Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_08-cv-00165/USCOURTS-caed-2_08-cv-00165-4/pdf.json

Parties Involved:
Asia Abid
Plaintiff
Chaudry Abid
Plaintiff
Mudasar Abid
Plaintiff
Shamim Abid
Plaintiff
Tubasim Abid
Plaintiff
Allstate Insurance Company
Defendant
Kiran Chaudry
Plaintiff

Document Text:

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1 Because oral argument will not be of material

assistance, the court orders the matter submitted on the briefs. 

E.D. Cal. L. R. 78-230(h).

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

CHAUDRY ABID, SHAMIM ABID,

KIRAN CHAUDRY, previously

known as ASIA ABID, MUDASAR

ABID, and TUBASIM ABID,

NO. CIV. 08-165 FCD GGH

Plaintiffs,

v. MEMORANDUM AND ORDER

ALLSTATE INSURANCE COMPANY, a

California corporation; and

DOES 1-50, inclusive,

Defendants.

----oo0oo----

This matter is before the court on defendant Allstate

Insurance Company’s (“Allstate”) motion to dismiss plaintiffs’

Second Amended Complaint, pursuant to Federal Rule of Civil

Procedure 12(b)(6).1

 Plaintiffs Chaudry Abid, Shamim Abid, Kiran

Chaudry, Mudasar Abid, and Tubasim Abid (collectively

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2 The facts contained herein are drawn from plaintiff’s

Corrected Second Amended Complaint. (See Pl.’s Corrected Second

Amended Compl. (“SAC”), filed June 3, 2008.)

2

“plaintiffs”) oppose the motion. For the reasons set for below,

defendant’s motion to dismiss is GRANTED.

BACKGROUND2

On September 11, 2001, a fire broke out at plaintiffs’ home

in Sacramento, California. (SAC ¶ 7.) The residence was covered

by a homeowner’s insurance policy issued by Allstate. (Id.) On

September 12, 2001, plaintiffs filed a claim for benefits under

the insurance policy, alleging damage to the home, damage to

personal property within the home, and other injuries. (Id. ¶

24.) 

Chaudry Abid was a suspect in the fire, and a criminal

investigation was started. (Id. ¶ 9.) Plaintiffs allege that

Allstate was on notice of this and “contributed” to the

investigation. (Id.) As a result of the criminal investigation

for arson, plaintiffs were forced to file for bankruptcy in 2004. 

(Id. ¶ 10.) Plaintiffs did not list the insurance claim as an

asset. (Bankruptcy File, Ex. A. to Def.’s Req. for Judicial

Notice, filed May 5, 2008, at Schedule B.) Rather, plaintiffs

marked the box under “None” next to the inquiry regarding “Other

contingent and unliquidated claims of every nature.” (Id.) 

Plaintiffs argue that any claims they had in the insurance policy

were not ripe because the insurance company was essentially

investigating Chaudry Abid for insurance fraud. (Id.) After the

bankruptcy was completed, the criminal investigation was dropped. 

(Id. ¶ 11.) 

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3

On December 12, 2007, plaintiffs filed a complaint against

Allstate in Sacramento Superior Court to recover benefits under

the homeowner’s insurance policy. An amended complaint was filed

on December 19, 2007. Thereafter, Allstate removed the action to

this court. After the court granted Allstate’s motion to dismiss

and gave plaintiffs leave to amend, plaintiffs filed a Second

Amended Complaint. The Second Amended Complaint asserts claims

for breach of contract, breach of the covenant of good faith and

fair dealing, and unfair competition. Allstate now moves to

dismiss this complaint pursuant to Rule 12(b)(6).

STANDARD

On a motion to dismiss, the allegations of the complaint

must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322

(1972). The court is bound to give plaintiff the benefit of

every reasonable inference to be drawn from the “well-pleaded”

allegations of the complaint. Retail Clerks Int’l Ass'n v.

Schermerhorn, 373 U.S. 746, 753 n.6 (1963). Thus, the plaintiff

need not necessarily plead a particular fact if that fact is a

reasonable inference from facts properly alleged. See id. 

Nevertheless, it is inappropriate to assume that the

plaintiff “can prove facts which it has not alleged or that the

defendants have violated the . . . laws in ways that have not

been alleged.” Associated Gen. Contractors of Calif., Inc. v.

Calif. State Council of Carpenters, 459 U.S. 519, 526 (1983). 

Moreover, the court “need not assume the truth of legal

conclusions cast in the form of factual allegations.” United

States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th

Cir. 1986).

