In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 05-4605

TRACI CANNON-STOKES,

Plaintiff-Appellant,

v.

JOHN E. POTTER, Postmaster General

of the United States Postal Service,

Defendant-Appellee.

____________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 03 C 1942—Joan Humphrey Lefkow, Judge.

____________

SUBMITTED JUNE 19, 2006—DECIDED JULY 5, 2006

____________

Before COFFEY,EASTERBROOK, and SYKES, Circuit Judges.

EASTERBROOK, Circuit Judge. Traci Cannon-Stokes

contends that the Postal Service, which hired her as a letter

carrier, violated the Rehabilitation Act, 29 U.S.C. §791, by

not accommodating her mental aversion to making residential deliveries and by retaliating against her for asserting

her statutory rights. At the same time as Cannon-Stokes

was pursuing an administrative claim for $300,000 from the

Postal Service, she filed a Chapter 7 bankruptcy petition

asserting that she had no assets; her petition expressly

denied that she had any valuable legal claims (“contingent

and unliquidated claims of every nature”, the schedule calls

them, leaving no room for quibbles). The bankruptcy court
2 No. 05-4605

believed that assertion and discharged all of her approximately $98,000 in unsecured debts.

After the bankruptcy was over, Cannon-Stokes filed this

suit. Naturally enough, the Postal Service contended that

judicial estoppel forecloses the action. Cannon-Stokes had

represented that she had no claim against the Postal

Service (or anyone else); that representation had prevailed;

she had obtained a valuable benefit in the discharge of her

debts. Now she wants to assert the opposite in order to win

a second time. That satisfies the requirements of judicial

estoppel. See, e.g., New Hampshire v. Maine, 532 U.S. 742,

749 (2001); Astor Chauffeured Limousine Co. v. Runnfeldt

Investment Corp., 910 F.2d 1540, 1547-48 (7th Cir. 1990).

Cannon-Stokes blamed the false statement on her bankruptcy lawyer; accepting this explanation, the district court

declined to dismiss the proceeding but later granted

summary judgment to the Postal Service on the merits—which on appeal defends its judgment by relying, once

again, on judicial estoppel.

All six appellate courts that have considered this question

hold that a debtor in bankruptcy who denies owning an

asset, including a chose in action or other legal claim,

cannot realize on that concealed asset after the bankruptcy

ends. See Payless Wholesale Distributors, Inc. v. Alberto

Culver (P.R.) Inc., 989 F.2d 570 (1st Cir. 1993); Krystal

Cadillac-Oldsmobile GMC Truck, Inc. v. General Motors

Corp., 337 F.3d 314 (3d Cir. 2003); Jethroe v. Omnova

Solutions, Inc., 412 F.3d 598 (5th Cir. 2005); United States

ex rel. Gebert v. Transport Administrative Services, 260 F.3d

909, 917-19 (8th Cir. 2001); Hamilton v. State Farm Fire &

Casualty Co., 270 F.3d 778 (9th Cir. 2001); Barger v.

Cartersville, 348 F.3d 1289, 1293-97 (11th Cir. 2003). We

reserved that question in Biesek v. Soo Line R.R., 440 F.3d

410 (7th Cir. 2006), while holding that judicial estoppel has

a proviso: bankruptcy fraud designed to hide an asset from
No. 05-4605 3

creditors does not prevent the creditors themselves from

realizing on the claim after its discovery.

Judicial estoppel is an equitable doctrine, and it is not

equitable to employ it to injure creditors who are themselves victims of the debtor’s deceit. Moreover, as a technical matter the estate in bankruptcy, not the debtor, owns all

pre-bankruptcy claims, and unless the estate itself engages

in contradictory litigation tactics the elements of judicial

estoppel are not satisfied. But if the estate (through the

trustee) abandons the claim, then the creditors no longer

have an interest, and with the claim in the debtor’s hands

the possibility of judicial estoppel comes to the fore. That is

what has happened here: the trustee abandoned any

interest in this litigation, so the creditors are out of the

picture and we must decide whether Cannon-Stokes may

pursue the claim for her personal benefit.

