Court Opinion

ID: 2681849
Source: CourtListenerOpinion
Date Created: 2014-07-03 14:01:18.336115+00
Date Added: 2024-06-11T15:23:09.457956
License: Public Domain

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             DISTRICT OF COLUMBIA COURT OF APPEALS

                                 No. 13-CV-1074

                             JOHN ATKINS, APPELLANT,

                                         V.

                         4940 WISCONSIN, LLC, APPELLEE.

                          Appeal from the Superior Court
                            of the District of Columbia
                                  (CAB-1922-12)

                          (Hon. Craig Iscoe, Trial Judge)

(Submitted May 6, 2014                                        Decided July 3, 2014)

      David M. Wasser was on the brief for appellant.

      Dawn E. Boyce and Martin Schubert were on the brief for appellee.

      Before GLICKMAN and MCLEESE, Associate Judges, and REID, Senior Judge.

      REID, Senior Judge:      Appellant, John Atkins, appeals the trial court‟s

dismissal of his personal injury action against appellee, 4940 Wisconsin, LLC

(“the LLC”). The trial court granted summary judgment for the LLC on the

ground that Mr. Atkins‟ lawsuit is barred by the doctrine of judicial estoppel. For

the reasons stated below, we affirm the judgment of the trial court.
                                          2

                             FACTUAL SUMMARY

      On June 5, 2009, Mr. Atkins was working in a furniture store, located on

property owned by the LLC, when he slipped and fell. Later, on January 8, 2010,

Mr. Atkins filed a Chapter 7 petition for bankruptcy in the United States

Bankruptcy Court for the District of Columbia. He identified the LLC as one of

his creditors, due to a retail lease, and he listed $328,606 as the disputed amount of

the LLC‟s unsecured nonpriority claim. He made no mention of his potential

personal injury claim on his Schedule C pertaining to property or interests claimed

as exempt from the reach of creditors. The United States Bankruptcy Judge signed

an order on June 28, 2010, granting Mr. Atkins‟ a discharge under Chapter 7 of the

Bankruptcy Code.

      Mr. Atkins filed his personal injury lawsuit against the LLC in the trial court

on February 27, 2012, claiming injury due to the negligence of the LLC. The LLC

lodged a motion to dismiss and for summary judgment on October 4, 2012, stating

as an undisputed fact that Mr. Atkins “did not schedule [his] personal injury claim

on any schedule attached to [his] Voluntary Petition for Bankruptcy.” The trial

court held the LLC‟s motions in abeyance to allow Mr. Atkins an opportunity to

substitute the Bankruptcy Trustee as plaintiff, or to submit a statement that the
                                           3

Trustee “abandon[ed] the action to the Plaintiff.”

      About one year after filing his personal injury action in the trial court, Mr.

Atkins moved to reopen his bankruptcy case; he submitted an amended Schedule C

on March 20, 2013, essentially claiming that his trial court cause of action against

the LLC was exempt from the reach of his creditors, in the amount of $23,500. No

objection was filed in the Bankruptcy Court, and consequently, the Bankruptcy

Trustee declared on May 14, 2013, that Mr. Atkins “owns the cause of action” up

to $23,500. Furthermore, the Trustee asserted that “any potential recovery will be

paid first to medical liens, . . . and attorneys[‟] fees,” and that any sum recovered in

excess of the $23,500 claimed exemption would belong to the bankruptcy estate.1

      In an eleven-page order, signed on July 19, 2013, the trial court granted the

LLC‟s motion for summary judgment.             First, the trial court determined that,

      1
         Later, on August 16, 2013, the Bankruptcy Trustee informed Mr. Atkins‟
attorney that he had not “abandoned” the personal injury cause of action, and that
he had “no authority to assign or authorize anything without specific authority of
the Bankruptcy Court,” which had not yet been obtained. He denied attempting “to
authorize [Mr. Atkins] to go forward on anything, particularly on behalf of the
estate.” Four days later, the Trustee stated that he was “not planning to become a
party to the suit.” He also expressed the view that “the bankruptcy estate with
court authority can assign a cause of action to whomever it decides,” and that in
the event that Mr. Atkins received the assignment, he “would take the cause of
action as assignee of the estate, not as the debtor.”
                                          4

contrary to the LLC‟s argument, Mr. Atkins has standing to bring his personal

injury action “because the Bankruptcy Trustee assigned the litigation to [Mr.

Atkins].” Second, the trial court concluded that judicial estoppel bars Mr. Atkins‟

personal injury lawsuit. The trial court reasoned that the elements of judicial

estoppel are satisfied in this case. First, Mr. Atkins‟ position in the trial court was

inconsistent with his position in the bankruptcy court because “when [he] filed for

bankruptcy he represented in his schedules that he had no unliquidated claims[;]

[h]owever, in [his personal injury litigation], he is claiming to have a cause of

action against the [LLC] arising from an accident that occurred before he filed for

bankruptcy.” Second, Mr. Atkins persuaded the bankruptcy court to accept his

position “because, in discharging [Mr. Atkins‟] debts the bankruptcy court relied

on [his] schedules, which did not list [his personal injury claim].” Third, Mr.

