Sunday, December 22, 2013

FYI: 9th Cir Confirms Failure to Schedule Claim in Bankruptcy Results in Plaintiff Being Estopped from Bringing Claim

The U.S Court of Appeals for the Ninth Circuit recently affirmed the dismissal of an employment discrimination claim because the plaintiff failed to list the employment discrimination action in her Chapter 7 bankruptcy schedules.


In so ruling, the Ninth Circuit held that the plaintiff was estopped from bringing an employment discrimination case where the plaintiff failed to disclose the employment discrimination action as an asset in her Chapter 7 bankruptcy schedules and the omission was neither inadvertent nor mistaken.


A copy of the Court's opinion is available at:


The case concerns whether a plaintiff's failure to list her claim in her Chapter 7 bankruptcy schedule and failure to provide any explanation for the omission estopped the plaintiff's employment discrimination action as a matter of law.


The plaintiff brought suit against her employer alleging discrimination. The plaintiff also filed for Chapter 7 bankruptcy protection. The plaintiff failed to list the employment discrimination action as an asset in her bankruptcy schedules. The defendant moved to dismiss the employment discrimination case on judicial estoppel grounds. Only after defendant moved to dismiss did the plaintiff amend her bankruptcy schedule to list the employment discrimination case as a potential asset.


The district court dismissed the plaintiff's employment discrimination case finding that no evidence suggested that plaintiff's original omission had been inadvertent or mistaken and, weighing the factors set forth in New Hampshire v. Maine, 532 U.S. 742, 750-51 (2001), judicial estoppel barred this action.


At issue in the appeal was whether the district court's dismissal was at odds with the Ninth Circuit's recent decision Ah Quin v. County of Kauai Department of Transportation, 733 F.3d 267 (9th Cir. 2013). The Ninth Circuit determined that the district court's dismissal was consistent with Ah Quin and affirmed the district court decision.


In Ah Quin, the Ninth Circuit reversed the district court's dismissal of a plaintiff's case on judicial estoppel grounds where the plaintiff failed to list the case as an asset in her bankruptcy schedule. The evidence in the case was disputed and supported a conclusion of either mistake and inadvertence or deceit.


The Ninth Circuit began by addressing the factual similarities and differences between Ah Quin and this case.  As in Ah Quin, the plaintiff here filed false bankruptcy schedules and failed to amend those schedules until defendant filed a motion to dismiss. The plaintiff's inaction suggested that the omission had not been inadvertent. However, unlike in Ah Quin, the plaintiff presented no evidence, by affidavit or otherwise, explaining the initial failure to include the employment discrimination action in the bankruptcy schedules. Even after the district court dismissed this case, the plaintiff did not seek reconsideration or attempt to supplement the record with a declaration or any other evidence to contradict the district court's finding that omitting the employment action from the bankruptcy schedules was not inadvertent.


Instead, plaintiff argued that Ah Quin mandates an evidentiary hearing every time a debtor omits a claim on her bankruptcy schedules and later amends those schedules. The Ninth Circuit disagreed. Instead, Ah Quin remanded for further factual development because, viewing the evidence in a light most favorable to the plaintiff, a reasonable fact finder could conclude that the debtor's omission of a potential claim on their bankrupt schedule was inadvertent. In this case, no reasonable fact finder could conclude that the plaintiff's omission was inadvertent or mistaken given the timing of the plaintiff's amendment and her decision not to file a declaration providing an explanation for her initial failure to list the potential claim. As such, the district court correctly dismissed the case and no evidentiary hearing was required.


The Plaintiff also argued that the district court abused its discretion in addressing the three main New Hampshire factors. See New Hampshire v. Maine, 532 U.S. 742, 149 L. Ed 2d 968, 121 S. Ct. 1808, 1815 (2001). As you may recall, the three primary New Hampshire factors are: (1) a party's later position must be clearly inconsistent with its earlier position; (2) whether the prior court accepted the party's earlier position; and (3) whether the party asserting the inconsistent opinion would derive an unfair advantage if not estopped.


Regarding the first factor, the district court in this case concluded that, by failing to list the claim while simultaneously pursuing the claim, Plaintiff clearly asserted inconsistent positions. Concerning the second factor, the district court found that the bankruptcy court was misled by Plaintiff's omission. As to the third factor, the district court determined that the Plaintiff received an unfair advantage in bankruptcy court by failing to list the claim. The Ninth Circuit found no error in the district court's New Hampshire analysis.


The Ninth Circuit held that the district court did not abuse its discretion in dismissing the plaintiff's employment discrimination claim because: (1) the plaintiff failed to list the claim as an asset in the plaintiff's Chapter 7 bankruptcy schedules; and (2) the plaintiff presented no evidence to demonstrate that this omission was inadvertent or mistaken.


Accordingly, the Ninth Circuit affirmed the district court's dismissal, based on judicial estoppel of the plaintiff's employment discrimination claim. 






Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
(312) 551-9320
(312) 284-4751
(312) 493-0874


Admitted to practice law in Illinois



          McGinnis Wutscher Beiramee LLP





NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.

Our updates are available on the internet, in searchable format, at: