Mcclincy Brothers Floor Coverings Inc. v. Eric Zubel ( 2019 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
McCLINCY BROTHERS FLOOR )
COVERING INC. and TIM McCLINCY, ) No. 78283-5-I
)
Appellants, ) DIVISION ONE
)
v. )
)
ERIC ZUBEL and his marital community;) UNPUBLISHED OPINION
and ERIC ZUBEL, P.C., )
) FILED: August 5, 2019
Respondents.
SMITH, J. — As a general rule, if a bankruptcy debtor fails to report a
cause of action in bankruptcy and then obtains a discharge or confirmation, a trial
court may apply judicial estoppelto bar the action. In 2017, McClincy Brothers
Floor Covering Inc. (company) and its owner, Tim McClincy (together the
McClincy parties) sued their former attorney, Eric Zubel, for malpractice related
to Zubel’s representation of the McClincy parties in a 2013 lawsuit. Because
McClincy did not disclose his malpractice claims during his intervening
bankruptcy and because he has not established that any exception to the general
rule applies here, the trial court did not err when it dismissed McClincy’s claims.
But the company is a separate legal entity from McClincy, and Zubel has not
established that the company’s separate legal entity status should be ignored.
Therefore, the trial court did err by dismissing the company’s claims against
Zubel solely because McClincy is the company’s sole owner. We affirm in part,
reverse in part, and remand for further proceedings.
No. 78283-5-1/2
FACTS
In 2013, the company sued its former clients, Trish and Collin Carpenter,
and a former project manager, Randall Brooks (underlying lawsuit). The
Carpenters filed a third party complaint against McClincy. Zubel represented
both the company and McClincy in the underlying lawsuit until September 2014,
when the McClincy parties terminated Zubel and hired a new attorney.
Brooks and the Carpenters prevailed in the underlying lawsuit.
Specifically, the court dismissed the company’s claims in their entirety and
entered judgment against the McClincy parties in February 2015. Some
components of the judgment were entered against the company and McClincy
individually, while others were entered against the company and McClincy jointly
and severally.
The McClincy parties appealed the judgment to this court. While that
appeal was pending, and after attempts to negotiate a stay of the judgment were
unsuccessful, McClincy (but not the company) filed a voluntary chapter 11
bankruptcy in January 2016. In the section of McClincy’s bankruptcy schedules
asking whether he had any “[c]laims against third parties, whether or not you
have filed a lawsuit or made a demand for payment,” McClincy responded no.
McClincy also responded no to the section of his schedules directing him to list
any “[o]ther contingent and unliquidated cLaims of every nature, including
counterclaims of the debtor and rights to set off claims.” McClincy later amended
his schedules to list the then-pending appeal of the underlying lawsuit as well as
a “Bad Faith/Insurance Coverage Claim.” But his amended schedules still
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No. 78283-5-1/3
responded no when asked to list any other “contingent and unliquidated claims of
every nature, including counterclaims . . . and rights to set off claims.”
In his schedule of creditors with unsecured claims, McClincy listed Zubel’s
claim for fees arising out of the underlying lawsuit and indicated that the claim
was disputed.1 Zubel timely filed a proof of claim on March 4, 2016, indicating
that the amount of his claim as of that date was $96,954.24. McClincy did not
object to Zubel’s proof of claim.
On April 28, 2016, McClincy filed a First Amended Disclosure Statement
(disclosure statement) and a proposed First Amended Plan of Reorganization
(plan). The purpose of the disclosure statement was to explain the proposed
plan and provide creditors with material needed to decide whether to vote to
accept the plan. The disclosure statement explained how the proposed plan
classified each creditor’s claim into 1 of 10 classes. Zubel’s claim was classified
as part of class 10, the “Allowed General Unsecured Claims.” The disclosure
statement also summarized how the claims within each class would be treated
under the proposed plan and whether each class would be impaired or
unimpaired by the plan.2 As relevant to Zubel’s claim, class 10 claims were
impaired under the proposed plan. Class 8, which consisted solely of the
Carpenters’ and Brooks’ claims arising from the judgment in the underlying
1 Under Fed. R. Bankr. P. Rule 3003(c)(2), a creditor whose claim is
scheduled as disputed must timely file a proof of claim to be treated as a creditor
with respect to that claim for purposes of voting and distribution.
2 Generally, a class of claims is “impaired” under a plan if the plan alters
the legal, equitable, or contractual rights of the holder of any claim within the
class. 11 U.S.C. § 1124.
