Raymond Espinosa v. Aaron's Rents, Inc.

Opinion

ACCEPTED 01-14-00843-CV FIRST COURT OF APPEALS HOUSTON, TEXAS 4/2/2015 3:40:44 PM CHRISTOPHER PRINE CLERK

CASE NO. 01-14-00843-CV FILED IN 1st COURT OF APPEALS HOUSTON, TEXAS 4/2/2015 3:40:44 PM IN THE COURT OF APPEALS FOR CHRISTOPHER A. PRINE Clerk THE FIRST DISTRICT OF TEXAS HOUSTON, TEXAS

RAYMOND ESPINOSA,

Appellant,

v.

AARON’S RENTS, INC., AARON’S INC., AARON’S SALES & LEASE OWNERSHIP, and NICOLE LEE,

Appellees.

On Appeal from the District Court of Harris County, Texas, 129th Judicial District Cause Number 2010-70720

BRIEF OF APPELLEES

Dion Y. Kohler Virginia Mixon Swindell Georgia Bar No. 427715 Texas State Bar No. 00794711 Admitted Pro Hac Vice JACKSON LEWIS P.C. JACKSON LEWIS P.C. 1415 Louisiana, Suite 3325 1155 Peachtree Street, Suite 1000 Houston, TX 77002-7332 Atlanta, Georgia 30309-3600 (713) 650-0404 [Telephone] (404) 525-8200 [Telephone] (713) 650-0405 [Facsimile] (404) 525-1173 [Facsimile]

ATTORNEYS FOR APPELLEES TABLE OF CONTENTS

TABLE OF CONTENTS……………………………………………………..….ii

TABLE OF AUTHORITIES………………………………………………….....iv

IDENTITY OF PARTIES AND COUNSEL…………………………………....x

STATEMENT OF THE CASE………………………………………………....xii

STATEMENT REGARDING ORAL ARGUMENT………………………....xiv

ISSUES PRESENTED…………………………………………………………..xv

I. STATEMENT OF FACTS………………………………………………...1

A. FACTUAL BACKGROUND……………………………………....1

1. Espinosa’s Employment with Aaron’s………………………1

2. Events Leading up to Espinosa’s Arrest and Prosecution...1

3. Espinosa Files For Chapter 7 Bankruptcy………………….9

B. PROCEDURAL BACKGROUND………………………………..11

C. SUMMARY OF THE ARGUMENT……………………………..14

II. ARGUMENT……………………………………………………………...16

A. ESPINOSA IS ONCE AGAIN ATTEMPTING TO DECEIVE THE TRUSTEE AND HIS CREDITORS BY BRINGING THIS APPEAL…………………………………………………………....16

B. ESPINOSA’S CLAIMS AGAINST AARON’S ARE BARRED UNDER THE DOCTRINE OF JUDICIAL ESTOPPEL……….17

1. Any Reliance By the Trial Court on Federal Law Was Proper………………………………………………………..17

ii 2. Espinosa Is Judicially Estopped under Both the Texas and Federal Standards for Judicial Estoppel…………………..23

3. No Alleged Equitable Considerations Weigh against Application of Judicial Estoppel…………………………....44

C. ESPINOSA’S MALICIOUS PROSECUTION CLAIM FAILS AS A MATTER OF LAW………………………………………….….45

1. Aaron’s Did Not Act With Malice……………………….....47

2. Espinosa Failed to Rebut the Presumption that Aaron’s Had Probable Cause to Make a Report to the Police……..48

3. Aaron’s Did Not Initiate or Procure the Prosecution of Espinosa……………………………………………………..50

D. ESPINOSA’S INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS CLAIM FAILS AS A MATTER OF LAW………...51

E. ESPINOSA’S DEFAMATION CLAIM FAILS AS A MATTER OF LAW…………………………………………………………...52

III. CONCLUSION AND PRAYER………………………………………..54

CERTIFICATE OF COMPLIANCE………………………………………....56

CERTIFICATE OF SERVICE………………………………………………..57

APPENDIX

iii TABLE OF AUTHORITIES

CASES PAGES(S)

Ah Quin v. County of Kauai DOT, 733 F.3d 267 (9th Cir. 2013)............................................................................30 Akin v. Dahl, 661 S.W.2d 917 (Tex. 1983)............................................................................48

Andrews v. Diamond, Rash, Leslie & Smith, 959 S.W.2d 646 (Tex. App.—El Paso 1997, writ denied) .................... 22, 32, 33

Antonov v. Walters, 168 S.W.3d 901 (Tex. App.—Fort Worth 2005) ..............................................11

Arrendondo v. Rodriguez, No. 14-09-00857-CV, 2011 Tex. App. LEXIS 584 (Tex. Ct. App.---Hou. [14th Dist.] 2011, no pet.) ................................................................................49 Arrow Marble, LLC v. Killion, 441 S.W.3d 702 (Tex. App.—Hou. [1st Dist.] 2014, no pet.)...........................35

Backman v. J.C. Penney Co., No. 14-03-00436-CV, 2004 Tex. App. LEXIS 9003 (Tex. Ct. App.--- Hou. [14th Dist.] 2004, no pet.) .......................................................................48

Bailey v. Barnhart Interest, Inc., 287 S.W.3d 906 (Tex. App.—Hou. [14th Dist.] 2009, no pet.) ..................22, 30 Balaban v. Balaban, 712 S.W.2d 775 (Tex. App.—Hou. [1st Dist.] 1986, writ ref'd n.r.e) ...............40

Bennett v. Grant, 2014 Tex. App. LEXIS 8849 (Tex. App.—Austin Aug. 13, 2014)...................51

Bhatia v. Woodlands North Houston Heart Center, PLLC, 396 S.W.3d 658 (Tex. App.—Hou. [14th Dist.] 2013, pet. for review denied).............................................................................................................36 Biesek v. Soo Line Railroad Co., 440 F.3d 410 (7th Cir. 2006)............................................................................30

iv Brown v. Swett & Crawford of Tex., Inc., 178 S.W.3d 373 (Tex. App.—Hou. [1st Dist.] 2005, no pet.)....................passim Bunnell v. Lewis, 1993 WL 290781 (Tex. App.—Hou. [14th Dist.] July 27, 1993) .....................40

Clear Lake Ctr., L.P. v. Garden Ridge, L.P., 416 S.W.3d 527 (Tex. App.—Houston [14th Dist.] 2013, no pet.)...................18

Cricket Commc’ns, Inc. v. Trillium Indus. Inc., 235 S.W.3d 298 (Tex. App.—Dallas 2007, reh'g denied)..........................passim

D.R. Horton-Texas, Ltd. v. Markel Int'l Ins. Co., 300 S.W.3d 740 (Tex. 2009)............................................................................18

Dallas Sales Co., Inc. v. Carlisle Silver Co., Inc., 134 S.W.3d 928 (Tex. App.—Waco 2004, pet. for review denied) ...................... ....................................................................................................... 19, 23, 34, 43

Davis v. Household International, Inc., No. 05-90-01553-CV, 1991 Tex. App. LEXIS 3301 (Tex. App.---Dallas 1991, no writ) ..................................................................................................53 Davis v. Prosperity Bank, 383 S.W.3d 795 (Tex. Ct. App.—Hou. [14th Dist.] 2012, no pet.)....................... ....................................................................................................... 47, 50, 51, 53

Dow Chem. Co. v. Francis, 46 S.W.3d 237 (Tex. 2001)..............................................................................46

Dunmore v. U.S., 358 F.3d 1107 ..................................................................................................31

Erie v. R.R. v. Thompkins, 304 U.S. 64 (1938)...........................................................................................23 Ferguson v. Building Materials Corp. of Am., 276 S.W.3d 45 (Tex. App.—El Paso 2008, pet. for review granted, rev'd, remanded).................................................................................................passim

Ferguson v. Building Materials Corp. of Am., 295 S.W.3d 642 (Tex. 2009).......................................................... 20, 21, 37, 42

v First Valley Bank of Los Fresnos v. Martin, 55 S.W.3d 172 (Tex. App.—Corpus Christi 2001)...........................................51 First Valley Bank v. Martin, 144 S.W.3d 466 (Tex. 2004)............................................................................51

Flores v. Deutsche Bank Nat’l Trust Co., 2014 Tex. App. LEXIS 9318 (Tex. App.—Fort Worth Aug. 21, 2014, no pet.) ...........................................................................................................21, 37

Forbes, Inc. v. Granada Biosciences, Inc., 124 S.W.3d 167 (Tex. 2003)............................................................................46 Freedom Communications, Inc. v. Coronado, 372 S.W.3d 621 (Tex. 2012)............................................................................11

