MEMORANDUM AND ORDER
I. Introduction
Plaintiff Okey Azuike commenced this action against defendants BNY Mellon, Bank of New York Mellon Corp., Bank of New York Corp., and John Doe Corporations 1-10, asserting discrimination, harassment, and retaliation in employment on the basis of his color, race, and national origin. He also asserted claims for intentional and negligent infliction of emotional distress. Presently before the Court are defendants’ motion to dismiss plaintiffs complaint and defendants’ motion to impose sanctions against plaintiff and his former counsel. For the reasons stated below, defendants’ motion to dismiss is granted and their motion for sanctions is denied.
II. Background
In 1998, plaintiff “was hired by The Bank of New York Corporation as a Night Shift Console Operator.” Compl. ¶ 7. In July 2008, he was allegedly promoted to a Software Systems Specialist III. Id. ¶ 10. Throughout his tenure working for defendants, plaintiff allegedly “never once received a disciplinary report or warning” and “never received a negative performance evaluation.” Id. ¶ 11. Nonetheless, plaintiff was allegedly compensated less than similarly situated coworkers, see id. ¶¶ 16-18, passed over for a promotion that many allegedly less-qualified colleagues received, see id. ¶¶ 21-24, and subjected to a hostile work environment, see id. ¶¶ 42-44. When plaintiff filed complaints with defendants, the discriminatory treatment allegedly not only continued, see id. ¶¶ 25-31, 44, but also intensified in retaliation for plaintiffs complaints, see id. ¶¶ 45-47. On September 21, 2009, plaintiffs employment was terminated. See id. ¶ 33.
On January 6, 2010, plaintiff filed a Charge of Discrimination against defendants with the Equal Employment Opportunity Commission (the “EEOC”), claiming that defendants discriminated against him based on race and national origin and that he was subject to retaliation. See EEOC Charge of Discrimination, Ex. A. Kirschner Aff. in Supp. of Rule 11 Mot. [hereinafter Kirschner Aff.]. Plaintiffs allegations of discrimination and retaliation in his EEOC Charge were substantially similar to his allegations in the present Complaint. See id.
On July 23, 2010, plaintiff filed a Voluntary Bankruptcy Petition pursuant to Chapter 7 in the United States Bankruptcy Court for the District of New Jersey. See Voluntary Petition, Ex. B, Kirschner Aff. Plaintiff was represented by counsel in the filing of this petition. See id. In response to the instruction, “List all suits and administrative proceedings to which the debtor is or was a party within one year immediately preceding the filing of this bankruptcy case,” plaintiff failed to disclose his pending EEOC claim. Id. at 27. Further, in the schedule for personal property, plaintiff did not disclose his EEOC claim, and placed a checkmark for “None” next to “Other contingent and unliquidated claims of every nature, including tax refunds, counterclaims of the debtor, and rights to setoff claims.” Id. at 10. The bankruptcy court issued a discharge order on October 29, 2010, and the case was closed on November 5, 2010. See Bankruptcy Docket, Ex. C, Kirschner Aff.
On April 6, 2012, the EEOC sent plaintiff a “right to sue letter,” stating: “Based
On August 21, 2012, defendants’ counsel, Kenneth Kirschner, sent a letter to Mr. Schewe informing him of plaintiffs failure to disclose his EEOC claim in his prior bankruptcy proceeding. See Letter from Kenneth Kirschner to Michael J.P. Schewe (Aug. 21, 2012), Ex. E, Kirschner Aff. The letter explained why that omission deprived plaintiff of standing to pursue the present action and stated that if plaintiffs complaint was not withdrawn within fourteen days — by September 4, 2012 — defendants would seek sanctions against plaintiff and his counsel. See id.
On August 31, 2012, Mr. Schewe sent an email to Mr. Kirschner stating that he was looking into the issue of standing and requesting an additional two weeks to respond.
