Court Opinion

ID: 21439
Source: CourtListenerOpinion
Date Created: 2010-04-25 07:44:33+00
Date Added: 2024-06-11T12:43:12.342251
License: Public Domain

UNITED STATES COURT OF APPEALS
                         FOR THE FIFTH CIRCUIT

                               No. 99-60037

                       CONDERE CORPORATION,
           doing business as Servis Fleet Tire Company,
    doing business as Fidelity Tire and Manufacturing Company

                                                                 Debtor.

  ------------------------------------------------------------

                            LOCAL UNION 303L.

                                                                 Appellant,

                                     v.

                       CONDERE CORPORATION,
           doing business as Servis Fleet Tire Company,
    doing business as Fidelity Tire and Manufacturing Company

                                                                  Appellee.

         Appeal from the United States District Court for the
                   Southern District of Mississippi
                             (3:97-CV-471)

                              July 11, 2000

Before REYNALDO G. GARZA, JONES, and EMILIO M. GARZA, Circuit
Judges.

PER CURIAM:*

     *
            Pursuant to 5TH CIR. R. 47.5, the Court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
                The United Steelworkers of America and its Local Union

303L       (collectively,    the   “Union”)    appeal   the   district   court’s

application of judicial estoppel to prevent arbitration of certain

grievances under its collective bargaining agreement with Condere

Corporation (“Condere”).            Because the requirements for judicial

estoppel have not been met in this case, we vacate the district

court’s order as to the arbitrability of the Union’s grievances and

remand for further proceedings.

                                   I.   BACKGROUND

                Until June 1997, Condere Corporation operated a tire

manufacturing facility in Natchez, Mississippi.               Local Union 303L

was the collective bargaining representative for the employees at

this plant.       On May 13, 1997, Condere filed a Chapter 11 bankruptcy

petition.1       Condere shut down most of its production, and on June

27,        it   stopped     all    production     and    closed    the    plant.

Contemporaneously, Condere filed a motion under 11 U.S.C. § 1113 to

reject the collective bargaining agreement (“CBA”) between it and

the Union. The reference was withdrawn to the district court under

28 U.S.C. § 157(d) on the court’s motion.

                In a hearing on the motion shortly thereafter, the Union

opposed rejection and argued that the court should direct the

parties to continue negotiating a new bargaining agreement.                   The

       1
                In re Condere Corporation, 228 B.R. 615 (Bankr. S.D. Miss. 1998).

                                          2
district court so ordered, and in the next few weeks, the parties

were able to resolve most, but not all, outstanding disputes. They

then agreed and stipulated in a conference with the court that the

court had jurisdiction and authority, with the parties’ consent, to

determine the few remaining unresolved issues by rejecting the CBA

on certain stated conditions.          These conditions would consist of

the court’s choosing the position of one party over the other,

thereby resolving the remaining issues between them.             The district

court complied with the parties’ wishes, issuing an order (the

“Rejection Order”) on August 18, 1998 that denied rejection of the

CBA as to certain disputed items and allowed rejection as to

others.

            The Union had initially opposed rejection on grounds that

Condere had violated the CBA after filing its bankruptcy petition

and had thereby forfeited rejection under § 1113.              These alleged

violations were detailed in numerous grievances the Union had filed

against    Condere.     Following      the   Rejection   Order,      the   Union

attempted to submit these post-petition grievances to arbitration,

in accordance with the grievance and arbitration provisions of the

CBA.      Condere   responded   that       the   Rejection   Order   precluded

arbitration of the grievances.

