DISCUSSION

Potter has filed this motion under Rule 12(b)(6) of the Federal Rules of Civil Procedure
arguing that Cannon-Stokes’ Amended Complaint fails to state a claim upon which relief may be
granted on the basis that judicial estoppel bars her claims. Because estoppel is an affirmative
defense, see Rule 8(c), and given that Cannon-Stokes has filed an affidavit to which Potter
neither objects nor seeks to respond, the court shall consider Potter’s motion as one for summary
judgment on his affirmative defense.' As such, the facts as asserted by Cannon-Stokes are taken
as established and the court will assess whether Potter is entitled to judgment as a matter of law.
See Rule 56(c) (“. .. The judgment sought shall be rendered forthwith if the [evidence submitted]
show(s] that there is no genuine issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law.”)

Potter asserts that because Cannon-Stokes obtained complete relief from her debts in her
bankruptcy court action but never disclosed in her bankruptcy petition either her EEO charge
against the USPS or the possibility that she would pursue her claims of employment
discrimination against the USPS in this court, the doctrine of judicial estoppel is invoked and
Cannon-Stokes’ Amended Complaint must fail. Judicial estoppel “generally prevents a party
from prevailing in one phase of a case on an argument and then relying on a contradictory
argument to prevail in another phase.” New Hampshire v. Maine, 532 U.S. 742, 749 (2001).
The purpose of the doctrine is to protect “the integrity of the judicial process.” Jd. The Seventh

Circuit has stated that judicial estoppel may apply when “(1) the later position is clearly

‘Cannon-Stokes attaches an affidavit to her response to the motion to dismiss. Potter states that he has no
objection to the court’s converting the motion to one under Federal Rule of Civil Procedure 56 and that he has no
additional documents to include for purposes of a converted motion.

4


Stokes is charged with knowledge of the law, as Potter would have it, she also would know that
the trustee is authorized under 11 U.S.C. § 350 and Federal Rule of Bankruptcy Procedure 5011
to reopen the bankruptcy case to administer assets in order to capture any monetary recovery she
might obtain in her law suit.? The undisputed facts point to a conclusion that plaintiff was not in
bad faith in failing to disclose her claim.

Furthermore, the court is not persuaded that judicial estoppel serves the interest of justice
in the circumstances presented here. As binding precedent from the Seventh Circuit makes clear,
intentional wrongdoing is the focus of judicial estoppel, Jn re Cassidy, 892 F.2d at 641,
Chaveriat, 11 F.3d at 1428, and there is little to support such an intentional wrongdoing theory
here. This conclusion should in no way mean to minimize the significance of full disclosure in
bankruptcy actions, and the court certainly does not condone the nondisclosure that took place
here. However, as the court accepts Cannon-Stokes’ statement that she disclosed her claim to her
attomey and she relied on his expertise in preparing her bankruptcy petition, and in light of the
capacity of the trustee to reopen her bankruptcy case if he deems it prudent, the court is unable to
find the intentional misconduct that would invoke a penalty foreclosing her claims in this court.

CONCLUSION
For the reasons stated above, Potter’s motion [#18] is denied. Potter is directed to answer

the Amended Complaint by March 25, 2004. A status hearing/scheduling conference is set for

>See Guenther v. Snap-On Tools Corp., No. 90 C 4436, 1995 WL 137061, at *12 (N.D. Il. March 28,
1995). The Eleventh Circuit rejected the notion that reopening a bankruptcy case would cure a failure to disclose,
stating that allowing a debtor to “back-up, re-open [a] bankruptcy case, and amend . . . bankruptcy filings, only after
[an] omission has been challenged by an adversary, suggests that a debtor should consider disclosing potential assets
only if he is caught concealing them.” Burnes, 291 F.3d at 1288. In that case, however, the court did note that there
was “sufficient evidence to infer intentional manipulation” by the debtor. /d. at 1287. The circumstances here are
quite different.


Moreover, the bankruptcy court accepted the trustee’s no asset report, which illustrates that
Cannon-Stokes convinced the first court to adopt her position. The fourth factor is less clear,
however, as it is difficult to see how Cannon-Stokes has received an unfair advantage from her
inconsistent positions. Potter argues that Cannon-Stokes would derive an unfair advantage
because had her claim for $300,000 been disclosed to the bankruptcy court, in all likelihood the
finding of no assets would not have been entered and her debts would not have been discharged.
This assertion is not substantiated by an affidavit from the bankruptcy trustee and, in reality, the
trustee might rather have abandoned this contingent claim on the basis that it was “of
inconsequential value and benefit to the estate.” 11 U.S.C. § 554.

