The Plaintiff’s Bankruptcy as a Bar to Later Lawsuits

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When does a plaintiff’s bankruptcy bar a later discrimination claim? The Ninth Circuit recently framed the issue with two cases:

In Ah Quin v. County of Kauai Department of Transportation, No. 10-16000 (9th Cir. 2013), a plaintiff-debtor failed to list her pending employment lawsuit as an asset in her bankruptcy case. When the employer-defendant moved to dismiss the employment lawsuit because the claim really belonged to the bankruptcy estate, the plaintiff-debtor filed an affidavit explaining that her failure to disclose the employment lawsuit to the bankruptcy court was a harmless mistake. Accepting the affidavit at face-value, the Ninth Circuit held in July 2013 that omitting the case from the bankruptcy might have been inadvertent, and remanded the case for further factual development. However, in Dzakula v. McHugh, No. 11-16404 (9th Cir. Dec. 11, 2013), the plaintiff-debtor offered no evidence, by affidavit or otherwise, explaining why she omitted her employment claim from her bankruptcy filing. Unlike in Ah Quin, the Ninth Circuit held that no reasonable fact-finder could conclude the omission resulted from mistake or inadvertence. The plaintiff in Dzakula was barred by judicial estoppel from proceeding with the employment claim.

The rule then is: if a plaintiff fails to disclose a pending lawsuit in bankruptcy filings, judicial estoppel might bar the assertion of the claims – unless the plaintiff presents evidence the omission resulted from mistake.

Topics:  Consumer Bankruptcy, Discrimination

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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