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No. 78283-5-1/4
lawsuit, was the only other impaired class.
Class 10, including Zubel, voted to accept the proposed plan, but class 8
voted to reject it. Objections to confirmation of the plan were later resolved in a
Second Amended Plan of Reorganization, and on June 29, 2016, the bankruptcy
court confirmed that plan. The bankruptcy court later approved certain
postconfirmation modifications to the plan and confirmed a Fourth Amended Plan
of Reorganization (confirmed plan).
On July21, 2017, the McClincy parties filed this malpractice lawsuit
against Zubel. Zubel moved for summary judgment, arguing that the McClincy
parties’ claims were barred (1) by judicial estoppel because McClincy did not
disclose them as potential assets in his bankruptcy case and (2) by res judicata
because McClincy did not object to Zubel’s proof of claim.
The McClincy parties opposed the motion, arguing among other things
that (1) Zubel failed to establish that the elements of judicial estoppel had been
satisfied; (2) Zubel’s judicial estoppel theory did not apply to chapter 11, as
opposed to chapter 7, bankruptcy cases; (3) judicial estoppel could not apply to
the company; (4) res judicata was inapplicable because McClincy marked
Zubel’s claim as “disputed” in his bankruptcy schedules; and (5) the trial court
should impose CR 11 sanctions against Zubel’s counsel for filing “a summary
judgment motion with no evidence and no authority.” In reply, Zubel submitted a
declaration from Charles Robinson, a bankruptcy attorney who opined among
other things that McClincy could not have obtained plan confirmation without
Zubel’s vote. Additionally, Zubel argued for the first time in his reply that
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No. 78283-5-1/5
because McClincy did not “specifically and unequivocally” retain the right under
the confirmed plan to pursue his malpractice claim against Zubel, McCIincy
lacked standing to bring the claim, and the trial court lacked jurisdiction to hear it.
The trial court granted Zubel’s motion for summary judgment. The
McClincy parties then moved for reconsideration. They argued that the trial court
erred by considering the Robinson declaration and reinforced their arguments
regarding judicial estoppel and res judicata. The trial court denied
reconsideration but indicated in its order that it did not consider Robinson’s
opinion that McClincy lacked standing. The McClincy parties appeal.
ANALYSIS
Judicial Esto~pel of McClincy’s Claims
The McClincy parties argue that the trial court erred by dismissing
McClincy’s claims on judicial estoppel grounds. We disagree.
“‘Judicial estoppel is an equitable doctrine that precludes a party from
asserting one position in a court proceeding and later seeking an advantage by
taking a clearly inconsistent position.” Arkison v. Ethan Allen, Inc., 160 Wash. 2d
535, 538, 160 P.3d 13 (2007) (quoting Bartley-Williams v. Kendall, 134 Wash. App.
95, 98, 138 P.3d 1103 (2006)). The doctrine is not designed to protect litigants.
Chonah v. Coastal Vills. Pollock, LLC, 5 Wash. App. 2d 139, 147, 425 P.3d 895
(2018), review denied, 192 Wash. 2d 1012 (2019). Rather, “[t]he doctrine seeks ‘to
preserve respect for judicial proceedings,’ and ‘to avoid inconsistency, duplicity,
and . . . waste of time.” Arkison, 160 Wash. 2d at 538 (alterations in original)
(internal quotation marks omitted) (quoting Cunningham v. Reliable Concrete
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No. 78283-5-1/6
Pumping, Inc., 126 Wash. App. 222, 225, 108 P.3d 147 (2005)).
In Arkison, our Supreme Court set forth the following three factors to
“guide a trial court’s determination of whether to apply the judicial estoppel
doctrine”:
(1) whether “a party’s later position” is “clearly inconsistent with its
earlier position”; (2) whether “judicial acceptance of an inconsistent
position in a later proceeding would create ‘the perception that
either the first or the second court was misled”; and (3) “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.”
Arkison, 160 Wash. 2d at 538-39 (quoting New Hampshire v. Maine, 532 U.S. 742,
750-51, 121 5. Ct. 1808, 149 L. Ed. 2d 968 (2001)).
