Helen Allen v. C & H Distributors, L.L.C.
2015 U.S. App. LEXIS 22567
| 5th Cir. | 2015Background
- Robert and Helen Allen filed Chapter 13 bankruptcy on July 14, 2009; their confirmed plan was amended three times and the case was closed in April 2014 without discharge for failure to file a financial-management course certificate.
- Helen Allen was injured at work on October 21, 2009 and sued multiple defendants in federal diversity court on October 21, 2010; the State of Louisiana had paid workers’ compensation and sought reimbursement.
- The Allens did not disclose the personal-injury claim in their bankruptcy filings or plan amendments despite a continuing duty to disclose post-petition claims.
- Defendants moved for summary judgment based on judicial estoppel after learning of the bankruptcy; the district court granted summary judgment and dismissed the Allens’ claims with prejudice, but left open the possibility for a Chapter 7 trustee to pursue the claims if the bankruptcy is reopened and converted.
- The Allens appealed; the Fifth Circuit reviewed de novo the summary-judgment aspects and for abuse of discretion the invocation of judicial estoppel, and affirmed as modified to clarify substitution of a trustee within a reasonable time.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether judicial estoppel bars Allens’ personal-injury suit for failure to disclose the claim in bankruptcy | Allen: nondisclosure was inadvertent or not motivated; closing without discharge prevents estoppel; inequitable to bar suit | Defendants: omission was an affirmative representation there was no claim; bankruptcy court relied on that omission; motive to conceal existed | Held: Judicial estoppel applies — Allens’ omission was inconsistent, accepted by the bankruptcy court, and not inadvertent; dismissal affirmed (with modification) |
| Whether judicial acceptance element is satisfied when a claim is omitted from bankruptcy filings | Allen: no judicial acceptance because no explicit adjudication of absence of claim | Defendants: omission led bankruptcy court to accept position that no claim existed | Held: Satisfied — acceptance can be implicit when court adopts plan without reference to the claim |
| Whether Allens acted inadvertently or lacked motive to conceal | Allen: unaware of disclosure duty; case closed without discharge; claim is small | Defendants: Allens knew facts post-injury and amended plans; nondisclosure could yield financial benefit | Held: Not inadvertent — knowledge of facts and clear motive to conceal satisfy the third prong |
| Whether equitable considerations preclude estoppel or allow creditors/state to recover | Allen/State: estoppel is inequitable; State’s recovery impaired by dismissal | Defendants: trustee can pursue claim for creditors if case reopened | Held: Equitable application upheld — district court properly dismissed claims but may substitute Chapter 7 trustee within a reasonable time to pursue the claim for creditors |
Key Cases Cited
- In re Flugence, 738 F.3d 126 (5th Cir. 2013) (discusses duty to disclose post-petition causes of action and inadvertence standard)
- In re Superior Crewboats, Inc., 374 F.3d 330 (5th Cir. 2004) (omission of claim from bankruptcy filings implies representation no claim existed)
- Reed v. City of Arlington, 650 F.3d 571 (5th Cir. 2011) (judicial estoppel must balance deterrence of dishonest debtors with equitable distribution to creditors)
- In re Coastal Plains, 179 F.3d 197 (5th Cir. 1999) (foundational discussion of judicial estoppel in bankruptcy context)
- Jethroe v. Omnova Solutions, Inc., 412 F.3d 598 (5th Cir. 2005) (inadvertence inquiry and application of estoppel where debtor failed to disclose claim)
- Love v. Tyson Foods, Inc., 677 F.3d 258 (5th Cir. 2012) (motivation sub-element and relevant time frame for disclosure analysis)
- Long v. GSDM-Idea City, L.L.C., 798 F.3d 265 (5th Cir. 2015) (permitting trustee a limited period to decide whether to pursue an undisclosed claim)