In the

United States Court of Appeals

For the Seventh Circuit

No. 11-3588

IN RE:

KNIGHT-CELOTEX, LLC et al.,

Debtors.

APPEAL OF:

JAMES A. KNIGHT

Appeal from the United States District Court 

for the Northern District of Illinois, Eastern Division.

No. 1:11-cv-01815—Samuel Der-Yeghiayan, Judge.

ARGUED MAY 24, 2012—DECIDED SEPTEMBER 5, 2012

Before CUDAHY, KANNE, and HAMILTON, Circuit Judges.

HAMILTON, Circuit Judge. Using a judicial estoppel

theory, debtor-appellant James Knight attempts to turn a

harmless and seemingly inadvertent failure to disclose

an adverse interest in a bankruptcy proceeding into a

potential multimillion dollar windfall. He appeals from

an order in the jointly administered bankruptcy cases

of Knight-Celotex, LLC and Knight Industries I, LLC
2 No. 11-3588

(collectively, the “Companies”). That order permitted

the Companies’ chapter 7 bankruptcy trustee to assign

to Bank of America certain causes of action that the Companies’ estate held against Knight as an individual. At

the time of the assignment, the same trustee, Barry Chatz,

was also serving as the chapter 7 trustee in Knight’s

own bankruptcy case, and the law firm of Freeborn &

Peters LLP represented trustee Chatz in his administration of both the Companies’ bankruptcy estate and

Knight’s individual estate.

Chatz and Freeborn & Peters failed to disclose — in

Chatz’s application to retain Freeborn & Peters in

Knight’s individual bankruptcy — that Chatz, as the

Companies’ trustee, intended to continue to pursue

claims held by the Companies against Knight. Knight

contends that this failure should be deemed the

trustee’s abandonment of those claims. On this theory,

he argues that the bankruptcy court abused its discretion when it refused to invoke the doctrine of judicial

estoppel to prevent the later assignment of those claims

to the Bank. The district court affirmed the bankruptcy

court’s rejection of Knight’s judicial estoppel theory,

and we do the same, finding no abuse of the bankruptcy

court’s discretion.

First, we review the factual background of the

case and the interplay of the various bankruptcy proceedings. We then dispose of the threshold question

whether Knight had standing to object to the assignment

of the claims against him to the Bank. Finally, we reach

the merits of Knight’s appeal. We detail the judicial
No. 11-3588 3

estoppel trap Knight tried to set for the trustee, and

we explain why the bankruptcy court’s refusal to

spring the trap was a proper exercise of its discretion.

Although we do not condone Chatz’s and Freeborn &

Peters’s failure to disclose Chatz’s intent, as the Companies’ bankruptcy trustee, to pursue (or assign)

the claims against Knight, that failure did not

harm Knight, and other remedies are available. It

would be inequitable and an improper use of judicial

estoppel — an equitable remedy — to permit Knight

to reap a huge benefit from an otherwise harmless omission.

I. Factual and Procedural Background

Knight Companies’ Bankruptcy. Knight, the individual

debtor, was the principal owner and CEO of Knight

Industries I, LLC. Knight Industries was a holding company that owned equity interest in Knight-Celotex

LLC and other entities. Bank of America had provided

secured credit of more than $34 million to Knight Industries I and Knight-Celotex. On April 6, 2009, Knight Industries and Knight-Celotex filed voluntary petitions for

relief under chapter 11 of the bankruptcy code. The Companies’ bankruptcy petition was converted to a chapter 7

petition two months later, and Chatz was appointed as

chapter 7 trustee of the Companies’ estates. The bankruptcy court authorized trustee Chatz to retain the law

firm of Freeborn & Peters as counsel.

In December 2009, Chatz and the Bank each sent similar

letters to Knight. They alleged that Knight had made
4 No. 11-3588

fraudulent and/or preferential transfers of the Companies’ assets, had breached the duty of good faith and

fair dealing, had breached duties Knight owed to

creditors, had misappropriated corporate opportunities,

had committed conversion, and had violated state and/or

federal securities laws, among other claimed acts and

omissions. The letters named several potential legal

claims against Knight, including claims for director and

officer liability — for ease of reference, we refer to all

the allegations against Knight as the “D&O claims”— and

demanded payment from Knight of at least $27 million

(to the Companies) and $34 million (to the Bank).

