1996 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

4-15-1996

Ryan Operations GP v. Santiam-Midwest

Precedential or Non-Precedential:

Docket 95-3250

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Recommended Citation

"Ryan Operations GP v. Santiam-Midwest" (1996). 1996 Decisions. Paper 197.

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1 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

---------- 

No. 95-3250 

---------- 

RYAN OPERATIONS G.P., a Virginia General Partnership 

and NVR, L.P., a Virginia Limited Partnership, 

on behalf of its division, NVR BUILDING PRODUCTS CO. 

 

v. 

SANTIAM-MIDWEST LUMBER CO., an Oregon Corporation; 

FURMAN LUMBER, INC., a Massachusetts Corporation; 

BRIGHT WOOD CORP., an Oregon Corporation 

BRIGHT WOOD CORP., 

 Third Party Plaintiff 

v. 

FORREST PAINT CO., INC., an Oregon Corporation; 

GUARDSMAN PRODUCTS, INC., a Delaware Corporation, 

 Third Party Defendants 

 Ryan Operations G.P. and NVR, L.P. and 

its division, NVR Building Products Co., 

 Appellants 

---------- 

On Appeal from the United States District Court 

for the Western District of Pennsylvania 

(D.C. Civ. No. 92-2480) 

---------- 

Argued: December 4, 1995 

BEFORE: SLOVITER, Chief Judge, STAPLETON 

and SAROKIN, Circuit Judges

---------- 

(Opinion filed April 15, 1995) 

Robert B. Cave, Esq. 

David G. Leitch, Esq. (ARGUED) 
2 

Hogan & Hartson 

555 13th Street, N.W. 

Washington, DC 20004-1109 

Richard F. Rinaldo, Esq. 

Meyer, Unkovic & Scott 

1300 Oliver Building 

Pittsburgh, PA 15222 

 Attorneys for Appellants, 

 Ryan Operations G.P.; 

 NVR LP, and its division 

 NVR Building Products Co. 

Stephen J. Poljak, Esq. 

Anstandig, Levicoff, McDyer, 

 Burdette & Yurcas 

707 Grant Street 

600 Gulf Tower 

Pittsburgh, PA 15219 

 Attorney for Appellees, 

 Santiam-Midwest Lumber Co. 

Louis C. Long, Esq. 

Meyer, Darragh, Buckler, 

 Beberick & Eck 

2000 The Frick Building 

Pittsburgh, PA 15219 

 Attorney for Appellees, 

 Furman Lumber Inc. 

Louis C. Long, Esq. 

Meyer, Darragh, Buckler, 

 Beberick & Eck 

2000 The Frick Building 

Pittsburgh, PA 15219 

Michael K. Atkinson, Esq. 

Thomas M. Buchanan, Esq. 

Michael L. Sibarium, Esq. (ARGUED) 

Winston & Strawn 

1400 L Street, N.W. 

Washington, DC 20005 

 Attorneys for Third Party Plaintiff, 

 Bright Wood Corp. 
3 

Randy K. Hareza, Esq. 

Burns, White & Hickton 

120 Fifth Avenue 

Suite 2400 

Pittsburgh, PA 15222-3001 

 Attorney for Third Party Defendant, 

 Forrest Paint Co. Inc. 

Norbert F. Kugele, Esq. 

Warner, Norcross & Judd 

111 Lyon Street, N.W. 

900 Old Kent Building 

Grand Rapids, MI 49503 

 Attorney for Third Party Defendant, 

 Guardsman Products Inc. 

---------- 

OPINION OF THE COURT 

---------- 

SAROKIN, Circuit Judge:

 This case raises issues concerning the application and scope 

of the doctrine of judicial estoppel. The district court, upon 

recommendation of a United States Magistrate Judge, granted 

summary judgment in favor of defendants on the theory that 

plaintiff, having failed to disclose its claims against 

defendants as a contingent asset in its Chapter 11 bankruptcy 

proceedings, was judicially estopped from seeking to recover on 

those claims. For the reasons that follow, we will reverse. 

I.
4 

 Ryan Operations, plaintiff in this matter1, is in the 

business of constructing homes. This action arises out of a 

commercial dispute between Ryan and the manufacturer and 

suppliers of primed Fingerjointed Ponderosa Pine wood trim that 

Ryan purchased between January 1988 and June 1991 and used in the 

construction of several thousand new homes. Ryan purchased the 

wood trim from Santiam-Midwest Lumber Co. ("Santiam") from 

January 1988 to March 1990, and from Furman Lumber, Inc. from 

March 1990 to June 1991. The trim was manufactured by Bright 

Wood Corporation. 

 In July 1989, Ryan began receiving complaints from 

homeowners that the paint and underlying primer were peeling off 

the Ponderosa Pine trim on their new homes. Ryan informed 

Santiam of the problem, and Santiam suggested that Ryan switch to 

a different brand of primer. Ryan did so, but the problems 

continued and the complaints increased. As a result, Ryan 

instituted a consumer repair program in the fall of 1991, 

pursuant to which it has repainted and/or replaced the wood trim 

on hundreds of houses. Ryan is currently engaged in the costly 

process of replacing the trim on Ryan homes in several states. 

