Opinion ID: 725141
Heading Depth: 3
Heading Rank: 1

Heading: What Law of Judicial Estoppel Applies?

Text: Preliminarily, in light of the fact that state law supplies the rule of decision on plaintiff's FEHA claim, we must determine what law applies to the question whether plaintiff is judicially estopped from proceeding with that claim. The district court had federal question jurisdiction over plaintiff's § 301-preempted breach of contract and breach of the implied covenant claims. Plaintiff's FEHA claim was a supplemental state claim on which California law supplies the rule of decision. None of this Court's cases says anything about the question of what estoppel law governs in such a situation. However, cases from other circuits have acknowledged this problem. The clearest statement is by Judge Easterbrook in Astor Chauffeured Limousine Co. v. Runnfeldt Investment Corp., 910 F.2d 1540 (7th Cir.1990): But what of the state claim? The Rules of Decision Act, 28 U.S.C. § 1652, requires federal courts to apply [t]he laws of the several states ... as rules of decision in civil actions to the extent no federal statute or rule governs. Does this require us to apply Illinois rules of judicial estoppel to the common law claim, on the ground that it is substantive, or do we treat judicial estoppel as wholly a matter of procedure, to be governed by the law of the court in which the case is pending? Several circuits have assumed that Erie requires application of the state rule. E.g., Konstantinidis v. Chen, 626 F.2d 933, 937-38 (D.C.Cir.1980). Others apply the federal rule, relying on the 'balancing test' of Byrd v. Blue Ridge Rural Electric Cooperative, 356 U.S. 525, 536-38, 78 S.Ct. 893, 900-01, 2 L.Ed.2d 953 (1958). E.g., Allen [v. Zurich Ins. Co.], 667 F.2d [1162], 1167 n. 4 [(4th Cir.1982)]; Edwards [v. Aetna Life Ins. Co.], 690 F.2d , 598 n. 4 [(6th Cir.1982)].... [T]he choice between state and federal law [is] hard for a doctrine such as judicial estoppel, a hybrid between substance and process that on occasion affects the outcome. Mercifully, the parties have spared us the choice, by ignoring the potential effects of Erie. Both sides have treated judicial estoppel as a doctrine to be shaped by the court in which the case is pending. On that assumption we apply to Astor's claim under state law the same rule used for its [federal] securities claims.... Id. at 1550-51. Unfortunately, there is less judicial development of this question than the Seventh Circuit perhaps implied by preceding Allen and Konstantinidis with e.g.. In fact, our research has turned up only a handful of cases that even mention this issue. In Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81 F.3d 355, 358 (3d Cir.1996), the court noted that the parties agreed that federal law on judicial estoppel governed, and (like the Seventh Circuit in Astor) the court accepted their agreement. Judge Sarokin, concurring with his own opinion for the panel, said that he thought the court could not merely accept the parties' agreement, but had to decide what law governed. He concluded that Erie did not mandate the application of state law, since a court has an extremely strong interest in being able to employ judicial estoppel in order to protect its integrity: 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. Id. at 358 n. 2 (Sarokin, J., concurring). He therefore concluded that federal law on judicial estoppel should govern in federal court. Id. 1 In Czajkowski v. City of Chicago, 810 F.Supp. 1428, 1435 (N.D.Ill.1993), the court contrasted Astor with Diginet, Inc. v. Western Union ATS, Inc., 958 F.2d 1388, 1397 (7th Cir.1992), in which the court applied state law on judicial estoppel. Left thus somewhat adrift, the district court in Czajkowski decided to apply federal law to the plaintiff's supplemental state law claims, while noting that federal and Illinois law might be the same in this regard. 