In any event, as the use of the word “may” suggests in the Seventh Circuit’s discussion of
these factors, the presence or absence of any one factor is not outcome determinative and the
court must be mindful of other statements the Seventh Circuit has made conceming judicial
estoppel. For example, judicial estoppel should only apply where “intentional self-contradiction
is being used as a means of obtaining unfair advantage in a forum designed for suitors seeking
justice.” In re Cassidy, 892 F.2d 637 at 641 (quoting Scarano v. Central R. Co., 203 F.2d 510,
513 (3d Cir. 1953)); see also, Chaveriat v. Williams Pipe Line Co., 11 F.3d 1420, 1428 (7th Cir.
1993) (“Judicial estoppel is strong medicine, and this has led courts and commentators to
characterize the grounds for its invocation in terms redolent of intentional wrongdoing.”).

Cannon-Stokes, in response to the motion, suggests a number of reasons why judicial
estoppel should not be applied here. First, she maintains that many of the acts she complains of
occurred after she filed for bankruptcy and after she received her discharge. For example,

Cannon-Stokes reasons that because (a) she originally filed her bankruptcy petition under


inconsistent with the earlier position; (2) the facts at issue are the same in both cases; (3) the
party to be estopped convinced the first court to adopt its position; and (4) 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.” United States v. Christian, 342 F.3d 744, 747 (7th Cir.
2003). But see In re Cassidy, 892 F.2d 637, 641 n.2 (7th Cir. 1990) (“[P]rejudice to the
opponent from the change of position is not a necessary element of judicial estoppel, thus
contrasting judicial estoppel from the more familiar equitable estoppel.”). While the Seventh
Circuit has not yet determined whether judicial estoppel would bar claims filed in a separate
action that were not disclosed in a previous bankruptcy filing, other courts have concluded that
judicial estoppel applies in such situations. See, e.g., Barger v. City of Cartersville, 348 F.3d
1289, 1294-97 (11th Cir. 2003); Krystal Cadillac-Oldsmobile GMC Truck, Inc. v. GMC, 337
F.3d 314 (3d Cir. 2003); Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1288 (11th Cir. 2002),
Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782-86 (9th Cir. 2001); In re Coastal
Plains, Inc., 179 F.3d 197, 208-09 (Sth Cir. 1999); Payless Wholesale Distribs., Inc. v. Alberto
Culver (P.R.) Inc., 989 F.2d 570 (1st Cir. 1993).

Clearly, most of the above listed judicial estoppel factors are satisfied here. For example,
Cannon-Stokes is clearly taking a position that is inconsistent with an earlier position, as she
asserted to the bankruptcy court that she had no contingent or unliquidated claims while at the
same time pursuing claims against the USPS for $300,000. Also, the facts are identical insofar

as the claim Cannon-Stokes failed to disclose is the identical claim she is asserting now.

It is worth noting that most of these cases dealt with a situation in which a discharged debtor later sued a
creditor whose interest had been omitted from the bankruptcy petition. Barger and Burnes are the only cases
decided in the employment discrimination context.



81 F.3d 355, 360 (3d Cir. 1996) (‘The integrity of the court is affronted by the inconsistency
notwithstanding the lack of identity of those against whom it is asserted.”); Muellner v. Mars,
Inc., 714 F. Supp. 351, 356 (N.D. Ill. 1989) (“Because the purpose of judicial estoppel is to
prevent a party from playing fast and loose with the courts, rather than to protect litigants, under
the prevalent view there generally is no need to demonstrate detrimental reliance or privity of the
adverse party.”) (internal quotations and citations omitted).

With regard to bad faith, on the other hand, Cannon-Stokes is more pefsuasive. She
argues that she disclosed her EEO charge to her attorney and he advised that the action did not
have to be listed because it was still being investigated by an administrative agency. In response
to this argument, Potter urges adoption of standards for intentional conduct used in both the Fifth
and Eleventh Circuits. Those circuits have noted that a debtor’s failure to disclose claims can
only be construed as unintentional when “the debtor either lacks knowledge of the undisclosed
claims or has no motive for their concealment.” Jn re Costal Plains, Inc., 179 F.3d at 210;
DeLeon v. Comcar Indus., Inc., 321 F.3d 1289, 1291 (11th Cir. 2003). Here, Cannon-Stokes
admits she had knowledge of her undisclosed claims. But whether she was motivated to conceal
is not self-evident as Potter suggests. Although a debtor in bankruptcy might be motivated to
hide assets in order that they not be recovered for the benefit of creditors, that seems unlikely
here. Plaintiff professes an innocent reason for the non-disclosure, that she was misinformed.
Moreover, for Cannon-Stokes to have thought that she could hide this asset would have been
naive in the extreme. After the completion of the administrative proceeding, she filed her pro se
complaint in the same court house as that in which her bankruptcy petition had been filed. The

complaint is a public record, easily discovered as Potter can attest. Furthermore, if Cannon-



> Minute Order Form (06/97)

United States District Court, Northern District of Minois

Docketing to mail notices,

Copy to judge/magistrate judge.

