ERISA: 6th Circuit — Failing to Disclose Disability Claim in Bankruptcy NOT Fatal to Disability Lawsuit

What happens when a long term disability claimant declares bankruptcy, and fails to list the long term disability claim in the bankruptcy estate?

Is he judicially estopped from bringing the lawsuit alleging wrongful denial of disability benefits?  Probably not.

Here’s the case of Javery v Lucent Tech, Inc. Long Term Disability Plan, __ F.3d __ (6th Cir. February 3, 2014).

FACTS:  Javery, a software engineer, sought long term disability benefits under an ERISA-governed plan. His claim was denied, after two administrative appeals. In October 2007 Javery declared Chapter 13 bankruptcy.  In 2009 Javery brought suit in federal court alleging wrongful denial of long term disability benefits. The court remanded to the plan administrator for further review.  The claim was later denied again in 2011.  In 2012 Javery then moved to reactivate his case alleging wrongful denial of benefits.

The Plan alleged Javery should be judicially estopped from pursuing his long term disability suit because he failed to list his disability claim in his bankruptcy proceedings.

SIXTH CIRCUIT HOLDS:

  1. The Court applied de novo review in reviewing the trial court’s application of the doctrine of judicial estoppel.  Op. at 13.
  2. “‘[J]udicial estoppel does not apply where the prior inconsistent position occurred because of ‘mistake or inadvertence.’” Failure to disclose a claim in a bankruptcy proceeding also may be excused where the debtor lacks a motive to conceal the claim or where the debtor does not act in bad faith.”  (Citations omitted.) (Emphasis in original.) Op. at 15.
  3. Plaintiff’s wife prepared the bankruptcy information and any non-disclosure was “at best inadvertent and will be remedied.”  Op. at 15.
  4. Defendant failed to produce any evidence that the Plaintiff’s factual assertions were incorrect. “There is simply no basis to infer intentional concealment.”  Op. at 15.
  5. Under Ohio law, proceeds from a disability insurance policy are completely exempt from a debtor’s estate.  “Accordingly, Plaintiff had no motive for intentionally concealing the claim.”  Op. at 16.

BY THE WAY, how ‘bout those Seattle Seahawks?

Topics:  Chapter 13, Consumer Bankruptcy, Debtors, Disability Benefits, ERISA, Judicial Estoppel

Published In: Bankruptcy Updates, Civil Procedure Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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