            Several more disputes over the interpretation of the

Rejection Order arose between the parties, and they again went

before the district court.      On December 21, 1998, the court issued

                                       3
an order (the “Clarification Order”), finding, inter alia, that the

Union   was    judicially   estopped       from   arbitrating   post-petition

grievances.     Following the court’s rejection of the Union’s motion

to reconsider, the Union filed this appeal challenging the court’s

application of judicial estoppel to bar arbitration of the Union’s

post-petition grievances.2

                              II.   DISCUSSION

              Because the decision to invoke judicial estoppel lies

within the court’s discretion, we review the decision to invoke

this doctrine for abuse of discretion. In re Coastal Plains, Inc.,

179 F.3d 197, 205 (5th Cir. 1999); Ergo Science, Inc. v. Martin, 73
F.3d 595, 598 (5th Cir. 1996); Data General Corp. v. Johnson, 78
F.3d 1556, 1565 (Fed. Cir. 1996).             A district court abuses its

discretion when it makes an error of law or clearly erroneous

factual findings.      Koon v. United States, 518 U.S. 81, 100, 116
S. Ct. 2035 (1996); see also Latvian Shipping Co. v. Baltic Shipping

Co., 99 F.3d 690, 692 (5th Cir. 1996).            Because judicial estoppel

was raised in the context of a bankruptcy case, we will apply

federal law here.      In re Coastal Plains, 179 F.3d at 205.

      2
            The Clarification Order was a final decision on a discrete matter in
the larger bankruptcy case, effectively foreclosing any adjudication on the
merits, by arbitration or otherwise, of the Union’s post-petition grievances.
It was therefore a final order within the meaning of 28 U.S.C. § 1291. See
Official Committee of Unsecured Creditors v. Cajun Elec. Power Co-op, Inc., 119
F.3d 349, 353-54 (5th Cir. 1997).

                                       4
            Judicial estoppel is a common law doctrine that “prevents

a party from asserting a position in a legal proceeding that is

contrary to a position previously taken in the same or some earlier

proceeding.” Ergo Science, 73 F.3d at 598.          The doctrine’s purpose

is to protect the integrity of the judicial process by preventing

the parties from playing “fast and loose with the courts to suit

the exigencies of self-interest.”         In re Coastal Plains, 179 F.3d

at 205, quoting Brandon v. Interfirst Corp., 858 F.2d 266, 268 (5th

Cir. 1988).       Because the doctrine is intended to protect the

judicial system rather than the litigants, there is no requirement

of detrimental reliance by the opponent of the party against whom

the doctrine is applied.       In re Coastal Plains, 179 F.3d at 205.

            This circuit applies judicial estoppel circumspectly and

thus requires that (1) the position of the party to be estopped

must be clearly inconsistent with its previous position, and

(2) the party to be estopped must have convinced the court to

accept the previous position.        See In re Coastal Plains, 179 F.3d

at 206.    In addition, the party to be estopped must have acted

intentionally, not inadvertently.         See id.

            The district court applied judicial estoppel based on its

belief that the Union could not have stipulated to rejection

without    also   abandoning   its   post-petition    grievances   against

Condere.   In its Clarification Order, the court noted that the CBA

could only be rejected in accordance with 11 U.S.C. § 1113 and that

                                      5
§ 1113(f) prohibited Condere from unilaterally terminating or

modifying the CBA before rejection.      See In re Alabama Symphony

Ass’n, 211 B.R. 65, 71 (N.D. Ala. 1996)(breach of a CBA constitutes

violation of § 1113(f) precluding rejection).    The Union relied on

Alabama Symphony in opposing rejection, precisely because Condere

had allegedly committed post-petition violations of the CBA.      When

the Union reversed course and stipulated to rejection the district

court concluded that the Union had “implicit[ly]” abandoned its

position that Condere committed post-petition violations of the

CBA:

       From their joint stipulation to rejection, the court
       concluded that the parties’ understanding, vis-á-vis
       their future relationship, was that by-gones were by-
       gones. . . . [T]he court assumed from their conduct and
       representation that the parties intended a “fresh start”
       in all respects.    The court relied on this implicit
       representation in rejecting the specific provisions of
       the CBA. The court therefore finds that, by voluntarily
       stipulating to rejection under § 1113, the Union is
       judicially estopped from asserting that Condere engaged
       in conduct that precluded rejection of the CBA.

December 21, 1998 Order at 5.

