Opinion
Case No. 98-82409-JAC-7.
February 23, 2000
Vincent Ledlow, attorney for debtor.
Tim Case, attorney for debtor.
Shannon Powell, attorney for Liberty National.
Judith Thompson, trustee.
MEMORANDUM OPINION
Before the Court is debtor's motion to reopen his case to add an unscheduled asset. The asset is a prepetition discrimination claim against the debtor's employer, Liberty National Life Insurance Company ("Liberty National"). Debtor alleges that the omission of the claim as an asset in his schedules was inadvertent. Liberty National argues that the doctrine of judicial estoppel bars the debtor from reopening his bankruptcy case to assert the undisclosed discrimination claim. The doctrine of judicial estoppel requires a determination that: (1) positions asserted in two different proceedings are in fact inconsistent, and (2) the inconsistency would allow a party to benefit from deliberate manipulation of the courts. If the Court reopens the case and the debtor lists the claim as an asset in his schedules, the effect will be to prevent the district court from ruling on the issue of judicial estoppel because reopening the case will revive the original bankruptcy proceeding and thereby nullify the final determination upon which judicial estoppel could be predicated. If Liberty National is successful in opposing the motion to reopen, the determination of whether or not the discrimination action is barred by the doctrine of judicial estoppel shall be left to the discretion of the district court.
Chandler v. Samford Univ., 35 F.Supp.2d 861 (N.D. Ala. 1999) (citing Ryan Operations, G.P. v. Santiam-Midwest Lumber Co., 81 F.3d 355, 361 (3rd Cir. 1996); In re Tippins, 221 B.R. 11, 26-27 (Bankr. N.D. Ala. 1998)).
In re Koch, 229 B.R. 78, 85 (Bankr. E.D.N.Y. 1999).
Id. at 87.
FINDINGS OF FACT
The relevant facts developed at trial are as follows:
1. On June 22, 1998, the debtor filed a voluntary petition for relief under chapter 13 of the Bankruptcy Code. At filing, the debtor was employed by Liberty National as a sales manager in Florence, Alabama and his responsibilities included training new insurance agents.
2. On June 25, 1998, Liberty National demoted the debtor to an insurance agent. The debtor alleges that he was demoted because he was hospitalized in December of 1997 for depression. The debtor did not amend his schedules to disclose his potential claim against Liberty National arising from his demotion and the alleged discrimination.
3. On August 24, 1998, the trustee held the debtor's 341 meeting at which the debtor failed to disclose his potential claim against Liberty National. The Court on October 7, 1998 entered an order confirming the chapter 13 case.
4. On October 9, 1998, the debtor met with an employment discrimination attorney to discuss his legal remedies against Liberty National.
5. On October 13, 1998, the debtor filed a notice of conversion to chapter 7. The debtor did not file amended schedules in the chapter 7 case listing his claim against Liberty National as an asset of the estate.
6. On October 16, 1998, the debtor filed a charge of discrimination with the Equal Employment Opportunity Commission ("EEOC") against Liberty National.
7. On November 20, 1998, the chapter 7 trustee held the debtor's 341 meeting in Florence, Alabama. The debtor did not disclose his claim against Liberty National at the meeting.
8. On January 25, 1999, the debtor received a chapter 7 discharge.
9. On February 5, 1999, the debtor's case was closed.
10. On February 11, 1999, the debtor received a right to sue letter from the EEOC.
11. On May 7, 1999, the debtor sued Liberty National under the Americans with Disabilities Act in the United States District Court, Northern District of Alabama. The suit was based on the debtor's allegation that he was demoted in June of 1998 to the position of insurance agent and then transferred and reassigned to a sales manager position is a smaller district earning less money because he was hospitalized for depression in December of 1997.
12. On August 27, 1999, Liberty National filed a motion to dismiss the complaint based on lack of standing and judicial estoppel. The district court on October 14, 1999 dismissed the case without prejudice pending resolution of the debtor's motion to reopen his bankruptcy case to include the cause of action as an asset.
ANALYSIS
A bankruptcy case may be reopened pursuant to 11 U.S.C. § 350(b) of the Bankruptcy Code "to administer assets, to accord relief to the debtor, or for any other cause." The decision to reopen a case under § 350(b) is not mandatory. Instead, such decision falls within the sound discretion of the bankruptcy court based upon the facts of each case. The following have been enumerated as factors for a court to consider under § 350(b) to determine if a case should be reopened: (1) the benefit to the debtor; (2) the prejudice to the affected entity; and (3) the benefit to the creditors.
In re Moyette, 231 B.R. 494, 496 (E.D.N.Y. 1999); In re Cloninger, 209 B.R. 125, 126 (Bankr. E.D. Ark. 1997).
In re McDaniel, 217 B.R. 348, 351 (Bankr N.D. Ga. 1998); In re Daniel, 205 B.R. 346, 347 (Bankr. N.D. Ga. 1997); Helms v. Arboleda, 224 B.R. 640 (Bankr. N.D. Ill. 1998); In re Collis, 223 B.R. 814 (Bankr. M.D. Fla. 1997).
