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Summarizing by Amir Shachmurove

[UPDATED] Guay v. Burack

Guay v. Burack, United States Court of Appeals for the First Circuit, No. 10-2513, April 19, 2012
Applying an abuse of discretion standard, the Court affirmed the dismissal of a civil action based on judicial estoppel when the plaintiffs had failed to amend their bankruptcy Schedules officially to reveal that claims for violation of constitutional rights had arisen during their Chapter 11 case. More specifically, the Court determined that because property of the estate includes property, here potential causes of action, that a debtor acquires during a Chapter 11, a duty exists to amend the Schedules where circumstances change during the proceeding. Generally, under the equitable doctrine of judicial estoppel (the "Doctrine") a litigant will be barred from pressing a claim where (i) the estopping position and the estopped position are directly inconsistent, and (ii) the responsible party has convinced a court to accept its prior position. In the First Circuit it is not necessary also to show that the responsible party would derive an unfair advantage if not estopped. Applying the Doctrine, the Court concluded that (i) a failure to identify a claim as an an asset in a bankruptcy case is a prior inconsistent position that may support application of the Doctrine in another court and (ii) the bankruptcy court "accepted" the prior position by granting the discharge. The Court expressly left open whether an exception might exist, not present here, where the responsible party lacked sufficient knowledge of the undisclosed claim or had no motive for its concealment.
Procedural context:
Appeal from the U.S. District Court for the District of New Hampshire of a summary judgment for defendants, applying the doctrine of judicial estoppel to dismiss a civil action.
Husband and wife debtors had filed a Chapter 11 petition, later converted to Chapter 7. During the administrative period local police allegedly violated their constitutional rights in a search of their home in connection with an official investigation, and they filed a civil action shortly after the conversion date. The debtors never officially amended their Schedules to identify the pending actions, although information relating to the litigation was revealed to the trustee and the trustee later filed a Notice of Abandonment related to the actions; to the contrary, they filed an Affidavit stating that their Schedules were correct and required no modification. A discharge was granted. The defendants in the civil action successfully moved for summary judgment based on the doctrine of judicial estoppel.
Boudin, Selya and Lipez

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