 In April 1992, Ryan filed a voluntary petition for relief 

under Chapter 11 of the Bankruptcy Code. In re NVR L.P., No. 92-

 

1Co-plaintiff in this matter is NVR, L.P., a limited partnership 

suing on behalf of its division NVR Building Products Company. 

Through a merger or series of mergers, a corporation entitled 

NVR, Inc. has become the successor in interest of NVR, L.P. and 

the parent corporation of NVR Homes, Inc. NVR Homes, Inc., also 

through a merger, has become the successor in interest of Ryan 

Operations. For simplicity's sake, we will refer to plaintiffs 

in this matter simply as "Ryan" or "plaintiff." 
5 

11704-T (Bankr. E.D. Va. Apr. 6, 1992). The following month it 

filed its Schedule of Assets and Liabilities and Statement of 

Financial Affairs pursuant to Bankruptcy Code § 521. Although 

the Code requires the debtor to disclose all claims and causes of 

actions as contingent assets, Ryan did not mention any potential 

claims that it might have from the allegedly defective Ponderosa 

Pine trim. 

 In June 1992, the bankruptcy court entered an order 

authorizing Ryan to retain counsel to represent Ryan in lawsuits 

by and against it in the ordinary course of business. Among the 

"Routine Claims" that Ryan listed for the bankruptcy court were a 

class of "homeowners claims," nonspecifically defined as claims 

"by or against contractors or suppliers or relating to or arising 

out of the provision of services or material to the Debtors." 

App. 189-90. The court authorized Ryan to pursue and/or defend 

itself against such claims. 

 Subsequently, in December 1992, while the bankruptcy 

proceeding was still pending, Ryan filed suit in district court 

against Bright Wood, Santiam and Furman Lumber, alleging various 

breach of warranty claims arising out of the sale and manufacture 

of the Ponderosa Pine trim and seeking to recover the costs 

incurred in its consumer repair program. 

 In July 1993, without ever having been specifically informed 

of the pending lawsuit or the potential for recovery, the 

bankruptcy court confirmed Ryan's reorganization plan. Ryan 

emerged from bankruptcy the following month. 
6 

 In September 1994, defendant Bright Wood moved for summary 

judgment on judicial estoppel grounds, arguing that Ryan's 

failure to inform the bankruptcy court of its warranty claims 

against Bright Wood precluded Ryan from pursuing those claims in 

the district court. Santiam, Furman, and the third-party 

defendants (who manufactured the primers used on the wood trim) 

joined in Bright Wood's motion. Upon recommendation of a United 

States Magistrate Judge, the district court granted summary 

judgment against Ryan on March 21, 1995, on the ground of 

judicial estoppel alone. From that ruling, Ryan appeals. 

II.

 The district court had jurisdiction pursuant to 28 U.S.C. 

§1332(a)(1). We have appellate jurisdiction pursuant to 28 

U.S.C. § 1291. 

III.

 We exercise plenary review over the district court's order 

granting summary judgment. Mark v. Borough of Hatboro, 51 F.3d 

1137, 1141 (3d Cir.), cert. denied, 116 S. Ct. 165 (1995). 

IV. 

 Judicial estoppel, sometimes called the "doctrine against 

the assertion of inconsistent positions," is a judge-made 

doctrine that seeks to prevent a litigant from asserting a 

position inconsistent with one that she has previously asserted 

in the same or in a previous proceeding. It is not intended to 

eliminate all inconsistencies, however slight or inadvertent; 

rather, it is designed to prevent litigants from "playing 'fast 

and loose with the courts.'" Scarano v. Central R. Co. of New 
7 

Jersey, 203 F.2d 510, 513 (3d Cir. 1953)(citation omitted). "The 

basic principle . . . is that absent any good explanation, a 

party should not be allowed to gain an advantage by litigation on 

one theory, and then seek an inconsistent advantage by pursuing 

an incompatible theory." 18 Charles A. Wright, Arthur R. Miller 

& Edward H. Cooper, Federal Practice and Procedure § 4477 (1981), 

p.782. 

 Ryan raises four issues regarding the scope and application 

of judicial estoppel for our review: (1) whether the district 

court erred in applying judicial estoppel at the request of one 

who was neither a party to the prior proceeding nor in privity 

with a party to that proceeding; (2) whether the district court 

erred in applying judicial estoppel because Ryan derived no 

benefit from its failure to disclose these potential claims in 

the bankruptcy proceedings; (3) whether the district court erred 

in concluding that Ryan's position in this lawsuit is 

inconsistent with a position it took in the bankruptcy 

proceedings; and (4) whether the application of judicial estoppel 

in this case is inconsistent with principles of equity and 

justice. We will examine each in turn. 

V.