In re Koch, 229 B.R. 78, 85 (Bankr. E.D.N.Y. 1999); In re Maloy, 195 B.R. 517, 518 (Bankr. N.D. Ga. 1996).
In the case of In re Koch, 229 B.R. 78 (Bankr. E.D.N.Y. 1999), the bankruptcy court applied these factors and determined that the debtor was not entitled to reopen his case to amend his schedules to include a cause of action against the National Basketball Association ("NBA") for its alleged destruction of photographic slides owned by the debtor. The court found that the debtor did not act in good faith in failing to disclose the claim as an asset when the trustee could have pursued the cause of action for the benefit of the debtor's creditors. As in the case before this Court, it was only after the defendant in Koch moved to dismiss the complaint on the ground that the debtor had no standing in the action that the debtor filed the motion to reopen. The court analyzed the debtor's actions and found that there was no benefit to his creditors to reopen the case. The debtor filed suit against the NBA more than a year after his case was closed at which time it was too late for the trustee or a creditor to move to revoke debtor's discharge under § 727(e). The time for revoking the debtor's discharge having expired, there was no benefit to the creditors to have the case reopened, because their claim were extinguished. The Court notes that time for revoking the debtor's discharge in this case has also expired since it has been more than one year since the debtor received his discharged and the case was closed.
(e) The trustee, a creditor, or the United States trustee may request a revocation of a discharge —
(1) under subsection (d) ((1) of this section within one year after such discharge is granted; or
(2) under subsection (d) (2) or (d) (3) of this section before the later of —
(A) one year after the granting of such discharge and
(B) the date the case is closed.
In the case of In re Maloy, 195 B.R. 517 (Bankr. M.D. Ga. 1996), the bankruptcy court determined that the debtor was not entitled to reopen his case to amend his schedules to include a claim that he was aware of during the pendency of his case. The court refused to allow debtor's case to be reopened "solely for the purpose of amending the schedules so as to equip the debtor with new arguments to assert" in a civil action finding such purpose to be an "inappropriate function" of the bankruptcy court. With regard to the benefit to the debtor versus the prejudice to the defendant in the civil action, the court found that any benefit to the debtor would have to come as a detriment to the defendant. To enjoy some benefit from reopening the case to the detriment of the defendant, the court stated that there has to be a showing of good faith on part of the debtor. Instead, the court found that the debtor knew of his claim prior to the time his case was closed and failed to disclose its existence in casual disregard for the disclosure requirements of the Bankruptcy Code.
Maloy, at 518.
Id. at 519 (citing Samuel v. Baitcher (In re Baitcher), 781 F.2d 1529 (11th Cir. 1986)).
The debtor in the present case was also well aware of his claim against Liberty National during the pendency of his case, but argues that the omission of the claim was merely inadvertent. In the case of Chandler v. Samford Univ., 35 F.Supp.2d 861 (N.D. Ala. 1999), the court judicially estopped the debtor from pursuing an employment discrimination action against Samford University in part because the court found that the debtor deliberately manipulated the bankruptcy court by failing to amend her schedules to reflect the action as an asset of her bankruptcy estate. The court rejected the argument by debtor that she would have disclosed the discrimination claim against the university if only her attorneys would have informed her that such disclosure was necessary. The court noted that even if the omission was inadvertent, inadvertence is not an acceptable excuse for a party's failure to comply with the bankruptcy disclosure requirements.
In the present case, the debtor did not disclosed his claim against Liberty National as an asset in his chapter 13 schedules even though he was demoted a mere three days after filing his bankruptcy petition in June of 1998. Even if the debtor was not aware that he had a potential claim against Liberty National at that time, he was certainly aware of the claim when he converted his case to chapter 7 on October 13, 1998 only four days after meeting with an attorney to discuss suing his employer for discrimination. The claim was never disclosed in the schedules that were required to be filed following conversion. On October 16, 1998, only three days after the debtor converted his case to chapter 7, he again met with his attorney and filed a charge of discrimination against the EEOC. When the debtor attended his 341 meeting approximately one month later on November 20, 1998, he had yet another opportunity to disclose the claim to his trustee and creditors but failed to do so. Instead, the debtor did not disclosed the claim until Liberty National filed a motion to dismiss the civil action based on lack of standing and judicial estoppel. The proper time for disclosure had passed. It is inconceivable given the time frame during which the debtor converted his case and filed his EEOC charge against Liberty National that the debtor's failure to disclose the claim was inadvertent, but as stated in Chandler "[e]ven if this `explanation' is true, it is irrelevant." The Bankruptcy Code requires full disclosure and the debtor did not comply with this requirement despite have numerous opportunities to disclose his claim both during his chapter 13 case, after conversion, and before filing suit in his own name against Liberty National. Accordingly, the Court finds that any benefit of reopening this case is offset by the detriment to Liberty National. The Court further finds that no benefit from reopening this case will be enjoyed by the debtor's creditors because the time for revoking the debtor's discharge has expired.
Maloy at 519 (finding that the time for disclosure had passed once the defendant in the civil action moved for dismissal based on lack of standing).
Chandler at 864.
A separate order will be entered consistent with this opinion.