Opinion
Case No. 03-12157, Adv. Proc. No. 04-1058.
April 5, 2005
OPINION
On consideration before the court is the defendants' Motion to Dismiss for Failure to Participate in Discovery and Attend Depositions, or, in the Alternative, Motion for Summary Judgment Based on Certain Preclusive Defenses Arising From the Plaintiffs' Prior Bankruptcy Cases; responses to said motions having been filed by the plaintiffs; and the court, having heard and considered same, hereby finds as follows, to-wit:
I.
The court has jurisdiction of the parties to and the subject matter of this proceeding pursuant to 28 U.S.C. § 1334 and 28 U.S.C. § 157, as well as, the general order of reference issued by the United States District Court for the Northern District of Mississippi on July 27, 1984.
II.
Since the defendants' motion for summary judgment is dispositive of this proceeding, it is unnecessary for the court to address the defendants' motion to dismiss for the plaintiffs' failure to participate in discovery, etc.
III.
On November 8, 2002, each of the seven plaintiffs involved in the current adversary proceeding, along with numerous other plaintiffs, filed a cause of action against the defendants, referred to hereinafter for simplicity as American General, in the Circuit Court of Washington County, Mississippi, Civil Action No. CI2002-404. In summary, the plaintiffs' cause of action asserted that the defendants had perpetrated certain predatory lending practices.
The defendants removed the cause of action to the United States District Court for the Northern District of Mississippi on February 13, 2003, alleging both federal diversity jurisdiction under 28 U.S.C. § 1332 and federal bankruptcy jurisdiction under 28 U.S.C. § 1334. The plaintiffs filed a motion to remand on March 14, 2003, but this motion was denied by the district court on March 15, 2004. The district court concluded that it had both federal diversity jurisdiction, as well as, federal bankruptcy jurisdiction. As to the seven bankruptcy plaintiffs, the cause of action was then referred to this court for further proceedings.
IV.
The plaintiffs' bankruptcy cases and pertinent activities occurring therein are set forth as follows, to-wit:
A. Linda A. Foreman filed a joint bankruptcy with her husband, Jerry E. Foreman: This was a Chapter 7 bankruptcy case filed in the United States Bankruptcy Court for the Southern District of Mississippi on January 14, 2003, Case No. 03-00269. The debtors received their discharge on May 22, 2003. American General was listed in the bankruptcy schedules as an unsecured creditor.
B. Odean Gladney: This was a Chapter 13 bankruptcy case filed in the United States Bankruptcy Court for the Northern District of Mississippi on December 31, 2003, Case No. 03-18163. The debtor's Chapter 13 plan was confirmed on February 23, 2004. American General was not scheduled as a creditor.
C. James Harber filed a joint case with his wife, Delois Harber: This was a Chapter 7 bankruptcy case filed in the United States Bankruptcy Court for the Southern District of Mississippi on November 19, 2003, Case No. 03-06712. The debtors received their discharge on February 26, 2004. American General was not scheduled as a creditor.
D. Willie Henry: This was a Chapter 13 bankruptcy case filed in the United States Bankruptcy Court for the Northern District of Mississippi on April 3, 2003, Case No. 03-12157. The debtor's Chapter 13 plan was confirmed on June 9, 2003. American General was scheduled as a secured creditor. However, no counter claim or set off was raised by the debtor concerning this claim. In addition, the indebtedness to American General was not reflected as being either contingent, unliquidated, or disputed.
E. Lucy B. Jones: This was a Chapter 13 bankruptcy case filed in the United States Bankruptcy Court for the Western District of Tennessee on April 29, 2004, Case No. 04-26568. The debtor's Chapter 13 plan was confirmed on June 14, 2004. American General was not scheduled as a creditor.