Name of Assigned Jud; Sitting Judge if Oth
vor Magistrate Judge Joan H. Lefkow than Ansgned Judge
CASE NUMBER 03 C 1942 DATE 3/4/2004
CASE Cannon-Stokes vs. Potter
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
qd) im} Filed motion of [ use listing in “Motion” box above.]
(2) o Brief in support of motion due :
@) a Answer brief to motion due. . Reply to answer brief due. .
(4) Qo Ruling/Hearing on set for at
(5) Oo Status hearing[held/continued to] [set for/re-set for] on set for at
(6) a Pretrial conference[held/continued to] [set for/re-set for] on set for at .
(@) a Trial[set for/re-set for] on at
(8) Q [Bench/Jury trial] [Hearing] held/continued to at
(9) Qa This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OERCP4(m) OLocal Rule 41.1 CFRCP41(a)(1) CFRCP41(a)(2).
ao ff [Other docket entry] | Enter Memorandum Opinion and Order. Defendant’s motion to dismiss
[18-1] is denied. Defendant is directed to answer the amended complaint by 3/25/04. Status hearing is
set for 4/20/04 at 9:30 a.m. Plaintiff's counsel is directed to send a copy of this decision to Alexander F.
Knopfler and to the United States Bankruptcy Trustee.
(ii) [For further detail see order attached to the original minute order.]
No notices required, advised in open court. :
No notices required. nba of mien
oS | Notices mailed by judge's staff.
Notified counsel by telephone. MAR 0 5, 2004

Mail AO 450 form. iheee nt | wht... Jl

‘vannor
one 7 u dae mailed votce
courtroom “=
deputy’s . MD
initials
Dateltinie received in ; 7
central Clerk’s Office raiing deputy inate



April 20, 2004. Plaintiff’s counsel is directed to send a copy of this decision to Alexander F.

Knopfler and to the United States Bankruptcy Trustee.

enter: _ ese OM hethernr——
(JOAN HUMPHREY LEFKOW

United States District Judge

Dated: March 4, 2004

10



Chapter 13 and that the petition was converted to one under Chapter 7 on January 7, 2001; (b) a
Chapter 7 petition includes only the debtor’s assets as of the date the petition was filed, 11
U.S.C. § 541; and (c) under 11 U.S.C. § 348(£)(1)(A), “when a case under Chapter 13 of this title
is changed to a case under another chapter under this title, property of the estate in the converted
case shall consist of property of the estate as of the date of the filing of the petition,” then (d) any
discriminatory action taking place after July 28, 1998 (when she filed the Chapter 13 bankruptcy)
is not part of the bankruptcy estate and, therefore, judicial estoppel would not apply.

The problem with this argument, as Potter points out, is that the post-bankruptcy acts
must either be “fairly encompassed” within Cannon-Stokes’ prior EEO charge, see Chambers v.
American Trans Air, Inc., 17 F.3d 998, 1003 (7th Cir. 1994), or, if not, then she was required to
file a new EEO charge in order to exhaust her administrative remedies. The more likely of the
two is that her new claims of discrimination were fairly encompassed by her earlier charge, and
because that charge was filed nearly two years before Cannon-Stokes’ bankruptcy, this argument
is rejected.

Cannon-Stokes next argues that the requirements for judicial estoppel to apply, that the
two inconsistent positions must be related to the same facts and there must be evidence of bad
faith, are not met here. If Cannon-Stokes means to suggest that it is relevant that the USPS was
not a creditor in her bankruptcy proceeding, the court disagrees. While this is true of many of the
cases that have applied judicial estoppel in this setting, “[t]he doctrine of judicial estoppel
protects the integrity of the judicial system, not the litigants.” Burnes, 291 F.3d at 1297.
Therefore, “while privity and/or detrimental reliance are often present in judicial estoppel cases,

they are not required.” Id.; see also, Ryan Operations G.P. v. Santiam-Midwest Lumber Co.,



decision was issued on Cannon-Stokes’ discrimination claim when her Request for
Reconsideration was denied. Cannon-Stokes received notice of this decision on December 20,
2002 and, thereafter, filed this action on March 18, 2003.

