Anne Spaine v. Community Contacts, Inc. , 756 F.3d 542 ( 2014 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 13-3059
ANNE M. SPAINE,
Plaintiff-Appellant,
v.
COMMUNITY CONTACTS, INC.,
Defendant-Appellee.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 12 C 5304 — Virginia M. Kendall, Judge.
SUBMITTED APRIL 17, 2014* — DECIDED JUNE 24, 2014
Before FLAUM, WILLIAMS, and HAMILTON, Circuit Judges.
HAMILTON, Circuit Judge. This appeal presents a recurring
issue that can arise when a debtor files for bankruptcy protec-
tion without disclosing a contingent claim, such as an employ-
ment discrimination lawsuit, and later seeks to correct the
*
After examining the briefs and record, we have concluded that oral
argument is unnecessary. Thus, the appeal is submitted on the briefs and
record. See FED. R. APP. P. 34(a)(2)(C).
2 No. 13-3059
failure to disclose the claim. In this case, the defendant-
employer moved for summary judgment. It argued that the
plaintiff should be judicially estopped from pursuing her
employment discrimination case because she had failed to list
it in the schedules of her bankruptcy petition. The plaintiff then
sought and obtained leave to reopen her bankruptcy case to
amend her disclosures to include the employment discrimina-
tion claim. The district court granted the employer’s motion,
finding that the plaintiff had intended to conceal the claim and
tried to correct her failure only after her omission had been
caught.
If the facts were as described by the district court, we
would affirm. But the district court’s decision did not account
for the plaintiff’s testimony that she orally disclosed the
employment discrimination claim to the bankruptcy court long
before the employer filed its motion for summary judgment in
this case. In light of this evidence, plaintiff’s intent is genuinely
in dispute. We reverse the grant of summary judgment.
I. Facts for Purposes of Summary Judgment
As required under Federal Rule of Civil Procedure 56(a),
we set forth the facts by examining the evidence in the light
reasonably most favorable to the non-moving party, giving her
the benefit of reasonable, favorable inferences and resolving
conflicts in the evidence in her favor. E.g., Perez v. Thorntons,
Inc., 731 F.3d 699, 703 (7th Cir. 2013). Plaintiff Anne Spaine
worked for defendant Community Contacts as a seasonal
employee from 2008 until 2011. She helped low-income and
disabled persons register for state and federal housing assis-
tance.
No. 13-3059 3
Throughout her employment, Spaine alleges, she was
harassed and unfairly disciplined because of her race. She
alleges she was told when her seasonal employment ended in
2011 that instead of being reinstated automatically as in past
years, she would have to reapply for employment the next
year. Spaine interpreted this to mean she had been fired. In
July 2012, Spaine filed this suit against Community Contacts
under 42 U.S.C. § 1981 alleging that she was harassed and
eventually fired because she is African American.
Spaine had previously filed for bankruptcy protection in
2010, but that petition had been dismissed without a discharge
of debts because Spaine had failed to pay the filing fee. In
November 2012, four months after filing her complaint against
Community Contacts, Spaine filed a new petition for protec-
tion under Chapter 7 of the bankruptcy code. Spaine was
represented by counsel in this action against
Community Contacts, but she was proceeding without a
lawyer in the bankruptcy case.
On her schedule of personal property for the 2012 bank-
ruptcy case, Spaine was required to list “contingent and
unliquidated claims of every nature.” She listed nothing. In the
separate 2012 statement of financial affairs, Spaine was
required to list lawsuits to which she was party within the
preceding year. She listed two eviction suits that came after her
2010 bankruptcy but did not list her suit against Community
Contacts. Spaine filed those schedules with the bankruptcy
court on November 5, 2012. The meeting of creditors was held
about five weeks later. See 11 U.S.C. § 341.
4 No. 13-3059
Spaine’s affidavit in opposition to Community Contacts’
motion for summary judgment stated: “During the course of
the 2012 (re-filed) Chapter 7 Bankruptcy filing, I discussed with
[Bankruptcy] Judge Black the fact that I had a pending Civil
claim as to Community Contacts, Inc.” Her affidavit also said
(a) that she did not hide this pending claim from the bank-
ruptcy court or the bankruptcy trustee, and (b) that she was
not told by the bankruptcy court of any need to amend her
schedules listing assets.
Complicating the factual picture, Spaine has included in her
appellate appendix a partial transcript of the meeting of
creditors on December 12, 2012. The transcript shows that
Spaine told the bankruptcy trustee about her lawsuit against
Community Contacts, and that she did so at the very first
opportunity after filing her incomplete Chapter 7 schedules of
assets with the petition itself. Community Contacts urges us to
disregard this transcript because it was not part of the record
before the district court.
