FILED NOT FOR PUBLICATION AUG 29 2017 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
PETER J. MEYER; SHAREE MEYER, No. 15-35560 husband and wife, D.C. No. 2:14-cv-00297- RSM Plaintiff-Appellants,
v. MEMORANDUM*
NORTHWEST TRUSTEE SERVICES INC., a Washington Corporation,
Defendant-Appellee.
Appeal from the United States District Court for the Western District of Washington Ricardo S. Martinez, Chief Judge, Presiding
Argued and Submitted July 11, 2017 Seattle, Washington
Before: TASHIMA and NGUYEN, Circuit Judges, and WALTER,** District Judge.
Plaintiffs-Appellants Peter and Sharee Meyer (together, the “Meyers”) sued
defendant-appellee Northwest Trustee Services, Inc. (“NWTS”) after it initiated
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Donald E. Walter, United States District Judge for the Western District of Louisiana, sitting by designation. nonjudicial foreclosure proceedings on their deed of trust. Following a three-day
bench trial, the bankruptcy court ruled that NWTS had committed three violations
of Washington’s Deed of Trust Act (“DTA”) and, in doing so, also violated that
state’s Consumer Protection Act (“CPA”). NWTS appealed to the district court,
which reversed. The Meyers now appeal that ruling. We have jurisdiction under
28 U.S.C. § 158(d)(1), and we affirm.
The Meyers are barred by judicial estoppel from asserting their DTA and
CPA claims. A debtor who seeks bankruptcy relief is required to disclose his
assets, including any potential legal claims. See 11 U.S.C. § 521(a)(1)(B). A
debtor “is judicially estopped from asserting a cause of action not raised in a
reorganization plan or otherwise mentioned in the debtor’s schedules or disclosure
statements” because “both the court and [the debtor’s] creditors base their actions
on the disclosure statements and schedules.” Hamilton v. State Farm Fire & Cas.
Co., 270 F.3d 778, 783, 784 (9th Cir. 2001). The duty to disclose assets “continues
for the duration of the bankruptcy proceeding.” Id. at 785. Thus, “[j]udicial
estoppel will be imposed when the debtor has knowledge of enough facts to know
that a potential cause of action exists during the pendency of the bankruptcy, but
fails to amend his schedules or disclosure statements to identify the cause of action
as a contingent asset.” Id. at 784.
2 The Meyers filed for bankruptcy in 2010, and were not discharged until
2016. They asserted their DTA and CPA claims in 2012, and therefore knew of
those claims “during the pendency of the bankruptcy.” Id. Yet, the Meyers never
amended their schedules to disclose their DTA and CPA claims. This “deceived
the bankruptcy court,” which confirmed a plan that did not account for those
assets. See id. at 785. Accordingly, the Meyers are judicially estopped from
pursuing those claims.1
1 Relying on Ah Quin v. County of Kauai Department of Transportation, 733 F.3d 267 (9th Cir. 2013), the dissent contends that judicial estoppel should not be invoked in this case. The dissent’s reliance on Ah Quin, however, is misplaced. The “key factor [in Ah Quin] is that Plaintiff reopened her bankruptcy proceedings and filed amended bankruptcy schedules that properly listed this claim as an asset.” Id. at 272. That factor is absent in this case. Thus, the issue in Ah Quin was whether the plaintiff’s conduct should be excused, i.e., whether her “prior position was based on inadvertence or mistake.” Id. at 271 (quoting New Hampshire v. Maine, 532 U.S. 742 , 753 (2001)). In this case, however, the Meyers do not claim that their failure file a claim during the four years that their bankruptcy case was pending before they were granted a discharge was the result of “inadvertence or mistake,” even as that term has been broadly defined in Ah Quin. And the Meyers certainly have not reopened their bankruptcy proceeding in order to late-file their claim, a circumstance which the Ah Quin majority recognized as “consistent with New Hampshire and with the policies animating the doctrine of judicial estoppel.” Id. at 272.
The dissent contends that “[t]here was no need for the Meyers to reopen their bankruptcy case because they already disclosed their claims before they received their bankruptcy discharge.” Whatever the dissent means by its statement that the Meyers “already disclosed their claims,” they did not amend their disclosure statements and schedules, and bankruptcy is a form-driven process. (continued...) 3 AFFIRMED.
1 (...continued) [The debtor] is required to have amended his disclosure statements and schedules to provide the requisite notice, because of the express duties of disclosure imposed on him by 11 U.S.C. § 521(1), and because both the court and [the debtor’s] creditors base their actions on the disclosure statements and schedules. Hamilton, 270 F.3d at 784 (citation omitted). Despite the dissent’s protestation, we are bound by Hamilton. 4 Meyer et al. v. Northwest Trustee Services, Inc., No. 15-35560 FILED NGUYEN, Circuit Judge, dissenting: AUG 29 2017 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS Because judicial estoppel should not apply here, I respectfully dissent.
