Spaine v. Community Contracts, Inc.

Citation:
13-3059, 2014 WL 2855000 (7th Cir. 2014)
Tag(s):
Ruling:
Trial court ruled that Spaine, with intent, concealed from the bankruptcy court her claims against Community Contacts, and by so doing she should be judicially estopped from asserting her claim. The Appellate Court reversed the lower court’s ruling on the grounds that there is a genuine issue of dispute as to whether Spaine concealed her claims against Community Contacts from the bankruptcy court with intent. The Appellate court heavily considered Spaine’s affidavit in opposition to Community Contact’s motion for summary judgment which stated that she had discussed her pending claims against Community Contact with the Bankruptcy Judge soon after filing her petition and that she was not told by the bankruptcy court that she needed to amend her schedule listing assets. Additionally, she provided a transcript of the creditors meeting from December 2012 which revealed that Spaine had told the trustee about her lawsuit against Community Contacts. Importantly, the court noted that in ruling to reverse the lower court’s holding, the transcript was not taken into consideration as it was not part of the record of the District Court, but Spaine’s affidavit alone was sufficient to create a genuine issue of material fact. Specifically in regard to the issue of standing, the court ruled that because the trustee had become aware of the claim against Community Contacts but abandoned it, the lawsuit as property reverted from the Chapter 7 estate back to the debtor, thus Spaine was the correct Plaintiff. Finally in regards the issue of judicial estoppel, the court ruled it did not apply because Spaine’s affidavit was material enough to show that she lacked intent from concealing the lawsuit and had made the trustee and bankruptcy judge aware of her the claim, therefore Spaine did not “manipulate the judicial system”.
Procedural context:
On May 3, 2013 Community Contacts moved for summary judgment arguing two points: (1) that Spaine lacked standing as the claim was not hers to make but instead the property of the bankruptcy trust; and (2) that she should be judicially estopped from pursuing the claim because she concealed the claims from the bankruptcy court. Two weeks after Community Contacts filed its motion, Spaine asked the bankruptcy court to reopen her case so she could amend her list of assets to include her claim against Community Contacts. Eventually, the District Court granted Community Contacts motion on the finding that Spaine had intended to conceal the claim against Community Contacts from the bankruptcy court.
Facts:
Plaintiff Anne Spaine worked for Defendant Community Contacts as an employee from 2008 through 2011. In July 2012 Spaine filed suit against Community Contacts alleging that she was terminated because of her race. Five months later in November 2012, Spaine filed for bankruptcy protection under Chapter 7 (she had previously filed in 2010 but failed to pay the filing fee, thus the case was dismissed). On her November 2012 bankruptcy petition, she listed nothing under the section requiring her to list “contingent and unliquidated claims of every nature”. Additionally in a separate statement of financial affairs she was asked to list lawsuits to which she was a party and again failed to list her suit against Community Contracts. Five weeks after submitting her petition and other required filings the meeting of the creditors was held. Soon after this meeting, the bankruptcy trustee concluded that Spaine’s bankruptcy was a “no asset” case and on February 12, 2013 she received a general discharge of her unsecured debts. However, soon after this discharge the trustee wrote to Spaine’s lawyer representing her in the case against Community Contacts asking if it’s possible to value the case as an asset. Based on this conversation the trustee concluded that he did not need to reopen the bankruptcy case. On March 21, 2013, Spaine wrote the trustee asking to classify her claims against Community Contracts as exempt property, asserting that she would need any potential earnings as money for living expenses.
Judge(s):
Virginia M. Kendall

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