Galley v. Apollo Associated Servs., Ltd., 177 S.W.3d 523 (Tex. App.—Hou. [1st Dist.] 2005, no pet.)...........................39

Garcia v. BNSF Railway Co., 387 S.W.3d 763 (Tex. App.—El Paso 2012, no pet.) ................................passim

Hoffmann-La Roche, Inc. v. Zeltwanger, 144 S.W.3d 438 (Tex. 2004)............................................................................52

In re Coastal Plains, 179 F.3d 197 (5th Cir. 1999).....................................................................passim

In re Superior Crewboats, Inc., 374 F.3d 330 (5th Cir. 2004).....................................................................passim Jackson v. Hancock & Canada, L.L.P., 245 S.W.3d 51 (Tex. App.—Amarillo 2007, pet. for review denied) ........passim

Kane v. Nat’l Union Fire Ins. Co., 535 F.3d 380 (5th Cir. 2008)......................................................................31, 44

Kroger Tex. L.P. v. Suberu, 216 S.W.3d 788 (Tex. 2006)................................................................ 46, 48, 49

Lewis v. Continental Airlines, 80 F. Supp. 2d 686 (S.D. Tex. 1999)..........................................................50, 51

vi Long v. Knox, 155 Tex. 581 (Tex. 1956)............................................................... 21, 37, 38, 45 Norris v. Brookshire Grocery Co., 362 S.W.3d 226 (Tex. App.—Dallas 2012, pet. for review denied) .................35

O'Melveny & Myers v. FDIC, 512 U.S. 79 (1994)...........................................................................................21

Pleasant Glade Assembly of God v. Schubert, 246 S.W.3d 1 (Tex. 2008)................................................................................21

Praytor v. Ford Motor Co., 97 S.W.3d 237 (Tex. App.—Houston [14th Dist.] 2002, no pet.)......................46

Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211 (Tex. 2003)............................................................................17 Randall’s Food Markets v. Johnson, 891 S.W.2d 640 (Tex. 1995)............................................................................54 Range v. U.S., 256 B.R. 868 (S.D. Tex. 2000).........................................................................36

Reed v. City of Arlington, 620 F.3d 477 (5th Cir. 2010)............................................................................32

Reed v. City of Arlington, 650 F.3d 571 (2011).........................................................................................32

Richey v. Brookshire Grocery Co., 952 S.W.2d 515 (Tex. 1997)......................................................................48, 49

Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81 F.3d 355 (3rd Cir. 1996) .............................................................................43 Siller v. LPP Mortgage, LTD, 2013 Tex. App. LEXIS 4520 (Tex. App.—San Antonio Apr. 10, 2013, pet. for review denied) ................................................................... 18, 19, 21, 37

Spera v. Fleming, Hovenkamp & Grayson, P.C., 25 S.W.3d 863 (Tex. App.—Hou. [14th Dist.] 2000, no pet.) ..........................39

vii Stallings v. Hussman Corp., 447 F.3d 1041 (8th Cir. 2006)..........................................................................43 Stephenson v. Leboeuf, 16 S.W.3d 829 (Tex. App.—Hou. [14th Dist.] 2000, pet. for review denied and subsequent appeal, remanded on other grounds) .....................passim

Thomas v. Ginter, 2014 Tex. App. LEXIS 8183 (Tex. App.—Hou. [1st Dist.] July 29, 2014, no pet.)......................................................................................................passim

Torres v. GSC Enters., Inc., 242 S.W.3d 553 (Tex. Ct. App.---El Paso 2007, no pet.) .................................52

Tow v. Pagano, 312 S.W.3d 751 (Tex. App.—Hou. [1st Dist.] 2009, no pet.)............... 19, 21, 37

Travelers Ins. Co. v. Joachim, 315 S.W.3d 860 (Tex. 2010)............................................................................17

Trostle v. Combs, 104 S.W.3d 206 (Tex. App.---Austin 2003, no pet.) ..................................52, 53 U.S. v. 162 Megamania Gambling Devices, 231 F.3d 713 (10th Cir. 2000)..........................................................................22 Valence Operating Co. v. Dorsett, 164 S.W.3d 656 (Tex. 2005)............................................................................17

Vinson & Elkins v. Moran, 946 S.W.2d 381 (Tex. App.—Hou. [14th Dist.] 1997, writ dism'd by agr. and mot. dismissed) .........................................................................................39

Vitale v. Keim, 1997 Tex. App. LEXIS 4719 (Tex. App.—Hou. [1st Dist.] Aug. 29, 1997, review denied)........................................................................................39

Wal-Mart Stores, Inc. v. Medina, 814 S.W.2d 71 (Tex. Ct. App.---Corpus Christi 1991, writ denied and reh’g of writ of error overruled) .......................................................................46

Western Invs., Inc. v. Urena, 162 S.W.3d 547 (Tex. 2005)............................................................................17

viii WFAA-TV, Inc. v. McLemore, 978 S.W.2d 568 (Tex. 1998)............................................................................53

OTHER AUTHORITIES Eric Hilmo, Bankrupt Estoppel: The Case for a Uniform Doctrine of Judicial Estoppel As Applied Against Former Bankruptcy Debtors, 81 Fordham L. Rev. 1353 (2012)..........................................................................30

Tex. R. App. P. 53.2(f)..........................................................................................15

Tex. R. Civ. P. 166a(i) ..........................................................................................46 Tex. R. Civ. P. 166a(c) ..................................................................................passim

ix IDENTITY OF PARTIES AND COUNSEL

The following constitutes a list of all parties and the names and

addresses of all trial and appellate counsel:

Appellant/Plaintiff: Raymond Espinosa

Appellant’s Trial Counsel: Mark T. Murray Stevenson & Murray Texas State Bar No. 14724810 24 Greenway Plaza, Suite 750 Houston, Texas 77046 (713) 622-3223 [Telephone] (713) 622-3224 [Facsimile]

Appellant’s Appellate Counsel: Robert Teir Robert Teir, PLLC 845 FM 517 W, Suite 200 Dickinson, Texas 77539 (832) 365-1191 [Telephone] (832) 550-2700 [Facsimile]

Appellees/Defendants: Aaron’s Rents, Inc., Aaron’s, Inc., Aaron’s Sales and Lease Ownership, and Nicole Lee

Appellees’ Appellate Counsel: Virginia Mixon Swindell Texas State Bar No. 00794711 JACKSON LEWIS P.C. 1415 Louisiana, Suite 3325 Houston, TX 77002-7332 (713) 650-0404 [Telephone] (713) 650-0405 [Facsimile]

x Dion Y. Kohler Georgia Bar No. 427715 JACKSON LEWIS P.C. 1155 Peachtree Street, Suite 1000 Atlanta, Georgia 30309-3600 (404) 525-8200 [Telephone] (404) 525-1173 [Facsimile]

Defendant/Third-Party Plaintiff : J. Norris.1

1 Mr. Norris was dismissed from this case by Appellant/Plaintiff Raymond Espinosa at the trial court.

xi STATEMENT OF THE CASE

Appellant/Plaintiff Raymond Espinosa (“Espinosa”) brought suit against

Appellees/Defendants Aaron’s Rents, Inc., Aaron’s, Inc., Aaron’s Sales & Lease

Ownership, and Nicole Lee (collectively, “Aaron’s) on December 3, 2010, alleging

claims for malicious prosecution, defamation, and intentional infliction of

emotional distress based on allegedly false accusations of theft by Aaron’s

following the termination of Espinosa’s employment. Espinosa also brought

claims for fraud and breach of fiduciary duty in connection with Aaron’s alleged

failure to pay him a quarterly bonus. On October 20, 2010, just six weeks before

bringing his claims against Aaron’s, Espinosa filed for Chapter 7 bankruptcy.

Espinosa was granted a “no asset” discharge and his bankruptcy case was closed

on January 31, 2011. Espinosa never disclosed his claims against Aaron’s to the

bankruptcy court while his bankruptcy case was pending during the approximately

two months after this lawsuit was initiated.

On December 13, 2013, Aaron’s filed a Motion for Summary Judgment as to

all of Espinosa’s claims, on the grounds that Espinosa’s claims were barred by the

doctrine of judicial estoppel due to his failure to disclose them to the bankruptcy

court. Aaron’s also asserted other meritorious grounds for summary judgment

with respect to the substantive elements of all of Espinosa’s claims. On September

16, 2014, the court issued an Order granting summary judgment on all of

xii Espinosa’s claims and awarding Aaron’s its costs. On October 14, 2014, Espinosa

filed a notice of appeal with this Court.

xiii STATEMENT REGARDING ORAL ARGUMENT

This case does not present novel issues that require oral argument. The

record before the trial court clearly shows that summary judgment was properly

granted for Appellees.

xiv ISSUES PRESENTED

1. Whether the trial court properly granted summary judgment to Aaron’s based on judicial estoppel due to Espinosa’s failure to disclose his claims during his bankruptcy proceedings.