The Arkison factors are not an “exhaustive formula,” and additional
considerations may guide a court’s decision whether to apply the judicial
estoppel doctrine. Arkison, 160 Wash. 2d at 539 (quoting New Hampshire, 532 U.S.
at 751). For example, “[a]pplication of the doctrine may be inappropriate ‘when a
party’s prior position was based on inadvertence or mistake.” Arkison, 160
Wash. 2d at 539 (internal quotation marks omitted) (quoting New Hampshire, 532
U.S. at 753). Furthermore, “[a]s a general rule, if a debtor in a bankruptcy
proceeding fails to report a cause of action and obtains a discharge or
confirmation, a trial court may apply judicial estoppel to bar the action.” Arp v.
Riley, 192 Wash. App. 85, 92, 366 P.3d 946 (201 5). “This prevents a debtor from
protecting the asset from creditors by representing to the bankruptcy court that
no claim exists and then asserting in another court that the claim does exist.”
~, 192 Wash. App. at 92.
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No. 78283-5-117
In short, judicial estoppel is flexible and fact-based. Chonah, 5 Wash. App.
2d at 148. “[C]ourts must apply [it] at their own discretion; they are not bound to
apply it but rather must determine on a case-by-case basis if applying the
doctrine is appropriate.” ~, 192 Wash. App. at 92. To that end, we review a trial
court’s decision to apply judicial estoppel for abuse of discretion. Miller v.
Campbell, 164 Wash. 2d 529, 536, 192 P.3d 352 (2008). “A decision constitutes an
abuse of discretion when it is manifestly unreasonable or based on untenable
grounds or reasons.” Gosney v. Fireman’s Fund Ins. Co., 3 Wash. App. 2d 828,
880, 419 P.3d 447, review denied, 191 Wash. 2d 1017 (2018). We look to federal
cases as persuasive when determining whether judicial estoppel bars a claim
that a debtor failed to disclose in bankruptcy. See, ~ ~, 192 Wash. App. at 92
(citing Ah Quin v. County of Kauai Dep’t of Transp., 733 F.3d 267, 271 (9th Cir.
2013)); Cunninciham, 126 Wash. App. at 227 & n.10 (citing numerous federal
cases).
Here, the McClincy parties concede for purposes of their appeal that the
first of the three Arkison factors is satisfied. Thus, the only question before us is
whether, based on the remaining two Arkison factors viewed in light of relevant
bankruptcy-related considerations, the trial court abused its discretion by
applying judicial estoppel to bar McClincy’s claims. For the reasons discussed
below, we conclude that it did not.
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No. 78283-5-1/8
The Second Arkison Factor: Judicial Acceptance
As discussed, the second Arkison factor directs us to consider whether
‘“judicial acceptance of an inconsistent position in a later proceeding would
create the perception that either the first or the second court was misled.”
Arkison, 160 Wash. 2d at 539. Under this factor, “[ajcceptance of an initial position
is a precondition to the application of judicial estoppel.” Taylor v. Bell, 185 Wn.
App. 270, 284, 340 P.3d 951 (2014). In the bankruptcy context, “[t]he bankruptcy
court may ‘accept’ the debtor’s assertions by relying on the debtor’s
nondisclosure of potential claims in many. . . ways,” such as by confirming a
plan. Hamilton, 270 F.3d at 784.
Here, the record reflects that McClincy had knowledge of a potential
malpractice claim against Zubel before McClincy filed bankruptcy. Specifically,
McClincy, through counsel, threatened—once in January 2015, and again in
November 2015—to counterclaim for malpractice if Zubel attempted to collect his
fees. Furthermore, once judgment was entered in the underlying lawsuit,
McClincy was, as a matter of law, charged with “knowledge of all the facts which
may give rise to his . . . cause of action for negligent representation.” Richardson
v. Denend, 59 Wash. App. 92, 96-97, 795 P.2d 1192 (1990). He also had an
affirmative duty to disclose that cause of action to the bankruptcy court.
Cunnincjham, 126 Wash. App. at 229-30. Indeed, “[t}he debtor’s duty to disclose
potential claims as assets does not end when the debtor files schedules, but
instead continues for the duration of the bankruptcy proceeding.” Hamilton, 270
F.3d at 785; ~ FED. R. BANKR. P. 1009(a) (Schedules may be amended as
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No. 78283-5-1/9
a matter of course before the case is closed.). “The continuing nature of the duty
to assure accurate schedules of assets is fundamental because the viability of
the system of voluntary bankruptcy depends upon full, candid, and complete
disclosure by debtors of their financial affairs.” In re Searles, 317 B.R. 368, 378
(B.A.P. 9th Cir. 2004), affd, 212 F. App’x 589 (9th Cir. 2006).
