Sandra Marshall v. Honeywell Technology Systems

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 8, 2015 Decided July 12, 2016
No. 14-7190
SANDRA MARSHALL,
APPELLANT
v.
HONEYWELL TECHNOLOGY SYSTEMS INC, ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:05-cv-02502)
JoAnn Patricia Myles argued the cause and filed the brief
for appellant.
Leslie Paul Machado argued the cause for appellees. With
him on the brief were Sarah E. Moffett, Paul W. Mengel III,
Julia D. Di Vito, Zachary S. Stinson, M. Ginger McCauley, and
John B. Flood. Isaias I. Alba entered an appearance.
Before: HENDERSON and GRIFFITH, Circuit Judges, and
RANDOLPH, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
RANDOLPH.
Dissenting opinion filed by Circuit Judge GRIFFITH.
2
RANDOLPH, Senior Circuit Judge: Sandra Marshall’s
appeal is from the district court’s grant of summary judgment
dismissing her discrimination complaint on the ground of
“judicial estoppel,” stemming from her failure to disclose this
lawsuit and related administrative proceedings on the schedules
she filed with the bankruptcy court.
Marshall worked at the National Aeronautics and Space
Administration in Maryland, making $50,000 a year as a “voice
control manager.” Her co-employers were Honeywell
Technology Solutions, Inc.,1 a government contractor, and L-3
Communications Government Services, Inc., a subcontractor
now known as Engility. In late 2003, another company, SGT,
Inc., took over the subcontract under Honeywell. SGT
interviewed Marshall but did not hire her.
On December 29, 2003, Marshall filed charges against SGT
with a Maryland human relations commission and with the
Equal Employment Opportunity Commission, alleging that SGT
had unlawfully discriminated against her based on her race and
sex and that SGT retaliated against her because she had filed
other discrimination complaints against other companies. In
February 2004 – the dates and the sequence of filings have some
significance – Marshall filed two additional charges with the
same agencies, one against Honeywell, the other against
Engility. Both of her charges also alleged race and sex
discrimination and retaliation. By this time, Marshall therefore
had three ongoing administrative proceedings against three
separate companies, none of which were affiliated with each
1
In filing this suit, Marshall incorrectly identified Honeywell
Technology Solutions, Inc., as “Honeywell Technology Systems, Inc.”
The district court opinion from which Marshall appeals reflects the
incorrect name, as does the caption in this court. Marshall v.
Honeywell Tech. Sys., 73 F. Supp. 3d 5 (D.D.C. 2014).
3
other. In August 2005, Marshall retained attorney JoAnn P.
Myles to represent her in these proceedings and in any lawsuits
that might result from them.
In September 2005, while her three EEOC proceedings
were going forward, Marshall filed a Chapter 7 bankruptcy
petition in the United States Bankruptcy Court for the District of
Columbia. See 11 U.S.C. § 301. Marshall was then residing in
Washington, D.C. Freshstart Solutions, Inc. served as her
“bankruptcy petition preparer,” see 11 U.S.C. § 110, charging
her a fee of $185.00.2 This was Marshall’s second bankruptcy
petition in ten years. The Bankruptcy Code bars individuals
from filing a new Chapter 7 petition within eight years of an
earlier petition. 11 U.S.C. § 727(a)(8). Marshall had filed her
1995 petition with the assistance of an attorney in federal
bankruptcy court in Baltimore, Maryland. That court granted
her a discharge.
One of the schedules Marshall submitted with her
September 2005 petition required her to list “all suits and
administrative proceedings” to which she “is or was a party
within one year” preceding her bankruptcy petition. On her
“Statement of Financial Affairs,” Marshall listed three such
2
During the first Meeting of Creditors, Marshall told the trustee
that although her sister’s neighbor had looked over her bankruptcy
filings, he had not charged her any money for doing so. But a
document filed with the bankruptcy court signed by her preparer –
“Disclosure of Compensation of Bankruptcy Preparer” – showed that
this neighbor worked for Freshstart Solutions, Inc., and had charged
Marshall $185. See In re Frazier, No. 12-29668-DER, 2013 WL
654399, at *4 (Bankr. D. Md. Feb. 21, 2013) (“[T]he reasonable value
of the services of a bankruptcy petition preparer in a simple,
straightforward consumer Chapter 7 bankruptcy case . . . does not
exceed $100.00.”).
4
matters. Two were civil actions in which she was a defendant.
She gave the name of the court and its location in each case; in
both she reported that judgment had been entered against her.
The third matter she listed – “Internal Revenue Service vs
Sandra McDougald”3 – was an administrative proceeding that
had not yet ripened into a judicial proceeding: Marshall left a
blank under the form’s heading “COURT OR AGENCY AND
LOCATION.” The only detail she provided was that the IRS
matter was “Pending.” On her Schedule E – “Creditors Holding
Unsecured Priority Claims” – she listed the IRS “Insolvency
Div” as a creditor in the amount of $5,500.4
Nowhere on her Statement of Financial Affairs (or on any
other schedule) did Marshall disclose her three administrative
proceedings against SGT, Honeywell, and Engility. Under
penalty of perjury, she signed the Statement and affirmed that
her answers were “true and correct.” She also filed a “Personal
Property” schedule, which required her to disclose all
“contingent and unliquidated claims of every nature . . ..” See
11 U.S.C. § 521(a)(1)(B)(ii). Again she stated under penalty of
perjury that she had “None.” On her Schedule F – “Creditors
3
Marshall has changed her name at least twice. She filed her
1995 bankruptcy under the name Sandra McDougald, her 2005
bankruptcy under the name Sandra McDougald-Marshall, and her
discrimination case under the name Sandra Marshall.
