BPP Illinois, LLC v. Royal Bank of Scotland Group PLC, 859 F.3d 188

BPP Illinois LLC and related guarantors/investor (collectively plaintiffs) sued RBS, RBS Citizens, and Citizens Bank for fraud, alleging LIBOR manipulation induced a loan that led to BPP’s bankruptcy.
BPP filed for bankruptcy in 2010 (E.D. Tex.); its bankruptcy schedules did not list any claims against RBS, RBS Citizens, or Citizens Bank for LIBOR-related fraud.
RBS publicly disclosed it was cooperating with LIBOR investigations in May 2011; multiple news reports and lawsuits relating to LIBOR manipulation existed before BPP’s plan confirmation (Oct. 4, 2011) and closing (Nov. 15, 2012).
On remand from this Court, the district court dismissed BPP’s fraud claims as barred by judicial estoppel (for failing to disclose the claims in bankruptcy) and denied leave to amend for the guarantors/investor as untimely under the scheduling order and Rule 16.
This Court affirmed: (1) BPP is judicially estopped from asserting the LIBOR claim because the claim was a ‘‘known’’ asset that should have been scheduled before confirmation; and (2) the FFC Plaintiffs and Equity Plaintiff were properly denied leave to amend for lack of good cause and untimeliness.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether BPP is barred by judicial estoppel from asserting LIBOR fraud claims after failing to list them in bankruptcy schedules	BPP said it lacked sufficient notice of a LIBOR claim before confirmation and therefore had no duty to disclose	Defendants argued the LIBOR-related claim was a known asset by confirmation and nondisclosure amounted to a representation that no claim existed, so estoppel applies	Court held judicial estoppel bars BPP: under Fifth Circuit law BPP had a duty to disclose a potential LIBOR claim before confirmation because public disclosures and reports gave sufficient information
Whether FFC Plaintiffs and Equity Plaintiff should be allowed to amend their complaint after the scheduling-order deadline	Plaintiffs argued exceptions (district scheduling, local rule, and that the court/parties already knew facts) justify late amendment	Defendants argued no good cause under Rule 16; plaintiffs proposed the scheduling restriction and failed to show diligence	Court held denial of leave to amend was proper: no good cause under Rule 16, local rule and prior knowledge do not excuse failure to timely plead, and district court didn’t abuse discretion

In re Coastal Plains, 179 F.3d 197 (5th Cir. 1999) (debtor must disclose all potential causes of action in bankruptcy schedules)
Adelphia Recovery Trust v. Goldman, Sachs & Co., 748 F.3d 110 (2d Cir. 2014) (elements and application of judicial estoppel)
In re Adelphia Recovery Trust, 634 F.3d 678 (2d Cir. 2011) (judicial estoppel framework and adoption requirement)
DeRosa v. Nat’l Envelope Corp., 595 F.3d 99 (2d Cir. 2010) (judicial estoppel standards)
Chartschlaa v. Nationwide Mut. Ins. Co., 538 F.3d 116 (2d Cir. 2008) (importance of full disclosure in bankruptcy)
Grandon v. Merrill Lynch & Co., 147 F.3d 184 (2d Cir. 1998) (standard of review on motion to dismiss)
Holmes v. Grubman, 568 F.3d 329 (2d Cir. 2009) (good-cause, Rule 16 standard for post-deadline amendments)
Grochowski v. Phoenix Constr., 318 F.3d 80 (2d Cir. 2003) (abuse-of-discretion review for denial of leave to amend)
Sinochem Int’l Co. v. Malaysia Int’l Shipping Corp., 549 U.S. 422 (2007) (court may decide threshold non-merits grounds)
Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414 (3d Cir. 1988) (unfair advantage to debtor from nondisclosure in bankruptcy)