Nevertheless, McClincy did not disclose a potential malpractice claim in
his original bankruptcy schedules filed in January 2016. He also did not disclose
the claim in his amended bankruptcy schedules, nor does the claim appear as an
asset in the disclosure statement. And there is no indication in the record that
McClincy ever amended his schedules to include his claim against Zubel.
Because the bankruptcy court “base[s its] actions on the disclosure statements
and schedules,” the bankruptcy court, by confirming the plan, accepted that
McClincy had no claims against Zubel. See Hamilton, 270 F.3d at 784. And if
the trial court were to permit McClincy’s malpractice claim to move forward, it
would create the perception that either it or the bankruptcy court was misled.
Therefore, the judicial acceptance factor is satisfied.
The McClincy parties disagree, arguing that Zubel failed to prove that the
bankruptcy court accepted McClincy’s representation that he had no malpractice
claim against Zubel. They rely on Taylor to support their argument, but their
reliance is misplaced. In that case, Reed Taylor sued an Idaho law firm for
malpractice. Taylor, 185 Wash. App. at 276-77. The Idaho court dismissed
Taylor’s claim after it concluded there was no attorney-client relationship
between Taylor and the Idaho firm. Taylor, 185 Wash. App. at 277. Taylor then
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No. 78283-5-1/10
sued his Washington attorneys, Cairncross & Hempelmann PS (Cairncross), in
King County Superior Court. Taylor, 185 Wash. App. at 278. The court dismissed
Taylor’s claims on judicial estoppel grounds, finding that Taylor took inconsistent
positions by claiming in the Idaho court that the Idaho attorney was the only one
representing him, and then later claiming in King County Superior Court that
Cairncross represented him. Taylor, 185 Wash. App. at 278-79.
We reversed, observing that Taylor’s earlier position was “undoubtedly
rejected” by the Idaho court when it ruled that there was no attorney-client
relationship between Taylor and the Idaho firm. Taylor, 185 Wash. App. at 283-84.
Put another way, we recognized that where the plaintiff’s initial position is
affirmatively rejected by the first court, there is no risk that another court will be
misled by accepting the plaintiff’s later inconsistent position. But here, there is no
indication that as in Taylor, the bankruptcy court affirmatively rejected McClincy’s
representation that he had no claim against Zubel. Therefore, Taylor is
unpersuasive.
The McClincy parties alsorely on ~ to argue that Zubel’s failure to prove
acceptance is fatal to his judicial estoppel argument. But the claim at issue in
~ was a personal injury claim that arose from a postbankruptcy motor vehicle
accident that the bankruptcy code did not require the debtor to disclose. ~,
192 Wash. App. at 88-89, 98. Here, by contrast, McClincy’s malpractice claim
arose before he filed bankruptcy, and he had an affirmative duty to disclose it.
See Cunningham, 126 Wash. App. at 229-30 (debtor has express, affirmative duty
to disclose all assets). The McClincy parties’ reliance on ~ is misplaced.
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No. 78283-5-Ill I
The McClincy parties next argue that the judicial acceptance factor is not
satisfied unless Zubel proves “‘that disclosure would have changed the outcome
of the bankruptcy.” They rely on Gosney to support their argument, but
Gosney’s judicial estoppel analysis is distinguishable because in that case, as in
~, all of the debtor-plaintiff’s damages arose postbankruptcy. Gosney, 3 Wn.
App. 2d at 884. We did observe in Gosney that the defendant’s “failure to
produce any evidence that disclosure would have changed the outcome of the
bankruptcy proceedings precludes application of judicial estoppel.” Gosney, 3
Wash. App. 2d at 884. But properly read in the context of Gosney’s facts, our
statement merely suggests that when a defendant argues that judicial estoppel
bars a debtor-plaintiff’s postbankruptcy claims, which the debtor-plaintiff is not
required to disclose, the defendant must produce some evidence that disclosure
would have changed the outcome of the bankruptcy. That statement does not
apply here because as discussed, McClincy’s claims arose prebankruptcy and he
was required to disclose them.
