Ed Carnes, Chief Judge, Tjoflat, Marcus, Wilson, William Pryor, Martin, Jordan, Rosenbaum, Julie Carnes, and Jill Pryor, Circuit Judges
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