Knight’s Personal Bankruptcy. On February 23, 2010,

Knight filed his own voluntary petition for chapter 7

bankruptcy. Knight listed in his schedule of assets and

liabilities the Companies’ D&O claims, disclosing their

potential value as “unknown.” Knight originally filed

his bankruptcy petition in New Hampshire, but it was

transferred to the Northern District of Illinois and to

the judge presiding over the Companies’ petition. In

granting transfer, the bankruptcy court noted the

existence of the D&O claims. See In re Knight-Celotex,

LLC, 427 B.R. 697, 701 (Bankr. N.D. Ill. 2010). Chatz was

appointed to serve as the chapter 7 trustee of Knight’s

estate.

Retention Application in Knight’s Bankruptcy. On May 19,

2010, trustee Chatz asked the bankruptcy court to allow

him to retain Freeborn & Peters as his counsel in Knight’s

individual bankruptcy, as well. In the retention application, Chatz said that Freeborn & Peters “does not have
No. 11-3588 5

The bankruptcy code defines “disinterested person” as a 1

person that: “(A) is not a creditor, an equity security holder, or

an insider; (B) is not and was not, within 2 years before the

date of the filing of the petition, a director, officer, or employee

of the debtor; and (C) does not have an interest materially

adverse to the interest of the estate or of any class of creditors

of equity security holders, by reason of any direct or indirect

relationship to, connection with, or interest in, the debtor, or

for any other reason.” 11 U.S.C. § 101(14).

any connection with [Knight], his creditors, or other

parties-in-interest or their respective attorneys . . . and is

a ‘disinterested person’ ” as that term is defined in

the bankruptcy code. In support of the application, 1

Chatz submitted the “Declaration of Richard S. Lauter

in Accordance with Section 327 of the Bankruptcy Code

and Rule 2014 of the Federal Rules of Bankruptcy Procedure.” In the declaration, attorney Lauter explicitly

stated that Freeborn & Peters served as bankruptcy

counsel to Chatz in the Companies’ bankruptcy. Lauter

also asserted that “to the best of my knowledge, I have

determined that F&P does not currently represent any

entity, or hold interests adverse to any entity, in

matters related to [Knight’s] chapter 7 case.”

At a hearing on the retention application on May 25,

2010, the court asked if anyone objected to Chatz’s retention of Freeborn & Peters as counsel in the Knight bankruptcy. Knight’s counsel replied:

There’s no objection, Your Honor. I just . . . was curious. I didn’t see in here where counsel indicated

he represented Mr. Chatz as to his capacity as corpo-
6 No. 11-3588

Knight’s counsel was mistaken; as noted, the Lauter Declara- 2

tion did disclose the fact that Freeborn & Peters represented

Chatz as Trustee of the Companies.

rate trustee. But since we all know that’s the case,

I mean, I don’t think that’s a problem that it was

omitted.

 . . .

As long as they’re still disinterested, we’re fine, Your

Honor.2

In response, Lauter volunteered to submit a supplemental declaration, which he did the next day. Lauter

reaffirmed that Freeborn & Peters served as counsel

to Chatz in the Companies’ bankruptcy and also

reaffirmed that:

Based on the foregoing and the declaration

previously submitted in support of the [Retention]

Application, upon reasonable inquiry and to the best

of my knowledge, I have determined that F&P does

not currently represent any entity or hold any

interests, adverse to the estate, and is a “disinterested

person” pursuant to 11 U.S.C. § 101(14).

Without further objection, the bankruptcy court entered

an order authorizing Chatz to retain Freeborn & Peters

as counsel in the Knight bankruptcy, finding that the

firm was a “disinterested person” as defined in the bankruptcy code. Knight’s trap was set.

Assignment of Knight Companies’ Claims to Bank. More

than five months later, on November 3, 2010, the Bank
No. 11-3588 7

and Chatz jointly asked the court to allow Chatz to

assign the Companies’ D&O claims to the Bank. These

were the same claims that Chatz and the Bank had

asserted against Knight in the December 2009 letters

that had preceded Knight’s personal bankruptcy. In a

separate filing, the Bank asserted that it would seek

recovery only against Knight’s liability insurance policy

and not against Knight himself.