The status of this transcript is troublesome. On one hand,
we have said that we may take judicial notice of publicly
available records of court proceedings, see Scherr v. Marriott
Int’l, Inc., 703 F.3d 1069, 1073 (7th Cir. 2013); United States v.
Hope, 906 F.2d 254, 260 n.1 (7th Cir. 1990), including even
records unavailable or not presented to the district court at
summary judgment, see Northfield Ins. Co. v. City of Waukegan,
701 F.3d 1124, 1128 n.2 (7th Cir. 2012); Driebel v. City of Milwau-
kee, 298 F.3d 622, 630 n.2 (7th Cir. 2002). On the other hand,
Federal Rule of Civil Procedure 56(c)(1)(A) requires a party
seeking or opposing summary judgment to cite “particular
parts of materials in the record,” and we have held that
No. 13-3059 5
deposition transcripts filed in a separate civil action are not
made part of the record in a different case merely because they
can be accessed easily using modern electronic dockets.
Alexander v. Casino Queen, Inc., 739 F.3d 972, 978–79 (7th Cir.
2014).
Further, and as a general rule of course, we should reverse
a district court’s decision on the basis of evidence or arguments
not presented to the district court only in highly unusual and
compelling circumstances. See, e.g., Economy Folding Box
Corp. v. Anchor Frozen Foods Corp., 515 F.3d 718, 720–21 (7th Cir.
2008) (“it is axiomatic that an issue not first presented to the
district court may not be raised before the appellate court as a
ground for reversal,” but noting limited exceptions for jurisdic-
tional questions and exceptional cases where “justice demands
more flexibility”); Boyers v. Texaco Refining and Marketing, Inc.,
848 F.2d 809, 812 (7th Cir. 1988) (noting that requirement
“maintains the efficiency, fairness, and integrity of the judicial
system for all parties”); Green v. Warden, 699 F.2d 364, 369 (7th
Cir. 1983) (noting general rule but issuing injunction against
further frivolous litigation by taking judicial notice of other
federal court records); see also, e.g., Perry v. City of Chicago,
733 F.3d 248, 253–54 (7th Cir. 2013) (declining to find “plain
error” in civil case); Jimenez v. City of Chicago, 732 F.3d 710, 720
(7th Cir. 2013) (same); Stringel v. Methodist Hospital of Indiana,
Inc., 89 F.3d 415, 421 (7th Cir. 1996) (same).
In this case, the transcript seems to clarify and perhaps to
correct Spaine’s affidavit. Perhaps she told the trustee instead
of the bankruptcy judge; perhaps she told both. Ultimately,
though, we do not rely on the transcript in this appeal. As we
explain below, Spaine’s affidavit saying that she told the court
6 No. 13-3059
about the claim against Community Contacts and was never
told of any need to correct or amend her bankruptcy schedules
is sufficient to create a genuine issue of material fact. The
transcript will be available for use as evidence on remand.
In any event, after the creditors meeting the trustee con-
cluded that Spaine’s bankruptcy was a “no asset” case, and on
February 12, 2013, she received a general discharge of her
unsecured debts. Soon after that discharge, the bankruptcy
trustee wrote to Spaine’s lawyer in this case about this claim
against Community Contacts and its possible value as an asset.
The two then spoke, and the trustee said he was not reopening
the bankruptcy case or making any claim for any assets that
might result from the case. He told Spaine’s lawyer he did not
need to report further on the matter.
On March 21, 2013, Spaine wrote the trustee, with a copy to
the bankruptcy judge, asking the trustee to classify her claims
against Community Contacts as exempt property and asserting
that she would need any potential recovery for living expenses.
See 11 U.S.C. § 522(d)(11)(E). In her letter, Spaine expressed the
mistaken view that she had a constitutional right to discharge
of her debts without “sacrificing” compensation for her
wrongful termination.
On May 3, 2013, Community Contacts moved for summary
judgment. The motion did not contest the suit on the merits but
argued only that Spaine either lacked standing or should be
judicially estopped from pursuing her claims of employment
discrimination because she had concealed those claims from
the bankruptcy court. About two weeks after Community
Contacts filed its motion, Spaine asked the bankruptcy court to
No. 13-3059 7
reopen her bankruptcy case so that she could amend her list of
assets to add her claims against Community Contacts. The
bankruptcy court allowed the amendment.
