Copelan v. Techtronics Industries Co.
2015 U.S. Dist. LEXIS 39597
| S.D. Cal. | 2015Background
- Plaintiff Charles Copelan filed a personal-injury suit in state court on November 7, 2011; he filed a Chapter 7 petition on January 11, 2012 and did not list the pending suit on his bankruptcy schedules.
- The bankruptcy court discharged Copelan on April 10, 2012; the personal-injury action was removed to federal court on May 25, 2012.
- During a 2013 deposition counsel learned of the bankruptcy; Copelan’s counsel moved to reopen the bankruptcy in April 2014 and the bankruptcy court reopened the case and the trustee later elected to pursue the suit.
- Defendants moved to dismiss under Rules 12(b)(1) and 12(b)(6), arguing Copelan is judicially estopped for failing to disclose the claim in bankruptcy.
- The Court allowed substitution of U.S. Bankruptcy Trustee Richard Kipperman as the real party in interest under Rules 17 and 25 and denied the defendants’ motion to dismiss, holding judicial estoppel does not bar the trustee from pursuing the prepetition claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trustee should be substituted as real party in interest | Substitution is proper because the claim vested in the trustee upon filing and the trustee moved to pursue it | Substitution is premature because the pending motion to dismiss (judicial estoppel) should dispose of the case | Granted: trustee substituted under Fed. R. Civ. P. 17/25; change is formal and does not alter allegations |
| Whether judicial estoppel bars the suit | Copelan (and trustee) argued trustee can pursue the claim for creditors despite the debtor’s omission | Defendants argued debtor’s failure to disclose and bankruptcy discharge require dismissal under judicial estoppel | Denied: judicial estoppel cannot be applied to bar an innocent trustee pursuing estate assets; court considered Ninth Circuit precedent and persuasive circuits |
| Whether dismissal is jurisdictional (12(b)(1)) or merits (12(b)(6)) | Plaintiff argued judicial estoppel is an affirmative defense, not a subject-matter jurisdiction issue | Defendants relied partly on cases suggesting dismissal is appropriate without conversion to summary judgment | Court treated the estoppel argument under Rule 12(b)(6) and denied dismissal; substitution mooted standing concern |
| Whether evidence outside the pleadings is required to resolve estoppel | Plaintiff contended resolution would require inquiry into debtor’s subjective intent and extra-pleading evidence | Defendants contended estoppel could be resolved on the pleadings (citing Dzakula) | Court found no need to consider extra-pleading evidence because trustee substitution controls outcome; denied dismissal |
Key Cases Cited
- New Hampshire v. Maine, 532 U.S. 742 (2001) (sets out judicial estoppel doctrine and factors)
- Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778 (9th Cir. 2001) (applies judicial estoppel in bankruptcy context when debtor conceals claims)
- Reed v. City of Arlington, 650 F.3d 571 (5th Cir. 2011) (an innocent trustee may pursue a claim the debtor concealed)
- Parker v. Wendy’s Int’l Inc., 365 F.3d 1268 (11th Cir. 2004) (trustee substitution precludes application of judicial estoppel to the trustee)
- Biesek v. Soo Line R.R. Co., 440 F.3d 410 (7th Cir. 2006) (prepetition claims belong to trustee and estoppel applies only if trustee abandons claim)
- Ah Quin v. County of Kauai Dept. of Transp., 733 F.3d 267 (9th Cir. 2013) (inadvertent omission in bankruptcy requires inquiry into debtor’s subjective intent when applying estoppel)