05-8106 - James M. Eastman, et al., Plaintiffs; R. Michele Russell, etc. Appellant v. Union Pacific Railroad Company, etc, et al.
U.S. Tenth Circuit Court of Appeals
(March 8, 2007)

Briefs

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Case Summary (prepared at Washburn Law)

Procedure

This is an appeal from a judgment against Gardner on February 10, 2006. The District Court dismissed Gardner's claims based on judicial estoppel (a judicial decision to bar the relitigation of issues) because Gardner failed to disclose that his personal injury lawsuit was pending when he filed for Chapter 7 Bankruptcy.

Facts

Gardner received a discharge of debts from the court after filing Chapter 7 bankruptcy. However, Gardner did not notify the court that he filed a personal injury action against Union Pacific Railroad Company seeking damages for negligence in excess of 75,000 dollars. That suit arose out of a multi-vehicle collision. Trial was set for August, however, in July Gardner and his wife filed a Chapter 7 bankruptcy petition and received a discharge of debts. The bankruptcy petition required debtors to list "other contingent and unliquidated claims of every nature, including tax refunds, counterclaims of the debtor, and rights to setoff claims. Give estimated value of each." Debtors are also instructed to list all suits or administrative proceedings to which the debtor is or was a party to within one year prior to the bankruptcy case. The Gardners did not list the pending personal injury lawsuit with Union Pacific. Also, when asked whether they had any personal injury suits pending they responded in the negative. However, in deposition both Gardner and his wife testified that they knew the importance of being honest and also that at the time of the bankruptcy filing they new of the pending lawsuit. The District Court granted Union Pacific's motion for summary judgment based on the affirmative defense of judicial estoppel. The District Court ruled according to Johnson v. Lindon City Corporation, 405 F.3d 1065 (10th Cir. 2005), and determined that Gardner was judicially estopped from pursuing him claims and that those claims were to be dismissed with prejudice. This is an appeal of that decision.

Issue

Did the District Court abuse its discretion when it dismissed Gardner's claims based on judicial estoppel when he failed to disclose his personal injury lawsuit in his Chapter 7 bankruptcy case?

Appellant's Arguments

Appellant argues that Gardner did not act in bad faith, rather that he made a mistake. Appellant argues that Gardner should be allowed to amend his bankruptcy claim and therefore not be estopped from his claims because of a mistake of law. Appellant argues that there is no showing of bad faith because the Gardners willfully disclosed to their attorney that they had a personal injury suit pending against Union Pacific and that this willful disclosure proves that Gardner made a mistake of law rather than purposefully and fraudulently withholding information from the court.

Respondent's Arguments

The district court did not abuse its discretion in applying the doctrine of judicial estoppel to Gardner's claims because Gardner engaged in fraudulent conduct by (1) failing to list his personal injury lawsuit in his bankruptcy schedule and (2) failing to notify and denying that a personal injury lawsuit was pending. Because of this failure to notify, Gardner received a discharge of his debts. Respondent's argument is that if the appellate court overrules the decision of the District Court it will send a message to all debtors filing for bankruptcy that they need not be completely honest and will still be rewarded with the discharge of their debts. Therefore the District Court's decision should be upheld.