4
There are several reasons to believe the IRS action was an
administrative proceeding. In her deposition in this case, Marshall
stated that she had been sued only twice, once by a company called
Carydale and once by the State Department Federal Credit Union.
There is also no record in the Tax Court or in any federal district court
of a lawsuit between Marshall and the Internal Revenue Service. This
suggests that the matter was an administrative proceeding before an
appeals officer within the agency. See INTERNAL REVENUE SERVICE,
INTERNAL REVENUE MANUAL 1.1.7 (2015).
5
Holding Unsecured Nonpriority Claims” – Marshall listed
“Joann Myles, Esquire.” Myles was the attorney representing
Marshall in the three EEOC proceedings. Marshall did not
report how much she then owed Myles. Her debts, including
priority and nonpriority claims of 50 creditors, totaled
$135,884.74. She reported total assets of $100.
Two months after she filed for bankruptcy, in the fall of
2005, Marshall attended a meeting of creditors, although none
of her creditors attended. See 11 U.S.C. § 341. During the
session, in response to the trustee’s written interrogatories and
the trustee’s questioning, Marshall revealed that she had “an
EEOC claim.” When the trustee asked, “Against whom?”
Marshall replied, “Honeywell.” As to the status of her claim,
she said it was “pending.” The trustee then asked whether she
had an attorney representing her in the Honeywell proceeding.
She answered yes and, at the trustee’s urging, she identified her
attorney as JoAnn Myles and provided Myles’ telephone
number. Attorney Myles already knew of Marshall’s Chapter 7
filing. As a creditor herself, she had received notice from the
bankruptcy court. According to Marshall and Myles, her
attorney later had a telephone conversation with the trustee and
informed him of Marshall’s other two administrative
proceedings against Engility and SGT.
On December 30, 2005, Myles filed on Marshall’s behalf
a complaint in federal district court in Washington, D.C. against
Honeywell, Engility, and SGT. Marshall’s complaint contained
a single count alleging age discrimination in violation of the Age
Discrimination in Employment Act, 29 U.S.C. § 621 et seq. She
sought more than two million dollars in damages. Paragraph 9
of her complaint stated that “prior to filing this civil action”
Marshall had filed “a written charge of age discrimination with”
the EEOC and the local human rights commission. That
statement was false. Marshall did not lodge an age
6
discrimination charge before those agencies until after she filed
the lawsuit. In the next paragraph, Marshall stated that she
“filed this action subsequent to the expiration of sixty (60) days
from the filing of a charge of age discrimination with the
[Maryland human rights commission] and the EEOC . . ..” That
too was false.5
Under the bankruptcy rules, “a debtor is under a duty both
to disclose the existence of pending lawsuits when he files a
petition in bankruptcy and to amend his petition if circumstances
change during the course of the bankruptcy.” Moses v. Howard
Univ. Hosp., 606 F.3d 789, 793 (D.C. Cir. 2010); see 11 U.S.C.
§ 541(a)(7). “[W]hen an estate is in bankruptcy under Chapter
7,” as Marshall’s estate was at the time, “the trustee is the
representative of the estate and retains the sole authority to sue
and be sued on its behalf.” Moses, 606 F.3d at 793. Marshall
did not amend her bankruptcy petition after she filed her age
discrimination lawsuit. Rather, her attorney Myles alleges that
she – Myles – spoke with the trustee’s secretary over the phone
about having filed the December 2005 lawsuit.
In late January 2006 the trustee issued a “Notice of Possible
Dividends” informing creditors that Marshall’s estate may have
assets after all, but giving no other information. In February
2006, the bankruptcy court granted Marshall a discharge from
5
The district court, finding that these statements were untrue,
issued an order to show cause why sanctions under Rule 11 of the
Federal Rules of Civil Procedure should not be imposed on attorney
Myles. Marshall v. Honeywell Tech. Sols., Inc., 536 F. Supp. 2d 59,
64 n.4 (D.D.C. 2007). The court later discharged the show cause order.
7
bankruptcy6 and in June 2006 the bankruptcy court closed the
case because her estate had no assets.
In early 2007, Marshall expanded her lawsuit. By then
Marshall had received right-to-sue letters from the EEOC in her
three administrative actions, notifying her that the agency had
terminated its investigation of her charges against SGT,
Honeywell and Engility. Marshall then amended her age
discrimination district court complaint against these companies
to add a litany of new charges, including counts of race and sex
discrimination and retaliation against each defendant.
The district court dismissed many of her new charges and
dismissed the age discrimination count because it had not been
timely filed. Marshall v. Honeywell Tech. Sols., Inc., 536 F.
Supp. 2d 59, 64 n.4 (D.D.C. 2007).