Knight objected. He contended that Chatz should

be judicially estopped from asserting that the Companies

had any claims against him that could be assigned to

the Bank. He based his contention on the following logic,

trying to spring the trap he set when he did not object

to the trustee’s retention of Freeborn & Peters: First,

Freeborn & Peters had asserted in its retention application that it was a “disinterested person” in Knight’s

individual bankruptcy proceeding even though the

firm also represented Chatz in his role as trustee for the

Companies. Second, the bankruptcy court had approved

the retention application, signaling that the court believed or assumed that Chatz, as the Companies’ trustee,

held no interests adverse to Knight. According to

Knight’s theory, this position, assumed by the court,

directly conflicted with the premise of the later-filed

assignment motion, specifically that the Companies had

viable claims against Knight that their trustee could

pursue or assign to the Bank. Third, since the bankruptcy

court had approved the firm’s retention application

and thus implicitly had concluded that the trustee and

Freeborn & Peters had no interests adverse to Knight, they
8 No. 11-3588

Once the automatic stay was lifted, the Bank sued Knight and

3

several co-defendants based in part on the D&O claims. On

June 20, 2012, the district court dismissed with prejudice the

Bank’s second amended complaint in that action. Bank of

America, N.A. v. Knight, 2012 WL 2368458 (N.D. Ill. June 20,

2012). The Bank has appealed the dismissal, which is pending

as No. 12-2698. The ultimate outcome of those proceedings

might render this case academic, but we think the better course

is to resolve the separate appeals as they have arisen rather

than to postpone a decision in this one.

should be judicially estopped from taking any further

action to pursue or assign those claims against Knight.

The bankruptcy court overruled Knight’s objection,

finding that the assignment was a proper exercise

of the trustee’s business judgment. The court re3

jected Knight’s judicial estoppel theory, reasoning that

application of the doctrine is discretionary, and that in

this instance, Freeborn & Peters’s statements should

not prevent the Companies’ creditors from pursuing

otherwise legitimate claims against the Knight estate. If

the law firm acted improperly, the bankruptcy court

reasoned, other remedies were available that would not

impose such a hardship on the estate’s creditors.

On appeal, the district court affirmed. See Knight v.

Bank of America, N.A., 2011 WL 5008528, at *2-4 (N.D. Ill.

Oct. 18, 2011). Even if the bankruptcy court had not

explicitly addressed all the judicial estoppel factors

identified in New Hampshire v. Maine, 532 U.S. 742 (2001),

nothing required the court to do so. The hearing

transcript satisfied the district court that the bankruptcy
No. 11-3588 9

court had considered the equities in weighing whether

to apply the doctrine of judicial estoppel. Knight appeals

that decision of the district court. We have jurisdiction

under 28 U.S.C. § 158(d)(1).

II. Knight’s Standing to Object

Before proceeding to the merits, we must address a

threshold issue: Knight’s standing. The trustee and the

Bank point out that the Bank would seek recovery on the

D&O claims only from Knight’s insurer and not from

Knight personally. They argue, therefore, that the D&O

claims were not actually adverse to Knight’s estate.

Accordingly, they contend that Knight may lack standing

to object to the assignment of the claims. In response,

Knight points out that the insurance policy would not

necessarily cover all of his potential liability on the

D&O claims for two reasons. The policy is a “wasting”

policy with a limit of $5 million on combined defense

and indemnification costs, and the policy excludes coverage for intentional fraudulent acts, which have been

alleged as part of the D&O claims.

Bankruptcy standing is narrower than constitutional

standing and requires that a person “have a pecuniary

interest in the outcome of the bankruptcy proceedings.”

Cult Awareness Network, Inc. v. Martino, 151 F.3d 605, 607

(7th Cir. 1998). The prospect that the D&O claims might

not be entirely discharged, at least to the extent they are

based on fraud, is sufficient to give Knight standing here.

See, e.g., 11 U.S.C. §§ 523(a)(2), (4), (19) (exceptions to
10 No. 11-3588

discharge in bankruptcy). He faced the prospect of personal liability on some of the claims.

We also reject the basic premise on which the

standing argument is based, specifically, that the D&O

claims were not “adverse” to Knight because they could be

ultimately covered by liability insurance. The cases on

which the trustee and the Bank rely for this point are

inapposite. We stated in IBM v. Fernstrom Storage and Van

Co., that permitting a creditor to seek recovery from a

debtor’s insurers “will neither deplete the debtor’s

assets or otherwise interfere with the administration of

the bankruptcy proceeding, nor hinder the debtor’s fresh

start at the close of the proceeding.” 938 F.2d 731, 734

(7th Cir. 1991) (creditors who did not file proofs of claim

in a debtor’s bankruptcy case were free to pursue

claims against debtor’s insurers). And, in In re Shondel,

950 F.2d 1301, 1304, 1307 (7th Cir. 1991), we held that a

plaintiff could proceed with a wrongful death action

against a debtor after discharge, in spite of the debtor’s

interest in a “fresh start,” because any recovery would

come from the debtor’s automobile liability insurance.