2. Whether the trial court properly granted summary judgment to Aaron’s on Espinosa’s malicious prosecution claim.

4. Whether the trial court properly granted summary judgment to Aaron’s on Espinosa’s intentional infliction of emotional distress claim.

5. Whether the trial court properly granted summary judgment to Aaron’s on Espinosa’s defamation claim.

xv IV. STATEMENT OF FACTS

A. FACTUAL BACKGROUND

1. Espinosa’s Employment with Aaron’s

Aaron’s is a specialty retailer serving consumers through the sale and lease

ownership of furniture, consumer electronics, computers, home appliances, and

accessories in over 2,100 Company-operated and franchised stores in the United

States and Canada. Espinosa was employed by Aaron’s from February 6, 2002

until January 9, 2006. (CRS 59, 65.)2 On October 21, 2002, Espinosa became the

General Manager (GM) at store C0020 located in Monroe, Texas. (CRS 21.) He

reported to Regional Manager (RM) Roger Hooker. (Id.) One of Espinosa’s

primary duties as GM was to protect company assets such as store inventory sold

and leased to customers. (CRS 66-67.) On January 9, 2006, Espinosa’s

employment ended. (CRS 59.) Espinosa contends he resigned and Hooker claims

Espinosa was terminated for performance reasons. (CRS 60.)

2. Events Leading Up to Espinosa’s Arrest and Prosecution

On February 11, 2006, Aaron’s sent a truck to customer Jimmie Norris’

residence to work with Norris to obtain payment or to collect rental furniture due

to delinquent lease payments. (CRS 95-100.) The Aaron’s drivers told Norris they

understood he had rented a keyboard, 3 refrigerators, a washer/dryer, a big screen

2 References to the Clerk’s Record are identified as “CR.” References to the First Supplemental Clerk’s Record are identified as “CRS.”

1 TV and a Bose home theater system from Aaron’s. (Id.) Norris told them he had

never rented anything or signed a rental contract. (Id.)

Aaron’s, through Vice-President Internal Security (Loss Prevention) Danny

Walker, former Legal Counsel for Southwest Operations Nicole Lee, who is a

named Defendant, and Hooker conducted an investigation of this incident. (CRS

185.) Ultimately, its investigation included: 1) interviewing Norris, Customer

Service Representative (CSR) Tina Duhon, CSR Dawnisha Collier, Product

Technician (PT) William Rogers, PT James Hebert, and Customer Accounts

Manager (CAM) Joe Mermella; 2) conducting an audit of missing merchandise at

the Monroe store; 3) reviewing documents related to lease agreements which

appeared to be bogus; and 4) contacting customers who appeared to have bogus

lease agreements. (CRS 188.)

On February 15, 2006, Norris provided a handwritten statement to Aaron’s.

(CRS 95-100.) According to the statement, Norris met Espinosa at a gym in 2002

and ran into him again in late 2003 or early 2004. Norris inquired about

purchasing a big screen TV and Espinosa said the store did not have one to sell at

the time but he would keep an eye out for one. (Id.) Norris later saw Espinosa at

the gym and Espinosa told him he had a big screen TV coming in he could sell

Norris for cash. (Id.) A couple of days later, Espinosa called Norris and said he

had a 52” RCA TV he could sell him for $400 cash. (Id.) Norris agreed, but

2 Espinosa told him not to come by the store to pick it up, he would have it delivered

instead. (Id.) Espinosa later called Norris and asked him if he was still interested

in leather furniture, which Norris had seen at a tent sale. (Id.) Norris said he was

interested and Espinosa agreed to sell Norris the furniture and TV for $1200 and

have it delivered to him. (Id.) The next night, according to Norris, a large black

male in an Aaron’s truck delivered the TV and brown leather sofa, chair and

ottoman; Norris gave him a check for $1200 payable to Aaron Rents. (Id.)

Subsequently, Norris called Espinosa about buying a washer, dryer and side by

side refrigerator. (Id.) Espinosa called Norris a couple of days later and said he

had these items available for between $500-700 cash, which Norris said was

acceptable depending on their quality. (Id.) On December 28, 2004, Espinosa

delivered to Norris a Maytag refrigerator with no shelves and a GE washer/dryer

with no hoses or cords. (Id.) Norris paid Espinosa $500 cash. (Id.)

On February 17, 2006, Duhon also provided a written statement to Aaron’s.

(CRS 102.) Duhon worked at the Monroe store under Espinosa as a CSR. (Id.)

She stated that in mid-February, 2006, she discovered her brother had a big screen

TV on his account she did not believe he had rented. (Id.) She contacted her

brother who confirmed he did not rent the TV. (Id.) According to Duhon, she

called Espinosa and they spoke on February 15, 2006. (Id.) Espinosa told Duhon

he knew about the TV and would have the money dropped off to pay for it. (Id.)

3 Espinosa also asked Duhon about the whereabouts of customer Marese Butler’s

folder and she replied that she did not know. (Id.) Espinosa called Duhon back

and said he had just gotten out of a meeting with Aaron’s Vice President Dave

Buck and he was not going to drop anything off until he met with Buck to discuss

the “bogus deals” that had been written up. (Id.) According to Duhon, Espinosa

also said “the guys would back up his story” rather than her. (Id.)

Duhon also told Aaron’s in her statement she had created a lease folder for

Norris and 3 other customers at the request of Espinosa, but he told her not to

process them because they were “related to him and were good.” (CRS 102.)

Duhon also reported Espinosa dealt with certain customers and Espinosa took their

lease payments directly. (Id.) Customers also told her they paid Espinosa directly

and their accounts were paid. (Id.) Duhon reported other irregularities and stated

she believed that Espinosa had merchandise which belonged to Aaron’s. (Id.) The

manner in which these transactions were handled by Espinosa as reported by

Duhon were irregular and in violation of Aaron’s policies and procedures.

Collier reported to Aaron’s during her investigation interview that Espinosa

called her after the investigation of Espinosa’s practices began and said he was

sending in a customer to get two big screen TV sets and two LCD monitors. (CRS

162.) According to Collier, Espinosa asked her to fill out an order form with false

4 information and schedule it for delivery. (Id.) Espinosa then asked Collier what

she wanted out of the deal---money or product. (Id.)

The investigation also included an audit comparing the store’s inventory

versus merchandise which was recorded as on-lease or purchased since September

2005; this audit revealed approximately 30 items of merchandise which could not

be accounted for. This included washers and dryers, large televisions, computers,

Bose stereos and various items of furniture having a retail value in the amount of

approximately $63,556.32. (CRS 111.) Customers whom Aaron’s was able to

contact denied renting the merchandise listed on their lease agreement(s) and much

of the information on the lease agreements was false. (CRS 110-111, 194.) Also

as part of the investigation, Hooker looked at the route sheets for the delivery

drivers and the transactions which appeared to be phony were not listed. (CRS

193.) Further, GM Scott Newton reported to Hooker that Espinosa told him to

“free time” Norris’s delinquent lease accounts because he assisted him with

collections.3 (CRS 188.) In total, approximately 11 lease agreements were

identified as fraudulent. (See CRS 95-100.)

On February 22, 2006, Lee and Walker contacted the Houston Police

Department (“HPD”). Officer Hernandez was dispatched and prepared a police

report which stated Espinosa appropriated property illegally over the last 1 ½ years

3 When a lease is “free timed” the customer is not charged their normally due rental payment.

5 resulting in a total loss of $63,556.32. (CRS 104, 110-112.) Lee and Walker only

reported information to Hernandez they believed to be true at the time. (CRS 186.)

Officer Chapman was assigned by HPD to investigate the case. (CRS 104-105,

113-114.) Officer Chapman interviewed Lee and Walker and was told about the

investigation Aaron’s conducted and Aaron’s provided a partial list of customer

names used on fake rental agreements. (Id.) Officer Chapman personally

attempted to contact the customers named on the rental agreements, but none of

telephone numbers were valid. (Id.) Officer Chapman noted some of the

agreements had the same address or included addresses for motels. (Id.) Officer

Chapman told Assistant District Attorney Shipley that Aaron’s records showed the

merchandise for the bogus agreements amounted to approximately $31,000. (Id.)

Officer Chapman was able to interview “customer” Leo Cardenas who stated he

had borrowed the large TV listed in a bogus rental agreement to watch an election

and then he purchased it. (CRS 105, 115.) Espinosa handled the transaction with

Cardenas. (Id.) However, Aaron’s had no record of the sale of this merchandise to

Cardenas. (CRS 105.)

