THE ISSUE: Was a Chapter 13 debtor who initially failed to report a potential sexual harassment and retaliation claim against her former employer as an asset in her bankruptcy filing judicially estopped from bringing the action?
DECISION: No (Appeals Court)
LAWYERS: Richard K. Latimer of Falmouth (plaintiff)
Keerthi Sugumaran of Jackson Lewis, Boston (defense)
An investigation resulted in no disciplinary action after Quinn allegedly reported that the plaintiff “enjoyed” her co-workers’ treatment.
The plaintiff was eventually reassigned to a school building, where a third former co-worker would allegedly show up and continue to harass her.
On Nov. 6, 2017, following the plaintiff’s additional complaints of harassment to town officials, the town terminated her for performance issues, though it allegedly failed to provide any prior notice of performance deficiencies.
The plaintiff and her husband filed for Chapter 13 bankruptcy on Dec. 29, 2017, seeking a payment plan to forestall foreclosure on their home mortgage.
Neither she nor her husband were represented by counsel in Bankruptcy Court at the time and did not disclose among their assets any potential claims arising from her employment or termination.
On Oct. 17, 2019, the plaintiff, represented by Latimer, filed suit in Superior Court against the town, Quinn and the alleged harassers, asserting harassment, hostile work environment, and retaliatory discharge claims.
Three years later, defense counsel discovered that Mahabir never disclosed the suit or its underlying claims to the Bankruptcy Court.
After notifying plaintiff’s counsel of the omission, the defendants moved for judgment on the pleadings, citing judicial estoppel.
The defendants served the motion before they filed it, after which the Mahabirs moved in Bankruptcy Court to amend their pleadings to disclose the Superior Court case. The Bankruptcy Court granted the motion, appointing Latimer to pursue the Superior Court case on behalf of the bankruptcy estate.
The defendants pressed ahead with their motion in Superior Court, which Judge Thomas J. Perrino granted. The plaintiff appealed.
Judgment reversed
The Appeals Court found that Perrino abused his discretion in granting the defendants’ motion.
Specifically, the panel found that while the purpose of judicial estoppel — which bars a party from asserting a position in a court proceeding that is inconsistent with a position taken in a prior proceeding — is to prevent litigants from manipulating the judicial system, this was not such a case.
“Given that the bankruptcy proceeding remained open, the plaintiff and her husband continued to make payments under the approved plans, the debts had not been discharged, the bankruptcy court judge had allowed the plaintiff’s and her husband’s belated amended disclosure of assets, and the bankruptcy court judge had appointed the plaintiff’s counsel to pursue the Superior Court claims for the benefit of the bankruptcy estate, we conclude that he did,” Wolohojian said. “It fell outside the range of reasonable alternatives for the judge not to consider the bankruptcy court judge’s own treatment of the belated disclosure when determining whether the integrity of the bankruptcy proceeding had been compromised by the belated disclosure.”
Additionally, the panel found that the defendants identified no harm from the delayed disclosure.
“In these circumstances, although we do not endorse the belated disclosure of the claims in the bankruptcy action … the judge abused his discretion in judicially estopping the plaintiff from pursuing her Superior Court claims,” Wolohojian wrote.
Source: https://masslawyersweekly.com/2024/05/30/employment-judicial-estoppel-bankruptcy/
