### F I LE D U. S . COURT OF AP PE ALS E LEVE NTH CI RCUI T A pr i l 15, 2004 T HOM AS K. KAHN C L E RK [ P UB L I S H] I N THE UN I TE D STATE S C OU RT OF APPE ALS F O R T H E E L E V E N T H C IR C U IT

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________________________ D . C . D ocketN o. 99 -000 38 -C V -N -S V I C K I P A R K E R , P la in tif f , T H O M A S E . R E Y N O L D S , Int erveno r- P l ai nt i ffA p p e lla n t, v ersu s W E N D Y 'S I N T E RN A T I O N A L , I N C ., W E N - A L A B A M A , W e n - A lab a m a , I n c ., D e f e n d a n ts - A p p e lle e s .

________________________ A pp ea l fr om the U ni t ed S t at es D i stri ctC ou rt f o rth e N o r th e rn D i s tr i c to f A l ab a ma

_________________________ ( A p r i l 15, 2004)Honora ble Alfre d T. Goodwin, United States Circuit Judg e for the Ninth Circuit, sitt ing * by designation. 2 B efo re T JO F L A T , B IR C H an d G O O D W IN , C i rcu i tJu d g es. * B IR C H , C i rc ui tJudg e: T he opi ni on i s s ue d i n thi s c a s e on M a r c h 31, 2004 i s he r e by va c a t e d, the fol l ow i ng op i ni on i s e nt er ed i n l i eu there of. B a n k ru p tc y tru s te e T h o m a s E . R e y n o ld s , p la in tif f - in te r v e n o rin th is em p lo ym en t d iscr im in atio n ac ti o n filed b y V ick i P ar k erag ain st W en d y’s Int ernat i on al , Inc. , and W en-A l abam a, Inc. (her ei naft ercol l ec t i vel y r ef erre d t o as

“ W endy’ s” ), appeal s the di stri ctcourt ’ s f i nd i ng thatj ud i ci al es t op pel bars R e y n o ld s f

r o m p u r s u in g P a r k e r ’s c la im o n b e h a lf o f P a r k e r ’s c r e d ito r s in ba nkrupt c y . T he di s tr i c tc our tappl i e d ourhol di ng i n B urne s v. P e m c o A e r opl e x, Inc. , 29 1 F . 3d 12 82 (11t h C i r. 20 02 ), and fou nd thatj ud i ci al es t op pel w as prop er because P arker f

ai l ed t o d i sc l ose the exi st ence of her di sc ri m i nat i on cl ai m s w hen sh e fi l ed fo r C h ap t er 7 b an k ru p t cy. H o w ev er, b ecau se th e p arty p u rsu i n g th i s case a ga i ns tW e ndy ’ s i s notP a r ke r , buti s i ns t e a d the ba nkrupt c y trus t e e ––w ho di d not m ake a ny i ncon si st entst at em ent s t o the court s––w e hol d thatj ud i ci al es t op pel do es n o t ap p ly . A c c o r d in g ly , w e R E V E R S E th e d e c is io n o f th e d is tr ic t c o u r t.3 I . B AC KG RO UN D In Jan u ary 1 9 9 9 , P ark er fi l ed a co m p l ai n t , as am en d ed , ag ai n stW en d y’ s, a lle g in g r a c ia l d is c r im in a tio n in th e w o r kp la c e a n d r e ta lia tio n in v io la tio n o f T itle V I I of the C i vi l R i ght s A c t , 42 U . S . C . § 2000e , e ts e q. W e ndy ’ s de ni e d the a l l e ga t i ons c ont a i ne d i n the c om pl a i nt , a nd the c a s e w a s s e tf ortr i a l . O n 9 F ebruary20 01 , P arker a nd her f orm erhu sband fi l ed a pet i t i on for r el i ef un der C hapt e r7 of