The Harris County District Attorney’s office was also involved in the

investigation. Norris was interviewed by Assistant District Attorney (“ADA”)

Layne Thompson, and stated he (Norris) purchased a refrigerator, washer and dryer

from Espinosa for $500 cash. (CRS 105.) Again, Aaron’s had no record of this

6 sale. (Id.) ADA Thompson reported Norris said that when he contacted Espinosa

about the bogus lease agreements, Espinosa acted as if he knew about them and

said he would contact Hooker and “straighten everything out.” (CRS 105-106.)

ADA Thompson also interviewed Duhon and she confirmed that the

signature on 2 pages of a bogus lease agreement was Espinosa’s. (CRS 106, 180.)

Duhon also confirmed the information in the statement she had given to Aaron’s

during their investigation. (CRS 106.) ADA Thompson also interviewed Collier,

who confirmed her report to Aaron’s that Espinosa asked her to facilitate a theft of

merchandise by filing out an order form with false information and scheduling the

products to be delivered. (CRS 107.) Collier told ADA Thompson that Espinosa

said she could either get money or product out of the deal. (Id.)

ADA Thompson also interviewed Marese Butler, who denied ever leasing

merchandise but had a false lease agreement showing she had leased merchandise

which could not be located by Aaron’s. (CRS 106.) Butler stated she went to

Espinosa’s store, looked at some merchandise and completed paperwork, but did

not rent anything. (Id.) About a year later, Aaron’s came to collect different

merchandise they claimed she had rented. (Id.)

Based on the investigation conducted by his office, ADA Thompson

concluded that Espinosa had stolen the merchandise from Aaron’s, but ADA

Thompson had concerns whether he could prove Espinosa’s guilt beyond a

7 reasonable doubt to a jury. (CRS 107.) ADA Thompson was confident he could

prove the transaction with Norris by Espinosa was theft but was concerned about

not being able to conclusively prove Espinosa was responsible for the other

transactions. (Id.) In addition, the value of the merchandise involved in the Norris

transaction alone did not rise to the level of a felony. (Id.)

After the police and DA’s office spent over 3 months investigating, a grand

jury issued a felony theft indictment on May 31, 2006 (filed July 7, 2006) against

Espinosa for appropriating 10 televisions, 4 refrigerators, 2 washers, 2 dryers and

furniture with a value of approximately $20,100. (CRS 201-202.) The charges

were filed by Officer Chapman after conducting his own investigation of the initial

report made by Aaron’s. Espinosa was arrested on a warrant obtained by Officer

Chapman. (CRS 108.) The decision to file the charges and proceed with the

prosecution was based upon the DA’s investigation of the case. (Id.) No one at

Aaron’s pressured or attempted to influence the police or the DA’s office to pursue

the matter. (CRS 108, 186.) Importantly, Aaron’s did not provide any false

information to HPD or the DA’s office during their investigation. (CRS 107.)

Ultimately, the grand jury issued a “no bill” to the charges. (CRS 107.)

While ADA Thompson’s office disagreed with the decision and was convinced of

Espinosa’s guilt, it was the policy of the District Attorney at the time not to pursue

8 prosecution when the grand jury issues a no bill. (Id.) On or about August 4, 2008,

the charges against Espinosa were dismissed. (CRS 219-220.)

3. Espinosa Files For Chapter 7 Bankruptcy

On October 20, 2010, Espinosa filed a petition for a Chapter 7 bankruptcy in

the United States Bankruptcy Court for the Southern District of Texas. (CRS 227-

229.) Espinosa was represented by attorney Jared Brent Ynigez in his bankruptcy.

(CRS 222.) In his Statement of Financial Affairs and Schedule B (in which he was

required to list personal property), Espinosa did not list his claims against Aaron’s.

(CRS 30-31, 223, 235.) Question 21 of Schedule B of Espinosa’s bankruptcy

petition asked him to list “[o]ther contingent and unliquidated claims of every

nature.” (CRS 235.) In response to Question 21, Espinosa checked “none.” (Id.)

With respect to Schedule B, Espinosa signed a “Declaration Concerning Debtor’s

Schedules” indicating that “I declare under penalty of perjury that I have read the

foregoing summary and schedules consisting of 17 sheets, and that they are true

and correct to the best of my knowledge, information, and belief.” (CRS 247.)

On or about November 29, 2010, a creditors meeting was held and Espinosa

also attended. (CRS 224.) On November 30, 2010, the trustee of Espinosa’s

bankruptcy estate, Rodney Tow, issued a “Report of No Distribution” indicating

that there was no property available for distribution from the estate over and above

9 that exempted by law and that $267,745.48 in claims were scheduled to be

discharged without payment. (CRS 224-225.)

On December 3, 2010, just 6 weeks after filing for bankruptcy, Espinosa

filed his First Amended Original Petition against Aaron’s. (CR 4-12.) Espinosa’s

bankruptcy petition remained pending for approximately two months after this

lawsuit was initiated against Aaron’s, but Espinosa never amended his listing of

assets to include his claims against Aaron’s. On January 31, 2011, Espinosa was

granted a discharge and his bankruptcy case was closed. (CRS 225, 256-257.)

Aaron’s filed its Motion for Summary Judgment on December 13, 2013,

asserting that Espinosa’s claims were barred due to, among other reasons, his

failure to disclose his claims during his bankruptcy proceeding and because

Espinosa lacked standing to bring his claims because they were property of the

bankruptcy estate. (CRS 19-53.)

Trustee Rodney Tow subsequently filed a Motion to Reopen Espinosa’s

bankruptcy case, which the bankruptcy court granted on January 7, 2014. (CR

197.) On March 25, 2014, Mark Murray, Espinosa’s trial counsel, was authorized

by the trustee to act as special counsel for the bankruptcy estate in connection with

Espinosa’s case against Aaron’s. (CR 195-197.) The trustee never intervened in

Espinosa’s case against Aaron’s or moved to substitute himself as the real party in

interest.

10 The trial court granted summary judgment to Aaron’s on all of Espinosa’s

claims on September 14, 2014. (CR 312-313.) Subsequently, on February 4,

2015, Trustee Tow filed a “Report of No Distribution” stating that that there was

no property available for distribution from the estate over and above that exempted

by law and indicating that $167,270.00 in assets were abandoned and $267,745.48

were scheduled to be discharged without payment.4 (Appendix, Bankruptcy

Docket Sheet, Entry Dated February 4, 2015.) The bankruptcy court closed

Espinosa’s case for a second time on March 9, 2015. (Appendix, Doc. 45, Order

Closing Case.)

B. PROCEDURAL BACKGROUND On October 26, 2010, Espinosa filed an Original Petition against Jimmie

Norris in the District Court of Harris County, 129th Judicial District. (CRS 4-6.)

On November 4, 2010, Norris filed an Agreed Motion for Leave to designate

Appellees Aaron Rents, Inc., Aaron’s, Inc., Aaron’s Sales & Lease Ownership, and

Nicole Lee as responsible third parties. (CR 30-33.) The Court issued an Order on

November 11, 2010 granting Norris’ motion. (CRS 9.) Espinosa moved to nonsuit

4 Although these subsequent events in Espinosa’s bankruptcy case are not part of the trial court’s record, Aaron’s believes this updated information will assist the Court in understanding the procedural posture of this case and in making a determination as to the issues raised in Espinosa’s appeal, and asks the Court to take judicial notice of these documents. See Freedom Communications, Inc. v. Coronado, 372 S.W.3d 621, 623 (Tex. 2012) (“a court will take judicial notice of another court's records if a party provides proof of the records”); Antonov v. Walters, 168 S.W.3d 901, 903 n.1 (Tex. App.—Fort Worth 2005) (taking judicial notice of facts set forth in records from bankruptcy proceedings filed by appellees as an appendix).

11 Norris without prejudice and Norris was dismissed from the case on March 22,

2011. (CRS 11.) Espinosa used this legal maneuver because otherwise his claims

against Aaron’s and Lee would have been time-barred.

Espinosa’s First Amended Original Petition was filed December 3, 2010,

alleging claims for malicious prosecution, defamation, and intentional infliction of

emotional distress in connection with allegedly false accusations of theft by

Aaron’s. (CR 4-12.) Espinosa also asserted claims for fraud and breach of

fiduciary duty in connection with Aaron’s alleged failure to pay him a quarterly

bonus for the last quarter he worked. (Id.)

