Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_04-cv-01862/USCOURTS-azd-2_04-cv-01862-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition For Removal--Other Contract

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The Court will deny the request for oral argument because the parties have submitted

memoranda thoroughly discussing the law and evidence, and the Court concludes that oral

argument will not aid its decision process. See Mahon v. Credit Bur. of Placer County, Inc.,

171 F.3d 1197, 1200 (9th Cir. 1999).

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Darren Wietecha, 

Plaintiff, 

vs.

Dollarhide Financial Group, Inc.,

Massachusetts Mutual Life Ins. Co., CM

Life Ins. Co. and MML Bay State Life

Ins. Co.,

Defendants. 

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No. CV 04-1862-PHX-DGC

ORDER

Defendants Massachusetts Mutual Life Insurance Company, C.M. Life Insurance

Company, and MML Bay State Life Insurance Company (collectively, “MassMutual”) move

for summary judgment. Doc. #47. Defendant Dollarhide Financial Group, Inc.

(“Dollarhide”) joins the motion for summary judgment. Doc. # 48.1

I. Background.

Plaintiff joined Dollarhide, MassMutual’s general agent in Arizona and New Mexico,

as an insurance agent in March 2001. Doc. #47 at 2. The agreement between Dollarhide and

Plaintiff states that nothing in the contract “shall be construed as creating the relationship of

an employer and employee” between the parties. Id. 

Case 2:04-cv-01862-DGC Document 58 Filed 06/28/06 Page 1 of 7
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From May 2003 through August 2003, Plaintiff complained to Dollarhide about

stressors in his life. Id. at 4. Plaintiff states that he was suffering from serious depression

and anxiety, accompanied by physical health problems, Doc. #51 at 15, but he did not take

sick leave or apply for disability, Doc. #47 at 16. On August 7, 2003, Plaintiff was arrested

at work on assault charges and escorted out of the office in front of the Dollarhide staff. Doc.

#47 at 3-4. Dollarhide terminated its relationship with Plaintiff in late August 2003, stating

in a letter to the office (“Office Letter”) that: “[a]ctions by any individual that could tarnish

this organization or MassMutual’s name and image are not acceptable.” Id. Following

Plaintiff’s termination, MassMutual submitted a form to the National Association of

Securities Dealers (“NASD”) that disclosed the reasons for Plaintiff’s termination. Id. at 4.

Plaintiff now brings a claim against Defendants for defamation and violations of the

Family Medical Leave Act (“FMLA”). See Doc. #51. Plaintiff asserts negligence as an

alternative theory of recovery. Id. at 16.

In October 2003, Plaintiff filed a voluntary petition for bankruptcy. Doc. #47 at 7-8.

On his schedule B form, under the section entitled “Other contingent and unliquidated claims

of every nature, including tax refunds, counterclaims of the debtor, and rights to setoff

claims,” Plaintiff listed a “possible claim for wrongful termination against Dollar Hoc (sic)

Financial Group LLC.” Doc. #53 Ex. 17. The bankruptcy trustee requested all information

pertaining to the alleged termination claim, including the employment contract and phone

number of Plaintiff’s direct supervisor. Id. Ex. 30. Plaintiff disclosed a termination letter

(“Termination Letter”) in which Dollarhide mentions MassMutual as an affiliate. Id. Ex. 24.

 Plaintiff failed to disclose the defamation, FMLA, and negligence claims he now asserts in

this Court. Doc. #47 at 5.

The bankruptcy court discharged Plaintiff’s debt on July 29, 2004. Doc. #56 at 3.

Plaintiff filed this lawsuit on August 6, 2004, approximately one week after the conclusion

of his bankruptcy proceeding. Id.

Defendants argue that the doctrine of judicial estoppel bars plaintiffs claims against

MassMutual and Dollarhide. Doc. #47 at 2. The Court agrees.

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II. Discussion.

The doctrine of judicial estoppel protects the integrity of the judicial process by

precluding a party “from gaining an advantage by asserting one position, and then later

seeking an advantage by taking a clearly inconsistent position.” Hamilton v. State Farm Fire

& Cas. Co., 270 F.3d 778, 782 (9th Cir. 2001). Judicial estoppel “is an equitable doctrine

invoked by a court at its discretion.” Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990).

“Federal law governs the application of judicial estoppel in federal courts.” Johnson v.

Oregon Dep’t of Human Res., Rehab. Div., 141 F.3d 1361, 1364 (9th Cir. 1998).