Judicial estoppel is an equitable doctrine, one that is not designed to punish a
party’s “inadvertence or mistake”; rather, its purpose is “to protect the integrity of
the judicial process by prohibiting parties from deliberately changing positions
according to the exigencies of the moment.” New Hampshire v. Maine, 532 U.S.
742, 749–50, 753 (2001) (internal quotation marks and citations omitted). A key
concern is whether the bankruptcy “court was misled.” Id. at 750–51; see Ah Quin
v. Cnty. of Kauai Dep’t of Transp., 733 F.3d 267, 275–76 (9th Cir. 2013)
(reversing summary judgment because judicial estoppel did not bar debtor’s claim
where, “possibly due to inadvertence, [debtor] happened to omit the claim from her
initial schedules”); see also In re MAI Sys. Corp., 178 B.R. 50, 52–54 (Bankr. D.
Del. 1995) (holding debtor was not judicially estopped from bringing claims in
adversary proceeding simply because they were omitted from its initial
disclosures).
The Meyers’ forthright litigation of their claims is a far cry from the
deliberate dissembling by the debtor in the case relied upon by the majority. In
Hamilton v. State Farm Fire & Casualty Co., the debtor took a uniform position
throughout the bankruptcy case that no insurance claims existed, even refusing to
1 answer the bankruptcy trustee’s questions about them. 270 F.3d 778, 781 (9th Cir.
2001). After his bankruptcy case was dismissed due to his dishonesty, the debtor
brought the claims in state court. Id.
Free access — add to your briefcase to read the full text and ask questions with AI
FILED NOT FOR PUBLICATION AUG 29 2017 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
PETER J. MEYER; SHAREE MEYER, No. 15-35560 husband and wife, D.C. No. 2:14-cv-00297- RSM Plaintiff-Appellants,
v. MEMORANDUM*
NORTHWEST TRUSTEE SERVICES INC., a Washington Corporation,
Defendant-Appellee.
Appeal from the United States District Court for the Western District of Washington Ricardo S. Martinez, Chief Judge, Presiding
Argued and Submitted July 11, 2017 Seattle, Washington
Before: TASHIMA and NGUYEN, Circuit Judges, and WALTER,** District Judge.
Plaintiffs-Appellants Peter and Sharee Meyer (together, the “Meyers”) sued
defendant-appellee Northwest Trustee Services, Inc. (“NWTS”) after it initiated
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Donald E. Walter, United States District Judge for the Western District of Louisiana, sitting by designation. nonjudicial foreclosure proceedings on their deed of trust. Following a three-day
bench trial, the bankruptcy court ruled that NWTS had committed three violations
of Washington’s Deed of Trust Act (“DTA”) and, in doing so, also violated that
state’s Consumer Protection Act (“CPA”). NWTS appealed to the district court,
which reversed. The Meyers now appeal that ruling. We have jurisdiction under
28 U.S.C. § 158(d)(1), and we affirm.
The Meyers are barred by judicial estoppel from asserting their DTA and
CPA claims. A debtor who seeks bankruptcy relief is required to disclose his
assets, including any potential legal claims. See 11 U.S.C. § 521(a)(1)(B). A
debtor “is judicially estopped from asserting a cause of action not raised in a
reorganization plan or otherwise mentioned in the debtor’s schedules or disclosure
statements” because “both the court and [the debtor’s] creditors base their actions
on the disclosure statements and schedules.” Hamilton v. State Farm Fire & Cas.
Co., 270 F.3d 778, 783, 784 (9th Cir. 2001). The duty to disclose assets “continues
for the duration of the bankruptcy proceeding.” Id. at 785. Thus, “[j]udicial
estoppel will be imposed when the debtor has knowledge of enough facts to know
that a potential cause of action exists during the pendency of the bankruptcy, but
fails to amend his schedules or disclosure statements to identify the cause of action
as a contingent asset.” Id. at 784.
2 The Meyers filed for bankruptcy in 2010, and were not discharged until
2016. They asserted their DTA and CPA claims in 2012, and therefore knew of
those claims “during the pendency of the bankruptcy.” Id. Yet, the Meyers never
amended their schedules to disclose their DTA and CPA claims. This “deceived
the bankruptcy court,” which confirmed a plan that did not account for those
assets. See id. at 785. Accordingly, the Meyers are judicially estopped from
pursuing those claims.1
1 Relying on Ah Quin v. County of Kauai Department of Transportation, 733 F.3d 267 (9th Cir. 2013), the dissent contends that judicial estoppel should not be invoked in this case. The dissent’s reliance on Ah Quin, however, is misplaced. The “key factor [in Ah Quin] is that Plaintiff reopened her bankruptcy proceedings and filed amended bankruptcy schedules that properly listed this claim as an asset.” Id. at 272. That factor is absent in this case. Thus, the issue in Ah Quin was whether the plaintiff’s conduct should be excused, i.e., whether her “prior position was based on inadvertence or mistake.” Id. at 271 (quoting New Hampshire v. Maine, 532 U.S. 742 , 753 (2001)). In this case, however, the Meyers do not claim that their failure file a claim during the four years that their bankruptcy case was pending before they were granted a discharge was the result of “inadvertence or mistake,” even as that term has been broadly defined in Ah Quin. And the Meyers certainly have not reopened their bankruptcy proceeding in order to late-file their claim, a circumstance which the Ah Quin majority recognized as “consistent with New Hampshire and with the policies animating the doctrine of judicial estoppel.” Id. at 272.