Later, during several years of extensive discovery, the
defendants learned for the first time of Marshall’s simultaneous
bankruptcy case. Then, in February 2009, Marshall’s attorney
Myles provided the defendants’ attorneys with “Supplemental
Discovery Documents” consisting of Marshall’s filings in the
bankruptcy proceeding. The documents revealed that Marshall
had omitted her three administrative proceedings on her
bankruptcy schedules and that she had not amended her
bankruptcy filings to disclose what has become this lawsuit.
The district court – on December 18, 2009 – dismissed
Marshall’s complaint without prejudice, an interim decision
Marshall has not challenged on appeal. Marshall v. Honeywell
Tech. Sols., Inc., 675 F. Supp. 2d 22 (D.D.C. 2009). The court
held that Marshall’s causes of action, which “existed by the time
6
Marshall waited until late March 2006 to serve the three
defendants in her age discrimination lawsuit.
8
Marshall filed her bankruptcy petition in September 2005,”
became property of the estate under the Bankruptcy Code when
she filed her bankruptcy petition. Id. at 25. Because Marshall
failed to list these causes of action on her bankruptcy schedules,
the bankruptcy trustee did not abandon this estate property when
he failed to intervene. Id. The trustee was therefore the real
party in interest and Marshall did not have standing to pursue
the lawsuit she had instituted. Id. at 26. Only then, in January
2010, five years after her bankruptcy discharge, did Marshall
move to reopen her bankruptcy case, a motion the bankruptcy
court promptly granted. Two months later, in March 2010,
Marshall amended several of the bankruptcy schedules she had
filed in 2005. For the first time she disclosed this lawsuit as an
asset valued at “$1,000,000.” She also added, on her Schedule
D, attorney JoAnn Myles as a secured creditor holding a claim
in the amount of “$150,000 Plus.”
In June 2010, the district court granted the trustee’s motion
to reinstate Marshall’s case, substituting the trustee for
Marshall’s estate as the plaintiff. But Marshall’s estate had no
money to hire another attorney and, given the passage of time,
the bankruptcy trustee informed the district court that he could
not “attract new counsel, unfamiliar with the case, on a
contingency basis.” Six months later, in early 2011, after
settlement negotiations between the trustee and the defendants
failed to yield an agreement, the trustee abandoned the case. As
a result, the suit reverted to Marshall as plaintiff. See Moses,
606 F.3d at 795.
The defendants then filed a motion for summary judgment
on the basis of judicial estoppel, arguing that Marshall’s
deception barred her from pursuing this action. The district
court, finding Moses v. Howard University Hospital, 606 F.3d
789 (D.C. Cir. 2010), controlling, granted the defendants’
9
motion for reasons we describe in a moment. Marshall v.
Honeywell Tech. Sys., 73 F. Supp. 3d 5 (D.D.C. 2014).
At last we come to the issues in this case. One question, left
open in Moses, 606 F.3d at 797, is the appropriate standard of
review of judicial estoppel district court decisions granting
summary judgment in cases such as this. Ordinarily we review
a district court’s grant of summary judgment de novo. See, e.g.,
Doe v. Gates, 981 F.2d 1316, 1322 (D.C. Cir. 1993). A large
majority of the courts of appeals, heeding the Supreme Court’s
description of judicial estoppel as “an equitable doctrine invoked
by a court at its discretion,” New Hampshire v. Maine, 532 U.S.
742, 750 (2001), have adopted an abuse-of-discretion standard
rather than de novo review.7 Many of the reasons underlying
these decisions are ably set forth in Alternative System
Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23, 30-32 (1st Cir.
2004). We add another. De novo review would displace the
discretion of the district court to apply judicial estoppel with the
discretion of the appellate court to do so. We see no sense in
this. See United States v. McKinney, 919 F.2d 405, 418 (7th Cir.
1990) (Posner, J. concurring). We therefore join the majority of
7
See Guay v. Burack, 677 F.3d 10, 15-16 (1st Cir. 2012);
McNemar v. Disney Store, Inc., 91 F.3d 610, 613 (3d Cir. 1996); King
v. Herbert J. Thomas Mem’l Hosp., 159 F.3d 192, 196, 198 (4th Cir.
1998); Jethroe v. Omnova Sols., Inc., 412 F.3d 598, 599-600 (5th Cir.
2005); EEOC v. CRST Van Expedited, Inc., 679 F.3d 657, 678 (8th
Cir. 2012); Engquist v. Or. Dept. of Agric., 478 F.3d 985, 1000 (9th
Cir. 2007); Eastman v. Union Pac. R.R. Co., 493 F.3d 1151, 1155-56
(10th Cir. 2007); Talavera v. Sch. Bd. of Palm Beach Cty., 129 F.3d
1214, 1216 (11th Cir. 1997); Data Gen. Corp. v. Johnson, 78 F.3d
1556, 1565 (Fed. Cir. 1996); but see Browning v. Levy, 283 F.3d 761,
775 (6th Cir. 2002) (reviewing application of judicial estoppel de
novo); United States v. Hook, 195 F.3d 299, 305 (7th Cir. 1999)
(same).
10
circuit courts in holding that the standard of review in this sort
of case is abuse of discretion.
