923 F.3d 260
2d Cir.2019Background
- Ashmore filed a Sarbanes‑Oxley (SOX) whistleblower suit in SDNY in Nov. 2011 alleging he was fired for objecting to an alleged fraudulent bid‑shifting scheme; he also asserted a contract/bonus claim.
- Ashmore filed a pro se Chapter 7 petition in the Bankruptcy Court (D.N.J.) in Apr. 2013; he listed the SOX suit on his Statement of Financial Affairs (SOFA) but did not list it on Schedule B.
- The Chapter 7 trustee (Edwards) learned of the SOX suit, received a copy of the complaint, and discussed it at the §341 meeting; she opposed dismissal of the bankruptcy but later signed a Letter Agreement allowing Ashmore to continue prosecuting the SOX suit subject to reopening if creditors should receive a distribution.
- The bankruptcy case was closed in 2013; later developments included motions to reopen (trustee sought to protect creditors), a limited reopening in Mar. 2016 to administer the litigation, and a settlement/official abandonment in 2017 under which Ashmore paid filed creditors and the trustee abandoned the SOX claim.
- The district court (Judge Torres) initially denied summary judgment on SOX claims but granted summary judgment to CGI on the contract claim; after abandonment and substitution motions, the district court reinstated Ashmore as plaintiff but dismissed the SOX suit on judicial‑estoppel grounds; the Second Circuit vacated that dismissal, affirmed summary judgment on the contract claim, and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether judicial estoppel bars Ashmore from prosecuting the SOX suit because he failed to list it on Schedule B | Ashmore: he disclosed the suit on the SOFA, to the trustee at the §341 meeting, and to the bankruptcy court; omissions were inadvertent or corrected and trustee/ court were on notice, so estoppel is inappropriate | CGI: nondisclosure on Schedule B plus closing/discharge constituted an assertion the claim did not exist, giving Ashmore an unfair advantage; estoppel protects creditors and judicial integrity | Vacated district court dismissal for judicial estoppel; estoppel inappropriate here given SOFA disclosure, oral disclosures to trustee, trustee/court awareness, subsequent reopening and official abandonment; more indicia of intent to deceive required |
| Whether the bankruptcy court (and thus the district court) adopted a position that the SOX claim did not exist when it discharged and closed the case in 2013 | Ashmore: bankruptcy judge and trustee were aware of the suit; discharge/closing did not reflect adoption that the asset did not exist | CGI: closure with no administration of the asset amounted to adoption that the asset did not exist | Rejected as applied here—the record shows trustee/judge were aware and later reopened to administer the litigation; no clear adoption supporting estoppel |
| Whether Ashmore obtained unfair advantage or caused prejudice to creditors by nondisclosure | Ashmore: Letter Agreement, trustee involvement, later reopening, and eventual payment to creditors cured any speculative prejudice | CGI: Ashmore’s nondisclosure preserved discharge benefits and avoided creditor claims, causing prejudice | Court found alleged prejudice speculative; creditors were later notified and could file claims; no demonstrable unfair advantage supporting estoppel |
| Whether CGI breached contract (bonus claim) | Ashmore: he was entitled to a bonus under his offer letter | CGI: bonus was discretionary and subject to eligibility rules (6 months employment and active at fiscal year end) | Affirmed summary judgment for CGI; bonus discretionary and Ashmore was ineligible under policy/ timing |
Key Cases Cited
- Wight v. BankAmerica Corp., 219 F.3d 79 (2d Cir.) (judicial estoppel prevents parties from adopting clearly inconsistent positions)
- New Hampshire v. Maine, 532 U.S. 742 (2001) (two‑part test for judicial estoppel and purpose to protect judicial integrity)
- Adelphia Recovery Tr. v. Goldman, Sachs & Co., 748 F.3d 110 (2d Cir.) (use of judicial estoppel to protect bankruptcy process where asset ownership was not asserted)
- BPP Illinois, LLC v. Royal Bank of Scotland Grp. PLC, 859 F.3d 188 (2d Cir.) (judicial estoppel applied where claims were never disclosed in bankruptcy)
- Clark v. AII Acquisition, LLC, 886 F.3d 261 (2d Cir.) (abuse of discretion where debtor’s nondisclosure was attributable to counsel error and estoppel inappropriate)
- Ryan Ops. G.P. v. Santiam‑Midwest Lumber Co., 81 F.3d 355 (3d Cir.) (nondisclosure alone insufficient to infer bad faith; estoppel requires intentional self‑contradiction)
- In re Kane, 628 F.3d 631 (3d Cir.) (debtor’s duty is reasonable diligence; failure to list on Schedule B does not automatically trigger judicial estoppel)
- Spaine v. Community Contacts, Inc., 756 F.3d 542 (7th Cir.) (oral disclosure to trustee can defeat estoppel where omission was corrected before discharge)
- Marshall v. Honeywell Tech. Sys., Inc., 828 F.3d 923 (D.C. Cir.) (oral disclosure insufficient to correct false schedules for estoppel purposes)
- Simon v. Safelite Glass Corp., 128 F.3d 68 (2d Cir.) (statements that can be reconciled do not support judicial estoppel)