Court Opinion

ID: 4111890
Source: CourtListenerOpinion
Date Created: 2016-12-28 21:01:13.47565+00
Date Added: 2024-06-11T07:46:12.006810
License: Public Domain

NOT FOR PUBLICATION                             FILED
                    UNITED STATES COURT OF APPEALS                         DEC 28 2016

                            FOR THE NINTH CIRCUIT                       MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS

S. SADLOWSKI,                                    No.   14-56654

              Plaintiff-Appellant,               D.C. No. 8:13-00455-GW-AGR

 v.
                                                 MEMORANDUM*
MICHAELS STORES, INC.,
a Delaware corporation,

              Defendant-Appellee.

                    Appeal from the United States District Court
                       for the Central District of California
                     George H. Wu, District Judge, Presiding

                      Argued and submitted October 17, 2016
                               Pasadena, California

Before: TALLMAN and CHRISTEN, Circuit Judges, and KENNELLY,** District
Judge.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
            The Honorable Matthew F. Kennelly, United States District Judge for
the Northern District of Illinois, sitting by designation.
      Sophia Sadlowski appeals the district court’s decision to grant summary

judgment barring her wage-and-hour claims against Michaels Stores, Inc. based on

the doctrine of judicial estoppel. We have jurisdiction under 28 U.S.C. § 1291, and

we reverse the district court’s ruling.

      1. We review a district court’s application of judicial estoppel for an abuse

of discretion. Ah Quin v. Cty. of Kauai Dep’t of Transp., 733 F.3d 267, 270 (9th

Cir. 2013). “The district court necessarily abuses its discretion when it bases its

decision on an erroneous legal standard.” Id. (ellipses and internal quotation marks

omitted) (quoting Farris v. Seabrook, 677 F.3d 858, 864 (9th Cir. 2012)).

      2. The district court’s ruling was based on Sadlowski’s failure to disclose

her wage-and-hour claims during her Chapter 13 bankruptcy case, which was

ultimately dismissed due to her failure to make required payments. “Although

judicial estoppel is ‘probably not reducible to any general formulation of principle,

. . . several factors typically inform the decision whether to apply the doctrine in a

particular case.’” Id. (Quoting New Hampshire, 532 U.S. at 750-51). These factors

include: (1) whether the party’s later position was clearly inconsistent with its

earlier position; (2) whether the party had succeeded in persuading a court to

accept its earlier position, such that accepting an inconsistent position in a later

proceeding would create the perception that the one court or the other was misled;

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and (3) whether the party asserting an inconsistent position would derive an unfair

advantage or impose an unfair detriment on its opponent if not estopped. New

Hampshire v. Maine, 532 U.S. 742, 750-51 (2001).

      3. In applying this doctrine in the present context, the default rule is that

“[i]f a plaintiff-debtor omits a pending (or soon-to-be-filed) lawsuit from the

bankruptcy schedules and obtains a discharge (or plan confirmation), judicial

estoppel bars the action.” Ah Quin, 733 F.3d at 271. This is not what occurred

here. Although Sadlowski did not disclose her wage-and-hour claim as an asset in

her bankruptcy case, the bankruptcy was filed long before her wage-and-hour

lawsuit. There was no basis in the record for a finding that Sadlowski was aware

of enough facts to know that she had a legal claim against Michaels until she

retained legal counsel for the wage-and-hour case in September 2011, about a

month before her bankruptcy case was dismissed in October 2011. More

importantly, the bankruptcy court never “accepted” or relied upon Sadlowski’s

nondisclosure of her wage-and-hour claim. She did not receive a discharge, a

favorable ruling, or any other benefit; rather, her bankruptcy case was dismissed

due to her noncompliance with the Chapter 13 payment plan.

      4. The district court’s ruling amounted to a determination that simple

nondisclosure of a potential claim during bankruptcy, without more, estops a party

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from asserting the claim in a civil suit. The court applied an incorrect legal

standard, because it essentially reduced New Hampshire v. Maine’s three-factor

analysis to a single factor: whether the party took inconsistent positions. No case

decided by this Court supports this.

      5. For these reasons, we conclude that the district court abused its discretion

by barring Sadlowski’s claims against Michaels on the basis of judicial estoppel.

The case is remanded with instructions to deny Michaels’s motion for summary

judgment. Each party shall bear its own costs on appeal.

      REVERSED AND REMANDED.

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