In exercising its discretion to invoke judicial estoppel, the
district court relied on our opinion in Moses, the only opinion of
our court in a comparable case. Judicial estoppel “prevents a
party from asserting a claim in a legal proceeding that is
inconsistent with a claim taken by that party in a previous
proceeding.” New Hampshire, 532 U.S. at 749. In Moses we
wrote: “every circuit that has addressed the issue has found that
judicial estoppel is justified to bar a debtor from pursuing a
cause of action in district court where that debtor deliberately
fails to disclose the pending suit in a bankruptcy case.” 606
F.3d at 798. Or as Judge Easterbrook put the point for the
Seventh Circuit, the circuit courts “hold that a debtor in
bankruptcy who denies owning an asset, including a chose in
action or other legal claim, cannot realize on that concealed
asset after the bankruptcy ends.” Cannon-Stokes v. Potter, 453
F.3d 446, 448 (7th Cir. 2006).
The basic concept is not new. Early in the last century the
Supreme Court laid down a related rule. “It cannot be that a
bankrupt, by omitting to schedule and withholding from his
trustee all knowledge of certain property, can, after his estate in
bankruptcy has been finally closed up, immediately thereafter
assert title to the property on the ground that the trustee had
never taken any action in respect to it. If the claim was of value
(as certainly this claim was, according to the judgment below),
it was something to which the creditors were entitled, and this
bankrupt could not, by withholding knowledge of its existence,
obtain a release from his debts, and still assert title to the
11
property.” First Nat’l Bank v. Lasater, 196 U.S. 115, 119
(1905).8
Our court in Moses also held that in order for judicial
estoppel to apply, there must be “a discernible connection”
between the bankruptcy proceeding and the current lawsuit. 606
F.3d at 799. The connection here is the same. In Marshall’s
bankruptcy schedules, she denied the existence of her then-
current discrimination claims and she brought this lawsuit after
filing for bankruptcy even though, as in Moses, she was not a
proper plaintiff. Id.
The court in Moses identified three other questions the
district court “should answer in deciding whether to apply
judicial estoppel.” Id. at 798. The first is whether “a party’s
later position [is] clearly inconsistent with its earlier position
. . ..” Id. Here the district court found that Marshall pursued
this lawsuit despite having sworn, under penalty of perjury, that
no such lawsuit or legal claims existed. The district court also
found that Marshall repeatedly failed to amend her bankruptcy
petition when circumstances changed, despite having a legal
duty to do so. 73 F. Supp. 3d at 9-10. And as in Moses, 606
F.3d at 799, Marshall held herself “out before the District Court
as a proper plaintiff, a position which was clearly inconsistent
with [her] pursuit of bankruptcy.”
The next question Moses posed is: “Has the party succeeded
in persuading a court to accept that party’s earlier position, so
8
The Supreme Court reiterated this statement twenty years later.
In Danciger v. Smith, 276 U.S. 542, 547 (1928), the Court stated that
“[t]he doctrine” of Lasater is “that a bankrupt who omits to schedule
and withholds all knowledge of a valuable claim, cannot, after
obtaining a discharge from his debts, assert title to such claim and
maintain a suit thereon in his own right . . ..”
12
that judicial acceptance of an inconsistent position in a later
proceeding would create the perception that either the first or the
second court was misled?” Id. at 798. Here again the Moses
case and Marshall’s case are indistinguishable and the district
court so found. 73 F. Supp. 3d at 10. To quote from our opinion
in Moses, “the bankruptcy court’s decision to initially discharge
Moses [and Marshall] from Chapter 7, and the District Court’s
decision to allow this case to continue even during the pendency
of Moses’s [and Marshall’s] bankruptcy proceedings, leaves
little doubt that Moses [and Marshall] succeeded in hiding the
inconsistency from the courts and ‘creating the perception that
either the first or the second court was misled.’” Moses, 606
F.3d at 799 (quoting New Hampshire, 532 U.S. at 750).
The third question in Moses dealt with the effect of the
debtor’s inconsistent positions. Here, the district court
determined that “Marshall’s bankruptcy creditors were
disadvantaged by her non-disclosure. Marshall’s non-disclosure
of her discrimination claims allowed the bankruptcy proceeding
to close as a ‘no asset’ case and prevented early discussions of
settlement or abandonment by the Trustee.” 73 F. Supp. 3d at
11. The district court added that in Marshall’s amended
schedules, filed after the bankruptcy court reopened the case,
she listed for the first time her attorney as a secured creditor to
whom she owed “$150,000 Plus,” which the court said “reduced
the potential bankruptcy payout to other creditors.” Id.9
9
Marshall’s amended Schedule D states that she incurred this debt
to attorney Myles on December 30, 2005, three months after she had
filed her bankruptcy petition seeking a discharge of pre-petition debts.”
See 11 U.S.C. § 727(b) (providing that a discharge under Chapter 7
relieves the debtor “from all debts that arose before the date” the
bankruptcy petition was filed); see also Bethea v. Robert J. Adams &
Assocs., 352 F.3d 1125, 1128 (7th Cir. 2003). None of the parties have
addressed this subject and so we will not say anything further about it.
