Court Opinion

ID: 2961850
Source: CourtListenerOpinion
Date Created: 2015-09-21 20:48:49.895599+00
Date Added: 2024-06-11T11:42:22.319873
License: Public Domain

USCA1 Opinion

	

          April 5, 1993                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 92-2149                    PAYLESS WHOLESALE DISTRIBUTORS, INC., ET AL.,                               Plaintiffs, Appellants,                                          v.                         ALBERTO CULVER (P.R.) INC., ET AL.,                                Defendants, Appellees.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF PUERTO RICO                   [Hon. Gilberto Gierbolini, U.S. District Judge]                                              ___________________                                 ____________________                                        Before                                 Stahl, Circuit Judge,                                        _____________                      Aldrich and Coffin, Senior Circuit Judges.                                          _____________________                                 ____________________            Fernando L.  Gallardo with  whom Woods  & Woods  was on brief  for            _____________________            ______________        appellants.            Victor  E. Grimm  with whom  Michael  J.  Abernathy, Bell,  Boyd &            ________________             ______________________  _____________        Lloyd, Ana Matilde  Nin, Ramon Coto-Ojeda and McConnell  Valdes Kelley        _____  ________________  ________________     ________________________        Sifre Griggs & Ruiz-Suria were on brief for appellees.        _________________________                                 ____________________                                    April 5, 1993                                 ____________________                      ALDRICH, Senior  Circuit Judge.   On July  17, 1990                               _____________________            plaintiffs  Payless  Wholesale Distributors,  Inc. (Payless);            L.A.  Formulations, Inc.  (LAF);  and Leonel  M. Lima  (Lima)            filed a  110 page first amended  complaint, containing twenty            causes  of action  against Alberto  Culver (P.R.),  Inc.; LSE            Sales Corp.; LSE Advertising Company; Alberto-Culver Company;            and Leonard S.  Etten.  Monetary  damages were specified  for            each cause, varying between $5 million and $150 million.  Out            of abundance of caution, plaintiffs requested "any additional            relief that this Honorable Court deem (sic) just and proper."            The  district court, quite properly, criticized the complaint            for not  being "a  short and  plain statement"  in accordance            with  Fed. R.  Civ. P. 8(a)(2).   Even more  justly, it could            have  complained of the flagrant violation of Fed. R. Civ. P.            11.1   The  amount of  damages sought  is a  relevant matter.            See Mestayer v. Wisconsin  Physicians Service Ins. Corp., 905            ___ ________    ________________________________________            F.2d 1077, 1080  (7th Cir. 1990).   Cf.  Thorpe v. Mutual  of                                                __   ______    __________            Omaha Ins. Co.,  984 F.2d 541, ___ (1st  Cir. 1993).  Coupled            ______________            with the extended complaint it would be difficult to think of            clearer indifference to counsel's elementary obligations.                      In  a  comprehensive   opinion  the  court  granted            defendants'  motion  to dismiss  nineteen  of  the causes  of            action, and  then granted a  motion for summary  judgment for                                            ____________________            1.  ". . . The signature of  an attorney or party constitutes            a  certificate  [of] belief  . . .  it  is  well grounded  in            fact. . . ."                                         -2-            defendants as to the  twentieth.  Happily, we need  not reach            the  correctness  of these  individual  rulings.   The  court            should have  recognized the defense of  judicial estoppel and            dismissed  the complaint  at the  outset.   On that  basis we            affirm.                      According to the  complaint defendants were guilty,            inter  alia,  of  violating  the  antitrust  and  RICO  laws,            _____  ____            tortious  interference with  contractual relations,  mail and            wire   fraud,  conspiracy,  breach   of  contract,  fault  or            negligence, and damage to reputation, all  for the purpose of            driving  plaintiffs out  of business.2    By reason  of these            alleged  wrongs Payless,  soon after  commencing  business in            February, 1986,  found itself having to  take various actions            that it  would not have  chosen.  Business  was unsuccessful,            and in July, 1988  it filed for bankruptcy under  Chapter 11.            In  re  Payless  Wholesale  Distributors,  Inc., No.  88-0951            _______________________________________________            (Bankr. D.P.R. filed July 14, 1988).  In connection therewith            there were  requirements to give  reasons for filing,  and to            list  all debtor's  assets,  including claims  and causes  of            action.3  In no filing did Payless even  vaguely refer to the                                            ____________________            2.  Strictly,  Payless  is  the one  business  entity  having            claims.  