Opinion ID: 3051480
Heading Depth: 2
Heading Rank: 2

Heading: Were Plaintiffs Judicially Estopped to Deny a

Text: Ratification of the Merger? Before analyzing other aspects of the ratification question, we address the district court’s holding that Plaintiffs were 3108 PERRETTA v. PROMETHEUS DEVELOPMENT judicially estopped to argue that the Merger vote was insufficient because of a representation made by Plaintiffs in their opposition to defendant’s motion to dismiss the original complaint. In Plaintiffs’ brief in opposition, they wrote: “Plaintiffs do not dispute that a majority of the unaffiliated limited partners voted in favor of the merger. Rather, the gravamen of their lawsuit is that they were induced to do so by statements in proxy materials that were deliberately false and misleading.” Plaintiffs now characterize this as a “misstatement of counsel”: what they meant to say was that they did not dispute that a majority of all limited partners—interested and disinterested—had approved the merger. [4] “Judicial estoppel, also known as ‘preclusion of inconsistent positions,’ prohibits a litigant from asserting inconsistent positions in the same litigation.” Humetrix, Inc. v. Gemplus S.C.A., 268 F.3d 910, 917 (9th Cir. 2001). The doctrine “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.” Pegram v. Herdrich, 530 U.S. 211, 227 n.8 (2000). The Supreme Court has identified three factors that “typically inform the decision whether to apply the doctrine in a particular case”: (1) whether the two positions are “clearly inconsistent,” (2) whether the party was successful in asserting the earlier position, and (3) whether the party seeking to assert the position would derive an unfair advantage or impose an unfair detriment upon the opposing party. New Hampshire v. Maine, 532 U.S. 742, 750-51 (2001). We review the decision whether to invoke judicial estoppel for an abuse of discretion. United States v. Ruiz, 73 F.3d 949, 953 (9th Cir. 1996). [5] In this case, we hold that the district court abused its discretion by invoking judicial estoppel. First, it is not obvious that the positions are clearly inconsistent, but we will concede that they are for purposes of this analysis. However, the second factor, success on the prior position, is entirely absent here. “Absent success in a prior proceeding, a party’s later PERRETTA v. PROMETHEUS DEVELOPMENT 3109 inconsistent position introduces no risk of inconsistent court determinations, and thus poses little threat to judicial integrity.” New Hampshire, 532 U.S. at 750-51 (citation and quotation marks omitted). In this case, Plaintiffs lost the very motion they were arguing, and it is difficult to see what advantage they might have derived from the apparent concession even then. The third factor, unfair prejudice to the opposing party, appears to be absent as well—the tally of votes cited above are drawn from Defendants’ Reply in Support of their Motion to Dismiss Plaintiffs’ First Amended Complaint and, on appeal, have been accepted by both parties as true. Plaintiffs’ explanation for the apparent change in position —that it merely reflects a misstatement, rather than a tactic— is also plausible. While plausibility is not one of the three New Hampshire factors, those factors were not meant to be exhaustive, and the text of New Hampshire itself lends support to the idea that it should be taken into account. See id. at 749 (quoting 18 Charles Wright, et al., Federal Practice and Procedure § 4477 at 782 (1981) (“absent any good explanation, a party should not be allowed to gain an advantage by litigation on one theory, and then seek an inconsistent advantage by pursuing an incompatible theory”) (emphasis added)). Finally, in this case, the district court noted, in justifying the holding of estoppel, that “the proxy materials indicated that the facts about the vote could not have been as plaintiffs allege.” It is not clear what the Proxy Statement, which preceded the vote, has to do with the factual matter of the final vote tally. At any rate (as shown below), it was the district court, not the Plaintiffs, that was mistaken about the importance of the Proxy Statement in determining how the outcome of the vote was to be determined. “An abuse of discretion occurs if the district court based its decision on an erroneous legal conclusion or a clearly erroneous finding of fact.” Gonzales v. Free Speech Coal., 408 F.3d 613, 618 (9th Cir. 2000) (quotation marks and citation omitted). 3110 PERRETTA v. PROMETHEUS DEVELOPMENT [6] We hold that the Plaintiffs are not judicially estopped from contesting the effectiveness of the ratification of the vote on the Merger.