F. Kenneth D. Lewis filed a joint bankruptcy case with his wife, Yvonne W. Lewis: This was a Chapter 13 bankruptcy case filed in the United States Bankruptcy Court for the Northern District of Texas on October 13, 1999, Case No. 99-37232. The debtors' Chapter 13 plan was confirmed on July 31, 2000. American General was scheduled as a secured creditor. However, no counterclaim or set off was raised by the debtors concerning this claim. In addition, the indebtedness to American General was not reflected as being either contingent, unliquidated, or disputed.
The following factors are common to each of the above bankruptcy cases, to-wit:
A. None of the debtors disclosed a claim against American General in their respective statements of financial affairs.
B. None of the debtors disclosed a cause of action against American General as a potential asset in their respective schedules.
C. None of the debtors disclosed that they were a party to a suit or proceeding in their statements of financial affairs.
D. With the exception of Kenneth and Yvonne Lewis, all of the debtors filed their bankruptcy cases after the civil action had been commenced in the Circuit Court of Washington County, Mississippi, on November 8, 2002. The Lewises remained in bankruptcy until they received their discharge on August 13, 2004. As such, they had ample opportunities to amend their bankruptcy schedules and statement of financial affairs to reflect their involvement in the cause of action against American General. The other debtors, of course, could and should have disclosed their involvement in the lawsuit when they initially filed their schedules and statements of financial affairs.
V.
American General, in its motion for summary judgment, has asserted that the plaintiffs' cause of action should be precluded because of the theory of judicial estoppel. This court recently addressed this concept in an opinion styled Donnie J. Breauxsaus v. First Mississippi Capital Corporation and Trustmark National Bank (In re Breauxsaus), 304 B.R. 273 (Bankr. N.D. Miss. 2003). The circumstances in the above captioned proceeding are very similar to those in Breauxsaus. See also, Southmark Properties v. Charles House Corp., 742 F.2d 862 (5th Cir. 1984), Howe v. Vaughn (In re Howe), 913 F.2d 1138 (5th Cir. 1990), Eastover Bank for Savings v. Smith (In re Little), 126 B.R. 861 (Bankr. N.D. Miss. 1991), Bank of Lafayette v. Baudoin (In re Baudoin), 981 F.2d 736 (5th Cir. 1993), In the Matter of Coastal Plains, Inc., 179 F.3d 197 (5th Cir. 1999), and DeLeon v. Comcar Industries, Inc., 321 F.3d 1289 (11th Cir. 2003).
As set forth hereinabove, each of the plaintiffs, excepting Kenneth and Yvonne Lewis, were parties to the lawsuit against American General prior to the time that they filed their bankruptcy cases. As such, they knew or should have known that their cause of action should have been disclosed in both their schedules and their statements of financial affairs. For inexplicable reasons, they elected not to do so. Consequently, the legal position that they took in their bankruptcy cases is inconsistent, insofar as the theory of judicial estoppel is concerned, with the legal position that they are taking in the civil cause of action.
The factual circumstances concerning the Lewises bankruptcy case is somewhat different. While they filed their case on October 13, 1999, and had their Chapter 13 plan confirmed on July 31, 2000, almost two years prior to the filing of the state court lawsuit, they remained under the jurisdiction of the bankruptcy court until their Chapter 13 discharge order was entered on August 13, 2004, almost two years after the lawsuit was filed. The Lewises were obviously cognizant of the indebtedness owed to American General because they scheduled it as a secured claim in their bankruptcy case. Since the claim was never challenged or disputed by the Lewises, it was allowed and paid in the sum of $983.25, over the life of their Chapter 13 plan. In the opinion of the court, the Lewises were obligated to amend their schedules to reflect their cause of action which had been filed against American General.