II. Standing/Real Party in Interest
Community Contacts argued in the district court that
Spaine lacked standing to assert her claims because they had
become the property of her bankruptcy estate. Such issues are
addressed sometimes in terms of standing, sometimes in terms
of the real party in interest, and sometimes in terms of both.
See, e.g., Biesek v. Soo Line R. Co., 440 F.3d 410, 413 (7th Cir.
2006) (standing); In re Perkins, 902 F.2d 1254, 1258 (7th Cir.
1990) (both); see also Weissman v. Weener, 12 F.3d 84, 86 (7th
Cir. 1993) (noting close relationship and distinctions between
standing and real-party-in-interest doctrines). The relationship
and distinctions were described well in Hernandez v. Forest
Preserve Dist. of Cook County, 2010 WL 1292499, at *2–3 (N.D. Ill.
March 29, 2010) (Dow, J.), and Guynn v. Potter, 2002 WL 243626,
at *4–5 (S.D. Ind. Jan. 25, 2002) (Tinder, J.).
Because standing implicates subject matter jurisdiction, we
address the question without being prompted by the parties.
The district court correctly found that Spaine has standing to
continue her suit against Community Contacts. The bank-
ruptcy case had been reopened and then closed again after the
trustee undoubtedly knew about the civil case. That sequence
of events indicated that the trustee had abandoned the lawsuit
as property of the Chapter 7 estate, so the property reverted to
the debtor, plaintiff Spaine. See 11 U.S.C. § 554(c); Cannon-
Stokes v. Potter, 453 F.3d 446, 448 (7th Cir. 2006); Biesek, 440 F.3d
8 No. 13-3059
at 413; Morlan v. Universal Guaranty Life Ins. Co., 298 F.3d 609,
618 (7th Cir. 2002).
III. Judicial Estoppel
Although Spaine has standing, the district court found that
the evidence raised an inference that Spaine had omitted the
lawsuit from her bankruptcy schedules to hide the potential
recovery from her creditors. On that basis, the court explained,
it would exercise its discretion and find Spaine judicially
estopped from pursuing the lawsuit. The court’s order did not
mention, however, Spaine’s testimony that she had disclosed
the lawsuit against Community Contacts during the bank-
ruptcy case.
The doctrine of judicial estoppel prevents litigants from
manipulating the judicial system by prevailing in different
cases or phases of a case by adopting inconsistent positions.
See New Hampshire v. Maine, 532 U.S. 742, 749 (2001);
Grochocinski v. Mayer Brown Rowe & Maw, LLP, 719 F.3d 785,
795 (7th Cir. 2013) (affirming application of judicial estoppel);
Walton v. Bayer Corp., 643 F.3d 994, 1002 (7th Cir. 2011).
Manipulation may occur when a debtor deliberately conceals
a contingent or unliquidated claim during bankruptcy pro-
ceedings and then later seeks to profit from that claim after
obtaining a discharge of her debts. See Cannon-Stokes, 453 F.3d
at 448.
Viewing the summary judgment record in the light reason-
ably most favorable to plaintiff Spaine, judicial estoppel does
not apply here. Spaine’s affidavit testimony that she had
disclosed her lawsuit against Community Contacts during the
bankruptcy case is material. Without considering the creditors
No. 13-3059 9
meeting transcript submitted on appeal, her testimony on this
point is not even disputed. Spaine’s disclosure made the
trustee aware of the litigation, and the trustee made a decision
about its value to her creditors. That testimony protects Spaine
from an inference on summary judgment that she deliberately
concealed her claim from the bankruptcy trustee and her
creditors.
Community Contacts suggests that it was somehow
harmed by Spaine’s incomplete Chapter 7 schedules. That view
misunderstands the reasons for applying judicial estoppel in
Cannon-Stokes and similar cases. Courts do not apply judicial
estoppel for the benefit of the defendant but try to protect
courts and creditors from deception and manipulation. Judicial
estoppel is an equitable doctrine intended to “induce[ ] debtors
to be truthful in their bankruptcy filings.” 453 F.3d at 448.
Again, though, the evidence in this case shows nothing more
than incomplete schedules that were timely corrected through
an oral disclosure. That evidence certainly does not compel an
inference of deceit on Spaine’s part. See Ah Quin v. County of
Kauai Dep’t of Transp., 733 F.3d 267, 272–73 (9th Cir. 2013)
(explaining that presumption of deceit does not arise if debtor
corrects omissions from bankruptcy schedules in manner that
permits bankruptcy court to assess case “with the full and
correct information”); Ryan Operations G.P. v. Santiam-Midwest
Lumber Co., 81 F.3d 355, 364 (3d Cir. 1996) (“policy consider-
ations militate against adopting a rule that the requisite intent
for judicial estoppel can be inferred from the mere fact of
nondisclosure in a bankruptcy proceeding”).