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4

Ultimately, the court may not dismiss a complaint in which

the plaintiff alleged “enough facts to state a claim to relief

that is plausible on its face.” Bell Atlantic Corp. v. Twombly,

127 S. Ct. 1955, 1973 (2007). Only where a plaintiff has not

“nudged [his or her] claims across the line from conceivable to

plausible,” is the complaint properly dismissed. Id. “[A] court

may dismiss a complaint only if it is clear that no relief could

be granted under any set of facts that could be proved consistent

with the allegations.” Swierkiewicz v. Sorema N.A., 534 U.S.

506, 514 (2002) (quoting Hudson v. King & Spalding, 467 U.S. 69,

73 (1984)). 

In ruling upon a motion to dismiss, the court may consider

only the complaint, any exhibits thereto, and matters which may

be judicially noticed pursuant to Federal Rule of Evidence 201. 

See Mir v. Little Co. of Mary Hospital, 844 F.2d 646, 649 (9th

Cir. 1988); Isuzu Motors Ltd. v. Consumers Union of United

States, Inc., 12 F. Supp. 2d 1035, 1042 (C.D. Cal. 1998). 

Specifically, a court “may take judicial notice of public records

related to legal proceedings in both state courts and in the

district court.” Rose v. Beverly Health and Rehab. Servs., Inc.,

356 B.R. 18, 23 (E.D. Cal. 2006) (citing Miles v. State of

California, 320 F.3d 986, 987 (9th Cir. 2003)). 

ANALYSIS

Allstate moves to dismiss plaintiffs’ Second Amended

Complaint on the basis of judicial estoppel. Specifically,

defendant asserts that because the claim for insurance benefits

was not disclosed as an asset in the bankruptcy petition, 

/////

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5

plaintiffs are estopped from bringing this current claim for

insurance benefits.

“Judicial estoppel is an equitable doctrine that precludes 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 & Casualty Co., 270 F.3d

778, 782 (9th Cir. 2001) (citing Risetto v. Plumbers &

Steamfitters Local 343, 94 F.3d 597, 600-01 (9th Cir. 1996);

Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990)). The

doctrine serves “to protect against a litigant playing fast and

loose with the courts” and to take into account “general

considerations of the orderly administration of justice and

regard for the dignity of judicial proceedings.” Id.; Russell,

893 F.2d at 1037. Application of judicial estoppel is not

limited to circumstances where a party asserts inconsistent

positions in the same litigation, but may also serve to bar

litigants from making inconsistent statements in two different

cases. Id. at 782-83; see also Rose v. Beverly Health and Rehab.

Servs., Inc., 356 B.R. 18, 23-24 (E.D. Cal. 2006).

A court “may” consider three factors in deciding whether to

exercise its discretion in applying the doctrine of judicial

estoppel in a particular case. New Hampshire v. Maine, 532 U.S.

742, 750-51 (2001); Hamilton, 270 F.3d at 782-83. “First, a

party’s later position must be ‘clearly inconsistent’ with its

earlier position.” Hamilton, 270 F.3d at 782. Second, the party

must have “succeeded in persuading a court to accept that party’s

earlier position, so that judicial acceptance of an of an

inconsistent position in a later proceeding would create ‘the

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perception that either the first or the second court was

misled.’” Id. Third, the court must determine “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.” Id. at 783. 

In the bankruptcy context, the Ninth Circuit has explicitly

held that “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. In Hamilton, the plaintiff filed an insurance claim

with the defendant insurance company for alleged losses resulting

from water damage. Id. at 780. After the insurance claim was

filed, the plaintiff filed for Chapter 7 bankruptcy. Id. at 781. 

The plaintiff failed to list the claims against State Farm as

assets of the estate and, eventually, the plaintiff’s bankruptcy

petition was dismissed. Id. Subsequently, the plaintiff filed

suit against State Farm. Id. at 781-82. The Ninth Circuit held

that the plaintiff had “clearly asserted inconsistent positions”

by failing to list his claims against State Farm as assets on the

bankruptcy schedules and later suing State Farm on the same

claims. Id. at 784. The Hamilton court also held that the

bankruptcy court had “accepted” the plaintiff’s prior

representation by discharging the debt, even though the discharge

was later vacated. Id. Finally, the court held that application

of the doctrine of judicial estoppel was necessary to protect the

integrity of the bankruptcy process. Id. at 785 (“The courts

will not permit a debtor to obtain relief from the bankruptcy

court by representing that no claim exists and then subsequently

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3 The court takes judicial notice of plaintiffs’

bankruptcy file. See Rose, 356 B.R. at 24 (taking judicial

notice of filings in the bankruptcy court).