On the afternoon of September 7, 2012, not having received a response from Mr. Schewe, see Kirschner Aff. ¶ 11, Mr. Kirschner sent him an email stating that, if he did not receive a response that day, he would “proceed with drafting an appropriate motion to dismiss and/or for sanctions.” Letter from Kenneth Kirschner to Michael J.P. Schewe (Sept. 7, 2012), Ex. I, Kirschner Aff. On September 10, 2012, Mr. Schewe sent Mr. Kirschner an email stating that he was waiting to hear back from plaintiffs bankruptcy attorney and would respond to Mr. Kirschner once he had. Letter from Michael J.P. Schewe to Kenneth Kirschner (Sept. 10, 2012), Ex. J, Kirschner Aff. Later that day, Mr. Kirschner sent Mr. Schewe a letter stating that, if plaintiff did not withdraw his complaint with prejudice by 5:00 p.m., defendants would move for Rule 11 sanctions. Letter from Kenneth Kirschner to Michael J.P. Schewe (Sept. 10, 2012), Ex. K, Kirschner Aff. That evening, not having heard from Mr. Schewe, see Kirschner Aff. ¶ 14, Mr. Kirschner sent him a draft Rule 11 Motion and stated his intention to file it twenty-one days later, on October 1, 2012. Letter from Kenneth Kirschner to Michael J.P. Schewe (Sept. 10, 2012), Ex. L, Kirschner Aff.
On September 18, 2012, Mr. Schewe sent Mr. Kirschner a letter which sought to distinguish the case cited by defendants in support of their position that plaintiff lacked standing. See Letter from Michael
On November 7, 2012, Mr. Schewe submitted a letter to the Court in which he requested to be relieved as plaintiffs attorney of record. See Letter from Michael J.P. Schewe to the Court (Nov. 7, 2012). On November 20, 2012, we sent all counsel a letter stating that the request to withdraw failed to comply with' Local Civil Rule 1.4. See Letter from the Court to Michael Following our receipt of a corrected application to withdraw by Mr. Schewe, we issued an Order on December 20, 2012, granting Mr. Schewe’s application but requiring him to respond to defendants’ motion for sanctions as against him.
Finally, in a letter dated January 30, 2013, the trustee in plaintiffs bankruptcy, John W. Sywilok, informed us that, upon motion by plaintiffs counsel, the Bankruptcy Court had reopened plaintiffs bankruptcy proceedings on January 23, 2013. See Letter from John W. Sywilok to the Court (Jan. 30, 2013). Mr. Sywilok enclosed the Bankruptcy Court’s Order, which stated:
ORDERED that the debtor’s chapter 7 case is reopened; that schedule B # 21 is amended to reference a charge of discrimination against Bank of N.Y. $ unknown; that schedules C is amended to claim the applicable exemption that debtor statement of financial affairs is amended to list a charge of discrimination against Bank of N.Y. $ unknown as an administrative proceeding and that the chapter 7 trustee take appropriate action to administer or abandon said asset.
In re Azuike, No. 10-32628DHS (Bankr. D.N.J. Jan. 23, 2013). On April 25, 2013, Mr. Sywilok notified the Court that “[he] ha[d] abandoned [his] interest in the cause of action and the bankruptcy case was closed on March 6, 2013.” Letter from John W. Sywilok to the Court (Apr. 25, 2013).
III. Discussion
A. Legal Standard
1. Motion to Dismiss
Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a complaint may be dismissed for “failure to state a claim upon which relief can be granted.” Fed. R.Civ.P. 12(b)(6). To avoid dismissal, a complaint must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly,
2. Motion for Sanctions
Under Rule 11(b) of the Federal Rules of Civil Procedure, “[b]y presenting to the court a pleading, written motion, or other paper,” an attorney certifies “to the best of [his or her] knowledge, information, and belief, formed after an inquiry reasonable under the circumstances!,]” that:
(1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;
(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law;
(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and
(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.