the B a nkrupt c y C ode i n the U ni t e d S t a t e s B a nkrupt c y C our tf orthe N o rth ern D i v i si o n o f A l ab am a. T h e sch ed u l es i n th e b an k ru p t cy case d i d n o tl i st P a r ke r ’ s c l a i m a ga i ns tW e ndy ’ s a s a pot e nt i a l a s s e t . O n 31 M a y 2001, the ba nkrupt c y c our te nt e r e d a n or de rgr a nt i ng a “ no a s s e t ” di s c ha r ge f orP a r ke ra nd h e rf o r m e rh u s b a n d . T here af t er , P arker’ s a tt orney i n thi s c as e r equest ed a tri al cont i nu ance , cont endi ng thatP arker had i nadv ert ent l y f ai l ed t o d i sc l ose the exi st ence of her di sc ri m i nat i on ca se t o the trust ee of her bankrup t cy es t at e, R ey no l ds, w ho needed to b e a d v is e d o f

th e d is c r im in a tio n a c tio n in o r d e rto r e o p e n th e b a n k ru p tc y c a s e . T he courtgrant ed thi s m ot i on . R ey no l ds m ov ed t o i nt ervene i n thi s c as e or, a l t e rna t i ve l y , f

ors ubs t i tut i on a s the r e a l pa r ty i n i nt e r e s t . R e y nol ds i nf or m e d the di stri ctcourtthatP arker had fi l ed for r el i ef un der C hapt er7 o n o r abo ut9 F ebruary 2 0 0 1 , a n d h a d f

a ile d to d is c lo s e th e e x is te n c e o f th e d is c r im in a tio n c la im s .4

R e y nol ds s t a t e d tha t , a f t e rP a r ke r ’ s a tt orne y s i nf or m e d hi m tha tthe di s c r i m i na t i on c a s e e x is te d , h e in v e s tig a te d a n d th e n m o v e d to r e o p e n th e b a n k ru p tc y c a s e to al l ow for f

urther a dm i ni stra t i on of the bank rupt cy as se t s. T he bank rupt cy court g r a n te d h is m o tio n to r e o p e n , a n d th e d is tr ic t c o u r t g r a n te d R e y n o ld s ’s m o tio n to i nt ervene. W en d y’s th en m o v ed to d ism iss P ar k er ’s d iscr im in atio n claim s. W en d y’s ar gu ed that , un der our rea soni ng i n B urnes, P arker’ s c l ai m s f or m on et ary dam ages w e r e ba rr e d by the doc tr i ne of j udi c i a l e s t oppe l be c a us e s he f a i l e d t o di s c l os e the exi st ence of her di sc ri m i nat i on sui tt o the bank rupt cy court . W endy’ s c on t ended tha tP a r ke rha d know l e dge of he rdi s c r i m i na t i on c l a i m s pr i ort o, a nd dur i ng, the b a n k ru p tc y p r o c e e d in g s a n d th a t s h e w o u ld n o t h a v e b e e n e n title d to a “n o a s s e t” com pl et e di sc harge of al l debt s had her c re di t ors, R ey no l ds, or the bank rupt cy co u rtk n o w n o f a l aw su i tcl ai m i n g su b st an t i al d am ag es. A cco rd i n g t o W en d y’ s, th e f a c t th a t th e b a n k ru p tc y c o u r t r e o p e n e d P a r k e r ’s p r o c e e d in g s w a s r e le v a n t o n ly a s a n a c k n o w le d g m e n t th a t P a r k e r ’s f a ilu r e to d is c lo s e r e s u lte d in a ta n g ib le b e n e f it to P a r k e rin th e b a n k ru p tc y p r o c e e d in g . T he di s tr i c tc our tgr a nt e d W e ndy ’ s m ot i on t o di s m i s s , c ons true d a s a m ot i on fo r ju d g m en t o n th e p lead in g s. T h e d istrict co u rt fo u n d th at “th is ca se [w a]s fa ctual l y a nd procedural l y i nd i st i ng ui shabl e” fr om B urnes because P arker had5

f a i l e d t o di s c l os e the e xi s t e nc e of he rdi s c r i m i na t i on c l a i m w he n s he f i l e d f or C hapt e r7 ba nkrupt c y a nd the ba nkrupt c y pr oc e e di ng r e s ul t e d i n the di s c ha r ge of h e rd e b ts . R 1 - 3 0 a t 2 . A s a r e s u lt, th e d is tr ic t c o u r t h e ld th a t P a r k e rw a s ju d ic ia lly e s to p p e d f