 Both parties agree that federal law should govern our 

disposition of this case, and we accept their agreement.2 Having 

 

2Judge Sarokin, the author of this opinion, would not accept the 

agreement of the parties as to whether federal or state law 

governs in this case, because he believes that the question must 

be analyzed under the doctrine of Erie Railroad v. Tompkins, 304 

U.S. 64 (1938), and that the parties cannot stipulate as to the 

applicable law as they might in a choice-of-law situation. The 
8 

 

following comments are the opinion of Judge Sarokin, not the 

court: It is well established that federal courts sitting in 

diversity must generally apply state substantive law and federal 

procedural law. Erie, 304 U.S. 64. This doctrine is rooted in 

the Constitution; the Supreme Court reasoned that "declar[ing] 

substantive rules of common law" in diversity cases is "'an 

unconstitutional assumption of powers by courts of the United 

States.'" Erie, 304 U.S. at 78, 79; see also Charles A. Wright, 

Arthur R. Miller & Edward H. Cooper, 19 Federal Practice and 

Procedure § 4505. Because the question of whether federal or 

state law should govern issues of judicial estoppel in diversity 

cases is a question of the constitutional powers of the federal 

courts, we cannot simply accept the parties' recommendation that 

federal law governs without first ensuring that applying federal 

law would be constitutional under the circumstances. We can 

ensure that the application of federal law is constitutional in 

one of two ways: (1) by determining, as I would, that the Erie

doctrine does not apply; or (2) by determining under Erie that 

the law of judicial estoppel is procedural rather than 

substantive in nature. 

 Although I believe that judicial estoppel is substantive in 

nature, I am persuaded by the reasoning of the Sixth Circuit in 

Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 598 n.4 (6th Cir. 

1982), and the Fourth Circuit in Allen v. Zurich Ins. Co., 667 

F.2d 1162, 1167 n.4 (4th Cir. 1982), that Erie does not require 

us to apply state law. The Erie doctrine is not absolute; 

exceptions can be made where, as here, there are "affirmative 

countervailing considerations" that implicate "strong federal 

policy" considerations. Byrd v. Blue Ridge Rural Elec. 

Cooperative, Inc., 356 U.S. 525, 537-38 (1958); see also AFN, 

Inc. v. Schlott, Inc., 798 F. Supp. 219 (D.N.J. 1992). A federal 

court's ability to protect itself from manipulation by litigants 

should not vary according to the law of the state in which the 

underlying dispute arose. I would therefore conclude that a 

federal court sitting in diversity must apply federal law to 

questions regarding the doctrine of judicial estoppel. 

 There is an additional reason why I think it important to 

reach this matter. This court has never addressed this issue 

directly. While we have tended in the past to rely on federal 

law of judicial estoppel in diversity cases, we have occasionally 

applied state law or a combination of state and federal law. 

Compare Scarano, 203 F.2d 510 (applying federal law) with LinanFaye Construction Co. v. Housing Auth. of Camden, 49 F.3d 915 (3d 

Cir. 1995)(applying New Jersey law) and with Gleason v. United 

States, 458 F.2d 171 (3d Cir. 1972)(applying both federal and 

state law). In some cases, there may be no relevant difference 

in terms of result between federal and state law of judicial 

estoppel. In other cases, however, the decision as to which law 

to apply may be dispositive of the outcome. As a result, I 

believe that we should take this opportunity to clarify the law 
9 

determined that federal law controls, we turn to the first issue 

presented for our review: whether the doctrine of judicial 

estoppel is available only to those who were parties or in 

privity with a party to the prior proceeding. Ryan argues that 

the doctrine as expounded in this circuit has a privity 

requirement which prevents its being enforced by "strangers to 

the earlier litigation." Appellant's Br. at 29. As it is 

undisputed that none of the defendants in the instant action was 

a party to the bankruptcy proceeding, Ryan contends that the 

district court erred in applying judicial estoppel for their 

benefit. 

 We first articulated the doctrine of judicial estoppel in 

the seminal case of Scarano v. Central R. Co. of New Jersey, 203 

F.2d 510 (3d Cir. 1953). The plaintiff in that case, following a 

work-related injury, sought damages from his employer on the 

ground that he was completely incapacitated. After winning a 

damages award, he proceeded to sue his employer for reinstatement 

under the terms of a collective bargaining agreement. We 

concluded that plaintiff was estopped from seeking reinstatement, 

explaining our reasoning as follows: 

The 'estoppel' of which, for want of a more precise 

word, we here speak is but a particular limited 

application of what is sometimes said to be a general 

rule that "a party to litigation will not be permitted 

to assume inconsistent or mutually contradictory 

positions with respect to the same matter in the same 

or a successive series of suits." 

 

of the circuit, especially since this issue has been properly 

briefed and presented to us. 
10 

Id. at 512-13. We expressly declined to decide "[w]hether the 

correct doctrine is that broad," however; instead, we stated that 

the 

rule we apply here need be and is no broader than this. 

A plaintiff who has obtained relief from an adversary 

by asserting and offering proof to support one position 

may not be heard later in the same court to contradict 

himself in an effort to establish against the same 

adversary a second claim inconsistent with his earlier 

contention. 

Id. at 513 (emphasis added). 