The dissent contends that “[t]here was no need for the Meyers to reopen their bankruptcy case because they already disclosed their claims before they received their bankruptcy discharge.” Whatever the dissent means by its statement that the Meyers “already disclosed their claims,” they did not amend their disclosure statements and schedules, and bankruptcy is a form-driven process. (continued...) 3 AFFIRMED.
1 (...continued) [The debtor] is required to have amended his disclosure statements and schedules to provide the requisite notice, because of the express duties of disclosure imposed on him by 11 U.S.C. § 521(1), and because both the court and [the debtor’s] creditors base their actions on the disclosure statements and schedules. Hamilton, 270 F.3d at 784 (citation omitted). Despite the dissent’s protestation, we are bound by Hamilton. 4 Meyer et al. v. Northwest Trustee Services, Inc., No. 15-35560 FILED NGUYEN, Circuit Judge, dissenting: AUG 29 2017 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS Because judicial estoppel should not apply here, I respectfully dissent.
Judicial estoppel is an equitable doctrine, one that is not designed to punish a
party’s “inadvertence or mistake”; rather, its purpose is “to protect the integrity of
the judicial process by prohibiting parties from deliberately changing positions
according to the exigencies of the moment.” New Hampshire v. Maine, 532 U.S.
742, 749–50, 753 (2001) (internal quotation marks and citations omitted). A key
concern is whether the bankruptcy “court was misled.” Id. at 750–51; see Ah Quin
v. Cnty. of Kauai Dep’t of Transp., 733 F.3d 267, 275–76 (9th Cir. 2013)
(reversing summary judgment because judicial estoppel did not bar debtor’s claim
where, “possibly due to inadvertence, [debtor] happened to omit the claim from her
initial schedules”); see also In re MAI Sys. Corp., 178 B.R. 50, 52–54 (Bankr. D.
Del. 1995) (holding debtor was not judicially estopped from bringing claims in
adversary proceeding simply because they were omitted from its initial
disclosures).
The Meyers’ forthright litigation of their claims is a far cry from the
deliberate dissembling by the debtor in the case relied upon by the majority. In
Hamilton v. State Farm Fire & Casualty Co., the debtor took a uniform position
throughout the bankruptcy case that no insurance claims existed, even refusing to
1 answer the bankruptcy trustee’s questions about them. 270 F.3d 778, 781 (9th Cir.
2001). After his bankruptcy case was dismissed due to his dishonesty, the debtor
brought the claims in state court. Id. We have previously recognized that the
omission in Hamilton was “intentional,” and thus its holding does not apply to a
possibly “inadvertent or mistaken omission from a bankruptcy filing.” Ah Quin,
733 F.3d at 271, 273 n.5.
In contrast, here, the Meyers were upfront with the bankruptcy court and
their creditors about their newly cognizable claims. The Meyers did not include
the claims on their initial disclosure because they were not cognizable until 2012.
But once their claims became cognizable, the Meyers disclosed them in the most
conspicuous way possible—by actually litigating the claims in a bench trial before
the bankruptcy court. No one suggests that the bankruptcy court was misled. Nor
does any creditor contend that it was misled. But even if one was, the majority’s
holding grants the creditors no relief. Instead, the majority’s ruling ensures that
“the only ‘winner’ in this scenario is the alleged bad actor in the estopped lawsuit.”
Ah Quin, 733 F.3d at 275.
The majority asserts that Ah Quin is factually distinguishable because that
debtor reopened her bankruptcy case to disclose claims (thereby ensuring the
bankruptcy court was not misled as to their existence). 733 F.3d at 269–70. There
was no need for the Meyers to reopen their bankruptcy case because they were
2 even more forthright than the debtor in Ah Quin, having already disclosed their
claims in their adversary proceeding before they received their bankruptcy
discharge. In holding that the Meyers should have also amended their schedules
(but not remanding so that they may do so), the majority literally elevates form
over substance. Yet, bankruptcy law is driven not by forms but by equitable
principles, the cornerstone of which is that “substance will not give way to form,
[and] technical considerations will not prevent substantial justice from being
done.” Pepper v. Litton, 308 U.S. 295, 304–05 (1939). Rather than invoking
judicial estoppel, I would reach the merits.