There have been several cases over the years dismissing lawsuits by Debtors who failed to list the claim as an asset in their Bankruptcy schedules. As the opinion below confirms, the same duty applies where the claim arose after the filing of a Chapter 13 case and even where the Debtor proposed to pay, and in fact did pay, all claims in full through a Chapter 13 plan.
Robinson v. Tyson Foods, Inc., 2010 U.S. App. LEXIS 2473 (11th Cir. Ala. Feb. 5, 2010). The Debtor filed a Chapter 13 petition in 2002, and proposed to pay all claims, secured and unsecured, in full over 60 months. In 2005, Debtor resigned from Tyson Foods alleging that she had been subject to harassment. In October 2006, Debtor brought a civil suit against Tyson, alleging unlawful employment practices and mistreatment on the basis of race severe enough to constitute constructive termination. She sought compensatory, punitive and liquidated damages.
Debtor did not amend her Bankruptcy schedules to disclose the claim against Tyson. However, in 2007, she completed all payments under her Chapter 13 plan, paid all creditors in full, and received a discharge.
Tyson subsequently moved for a dismissal of the lawsuit based on judicial estoppel as Debtor failed to disclose her claim in the Chapter 13 case.
In preparation for her employment discrimination suit, Tyson took Robinson’s deposition in September 2007. During the deposition, Robinson revealed that she had not disclosed her suit against Tyson to the bankruptcy court. …. When asked whether she had any suits or administrative proceedings pending, Robinson checked "NONE" on the schedule disclosure forms... Tyson argued that Robinson’s non-disclosure constituted inconsistent positions under oath that were calculated to make a mockery of the judicial system. The district court agreed and granted summary judgment for Tyson. This appeal followed. The only issue on appeal is whether the district court abused its discretion in applying judicial estoppel.
Debtor argued that she had no continuing duty to disclose changes in her assets after the Chapter 13 was filed. The Court disagreed.
Our court has emphasized the importance of full and honest disclosure in bankruptcy proceedings, stating that it is "crucial" to the system’s "effective functioning." Id. A debtor seeking shelter under the bankruptcy laws has a statutory duty to disclose all assets, or potential assets to the bankruptcy court. 11 U.S.C. §§ 521(1), 541(a)(7). "The duty to disclose is a continuing one that does not end once the forms are submitted to the bankruptcy court; rather the debtor must amend [her] financial statements if circumstances change." Burnes, 291 F.3d at 1286. This duty applies to proceedings under Chapter 13 and Chapter 7 alike because "any distinction between the types of bankruptcies available is not sufficient enough to affect the applicability of judicial estoppel because the need for complete and honest disclosure exists in all types of bankruptcies." …
[E]ven if the reasoning in Burnes is dicta, it became the law of this circuit…. Therefore, under the established law of this circuit, a Chapter 13 debtor has a statutory duty to disclose changes in assets…
In addition to the general statutory duty, in this case there was a court ordered duty to disclose additional assets. The bankruptcy court’s order specifically states that, "the property of the estate shall not vest in the Debtor until a discharge is granted under § 1328 or the case is dismissed." Therefore, all qualified property acquired by Robinson during the pendency her bankruptcy belonged to her bankruptcy estate and not her personally…
When Robinson submitted her bankruptcy schedules under oath, she also submitted that she would update those schedules as required. Therefore, when Robinson filed suit against Tyson, she had a sworn duty to disclose that suit to her bankruptcy estate.
By failing to update her bankruptcy schedule to reflect her pending claim, Robinson represented that she had no legal claims to the bankruptcy court while simultaneously pursuing her legal claim against Tyson in the district court. These actions, both taken under oath, are clearly inconsistent.
The Court further held that Debtor’s failure to amend was not due to a mistake.
It is undisputed that Robinson had knowledge of her claims. Therefore, the issue of motive is the determining factor in this case. Robinson contends she lacked motive to conceal her claims against Tyson as her Chapter 13 plan proposed complete repayment. However, full monetary repayment does not necessarily preclude a finding of a motive to conceal… The application of judicial estoppel does not require that the nondisclosure must lead to a different result in the bankruptcy proceeding… Rather, the motive to conceal stems from the possibility of defrauding the courts and not from any actual fraudulent result.
The district court found that Robinson had a motive to conceal her claim because if "she realized any proceeds from the suit prior to the discharge of her bankruptcy . . . she could have kept the proceeds for herself without their becoming part of the bankruptcy estate and going to her creditors to satisfy her debts." The district court focused on the nine month window between when Robinson brought her claim against Tyson and when she was dismissed from bankruptcy. Specifically, the district court found that if Robinson’s claim had settled in this time period, she would have been able to keep the proceeds for herself and denied the creditors a fair opportunity to claim what was rightfully theirs. ..