JOHN ATKINS v. 4940 WISCONSIN, LLC , 93 A.3d 1286 ( 2014 )

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DISTRICT OF COLUMBIA COURT OF APPEALS
No. 13-CV-1074
JOHN ATKINS, APPELLANT,
V.
4940 WISCONSIN, LLC, APPELLEE.
Appeal from the Superior Court
of the District of Columbia
(CAB-1922-12)
(Hon. Craig Iscoe, Trial Judge)
(Submitted May 6, 2014 Decided July 3, 2014)
David M. Wasser was on the brief for appellant.
Dawn E. Boyce and Martin Schubert were on the brief for appellee.
Before GLICKMAN and MCLEESE, Associate Judges, and REID, Senior Judge.
REID, Senior Judge: Appellant, John Atkins, appeals the trial court‟s
dismissal of his personal injury action against appellee, 4940 Wisconsin, LLC
(“the LLC”). The trial court granted summary judgment for the LLC on the
ground that Mr. Atkins‟ lawsuit is barred by the doctrine of judicial estoppel. For
the reasons stated below, we affirm the judgment of the trial court.
2
FACTUAL SUMMARY
On June 5, 2009, Mr. Atkins was working in a furniture store, located on
property owned by the LLC, when he slipped and fell. Later, on January 8, 2010,
Mr. Atkins filed a Chapter 7 petition for bankruptcy in the United States
Bankruptcy Court for the District of Columbia. He identified the LLC as one of
his creditors, due to a retail lease, and he listed $328,606 as the disputed amount of
the LLC‟s unsecured nonpriority claim. He made no mention of his potential
personal injury claim on his Schedule C pertaining to property or interests claimed
as exempt from the reach of creditors. The United States Bankruptcy Judge signed
an order on June 28, 2010, granting Mr. Atkins‟ a discharge under Chapter 7 of the
Bankruptcy Code.
Mr. Atkins filed his personal injury lawsuit against the LLC in the trial court
on February 27, 2012, claiming injury due to the negligence of the LLC. The LLC
lodged a motion to dismiss and for summary judgment on October 4, 2012, stating
as an undisputed fact that Mr. Atkins “did not schedule [his] personal injury claim
on any schedule attached to [his] Voluntary Petition for Bankruptcy.” The trial
court held the LLC‟s motions in abeyance to allow Mr. Atkins an opportunity to
substitute the Bankruptcy Trustee as plaintiff, or to submit a statement that the
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Trustee “abandon[ed] the action to the Plaintiff.”
About one year after filing his personal injury action in the trial court, Mr.
Atkins moved to reopen his bankruptcy case; he submitted an amended Schedule C
on March 20, 2013, essentially claiming that his trial court cause of action against
the LLC was exempt from the reach of his creditors, in the amount of $23,500. No
objection was filed in the Bankruptcy Court, and consequently, the Bankruptcy
Trustee declared on May 14, 2013, that Mr. Atkins “owns the cause of action” up
to $23,500. Furthermore, the Trustee asserted that “any potential recovery will be
paid first to medical liens, . . . and attorneys[‟] fees,” and that any sum recovered in
excess of the $23,500 claimed exemption would belong to the bankruptcy estate.1
In an eleven-page order, signed on July 19, 2013, the trial court granted the
LLC‟s motion for summary judgment. First, the trial court determined that,
1
Later, on August 16, 2013, the Bankruptcy Trustee informed Mr. Atkins‟
attorney that he had not “abandoned” the personal injury cause of action, and that
he had “no authority to assign or authorize anything without specific authority of
the Bankruptcy Court,” which had not yet been obtained. He denied attempting “to
authorize [Mr. Atkins] to go forward on anything, particularly on behalf of the
estate.” Four days later, the Trustee stated that he was “not planning to become a
party to the suit.” He also expressed the view that “the bankruptcy estate with
court authority can assign a cause of action to whomever it decides,” and that in
the event that Mr. Atkins received the assignment, he “would take the cause of
action as assignee of the estate, not as the debtor.”
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contrary to the LLC‟s argument, Mr. Atkins has standing to bring his personal
injury action “because the Bankruptcy Trustee assigned the litigation to [Mr.
Atkins].” Second, the trial court concluded that judicial estoppel bars Mr. Atkins‟
personal injury lawsuit. The trial court reasoned that the elements of judicial
estoppel are satisfied in this case. First, Mr. Atkins‟ position in the trial court was
inconsistent with his position in the bankruptcy court because “when [he] filed for
bankruptcy he represented in his schedules that he had no unliquidated claims[;]
[h]owever, in [his personal injury litigation], he is claiming to have a cause of
action against the [LLC] arising from an accident that occurred before he filed for
bankruptcy.” Second, Mr. Atkins persuaded the bankruptcy court to accept his
position “because, in discharging [Mr. Atkins‟] debts the bankruptcy court relied
on [his] schedules, which did not list [his personal injury claim].” Third, Mr.