See also Hendrix v. Page, 986 F.2d 195, 197 (7th Cir. 1993)

(collecting cases and noting that courts are nearly unanimous in holding that a post-discharge injunction does

not extend to suits in which relief is sought only against

debtor’s insurer; such suits do not create a “personal

liability of the debtor”) (internal citations omitted).

But here, there was a strong possibility that at least some

of the D&O claims would not be discharged in Knight’s

personal bankruptcy. Accordingly, these precedents

do not support the contention that the D&O claims
No. 11-3588 11

were not adverse to Knight. Nor do they excuse the

failure to identify the D&O claims, asserted by trustee

Chatz, represented by Freeborn & Peters, as claims

adverse to Knight at every appropriate turn.

For these reasons, the fact that the Bank intended to

seek payment under Knight’s liability insurance should

not have been considered by the bankruptcy court or

the district court in assessing the effect of the omission

of the D&O claims from the trustee’s disclosures in

the retention motion. However, both courts considered

the impact of Knight’s liability insurance only in the

alternative. See Knight, 2011 WL 5008528, at *5; Supp.

Appx. 5 (bankruptcy court describing insurance coverage as a “minor twist” that might or might not make

a difference). Accordingly, any error in doing so was

harmless. With standing secure, and without considering Knight’s insurance coverage, we turn to the

merits of his appeal and the issue of judicial estoppel. 

III. Judicial Estoppel

Judicial estoppel is a matter of equitable judgment

and discretion, and we review the bankruptcy court’s

decision for an abuse of that discretion. See Wiese v.

Community Bank of Central Wisconsin, 552 F.3d 584, 588

(7th Cir. 2009); Commonwealth Ins. Co. v. Titan Tire Corp., 398

F.3d 879, 887 (7th Cir. 2004). “[A] court abuses its discretion when its decision is premised on an incorrect

legal principle or a clearly erroneous factual finding, or

when the record contains no evidence on which the

court rationally could have relied.” Corporate Assets, Inc. v.
12 No. 11-3588

Paloian, 368 F.3d 761, 767 (7th Cir. 2004). We find that the

bankruptcy court properly exercised its discretion in

rejecting Knight’s theory and in refusing to invoke

the doctrine of judicial estoppel to preclude assignment

of the D&O claims against Knight to the Bank.

In New Hampshire v. Maine, 532 U.S. 742 (2001),

the Supreme Court observed that the standard for

invoking judicial estoppel is “not reducible to any

general formulation of principle,” but recognized three

factors that “typically inform the decision whether to

apply the doctrine in a particular case.” Id. at 750

(internal quotation omitted). Those factors are first, that

“a party’s later position must be clearly inconsistent

with its earlier position;” second, that “the party has

succeeded in persuading a court to accept that 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 second court was misled;” and third, that “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 750-51 (internal quotations omitted).

We reject Knight’s argument that the bankruptcy court’s

failure to march through the New Hampshire v. Maine

factors one by one was error in itself. These factors are

not a rigid test that must be applied every time the

issue of judicial estoppel is raised, but rather are

general guideposts that must be considered in the

context of all the relevant equities in any given case. See

Bisek v. Soo Line R.R. Co., 440 F.3d 410, 413 (7th Cir. 2006)
No. 11-3588 13

(refusing to invoke judicial estoppel, without explicitly

relying on New Hampshire v. Maine factors, where doctrine would render an inequitable result by “land[ing]

another blow” on bankrupt’s creditors, who were

victims of his bankruptcy fraud).