Spaine’s creditors were not and could not have been injured
by incomplete Chapter 7 schedules that were orally corrected
10 No. 13-3059
before Spaine received a discharge. That’s why her case is
different from Cannon-Stokes. See also Stephenson v. Malloy,
700 F.3d 265, 275 (6th Cir. 2012) (judicial estoppel not applica-
ble where debtor omitted claim from bankruptcy schedules but
orally disclosed claim to trustee); Eubanks v. CBSK Fin.
Grp., Inc., 385 F.3d 894, 898 & n.1 (6th Cir. 2004) (same).
Spaine’s situation is also unlike In re Superior
Crewboats, Inc., 374 F.3d 330 (5th Cir. 2004), and Eastman v.
Union Pac. R.R. Co., 493 F.3d 1151 (10th Cir. 2007), which the
defendant cites as support for its contention that Spaine’s
incomplete schedules should be deemed abusive. In both of
those cases the Chapter 7 debtors engaged in affirmative
misrepresentations. The debtors in Superior Crewboats
misinformed their creditors that a personal injury lawsuit was
barred by the statute of limitations and thus worthless. 374
F.3d at 333 & n.1. The debtor’s conduct in Eastman was even
more egregious. He petitioned for bankruptcy relief about nine
months after filing a personal injury suit. When the trustee
asked directly whether the debtor had a pending personal
injury lawsuit, he said no. 493 F.3d at 1153. The evidence in this
case, by contrast, is limited to an omission followed by a
truthful oral disclosure by Spaine, not misrepresentations.
The district court wrote that it would not be appropriate to
allow Spaine to go forward with this case based on her
reopened and amended bankruptcy. The court reasoned that
such a ruling would encourage debtors to conceal assets as
long as possible and then, if the omission is caught, to retreat
and make a quick correction. See Krystal Cadillac-Oldsmobile
GMC Truck, Inc. v. General Motors Corp., 337 F.3d 314, 321 (3d
No. 13-3059 11
Cir. 2003); Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1288
(11th Cir. 2002).
If there were undisputed evidence that Spaine intentionally
concealed her claim, we would agree. As noted above, though,
the district court overlooked Spaine’s testimony about her oral
disclosure during the bankruptcy. Honest mistakes and
oversights are not unheard of. That’s one reason why trustees
meet with debtors. The disclosures in the initial filings are not
necessarily final on this issue. The bankruptcy code explicitly
provides for further investigation into the debtor’s financial
affairs, 11 U.S.C. §§ 341, 704(a)(4), and contemplates
amendments to a debtor’s initial schedules, id. § 350(b); Fed. R.
Bankr. P. 1009(a); see also In re Waldron, 536 F.3d 1239, 1245
(11th Cir. 2008) (Federal Rules of Bankruptcy Procedure
“complement the continuing duty to disclose”). That’s all the
record in this case indicates, at least as a matter of law:
incomplete schedules cured by an oral disclosure that
permitted the trustee to assess and ultimately decide to
abandon Spaine’s claims against the defendant.
That is not to say that Spaine’s oral disclosure of the lawsuit
would necessarily foreclose use of judicial estoppel if
Community Contacts could prove that Spaine’s omission,
though later cured, was an intentional effort to conceal an asset
from her creditors. See Ah Quin, 733 F.3d at 276–79; Ajaka v.
BrooksAmerica Mortg. Corp., 453 F.3d 1339, 1344 (11th Cir. 2006);
Ryan Operations, 81 F.3d at 364–65. But on summary judgment,
Community Contacts made no effort to establish that Spaine
had filed incomplete schedules with the subjective intent to
conceal her lawsuit. For judicial estoppel to apply, Community
Contacts needed to show more than an initial nondisclosure on
12 No. 13-3059
a bankruptcy schedule. See Ah Quin, 733 F.3d at 276–77
(explaining that “plaintiff’s knowledge of the pending claim
and the universal motive to conceal a potential assert” do not
establish that debtor harbored subjective intent to conceal
“when filling out and signing the bankruptcy schedules”).
The district court’s judgment in favor of defendant
Community Contacts is REVERSED and the case is
REMANDED for further proceedings consistent with this
opinion.