Atkins would gain an unfair advantage over the LLC if he is not estopped because
he “discharged his obligations to his creditors, 99.7% of which was due to the
[LLC], before remembering the injury that led to [his] bankruptcy.” The trial court
concluded that Mr. Atkins‟ action “appears wholly calculated to abuse the judicial
process[,]” and further, he “would still receive at least $21,625.00, not a trivial
sum[,]” while “[c]ontinued litigation of the suit would impose significant costs on
the [LLC], as well as an expenditure of the [trial] [c]ourt‟s time and resources.”
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Mr. Atkins moved to alter or amend the trial court‟s order on July 26, 2013,
asking the trial court “to clarify that the instant action is dismissed” as to him, but
not the Bankruptcy Trustee “who remains the real party in interest,” and that “the
instant action remains part of the bankruptcy estate as a matter of law.” The LLC
opposed Mr. Atkins‟ motion, and the trial court denied Mr. Atkins‟ motion,
declaring that the Bankruptcy Trustee is not a party to the litigation and has no
interest beyond the excess of any potential recovery, that Mr. Atkins‟ “bankruptcy
estate was never a party to the litigation,” and that “[t]he Court‟s Order of July 19,
2013[,] does not bind the Bankruptcy Trustee,” although it might have implications
if “the Bankruptcy Trustee decides to pursue litigation.”2
ANALYSIS
Mr. Atkins argues that the trial court erred by: (1) concluding that the
Bankruptcy Trustee “abandoned” the personal injury claim;3 (2) failing to
recognize that “[t]he Trustee has ratified Mr. Atkins‟ pursuit of the claim on behalf
2
Like the trial court, we address only the question of whether Mr. Atkins
should be permitted to bring this suit. We express no view about the issues that
might be presented if the bankruptcy trustee were to pursue litigation against the
LLC with respect to this matter.
3
In his reply brief, Mr. Atkins states: “Contrary to [the LLC‟s] assertions,
there is no issue as to „abandonment‟ of the claim by the Trustee.”
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of the [bankruptcy] estate” rather than “as the debtor”; and (3) finding judicial
estoppel applicable against the Trustee while failing to recognize that application
of the judicial estoppel doctrine would be inequitable because it harms Mr. Atkins‟
creditors. “We review de novo [Mr. Atkins‟] claim that the trial court erred in
granting summary judgment in favor of [the LLC].” Papageorge v. Banks, 81
A.3d 311, 319 (D.C. 2013) (citing Onyeoziri v. Spivok, 44 A.3d 279, 283 (D.C.
2012)). Our analysis is guided by the following legal principles.
Generally, under bankruptcy proceedings, the Bankruptcy Trustee “is the
real party in interest, and is the only party with standing to prosecute causes of
action belonging to the estate once the bankruptcy petition has been filed.” Moses
v. Howard Univ. Hosp., 606 F.3d 789, 794 (D.C. Cir. 2010) (internal quotation
marks and citation omitted). Nevertheless, a bankruptcy trustee has the discretion
to choose one of three actions with respect to a debtor‟s cause of action: “(1)
intervene and assume prosecution as trustee, (2) consent to prosecution by the
debtor for the benefit of the estate, or (3) decline prosecution.” Detrick v.
Panalpina, Inc., 108 F.3d 529, 535 (4th Cir. 1997) (citations omitted). “[A]ny
unliquidated lawsuits initiated by a debtor prepetition (or that could have been
initiated by the debtor prepetition) become part of the bankruptcy estate subject to
the sole direction and control of the trustee, unless exempted or abandoned or
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otherwise revested in the debtor.” In re Bailey, 306 B.R. 391, 392 (Bankr. D.D.C.
2004). Although a bankruptcy trustee may abandon or divest all of the bankruptcy
estate‟s interest in property, causing the property to revert to the debtor,
abandonment requires a formal process – notice and hearing. 11 U.S.C. § 554 (a)
(2012); Midlantic Nat’l Bank v. New Jersey Dep’t of Envtl. Prot., 474 U.S. 494,
496 (1986).
“[T]he Bankruptcy Code and Rules impose upon bankruptcy debtors an
express, affirmative duty to disclose all assets, including contingent and
unliquidated claims.” In re Coastal Plains, Inc., 179 F.3d 197, 207-08 (5th Cir.
1999) (citation omitted). “The debtor need not know all the facts or even the legal
basis for the cause of action; rather, if the debtor has enough information . . . to
suggest that it may have a possible cause of action, then that is a known cause of
action such that it must be disclosed.” Id. at 208 (internal quotation marks and
citations omitted).
“Judicial estoppel is an „equitable doctrine‟ invoked at a court‟s discretion to
prevent „improper use of judicial machinery.‟” Hardy v. United States, 988 A.2d
950, 964 (D.C. 2010) (quoting New Hampshire v. Maine, 532 U.S. 742, 750
(2001)); see also, e.g., Moses, supra, 606 F.3d at 797 (“[A] majority of the circuits
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that have addressed the issue apply the abuse of discretion standard.” (internal
quotation marks and alterations omitted)). “The doctrine protects the integrity of
the bankruptcy system, and is meant to prevent parties from hiding causes of
actions during bankruptcy proceedings, thereby obtaining a valuable benefit in the
discharge of . . . debts, and then asserting [the causes of action] in order to win a
second time.” Robinson v. District of Columbia, No. 13-1297, 2014 U.S. Dist.
