Opinion ID: 223014
Heading Depth: 2
Heading Rank: 3

Heading: This Result Is Consistent with Our Own Precedents

Text: Declining to estop the Trustee is consistent with the trio of judicial estoppel cases we have hitherto decided in the bankruptcy context. The material facts of this case are indistinguishable from those of Kane v. National Union Fire Insurance Co., 535 F.3d 380 (5th Cir.2008) (per curiam), our most recent opinion. Both cases involve a Chapter 7 trustee who substituted into a cause of action to pursue a claim that the debtor had wrongly concealed during the bankruptcy proceeding. Neither trustee abandoned the claim at any point. In both situations, estopping the trustee would unnecessarily deny the estate's innocent creditors their right to seek some share of the recovery. Faced with the identical question raised here, we held in Kane that the trustee of a bankruptcy estate should not be judicially estopped from pursuing such a claim. Id. at 387. We reasoned that the Kanes' personal injury claim was an asset of the estate that the trustee had never abandoned, and that the only way the creditors would be harmed is if judicial estoppel were applied to bar the trustee from pursuing the claim on behalf of the estate. Id. In Superior Crewboats Inc. v. Primary P & I Underwriters (In re Superior Crewboats), 374 F.3d 330 (5th Cir.2004), we precluded the debtors themselves from pursuing a lawsuit for their own benefit that they had failed to disclose in their bankruptcy schedules. The debtors incorrectly told the bankruptcy trustee that the claim was proscribed by the statute of limitations; the trustee agreed, and formally abandoned the claim under the Bankruptcy Code. Id. at 333. Upon abandonment, the estate's interest in the claim reverted to the debtors, see 11 U.S.C. § 554, who were then properly estopped from benefiting from their deception, see In re Superior Crewboats, 374 F.3d. at 336; Kane, 535 F.3d at 386. Here, the Trustee has not abandoned the estate's interest in the judgment against the City; she is therefore entitled to pursue the judgment as the real party in interest for the benefit of the estate's creditors. In Browning Manufacturing v. Mims (In re Coastal Plains, Inc.), 179 F.3d 197 (5th Cir.1999), we judicially estopped a debtor's successor from collecting a judgment it obtained by pursuing, outside of bankruptcy, an undisclosed claim that was part of the debtor's estate. The trustee in that case was also estopped based on a sharing agreement with the debtor's successor in which the debtor's successor stood to receive 85 percent of any recovery, while the estate would receive only 15 percent. See id. at 204. Key to our application of judicial estoppel in Coastal Plains was the fact that recovery would benefit the individual who actually perpetrated the bankruptcy fraud in great disproportion to the bankruptcy estate. See Kane, 535 F.3d at 387 (citing In re Coastal Plains, 179 F.3d at 202-03, 212). No such equitable concerns inhere in this case, where Lubke does not stand to benefit from recovery of a judgment even if there is a surplus after all debts and fees have been paid.