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En Banc Eleventh Circuit Decision May Substantially Undermine Judicial Estoppel Defense

Posted on: November 17th, 2017

By: William H. Buechner, Jr.

A  decision recently issued by the Eleventh Circuit sitting en banc may substantially undermine the judicial estoppel defense in employment cases.

A judicial estoppel defense may arise in many contexts, but the most common scenario is when the plaintiff files for bankruptcy, denies under oath the existence of any actual or potential claims on the bankruptcy schedules, obtains relief (either a complete discharge or confirmation of a reorganization plan) and then pursues (or continues to pursue) the claims that the plaintiff failed to disclose.  Under circumstances such as these, courts may bar a plaintiff from pursuing these claims, on the ground that such conduct makes a mockery of the judicial system by denying the existence of claims in one judicial forum and then pursuing those claims in another forum.  Courts also recognize that such conduct would permit the plaintiff to enrich himself to the detriment of the plaintiff’s creditors.  We have asserted the judicial estoppel defense successfully to defeat a number of employment claims.

In order to apply judicial estoppel, the defendant must establish that the plaintiff intended to make a mockery of the judicial system.  The Eleventh Circuit previously had held that a district court may infer this intent if the plaintiff knew about the omitted claim and had a motive to conceal it (which the plaintiff almost always does).  In Slater v. United States Steel Corp., 871 f.3D 1174 (11th Cir. 2017) (en banc), the Eleventh Circuit reversed the dismissal of the plaintiff’s race and sex discrimination claims on the ground of judicial estoppel.  In doing so, the Eleventh Circuit overruled the precedent summarized above and held that the court should consider all the facts and circumstances of the case in deciding whether the plaintiff intended to make a mockery of the judicial system. Id. at 1185.  The Eleventh Circuit explained that the district court may consider factors such as (1) the plaintiff’s level of sophistication; (2) whether the plaintiff has corrected the non-disclosures and if, so, under what circumstances; (3) whether the plaintiff informed his bankruptcy attorney of the claim before filing the bankruptcy disclosures; and (4) whether the trustee or the creditors were aware of the claim before the plaintiff amended the disclosures. Id.

In announcing this totality of circumstances approach, the Eleventh Circuit suggested that, if the bankruptcy court allows the plaintiff to re-open the bankruptcy case to disclose the previously omitted claim, this factor may weigh against the application of judicial estoppel. Id. at 1186-1187.  In addition, the Eleventh Circuit resolved an intra-circuit conflict and held that judicial estoppel should not be applied in Chapter 7 cases where the claim belongs to the trustee, unless the trustee (rather than the plaintiff) fails to disclose the claim with the intent to make a mockery of the judicial system. Id. at 1184-1185, 1188 n.16.  Of course, a bankruptcy trustee seldom, if ever, engages in such conduct.

The Eleventh Circuit’s decision follows similar decisions in the Sixth, Seventh and Ninth Circuits, whereas the Fifth and Tenth Circuits continue to hold that the plaintiff’s intent may be inferred if the plaintiff knew about the omitted claim and had a motive to conceal it.  Given this circuit split, it is possible that the Supreme Court may address this issue at some point in the future.

Absent intervention by the Supreme Court, it may be much more difficult for employers in the Eleventh Circuit to prevail on a judicial estoppel defense as a result of the Slater decision.

If you have any questions or would like more information, please contact Bill Buechner at [email protected].

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