 Ryan argues that the language underlined above indicates our 

intention to instill a privity requirement into our newly 

articulated doctrine of judicial estoppel. The above excerpts 

make clear, however, that we did not hold that the doctrine was 

limited to circumstances in which a party asserted incompatible 

positions against the same adversary. On the contrary, we 

explicitly stated that we so articulated the rule because the 

facts of the case did not require us to determine whether a 

broader rule might apply in other circumstances. 

 Ryan correctly points out that we have never applied the 

doctrine of judicial estoppel for the benefit of parties who were 

not involved in the prior judicial proceeding. See, e.g.

Scarano, 203 F.2d 510; Oneida Motor Freight, Inc. v. United 

Jersey Bank, 848 F.2d 414 (3d Cir.)(holding that plaintiff is 

judicially estopped from asserting position in post-bankruptcy 

proceeding against a bankruptcy creditor that is inconsistent 

with position asserted in prior bankruptcy proceeding), cert.

denied, 488 U.S. 967 (1988); Fleck v. KDI Sylvan Pools, Inc., 981 
11 

F.2d 107 (3d Cir. 1992)(holding that plaintiffs who promised 

bankruptcy court they would not seek recovery against debtor in 

excess of insurance coverage are judicially estopped from 

subsequently attempting to do so), cert. denied sub nom Doughboy 

Recreational, Inc., Div. of Hoffinger Indus., Inc. v. Fleck, 507 

U.S. 1005 (1993); Delgrosso v. Spang & Co., 903 F.2d 234 (3d Cir. 

1990). However, we have never expressly limited the doctrine's 

applicability to situations in which a litigant asserts an 

inconsistent position against the same party or its privy. 

 The absence of an express rule notwithstanding, plaintiff 

argues that language in Gleason v. United States, 458 F.2d 171 

(3d Cir. 1972), reveals that privity is required. The plaintiff 

in that case filed a Workers' Compensation petition following his 

exposure to radioactive material in a work-related accident, 

alleging prospectively that he had suffered injury. When injury 

from the radiation actually materialized four years later, 

plaintiff sued his employer for damages. Although plaintiff 

testified in deposition that he had not actually experienced an 

injury at the time of the Workers' Compensation petition, the 

trial court dismissed the case on statute of limitations grounds, 

reasoning that plaintiff's Workers' Compensation petition 

indicated that he knew about the injury well within the 

limitations period. On plaintiff's appeal, the employer argued 

that plaintiff should be judicially estopped from relying on 

deposition testimony which directly contradicted his Workers' 

Compensation petition. 
12 

 In reaching our conclusion that judicial estoppel was 

inappropriate under the circumstances, we noted that the doctrine 

of judicial estoppel "has not always been applied, but has 

usually been applied where the same parties are involved and 

where one of the parties has changed his position or given 

something of value relying on the statement of his opponent." Id.

at 175. Ryan now argues that this language evidences a rule that 

privity is required for the application of judicial estoppel. We 

disagree, for two reasons. First, we neither stated a rule in 

Gleason that these equitable characteristics were requirements 

for the application of judicial estoppel nor rested our decision 

on that basis. Rather, our decision rested on our conclusion 

that the plaintiff "did not play fast and loose with the courts 

or with the defendants." 458 F.2d 176. Second, although Gleason

did not attempt to distinguish between equitable estoppel and 

judicial estoppel, we have since emphasized the importance of 

that distinction and more clearly articulated the border between 

the two doctrines. See Oneida, 848 F.2d at 419. Ryan cannot now 

extrapolate legal principles from any conflation of judicial and 

equitable estoppel that may have existed prior to our 

clarification of the distinction between the two. 

 In addition, we note that the purpose of the judicialestoppel doctrine militates against the imposition of a privity 

requirement. Judicial estoppel "is intended to protect the 

courts rather than the litigants." Fleck v. KDI Sylvan Pools, 

Inc., 981 F.2d 107, 121-22 (3d Cir. 1992). As we explained in 

Oneida, 
13 

[j]udicial estoppel looks to the connection between the 

litigant and the judicial system while equitable 

estoppel focuses on the relationship between the 

parties to the prior litigation. 

Oneida, 848 F.2d 414, 419 (3d Cir. 1988). Unlike equitable 

estoppel, therefore, judicial estoppel does not require that the 

party urging estoppel demonstrate that she believed or relied 

upon the plaintiff's prior inconsistent statement. Scarano, 203 

F.2d at 512. While privity and/or detrimental reliance are often 

present in judicial estoppel cases, they are not required. 

 Our conclusion that privity is not required for the 

application of judicial estoppel accords with the majority view. 

See Patriot Cinemas, Inc. v. General Cinema Corp., 834 F.2d 208, 

214 (1st Cir. 1987)("harm to an opponent is not an invariable 

prerequisite to judicial estoppel"); Edwards v. Aetna Life Ins. 

Co., 690 F.2d 595, 598 (6th Cir. 1982)("judicial estoppel may be 

applied even if detrimental reliance or privity does not exist"); 

Konstantinidis v. Chen, 626 F.2d 933, 937 (D.C. Cir. 1980)(same); 

Total Petroleum, Inc. v. Davis, 822 F.2d 734, 737 n.6 (8th Cir. 

