1

 Unless otherwise noted, the Facts are extracted from Defendant Scales’ Brief (Doc. 79)

in Support of the Motion for Summary Judgment. 

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

ELBERT SMITH, JR., and )

THERESA SMITH )

)

Plaintiffs, )

)

v. ) Civil Case No.: 05-331-BH-B

)

SCALES EXPRESS, INC., )

)

Defendant. )

ORDER

This matter is before the Court on Defendant Scales Express, Inc.’s (hereinafter, “Scales”)

Motion (Doc. 78) for Summary Judgment based upon a theory of judicial estoppel. Plaintiffs have

filed a Response (Doc. 82) and Defendants, in turn, have submitted a Reply (Doc. 85) to Plaintiffs’

Response. In addition, Defendant Scales’ Motions (Doc. 84) to Strike Plaintiffs’ affidavits of Joseph

Verneuille, Barry Thompson and Rick Maples. Upon consideration of the above pleadings and all

relevant evidence submitted therewith, the Court finds that Defendant’s Motion (Doc. 78) for

Summary Judgment and Motion (Doc. 84) to Strike are due to be DENIED. 

Facts1

Based upon the parties’ pleadings, the following timeline represents the chronological order

of events relevant to the issues before the Court on summary judgment:

1. September 9, 2003 Plaintiffs file a petition for relief under Chapter 13 of the

United States Bankruptcy Code.

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2. December 4, 2003 Plaintiffs Chapter 13 plan is confirmed.

3. September 28, 2004 Plaintiff Elbert Smith is involved in a motor vehicle accident

in St. Lucie County, Florida.

4. October 18, 2004 Plaintiffs file a Motion to Suspend Payments to the Chapter

13 Trustee based on Elbert Smith’s inability to work due to

injuries resulting from the accident. 

5. October 21, 2004 Plaintiffs notify Scales that they will be seeking damages for

injuries sustained in the accident.

6. January 31, 2005 Plaintiffs file a Notice of Conversion of the Chapter 13 case

to one under Chapter 7 of the United States Bankruptcy Code.

7. January 31, 2005 Plaintiffs also file a Chapter 7 Conversion Petition which

includes, among other things, a new Statement of Financial

Affairs, Schedules and Statement of Post-Petition Debts.

These updated schedules make no mention of the Smiths’

claims against Scales in Lincoln General Insurance Company.

8. March 7, 2005 Plaintiffs appear at their Section 341(a) Meeting of Creditors

where they are questioned about their assets and liabilities by

the Bankruptcy Administrator and the Chapter 7 Trustee. 

9. April 22, 2005 Smiths file this lawsuit, originally in the Circuit Court of

Mobile County.

10. May 10, 2005 Plaintiffs receive a no-asset discharge under Chapter 7 of the

United States Bankruptcy Code. 

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Legal Analysis

Defendant Scales contends that because the Smiths did not list this pending lawsuit in their

bankruptcy schedules while their case was pending in Chapter 13 nor at the time it was converted

to Chapter 7, they should be judicially estopped from proceeding as plaintiffs in this litigation and

as defendants in the related interpleader action. (Def.’s Br. Supp. Mot. Summ. J., Doc. 79, p. 5).

The Court finds, however, that judicial estoppel of Plaintiffs’ claims is inappropriate under the facts

of this case. 

Judicial Estoppel

Under the doctrine of judicial estoppel, a party will be precluded from “asserting a claim in

a legal proceeding that is inconsistent with a claim taken by a party in a previous proceeding.”

Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1285 (11th Cir. 2002) (internal quotations omitted).

Judicial estoppel is an equitable doctrine invoked at a court’s discretion to prevent the perversion

of the judicial process. Id. It is intended to “protect the integrity of the judicial process by

prohibiting parties from deliberately changing positions according to the exigencies of the moment.”

Id. (citing New Hampshire v. Maine, 532 U.S. 742, 750 (2001) (internal quotations omitted)). The

Eleventh Circuit has directed that two factors must be considered in the application of judicial

estoppel: 1) “it must be shown that the allegedly inconsistent positions were made under oath in a

prior proceeding” and 2) “such inconsistencies must be shown to have been calculated to make a

mockery of the judicial system.” Id. However, the Circuit Court does note, “these two enumerated

factors are not inflexible or exhaustive; rather, courts must always give due consideration to all the

circumstances of a particular case when considering the applicability of this doctrine.” Id. at 1286.

As noted in Chandler v. Samford Univ., “[c]ourts of various jurisdictions have held that a

debtor’s assertion of legal claims not disclosed in earlier bankruptcy proceedings constitutes an

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assumption of inconsistent positions.” 35 F.Supp.2d 861, 863 (N.D. Ala. 1999). Following this

assumption and because Plaintiffs do not seem to dispute the issue, the Court finds that the first

prong of the Eleventh Circuit’s standard has been satisfied. We now turn to the second prong

regarding Plaintiffs’ intent to manipulate the judicial system. 