On December 13, 2013, Aaron’s and Lee filed a Motion for Summary

Judgment as to all of Espinosa’s claims.5 (CRS 19-53.) Aaron’s Motion for

Summary Judgment was based on the following grounds: (1) Espinosa’s claims are

barred under the doctrine of judicial estoppel due to his failure to disclose them

during his bankruptcy proceedings; (2) Espinosa lacked standing to bring his

claims because they are property of the bankruptcy estate; (3) Espinosa’s malicious

prosecution claim fails as a matter of law because, among other things, Aaron’s did

not knowingly provide false information to the authorities; (4) Espinosa’s

defamation claim fails as a matter of law because Espinosa had no admissible

5 Aaron’s also filed an earlier Motion for Summary Judgment on June 6, 2012 on the grounds that Espinosa’s claims were barred by the applicable statutes of limitation. (CR 15-24.) The court denied this Motion for Summary Judgment on October 15, 2012. (CRS 16.)

12 evidence of a defamatory statement, there was no evidence Aaron’s acted

negligently, and the alleged statements were subject to a qualified privilege; (5)

Espinosa’s intentional infliction of emotion distress (IIED) claim fails as a matter

of law because he could not establish the necessary elements of an IIED claim and

Espinosa could not bring an IIED claim, which is a “gap-filler” tort, because it was

based on the same alleged actions as his other tort claims; and (6) Espinosa failed

to establish claims for fraud and breach of fiduciary duty. (Id.)

Espinosa filed a Response in Opposition to Aaron’s Motion for Summary

Judgment on September 8, 2014. (CR 170-183.) Aaron’s filed a Reply in Support

of its Motion for Summary Judgment on September 11, 2014. (CR 298-311.) The

court held a hearing on September 14, 2014. On September 16, 2014, the court

issued an Order granting summary judgment on all of Espinosa’s claims and

awarding Aaron’s and Lee their costs. (CR 312.) On October 14, 2014, Espinosa

filed a notice of appeal with this Court. (CR 320.)

13 C. SUMMARY OF THE ARGUMENT

This case raises two important public issues. First, the Court should affirm

the trial court’s grant of summary judgment because Espinosa is judicially

estopped from asserting his claims against Aaron’s due to his failure to disclose his

claims during the bankruptcy proceedings. This doctrine is necessary to protect the

integrity of the judicial system and was properly applied by the trial court. While

Espinosa waived any argument regarding the application of Texas law versus

federal law on judicial estoppel because he failed to raise that issue before the trial

court, Texas courts look to federal law when applying judicial estoppel in the

context of inconsistent statements made in a prior bankruptcy proceeding.

Furthermore, judicial estoppel applies to Espinosa under both federal and Texas

law.

In addition, the trial court’s grant of summary judgment on Plaintiff’s

malicious prosecution claim was proper and consistent with the public policy of

the state of Texas to encourage citizens to report suspected crimes to the

authorities. Even assuming arguendo that judicial estoppel does not apply to bar

Espinosa’s claims, summary judgment was properly granted due to Espinosa’s

failure to raise a genuine dispute of material fact as to the essential substantive

elements of his claims for malicious prosecution as well as his claims for

14 intentional infliction of emotional distress and defamation. Espinosa has failed to

articulate any valid basis for reversing the trial court’s grant of summary judgment

with respect to the substantive elements of these claims.6

6 Apart from his general challenge to the application of judicial estoppel, Espinosa has not raised any specific arguments challenging the trial court’s grant of summary judgment on his claims for fraud and breach of fiduciary duty. Therefore, they are deemed abandoned. See Tex. R. App. P. 53.2(f).

15 II. ARGUMENT

A. ESPINOSA IS ONCE AGAIN ATTEMPTING TO DECEIVE THE TRUSTEE AND HIS CREDITORS BY BRINGING THIS APPEAL. After Aaron’s raised its judicial estoppel defense on summary judgment,

Espinosa disclosed his claims against Aaron’s to the bankruptcy court and the

trustee authorized Espinosa’s trial counsel to act as special counsel for the

bankruptcy estate in connection with Espinosa’s case against Aaron’s. (CR 195-

197.) Following the trial court’s grant of summary judgment to Aaron’s on

September 14, 2014, the trustee issued a report of no distribution, abandoned the

remaining assets in Espinosa’s bankruptcy case, and Espinosa’s bankruptcy case

was closed. (Appendix, Bankruptcy Docket Sheet, Entry Dated February 4, 2015

and Doc. 45, Order Closing Case.) Apparently, unbeknownst to the trustee and the

bankruptcy court,7 however, Espinosa has brought this appeal through a different

attorney, Robert Teir, who was never authorized by the trustee to act on behalf of

the bankruptcy estate. It appears that Espinosa is now attempting to dupe the

trustee and his creditors a second time by bringing this appeal without their

knowledge or authorization. Since the trustee has abandoned the assets in

Espinosa’s bankruptcy estate, any proceeds from Espinosa’s claims against

7 The record of Plaintiff’s bankruptcy case does not indicate any filing providing notice to the bankruptcy court or his trustee of the filing of this appeal. (See Appendix, Bankruptcy Docket Sheet.)

16 Aaron’s would go directly to Espinosa, and not to his creditors. For this reason

alone, the Court should dismiss Espinosa’s appeal.

B. ESPINOSA’S CLAIMS AGAINST AARON’S ARE BARRED UNDER THE DOCTRINE OF JUDICIAL ESTOPPEL. A trial court’s grant of summary judgment is reviewed de novo on appeal.

Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010); Valence

Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). Summary judgment

should be affirmed if there is no genuine issue of material fact, and the moving

party is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Western

Invs., Inc. v. Urena, 162 S.W.3d 547, 550 (Tex. 2005). Because the trial court

granted Aaron’s motion for summary judgment without specifying the grounds

relied on, summary judgment may be upheld on appeal if any of the grounds

presented to the trial court is meritorious. Provident Life & Accident Ins. Co. v.

Knott, 128 S.W.3d 211, 216 (Tex. 2003).

To the extent the trial court granted summary judgment on the grounds that

Espinosa’s claims are barred by judicial estoppel due to his failure to disclose them

during the bankruptcy proceedings, the trial court’s grant of summary judgment

was proper.

1. Any Reliance By the Trial Court on Federal Law Was Proper.

As an initial matter, Espinosa has waived any argument that reliance on

federal law in applying judicial estoppel based on non-disclosure in a bankruptcy

17 proceeding was improper. He failed to raise this argument in response to Aaron’s

Motion for Summary Judgment, and did not cite any Texas law on judicial

estoppel in his Response. (CR 173-174.) See D.R. Horton-Texas, Ltd. v. Markel

Int'l Ins. Co., 300 S.W.3d 740, 743 (Tex. 2009) (“A non-movant must present its

objections to a summary judgment motion expressly by written answer or other

written response to the motion in the trial court or that objection is waived [on

appeal].”); Clear Lake Ctr., L.P. v. Garden Ridge, L.P., 416 S.W.3d 527, 542 (Tex.

App.—Houston [14th Dist.] 2013, no pet.) (In the summary judgment context,

“[i]ssues not expressly presented to the trial court by written motion, answer or

other response shall not be considered on appeal as grounds for reversal.”) (quoting

Tex. R. Civ. P. 166a(c)).

Regardless, any reliance by the trial court on federal law regarding judicial

estoppel was entirely proper. Texas courts have consistently applied federal law

when a party invokes judicial estoppel based on a prior bankruptcy proceeding.

See Thomas v. Ginter, 2014 Tex. App. LEXIS 8183, at *6 (Tex. App.—Hou. [1st

Dist.] July 29, 2014, no pet.) (“When a party invokes judicial estoppel in the

context of a bankruptcy proceeding, we apply federal law to determine whether the

doctrine applies.”); Siller v. LPP Mortgage, LTD, 2013 Tex. App. LEXIS 4520, at

*10 (Tex. App.—San Antonio Apr. 10, 2013, pet. for review denied) (“A majority

of Texas courts do apply federal judicial estoppel law when the prior proceeding

18 was in bankruptcy court.”) (citing cases); Tow v. Pagano, 312 S.W.3d 751, 756

(Tex. App.—Hou. [1st Dist.] 2009, no pet.) (“Because this issue arises in the

bankruptcy context, we apply federal law to decide whether judicial estoppel bars

Tow’s claims.”); Cricket Commc’ns, Inc. v. Trillium Indus. Inc., 235 S.W.3d 298,

304 (Tex. App.—Dallas 2007, reh'g denied) (applying federal law where judicial

estoppel was raised in the context of a prior bankruptcy proceeding involving a

party’s duty to disclose under the bankruptcy code); Brown v. Swett & Crawford of

Tex., Inc., 178 S.W.3d 373, 380-81 (Tex. App.—Hou. [1st Dist.] 2005, no pet.)

(applying federal law); Stephenson v. Leboeuf, 16 S.W.3d 829, 841 (Tex. App.—

Hou. [14th Dist.] 2000, pet. for review denied and subsequent appeal, remanded on

other grounds) (same).