r o m b r in g in g h e rd is c r im in a tio n c la im a n d d is m is s e d h e rc o m p la in t w ith prej ud i ce . R ey no l ds then m ov ed for r ec on si dera t i on , ar gu i ng thatthi s c as e w as d is tin g u is h ab le f

r o m B u rn e s . F ir s t, R e y n o ld s p o in te d o u t th a t, w h e r e th e r e a l p a r ty in in te r e s t in B u rn e s w a s th e d e b to ra c tin g o n h is o w n b e h a lf , h e r e th e r e a l p a r ty in i nt er es ti s the trust ee , R ey no l ds, ac t i ng on behal f of P arker’ s c re di t ors. M oreover, R e y nol ds a r gue d tha tP a r ke ra nd he ra tt orne y s i nf or m e d R e y nol ds of

the c l a i m a nd R eyn o l d s reo p en ed th e b an k ru p t cy case b efo re W en d y’ s h ad m o v ed t o d i sm i ss b ased o n j u d i ci al est o p p el . R eyn o l d s co n t en d ed th atth i s seq u en ce o f ev en t s al so d is tin g u is h e d th is c a s e f r o m B u rn e s b e c a u s e th e d e b to rin B u rn e s o n ly m o v e d to r e ope n hi s ba nkrupt c y c a s e a f t e rthe de f

e nda nta r gue d j udi c i a l e s t oppe l . R e y nol ds a r gue d tha tj udi c i a l e s t oppe l s houl d notappl y be c a us e P a r ke r“ ha [ d] done the r i ght thi ng f orthe c r e di t or s of

the ba nkrupt c y c a s e by r e ope ni ng the c a s e a nd a tt e m pt i ng t o reco v er so m e v al u e t o b e p ai d ag ai n stth ei r cl ai m s. ” R 1 -3 2 at3 . F i n al l y, R e y n o ld s c o n te n d e d th a t im p o s in g ju d ic ia l e s to p p e l w o u ld r e s u lt in a n in ju s tic e to the i nnoc e ntc r e di t or s w ho w oul d be de ni e d “ the pos s i bi l i ty of a c tua l l y r e c ove r i ngBe causewe rever se the district cour t’s grant of judgment on the pleading s, we do not 1 reach the issue of

whether the district court properly denied Rey

nolds’s motion for rec onsideration. 6 s o m e m o n e y ” a n d w o u ld g r a n t a w in d f a ll to W e n d y ’s w h o w o u ld b e a b le to

“ e s c ape the i row n l i abi l i ty a tthe e xpe ns e of the i nnoc e nt[ c r e di t or s ] i n the ba nkrupt c y c a s e . ” I d. a t4. T he di s tr i c tc our tde ni e d R e y nol ds ’ s m ot i on f orr e c ons i de r a t i on, c onc l udi ng tha tthe di s t i nc t i ons be tw e e n thi s c a s e a nd B urne s w e r e notde t e r m i na t i ve . T he d i stri ctco u rtfo u n d th atn ei th er R eyn o l d s’ s i n t erv en t i o n as th e real p arty i n i n t erest northe f a c ttha tR e y nol ds r e ope ne d the ba nkrupt c y c a s e pr i ort o W e ndy ’ s a s s e r t i on of j udi c i a l e s t oppe l c ha nge d the f a c ttha tP a r ke r , w ho r e m a i ne d a pa r ty t o the di s c r i m i na t i on a c t i on, a s s e r t e d a c l a i m tha tw a s i nc ons i s t e ntw i th the pos i t i on s he t ook i n the ba nkrupt c y pr oc e e di ng. R e y nol ds t i m e l y appe a l e d. I I . DI S CUS S I ON R e y nol ds now appe a l s the di s tr i c tc our t ’ s gr a ntof j udgm e nton the pl e a di ngs t o W en d y’ s an d i t s d en i al o f R eyn o l d s’ s m o t i o n fo r reco n si d erat i o n . S p eci fi cal l y, 1 R ey no l ds ar gu es thatthe di stri ctcourtabused i t s di sc re t i on w hen i tappl i ed j ud i ci al e s t oppe l . W e r e vi e w a j udgm e nton the pl e a di ngs de novo. C a nnon v. C i ty of We s tP a l m B e a c h , 2 5 0 F . 3 d 1 2 9 9 , 1 3 0 1 ( 1 1 th C i r . 2 0 0 1 ) . “ Ad d i t i o n a l l y , we re vi ew the di stri ctcourt ’ s app l i ca t i on of j ud i ci al es t op pel for abu se of di sc re t i on . ”7