1987)(judicial estoppel does not require reliance or prejudice, 

because it seeks to protect the courts); Muellner v. Mars, Inc., 

714 F. Supp. 351, 356 (N.D. Ill. 1989). 

 There are many instances in which the assertion of 

inconsistent positions can work to the advantage of a party but 

where there is no identity or relationship between those against 

whom the claim (or defense) is asserted. Where the contentions 

are mutually exclusive, it is irrelevant that they are asserted 

against diverse parties for the purposes of determining judicial 
14 

estoppel. The integrity of the court is affronted by the 

inconsistency notwithstanding the lack of identity of those 

against whom it is asserted. 

 The defendants in this case thus were not barred from 

seeking judicial estoppel by the fact that they were not parties 

to Ryan's bankruptcy proceeding. 

VI.

 We reach the same conclusion with respect to Ryan's related 

argument that "judicial estoppel should be applied only where the 

party resisting it benefited from the statement." Appellant's 

Br. at 44. Ryan contends that the district court erred in 

applying judicial estoppel in this case because, by Ryan's own 

estimation, Ryan did not benefit from its failure to disclose the 

instant claims in the bankruptcy court. 

 Putting aside for a moment the question of whether Ryan 

benefitted from its nondisclosure, we begin by determining 

whether as a general rule a party must have benefitted from her 

prior position in order to be judicially estopped from 

subsequently asserting an inconsistent one. We readily conclude 

that the doctrine of judicial estoppel in this circuit contains 

no such requirement.3 We have noted on several occasions that 

"application of the doctrine of judicial estoppel is particularly 

 

3We note that the Sixth and Seventh Circuits have reached the 

opposite conclusion. See Edwards v. Aetna Life Ins. Co., 690 

F.2d 595, 599 (6th Cir. 1982); Astor Chauffered Limousine Co. v. 

Runnfeldt Investment Corp., 910 F.2d 1540, 1548 (7th cir. 

1990)("The offense is not taking inconsistent positions so much 

as it is winning, twice, on the basis of incompatible 

positions."). 
15 

appropriate in situations . . . where the party benefitted from 

its original position." Delgrosso v. Spang & Co., 903 F.2d 234, 

242 (3d Cir.), cert. denied, 498 U.S. 967 (1990); Murray v. 

Silberstein, 882 F.2d 61 (3d Cir. 1989). In such cases, the 

tribunal has acted in reliance on the party's initial assertion, 

and thus the threat to the integrity of the judicial process from 

subsequent assertion of an incompatible position is more 

immediate. 

 Stating that benefit to the party from its prior position 

makes application of the doctrine "particularly appropriate," 

however, is not the equivalent of stating that such benefit is a 

necessary precondition to application of the doctrine. As we 

stated in Lewandowski v. National Railroad Passenger Corp. 

(Amtrak), 882 F.2d 815 (3d Cir. 1989), "the critical issue is 

what the [party] contended in the underlying proceeding, rather 

than what the jury found." Id. at 819. Whether the party sought 

to be estopped benefitted from its earlier position or was 

motivated to seek such a benefit may be relevant insofar as it 

evidences an intent to play fast and loose with the courts. It 

is not, however, an independent requirement for application of 

the doctrine of judicial estoppel. 

VII. 

 As judicial estoppel is intended to prevent parties from 

playing fast and loose with the courts by asserting inconsistent 

positions, any application of the doctrine must rest upon a 

finding that the party against whom estoppel is sought asserted a 

position inconsistent with one she previously asserted in a 
16 

judicial proceeding. The third issue that Ryan raises on appeal 

is whether Ryan has in fact asserted inconsistent positions 

within the meaning of the judicial-estoppel doctrine. This 

entails a two-part inquiry: (1) is Ryan's present position 

inconsistent with a position it asserted in its Chapter 11 

proceedings; and (2) if so, did Ryan assert either or both of the 

inconsistent positions in bad faith--i.e., with intent to play 

fast and loose with the court. Only if both prongs are satisfied 

is judicial estoppel an appropriate remedy. 

 The district court found that Ryan's failure to list its 

potential claims arising from the Ponderosa Pine trim on its 

schedule of assets in the Chapter 11 proceeding constituted a 

statement that Ryan had no such claim, which the current lawsuit 

contradicts. Ryan contends that its present claims are not 

inconsistent with any position it took in the bankruptcy 

proceeding because it neither affirmatively represented that it 

had no claim against defendants arising from the Ponderosa Pine 

Trim situation nor misled the court with regard to the existence 

and/or prosecution of those claims. 

A.

 As a preliminary matter, we will set forth the disclosure 

requirements of the United States Bankruptcy Code in order to 

place Ryan's alleged prior inconsistent statement in context. The 

Code imposes on debtors an affirmative duty of full disclosure. 