Since “the primary purpose of judicial estoppel is to preserve the integrity of

the prior judicial proceeding . . . it makes sense to apply the law applicable to the

prior proceeding.” Dallas Sales Co., Inc. v. Carlisle Silver Co., Inc., 134 S.W.3d

928, 931 (Tex. App.—Waco 2004, pet. for review denied);8 see also Siller, 2013

Tex. App. LEXIS 4520, at *10. This Court has also reasoned that application of

federal law is appropriate to “promote the goal of uniformity and predictability in

8 The court in Dallas Sales also reasoned that it was appropriate to apply federal law when judicial estoppel is invoked based on a prior bankruptcy proceeding by comparing it to the Texas Supreme Court’s long-standing holding that federal law governs in determining the res judicata effect of a prior federal judgment on a state court claim. See Dallas Sales Co, Inc., 134 S.W.2d at 931.

19 bankruptcy proceedings.” Jackson v. Hancock & Canada, L.L.P., 245 S.W.3d 51,

55 (Tex. App.—Amarillo 2007, pet. for review denied).

Espinosa miscites this Court’s decision in Ferguson v. Building Materials

Corp. of Am., 276 S.W.3d 45 (Tex. App.—El Paso 2008, pet. for review granted,

rev'd, remanded). It does not stand for the proposition that state law applies in this

context. Rather, this Court stated in that case that the purpose of judicial estoppel

“is to protect the integrity of the judicial process by preventing parties from

playing ‘fast and loose’ with the courts for their own self interests . . . [t]hus, the

doctrine is intended to protect the judicial system rather than litigants.” Id. at 49

(citing In re Coastal Plains, 179 F.3d 197, 205 (5th Cir. 1999)).

The Texas Supreme Court’s decision in Ferguson v. Building Materials

Corp. of Am., 295 S.W.3d 642 (Tex. 2009), did not alter the long-standing practice

of Texas courts of applying federal law on judicial estoppel when the prior

inconsistent statement was made in a bankruptcy proceeding. While the Ferguson

decision did not cite to federal law regarding judicial estoppel, the Texas Supreme

Court did not state that the Court of Appeals erred in any way in relying on federal

judicial estoppel law in rendering its decision. See id. at 643-644. Rather, the

Texas Supreme Court reversed the Court of Appeals’ decision on its facts and held

that judicial estoppel did not apply to bar the Fergusons’ claim because they fully

disclosed the pending lawsuit in one section of their bankruptcy filings and simply

20 omitted to list the lawsuit in another section, unlike Espinosa. Id. The Fergusons

also participated in a creditors meeting at which they again disclosed the pending

personal injury suit to the trustee and the trustee acknowledged the pending

litigation in his report and notified the bankruptcy court and creditors. Id. at 643.

In contrast, Espinosa never made any such disclosure while his bankruptcy case

was pending. (See CRS 30-31, 223, 235.) In Ferguson, the Fergusons fully

apprised the bankruptcy court of their claims and there were no inconsistent

statements upon which to base an application of judicial estoppel. Id. at 643-644.

Furthermore, Texas courts have continued to apply federal law on judicial

estoppel with respect to prior bankruptcy proceedings after the Ferguson decision.9

See Flores v. Deutsche Bank Nat’l Trust Co., 2014 Tex. App. LEXIS 9318, at *13

(Tex. App.—Fort Worth Aug. 21, 2014, no pet.); Thomas, 2014 Tex. App. LEXIS

8183, at *6; Siller, 2013 Tex. App. LEXIS 4520, at *10; Tow, 312 S.W.3d at 756.

Appellant also incorrectly argues that judicial estoppel is a common law

doctrine and therefore, compels the application of state law. Although there “is no

federal general common law,” O'Melveny & Myers v. FDIC, 512 U.S. 79, 83

(1994) (emphasis added), judicial estoppel is a doctrine based in common law that

9 The other two Texas Supreme Court cases Espinosa cites did not involve judicial estoppel based on a prior bankruptcy proceeding. See Pleasant Glade Assembly of God v. Schubert, 246 S.W.3d 1 (Tex. 2008); Long v. Knox, 155 Tex. 581 (Tex. 1956). Aaron’s is unaware of any Texas Supreme Court cases, other than Ferguson, addressing judicial estoppel in the context of bankruptcy proceedings.

21 has been developed by the federal courts. See In re Coastal Plains, 179 F.3d at

205. Texas courts relying on federal law and not state law when applying judicial

estoppel have repeatedly noted that judicial estoppel is a common law doctrine.

Cricket Commc’ns, Inc., 235 S.W.3d at 304 (quoting In re Coastal Plains, 179

F.3d at 205); Andrews v. Diamond, Rash, Leslie & Smith, 959 S.W.2d 646, 649

(Tex. App.—El Paso 1997, writ denied) (citing federal law).

There is no support for Espinosa’s assertion that federal law on judicial

estoppel “would be far more difficult to follow.” On the contrary, as evidenced by

the cases cited supra, Texas courts have relied on federal law on judicial estoppel

without any difficulty for years. While federal circuits may vary with respect to

the application of judicial estoppel,10 Texas courts have consistently looked to Fifth

Circuit law on judicial estoppel in the bankruptcy context. See Ferguson, 276

S.W.3d at 49 (“Application of the doctrine is a matter of regional circuit law.”);

Bailey v. Barnhart Interest, Inc., 287 S.W.3d 906, 910 (Tex. App.—Hou. [14th

Dist.] 2009, no pet.) (“This court has applied Fifth Circuit law with regard to the

elements of judicial estoppel and the proof required to establish the doctrine in the

bankruptcy context.”).

Texas courts have rejected Espinosa’s contention that Texas law should

10 As noted in U.S. v. 162 Megamania Gambling Devices, 231 F.3d 713, 726 (10th Cir. 2000), the Tenth Circuit’s express rejection of the doctrine of judicial estoppel is a minority viewpoint on this issue.

22 apply with respect to judicial estoppel based on bankruptcy proceedings because

the state courts are “trying to police their own processes.” Rather, in the

bankruptcy context, Texas courts have indicated that “the primary purpose of

judicial estoppel is to preserve the integrity of the prior judicial proceeding” and

thus the law applicable to the prior proceeding – i.e. federal law – applies. Dallas

Sales Co., Inc., 134 S.W.3d at 931; see also Jackson, 245 S.W.3d at 55 (use of

federal law on judicial estoppel is appropriate to “promote the goal of uniformity

and predictability in bankruptcy proceedings”).11

2. Espinosa Is Judicially Estopped under Both the Texas and Federal Standards for Judicial Estoppel.

Even assuming the trial court should have applied Texas law on judicial

estoppel, which Aaron’s disputes for the reasons discussed above, Espinosa has not

articulated any meaningful difference between Texas and federal law that would

have compelled a different result in this case. Aaron’s was entitled to summary

judgment under both the Texas and federal law on judicial estoppel.

a. Judicial Estoppel Applies to Espinosa Under Federal Law.

Under federal law, judicial estoppel applies in the bankruptcy context if the

following elements are met: (1) the party to be estopped has asserted a legal

position that is clearly inconsistent with its prior position; (2) a court accepted the

11 The Erie doctrine articulated by the U.S. Supreme Court in Erie v. R.R. v. Thompkins, 304 U.S. 64, 78 (1938), cited by Espinosa, applies in actions in federal court based on diversity jurisdiction, and is not applicable here.

23 prior position; and (3) the party to be estopped did not act inadvertently. Cricket

Commc’ns, Inc., 235 S.W.3d at 304 (citing In re Coastal Plains, 179 F.3d at 206-

07). The undisputed evidence presented at summary judgment established these

three elements; therefore, the Court’s entry of summary judgment on Aaron’s

judicial estoppel defense was proper.

i. Espinosa Asserted A Clearly Inconsistent Position.

The United States Bankruptcy Code and rules “impose upon bankruptcy

debtors an express, affirmative duty to disclose all assets, including contingent and

unliquidated claims.” Cricket Commc’ns, Inc., 235 S.W.3d at 305 (citing In re

Coastal Plains, 179 F.3d at 207-08). The debtor’s duty to disclose potential claims

“does not end when the debtor files schedules, but instead continues for the

duration of the bankruptcy proceedings.” Id. (citing In re Coastal Plains, 179 F.3d

at 208). The undisputed evidence establishes that Espinosa failed to disclose his

claims against Aaron’s in his Statement of Financial Affairs or Schedule B (in

which he was required to list personal property). (CRS 30-31, 235.) Accordingly,

Aaron’s established that Espinosa took a clearly inconsistent position in the

bankruptcy proceeding. See Garcia v. BNSF Railway Co., 387 S.W.3d 763, 767

(Tex. App.—El Paso 2012, no pet.) (holding that BNSF met its burden of

establishing that Garcia took a clearly inconsistent position where “[t]he evidence

conclusively establishes that Garcia did not disclose his personal injury suit against

24 BNSF in the Schedule of Personal Property or the Statement of Financial Affairs”).

Espinosa argues that he did not take an inconsistent position because his

failure to disclose his claims against Aaron’s in his bankruptcy filings was an

omission, rather than an affirmative statement, and because it was inadvertent.