B u rn e s , 2 9 1 F .3 d a t 1 2 8 4 . “T h e ab u s e o f d is c r e tio n s ta n d a r d in c lu d e s r e v ie w to det erm i ne thatthe di sc re t i on w as no tgu i ded b y e rr on eous l egal concl usi on s. ” T al aver a v. S choo l B d. of P al m B ea ch C ou nty, 12 9 F . 3d 12 14 , 12 16 (11t h C i r. 1 9 9 7 ) .A s a th r e s h o ld is s u e , w e m u s t d e te r m in e w h e th e rth e s e is s u e s w e r e p r o p e r ly pr e s e r ve d f

orappe a l . W e ndy ’ s a r gue s tha tR e y nol ds f a i l e d t o pr e s e r ve the i s s ue of w he the rj udi c i a l e s t oppe l appl i e s f orappe l l a t e r e vi e w be c a us e , pr i ort o the e ntry of th e d istrict co u rt’s o rd erd ism issin g th e c as e, h e f ailed to re sp o n d to W en d y’s m o ti o n to d ism iss in w h ich itfirs t raise d th e iss u e o f ju d icial esto p p el. W en d y’s ar gu m entfa i l s bec ause the j ud i ci al es t op pel i ss ue w as ra i se d i n the di stri ct c our t–by W e ndy ’ s i n i t s m ot i on t o di s m i s s . M or e ove r , j udi c i a l e s t oppe l w a s the pr e c i s e i s s ue the di s tr i c tc our ta ddr e s s e d i n i t s di s m i s s a l or de ra nd the i s s ue p resen t ed i n th i s ap p eal i s w h eth er th atap p l i cat i o n w as ap p ro p ri at e. A cco rd i n g l y, th e is s u e o f

ju d ic ia l e s to p p e l is s u b

je c t to o u rr e v ie w .

“ J udi c i a l e s t oppe l i s a n e qui t abl e c onc e pti nvoke d a ta c our t ’ s di s c r e t i on” a nd de s i gne d “ t o pr e ve ntthe pe r ve r s i on of the j udi c i a l pr oc e s s . ” B urne s , 291 F . 3d a t1285 ( c i t a t i on om i tt e d) . A l though the S upr e m e C our tha s not e d tha t“ the ci rc um st ance s und erw hi ch j ud i ci al es t op pel m ay approp ri at el y be i nv ok ed ar e pr oba bl y notr e duc i bl e t o a ny ge ne r a l f or m ul a t i on of