The answer is no, as the other circuits (cited above) have

concluded. “By making [litigants] choose one position

irrevocably, the doctrine of judicial estoppel raises the

cost of lying.” Chaveriat v. Williams Pipe Line Co., 11

F.3d 1420, 1428 (7th Cir. 1993). A doctrine that induces

debtors to be truthful in their bankruptcy filings will assist

creditors in the long run (though it will do them no good

in the particular case)—and it will assist most debtors too,

for the few debtors who scam their creditors drive up

interest rates and injure the more numerous honest

borrowers. Judicial estoppel is designed to “prevent the

perversion of the judicial process,” In re Cassidy, 892 F.2d

637, 641 (7th Cir. 1990), a fair description of the result if we

were to let Cannon-Stokes conceal, for her personal benefit,

an asset that by her reckoning is three times the value of

the debts she had discharged. It is impossible to believe

that such a sizeable claim—one central to her daily activities at work—could have been overlooked when CannonStokes was filling in the bankruptcy schedules. And if

Cannon-Stokes were really making an honest attempt to
4 No. 05-4605

pay her debts, then as soon as she realized that it had been

omitted, she would have filed amended schedules and

moved to reopen the bankruptcy, so that the creditors could

benefit from any recovery. Cannon-Stokes never did that;

she wants every penny of the judgment for herself.

In the district court Cannon-Stokes filed an affidavit

asserting that her false statement on the bankruptcy

schedules was the result of good-faith reliance on legal

advice. She maintained that in 2000 she told Erik Martin,

her bankruptcy lawyer, about her administrative claim

under the Rehabilitation Act and that he instructed her

to omit the information. Martin certainly was not above

shady dealings. In 2001 he was indicted on multiple

counts of perjury committed in the course of his bankruptcy

practice, and in 2003 he resolved that proceeding

by pleading guilty to contempt of court. Martin is not

currently authorized to practice law in either state or

federal court, and a bankruptcy court recently found him

complicit in tax fraud. See Claxton v. United States, 335

B.R. 680 (Bankr. N.D. Ill. 2006).

Yet bad legal advice does not relieve the client of the

consequences of her own acts. A lawyer is the client’s agent,

and the client is bound by the consequences of advice that

the client chooses to follow. Cannon-Stokes might as well

say that she is free to ignore any contract that a lawyer

advised her to sign with her fingers crossed behind her

back. The lawyer’s role as agent is why the Supreme Court

held in United States v. Boyle, 469 U.S. 241 (1985), that a

taxpayer could not avoid paying interest and penalties

occasioned by his lawyer’s mishandling of the return. Just

so here: a debtor in bankruptcy is bound by her own

representations, no matter why they were made, at least

until the debtor moves to amend the disclosures and pay

the creditors their due (a step that, to repeat, CannonStokes has not taken). The remedy for bad legal advice lies

in malpractice litigation against the offending lawyer.
No. 05-4605 5

What is more, Cannon-Stokes has repudiated the core

of her affidavit. Asked at her deposition about her dealings

with Martin, she replied that she could not remember

meeting or talking with him. Maybe with other lawyers in

his office, Cannon-Stokes said, but not Martin. Yet her

affidavit maintained that Martin personally had told her

not to list the Rehabilitation Act claim on her bankruptcy

schedules.

Whether the bankruptcy fraud was Martin’s suggestion,

some other lawyer’s, or Cannon-Stokes’s own bright idea

does not matter in the end. The signature on the bankruptcy schedule is hers. The representation she made is

false; she obtained the benefit of a discharge; she has never

tried to make the creditors whole; now she wants

to contradict herself in order to win a second case. Judicial

estoppel blocks any attempt to realize on this claim for her

personal benefit.

AFFIRMED

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—7-5-06