            Though the Union raises several objections to this order,

its chief contention -- that the requirements of judicial estoppel

were not met in this case -- is sufficient to do the job.          In

particular, the record supports the Union’s assertion that there

was no clear inconsistency between its stipulation to rejection and

its attempt to arbitrate post-petition grievances.      Because this

prerequisite of judicial estoppel is not met, we need not discuss

                                  6
whether an inconsistency must be factual or whether the Union in

some sense “prevailed” in the rejection proceeding.

            In stipulating to the court’s jurisdiction to reject on

conditions, the Union took no position on whether violations of the

CBA had occurred.      It never stated, in a hearing or by brief, that

its grievances were not arbitrable or that it was abandoning

arbitration. Rather, by stipulating to rejection, the Union waived

or withdrew its legal argument under Alabama Symphony that certain

violations of the CBA prevented rejection. This change of position

in the context of the rejection proceedings did not necessarily

implicate    the   Union’s     position     on   the   arbitrability     of   its

grievances.     Indeed, the rejection of the CBA under § 1113 is a

different proceeding in bankruptcy court than dealing with post-

petition, pre-rejection breaches of a CBA.3

            And even if the district court had been correct in

finding that the Union had implicitly abandoned its grievances by

stipulating to rejection, judicial estoppel was not warranted.

This circuit has never held that judicial estoppel is appropriate

when a party’s change of position is merely implied rather than

      3
             Moreover, we reject any suggestion on Condere’s part that arbitration
of Union’s grievances is inherently inconsistent with rejection. It was Condere,
after all, which argued in the rejection proceedings that the grievances were
arbitrable and that the CBA should be rejected.

                                        7
clear and express.4          Moreover, a recent Supreme Court decision

counsels against overbroad application of judicial estoppel.                See

Cleveland v. Policy Management Systems Corp., 526 U.S. 795, 119
S. Ct. 1597 (1999).        In Cleveland, the Court reversed a decision

that estopped an individual who had previously filed for social

security disability benefits (“SSDI”) from asserting a claim under

the Americans with Disabilities Act (“ADA”).              See Cleveland, 526
U.S. at 807.    While the Court noted the apparent conflict existing

in such a case (an SSDI recipient must be unable to work while an

ADA plaintiff must be able to perform essential job functions), the

Court found there was no inherent inconsistency that would justify

a   presumption   of    estoppel.       It   reasoned   that   the   assertions

required to make claims under SSDI and the ADA are not factual

statements but rather “context-dependent legal conclusion[s]” that

often “comfortably exist side by side” despite apparent conflict.

See id. at 802-03.

            While Cleveland does not directly control this case, its

cautious   approach     to   estoppel    counsels   against    extending   the

application of judicial estoppel to a party’s implied changes of

legal position.        Cleveland lends support to this circuit’s rule

limiting judicial estoppel to cases where a party’s position is

      4
            See, e.g., Ergo Science, 73 F.3d at 600 (applying judicial estoppel
based on statement made in open court); Hidden Oaks v. City of Austin, 138 F.3d
1036, 1047 (5th Cir. 1998)(same).

                                        8
clearly inconsistent with its previous one.5           To the extent the

district court believed that an implied representation rather than

an express inconsistency could support a finding of judicial

estoppel, it misapprehended the law and abused its discretion.

                             III.   CONCLUSION

           In sum, the district court abused its discretion in

applying judicial estoppel to bar arbitration of the Union’s

post-petition grievances.      There was no clear inconsistency

between the Union’s position on rejection and its position on

arbitration.    Furthermore, the district court misapprehended the

law in finding that anything less than clear inconsistency could

support the application of judicial estoppel.

           For the foregoing reasons, the district court’s order

of December 21, 1998 order is VACATED as to the arbitrability of

the Union’s post-petition grievances and REMANDED for further

proceedings.    In so doing, we take no position on whether other

considerations might bar the Union’s arbitration of post-petition

grievances.

      5
            Under some factual circumstances, it may be possible to make a
showing of clear inconsistency on the basis of an implied representation, but
this is not such a case.

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