Returning to the New Hampshire v. Maine factors,

Knight attempts to show that the trustee took “clearly

inconsistent” positions in the retention application and

the assignment motion. Specifically, he argues that

Chatz’s application to retain Freeborn & Peters violated

11 U.S.C. § 327(a) and Federal Rule of Bankruptcy Procedure 2014(a). Section 327(a) permits the trustee to

retain attorneys “that do not hold or represent an

interest adverse to the estate, and that are disinterested

persons.” See, e.g., Kravit, Gass & Weber, S.C. v. Michel

(In re Crivello), 134 F.3d 831, 835-36 (7th Cir. 1998)

(defining the phrase “hold or represent an interest

adverse to the estate”) (collecting cases). Rule 2014(a)

facilitates enforcement of section 327(a) by requiring that

professionals seeking to represent the trustee in a bankruptcy proceeding submit a verification that fully and

broadly discloses “the person’s connections with the

debtor, creditors, [or] any other party in interest,” among

others. See Fed. R. Bankr. P. 2014(a); In re Gluth Brothers

Construction, Inc., 459 B.R. 351, 364 (Bankr. N.D. Ill. 2011)

(describing “connections” that must be disclosed pursuant to Rule 2014(a) as “considerably broader” than the

disclosures required for section 327(a)). For purposes

of Knight’s appeal, though, his arguments on the merits

of those rules and the precedents applying them are

beside the point. 
14 No. 11-3588

If any violations of either section 327(a) or Rule 2014(a)

occurred, they occurred with the Freeborn & Peters

retention application. The order granting that application was entered in May 2010. Pursuant to Bankruptcy

Rule 8002(a), Knight had fourteen days to file any

appeal from that order, and that deadline has long since

passed. See Fed. R. Bankr. P. 8002(a). Knight insists that

he has not appealed the bankruptcy court’s grant of the

Freeborn & Peters retention application, only its grant

of the assignment order. But, having appealed only the

assignment order, any issues relating to the disclosures

made or not made during the retention application

process are only tangential. The question before us is

whether the bankruptcy court abused its discretion in

refusing to find the trustee judicially estopped from

pursuing the D&O claims, not, as Knight contends,

whether the disclosure rules were actually violated.

Knight argues that by asserting in the retention application that Freeborn & Peters was a “disinterested

person,” Chatz effectively disavowed the existence of

the D&O claims against Knight, and that it was then

“clearly inconsistent” to seek later to assign those abandoned D&O claims to the Bank. He claims that these

“clearly inconsistent” positions support his desired

remedy: the imposition of judicial estoppel to bar any

pursuit of the D&O claims. It is true that Freeborn & Peters

and Chatz failed to disclose explicitly the continued

existence of the D&O claims in the representation application — a regrettable lapse, for the omission has

resulted in this unnecessary litigation. But, it is also

true that Chatz never explicitly disavowed the D&O
No. 11-3588 15

claims or expressed any intent to abandon them at any

time before, during, or after the retention application.

The court, Knight, and all other interested parties

participating in the proceedings at the time of the

retention application were aware of Chatz’s dual

roles, of Freeborn & Peters’s representation of Chatz in

each of those roles, and of the continued existence of

the D&O claims. The court had taken note of the claims

in its opinion transferring Knight’s personal bankruptcy

case to the Northern District of Illinois, see In re KnightCelotex, 427 B.R. at 701, and Knight had listed the

D&O claims on his bankruptcy schedules. Trustee Chatz

had taken none of the steps needed to abandon the

claims by the Companies’ estate.

Knight asserts on appeal that his counsel “expressly

sought confirmation at the Retention application hearing

that [Freeborn & Peters] was, in fact, disinterested, in

order to confirm that Chatz had decided not to pursue

the D&O claims against Knight.” This assertion is belied

by the transcript. What Knight’s counsel was seeking in

his exchange with the court was less than clear, and

whatever he sought, he hardly sought it “expressly.” See

Appx. 97 (“There’s no objection . . . . I was curious, I didn’t

see in here where counsel indicated he represented

Mr. Chatz as to his capacity as corporate trustee. But

since we all know that’s the case . . . I don’t think that’s

a problem that it was omitted.”). He plainly was aware

of Freeborn & Peters’s role as Chatz’s counsel in the

Companies’ bankruptcy, and he raised no objection to

the firm’s dual representation. No response to Knight’s
16 No. 11-3588

If an asset is “burdensome” or of “inconsequential value,” the 4

trustee may abandon property after notice and a hearing

under 11 U.S.C. § 554(a). No notice was given or hearing

held, and at that stage the D&O claims could not have been

deemed “burdensome” or of “inconsequential value.”

counsel’s non-objection was required. We will not

construe the trustee’s silence regarding the D&O claims

at this moment of the retention application hearing as

an abandonment of those claims.