The Supreme Court has listed three factors that may be considered in deciding

whether judicial estoppel should be applied: (1) whether a party’s later position is “clearly

inconsistent” with its earlier position, (2) “whether the party has succeeded in persuading a

court to accept that party’s earlier position,” and (3) whether the party “would derive an

unfair advantage or impose an unfair detriment on the opposing party if not estopped.” New

Hampshire v. Maine, 532 U.S. 742, 750 (2001). These factors are not “inflexible

prerequisites or an exhaustive formula for determining the applicability of judicial estoppel.”

Id. The Ninth Circuit has considered these factors when applying judicial estoppel in a

bankruptcy context. See Hamilton, 270 F.3d at 782-86.

“The Bankruptcy Code and Rules ‘impose upon the bankruptcy debtors an express,

affirmative duty to disclose all assets, including contingent and unliquidated claims.’” Id.

at 785 (quoting In re Coastal Plains, 179 F.3d 197, 207-08 (5th Cir. 1999)) (emphasis in

original). “‘[T]he integrity of the bankruptcy system depends on full and honest disclosure

by debtors of all of their assets.’” Id. (quoting In re Coastal Plains, 179 F.3d at 208). The

debtor’s duty to disclose potential claims is ongoing throughout the bankruptcy proceeding.

Id.

The Ninth Circuit has held that “[i]n the bankruptcy context, a party is judicially

estopped from asserting a cause of action not raised in a reorganization plan or otherwise

mentioned in the debtor’s schedules or disclosure statements.” Id. at 783; see also Hay v.

First Interstate Bank of Kalispell, 978 F.2d 555 (9th Cir. 1992) (invoking judicial estoppel

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to prevent a party from asserting a claim not disclosed in previous bankruptcy proceeding).

Judicial estoppel will be applied if the debtor has enough facts to know that a potential cause

of action exists, but does not amend his bankruptcy schedules or disclosure statements to

include the potential action. Hamilton, 270 F.3d at 784.

The factors identified by the Supreme Court in New Hampshire are present in this

case. First, Plaintiff’s position in this Court is clearly inconsistent with the position taken in

his bankruptcy proceeding. Plaintiff’s bankruptcy filings included a possible wrongful

termination claim against Dollarhide, Doc. #53 Ex. 17, but did not include the defamation,

FMLA, or negligence claims asserted against Dollarhide and MassMutual in this case, Doc.

#56 at 2.

Plaintiff claims that the position asserted in his bankruptcy proceeding is “identical”

to the position taken in this case. Doc. # 51 at 5. He argues that the bankruptcy trustee had

notice of the present claims because Plaintiff included a possible wrongful termination claim

against Dollarhide, saw Dollarhide and MassMutual “as one and the same,” and disclosed

the Termination Letter which mentioned MassMutual. Id. He also asserts that the trustee

investigated the wrongful termination claim. Id. 

Although Plaintiff’s defamation claim arises from events related to his termination at

Dollarhide, the claim is conceptually distinct from a wrongful termination claim and the

evidence does not show that the trustee had notice of the defamation claim. Plaintiff does

not claim to have disclosed to the bankruptcy trustee the evidence relevant to his defamation

claim such as the Office Letter and the NASD form. Plaintiff’s FMLA and alternative

negligence claims are also of a different nature and extent than the wrongful termination

claim, and the information Plaintiff disclosed is not sufficient notice of the claims.

“Regardless, notifying the trustee by mail or otherwise is insufficient to escape judicial

estoppel. . . . [Plaintiff] is required to have amended his disclosure statements and schedules

to provide the requisite notice . . . .” Hamilton 270 F.3d at 784. Plaintiff never did so.

Second, Plaintiff has succeeded in persuading a court to accept his earlier position.

In the bankruptcy context, a discharge of debt constitutes an acceptance by a court of the

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debtor’s position and provides a basis for judicial estoppel. Id.; see also In re Associated

Vintage Group, Inc., 283 B.R. 549, 566 (9th Cir.BAP 2002). In this case, the bankruptcy

court discharged Plaintiff’s debt and terminated the proceeding. Doc. #56 at 3.

Third, Plaintiff would derive an unfair advantage if permitted to proceed with the

claims after his debt has been discharged. “The courts will not permit a debtor to obtain

relief from the bankruptcy court by representing that no claims exist and then subsequently

to assert those claims for his own benefit in a separate proceeding.” Hamilton, 270 F.3d

at785 (citation and quotations omitted); Schertz-Nelson v. AT&T Corp., No. Civ. 99-555-

PHX-SMM, 2003 WL 22047646, at *7 (D.Ariz. July 8, 2003) (finding that debtor “clearly

gained the advantage of discharge of her liabilities by concealing her pending claim”).