Section 521 requires the debtor to file with the court "a 

schedule of assets and liabilities . . . and a statement of the 

debtor's financial affairs." 11 U.S.C. § 521(1). The schedule 
17 

must disclose, inter alia, "contingent and unliquidated claims of 

every nature" and provide an estimated value for each one. 

Official Forms, Schedule B, App. 41. 

 Once the bankruptcy proceeding is underway, the debtor may 

not solicit approval of a plan of reorganization from a claimholder unless "at the time of or before such solicitation, there 

is transmitted to such holder the plan or a summary of the plan, 

and a written disclosure statement approved, after notice and a 

hearing, by the court as containing adequate information." 11 

U.S.C. § 1125(b). Adequate information is defined as 

information of a kind, and in sufficient detail, as far 

as is reasonably practicable in light of the nature and 

history of the debtor and the condition of the debtor's 

books and records, that would enable a hypothetical 

reasonable investor typical of holders of claims or 

interests of the relevant class to make an informed 

judgment about the plan . . . . 

11 U.S.C. § 1125(a). 

 These disclosure requirements are crucial to the effective 

functioning of the federal bankruptcy system. Because creditors 

and the bankruptcy court rely heavily on the debtor's disclosure 

statement in determining whether to approve a proposed 

reorganization plan, the importance of full and honest disclosure 

cannot be overstated. See Oneida, 848 F.2d at 417-18. 

B.

 It is undisputed that by failing to list its claims against 

defendants on its § 521 schedule of assets, Ryan violated these 

statutory duties of full disclosure. However, this court has 

expressly left open the question of whether such nondisclosure, 
18 

standing alone, can support a finding that a plaintiff has 

asserted inconsistent positions within the meaning of the 

judicial-estoppel doctrine. Oneida Motor Freight, Inc. v. United 

Jersey Bank, 848 F.2d 414, 419 (3d Cir. 1988)("[W]e stop short of 

finding that . . . [plaintiff's] prior silence is equivalent to 

an acknowledgment that it did not have a claim against the 

bank.").4 We need not decide this issue here, and we decline to 

do so, because we conclude that judicial estoppel would be 

inappropriate in any event as there is no evidence that Ryan 

acted in bad faith. 

 Asserting inconsistent positions does not trigger the 

application of judicial estoppel unless "intentional selfcontradiction is . . . used as a means of obtaining unfair 

advantage." Scarano, 203 F.2d at 513. Thus, the doctrine of 

 

4In that case, as here, the plaintiff sought to pursue claims 

that it had failed to disclose on its § 521 schedule of assets in 

a prior bankruptcy proceeding. Unlike Ryan, however, the 

plaintiff in Oneida had not only failed to disclose its potential 

claim against a bank for $7.7 million as a contingent asset on 

its § 521 schedule of assets and liabilities, but simultaneously 

claimed the corresponding $7.7 million debt to the bank as a 

liability on the same schedule. Because the plaintiff had 

claimed the debt in the bankruptcy proceeding without disclosing 

the potential offset, we found that the plaintiff's "current suit 

speaks to a position clearly contrary to its Chapter 11 treatment 

of the bank's claim as undisputed." Id. As a result, we 

concluded that judicial estoppel was appropriate under the 

circumstances, because "Oneida's failure to list its claim 

against the bank worked in opposition to preservation of the 

integrity of the system which the doctrine of judicial estoppel 

seeks to protect." Id. 

 In this case, Ryan did not treat the homeowners' claims 

arising from the Ponderosa Pine trim debacle as undisputed; in 

fact, it did not specifically mention those claims at all. As a 

result, Oneida does not compel a conclusion that Ryan's 

subsequent assertion of those claims was inconsistent with its 

Chapter 11 treatment of them. 
19 

judicial estoppel does not apply "when the prior position was 

taken because of a good faith mistake rather than as part of a 

scheme to mislead the court." Konstantinidis v. Chen, 626 F.2d 

933, 939 (D.C. Cir. 1980). An inconsistent argument sufficient 

to invoke judicial estoppel must be attributable to intentional 

wrongdoing. See Chaveriat v. Williams Pipe Line Co., 11 F.3d 

1420, 1428 (7th Cir. 1993); see also Total Petroleum, Inc. v. 

Davis, 822 F.2d 734 (8th Cir. 1987)(holding that the doctrine 

only applies to deliberate inconsistencies that are "tantamount 

to a knowing misrepresentation to or even fraud on the court."). 

 Defendants contend that in a bankruptcy proceeding, a 

debtor's failure to satisfy its statutory duty of full disclosure 

gives rise to an inference of bad faith sufficient to satisfy the 

requirements of the judicial-estoppel doctrine. They rely for 

support on our decision in Oneida, in which we applied judicial 

estoppel without an express finding of intentional misconduct. In 

reaching our conclusion that plaintiff's failure to list its 

claims as assets in the underlying Chapter 11 proceeding 

precluded it from asserting them in a post-bankruptcy proceeding, 

we stated that "Oneida's failure to list its claim against the 

bank worked in opposition to preservation of the integrity of the 

judicial system which the doctrine of judicial estoppel seeks to 

protect." 848 F.2d at 419. 

