Judicial Estoppel Prevents Litigants from Contradicting Themselves

When I’m involved in litigation, I always look for recent cases involving my opposing party, to mine those cases for similar issues, useful facts, and relevant admissions to use in my case.

The Tennessee Court of Appeals issued a recent opinion, at Polly Spann Kershaw v. Jeffrey Levy  (Tenn. Ct. Apps, Mar. 28, 2018, No. M2017-01129-COA-R3-CV), that reminds me that this is a good idea.

In that case, a former client sued her lawyer, alleging that, as a result of his alleged bad advice and malpractice, she entered into an unfair and generally bad divorce settlement after he withdrew from the case.

But, as part of her divorce settlement, she signed a sworn Marital Dissolution Agreement, which included the affirmation that “the Agreement is fair and equitable and that it is being entered into voluntarily…”

In response to the client’s claims that she was forced into an “unfair” divorce settlement, the lawyer filed for summary judgment, citing those sworn statements in the divorce pleadings and arguing, under the concept of “judicial estoppel,” that she can’t change her position.

The Court of Appeals agreed, saying that “[t]he sworn statement is not merely evidence against the litigant, but (unless explained) precludes him from denying its truth. It is not merely an admission but an absolute bar.” Further, judicial estoppel “seeks to ensure that parties do not ‘play fast and loose with the courts’ by contradicting a previous sworn statement or testimony.”

A litigant may have different incentives in front of different courts, and this is certainly useful when an opposing party has filed Bankruptcy or divorce–both settings where it may be beneficial to understate their income or the value of their assets.  I’ve specifically used it where a litigant affirms a debt or lien in Bankruptcy Schedules, which are signed under oath, and then, later in state court, tries to contest my bank’s claims.

Is it Bankruptcy Fraud to Dismiss a Case Where Your Plan is to Incur More Debt and then Refile?

I’ve done collections law too long to think of it in moral terms. I don’t think a person who doesn’t pay his bills is necessarily “bad” (though some are). Sometimes, I think the creditor is equally at fault for lending money or providing services to these poor folks.

But, I recently saw a Bankruptcy pleading  that stopped me dead in my tracks.

It was a Motion to Voluntarily Dismiss Chapter 7 Bankruptcy Case, which is a filing a debtor makes to stop his bankruptcy case. People want out of bankruptcy for a number of reasons, but this one took the cake.

In it, the Debtor asked the United States Bankruptcy Court  to dismiss his Chapter 7 because he wanted to, basically, wait a few more months to run up some more medical bills. Then, after that, he’d re-file his case and discharge those new debts.

The exact text from the Motion is this:

1. The Debtor filed a Chapter 7 bankruptcy on November 6, 2012.

2. The Debtor’s meeting of creditors is set for December 12, 2012.

3. Since the filing of this case, the Debtor has incurred extensive medical care and expects to have a surgery and additional medical care in the coming months.

4. The Debtor, therefore, desires this chapter 7 proceeding be voluntarily dismissed.

Without a doubt, that’s a tough situation for the Debtor, facing medical bills that he can’t pay.

But, what about that doctor or hospital who will be asked to provide those services? This is as close as “pre-meditated” default and bankruptcy as it gets.

The Bankruptcy Code allows a creditor to oppose discharge for some debts that are incurred immediately before Bankruptcy, including those incurred via fraud or bad intent. But, to do that, the creditor has to file a lawsuit to claim that the debt shouldn’t be discharged and that’s a burdensome, costly process.

In case you’re wondering, the Motion was granted.

Long story short, some doctor is going to provide goods and services in the near future that certainly will never be paid.  Yikes.