13
Quoting our opinion in Moses, 606 F.3d at 800, the district
court concluded that “Marshall ‘offended the integrity of the
District Court’ by presenting herself as a proper party to this
Court based on a position that is flatly inconsistent with the
position she took in the bankruptcy proceedings.” 73 F. Supp. 3d
at 11. Of this there can be no doubt. In the nine years from
2005 until the district court issued summary judgment in 2014,
this lawsuit generated nearly 200 docket entries, the bulk of
which came before the defendants discovered Marshall’s
bankruptcy proceedings. During those years, motions,
memoranda, oppositions, replies, orders and judicial opinions
(two of which were published) mounted. A moment’s research
by Marshall’s counsel or by Marshall herself, see
Cannon-Stokes, 453 F.3d at 449, would have revealed that
during this extensive period of intense back and forth between
the parties Marshall had no standing to be a plaintiff. Years
later, after so much water spilled over the dam, the trustee, as
the sole party in interest, determined that it “would be difficult
. . . to attract new counsel, unfamiliar with the case, on a
contingency basis.” No new counsel entered an appearance for
the trustee.
As against this, Marshall argues that judicial estoppel
should not apply because she orally disclosed one of her three
discrimination claims to the trustee at the creditors’ meeting in
2005, and her attorney allegedly had a telephone conversation
with the trustee about the other two.10 The district court
10
Marshall also argues that she cured her false representations in
her 2005 bankruptcy schedules when she amended them in 2010, after
the bankruptcy court reopened her case. Moses forecloses this
argument: to accept the argument would be to lessen the needed
incentive for the debtor to provide complete and truthful information
at the outset and “would similarly diminish the [judicial estoppel]
doctrine’s ability to deter the debtor from pursuing claims in the
District Court to which he is not entitled.” 606 F.3d at 800.
14
rejected Marshall’s argument. For one thing, “oral disclosure
does not meet the requirements of the bankruptcy code.” Guay
v. Burack, 677 F.3d 10, 20-21 (1st Cir. 2012); see Jeffrey v.
Desmond, 70 F.3d 183, 187 (1st Cir. 1995); Vreugdenhill v.
Navistar Int’l Transp. Co., 950 F.2d 524, 526 (8th Cir. 1991).
For another, Marshall’s oral disclosure to the trustee did not
constitute notice to her creditors and could not correct the false
information she conveyed on her schedules. See Barger v. City
of Cartersville, 348 F.3d 1289, 1295 (11th Cir. 2003); but see
Matthews v. Potter, 316 Fed. App’x 518, 522-23 (7th Cir.
2009).11 The bankruptcy court’s September 2005 Notice to each
of Marshall’s creditors understandably treated her bankruptcy
petition as a “no asset case.” In the Explanations section of the
Notice, the following appeared: “There does not appear to be
any property available to the trustee to pay creditors. You
therefore should not file a proof of claim at this time.”
Bankruptcy Case No. 05-01448, ECF No. 13, at 2 (Bankr.
D.D.C. Sept. 27, 2005) (italics in original).
Creditors wishing to evaluate a debtor’s financial condition
commonly consult the on-line resource PACER (Public Access
to Court Electronic Records). The Internal Revenue Service –
one of Marshall’s creditors – instructs employees of its
insolvency units to do so. INTERNAL REVENUE SERVICE,
INTERNAL REVENUE MANUAL 5.9.6.11.2 (2015). Any of
Marshall’s dozens of creditors who checked PACER in order to
11
In Matthews, the Seventh Circuit suggested that oral disclosure
was relevant, but the court did not imply that it was dispositive. The
court simply remanded for the district court to “make a factual
determination, by evidentiary hearing if necessary, regarding the
nature and extent of the disclosures [the debtor] made to the Chapter
7 trustee at the meeting of creditors,” and to decide whether judicial
estoppel was justified under all the circumstances of the case.
Matthews, 316 Fed. App’x at 523.
15
examine Marshall’s financial condition as revealed in her
bankruptcy petition and in her accompanying schedules would
have given up the chase. And because of her deception they
would have been entirely justified in doing so.
This brings us to Marshall’s remaining argument. In New
Hampshire, the Supreme Court wrote: “We do not question that
it may be appropriate to resist application of judicial estoppel
when a party’s prior position was based on inadvertence or
mistake.” 532 U.S. at 753 (internal quotation marks omitted).
To take advantage of the Supreme Court’s remark, Marshall
filed an affidavit stating that when she filed her bankruptcy
petition and schedules in 2005, “I had no knowledge that I was
required to list my discrimination administrative proceedings on
my bankruptcy petition schedules or on any financial
statements.” She tells us, as she told the district court, that her
failure to list her pending administrative claims resulted from
her “inadvertence or mistake.”12
Relying on Moses, the district court rejected Marshall’s
argument. 73 F. Supp. 3d at 11. Moses held that a debtor could
not avoid judicial estoppel if he omitted his pending cause of
action but reported “pending lawsuits that, unlike the instant
case, reduced the overall value of his assets through wage
garnishment.” 606 F.3d at 800. For good reason, the district
court in this case determined that Marshall was in the same
12
For five years, from the filing of her bankruptcy petition in
2005 until March 2010, Marshall had a continuing duty to amend her
bankruptcy schedules to reflect her administrative complaints that
ultimately formed the basis of this lawsuit. See Moses, 606 F.3d at
793; In re Coastal Plains, Inc., 179 F.3d 197, 208 (5th Cir. 1999).