pr i nc i pl e , ” N e w H a m ps hi r e v.8

Ma i n e , 5 3 2 U. S . 7 4 2 , 7 5 0 , 1 2 1 S . C t . 1 8 0 8 , 1 8 1 5 ( 2 0 0 1 ) ( c i t a t i o n s o m i tt e d ) , we g e n e r a lly c o n s id e rtw o f a c to r s . “F ir s t, it m u s t b e s h o w n th a t th e a lle g e d ly i ncon si st entpo si t i on s w er e m ade und eroath i n a pri or proceedi ng . S ec on d, such i nc ons i s t e nc i e s m us tbe s how n t o ha ve be e n c a l c ul a t e d t o m a ke a m oc ke ry of the ju d ic ia l s y s te m .” B u rn e s , 2 9 1 F .3 d a t 1 2 8 5 ( c ita tio n o m itte d ) . T h e d is tr ic t c o u r t d e te r m in e d th a t b o th th e f ir s t a n d s e c o n d p r o n g o f th is te s t w e r e m e t. T ru s te e R e y n o ld s c o n c e d e s th a t P a r k e rto o k in c o n s is te n t p o s itio n s in ba nkrupt c y c our ta nd di s tr i c tc our t . R e y nol ds a r gue s tha tP a r ke r ’ s i nc ons i s t e nt s ta te m e n ts s h o u ld n o t b e a ttr ib u te d to h im a n d th a t, e v e n if ju d ic ia l e s to p p e l w o u ld ba rP a r ke r , i ts houl d notba rR e y nol ds f r om pur s ui ng thi s c l a i m on be ha l f of P a r k e r ’s c r e d ito r s . R e y n o ld s c o n te n d s th a t ju d ic ia l e s to p p e l s h o u ld n o t ap p ly to h im , a s b a n k ru p tc y tru s te e , b e c a u s e h e d id n o t k n o w o f th e d is c r im in a tio n c la im dur i ng the ba nkrupt c y pr oc e e di ngs a nd, the r e f or e , di d nott a ke i nc ons i s t e nt po si t i on s i n the court s. M oreover, R ey no l ds po si t s thatappl yi ng j ud i ci al es t op pel to h im w o u ld n o t s e r v e th e p o lic y o f e n c o u r a g in g h o n e s t d is c lo s u r e to th e c o u r ts b e c a u s e R e y n o ld s w a s n e v e rd is h o n e s t w ith th e c o u r ts . T he corre ctanal ys i s her e c om pel s the concl usi on thatj ud i ci al es t op pel s h o u ld n o t b e ap p lie d a t a ll. M o r e o v e r , b a s e d o n o u ra n a ly s is w h ic h f o llo w s , it is que s t i ona bl e a s t o w he the rj udi c i a l e s t oppe l w a s c orr e c t l y appl i e d i n B urne s . T he9

m ore app ropri at e def

ense i n the B urnes c as e w as , i nst ea d, thatthe debt or l ac ked s t a ndi ng. G e ne r a l l y s pe a ki ng, a pr e - pe t i t i on c a us e of a c t i on i s the pr ope r ty of the C h ap te r7 b a n k ru p tc y e s ta te , a n d o n ly th e tru s te e in b a n k ru p tc y h a s s ta n d in g to p u r s u e it. B a r g e rv . C ity o f C a r te r s v ille , 3 4 8 F .3 d 1 2 8 9 , 1 2 9 2 ( 1 1 th C ir . 2 0 0 3 ) . S ect i o n 5 4 1 o f th e B an k ru p t cy C o d e p ro v i d es th atv i rtu al l y al l o f a d eb t o r’ s asset s, bo th t angi bl e a nd i nt angi bl e, vesti n the bank rupt cy es t at e upo n the fi l i ng of a b a n k ru p tc y p e titio n . 1 1 U .S .C . § 5 4 1 ( a ) ( 1 ) ( p r o v id in g th a t th e b a n k ru p tc y e s ta te i nc l ude s “ a l l l e ga l ore qui t abl e i nt e r e s tof the de bt ori n pr ope r ty a s of the c om m e nc e m e ntof

the c a s e ” ) . S uc h pr ope r ty i nc l ude s c a us e s of a c t i on be l ongi ng t o the debt or atthe com m ence m entof the bank rupt cy ca se . B ar ger, 34 8 F . 3d at 12 92 . T hu s, a trust ee , as the re pres ent at i ve of the bank rupt cy es t at e, i s the prop er pa r ty i n i nt e r e s t , a nd i s the onl y pa r ty w i th s t a ndi ng t o pr os e c ut e c a us e s of a c t i on be l ongi ng t o the e s t a t e . 11 U . S . C . § 323; B a r ge r , 348 F . 3d a t1292. O nc e a n a s s e tbe c om e s pa r tof the ba nkrupt c y e s t a t e , a l l r i ght s he l d by the de bt ori n the a s s e ta r e e xt i ngui s he d unl e s s the a s s e ti s a ba ndone d ba c k t o the de bt or pur s ua ntt o § 554 of

the B a nkrupt c y C ode . S e e 11 U . S . C . § 554( a ) - ( c ) . A tthe cl ose of the bank rupt cy ca se , prop erty of the es t at e thati s notabando ned u nd er§ 554 a nd tha ti s nota dm i ni s t e r e d i n the ba nkrupt c y pr oc e e di ngs r e m a i ns theWe a reno t ho ldingthat it

is impo ssiblefo r a

valid de fens eag ains t a

pre -p e tition

c laim 2 brought by

the trustee to a

rise post-petition. For

instance, if Par

ker had filed this claim after the statute of limitations had passed, the statute of limit ations defense would bar Rey nolds from purs uingthi s c laim, jus t a s it wo uld ba r P arke r f ro m pu rs uingit. Although g eneral bankr

