Finney v. Volvo Group North America, LLC, 562 B.R. 914

Background

Plaintiffs Patrick and Charlotte Finney sued Volvo Group North America, LLC (VGNA) after a March 9, 2015 truck wreck, alleging steering (draglink) failure and airbag defects and seeking millions in compensatory and punitive damages.
Plaintiffs were debtors in an active Chapter 13 bankruptcy plan at the time of the wreck and did not disclose the potential tort claim to the Bankruptcy Court or trustee before the case closed.
Plaintiffs investigated the wreck, consulted multiple attorneys between March 2015 and February 2016, and filed an NHTSA report shortly after the wreck; they filed the present complaint in March 2016 after the bankruptcy case had closed.
VGNA moved for judgment on the pleadings asserting judicial estoppel (and alternatively lack of standing), attaching the plaintiffs’ bankruptcy petition, confirmed plan, discharge, and closing order.
Plaintiffs conceded nondisclosure but submitted affidavits asserting their failure to disclose was inadvertent, relying on advice that they lacked a viable claim and that they only learned they had a claim after the bankruptcy case closed.
The district court treated the motion as one for summary judgment, found plaintiffs had motive and knowledge of the factual basis, that no timely notice to the trustee or court was shown, and held judicial estoppel barred the suit; the case was dismissed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether plaintiffs are judicially estopped from pursuing the tort claims because they failed to disclose them in Chapter 13	Nondisclosure was inadvertent; they lacked legal knowledge and relied on attorney advice that no claim existed; they only learned they had a claim after the bankruptcy closed	Plaintiffs failed to disclose a known potential asset while in bankruptcy; bankruptcy court relied on omission; plaintiffs had motive to conceal	Court held plaintiffs judicially estopped; dismissal granted
Whether plaintiffs had knowledge of the factual basis for a claim during bankruptcy	Plaintiffs claimed they did not appreciate an actionable claim until after the case closed	VGNA showed plaintiffs suspected draglink defect, investigated, and spoke with counsel while the case was pending	Court found plaintiffs knew the basic facts and continued to pursue the matter—knowledge requirement satisfied
Whether omission amounted to inadvertence or bad faith	Plaintiffs asserted inadvertence and submitted affidavits about reliance on counsel and misunderstanding	VGNA argued motive to conceal in bankruptcy and absence of any effort to notify trustee or court	Court held no evidence of lack of bad faith; affidavit alone insufficient; omission not inadvertent
Whether equity or creditor interests required a different remedy (e.g., permitting trustee to pursue claim)	Plaintiffs asserted dismissal is inequitable and cited precedent allowing trustee joinder or other relief	VGNA argued Sixth Circuit law supports estoppel where nondisclosure was relied upon by bankruptcy court and no trustee involvement was shown	Court found cases cited distinguishable; equitable relief not warranted here

Key Cases Cited

White v. Wyndham Vacation Ownership, Inc., 617 F.3d 472 (6th Cir. 2010) (elements and application of judicial estoppel in bankruptcy nondisclosure cases)
New Hampshire v. Maine, 532 U.S. 742 (2001) (doctrine and purpose of judicial estoppel)
Lewis v. Weyerhaeuser Co., [citation="141 Fed. App'x 420"] (6th Cir. 2005) (continued duty to disclose postpetition causes of action)
Browning v. Levy, 283 F.3d 761 (6th Cir. 2002) (motive and reliance factors relevant to estoppel)
Eubanks v. CBSK Financial Group, Inc., 385 F.3d 894 (6th Cir. 2004) (burden shifts to debtor to show lack of bad faith after initial showing)
Kimberlin v. Dollar General Corp., [citation="520 Fed. App'x 312"] (6th Cir. 2013) (affidavit of inadvertence insufficient to avoid estoppel)
Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burden-shifting principles)
Anderson v. Liberty Lobby, 477 U.S. 242 (standards for genuine issue of material fact)
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (drawing inferences in summary judgment analysis)