The trustee’s inquiries at the creditors’ meeting, as well as the
instructions on the bankruptcy schedules, were more than enough to
alert her of the need to do so.
16
position as the plaintiff-debtor in Moses. On part 4 of
Marshall’s Statement of Financial Affairs – “Suits and
administrative proceedings” – she disclosed two civil actions
against her, both of which had gone to judgment,13 and an IRS
administrative proceeding she described as “Pending.”14 Each of
these three matters increased the negative net value of
Marshall’s estate. Although her separate charges against the
three defendants she later sued were then tied up in
administrative proceedings, she did not disclose them. Yet she
must have understood that administrative proceedings had to be
listed. Otherwise there is no explanation – Marshall offered none
– for her reporting in part 4 of her Statement of Financial Affairs
the IRS administrative proceeding.
The instruction on the Statement of Financial Affairs was
clear enough: “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.” Marshall
understood that her three pending discrimination claims were, as
she admitted in her affidavit, “administrative proceedings.” She
could not have overlooked these claims. Her attorney alleges
that in November 2005, she told the bankruptcy trustee that
Marshall’s pending EEOC claims for race and sex
discrimination and retaliation, “had a value of at least $100,000
. . . and [perhaps] more depending on what a jury might award
13
Both civil actions were in a Virginia court. Marshall listed one
as “Carydale vs Sandra McDougald.” On Marshall’s Schedule F
(Creditors Holding Unsecured Nonpriority Claims) she reported that
“Carydale Enterprises” had a claim against her for $2,572.47. The
other civil action was “State Department F[CU] vs Sandra
McDougald.” On her Schedule F she listed a debt to the “State
Department FCU” of $267.10.
14
On her Schedule E (Creditors Holding Unsecured Priority
Claims), Marshall listed the IRS as a creditor in the amount of $5,500.
17
for punitive damages.” A few weeks later, Marshall filed an age
discrimination complaint in federal court seeking more than $2
million in damages. And when Marshall finally amended her
bankruptcy schedules in 2010 to include this lawsuit, she listed
its value as $1,000,000.
For all of these reasons, Judge Lamberth, the district judge
in this case, quite properly invoked judicial estoppel to grant
summary judgment in favor of the defendants.
We could end our opinion here. Cases such as this one are
legion in the other circuits. So we add a few words about how
the courts of appeals have evaluated the frequent contentions of
bankruptcy debtors in light of the Supreme Court’s observation
– in a case that did not involve inadvertence or mistake – that “it
may be appropriate to resist judicial estoppel when a party’s
earlier position was based on inadvertence or mistake.” 532 U.S.
at 753 (internal quotation marks omitted).
Many courts of appeals have adopted the Fifth Circuit’s
statement that a “debtor’s failure to satisfy its statutory
disclosure duty is ‘inadvertent’ only when, in general, the debtor
either lacks knowledge of the undisclosed claims or has no
motive for their concealment.” In re Coastal Plains, Inc., 179
F.3d 197, 210 (5th Cir. 1999) (italics in original); see Barger,
348 F.3d at 1295-96; Browning v. Levy, 283 F.3d 761, 776 (6th
Cir. 2002); Eastman v. Union Pac. R.R. Co., 493 F.3d 1151,
1157 (10th Cir. 2007). Others have found that evaluating
subjective motivations is difficult and the court can therefore
presume that a debtor has acted intentionally, unless there is
evidence otherwise. The Third Circuit, for example, has held
that if a debtor knowingly omits valuable assets from her
bankruptcy schedules, the court may infer that the omission was
not an innocent mistake. Krystal Cadillac-Oldsmobile GMC
Truck, Inc. v. Gen. Motors Corp., 337 F.3d 314, 321 (3d Cir.
18
2003); see also Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282,
1287-88 (11th Cir. 2002). The Ninth Circuit, disagreeing, holds
that district courts must give weight to “the plaintiff’s subjective
intent when filling out and signing the bankruptcy schedules.”
Ah Quin v. Cty. of Kauai Dep’t of Transp., 733 F.3d 267, 277
(9th Cir. 2013).
We see no need to take sides in this debate, if indeed there
are discrete sides at all. In practice, even those courts of appeals
that have followed the Fifth Circuit’s lead have not been “as
rigid as one would expect” in practice. Ah Quin, 733 F.3d at
277. The Fifth Circuit itself has emphasized that judicial
estoppel requires a “holistic, fact-specific consideration of each
claim . . ..” Reed v. City of Arlington, 620 F.3d 477, 482 (5th
Cir. 2010), rev’d on other grounds en banc, 650 F.3d 571 (5th
Cir. 2011). The Eleventh Circuit has held that courts “must
always give due consideration to all of the circumstances of a
particular case . . ..” Barger, 348 F.3d at 1294. And the Seventh
Circuit, which has said that “subjective intent does not matter,”
