Application of judicial estoppel abuse of discretion, Appeals Court says
Eric T. Berkman // June 7, 2024
The Appeals Court has determined that 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 was not judicially estopped from bringing the action.
Plaintiff Judith Mahabir and her husband filed for bankruptcy in late 2017, a month after the town of Barnstable fired her from her job as a janitor, allegedly in retaliation for reporting harassment by co-workers.
Two years later, Mahabir sued the town, her former supervisor, and the alleged harassers. Three years into the litigation, the defendants, none of whom had an interest in Mahabir’s bankruptcy proceeding, discovered she had not disclosed the action in Bankruptcy Court and moved for a judgment on the pleadings on judicial estoppel grounds.
Citing a need to safeguard the integrity of the bankruptcy proceeding, a Superior Court judge granted the motion even though the bankruptcy itself remained open; the Mahabirs had been permitted to amend their disclosures to add the claim; and the Bankruptcy Court appointed the attorney representing the plaintiff in the employment case to pursue the claim on behalf of the bankruptcy estate.
The Appeals Court reversed the decision.
“[T]he defendants have not identified any harm flowing from the delayed disclosure of the Superior Court claims — either to themselves, the creditors in the bankruptcy, to the bankruptcy trustee, to the bankruptcy court, or to the Superior Court,” wrote Judge Gabrielle Wolohojian, who has since taken a seat on the Supreme Judicial Court. “In these circumstances, although we do not endorse the belated disclosure of the claims in the bankruptcy action, especially considering that the plaintiff was represented by counsel in both actions, the judge abused his discretion in judicially estopping the plaintiff from pursuing her Superior Court claims.”
The 13-page decision is Mahabir v. Crocker, et al., Lawyers Weekly No. 11-045-24.
Lack of prejudice?
Mahabir’s attorney, Richard K. Latimer of Falmouth, said the court applied the appropriate analysis.
“Basically, the Appeals Court agreed with what I argued, which was that this was ultimately the Bankruptcy Court’s call,” he said. “There was no prejudice to the defendants in Superior Court. The only ones who could have been prejudiced were the creditors and the bankruptcy trustee, and that prejudice never happened because the bankruptcy case was never discharged.”
Latimer also pointed out that at the time the plaintiff and her husband filed for bankruptcy, they had no attorney advising them as to any claims against the town or other employees, and it was another six months before they went to the Massachusetts Commission Against Discrimination to file an initial charge.
There was no prejudice to the defendants in Superior Court. The only ones who could have been prejudiced were the creditors and the bankruptcy trustee, and that prejudice never happened because the bankruptcy case was never discharged.
— Richard K. Latimer, Falmouth
“All the subsequent reports they made were based on the Bankruptcy Court wanting to know what liquid assets were available. Nobody said anything about any other assets,” he said. “All [Mahabir] was reporting was what she could sell now to get money to meet her obligations. Subsequent reports weren’t asking about other assets, such as choses in action. It would have been unfair of the Superior Court to hold her accountable for that.”
Lynn bankruptcy lawyer Jacob T. Simon said the ruling was consistent with well-settled bankruptcy law.
“The prevailing view in Massachusetts is that debtors are allowed to amend their bankruptcy petitions freely,” said Simon, who was not involved in the case. “Debtors must be truthful, but many are unsophisticated and may not understand — or even know of — future claims, much less the value of those claims.”
Newton attorney Matthew J. Fogelman said that while the plaintiff should have disclosed the employment claim in the first instance, she corrected the error on subsequent disclosure, and the Bankruptcy Court accepted it, leaving no reason for the employment case to be dismissed instead of being heard on its merits.
In terms of instructive value, Fogelman said plaintiffs who are filing for bankruptcy must disclose any potential or actual claims against third parties, including personal injury and employment matters.
Todd J. Bennett, an employment lawyer in Cambridge, noted that many employment practitioners would not have considered how their client’s bankruptcy might affect the outcome of their employment litigation matter.
That is why it is a good idea for lawyers to develop relationships with competent counsel in other practice areas who can provide advice on issues that seem tangential to their matter but which can have potentially sweeping implications, he said.
“Of course, an ancillary benefit of fostering relationships with attorneys outside of your practice area is that this is beneficial for symbiotic business development,” Bennett said. “You will be able to both send and receive referrals from these trusted colleagues.”
The defendants’ attorney, Keerthi Sugumaran of Boston, did not respond to requests for comment.
Untimely disclosure
Mahabir began working as a temporary custodian for the Barnstable Department of Public Works in February 2017, reporting to defendant Joel Quinn.
Her duties included cleaning the town’s youth and community center, collecting and disposing of trash, shoveling snow, and moving and setting up furniture.
Beginning almost immediately, co-workers allegedly subjected her to sexually offensive language, inappropriate sexual solicitation, and unwanted text messages.
On one occasion, a co-worker allegedly slapped her posterior while calling her a “bitch,” and on another occasion, a co-worker allegedly slapped her in the face.
Quinn was allegedly present for some of the harassment and allowed it to continue.
The plaintiff, who received good performance reviews, was made a permanent employee in July 2017.
Several months later, she reported continued harassment to human resources.