LAF was a manufacturer of products Payless  proposed            to  sell,  and  Lima   a  mere  stockholder.    Neither   had            independent  rights.   Warth  v. Seldin,  422  U.S. 490,  499                                   _____     ______            (1975);  Jones v.  Niagara Frontier  Transp. Auth.,  836 F.2d                     _____     _______________________________            731, 736 (2d Cir. 1987), cert. denied, 488 U.S. 825 (1988).                                     ____________            3.  11 U.S.C.    521(1), 1125(a).                                         -3-            present claims, or  distinguish the  one defendant  mentioned            from its other creditors,  yet Payless now alleges bankruptcy            was  "a   direct  result   of  the  conspiratorial   acts  of            defendants."    First Am.  Complaint    98.   Even  a cursory            examination of  the claims shows that  defendants should have            figured in  both aspects of  the Chapter 11  proceedings, and            that  Payless   could  not  have  thought   otherwise.    The            brazenness of  its ambivalence is illustrated  by its present            assertion that the statute of limitations had not run because            it had been tolled by the pendency of Chapter 11.                      The basic  principle of  bankruptcy is to  obtain a            discharge  from  one's  creditors  in return  for  all  one's            assets, except  those exempt, as a result  of which creditors            release their  own claims and  the bankrupt can  start fresh.            Assuming there is validity in Payless's present suit,  it has            a  better plan.    Conceal  your  claims;  get  rid  of  your            creditors  on  the cheap,  and start  over  with a  bundle of            rights.   This is  a palpable fraud  that the court  will not            tolerate,  even  passively.   See,  e.g., In  re  H.R.P. Auto                                          ___   ____  ___________________            Center,  Inc., 130 B.R.  247, 253-54 (Bankr.  N.D. Ohio 1991)            _____________            (collecting cases).  Payless, having obtained judicial relief            on  the representation  that no claims  existed, can  not now            resurrect them and obtain relief on the opposite basis.  This            may  not  be  strictly   equitable  estoppel,  as  the  court                                         -4-            observed.  Indeed, defendants may have  a windfall.  However,            it is an unacceptable abuse of judicial proceedings.                      It is  a generally recognized  proposition that one            cannot  play "fast  and  loose  with  the courts."    Patriot                                                                  _______            Cinemas, Inc. v. General Cinema Corp., 834 F.2d 208, 212 (1st            _____________    ____________________            Cir.  1987).  The language  in Oneida Motor  Freight, Inc. v.                                           ___________________________            United Jersey Bank, 848 F.2d 414 (3d Cir.), cert. denied, 488            __________________                          ____________            U.S. 967 (1988) is singularly on point.                           A long-standing  tenet of bankruptcy                      law requires one  seeking benefits  under                      its terms to satisfy a companion duty  to                      schedule, for the  benefit of  creditors,                      all  his  interests and  property rights.                      In  Re  Hannan, 127  F.2d  894  (7th Cir.                      ______________                      1942).            848 F.2d at 416.                           Disclosure  is  important,  in  this                      case,  not  only   to  the  bank   as  an                      adversary and as  a creditor, but to  the                      other  creditors  and  to the  bankruptcy                      court.  Here, "the silence" in the Oneida                      bankruptcy record concerning this present                      claim, as they say in the vernacular, "is                      deafening."            Id. at 417.            __                           In order to  preserve the  requisite                      reliability of  disclosure statements and                      to   provide   assurances  to   creditors                      regarding  the  finality  of plans  which                      they  have voted to approve, we hold that                      under  the  facts  here present  Oneida's                      failure to announce  this claim against a                      creditor precludes it from litigating the                      cause of action at this time.            Id. at 418.            __                                         -5-                      By  noting,  and  then  disregarding  Oneida  Motor                                                            _____________            Freight, and  stating  that Payless's  "disclosure  statement            _______            does  not constitute the adoption of a position by Payless in            one  judicial proceeding  that is  intentionally inconsistent            with  its claims in this case" the court failed to appreciate            the  long accepted  nature  of Payless's  obligations in  the            Chapter 11 proceeding.  Nothing more need be said.                      Affirmed.                      ________                                         -6-