S. Sadlowski v. Michaels Stores Inc , 672 F. App'x 729 ( 2016 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS DEC 28 2016
FOR THE NINTH CIRCUIT MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
S. SADLOWSKI, No. 14-56654
Plaintiff-Appellant, D.C. No. 8:13-00455-GW-AGR
v.
MEMORANDUM*
MICHAELS STORES, INC.,
a Delaware corporation,
Defendant-Appellee.
Appeal from the United States District Court
for the Central District of California
George H. Wu, District Judge, Presiding
Argued and submitted October 17, 2016
Pasadena, California
Before: TALLMAN and CHRISTEN, Circuit Judges, and KENNELLY,** District
Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Matthew F. Kennelly, United States District Judge for
the Northern District of Illinois, sitting by designation.
Sophia Sadlowski appeals the district court’s decision to grant summary
judgment barring her wage-and-hour claims against Michaels Stores, Inc. based on
the doctrine of judicial estoppel. We have jurisdiction under 28 U.S.C. § 1291, and
we reverse the district court’s ruling.
1. We review a district court’s application of judicial estoppel for an abuse
of discretion. Ah Quin v. Cty. of Kauai Dep’t of Transp., 733 F.3d 267, 270 (9th
Cir. 2013). “The district court necessarily abuses its discretion when it bases its
decision on an erroneous legal standard.” Id. (ellipses and internal quotation marks
omitted) (quoting Farris v. Seabrook, 677 F.3d 858, 864 (9th Cir. 2012)).
2. The district court’s ruling was based on Sadlowski’s failure to disclose
her wage-and-hour claims during her Chapter 13 bankruptcy case, which was
ultimately dismissed due to her failure to make required payments. “Although
judicial estoppel is ‘probably not reducible to any general formulation of principle,
. . . several factors typically inform the decision whether to apply the doctrine in a
particular case.’” Id. (Quoting New Hampshire, 532 U.S. at 750-51). These factors
include: (1) whether the party’s later position was clearly inconsistent with its
earlier position; (2) whether the party had succeeded in persuading a court to
accept its earlier position, such that accepting an inconsistent position in a later
proceeding would create the perception that the one court or the other was misled;
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and (3) whether the party asserting an inconsistent position would derive an unfair
advantage or impose an unfair detriment on its opponent if not estopped. New
Hampshire v. Maine, 532 U.S. 742, 750-51 (2001).
3. In applying this doctrine in the present context, the default rule is that
“[i]f a plaintiff-debtor omits a pending (or soon-to-be-filed) lawsuit from the
bankruptcy schedules and obtains a discharge (or plan confirmation), judicial
estoppel bars the action.” Ah Quin, 733 F.3d at 271. This is not what occurred
here. Although Sadlowski did not disclose her wage-and-hour claim as an asset in
her bankruptcy case, the bankruptcy was filed long before her wage-and-hour
lawsuit. There was no basis in the record for a finding that Sadlowski was aware
of enough facts to know that she had a legal claim against Michaels until she
retained legal counsel for the wage-and-hour case in September 2011, about a
month before her bankruptcy case was dismissed in October 2011. More
importantly, the bankruptcy court never “accepted” or relied upon Sadlowski’s
nondisclosure of her wage-and-hour claim. She did not receive a discharge, a
favorable ruling, or any other benefit; rather, her bankruptcy case was dismissed
due to her noncompliance with the Chapter 13 payment plan.
4. The district court’s ruling amounted to a determination that simple
nondisclosure of a potential claim during bankruptcy, without more, estops a party
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from asserting the claim in a civil suit. The court applied an incorrect legal
standard, because it essentially reduced New Hampshire v. Maine’s three-factor
analysis to a single factor: whether the party took inconsistent positions. No case
decided by this Court supports this.
5. For these reasons, we conclude that the district court abused its discretion
by barring Sadlowski’s claims against Michaels on the basis of judicial estoppel.
The case is remanded with instructions to deny Michaels’s motion for summary
judgment. Each party shall bear its own costs on appeal.
REVERSED AND REMANDED.
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