Gecker v. Flynn (In Re Emerald Casino, Inc.)
459 B.R. 298
Bankr. N.D. Ill.2011Background
- Emerald Casino, Inc. filed for Chapter 11, later converted to Chapter 7; Frances Gecker appointed as Chapter 7 trustee.
- Payton Plaintiffs investors filed a state court action against Emerald's management defendants.
- Trustee removed the state court action to bankruptcy court and amended to include estate claims.
- Defendants moved for remand/abstention, arguing severability and that Payton claims were remote from estate claims.
- Bankruptcy court initially abstained, finding Payton claims severable and distinct from Emerald estate claims.
- State court dismissed the Payton claims on statute-of-limitations grounds; trustee then challenged res judicata in bankruptcy court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether res judicata bars the bankruptcy estate claims. | Gecker asserts severability and identity defects prevent res judicata. | Defendants contend the claims are identical to Payton claims. | Res judicata does not bar the estate claims. |
| Whether judicial estoppel prevents asserting the claims are different. | Trustee argues prior severance approval shows differences. | Defendants claim no inconsistency. | Judicial estoppel applies; prior positions were inconsistent. |
| Whether equitable claim-splitting defeats res judicata. | Trustee sought unified adjudication in bankruptcy court. | Defendants acquiesced in splitting claims. | Equitable split defeats application of res judicata. |
Key Cases Cited
- Ogden Martin Sys. of Indianapolis, Inc. v. Whiting Corp., 179 F.3d 523 (7th Cir. 1999) (three requirements for judicial estoppel; prior inconsistent positions)
- In re Memorial Estates, 950 F.2d 1364 (7th Cir. 1991) (related-to jurisdiction framework for bankruptcy appeals)
- Nowak v. St. Rita High Sch., 197 Ill. 2d 381 (Ill. 2001) (equitable exceptions to res judicata (Restatement §26))
- River Park, Inc. v. City of Highland Park, 184 Ill.2d 290 (Ill. 1998) (identicality of causes from single operative facts; different theories allowed)
- Stern v. Marshall, 131 S. Ct. 2594 (U.S. 2011) (constitutional limits on core proceedings; removal of certain counterclaims)
- Hagee v. City of Evanston, 729 F.2d 510 (7th Cir. 1984) (full faith in state judgments applying 28 U.S.C. § 1738)