61 F.4th 10
1st Cir.2023Background
- Neighbors Mary Buscone and Ann Botelho opened a frozen-yogurt business (2012); business closed (2014). Ann filed Chapter 7 in 2014 and did not list any claim against Mary on her schedules. Ann received a no-asset discharge.
- In 2018 Ann sued Mary in Massachusetts state court for fraud, fiduciary breach, etc.; Mary did not answer and a default judgment for $91,673.45 was entered for Ann.
- Mary later filed Chapter 7 and listed Ann’s state-court judgment as a scheduled claim against her; Ann commenced an adversary proceeding under 11 U.S.C. § 523 seeking to except the $91,673.45 debt from Mary’s discharge (fraud/fiduciary exceptions).
- Mary moved to dismiss/for summary judgment based on judicial estoppel (Ann’s prior failure to disclose the claim in her 2014 bankruptcy). The bankruptcy court converted the motion, considered Ann’s affidavit denying knowing omission, and denied summary judgment.
- Extensive discovery disputes followed; Mary and her counsel repeatedly failed to comply with discovery orders. The bankruptcy court entered default judgment as a discovery sanction and excepted the $91,673.45 debt from discharge. Mary’s motions to reconsider and the BAP appeal were denied; Mary appealed to the First Circuit.
Issues
| Issue | Plaintiff's Argument (Botelho) | Defendant's Argument (Buscone) | Held |
|---|---|---|---|
| Whether judicial estoppel required summary judgment barring Ann’s adversary claim | Omission was inadvertent; she intended to reopen and amend 2014 schedules; factual dispute prevents estoppel at SJ | Omission was prior inconsistent position accepted by a court; estoppel bars the subsequent claim | Denied SJ affirmed: court did not abuse discretion — factual dispute (inadvertence) and estoppel is equitable/discretionary, so issue not resolvable on summary judgment |
| Whether default judgment was an appropriate discovery sanction | Entry of default was warranted given repeated discovery noncompliance and notice requesting default | Sanction was excessive and not supported by principled analysis | Affirmed: no abuse of discretion — repeated violations, prior lesser sanctions, notice of possible default, counsel failed to offer mitigating justification |
| Whether the bankruptcy court had jurisdiction to quantify the nondischargeable amount | Bankruptcy court may determine amount of a nondischargeable debt (court relied on state judgment and schedules) | Bankruptcy court exceeded jurisdiction by listing a monetary amount (argued In re Cambio) | Affirmed: court had authority to determine amount for nondischargeability purposes; it effectively recognized the state-court judgment amount rather than entering an independently enforceable money judgment |
| Whether denial of motion to reconsider was erroneous | Motion should have been granted to reconsider sanctions and SJ issues | Motion merely rehashed prior arguments and lacked grounds (no new evidence or manifest error) | Denial affirmed for manifest-abuse-of-discretion standard; motion reasserted already-considered arguments and failed to show grounds for relief |
Key Cases Cited
- New Hampshire v. Maine, 532 U.S. 742 (2001) (judicial estoppel is equitable, discretionary; baseline factors and additional considerations guide application)
- Guay v. Burack, 677 F.3d 10 (1st Cir. 2012) (declined to adopt a categorical inadvertence exception; estoppel analysis is fact intensive)
- Payless Wholesale Distribs., Inc. v. Alberto Culver, 989 F.2d 570 (1st Cir. 1993) (concealment in bankruptcy can constitute "playing fast and loose" warranting estoppel)
- Marrama v. Citizens Bank of Mass., 549 U.S. 365 (2007) (bankruptcy's principal purpose is to give honest debtors a fresh start; full disclosure required)
- Grogan v. Garner, 498 U.S. 279 (1991) (fundamental principles regarding discharge and fraud exceptions in bankruptcy)
- Alt. Sys. Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23 (1st Cir. 2004) (judicial estoppel contours are hazy; deferential review of discretionary estoppel rulings)
- In re Huang, 509 B.R. 742 (Bankr. D. Mass. 2014) (bankruptcy court may determine the amount of a nondischargeable debt though distinctions exist about entering executable money judgments)
- AngioDynamics, Inc. v. Biolitec AG, 780 F.3d 429 (1st Cir. 2015) (district courts have broad discretion in selecting sanctions)
- Hooper-Haas v. Ziegler Holdings, LLC, 690 F.3d 34 (1st Cir. 2012) (default can be an appropriate sanction for discovery abuse)
- Robson v. Hallenbeck, 81 F.3d 1 (1st Cir. 1996) (factors to consider when imposing discovery sanctions)
- Stern v. Marshall, 564 U.S. 462 (2011) (limits on bankruptcy courts’ constitutional authority)
- Wellness Int’l Network, Ltd. v. Sharif, 575 U.S. 665 (2015) (Stern claims may be adjudicated in bankruptcy court with party consent)