LEXIS 10749, at *10 (D.D.C. Jan. 29, 2014) (alterations in original) (internal
quotation marks and citations omitted).
We generally consider three factors in deciding whether to apply judicial
estoppel:
First, [whether] a party‟s later position . . . [is] clearly
inconsistent with its earlier position. Second, . . .
whether the party has succeeded in persuading a court to
accept the party‟s earlier position, so that judicial
acceptance of an inconsistent position in a later
proceeding would create the perception that either the
first or the second court was misled . . . . [T]hird[,] . . .
whether the party seeking to assert an inconsistent
position would derive an unfair advantage or impose an
unfair detriment on the opposing party if not estopped.
Ward v. Wells Fargo Bank, N.A., 89 A.3d 115, 127 (D.C. 2014) (alterations in
original) (quoting Mason v. United States, 956 A.2d 63, 66 (D.C. 2008)).
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In light of the applicable legal principles, we are not persuaded by Mr.
Atkins‟ arguments. Our review of the record indicates that no genuine issue as to
whether the Bankruptcy Trustee abandoned Mr. Atkins‟ cause of action was ever
presented to the trial court for decision, and the issue simply was not addressed, as
Mr. Atkins appears to recognize in his reply brief. As the trial court said in its
order of September 4, 2013, Mr. Atkins cited to abandonment cases that “are not
on point.” Moreover, the Bankruptcy Trustee‟s communications to Mr. Atkins‟
attorney, dated May 14, August 16, and August 20, 2013, clearly indicate that he
had not “abandoned” the personal injury cause of action (and could not do so
without the authority of the bankruptcy court, following notice and hearing, see
Midlantic Nat’l Bank, supra, 474 U.S. at 496). In addition, the Bankruptcy Trustee
stated that Mr. Atkins “owns the cause of action” up to the amount of $23,500 and
anything recovered in litigation above that amount belonged to the bankruptcy
estate, and that the Trustee would not become a party to the lawsuit. The trial
court reiterated in its September 4, 2013, order that, consistent with Detrick, supra,
and consistent with the position taken by Mr. Atkins in the trial court, “the
Bankruptcy Trustee made a deliberate decision to cede litigation to [Mr. Atkins]
and only retain a right to any potential recovery after costs and a $23,500
exemption.” Furthermore, the record does not support Mr. Atkins‟ apparent
insistence on appeal that the trial court‟s orders should have recognized that Mr.
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Atkins took the cause of action “as assignee of the estate, not as debtor,” and thus,
“the Trustee . . . exercised his right to appoint a representative to bring the claim on
behalf of the Trustee and the bankruptcy estate.” We see nothing in the record
showing that the bankruptcy court authorized Mr. Atkins to proceed as “assignee
of the estate,” instead of as a debtor with respect to his $23,500 personal injury
cause of action.
Finally, we reject Mr. Atkins‟ judicial estoppel contention. By attempting to
position himself as an actor for the Bankruptcy Trustee, he seeks to deflect
attention from the trial court‟s conclusion that he is judicially estopped from
proceeding with his personal injury cause of action. We are satisfied that the trial
court correctly applied the judicial estoppel doctrine in its extensive and thoughtful
orders in this case. The court determined, as indicated above, that all three
requirements of judicial estoppel were satisfied and we discern no abuse of
discretion. See Hardy, supra, 988 A.2d at 964. Before he filed for bankruptcy,
Mr. Atkins knew that the LLC was a substantial creditor and that he had a potential
personal injury cause of action against the LLC. Yet, he did not include this
potential claim on his Schedule C bankruptcy form. After he filed his personal
injury lawsuit in the trial court, he waited for approximately one year before
moving to reopen his bankruptcy proceeding in March 2013 to amend his Schedule
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C, even though as early as October 4, 2012, the LLC had asserted as undisputed
fact that he failed to list his personal injury cause of action, and despite the fact that
he had “an express, affirmative duty” to disclose all potential claims. In re Coastal
Plains, supra, 179 F.3d at 207-08. In addition, Mr. Atkins‟ effort to convince this
court that the trial court improperly applied the judicial estoppel doctrine because it
“harms” his creditors is unavailing. By not listing (and thus hiding) his potential
personal injury claim on his Schedule C, and obtaining a valuable benefit for
himself by successfully discharging his substantial debt to his major creditor, the
LLC, Mr. Atkins‟ own actions disadvantaged his creditors, not the application of
judicial estoppel against him. See Robinson, supra, 2014 U.S. Dist. LEXIS 10749,
at *10; see also Hardy, supra, 988 A.2d at 964.
Accordingly, for the foregoing reasons, we affirm the judgment of the trial
court.
So ordered.