Insofar as the theory of judicial estoppel is concerned,Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414 (3rd Cir. 1988), cert. denied, 488 U.S. 967, 109 S.Ct. 495, 102 L.Ed.2d 532 (1988), provides the following:
We are also mindful of the equitable concept of judicial estoppel. This doctrine, distinct from that of equitable estoppel, applies to preclude a party from assuming a position in a legal proceeding inconsistent with one previously asserted. Judicial estoppel looks to the connection between the litigant and the judicial system while equitable estoppel focuses on the relationship between the parties to the prior litigation. Scarano v. Central Railroad Co., 203 F.2d 510 (3rd Cir. 1953); USLIFE Corp. v. U.S. Life Insurance Co., 560 F.Supp. 1302 (N.D. Tex. 1983).
We conclude that Oneida's failure to list its claim against the bank worked in opposition to preservation of the integrity of the system which the doctrine of judicial estoppel seeks to protect. Although we stop short of finding that, as the bank urges, Oneida's prior silence is equivalent to an acknowledgment that it did not have a claim against the bank, we agree that its current suit speaks to a position clearly contrary to its Chapter 11 treatment of the bank's claim as undisputed.Id. at 419.
The Fifth Circuit expressly recognized the doctrine of judicial estoppel in Ergo Science, Inc. v. Martin, et al, 73 F.3d 595 (5th Cir. 1996), where the court stated as follows:
Viewed in this light, the issue is more akin to judicial estoppel. The doctrine of judicial estoppel prevents a party from asserting a position in a legal proceeding that is contrary to a position previously taken in the same or some earlier proceeding. United States v. McCaskey, 9 F.3d 368, 378 (5th Cir. 1993), cert. denied, 511 U.S. 1042, 114 S.Ct. 1565, 128 L.Ed.2d 211 (1994). We recognize the applicability of this doctrine in this circuit because of its laudable policy goals. The doctrine prevents internal inconsistency, precludes litigants from "playing fast and loose" with the courts, and prohibits parties from deliberately changing positions based upon the exigencies of the moment.
73 F.3d 595 at 598. See also, In the Matter of Coastal Plains, Inc., 179 F.3d 197 (5th Cir. 1999), and Hall v. GE Plastic Pacific PTE Ltd., et al, 2003 WL 1747764 (5th Cir. 2003).
Judicial estoppel was recently applied by the Eleventh Circuit in DeLeon v. Comcar Industries, Inc., 321 F.3d 1289 (11th Cir. 2003), to preclude a Chapter 13 debtor's post-bankruptcy cause of action against a former employer for discrimination and retaliation. The court determined that the debtor knew about the claim before filing bankruptcy and possessed a motive to conceal the claim from the court in order to reduce the payments to the estate's creditors.
VI.
Summary judgment is properly granted when pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Bankruptcy Rule 7056; Uniform Local Bankruptcy Rule 18. The court must examine each issue in a light most favorable to the nonmoving party.Anderson v. Liberty Lobby, 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Phillips v. OKC Corp., 812 F.2d 265 (5th Cir. 1987); Putman v. Insurance Co. of North America, 673 F.Supp. 171 (N.D. Miss. 1987). The moving party must demonstrate to the court the basis on which it believes that summary judgment is justified. The nonmoving party must then show that a genuine issue of material fact arises as to that issue. Celotex Corporation v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.29 265 (1986); Leonard v. Dixie Well Service Supply, Inc., 828 F.2d 291 (5th Cir. 1987), Putman v. Insurance Co. of North America, 673 F.Supp. 171 (N.D. Miss. 1987). An issue is genuine if "there is sufficient evidence favoring the nonmoving party for a fact finder to find for that party." Phillips, 812 F.2d at 273. A fact is material if it would "affect the outcome of the lawsuit under the governing substantive law." Phillips, 812 F.2d at 272.
VII.
Insofar as the defendants' motion for summary judgment is concerned, there are no material facts that remain in dispute. Consequently, considering the authorities cited hereinabove, the court is of the opinion that the theory of judicial estoppel precludes the cause of action being asserted against the defendants by all of the plaintiffs, including the Lewises. The motion for summary judgment is well taken in this regard, and it will be sustained by a separate order entered contemporaneously herewith.