Contrary to Espinosa’s argument, judicial estoppel in the bankruptcy context

clearly covers omissions. See Jackson, 245 S.W.3d at 55 (“The omission of a

known cause of action from the debtor’s mandatory bankruptcy filings is

tantamount to a representation that no such claim existed.”); In re Coastal Plains,

179 F.3d at 210 (holding that the inconsistent positions prong was satisfied when

the party to be estopped omitted the claims from its schedules and stipulations with

the bankruptcy court). Furthermore, while inadvertence of the omission is

considered under a separate prong, “the debtor’s failure to disclose assets is

inadvertent only when the debtor lacks knowledge of the undisclosed claim or has

no motive for their concealment.” Jackson, 245 S.W.2d at 57 (citing In re Coastal

Plains, 179 F.3d at 208). Since Espinosa had knowledge of his claims and a

motive to conceal his claims from creditors since the proceeds would not go to the

creditors if they were concealed, but to him instead, his failure to disclose cannot

be considered to be inadvertent. See id.

ii. The bankruptcy court accepted Espinosa’s prior position.

Espinosa does not appear to dispute that the bankruptcy court accepted his

25 prior position under the federal standard, nor could he under the undisputed facts

of this case. Based on the trustee’s determination that there were no assets

available for distribution, the bankruptcy court granted Espinosa a discharge of

$267,745.48 in creditor claims without payment and his bankruptcy case was

closed. (CRS 224-225, 256.) Accordingly, it is clear that the bankruptcy court

accepted Espinosa’s prior position that he had no contingent or unliquidated

claims. See Brown, 178 S.W.2d at 381 (holding that where the bankruptcy case

was dismissed based on a finding that there are no assets available for distribution,

the bankruptcy court accepted Brown’s inconsistent position); Stephenson, 16

S.W.3d at 842 (rejecting argument that the party did not successfully maintain her

inconsistent position in bankruptcy court where the party’s debt “was discharged

on the bankruptcy trustee’s finding that she had no assets”).

iii. Espinosa Did Not Act Inadvertently.

As an initial matter, Espinosa never argued in response to Aaron’s Motion

for Summary Judgment that his omission was inadvertent, and thus he has waived

this argument and it should not be considered by this Court. (CR 173-174.) See

Tex. R. Civ. P. 166a(c) (“Issues not expressly presented to the trial court by written

motion, answer or other response shall not be considered on appeal as grounds for

reversal.”) Now, after the fact and for the first time, Espinosa blames one of his

prior attorneys, which of course, even if true, would not make the non-disclosure

26 inadvertent. Brown, 16 S.W.3d at 841-842 (holding that reliance on an attorney’s

advice does not bar application of judicial estoppel); see also Garcia, 387 S.W.3d

at 768 (rejecting Garcia’s argument that the disclosure was inadvertent because he

informed his attorney about the personal injury suit and the attorney failed to

include it in the bankruptcy documents).

As discussed, “[i]n considering judicial estoppel in the context of a prior

bankruptcy case, the debtor’s failure to disclose assets is inadvertent only when the

debtor lacks knowledge of the undisclosed claim[s] or has no motive for their

concealment.” Jackson, 245 S.W.2d at 57 (citing In re Coastal Plains, 179 F.3d at

208). It is undisputed Espinosa had knowledge of the undisclosed claims because

he initiated the present action only six weeks after filing for Chapter 7 bankruptcy

protection. (CR 4-12, CRS 227-229.) Further in a conversation with Norris after

his criminal proceeding ended but before Espinosa filed for bankruptcy, Espinosa

told Norris “now it’s my turn,” a reference to his intent to pursue a claim against

Aaron’s. (CRS 61-62.)

Espinosa does not dispute that he had knowledge of his claims against

Aaron’s while his bankruptcy proceeding was pending, but alleges, citing to his

Affidavit submitted in response to Aaron’s Motion for Summary Judgment, that he

discussed his potential claim against Aaron’s with his bankruptcy attorney, but his

attorney told him that he did not have a viable claim against Aaron’s because the

27 statute of limitations had passed and it was not until later that he learned from his

trial counsel that there was a way to pursue his claims against Aaron’s. The first

problem with this argument, however, is that this purported testimony by Espinosa

was never included in any of the affidavits submitted to the trial court, and

Espinosa never provided this explanation for his failure to disclose in his

opposition to summary judgment.12 (See CR 173-174, 184-188.)

Even if this purported testimony were submitted to the trial court, which it

was not, Texas courts have rejected the argument that a non-disclosure was

inadvertent based on reliance on advice from an attorney. See Brown, 16 S.W.3d

at 841-842; see also Garcia, 387 S.W.3d at 768. Furthermore, even if Espinosa

truly believed that his claims against Aaron’s were worthless because they were

barred by the statute of limitations, he still had an obligation to report it in his

bankruptcy filings. Brown, 178 S.W.3d at 380 (“debtors in a bankruptcy action

have an absolute duty to report whatever interests they hold in property, even if

they believe the asset is worthless or unavailable to the bankruptcy estate”);

Stephenson, 16 S.W.3d at 841; see also Cricket Commcn’s, Inc., 235 S.W.3d at

307 (“Any claim with potential must be disclosed, even if it is ‘contingent, 12 Espinosa’s characterization of his alleged discussions with his bankruptcy attorney and trial attorney also misrepresents the relevant timeline. Espinosa filed his bankruptcy petition on October 20, 2010, filed his Original Petition against Norris on October 26, 2010, and filed the First Amended Original Petition against Aaron’s on December 3, 2010, all within a span of approximately six weeks. (CR 4-6, CRS 4-6, 227-229.) Thus, his bankruptcy proceeding had not been “going on for some time” (as alleged by Espinosa) before his attorney found a way to pursue Aaron’s.

28 dependent, or conditional.’”) (citing In re Coastal Plains, 179 F.3d at 208); In re

Superior Crewboats, Inc., 374 F.3d 330, 335 (5th Cir. 2004) (“Alleged confusion

as to a limitations period does not evince a lack of knowledge as to the existence of

the claim.”)

It cannot be seriously argued that Espinosa lacked a motive to conceal his

claims against Aaron’s from his creditors in the bankruptcy proceeding because

any proceeds from the undisclosed claims would have gone to Espinosa rather than

to his creditors. See Cricket Commcn’s, Inc., 235 S.W.3d at 307 (“If a debtor’s

undisclosed claim would have added assets to the bankruptcy estate . . . a debtor

will usually be deemed to have a motive to conceal those claims.”); Jackson, 245

S.W.3d at 57 (holding that “the Jacksons had a motive to conceal their claims . . .

as their failure to disclose the claims would prevent any future recovery from

inuring to the benefit of their creditors”); In re Superior Crewboats, Inc., 374 F.3d

at 336 (finding that the plaintiffs “had the requisite motivation to conceal the claim

as they would certainly reap a windfall had they been able to recover on the

undisclosed claim without having disclosed it to the creditors.”).

The fact that the bankruptcy court was later apprised of Espinosa’s claims

against Aaron’s after Aaron’s moved for summary judgment on the issue of

judicial estoppel does not cure his prior act of non-disclosure or alter the analysis

for purposes of judicial estoppel. See In re Superior Crewboats, Inc., 374 F.3d at

29 336 (applying judicial estoppel despite the fact that the debtors later reopened their

bankruptcy case and disclosed their claims because “[j]udicial estoppel was

designed to prevent such abuses”). Thus, even assuming Espinosa’s creditors

would stand to benefit from any proceeds resulting from his claims against Aaron’s

(which is not the case because the trustee formally abandoned Espinosa’s assets

and Espinosa is pursuing this appeal without the authorization or apparent

knowledge of the bankruptcy trustee), any such benefit is inconsequential at this

juncture.

iv. Fifth Circuit Precedent Supports the Application of Judicial Estoppel.