 While we did not expressly analyze plaintiff's intent in 

Oneida, we did not discard that analysis entirely in light of 

plaintiff's affirmative duty of full disclosure under the 

Bankruptcy Code. On the contrary, there was ample evidence in 
20 

the record from which an inference of deliberate manipulation 

could be drawn. Oneida had listed its $7.7 million debt to the 

bank on its schedule of liabilities without mentioning the 

possibility of an offset. As a result, the creditors as a whole 

had a skewed sense of Oneida's financial condition and no 

knowledge of a claim that could inure to their benefit. Whereas 

the creditors may have been entitled to the full amount of any 

recovery had they known about the claim in advance, the 

reorganization plan that they approved without knowledge of the 

claim limited their potential recovery to one-third of the 

debtor's gross recovery. 848 F.2d at 416 n.1. In addition, had 

the bank known that Oneida would subsequently seek restitution of 

the amount paid under the plan, it might well have voted against 

approval of the plan. 848 F.2d at 418. It is therefore clear 

that Oneida had ample motive to conceal its claim. Moreover, as 

the gravamen of Oneida's case against the bank was that the 

bank's actions were responsible for forcing Oneida into 

bankruptcy, it is clear that Oneida had knowledge of this 

potential claim at the time it filed for bankruptcy. This 

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. 

 In contrast to Oneida, there is no basis in this case for 

inferring that Ryan deliberately asserted inconsistent positions 

in order to gain advantage--i.e., that it played fast and loose 

with the courts. There is no evidence that the nondisclosure 
21 

played any role in the confirmation of the plan or that 

disclosure of the potential claims would have led to a different 

result. Although it may generally be reasonable to assume that a 

debtor who fails to disclose a substantial asset in bankruptcy 

proceedings gains an advantage, the undisputed facts weigh 

against such an inference in this case. First, Ryan's failure to 

list the instant claims as contingent assets was offset by its 

failure to list the corresponding claims of homeowners against 

Ryan resulting from the allegedly defective wood trim as 

liabilities. As a result, the balance of assets and liabilities 

before the court and creditors when the reorganization plan was 

approved may have been unaffected by the failure to list the 

claims as assets. Compare Oneida, 848 F.2d at 418 (finding 

debtor who listed amount owed to creditor as a liability in 

bankruptcy proceeding without any mention of possible offset 

judicially estopped from pursuing post-bankruptcy claim against 

that creditor). Second, pursuant to the reorganization plan, 

creditors will receive 91 percent of any future recovery on the 

Ponderosa Pine Trim claims, and will suffer 91 percent of the 

loss if Ryan is unable to recover the expenses incurred in the 

repair and replacement program from defendants. Affidavit of 

Bruce W. Gilchrist, App. 191-92. Thus, it appears that Ryan 

derived and intended no appreciable benefit from its 

nondisclosure. Compare Payless Wholesale Distributors, Inc. v. 

Culver, 989 F.2d 570, 571 (1st Cir.)(applying judicial estoppel 

upon finding that plaintiff intended to "[c]onceal [its] claims 

[in bankruptcy proceeding]; get rid of [its] creditors on the 
22 

cheap; and start over with a bundle of rights"), cert. denied, 

114 S. Ct. 344 (1993). 

 Nor do Ryan's actions subsequent to the filing of its § 521 

schedule support a finding that it sought to conceal the claims 

deliberately. In an order modifying the automatic stay to allow 

for litigation of "routine claims," the bankruptcy court 

specifically authorized Ryan to pursue "(i) homeowner claims, 

including, but not limited to, warranty claims, . . . [and] (ii) 

claims by or against contractors or suppliers or relating to or 

arising out of the provision of services or materials to the 

Debtors . . . ." Order (i) Modifying the Automatic Stay to Allow 

Litigation of Routine Claims to Proceed, (ii) Authorizing Debtors 

to Settle Routine Claims, and (iii) Authorizing Debtors to Pay 

Settlement Amounts or Judgments of $15,000 or Less Relating to 

Routine Claims, July 1, 1992, App. 218-19. Upon receipt of this 

authorization, Ryan filed the instant action during the pendency 

of the bankruptcy proceedings, albeit in a different 

jurisdiction. Ryan then submitted fee requests to the bankruptcy 

court detailing, among other things, counsel's work in the 

Ponderosa Pine Trim litigation, which the bankruptcy court 

reviewed and approved for payment. App. 231-40. Finally, the 

reorganization plan that the court and creditors approved 

authorized Ryan to retain and enforce claims against any entity 

and to adjudicate homeowner claims. Second Amended Joint Plan of 

Reorganization, §§ 4.09 & 7.02, App. 86 & 92. While none of 

these facts standing alone is sufficient to substitute for 

disclosure under § 521, in combination they preclude a finding 
23 

that Ryan deliberately concealed its claims against defendants 

from the bankruptcy court or otherwise sought to "obtain . . . 

unfair advantage." Scarano, 203 F.2d at 513.5 

 We note in addition that while plaintiff cites district 

court decisions from various jurisdictions that support its 

position,6 defendant cites no case in which a court held that 

intent to mislead or deceive could be inferred from the mere fact 

of nondisclosure, and we are aware of none. We are persuaded, 

however, that policy considerations militate against adopting a 

rule that the requisite intent for judicial estoppel can be 

 

5Defendants cite several district court cases from other 

jurisdictions in support of their position that a debtor's 

failure to disclose a claim as an asset in bankruptcy precludes 

later assertion of that claim under the doctrine of judicial 

estoppel. See Pako Corp. v. Citytrust, 109 B.R. 368 (D. Minn. 