810 F.Supp. at 1435 n. 7. In contrast, the court in Muellner v. Mars, Inc., 714 F.Supp. 351, 356 (N.D.Ill.1989) discussed this problem and decided to apply Illinois law. 2 In Kale v. Obuchowski, 985 F.2d 360, 361 (7th Cir.1993), the court stated: Despite [Astor], appellants have not paid the slightest attention to the question whether state or federal law defines the extent of judicial estoppel in litigation under federal law, where the inconsistent position was taken in state court. This is a somewhat different question than whether state law governs on the issue of judicial estoppel on a state law claim in federal court (and thus a different question than Astor addressed). As in Astor, the court did not decide the question. Like the parties, we refer to Illinois law and federal law interchangeably-if only because the cases use consistent approaches. Id. We do not believe that whether the prior position was taken in state or federal proceedings should be determinative. The integrity problem concerns the court presently confronted with the inconsistent statement; when the prior statement was made, it wasn't inconsistent yet, so the first court is powerless to address the fast and loose behavior. 3 In Monterey Development Corp. v. Lawyer's Title Ins. Corp., 4 F.3d 605, 608-09 (8th Cir.1993), the court stated that [b]ecause this is a diversity case, we must apply the substantive law of Missouri, and proceeded to apply Missouri judicial estoppel law. The court did not explain or cite any cases in support of its implicit conclusion that judicial estoppel was substantive under Erie. Similarly, in Reno v. Beckett, 555 F.2d 757, 770 (10th Cir.1977), a diversity case, the court analyzed Kansas law in holding judicial estoppel inapplicable. The court did not say why Kansas law controlled that question. And in Walker v. American Motorists Ins. Co., 529 F.2d 1163, 1164-65 (5th Cir.1976), a per curiam adoption of the district court's order, the court referred to Alabama law in holding judicial estoppel inapplicable, again without explaining why Alabama law controlled. See also In re Osborn, 24 F.3d 1199, 1207 & n. 11 (l0th Cir.1994) (applying Texas judicial estoppel law). 4 The Fourth Circuit reaffirmed its holding in Allen that federal law governed in the recent case of Guinness PLC v. Ward, 955 F.2d 875, 899 n. 20 (4th Cir.1992). In an opinion cited by Judge Sarokin in his Ryan Operations concurrence, a district court held that even if diversity were the sole ground of jurisdiction, the issue of judicial estoppel would be one properly resolved by the application of federal law rather than state law. AFN, 798 F.Supp. at 224 n. 6. The district court in AFN concluded that affirmative countervailing considerations of the sort recognized by Byrd, 356 U.S. at 537, 78 S.Ct. at 901, counseled in favor of applying federal law, since it is the federal court's integrity that is presently at stake. Id. Cf. Wang Laboratories, Inc. v. Applied Computer Sciences, Inc., 741 F.Supp. 992, 997 (D.Mass.1990) (even if jurisdiction was based on diversity, federal estoppel law would govern because question of which law to apply 'primarily concerns federal interests' ), rev'd on other grounds, 958 F.2d 355 (Fed.Cir.1992) (quoting Edwards, 690 F.2d at 598 n. 4). 5 It should also be noted that, as pointed out in AFN, in Scarano v. Central Railroad Co., 203 F.2d 510 (3d Cir.1953), the seminal case adopting the judicial estoppel doctrine, the court applied federal law to resolve the judicial estoppel question, albeit without explicitly stating its reasons for doing so. AFN, 798 F.Supp. at 224 n. 6. 6 Only one case from this Court that discusses judicial estoppel involved a state law claim, either supplemental or in diversity. In Milgard Tempering, Inc. v. Selas Corp. of Am., 902 F.2d 703 (9th Cir.1990), a diversity case, we applied federal law in determining that judicial estoppel was inappropriate. However, we did not explain why federal law controlled. 7 We now hold what Milgard assumed: federal law governs the application of judicial estoppel in federal court. Judicial estoppel enables a court to protect itself from manipulation. The interested party is thus the court in which a litigant takes a position incompatible with one the litigant has previously taken. The tribunal in which the litigant made the first statement could also be interested (there is no reason to think as a general proposition that one statement is more likely than the other to be true), but it is not in a position to do anything about its interest. Therefore, for all practical purposes, the interests of the second court are uniquely implicated and threatened by the taking of an incompatible position. In our view, this quite strong affirmative countervailing consideration of federal policy weighing in favor of the application of federal law in this case requires the policies of Erie to yield. Byrd, 356 U.S. at 537, 78 S.Ct. at 901. 8