As stated by the Court in Chandler, “many courts have found that the combination of a

party’s knowledge of the claim and motive for concealment in the face of an affirmative duty to

disclose the claim provides sufficient evidence of intent to manipulate the system.” Id. at 864. To

that end, Defendant alleges that Plaintiffs had a duty to disclose their lawsuit on three separate

occasions and failed to do so. They assert that Plaintiffs had a duty to disclose their potential claims

as soon as they accrued while they were still in Chapter 13 bankruptcy, when they converted from

Chapter 13 to Chapter 7 bankruptcy and when they were questioned about any “third-party claims”

during their Section 341(a) Meeting of Creditors. (Def’s Br. Supp. Mot. Summ. J. at 5-6).

However, the Chandler Court goes on to note, “where there is no affirmative duty to disclose, courts

have not applied the doctrine of judicial estoppel to bar a party from asserting claims not disclosed

during the course of bankruptcy proceedings.” Contrary to Defendant’s propositions, this Court

finds that Plaintiffs did not have a duty, once their Chapter 13 plan was confirmed, to disclose their

potential claims. 

Duty to Disclose

In determining whether Plaintiffs had a duty to disclose, we turn to the relevant Bankruptcy

Code provisions governing conversion of a Chapter 13 bankruptcy. 11 U.S.C. 348(f)(1) states,

“when a case under chapter 13 of this title is converted to a case under another chapter under this

title (A) 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 ... .” (emphasis added). Faced with a factually similar situation in

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which the plaintiffs’ tort claim accrued after confirmation of their Chapter 13 bankruptcy but before

they converted to Chapter 7, the Court in Farmer v. Taco Bell Corp., 242 B.R. 435 (W.D. Tenn.

1999) held, based on the clear legislative intent of Congress’s 1994 amendment to this section of

the Bankruptcy Code, that “[s]ection 348(f)(1)(A) clearly dictates that any property acquired ...

[after Chapter 13 confirmation, but prior to conversion to Chapter 7] is not part of the bankruptcy

estate.” In the instant case, we find the Farmer Court’s analysis to be sound and thereby hold,

consistent with their ruling, that Plaintiffs’ post Chapter 13 confirmation cause of action against

Scales was statutorily never meant to be included in their bankruptcy estate. Because their claims

were not a part of their confirmed Chapter 13 bankruptcy estate, Plaintiffs had no affirmative duty

to report them. 

Defendant Scales, however, relies substantially on Burnes and Chandler as dispositive cases

indicating that an application of judicial estoppel is appropriate in the instant matter. The Court

disagrees. In both cases, the presiding Court determined that a Chapter 13 bankruptcy debtor, who

had converted to Chapter 7 and was discharged, was judicially estopped from proceeding in a tort

action that they were aware of while in Chapter 13 but did not disclose. However, in neither Burnes

nor Chandler is there any indication that either of the Plaintiffs’ Chapter 13 plans were confirmed.

In the instant case, however, as in Farmer, the Plaintiffs’ Chapter 13 plan had been confirmed for

a significant period of time prior to the claim accruing. Following the plain language and clear intent

of 11 U.S.C. §348(f)(1), the Court finds that Plaintiffs had no affirmative duty to disclose any

property acquired after confirmation of their Chapter 13 plan. 

Defendants next turn to section 348(f)(2)’s provision that, “[i]f the debtor converts a case

under Chapter 13 of this title to a case under another chapter in bad faith, the property of the estate

in the converted case shall consist of the property of the estate as of the date of conversion.” The

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Court does not find that there is any evidence that Plaintiffs converted this case in bad faith.

Plaintiffs converted from Chapter 13 bankruptcy to Chapter 7 because they were unable to continue

payments to the Trustee as a result of Elbert Smith’s inability to work. Defendant’s only evidence

of bad faith, however, is Plaintiffs’ failure to disclose their claims against Scales. As we have

already stated, pursuant to section 348, their claims against Scales were not to be part of their

bankruptcy estate and they had no duty to disclose. With no duty to disclose, we cannot find their

to be bad faith on the part of the Plaintiffs for failure to do so. 

Upon due consideration of all the facts and circumstances of this particular case, the Court

finds the Plaintiffs neither acted in bad faith nor attempted to make a mockery of the judicial system.

Therefore, we hold that Defendant’s Motion (Doc. 78) for Summary Judgment is due to be and

hereby DENIED.

Motion to Strike

Defendant Scales also Motions (Doc. 84) to Strike the statements of Joseph Verneuille, Barry

Thompson and Rick Maples as alleged “expert” affidavits. Though Plaintiffs refer to these

individuals as “experts” in the area of bankruptcy law (See Pls. Resp. Opp. Summ. J., Doc. 82, p.

7), the affidavits seem, as Plaintiffs have proposed in their Response (Doc. 87) in Opposition to the

Motion to Strike, to merely be fact affidavits regarding those individuals’ interpretations of what

transpired at the Section 341(a) Meeting of Creditors on March 7, 2005. This is the capacity in

which the Court considered those statements and to the extent that any “expert opinion” interpreting

bankruptcy law was proffered, the Court disregarded such testimony. In any event, the Court did

not substantially rely on any of the opinions expressed in these affidavits in ruling on the matter

before us. Therefore, we find that striking these affidavits is inappropriate and unnecessary.

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Defendant’s Motion (Doc. 84) to Strike is due to be and hereby DENIED.

So ORDERED, this 2nd day of August, 2006.

s/ W. B. Hand

SENIOR DISTRICT JUDGE

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