1989); In re Hoffman, 99 B.R. 929 (N.D. Iowa 1989); In re Louden, 

106 B.R. 109 (E.D. Ky. 1989); In re Galerie des Monnaies, 62 B.R. 

224 (S.D.N.Y. 1986), aff'd, 1986 WL 6230 (S.D.N.Y. 1986); In re 

Caro Area Services for the Handicapped, 53 B.R. 438 (E.D. Mi. 

1985). Several of these cases are clearly distinguishable from 

the instant case. See, e.g., Pako, 109 B.R. at 377 (finding that 

debtor knowingly concealed claim in light of pre-bankruptcy 

testimony of General Counsel/Chief Administrative Officer that he 

thought debtor had been wronged by defendant). To the extent 

that some are not, we note simply that these cases are not 

binding on this court, and we are not persuaded by their 

analysis. 

6See Guenther v. Snap-On Tools Corp., 1995 WL 137061, *11 (N.D. 

Ill. 1995)(unreported decision)(holding that judicial estoppel on 

the basis of bankruptcy nondisclosure is inappropriate because 

"there is no basis for finding any misconduct or injustice"); In 

re TGX Corp., 168 B.R. 122, 132 (W.D. La. 1994)(finding 

nondisclosures "not sufficiently egregious" to justify judicial 

estoppel); Reciprocal Merchandising Services, Inc. v. All 

Advertising Associates, Inc., 163 B.R. 689, 697 n.11 (S.D.N.Y. 

1994)(finding that "intentional misconduct is a necessary element 

in a claim for judicial estoppel" even in bankruptcy context); In 

re Neptune World Wide Moving, Inc., 111 B.R. 457 (S.D.N.Y. 

1990)(stating that judicial estoppel does not apply where 

inconsistency was based on inadvertence or mistake). 
24 

inferred from the mere fact of nondisclosure in a bankruptcy 

proceeding. Such a rule would unduly expand the reach of 

judicial estoppel in post-bankruptcy proceedings and would 

inevitably result in the preclusion of viable claims on the basis 

of inadvertent or good-faith inconsistencies. While we by no 

means denigrate the importance of full disclosure or condone 

nondisclosure in bankruptcy proceedings, we are unwilling to 

treat careless or inadvertent nondisclosures as equivalent to 

deliberate manipulation when administering the "strong medicine" 

of judicial estoppel. Chaveriat v. Williams Pipe Line Co., 11 

F.3d 1420, 1428 (7th Cir. 1993). 

 Defendants argue that rejecting their proposed "inferred 

intent" rule "would invite prolonged discovery into the motives 

of the debtor." Bright Wood's Br. at 25. We disagree. For 

purposes of judicial estoppel, we require a showing of intent in 

other contexts; we see no reason why the process of discerning 

that intent should be unworkable in the bankruptcy context when 

it is workable elsewhere. We therefore reject defendant's 

argument that intent may be inferred for purposes of judicial 

estoppel solely from nondisclosure notwithstanding the 

affirmative disclosure requirement of the Bankruptcy Code. 

 Because Ryan did not act with the intent to play fast and 

loose with the courts that is required for application of the 

judicial-estoppel doctrine, we conclude that the district court 

erred in granting summary judgment against Ryan on judicial 

estoppel grounds. 

VIII.
25 

 As we have already concluded that the district court erred 

in granting summary judgment against Ryan on judicial estoppel 

grounds, we need not reach Ryan's argument that application of 

judicial estoppel under the circumstances of this case would 

violate principles of equity and justice. We nonetheless state 

briefly our belief that judicial estoppel is an "extraordinary 

remed[y] to be invoked when a party's inconsistent behavior will 

otherwise result in a miscarriage of justice." Oneida, 848 F.2d 

at 424 (Stapleton, J., dissenting). It is not meant to be a 

technical defense for litigants seeking to derail potentially 

meritorious claims, especially when the alleged inconsistency is 

insignificant at best and there is no evidence of intent to 

manipulate or mislead the courts. Judicial estoppel is not a 

sword to be wielded by adversaries unless such tactics are 

necessary to "secure substantial equity." Gleason, 458 F.2d at 

175. In this case, application of judicial estoppel would be 

unduly harsh and inequitable. While we need not and do not 

decide whether we would reverse the district court's order on 

this ground alone, our equitable concerns lend support to our 

overall conclusion. 

IX.

 For the foregoing reasons, we will reverse the order of the 

district court granting summary judgment in favor of defendants 

and remand for further proceedings.