Reed v. City of Arlington, 650 F.3d 571

Lubke, a former firefighter, won >$1 million against the City under FMLA; he and spouse filed Chapter 7 and omitted the judgment and related fees from bankruptcy schedules.
Trustee Reed later learned of the judgment and moved to reopen the estate; she substituted in as real party in interest and planned to distribute proceeds to creditors.
District court held judicial estoppel against Lubke but not against the Trustee, crafting a remedy allowing Trustee to collect for the estate while shielding Lubke from recovery.
Panel reversed, en banc rehearing granted, and this court affirmed that an innocent trustee may pursue a concealed asset for creditors in general.
The bankruptcy estate remains the real party in interest; the Trustee’s pursuit aims to maximize equitable distribution to creditors.
The district court’s remedy balanced deterrence of fraud with preservation of asset distribution to innocent creditors.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether judicial estoppel bars the Trustee’s pursuit of the judgment	Reed argues the Trustee is the real party in interest and should pursue the asset	City contends estoppel applies to prevent the Trustee from recovery	No; Trustee may pursue for the estate absent unusual circumstances.
Whether post-petition misconduct affects the Trustee’s rights	Asset became estate property; Trustee can pursue	Estoppel should bar pursuit due to debtor’s misconduct	Trustee's post-petition pursuit permitted; estate-based defenses apply.
Role of equity in applying judicial estoppel	Equitable distribution to creditors justifies Trustee’s pursuit	Equity requires deterrence of fraud and protecting City	Equity supports allowing Trustee to pursue assets for creditors.
Consistency with bankruptcy precedents	Trustee’s actions align with Kane and Superior Crewboats principles	City argues contrary precedents require estoppel	Agrees with Kane and related precedents; Trustee may pursue.
Effect on creditors and fees	Recovery benefits creditors and respects statutory priorities	Fees and costs to litigate are burdensome	Remedy upheld; fee issues affirmed as reasonable.

Kane v. National Union Fire Insurance Co., 535 F.3d 380 (5th Cir. 2008) (trustee may pursue estate asset despite debtor’s nondisclosure)
In re Superior Crewboats, Inc., 374 F.3d 330 (5th Cir. 2004) (trustee may pursue estate claim; debtor’s failure to disclose not fatal to trustee’s claim)
In re Coastal Plains, Inc., 179 F.3d 197 (5th Cir. 1999) (trustee barred when recovery would unjustly benefit debtor; equity-based rules vary by context)
Parker v. Wendy's International, Inc., 365 F.3d 1268 (11th Cir. 2004) (trustee may pursue asset concealed by debtor; asset becomes estate property at petition)
Eastman v. Union Pacific Railroad Co., 493 F.3d 1151 (10th Cir. 2007) (trustee may pursue post-discharge assets for estate)
Biesek v. Soo Line Railroad Co., 440 F.3d 410 (7th Cir. 2006) (courts may accommodate creditors; balancing equities in bankruptcy context)