On July 28, 1998, while her administrative proceeding was pending, Cannon-Stokes filed
a voluntary petition in bankruptcy under Chapter 13 of the Bankruptcy Code, 11 U.S.C. §§ 101 et
seq., in the United States Bankruptcy Court for the Norther District of Illinois. Throughout her
entire bankruptcy action Cannon-Stokes was represented by counsel. On January 21, 2000, she
converted her Chapter 13 petition to one for liquidation of her assets under Chapter 7. During
the pendency of her bankruptcy action, Cannon-Stokes did not disclose to the trustee or the court
her pending administrative claim for employment discrimination against the USPS. In Schedule
B of her bankruptcy petition, when asked to list “[o]ther contingent and unliquidated claims of
every nature, including tax refunds, counter claims of the debtor, and the rights to setoff claims,”
Cannon-Stokes listed “NONE.” In item 4 of the Statement of Financial Affairs portion of her
bankruptcy petition Cannon-Stokes was instructed to “[I]ist all suits and administrative
proceedings to which the debtor is or was a party within one year immediately preceding the
filing of this bankruptcy case.” Cannon-Stokes responded “None.” She also declared in a
number of places in her bankruptcy petition that the information contained in her petition was
true and correct under the penalty of perjury.

On April 19, 2000, bankruptcy trustee Alexander S. Knopfler made a “Finding of No
Assets” on Cannon-Stokes’ bankruptcy claim. On May 19, 2000, the bankruptcy court entered
an order granting Cannon-Stokes a complete discharge of debts pursuant to 11 U.S.C. § 727.

Cannon-Stokes’ discharged unsecured debts totaled over $98,000.


(2) ordering her to deliver mail on a residential route in April of 1996 and on several other
occasions in violation of her medical restrictions; (3) refusing to transfer her to a different facility
where her medical and work restrictions could be accommodated and refusing to assign her to a
different craft where she could fully perform her job duties with reasonable accommodations;
(4) repeatedly transferring her to different facilities without her request or approval and without
regard to whether there were positions available within her medical restrictions; (5) informing
her that there was nothing wrong with her and that she would be forced to deliver mail on the
street as soon as she completed her fitness for duty examination; and (6) insisting that she sign
her approval to a different job duty description in June of 2003 and refusing to allow her to
perform her original limited job duty description,

For her Count Il claim, Cannon-Stokes alleges that the USPS retaliated against her on
numerous occasions since 1996 when she filed her charges of discrimination under the
Rehabilitation Act. Cannon-Stokes states that such retaliation includes all acts 1-6 listed above.

Cannon-Stokes first filed a formal complaint of discrimination under the USPS’ Equal
Employment Opportunity procedures (herein, “EEO charge”) on June 21, 1996. After an EEO
Investigative Report was completed on August 4, 1999, Cannon-Stokes requested a hearing
before an Administrative Judge on August 30, 1999. On November 8, 1999, Administrative
Judge Margaret Lee Herbert set the case for trial on February 23, 2000. On December 3, 1999,
Cannon-Stokes filed with the EEOC her “Statement of Relief Sought,” in which she requested
$300,000 as damages for the alleged employment discrimination. On February 24, 2000,
Cannon-Stokes’ claims were heard at trial by Administrative Judge Herbert. Administrative

Judge Herbert ruled in favor of the USPS on January 11, 2001. On December 16, 2002, a final



UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS DOCKETEL
‘EASTERN DIVISION
MAR 05 2004
)
TRACI CANNON-STOKES, )
)
Plaintiff, )
)
vs. ‘ ) No. 03 C 1942

) Judge Joan H. Lefkow
JOHN E. POTTER, Postmaster General, )
United States Postal Service, )
)
Defendant, )
)

MEMORANDUM OPINION AND ORDER

Plaintiff, Traci Cannon-Stokes (“Cannon-Stokes”), has filed an Amended Complaint
against defendant, John E. Potter (“Potter”), Postmaster General, United States Postal Service
(“USPS”), alleging in Count I discrimination based on disability in violation of the Rehabilitation
Act of 1973, 29 U.S.C. §§ 791 et seg., and in Count II retaliation in violation of 42 U.S.C.

§§ 2000e ez seg. Before the court is Potter’s motion to dismiss Cannon-Stokes’ Amended
Complaint. For the reasons stated below, the motion is denied.
BACKGROUND

Cannon-Stokes is employed at the USPS facility in Bloomingdale, Hlinois. Since 1995,
she has suffered from Post Traumatic Stress Disorder, which Cannon-Stokes alleges is a
permanent disability. In Count I of her Amended Complaint, she claims that employees of the
USPS have harassed and discriminated against her on numerous occasions. These actions

included (1) accusing her of moral problems because she was placed on light duty in 1996;

7