Fed.R.Civ.P. 11(b). Although, as a general matter, “Rule 11 does not impose a continuing obligation on the presenter to update, correct or withdraw any pleading, written motion or other paper which, when presented, satisfies the requirements of the Rule,” Fuerst v. Fuerst,
“If, after notice and a reasonable opportunity to respond, the court determines that Rule 11(b) has been violated, the court may impose an appropriate sanction on any attorney, law firm, or party that violated the rule or is responsible for the violation.” Fed.R.Civ.P. 11(c)(1). The Second Circuit has held that “the standard for triggering sanctions under Rule 11 is ‘objective unreasonableness,’ ” Star Mark Mgmt., Inc. v. Koon Chun Hing Kee Soy & Sauce Factory, Ltd.,
B. Analysis
1. Defendants’ Motion to Dismiss
Defendants have moved to dismiss plaintiffs Complaint on two grounds: (1) plaintiff lacks standing, and (2) plaintiffs Complaint is barred by judicial estoppel. Although it is not clear whether plaintiffs Complaint should be dismissed for lack of standing,
Judicial estoppel is often applied “to prevent a party who failed to disclose a claim in bankruptcy proceedings from asserting that claim after emerging from bankruptcy.” Ibok v. SIAC-Sector Inc.,
Further, this is a situation where applying judicial estoppel is necessary to protect judicial integrity. “[T]he integrity of the bankruptcy system depends on full and honest disclosure by debtors of all of their assets.” Id. at *6 (quoting Rosenshein v. Kleban,
An exception to the normal application of judicial estoppel applies “if the first statement or position at issue resulted from a ‘good faith mistake or an unintentional error.’ ” Ibok,
Applying this standard here, we cannot conclude that plaintiffs omission of his EEOC claim resulted from a “good faith mistake or an unintentional error.” First,
2. Defendants’ Motion for Sanctions
Defendants have moved for sanctions pursuant to Rule 11 against both plaintiff and Mr. Sehewe. Sanctions are appropriate, they argue, because “Plaintiff cannot assert any nonfrivolous argument for extending, modifying or reversing ... existing law or for establishing new law” and because “Plaintiffs refusal to withdraw his Complaint is objectively unreasonable and can only be construed as being done for the purpose of harassment and increasing the cost of litigation for Defendants.” Defs.’ Mem. of Law in Supp. of Their Mot. for Rule 11 Sanctions 8-9 [hereinafter Defs.’ Mot. for Sanctions]. With particular regard to Mr. Sehewe, defendants argue that “although [he] was not aware that Plaintiff had filed for bankruptcy [at the time that plaintiffs Complaint was filed], Defendants brought that fact to his attention on August 21, 2012,” and yet he “refus[ed] to withdraw the Complaint or take timely and appropriate action” and did not request to withdraw as counsel until two- and-one-half months later. Defs.’ Reply 7.
As a sanction for plaintiff’s and Mr. Schewe’s alleged violations of Rule 11, defendants seek “reasonable attorneys’ fees incurred in connection with Defendants’ preparation and filing of both motions.” Defs.’ Mot. for Sanctions 9. Defendants have calculated that, from August 21, 2012, through October 31, 2012, these fees equaled $36,939.50. See Defs.’ Mem. of Law in Supp. of Their Mot. to Dismiss Pl.’s Compl. 12 n. 6 [hereinafter Defs.’ MTD]; see also Kirschner Aff. in Supp. of Defs.’ Mot. to Dismiss Pis.’ Compl. ¶¶ 16-17 [hereinafter Kirschner MTD Aff.]. Plaintiffs seek these sanctions not only through their Rule 11 motion, but also through their Motion to Dismiss, presumably relying on the Court’s inherent power to sanction.
a. Rule 11 Sanctions Against Plaintiff
The entry of Rule 11 sanctions against plaintiff is not warranted. There is no basis to conclude that, at the time this case was filed, plaintiff understood how the failure to report a pending claim before the EEOC on his bankruptcy petition would prevent him from pursuing a civil action against his employer. Further, given that Mr. Sehewe was not aware of plaintiffs bankruptcy at the time the Complaint was filed, he was not in a position to advise plaintiff on the issues addressed in this opinion.