It defies belief to think that the trustee would have

abandoned a possible multimillion dollar recovery

on behalf of the Companies’ creditors without a word,

without complying with the statutory procedures for

abandoning property, and probably in violation of his

duties as trustee. If Knight really thought that re- 4

taining Freeborn & Peters in the individual bankruptcy was inconsistent with pursuit of the D&O claims,

he had ample opportunity to raise the issue explicitly at

the time of the retention application. He chose instead

to set a trap to be sprung when the trustee attempted

to pursue or assign the D&O claims. Under these circumstances, the bankruptcy court did not abuse its discretion by finding that the trustee and Freeborn &

Peters had not done anything “clearly inconsistent” with

the trustee’s later motion to assign the D&O claims to

the Bank. We therefore agree with the district court that

the omission of express reference to the D&O claims in

the retention application motion was, on this record,

at most a harmless violation of the disclosure obligations of section 327(a) and Rule 2014(a). It certainly
No. 11-3588 17

was not a foundation for judicial estoppel to bar pursuit

of the claims.

We also find no support in the record for the remaining

two New Hampshire v. Maine considerations. The record

does not support the conclusion that the trustee or Freeborn & Peters succeeded in “persuading” the bankruptcy

court to accept the conclusion that the Companies’ estate

was abandoning its D&O claims against Knight. The

bankruptcy court never suggested it viewed the D&O

claims as abandoned or that it had been misled. See

New Hampshire v. Maine, 532 U.S. at 750. The issue

simply did not come up.

Similarly, nothing in the record suggests that Chatz, as

trustee of the Companies, stood to derive an unfair advantage or impose an unfair detriment on Knight if not

estopped. See id. at 751. Knight contends that the assignment order forced him to defend himself in the

D&O litigation and put his eligibility for a discharge

in question, and that the existence of the D&O claims

“has cast a considerable pall” over his post-bankruptcy

“fresh start.” We agree with the district court that

Knight could not have reasonably believed that Chatz

intended to abandon so casually the D&O claims and

the millions of dollars that they could bring into the

Companies’ estate. The prospect that Knight would

have to defend himself against potentially valid claims

does not amount to either an “unfair advantage” to the

trustee or the Companies’ estate, or an “unfair detriment” to Knight.

Even if we assume for the sake of argument that the

Freeborn & Peters retention application violated the
18 No. 11-3588

disclosure requirements of 11 U.S.C. § 327(a) and that

the firm should have been precluded from its simultaneous representation of Chatz in his dual trustee

roles, it was entirely appropriate for the bankruptcy

court to consider the fact that the bankruptcy code provides a statutory remedy. Section 328(c) permits the

bankruptcy court to deny professional compensation

to a person who has been retained under section 327

if it is determined that that person is not actually disinterested or “represents or holds an interest adverse to

the interest of the estate with respect to the matter on

which such professional person is employed.” Knight

complains that this sanction would not provide him with

an effective remedy for the trustee’s and Freeborn &

Peters’s lack of disclosure. But Knight has not shown

that he should be entitled to any remedy at all. Even if

we put aside the fact that he and his counsel were fully

aware of the relevant facts, Knight has not shown how

he suffered any injury by pursuit of the D&O claims or

the hiring of Freeborn & Peters or the trustee. The bankruptcy court properly rejected Knight’s judicial estoppel

theory.

Conclusion

Like the bankruptcy court and the district court

before us, we find that the larger equities at stake in

this matter supported the bankruptcy court’s refusal to

invoke the doctrine of judicial estoppel. On this record,

the omission of the D&O claims from the Freeborn &

Peters retention application papers was a regrettable
No. 11-3588 19

mistake that led to this unnecessary litigation. That omission, however, did not warrant Knight’s attempt to foreclose pursuit of the D&O claims altogether. All interested parties were aware of the pertinent facts, specifically

of Chatz’s dual roles as trustee in the Companies’ bankruptcy and trustee in Knight’s personal bankruptcy, of

Freeborn & Peters’s representation of Chatz in both

of those roles, and of the existence of the D&O claims. The

omission of an explicit reference to the D&O claims

in the retention application was therefore harmless. Accordingly, there was no equitable basis for the bankruptcy court to invoke the doctrine of judicial estoppel

and to find that Chatz abandoned the D&O claims,

which would permit Knight to escape upwards of

$34 million in potential liability. Refusing to do so was

a sound exercise of the bankruptcy court’s discretion.

AFFIRMED.

9-5-12