Becker v. Verizon N., Inc., No. 06-2956, 2007 WL 1224039, at
*1 (7th Cir. Apr. 25, 2007), has also described judicial estoppel
as a “flexible equitable doctrine” that “does not lend itself to
rigid rules,” Grochocinski v. Mayer Brown Rowe & Maw, LLP,
719 F.3d 785, 796 (7th Cir. 2013).
The Supreme Court doubted that there is “any general
formulation of principle” that governs all cases involving
judicial estoppel. New Hampshire, 532 U.S. at 750. If some
courts of appeals have held otherwise – and we are not
convinced that they have – we disagree. Instead, as with many
matters that are left to the discretion of district courts, we
believe that it is better to wait until “a settled practice has
developed in cases of the type” and “the channel of discretion
ha[s] narrowed” organically. Henry J. Friendly, Indiscretion
About Discretion, 31 EMORY L.J. 747, 771-72 (1982). Our
19
circuit has seen few cases involving judicial estoppel in
bankruptcy cases, and we are reluctant to made broad
pronouncements prematurely. Instead, we hold that considering
all of the relevant factors, the district court in this case did not
abuse its discretion.
Affirmed.
1
GRIFFITH, Circuit Judge, dissenting: I agree with most of
what the majority says. Sandra Marshall may well have
deliberately left her civil claims off her bankruptcy forms in
an effort to conceal her assets from the bankruptcy court. Had
she undisputedly done so, the district court would have been
within its discretion to grant summary judgment on the basis
of judicial estoppel, just as we affirmed in Moses v. Howard
University Hospital, 606 F.3d 789 (D.C. Cir. 2010). But
summary judgment is appropriate only if the defendants have
shown that there is “no genuine issue as to any material fact.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). When
making this determination, we view the evidence in its full
context and in the light most favorable to Marshall, resolving
“any doubts” as to the existence of a genuine issue for trial in
her favor. McSurely v. McClellan, 697 F.2d 309, 321 (D.C.
Cir. 1982). Because Marshall told the trustee about her civil
claims, there is a genuine dispute over whether she lied or
simply made a mistake on her bankruptcy forms. And because
judicial estoppel is inappropriate in cases of mistake, whether
she lied or made a mistake is material. Accordingly, I would
hold that the district court abused its discretion by applying
judicial estoppel to grant summary judgment against
Marshall.
Judicial estoppel is an equitable remedy that we apply to
prevent litigants from manipulating the judicial system. Its
purpose is to “protect the integrity of the judicial process,”
New Hampshire v. Maine, 532 U.S. 742, 749-50 (2001)
(quoting Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 598
(6th Cir. 1982)), by “prevent[ing] parties from ‘playing fast
and loose with the courts,’” id. at 750 (quoting Scarano v.
Cent. R. Co., 203 F.2d 510, 513 (3d Cir. 1953)). This is why
judicial estoppel “looks toward cold manipulation and not
unthinking or confused blunder.” Konstantinidis v. Chen, 626
F.2d 933, 939 (D.C. Cir. 1980) (quoting Johnson Serv. Co. v.
2
Transamerica Ins. Co., 485 F.2d 164, 175 (5th Cir. 1973)).
The Supreme Court likewise instructs that judicial estoppel
“may be [in]appropriate” when a party’s past
misrepresentation “was based on inadvertence or mistake”
rather than a lie. New Hampshire, 532 U.S. at 753 (quoting
John S. Clark Co. v. Faggert & Frieden, P.C., 65 F.3d 26, 29
(4th Cir. 1995)).
Accordingly, many of our sister circuits do not apply
judicial estoppel when a party inadvertently omits information
from a bankruptcy filing. See, e.g., Spaine v. Cmty. Contacts,
Inc., 756 F.3d 542, 547-48 (7th Cir. 2014); Ah Quin v. Cty. of
Kauai Dep’t of Transp., 733 F.3d 267, 276-77 (9th Cir. 2013);
Stephenson v. Malloy, 700 F.3d 265, 275 (6th Cir. 2012);
Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81
F.3d 355, 364 (3d Cir. 1996). We have never disagreed with
this approach. The majority relies heavily on our decision in
Moses, but that case is fully consistent with our longstanding
refusal to apply judicial estoppel to “unthinking or confused”
litigants who neither manipulate the judicial system nor
threaten the integrity of the judicial process. Konstantinidis,
626 F.2d at 939 (quoting Johnson, 485 F.2d at 175). Moses
involved a plaintiff who selectively disclosed his liabilities,
concealed his assets, and offered no evidence to support his
claim that he made a mistake, much less evidence as
probative as an oral disclosure to the trustee. In short, the
plaintiff in Moses did not present a genuine issue as to
whether he made a mistake on his bankruptcy forms.
The majority does not dispute that judicial estoppel is
inappropriate in cases of mistake. But the majority improperly
limits the evidence that it considers in evaluating whether
Marshall made a mistake. It concludes that Marshall lied to
the bankruptcy court solely because she disclosed her
liabilities (cases in which she was a defendant) on her
3
bankruptcy forms yet concealed her assets (cases in which she
was a plaintiff). But this conclusion overlooks Marshall’s oral
disclosure, which suggests she made a mistake on her forms.
Instead, the majority treats Marshall’s oral disclosure as
wholly unrelated to her claim of mistake, concluding simply
that an oral disclosure to the trustee neither satisfies the
bankruptcy code’s requirements nor provides notice to
creditors. Nowhere does the majority acknowledge that
Marshall’s oral disclosure might also bear on whether she
made a mistake on her written forms.