uptcy law esta blishes that the trustee doe s not have a ny more 3 rights than the debtor ha s, Ba nk of Marin v. Eng land, 385 U.S. 99, 101, 87 S. Ct . 274, 276 (1 96 6) (“ Th etr

us te esu c c e e ds on ly

to s uc h rightsa s th eba

nk ru pt p os se sse d; a

nd thetr us te eis subject to all claims and de fense s which might have be en asserted ag ainst the bankrupt but for th ef i l i n go f th ep e t i t i o n . ” ) ; InreH al a b i , 1 8 4 F . 3 d

1 3 3 5 , 1 3 3 7 ( 1 1 thC i r . 1 9 9 9 ) , any post-petition conduct by

Parker , including f

ailure to disclose a

n asset, does not re late to the merits of the discrimination claim. This is becausethe instant the bankruptc y petition was filed, Parker’s c laim ag ains t Wend

y ’sbe c ameprop e rt

y of thee stateun der s e c tio n 5 41 and Rey no ldsbe c ame the re al par

ty in interest. At that point, the debtor c ease d to have a n interest in the discrimination claim, unless and until the trustee a bandoned it. B oth Ba

nk of Marin and In re H alabi are readily distinguishable sincethose ca ses deal with pre-petition defenses and c ounterc laims to a causeof ac tion that would have been applicableto the debtor had no bankruptc y casebeen f

iled. 10 pr ope r ty of

the e s t a t e . 11 U . S . C . § 554( d) . F a i l ur e t o l i s ta n i nt e r e s ton a

2 b a n k ru p tc y s c h e d u le le a v e s th a t in te r e s t in th e b a n k ru p tc y e s ta te . M o b ility S y s . & E qu i p. C o. v. U ni t ed S t at es , 51 F ed. C l . 23 3, 23 6 (F ed. C l . 20 01 ) ( ci t i ng ca se s) ; se e V re ug denh i l l v. N avi st arInt ' l T ra nsp. C orp. , 95 0 F . 2d 52 4, 52 5-26 (8th C i r. 19 91 ). In thi s c as e, P arker’ s di sc ri m i nat i on cl ai m beca m e a n ass etof the bank rupt cy e s ta te w h e n s h e f

ile d h e rp e titio n . R e y n o ld s , a s tru s te e , th e n b e c a m e th e r e a l p a r ty in in tere st in P ar k er ’s d iscr im in atio n su it . H e h as n ev erab an d o n ed P ar k er ’s d is c r im in a tio n c la im a n d h e n e v e rto o k a n in c o n s is te n t p o s itio n u n d e ro a th w ith r e ga r d t o thi s c l a i m . T hus , R e y nol ds c a nnotnow be j udi c i a l l y e s t oppe d f r om p u r s u in g it. 3Even if there were a demand in the debtor’s complaint for injunctive relief

so that the 4 debtor properly

remained a plaintiff a s to that relief, that would not alter the a nalysis of the inapplicability

of judicial estoppel to the truste e’s claim for money damag es. See B arg er, supra, at 1292-93. More over, in the unlikely scena rio where the trusteewould rec over morethan an amount that would satisfy all cre ditors and the costs and f ees incurre d, then, per

haps judicial estoppel could beinvoked by the def endant to limit any

rec overy to only that amount and prevent an undeserved w indfall from devolving on the non- disclosing debtor. 11 I I I . C ON C L US I ON T he di stri ctcourt ’ s j ud gm enti s r ever se d b ec ause the do ctri ne of j ud i ci al e s t oppe l w a s i m pr ope r l y i nvoke d. T he c l a i m a ga i ns tW e ndy ’ s be l ongs t o the ba nkrupt c y e s t a t e a nd i t s r e pr e s e nt a t i ve , the trus t e e . T he trus t e e m a de no f a l s e or i nc ons i s t e nts t a t e m e ntunde roa th i n a pr i orpr oc e e di ng a nd i s nott a i nt e d or b u r d e n e d b y th e d e b to r ’s m is c o n d u c t. 4 R E VE R S E D.