Plaintiff argues that judicial estoppel is only an appropriate remedy if the inconsistent

position is asserted in bad faith. Doc. #51 at 4. To support this argument, Plaintiff cites

Ryan Operations G.P v. Santiam-Midwest Lumber Co., 81 F.3d 355, 361 (3d. Cir. 1996),

which stated that an “intent to play fast and loose with the court” must be present for the

application of judicial estoppel. The Third Circuit did not find bad faith in Ryan, noting that

the debtor’s nondisclosed claims were offset by nondisclosed liabilities, creditors would

receive 91% of any recovery, the debtor had authorization to pursue the claims, and

disclosure would not have led to a different result in the bankruptcy proceeding. Id. at 363-

65. Similar facts do not exist in this case. 

 In a non-bankruptcy context, the Ninth Circuit has stated that judicial estoppel does

not apply “[i]f incompatible positions are based not on chicanery, but only on inadvertence

or mistake.” Johnson, 141 F.3d at1369 (analyzing an Americans with Disabilities Act

claim); but see Schertz-Nelson, 2003 WL 22047646 at *7 (stating that ADA cases are “easily

distinguishable” from bankruptcy circumstances). The Fifth Circuit has reviewed the

jurisprudence and concluded that “in considering judicial estoppel for bankruptcy cases, the

debtor’s failure to satisfy its statutory disclosure duty is ‘inadvertent’ only when, in general,

the debtor either lacks knowledge of the undisclosed claims or has no motive for their

concealment.” In re Coastal Plains, 179 F.3d at 210 (emphasis in original). The Ninth

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Ryan, which Plaintiff relies on, noted that the “combination of knowledge of the

claim and motive for concealment in the face of an affirmative duty to disclose gave rise to

an inference of intent sufficient to satisfy the requirements of judicial estoppel.” 81 F.3d at

363 (emphasis added).

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Circuit essentially adopted the Fifth Circuit’s approach by invoking judicial estoppel “when

the debtor has knowledge of enough facts to know that a potential cause of action exists

during the pendency of the bankruptcy, but fails to amend his schedules.” Hamilton, 270

F.3d at 784 (emphasis added); see also Hay, 978 F.2d at 556 (applying judicial estoppel

without making an inquiry as to whether the debtor was “playing fast and loose” with the

court); Shertz-Nelson 2003 WL 22047646 at *7 (applying judicial estoppel after finding a

motive for concealment).2

Several facts show that Plaintiff had enough knowledge to require listing of his

present claims on his bankruptcy schedules: (1) Plaintiff’s defamation, FMLA, and

negligence claims are all based on events that occurred before Plaintiff filed for bankruptcy,

(2) Plaintiff does not dispute that he was aware of the alleged claims prior to filing for

bankruptcy, (3) in an e-mail dated September 5, 2003 (one month before his bankruptcy was

filed), Plaintiff threatened MassMutual’s CEO that he would talk to an attorney about the

“slander” in the Office Letter and NASD form, and (4) Plaintiff filed this action only one

week after the termination of his bankruptcy. Doc. #56 at 2-4.

Moreover, as discussed above, Plaintiff would gain advantage by not disclosing the

potential claims – receiving a discharge from his debt and then asserting the claims for his

own benefit. Plaintiff plainly had a motive for concealment. See Schertz-Nelson, 2003 WL

22047646 at *7 (finding motive when plaintiff stood to gain from asserting a claim after the

discharge of her liabilities).

In short, the Court finds that the nondisclosure of Plaintiff’s claims was not based on

inadvertence. Plaintiff had both knowledge of the claims and a motive for concealment.

Furthermore, Plaintiff has not shown the presence of any of the circumstances which led the

Ryan court to deny the application of judicial estoppel. 

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The Court concludes that Plaintiff should be judicially estopped from pursuing his

present claims against Dollarhide and MassMutual. Given this decision, the Court need not

address the other issues raised by Defendants’ motion for summary judgment.

IT IS ORDERED:

1. Defendant MassMutual’s motion for summary judgment, Doc. #47, and

Dollarhide’s joinder, Doc. #48, are granted. 

2. The Clerk is directed to enter judgment in favor of Dollarhide and

MassMutual and terminate this case. 

DATED this 27th day of June, 2006.

Case 2:04-cv-01862-DGC Document 58 Filed 06/28/06 Page 7 of 7