The McClincy parties next rely on Haslett v. Planck, 140 Wash. App. 660,
166 P.3d 866 (2007), to argue that a bankruptcy court does not necessarily
accept the debtor’s prior position by confirming a bankruptcy plan. But in Haslett,
the debtors amended their bankruptcy schedules to include the claim at issue,
and their chapter 13 plan was also modified so that any recovery would benefit
creditors. Haslett, 140 Wash. App. at 666-67. Indeed, this fact was “[cjentral” to
the debtors’ argument that the bankruptcy court did not “accept” their prior
position. Haslett, 140 Wash. App. at 666-67. Here, by contrast, there is no
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No. 78283-5-1112
indication that McClincy amended his schedules to include a malpractice claim
against Zubel or that the confirmed plan has been modified to ensure that any
proceeds of the claim will benefit creditors. Haslett is unpersuasive.
As a final matter, the McClincy parties assert that “[a] bankruptcy court’s
acceptance has been implied on/y when the court granted a no asset
discharge.”3 They cite to two cases, Harris v. Fortin, 183 Wash. App. 522, 333 P.3d
556 (2014), and Cunninçjham, in which we have applied judicial estoppel to bar
undisclosed claims following a no-asset discharge. But that a no-asset discharge
may be sufficient to satisfy the judicial acceptance factor does not mean that a
no-asset discharge is necessary to satisfy it. Indeed, the McClincy parties cite no
authority to support the proposition that a no-asset discharge is a prerequisite to
judicial estoppel. Therefore, their argument fails.
The Third Arkison Factor: Unfair Advantage or Detriment
The third and final Arkison factor directs us to consider “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.” Arkison, 160
Wash. 2d at 539 (quoting New Hampshire, 532 U.S. at 750-51).
Here, McClincy would obtain an unfair advantage if not estopped.
Specifically, despite the fact that McClincy did not comply with his duty to fully
disclose his assets to the bankruptcy court and to his creditors, he obtained
confirmation of a plan that gave him more time to repay his class 8 and class 10
creditors. Therefore, the third Arkison factor is satisfied. Ct Ah Quin, 733 F.3d
~ (Emphasis added.)
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No. 78283-5-1/13
at 271 (explaining that plaintiff-debtors who later pursue undisclosed claims
obtain an unfair advantage by obtaining discharge or plan confirmation without
allowing creditors to learn of pending or soon-to-be-filed lawsuits).
The McClincy parties argue that “[w]hen the moving party fails to prove
that the debtor plaintiff obtained a benefit from the failure to disclose a claim,
judicial estoppel is improper.” But none of the five cases that the McClincy
parties cite to support this argument are persuasive. Two of them do not address
judicial estoppel in the postbankruptcy context. See Nw. Cascade, Inc. v. Unique
Constr., Inc., 187 Wash. App. 685, 701 n.9, 351 P.3d 172 (2015) (inconsistent
positions presented to two divisions of the Court of Appeals); Mercer Island Sch.
Dist. v. Office of Superintendent of Pub. Instruction, 186 Wash. App. 939, 972 &
n.25, 347 P.3d 924 (2015) (inconsistent positions presented to administrative law
judge, superior court, and this court). And of the remaining three, two are
distinguishable because the claims at issue arose postbankruptcy and the debtor
had no duty to disclose them. ~ Johnson v. Si-Cor Inc., 107 Wash. App. 902,
911-12, 28 P.3d 832 (2001); ~, 192 Wash. App. at 89, 98. In the final case, Miller
v. Campbell, the bankruptcy court reopened the debtor-plaintiff’s bankruptcy case
and appointed a trustee to administer a previously undisclosed childhood sexual
abuse claim for the benefit of the estate. Miller, 164 Wash. 2d at 534-35. Our
Supreme Court held that judicial estoppel would not apply under those
circumstances, i.e., when the bankruptcy trustee has been substituted as the real
party in interest to pursue the claim for the benefit of the bankruptcy estate.
Miller, 164 Wash. 2d at 543. But here, there is no indication that McClincy is
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No. 78283-5-1/14
pursuing his claim other than on his own behalf. Therefore, the McClincy parties’
argument is unpersuasive.
In short, the trial court did not abuse its discretion by applying judicial
estoppel to bar claims that McClincy did not disclose to the bankruptcy court.
