Flugence v. Axis Surplus Insurance (In Re Flugence)
738 F.3d 126
| 5th Cir. | 2013Background
- Flugence filed Chapter 13 in 2004 and a plan was confirmed.
- In March 2007 she was injured in a car accident and hired an attorney a month later.
- An amended Chapter 13 plan was confirmed in July 2007.
- In March 2008 Flugence sued for personal injury; she was discharged in November 2008.
- She never disclosed the accident or potential personal-injury claim to the bankruptcy court during the relevant periods.
- After discovery of nondisclosure, the bankruptcy case was reopened and the trustee pursued the claim for creditors.
- The bankruptcy court found Flugence estopped but allowed the trustee to pursue the claim for creditors; Reed v. City of Arlington was invoked.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Flugence is judicially estopped | Flugence’s non-disclosure raised estoppel against her claims | Defendants contend estoppel should not apply given disclosure uncertainties | Flugence is judicially estopped |
| Remedial scope for the trustee after estoppel | Trustee should pursue for creditors without limits | Trustee recovery should be limited to debtor’s debt | Trustee may pursue the claim for creditors without limitation |
| Interpretation of Reed on recovery limits | Reed allows trustee recovery without creditor-limit constraints | Reed implies potential limits to protect creditors and deter abuse | Reed does not require recovery limits; trustee may pursue full recovery under law |
| Whether the district court abused its discretion | Court should uphold estoppel and trustee remedy as proper | District court erred in reversing parts of bankruptcy court’s judgment | Bankruptcy court’s estoppel ruling upheld; district court reversed accordingly |
Key Cases Cited
- Reed v. City of Arlington, 650 F.3d 571 (5th Cir.2011) (judicial estoppel in bankruptcy context; trustee proceeds for creditors)
- Browning Mfg. v. Mims (In re Coastal Plains, Inc.), 179 F.3d 197 (5th Cir.1999) (abuse of discretion standard for judicial estoppel; equitable doctrine)
- Jethroe v. Omnova Solutions, Inc., 412 F.3d 598 (5th Cir.2005) (inadvertence standard in judicial-estoppel inquiry)
- In re Superior Crewboats, Inc., 374 F.3d 330 (5th Cir.2004) (continuing duty to disclose assets in bankruptcy)
- Love v. Tyson Foods, Inc., 677 F.3d 258 (5th Cir.2012) (judicial estoppel should be applied flexibly to achieve substantial justice)
- Kane v. Nat’l Union Fire Ins. Co., 535 F.3d 380 (5th Cir.2008) (continuing duty to disclose pending and potential claims)