Opinion ID: 3165449
Heading Depth: 2
Heading Rank: 4

Heading: Equitable Application

Text: Although judicial estoppel can apply to the Allens’ personal injury suit, the Allens and the State argue that the district court should not have applied it here because that doctrine leads to an inequitable result. 7 “Because judicial estoppel is an equitable doctrine, courts may apply it flexibly to achieve substantial justice.” Reed v. City of Arlington, 650 F.3d 571, 576 (5th Cir. 2011). Indeed, we have recognized that “judicial estoppel is not governed by ‘inflexible prerequisites or an exhaustive formula for determining [its] applicability,’ and numerous considerations ‘may inform the doctrine’s application in specific factual contexts.’” Love, 677 F.3d at 261 (alteration in original) (quoting New Hampshire v. Maine, 532 U.S. 742, 751 (2001)). Ultimately, “[t]he challenge is to fashion a remedy that does not do inequity by punishing the innocent.” Reed, 650 F.3d at 576 (quoting An-Tze Cheng v. K&S 7 We generally do not consider arguments raised by the amicus curiae unless those arguments were raised by a party on appeal. World Wide St. Preachers Fellowship v. Town of Columbia, 591 F.3d 747, 752 n.3 (5th Cir. 2009). 9 Case: 15-30330 Document: 00513320000 Page: 10 Date Filed: 12/23/2015 No. 15-30330 Diversified Invs., Inc. (In re An-Tze Cheng), 308 B.R. 448, 459 (B.A.P. 9th Cir. 2004)). We have recognized that judicial estoppel is appropriate when “a party fails to disclose an asset to a bankruptcy court, but then pursues a claim in a separate tribunal based on that undisclosed asset.” Jethroe, 412 F.3d at 600. However, “judicial estoppel must be applied in such a way as to deter dishonest debtors, whose failure to fully and honestly disclose all their assets undermines the integrity of the bankruptcy system, while protecting the rights of creditors to an equitable distribution of the assets of the debtor’s estate.” Reed, 650 F.3d at 574. “Accordingly, where a debtor is judicially estopped from pursuing a claim he failed to disclose to the bankruptcy court, the trustee, consistent with Reed, may pursue the claim without any limitation not otherwise imposed by law.” 8 In re Flugence, 738 F.3d at 132. Such an approach “protect[s] the integrity of the bankruptcy system by deterring debtors from concealing assets” while also being “consistent with the core bankruptcy goal of obtaining a maximum and equitable distribution for creditors.” Reed, 650 F.3d at 577. Here, the district court expressly dismissed the personal injury claim without prejudice to the rights of a trustee to pursue the claim, permitting the trustee to litigate the claim if the Allens’ bankruptcy case is reopened. The Allens and the State are therefore incorrect insofar as they argue that judicial estoppel is inequitable because the Allens’ creditors are harmed and that the State’s “only remaining avenue to seek redress” for its reimbursement claim is the stipulation entered into with the Allens. We are, of course, in no position 8 While both the Allens and the State focus on the closing of the Allens’ bankruptcy case without a discharge in distinguishing other authority, this circuit has previously affirmed a district court’s application of judicial estoppel when a previous bankruptcy case was closed without discharge. See Jethroe, 412 F.3d at 599. Moreover, allowing the bankruptcy trustee to pursue the personal injury claim in place of the Allens ensures that “the rights of creditors to an equitable distribution” are protected. Reed, 650 F.3d at 574. 10 Case: 15-30330 Document: 00513320000 Page: 11 Date Filed: 12/23/2015 No. 15-30330 to foretell the future outcome if a Chapter 7 trustee pursues the personal injury claim. But as to the district court’s actions in the present matter, our precedent clearly establishes that the district court did not abuse its discretion when it dismissed the Allens’ claims based on judicial estoppel and provided a trustee with the opportunity to “pursue for the benefit of creditors a judgment or cause of action that the debtor fails to disclose in bankruptcy.” Reed, 650 F.3d at 573.