Indeed, McClincy’s arguments largely ignore that judicial estoppel in this context
is the “general rule.” ~, 192 Wash. App. at 92; see also McFarling v. Evaneski,
141 Wn. App: 400, 403, 171 P.3d 497 (2007) (observing that judicial estoppel “is
particularly well suited to protect the integrity of the bankruptcy process”); ~
Quin, 733 F.3d 271 (characterizing judicial estoppel of previously undisclosed
claims as the “basic default rule” in the bankruptcy context). McClincy’s
arguments also fail to acknowledge that this general rule can be invoked in the
bankruptcy context, “[i]ndependent of unfair advantage from inconsistent
positions,” “out of ‘general consideration of the orderly administration of justice
and regard for the dignity of judicial proceedings;’ or to ‘protect against a litigant
playing fast and loose with the courts.” In re Associated Vintage Grg., Inc., 283
B.R. 549, 566 (B.A.P. 9th Cir. 2002) (quoting Hamilton, 270 F.3d at 782, 785;
Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990)).
Of course, there are exceptions to the general rule. For example, as
already discussed, Washington courts have declined to apply judicial estoppel to
claims that arise postbankruptcy—as in ~ and Gosney—and when the claim at
issue is being pursued for the benefit of creditors—as in Haslett and Miller.
Washington courts have also declined to apply judicial estoppel when a debtor’s
failure to disclose his claim is the result of mistake or inadvertence. See, ~
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No. 78283-5-1115
Chonah (holding that judicial estoppel would not bar debtor’s claim where
debtor’s attorney misunderstood the nature of the claim and mischaracterized it
in the debtor’s schedules, and debtor took immediate action to correct the error
once known). But none of these exceptions are present in this case. Therefore,
considering the Arkison factors in light of the need to protect the integrity of the
bankruptcy process, the trial court did not abuse its discretion by applying the
general rule here.
As a final matter, the McClincy parties contend that Zubel belatedly
argued for the first time in his reply below that (1) he believed, and relied on his
belief, that McClincy would not be pursuing a malpractice claim when he decided
to vote in favor of the proposed plan; (2) McClincy lacked standing to pursue a
malpractice claim; and (3) the trial court lacked jurisdiction to hear McClincy’s
malpractice claim. The McClincy parties are correct that the trial court erred to
the extent it considered these belated arguments, and Zubel does not argue
otherwise. But this court may affirm summary judgment on any basis supported
by the record. Bavand v. OneWest Bank, 196 Wash. App. 813, 825, 385 P.3d 233
(2016). Here, the record—even without considering Zubel’s belated
arguments—supports the trial court’s decision to dismiss McClincy’s claim on
judicial estoppel grounds. Therefore, reversal is not required.
Judicial Estoppel of the Company’s Claims
The McClincy parties argue that even if the trial court correctly applied
judicial estoppel to bar McClincy’s claims against Zubel, it abused its discretion
by applying judicial estoppel to the company’s claims. We agree.
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No. 78283-5-1/16
Gosney is instructive. In Gosney, the trial court concluded that a
bankruptcy debtor’s undisclosed claims were judicially estopped, and then
extended judicial estoppel to the claims of Pizza Time (PT), a company in which
the debtor was the sole shareholder. Gosney, 3 Wash. App. 2d at 882-83. We
reversed, characterizing the trial court’s application of judicial estoppel to PT as
“entirely unwarranted.” Gosney, 3 Wash. App. 2d at 885. Specifically, we
observed that PT was “a separate legal entity that never filed a bankruptcy
petition” and that “[t]he trial court made no findings of alter ego, commingling of
assets, or a failure to adhere to corporate formalities, or any other finding that
could support a ruling extending judicial estoppel to PT.” Gosney, 3 Wash. App. 2d
at 882, 885. Rather, the trial court simply noted that the debtor was PT’s sole
shareholder. Gosney, 3 Wash. App. 2d at 883.
Here, as in Gosney, the company is a separate legal entity, and there is
no indication in the record that it ever filed bankruptcy. And, as in Gosney, the
trial court made no findings of alter ego, commingling of assets, failure to follow
corporate formalities, or any other facts to support a ruling extending judicial
estoppel to the company. Furthermore, Zubel’s argument below was premised
entirely on the fact that McClincy is the company’s sole owner and that therefore
McClincy and the company are “privies.” In other words, as in Gosney, the trial
court erred by extending judicial estoppel to the company based solely on the
fact that McClincy is the company’s sole owner.
Zubel argues that Gosney is distinguishable because it was decided after
a jury trial, whereas this case was decided on summary judgment. But he does
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No. 78283-5-1/17
not explain why this distinction is relevant—much less why it weighs in his favor.
