Johnson v. Fuller Family Holdings, LLC
91 N.E.3d 537
Ill. App. Ct.2018Background
- On June 14, 2012 Gregory and Natasha Johnson filed joint Chapter 7 bankruptcy schedules and listed only a workers’ compensation claim (value unknown); they were discharged October 10, 2012. A creditors’ meeting occurred August 8, 2012 where the trustee discussed the workers’ compensation matter with Gregory.
- Gregory suffered a workplace slip-and-fall on December 15, 2010, obtained workers’ compensation benefits, and later (December 14, 2012) the Johnsons filed a state-court negligence suit against property and service defendants for Gregory’s personal injuries (and Natasha’s loss of consortium).
- Gregory did not list a potential third‑party personal injury claim on the bankruptcy schedules; he later testified in deposition that he “told [the trustee] I had no idea” whether he would file any third‑party suit and that at the time he didn’t think he would file a suit.
- Defendants moved to dismiss in state court under 735 ILCS 5/2‑619(a)(9) arguing lack of standing and judicial estoppel based on plaintiffs’ nondisclosure in bankruptcy. The bankruptcy case was reopened; the trustee ultimately abandoned the state‑court claim.
- The trial court granted dismissal with prejudice (citing standing and judicial estoppel). On appeal the appellate court limited review to two defendants (ABM and Fuller) and reversed the dismissal, holding plaintiffs had standing after trustee abandonment and that judicial estoppel did not apply because the record lacks clear and convincing evidence of intent to deceive.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to pursue state personal‑injury claim after trustee abandonment | Once trustee abandoned the claim standing revests in the debtors; plaintiffs therefore have standing | The claim remained exclusive property of the trustee; plaintiffs lacked standing | Reversed: standing revested after trustee abandonment (court relied on Board of Managers precedent) |
| Judicial estoppel based on failure to disclose potential third‑party claim in bankruptcy | Omission was inadvertent; plaintiffs disclosed the workers’ comp claim and believed that disclosed the matter; no clear & convincing evidence of intent to deceive | Plaintiffs took inconsistent positions (nondisclosure then suing) and benefited from bankruptcy discharge; judicial estoppel should bar suit | Reversed: five technical prerequisites for estoppel were met, but application requires discretion and intent to deceive — record does not show clear and convincing evidence of intent to deceive, so estoppel inappropriate |
| Standard of review for 2‑619 dismissal invoking judicial estoppel | De novo review (because dismissal terminates litigation similar to summary judgment) | Deferential (abuse of discretion) | De novo review applied |
| Effect of trustee’s abandonment on benefit prong of estoppel | Trustee abandonment negates any benefit and undermines estoppel | Receiving a discharge without disclosure conferred a benefit because creditors lacked access to the undisclosed asset | Court held discharge-without-disclosure constituted a benefit for estoppel prong, but intent to deceive still required and was not shown here |
Key Cases Cited
- Seymour v. Collins, 2015 IL 118432 (Ill. 2015) (establishes 5‑factor framework for judicial estoppel and requires court discretion to consider intent to deceive)
- Barnes v. Lolling, 2017 IL App (3d) 150157 (Ill. App. 2017) (affirmed estoppel where plaintiff waited to assert/settle claim until after bankruptcy discharge; indicative of intent to avoid creditors)
- Board of Managers of the 1120 Club Condominium Ass'n v. 1120 Club, LLC, 2016 IL App (1st) 143849 (Ill. App. 2016) (holding that when trustee abandons a claim, standing revests in debtor as if the debtor never lost standing)