At some point after August 21, 2012, when defendants informed Mr. Sehewe of plaintiffs bankruptcy and presented their argument for why the Complaint should be withdrawn, Mr. Sehewe discussed the issue with plaintiff. See Sehewe Aff. ¶ 12(d). Given that Mr. Sehewe “sincerely believed and believe[s] that ... [defendants’ counsel] has presented no case law that compels a plaintiff to voluntarily dismiss his complaint under facts similar to the instant matter,” id. ¶ 12(c), it seems plausible, even likely, that plaintiff believed that his decision not to withdraw his Complaint was legally justified. In light of these
b. Rule 11 Sanctions Against Mr. Schewe
We also decline to impose Rule 11 sanctions against Mr. Schewe. As discussed above, Mr. Schewe was not aware of plaintiffs bankruptcy at the time the Complaint was filed. After being informed of the bankruptcy on August 21, 2012, Mr. Schewe kept Mr. Kirschner informed of his progress in reviewing the issues raised, discussed those issues with his client, and presented to Mr. Kirschner his objections to Mr. Kirschner’s interpretation of relevant authority. See Schewe Aff. ¶ 12. On November 7, 2012, when he “felt [he] could no longer adequately represent Mr. Azuike,” who had refused to voluntarily dismiss his Complaint, Mr. Schewe sought to withdraw as counsel. Id. ¶ 12(f); see also id. ¶¶ 12(d), 16. On their face, Mr. Schewe’s actions do not strike us as the objectively unreasonable conduct by counsel that would merit sanctions pursuant to Rule 11. Rather, Mr. Schewe took a measured and deliberate approach.
Moreover, although we find, as discussed above, that judicial estoppel requires the dismissal of plaintiffs Complaint, we do not believe that Mr. Schewe adopted an objectively unreasonable position in arguing, prior to the bankruptcy case’s reopening, that the trustee should be afforded an opportunity to intervene. See Letter from Michael J.P. Schewe to Kenneth Kirschner (Sept. 21, 2012), Ex. N, Kirschner Aff. There is authority in this Circuit that “[w]here a former debtor commences an action and asserts claims that belong to her bankruptcy estate, the usual remedy is to substitute as the real party in interest the trustee of the bankruptcy estate in the place and stead of the former debtor.” Kohlbrenner v. Victor Belata Belting Co., No. 94-CV-0915E(H),
Further, as discussed above, courts in this Circuit have reasoned that whether a claim omitted from a plaintiffs bankruptcy petition is barred by judicial estoppel depends on whether the plaintiff acted in bad faith in failing to disclose the claim. See Ibok v. Siac-Sector Inc., No. 05 Civ. 6584(GBD)(GWG),
c. Sanctions Pursuant to the Court’s Inherent Authority
In addition to moving for attorney’s fees pursuant to Rule 11, defendants seek attorney’s fees in their motion to dismiss, presumably relying on our inherent power to sanction parties and attorneys. As the Supreme Court recently explained: “Notwithstanding the American Rule, ... we have long recognized that federal courts have inherent power to
Here, the first two grounds for awarding sanctions clearly do not apply with regard to either plaintiff or Mr. Schewe. The third ground also does not apply to plaintiff or Mr. Schewe, for the reasons set out above in the discussion of Rule 11 sanctions. Thus, we decline to exercise our inherent power to award attorney’s fees in favor of defendants.
IV. Conclusion
For the reasons stated above, defendants’ motion to dismiss is granted and their motion for Rule 11 sanctions is denied. The Clerk of the Court shall close the case.
SO ORDERED.
Notes
. That same day, Ms. Vi T. Vu, counsel for defendants, sent Mr. Schewe a copy of plaintiff's bankruptcy petition and the bankruptcy docket. See Letter from Vi T. Vu to Michael J.P. Schewe (Aug. 31, 2012), Ex. G, Kirschner Aff.
. We also extended the deadline for plaintiff to respond to defendants’ Motion to Dismiss and Motion for Sanctions.
. By endorsement dated February 7, 2013, we had extended defendants’ time to reply to March 1, 2013.
. On the one hand, "a debtor [in bankruptcy protection] is obligated 'to disclose all his interests at the commencement of a case,' ” Ibok v. Siac-Sector Inc., No. 05 Civ. 6584(GBD)(GWG),