Therefore, his argument fails.
Zubel next asserts that we should follow decisions from other jurisdictions
that have applied judicial estoppel both to parties who made inconsistent claims
in prior litigation and to their “privies.” But the cases he cites are not binding in
Washington, and we decline to consider them.
Zubel also argues that the company should be estopped because by filing
bankruptcy, “McClincy stayed collection efforts against both himself and [the
company].” This argument is raised for the first time on appeal and is
unsupported by citation to any authority. Therefore, we reject it. See Silverhawk,
LLC v. KevBank Nat’l Ass’n, 165 Wash. App. 258, 265, 268 P.3d 958 (2011) (“An
argument neither pleaded nor argued to the trial court cannot be raised for the
first time on appeal.”); Cowiche Canyon Conservancy v. Bosley, 118 Wash. 2d 801,
809, 828 P.2d 549 (1992) (Arguments must be supported by authority.).
Finally, Zubel attempts to “flesh out” his privity argument by pointing out
that (1) McClincy and the company are joint judgment debtors in the underlying
lawsuit, (2) McClincy is employed by the company, and (3) McClincy and the
company are coplaintiffs in this suit. But none of these facts are sufficient to
extend judicial estoppel to the company. First, the record does not reflect the
reasons that McClincy and the company are joint judgment debtors—much less
whether those reasons support disregarding the company’s separate legal entity
status. Second, Zubel cites no authority supporting his argument that judicial
estoppel should extend to an employer based on the bankruptcy-related
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No. 78283-5-1/18
omissions of its employee. He cites Ensley v. Pitcher, but that case is
distinguishable because it turned on the fact that an employer may be vicariously
liable for an employee’s torts. 152 Wash. App. 891, 903, 222 P.3d 99 (2009). And
finally, the fact that McClincy and the company are coplaintiffs in this suit is
unpersuasive because the company was a distinct client of Zubel’s and will need
to prove its own malpractice claims against Zubel regardless of its relationship to
McClincy. ~ RPC 1.13(a) (lawyer retained by an organization represents the
organization); RPC 1.13(g) (lawyer representing an organization may also
represent an individual constituent subject to RPC 1 .7 regarding conflicts of
interest). Therefore, Zubel’s additional privity-based arguments fail.
Res Judicata
The McClincy parties argue that the trial court erred to the extent that it
applied res judicata to dismiss their claims. Because we conclude that
McClincy’s claims were properly dismissed on judicial estoppel grounds, we do
not decide whether his claims were also properly dismissed on res judicata
grounds. See Wash. State Farm Bureau Fed’n v. Greqoire, 162 Wash. 2d 284, 307,
174 P.3d 1142 (2007) (“‘Principles of judicial restraint dictate that if resolution of
an issue effectively disposes of a case, we should resolve the case on that basis
without reaching any other issues that might be presented.” (internal quotation
marks omitted) (quoting Hayden v. Mut. of Enumclaw Ins. Co., 141 Wash. 2d 55, 68,
I P.3d 1167 (2000))). But assuming without deciding that McClincy’s claims are
barred by res judicata, application of res judicata to the company’s claims would
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No. 78283-5-1/19
be error for the same reasons that application of judicial estoppel to the company
was error.
Admission of Robinson Declaration
The McClincy parties argue that the trial court committed reversible error
by considering the Robinson declaration. We disagree.
In his declaration, Robinson explains how the bankruptcy code applies to
McClincy’s bankruptcy case and opines that (1) McClincy lacks standing to bring
claims against Zubel and (2) McClincy could not have obtained plan confirmation
without Zubel’s vote. In short, the Robinson declaration contains a number of
legal conclusions regarding the application of bankruptcy law to McClincy’s
bankruptcy case. Ordinarily, we would presume that the trial court ignored these
improper conclusions on summary judgment. See Orion Corp. v. State, 103
Wash. 2d 441, 462, 693 P.2d 1369 (1985) (on summary judgment, court is
presumed to ignore improper legal conclusions contained in expert affidavit); ~
also Cano-Garcia v. Kinci County, 168 Wash. App. 223, 249, 277 P.3d 34 (2012)
(“[Tjhat inadmissible evidence was presented to the trial court, without more,
does not require reversal.”).
Here, however, the trial court stated that in its ruling on reconsideration, it
disregarded only Robinson’s opinion that McClincy lacked standing to bring
claims against Zubel. This statement suggests that the trial court did not ignore
the remainder of the improper legal conclusions in the Robinson declaration. In
other words, we cannot presume the trial court ignored the legal conclusions in
the Robinson declaration.