Atkins would gain an unfair advantage over the LLC if he is not estopped because

he “discharged his obligations to his creditors, 99.7% of which was due to the

[LLC], before remembering the injury that led to [his] bankruptcy.” The trial court

concluded that Mr. Atkins‟ action “appears wholly calculated to abuse the judicial

process[,]” and further, he “would still receive at least $21,625.00, not a trivial

sum[,]” while “[c]ontinued litigation of the suit would impose significant costs on

the [LLC], as well as an expenditure of the [trial] [c]ourt‟s time and resources.”
                                          5

      Mr. Atkins moved to alter or amend the trial court‟s order on July 26, 2013,

asking the trial court “to clarify that the instant action is dismissed” as to him, but

not the Bankruptcy Trustee “who remains the real party in interest,” and that “the

instant action remains part of the bankruptcy estate as a matter of law.” The LLC

opposed Mr. Atkins‟ motion, and the trial court denied Mr. Atkins‟ motion,

declaring that the Bankruptcy Trustee is not a party to the litigation and has no

interest beyond the excess of any potential recovery, that Mr. Atkins‟ “bankruptcy

estate was never a party to the litigation,” and that “[t]he Court‟s Order of July 19,

2013[,] does not bind the Bankruptcy Trustee,” although it might have implications

if “the Bankruptcy Trustee decides to pursue litigation.”2

                                    ANALYSIS

      Mr. Atkins argues that the trial court erred by: (1) concluding that the

Bankruptcy Trustee “abandoned” the personal injury claim;3 (2) failing to

recognize that “[t]he Trustee has ratified Mr. Atkins‟ pursuit of the claim on behalf

      2
        Like the trial court, we address only the question of whether Mr. Atkins
should be permitted to bring this suit. We express no view about the issues that
might be presented if the bankruptcy trustee were to pursue litigation against the
LLC with respect to this matter.
      3
          In his reply brief, Mr. Atkins states: “Contrary to [the LLC‟s] assertions,
there is no issue as to „abandonment‟ of the claim by the Trustee.”
                                         6

of the [bankruptcy] estate” rather than “as the debtor”; and (3) finding judicial

estoppel applicable against the Trustee while failing to recognize that application

of the judicial estoppel doctrine would be inequitable because it harms Mr. Atkins‟

creditors. “We review de novo [Mr. Atkins‟] claim that the trial court erred in

granting summary judgment in favor of [the LLC].” Papageorge v. Banks, 81
A.3d 311, 319 (D.C. 2013) (citing Onyeoziri v. Spivok, 44 A.3d 279, 283 (D.C.

2012)). Our analysis is guided by the following legal principles.

      Generally, under bankruptcy proceedings, the Bankruptcy Trustee “is the

real party in interest, and is the only party with standing to prosecute causes of

action belonging to the estate once the bankruptcy petition has been filed.” Moses

v. Howard Univ. Hosp., 606 F.3d 789, 794 (D.C. Cir. 2010) (internal quotation

marks and citation omitted). Nevertheless, a bankruptcy trustee has the discretion

to choose one of three actions with respect to a debtor‟s cause of action: “(1)

intervene and assume prosecution as trustee, (2) consent to prosecution by the

debtor for the benefit of the estate, or (3) decline prosecution.”       Detrick v.

Panalpina, Inc., 108 F.3d 529, 535 (4th Cir. 1997) (citations omitted). “[A]ny

unliquidated lawsuits initiated by a debtor prepetition (or that could have been

initiated by the debtor prepetition) become part of the bankruptcy estate subject to

the sole direction and control of the trustee, unless exempted or abandoned or
                                          7

otherwise revested in the debtor.” In re Bailey, 306 B.R. 391, 392 (Bankr. D.D.C.

2004). Although a bankruptcy trustee may abandon or divest all of the bankruptcy

estate‟s interest in property, causing the property to revert to the debtor,

abandonment requires a formal process – notice and hearing. 11 U.S.C. § 554 (a)

(2012); Midlantic Nat’l Bank v. New Jersey Dep’t of Envtl. Prot., 474 U.S. 494,

496 (1986).

      “[T]he Bankruptcy Code and Rules impose upon bankruptcy debtors an

express, affirmative duty to disclose all assets, including contingent and

unliquidated claims.” In re Coastal Plains, Inc., 179 F.3d 197, 207-08 (5th Cir.

1999) (citation omitted). “The debtor need not know all the facts or even the legal

basis for the cause of action; rather, if the debtor has enough information . . . to

suggest that it may have a possible cause of action, then that is a known cause of

action such that it must be disclosed.” Id. at 208 (internal quotation marks and

citations omitted).

      “Judicial estoppel is an „equitable doctrine‟ invoked at a court‟s discretion to

prevent „improper use of judicial machinery.‟” Hardy v. United States, 988 A.2d
950, 964 (D.C. 2010) (quoting New Hampshire v. Maine, 532 U.S. 742, 750

(2001)); see also, e.g., Moses, supra, 606 F.3d at 797 (“[A] majority of the circuits
                                          8

that have addressed the issue apply the abuse of discretion standard.” (internal

quotation marks and alterations omitted)). “The doctrine protects the integrity of

the bankruptcy system, and is meant to prevent parties from hiding causes of

actions during bankruptcy proceedings, thereby obtaining a valuable benefit in the

discharge of . . . debts, and then asserting [the causes of action] in order to win a

second time.” Robinson v. District of Columbia, No. 13-1297, 2014 U.S. Dist.