The district court likewise never considered Marshall’s
oral disclosure as relevant evidence when it concluded that
she lied to the bankruptcy court. Marshall pointed out that
were she “trying to escape liability,” she “would not have
disclosed” her assets to the trustee during their meeting. Br.
for Pl. in Opp’n to Summ. J. at 17, Marshall v. Honeywell
Tech. Sys., Inc., 73 F. Supp. 3d 5 (D.D.C. 2014). But the
district court acknowledged her oral disclosure to the trustee
only to conclude that it “did not relieve her of the obligation
to provide complete information in her Bankruptcy Petition.”
Marshall, 73 F. Supp. 3d at 10. And when evaluating
Marshall’s claim that she made a mistake on her forms, the
district court never mentioned her oral disclosure, finding that
she lied solely because she disclosed her liabilities yet
concealed her assets. Id. at 11.
But it is wrong to evaluate Marshall’s oral disclosure and
her claim that she made a mistake on her forms as wholly
separate issues. See Aka v. Wash. Hosp. Ctr., 156 F.3d 1284,
1290 (D.C. Cir. 1998) (en banc) (explaining that at summary
judgment, “the court must consider all the evidence in its full
context”). Instead, her oral disclosure is evidence that she
never lied at all. Marshall voluntarily told the trustee about
her assets, and that fact, viewed in the light most favorable to
4
Marshall, suggests she was not trying to hide anything,
notwithstanding what she left off her forms. Thus, like the
Sixth and Seventh Circuits, I would hold that a debtor’s oral
disclosure to the trustee is material evidence of mistake and
would accordingly reverse the grant of summary judgment.
See Stephenson, 700 F.3d at 275 (reversing grant of summary
judgment, reasoning that an oral disclosure to the trustee
suggests no “intent to hide” a claim); Spaine, 756 F.3d at 547
(“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.”). But see
Guay v. Burack, 677 F.3d 10, 19-20 & n.7 (1st Cir. 2012).
This straightforward approach to mistake is particularly
appropriate in the bankruptcy context, where “[h]onest
mistakes and oversights are not unheard of.” Spaine, 756 F.3d
at 548. Indeed, a major reason that trustees meet with debtors
in the first place is to prevent inadvertent errors on bankruptcy
forms, which are often filled out by people like Marshall who
have little knowledge of the legal system. See id. The
bankruptcy code clearly anticipates that mistakes might
happen; it requires trustees to investigate debtors’ financial
affairs and meet with them to talk about their assets and
liabilities, 11 U.S.C. §§ 341, 704(a)(4), and the Federal Rules
of Bankruptcy Procedure allow amendments to initial filings,
Fed. R. Bankr. P. 1009(a).
Furthermore, I see little to be gained by jumping to the
conclusion that Marshall lied. When we apply judicial
estoppel based on bankruptcy omissions, the costs primarily
fall not on the plaintiff, but on her creditors, who might
otherwise recover assets from successful lawsuits. See Biesek
v. Soo Line R.R. Co., 440 F.3d 410, 413 (7th Cir. 2006); Ah
5
Quin, 733 F.3d at 276 (“If Plaintiff’s bankruptcy omission
was mistaken, the application of judicial estoppel in this case
would do nothing to protect the integrity of the courts, would
enure to the benefit only of an alleged bad actor, and would
eliminate any prospect that Plaintiff’s unsecured creditors
might have of recovering.”). Here, the defendant corporations,
who are accused of unlawful conduct, will get a windfall at
the expense of Marshall’s creditors, who are accused of
nothing at all.
Nor would it rewrite the bankruptcy code to acknowledge
that sometimes debtors make mistakes on their bankruptcy
forms. To be sure, Marshall had a “duty” to disclose potential
claims on her bankruptcy forms and to amend those forms
when she filed suit. Moses, 606 F.3d at 793. She violated the
bankruptcy code by failing to do so. But this fact, without
more, does not answer the question before us: whether
Marshall’s noncompliance with the bankruptcy code warrants
the application of judicial estoppel in her current lawsuit.
Judicial estoppel is appropriate only if Marshall’s failure was
deliberate, and not merely because she violated her duty to
disclose. See Ryan Operations, 81 F.3d at 364 (“[T]he
requisite intent for judicial estoppel [cannot] be inferred from
the mere fact of nondisclosure in a bankruptcy proceeding.”);
see also Moses, 606 F.3d at 798 (recognizing that courts of
appeals generally apply judicial estoppel when a debtor
“deliberately” fails to disclose her pending suit in an earlier
bankruptcy case).
I agree with the majority that Marshall’s selective written
disclosures suggest she lied on her forms. But her oral
disclosure to the trustee points in the other direction. This is
precisely the type of genuine dispute of material fact that the
district court should not have resolved at summary judgment.
However, the majority expressly declines to set a rule
6
dictating how the district court is to evaluate claims of
mistake and takes no stance on the role of an oral disclosure
in this calculus. Thus, I do not read the majority opinion to
limit the ability of a district court to consider a debtor’s oral
disclosure as evidence of mistake in a future case.