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Nevertheless, reversal is not required. As discussed, this court can affirm
summary judgment on any basis supported by the record. Bavand, 196 Wn.
App. at 825. Here, even without considering any of the legal conclusions in the
Robinson declaration, the record supports the trial court’s application of judicial
estoppel to McClincy’s claims. Therefore, even assuming the trial court erred by
considering the Robinson declaration, that error does not require reversal.
The McClincy parties chiefly rely on State v. Clausinci, 147 Wash. 2d 620, 56
P.3d 550 (2002), to argue that the trial court’s admission of the Robinson
declaration requires reversal. But in Clausing, the legal opinion at issue was
admitted during a jury trial. Clausing, 147 Wash. 2d at 628. Here, the Robinson
declaration was admitted on summary judgment where, as discussed, this court
may affirm on any basis supported by the record. Therefore, Claus inç~ is
distinguishable and does not control.
Sanctions
The McClincy parties argue that the trial court erred by declining to impose
CR 11 sanctions on Zubel’s counsel. We disagree.
CR 11(a) provides that by signing a motion, an attorney certifies that to the
best of the attorney’s knowledge, information, and belief after reasonable inquiry,
the motion (1) “is well grounded in fact,” (2) “is warranted by existing law or a
good faith argument for the extension, modification, or reversal of existing law or
the establishment of new law,” (3) “is not interposed for any improper purpose,”
and (4) contains only denials of factual contentions that “are warranted on the
evidence.” If a motion is signed in violation of CR 11(a), the court may impose
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No. 78283-5-1/21
sanctions on the person who signed it. CR 11(a). This court reviews a trial
court’s decision to deny sanctions for an abuse of discretion. Wash. State
Physicians Ins. Exch. & Ass’n v. Fisons Cow., 122 Wash. 2d 299, 338, 858 P.2d
1054 (1993).
Here, the McClincy parties argued below that sanctions were warranted
because Zubel’s motion for summary judgment was a “motion with no evidence
or authority.” On appeal, the McClincy parties argue, more specifically, “that
Zubel’s motion was frivolous because he presented no evidence that the
bankruptcy court accepted McClincy’s statement or that McClincy obtained an
unfair advantage.” But this argument is unpersuasive because Zubel presented
authority and argument below that judicial estoppel of undisclosed claims is the
default rule in the bankruptcy context and that the default rule applies here.
Therefore, the trial court did not abuse its discretion by denying the McClincy
parties’ request for sanctions.
The McClincy parties next assert that sanctions are warranted because in
Gosney, this court “called the argument to extend judicial estoppel to a plaintiff’s
wholly owned corporation ‘entirely unwarranted.” But because Gosney was not
decided until after the McClincy parties’ claims were dismissed, this argument is
unpersuasive.
Finally, the McClincy parties assert that at oral argument below, they cited
as additional bases for sanctions (1) Zubel’s submission of the Robinson
declaration and (2) Zubel’s new arguments on reply. But because the McClincy
parties did not provide a verbatim report of proceedings, this assertion is
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unsupported by any citation to the record. Therefore, we decline to consider it.
See Christensen v. Munsen, 123 Wash. 2d 234, 247, 867 P.2d 626 (1994)
(declining to consider factual assertion not supported by citations to the record).
Motion for Reconsideration
As a final matter, the McClincy parties argue that the trial court erred by
denying their motion for reconsideration. “Motions for reconsideration are
addressed to the sound discretion of the trial court and a reviewing court will not
reverse a trial court’s ruling absent a showing of manifest abuse of discretion.”
Wilcox v. Lexington Eye Inst., 130 Wash. App. 234, 241, 122 P.3d 729 (2005).
Here, for reasons already discussed, the trial court did not abuse its discretion by
declining to reconsider its dismissal of McClincy’s claims. And because we
reverse the trial court’s dismissal of the company’s claims, we need not consider
whether the trial court erred by not reconsidering that dismissal. ~ Wash.
State Farm Bureau Fed’n, 162 Wash. 2d at 307 (declining to address additional
issues on appeal when resolution of one issue effectively disposed of case).
We affirm the dismissal of McClincy’s claims, reverse the dismissal of the
company’s claims, and remand for further proceedings.
WE CONCUR:
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