LEXIS 10749, at *10 (D.D.C. Jan. 29, 2014) (alterations in original) (internal

quotation marks and citations omitted).

       We generally consider three factors in deciding whether to apply judicial

estoppel:

             First, [whether] a party‟s later position . . . [is] clearly
             inconsistent with its earlier position. Second, . . .
             whether the party has succeeded in persuading a court to
             accept the party‟s earlier position, so that judicial
             acceptance of an inconsistent position in a later
             proceeding would create the perception that either the
             first or the second court was misled . . . . [T]hird[,] . . .
             whether the party seeking to assert an inconsistent
             position would derive an unfair advantage or impose an
             unfair detriment on the opposing party if not estopped.

Ward v. Wells Fargo Bank, N.A., 89 A.3d 115, 127 (D.C. 2014) (alterations in

original) (quoting Mason v. United States, 956 A.2d 63, 66 (D.C. 2008)).
                                          9

      In light of the applicable legal principles, we are not persuaded by Mr.

Atkins‟ arguments. Our review of the record indicates that no genuine issue as to

whether the Bankruptcy Trustee abandoned Mr. Atkins‟ cause of action was ever

presented to the trial court for decision, and the issue simply was not addressed, as

Mr. Atkins appears to recognize in his reply brief. As the trial court said in its

order of September 4, 2013, Mr. Atkins cited to abandonment cases that “are not

on point.” Moreover, the Bankruptcy Trustee‟s communications to Mr. Atkins‟

attorney, dated May 14, August 16, and August 20, 2013, clearly indicate that he

had not “abandoned” the personal injury cause of action (and could not do so

without the authority of the bankruptcy court, following notice and hearing, see

Midlantic Nat’l Bank, supra, 474 U.S. at 496). In addition, the Bankruptcy Trustee

stated that Mr. Atkins “owns the cause of action” up to the amount of $23,500 and

anything recovered in litigation above that amount belonged to the bankruptcy

estate, and that the Trustee would not become a party to the lawsuit. The trial

court reiterated in its September 4, 2013, order that, consistent with Detrick, supra,

and consistent with the position taken by Mr. Atkins in the trial court, “the

Bankruptcy Trustee made a deliberate decision to cede litigation to [Mr. Atkins]

and only retain a right to any potential recovery after costs and a $23,500

exemption.”    Furthermore, the record does not support Mr. Atkins‟ apparent

insistence on appeal that the trial court‟s orders should have recognized that Mr.
                                          10

Atkins took the cause of action “as assignee of the estate, not as debtor,” and thus,

“the Trustee . . . exercised his right to appoint a representative to bring the claim on

behalf of the Trustee and the bankruptcy estate.” We see nothing in the record

showing that the bankruptcy court authorized Mr. Atkins to proceed as “assignee

of the estate,” instead of as a debtor with respect to his $23,500 personal injury

cause of action.

      Finally, we reject Mr. Atkins‟ judicial estoppel contention. By attempting to

position himself as an actor for the Bankruptcy Trustee, he seeks to deflect

attention from the trial court‟s conclusion that he is judicially estopped from

proceeding with his personal injury cause of action. We are satisfied that the trial

court correctly applied the judicial estoppel doctrine in its extensive and thoughtful

orders in this case.    The court determined, as indicated above, that all three

requirements of judicial estoppel were satisfied and we discern no abuse of

discretion. See Hardy, supra, 988 A.2d at 964. Before he filed for bankruptcy,

Mr. Atkins knew that the LLC was a substantial creditor and that he had a potential

personal injury cause of action against the LLC. Yet, he did not include this

potential claim on his Schedule C bankruptcy form. After he filed his personal

injury lawsuit in the trial court, he waited for approximately one year before

moving to reopen his bankruptcy proceeding in March 2013 to amend his Schedule
                                           11

C, even though as early as October 4, 2012, the LLC had asserted as undisputed

fact that he failed to list his personal injury cause of action, and despite the fact that

he had “an express, affirmative duty” to disclose all potential claims. In re Coastal

Plains, supra, 179 F.3d at 207-08. In addition, Mr. Atkins‟ effort to convince this

court that the trial court improperly applied the judicial estoppel doctrine because it

“harms” his creditors is unavailing. By not listing (and thus hiding) his potential

personal injury claim on his Schedule C, and obtaining a valuable benefit for

himself by successfully discharging his substantial debt to his major creditor, the

LLC, Mr. Atkins‟ own actions disadvantaged his creditors, not the application of

judicial estoppel against him. See Robinson, supra, 2014 U.S. Dist. LEXIS 10749,

at *10; see also Hardy, supra, 988 A.2d at 964.

         Accordingly, for the foregoing reasons, we affirm the judgment of the trial

court.

                                                So ordered.