7

to assert those claims for his own benefit in a separate

proceeding.”) (internal quotation omitted). Therefore, the Ninth

Circuit held that plaintiff was estopped from pursuing his claims

against State Farm. Id.; see also Hay v. First Interstate Bank

of Kalispell, N.A., 978 F.2d 555, 557 (9th Cir. 1992) (holding

that the failure to give notice of a potential cause of action in

bankruptcy schedules and Disclosure Statements estops the debtor

from prosecuting that cause of action); Rose, 356 B.R. at 25

(granting defendant’s motion to dismiss on the grounds that the

plaintiff was judicially estopped from litigating claims she had

a duty to disclose to the bankruptcy court).

In this case, plaintiffs have asserted inconsistent

positions.3 On Schedule B of the Voluntary Petition, signed by

Chaudry Abid and Shamim Abid, plaintiffs represented that they

had no contingent and unliquidated claims of any nature. 

(Bankruptcy File, Ex. A. to Def.’s Req. for Judicial Notice,

filed May 5, 2008, at Schedule B.) At the time plaintiffs filed

for bankruptcy, plaintiffs had already filed a claim with State

Farm. In fact, plaintiffs allege that the investigation into the

claim compelled the filing of the bankruptcy petition. Yet, the

insurance claim was not listed as an asset. Plaintiffs are now

asserting claims against State Farm arising out of the nonpayment of this same insurance claim. These positions are

inconsistent.

/////

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8

Plaintiffs contend that disclosure of the claims was not

required because, at the time the bankruptcy petition was filed,

any claims they had in the insurance policy were not ripe

“because the insurance company was essentially investigating Mr.

Abid for insurance fraud.” (SAC ¶ 11.) In essence, plaintiffs

argue that a claim does not have to be disclosed in bankruptcy if

its legitimacy is in dispute. Plaintiffs proffer no legal

support for this position. Rather, the Ninth Circuit has held

that claims must be disclosed, even if not yet filed, where there

were enough facts to put a plaintiff on notice of the existence

of potential claims. Hay, 978 F.2d at 557; Hamilton, 270 F.3d at

784 (“Judicial estoppel will be imposed 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 or disclosure statement to identify the cause

of action as an asset.”). Here, plaintiffs knew of all the

material facts surrounding the fire, the insurance claim, and

State Farm’s investigation into the claim at the time the

petition was filed. As such, plaintiffs were required to

disclose the claim in the petition. Hay, 978 F.2d at 557;

Hamilton, 270 F.3d at 784; Rose, 356 B.R. at 26. 

Further, the bankruptcy court accepted plaintiffs’ prior

inconsistent position. Specifically, on September 17, 2004, the

bankruptcy court filed a notice of filing of no distribution,

providing that the trustee in the case had stated there were no

funds available from the estate to distribute to creditors. 

(Bankruptcy File.) Subsequently, on November 18, 2004, the

bankruptcy court discharged the debts of Chaudry Abid and Shamim

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4 Because the court finds that the doctrine of judicial

estoppel applies in this case, the court does not address

defendant’s argument that plaintiffs’ claims are barred by the

statute of limitations.

9

Abid. (Id.) The discharge of debt, particularly where there was

no distribution of assets to creditors, constituted acceptance of

plaintiffs’ representation. See Hamilton, 270 F.3d at 784. 

Finally, plaintiffs would derive an unfair advantage from

the inconsistent position. The discharge of debt pursuant to the

prior inconsistent position means that plaintiffs are not obliged

to use the proceeds of this action against State Farm, if any, to

satisfy the debts of the bankruptcy estate. See Rose, 356 B.R.

at 27. “[T]he integrity of the bankruptcy system depends on the

full and honest disclosure by debtors of all their assets.” 

Hamilton, 270 F.3d at 786 (quoting In re. Coastal Plains, 179

F.3d 197, 208 (5th Cir. 1999). Allowing plaintiffs to prosecute

claims that they did not disclose in the bankruptcy action would

both undermine the integrity of the bankruptcy system and reward

non-disclosure. The court will not do so.

Accordingly, plaintiffs are judicially estopped from

pursuing claims against State Farm.4 

CONCLUSION

For the foregoing reasons, defendant’s motion to dismiss is

GRANTED. The Clerk of Court is directed to close this file.

IT IS SO ORDERED

DATED: June 23, 2008 

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