Espinosa argues that this Court should look to other federal circuits in its

application of judicial estoppel; however, it is clear that Texas courts should apply

Fifth Circuit law when analyzing judicial estoppel in the bankruptcy context. See

Ferguson, 276 S.W.3d at 49; Bailey, 287 S.W.3d at 910. Moreover, there is no

support for Espinosa’s assertion that Fifth Circuit law on judicial estoppel

represents a minority viewpoint. Numerous other federal circuits apply judicial

estoppel under a framework substantially similar to that articulated by the Fifth

Circuit in In re Superior Crewboats.13 See Eric Hilmo, Bankrupt Estoppel: The

13 The Ninth Circuit in Ah Quin v. County of Kauai DOT, 733 F.3d 267 (9th Cir. 2013) discussed In re Coastal Plains in the context of the Fifth Circuit’s narrow interpretation of the “inadvertence element,” which it noted was similar to the approach used by the Sixth, Tenth, and Eleventh Circuits. The Seventh Circuit in Biesek v. Soo Line Railroad Co., 440 F.3d 410 (7th Cir. 2006) did not specifically discuss In re Coastal Plains, and ultimately held that Biesek could

30 Case for a Uniform Doctrine of Judicial Estoppel As Applied Against Former

Bankruptcy Debtors, 81 Fordham L. Rev. 1353 (2012) (noting that the standard

articulated by the Fifth Circuit in In re Coastal Plains “has become the de facto

standard for federal courts applying judicial estoppel to claims previously

undisclosed in bankruptcy brought by former debtors” and citing cases).

The two cases cited by Appellant do not establish that In re Coastal Plains

and In re Superior Crewboats are no longer good law in the Fifth Circuit. Both

cases are easily distinguished. The Fifth Circuit in Kane v. Nat’l Union Fire Ins.

Co., 535 F.3d 380, 386-388 (5th Cir. 2008), distinguished In re Superior

Crewboats and In re Coastal Plains because in Kane, the bankruptcy trustee

(rather than the debtors themselves) was pursuing the claim as the real party in

interest and the Fifth Circuit reasoned it was inequitable to apply judicial estoppel

against the trustee, who had not himself made any inconsistent statements. Since

the trustee is not a party to the instant action and has abandoned Espinosa’s claims

against Aaron’s, no such equitable considerations apply and the trial court properly

applied judicial estoppel as to Espinosa.

not pursue his claim because it belonged to the bankruptcy estate. The Ninth Circuit in Dunmore v. U.S., 358 F.3d 1107, 1113 n.3, commented only that Dunmore’s omission of certain claims during his Chapter 7 bankruptcy “would ordinarily act as judicial estoppel against his asserting those very same claims against the Government,” but that the district court judge had allowed him to remedy his inconsistent assertions by reopening his bankruptcy case which “was a permissible alternative to judicial estoppel.”

31 Similarly, in Reed v. City of Arlington, 650 F.3d 571 (2011),14 the Fifth

Circuit held that while the debtor himself was properly estopped for his dishonesty,

the judicial estoppel defense did not apply to the bankruptcy trustee who had

substituted into the case as the real party in interest. In contrast, the trustee never

substituted into this case and he has abandoned the claims against Aaron’s, and

thus judicial estoppel was properly applied as to Espinosa under the Fifth Circuit’s

reasoning in Reed.

b. Judicial Estoppel Applies to Espinosa Under Texas Law.

Even if the Court applies Texas rather federal law as argued by Espinosa, his

claims are nonetheless barred under the doctrine of judicial estoppel. The elements

of judicial estoppel under Texas law are: (1) a sworn, inconsistent statement made

in a prior judicial proceeding; (2) which was successfully maintained in the prior

proceeding; (3) the absence of inadvertence, mistake, fraud, or duress in the

making of the prior statement; and (4) the statement was deliberate, clear and

unequivocal. Ferguson, 295 S.W.3d at 634; Garcia, 387 S.W.3d at 766 n.1;

Andrews, 959 S.W. 2d at 650 n.2. The undisputed evidence before the trial court

supports the application of judicial estoppel to Espinosa under Texas law.

14 Reed v. City of Arlington, 620 F.3d 477 (5th Cir. 2010), cited by Espinosa, was subsequently vacated by the Fifth Circuit’s opinion in Reed v. City of Arlington, 650 F.3d 571 (2011).

32 i. Espinosa Made a Sworn, Inconsistent Statement in the Bankruptcy Proceeding.

This Court has noted that the most significant difference between Texas and

federal law on judicial estoppel is that Texas courts require that the statement in

the prior proceeding be a sworn statement. See Andrews, 959 S.W. 2d at 650 n.2.

It is undisputed that the statements made by Espinosa in the bankruptcy proceeding

were sworn statements made under penalty of perjury. (CRS 247.)

Espinosa’s representation, made under oath, to the bankruptcy court that he

had no contingent or unliquidated claims and his later assertion of his claims

against Aaron’s after filing for bankruptcy are clearly inconsistent. (CRS 30-31,

235.) Espinosa argues, citing the Texas Supreme Court’s decision in Ferguson,

that he did not make any statements that were inconsistent. However, Ferguson is

plainly distinguishable. In Ferguson, the court found that the Fergusons had not

taken a clearly inconsistent position because they disclosed the pending lawsuit,

including the caption and style of the suit, nature of the claim, cause number, and

the court in which it had been filed, to the bankruptcy court in the Statement of

Financial Affairs. 295 S.W.3d at 643-644. The Fergusons also disclosed the

lawsuit at a creditors meeting to the bankruptcy trustee. Id. Based on these facts,

the court reasoned that judicial estoppel should not apply because they had clearly

made the bankruptcy court aware of the lawsuit. Id at 643-644.

In contrast, Espinosa completely failed to put the bankruptcy court on notice

33 of his claims against Aaron’s, despite having years to do so. Espinosa did not list

the lawsuit in either his Statement of Financial Affairs or Schedule of Personal

Property (Schedule B) and never informed the bankruptcy trustee about the lawsuit

at the creditor’s meeting at which he appeared. (CRS 30-31, 224, 235.) Based on

Espinosa’s representations, Espinosa was granted a “no asset” discharge and his

bankruptcy case was closed. (CRS 224-225, 256.) Thus, Ferguson is inapplicable.

See Dallas Sales Co., 134 S.W.3d at 932 (holding that where the appellant did not

list any of the claims asserted in the later lawsuit in his bankruptcy schedules,

“[i]t’s pursuit of these claims is clearly inconsistent with the position it took in

bankruptcy court”).

ii. Espinosa Successfully Maintained His Position in the Prior Proceeding.

Espinosa successfully maintained his position in the bankruptcy proceeding

because the bankruptcy trustee determined that Espinosa had no assets available

for distribution, he was granted a discharge of $267,745.48 in creditor claims

without payment, and his bankruptcy case was closed. (CRS 224-225, 256.) See

Ginter, 2014 Tex. App. LEXIS 8183, at *6 (“Examples of a bankruptcy court

‘accepting’ a debtor's claims for judicial estoppel purposes include cases where the

debtor receives a discharge based on information he gives about his bankruptcy

estate, and where the court issues a ‘no asset’ discharge.”); Brown, 178 S.W.2d at

381 (holding that Brown successfully maintained his prior position because the

34 bankruptcy case was dismissed based on a finding that there are no assets available

for distribution); Stephenson, 16 S.W.3d at 842 (rejecting argument that the party

did not successfully maintain her inconsistent position in bankruptcy court where

the party’s debt “was discharged on the bankruptcy trustee’s finding that she had

no assets”).

Contrary to Espinosa’s assertion, the court in Ferguson did not comment on

the issue of whether the Fergusons successfully maintained their prior position, but

rather held that judicial estoppel did not apply because they did not take a clearly

inconsistent position and did not gain any unfair advantage in their bankruptcy

proceeding because the bankruptcy court was fully apprised of their claims at the

outset. See 295 S.W.2d at 634-644. While the court in Ferguson did state that “a

party cannot be judicially estopped if it did not prevail in the prior action,” this

Court has held that for purposes of judicial estoppel, this does not mean that “the

party against whom the judicial estoppel doctrine is to be invoked must have

prevailed on the merits.” Norris v. Brookshire Grocery Co., 362 S.W.3d 226, 230

(Tex. App.—Dallas 2012, pet. for review denied). Rather, it is sufficient “that the

first court has adopted the position urged by the party, either as a preliminary

matter or as part of final disposition.”15 Id.

15 Espinosa cites to several cases discussing the prevailing party for purposes of attorneys’ fees awards which are inapplicable in the context of judicial estoppel based on bankruptcy proceedings. See Arrow Marble, LLC v. Killion, 441 S.W.3d 702 (Tex. App.—Hou. [1st Dist.]

35 iii. Espinosa’s Statements Were Not Inadvertent.

Espinosa waived any argument that the omission of his claims against

Aaron’s in the bankruptcy proceeding was inadvertent because he failed to raise

this argument at the trial court.16 See Tex. R. Civ. P. 166a(c). In any event,

Espinosa’s failure to disclose his claims against Aaron’s to the bankruptcy court

was not inadvertent. It is undisputed that Espinosa knew about his claims against

Aaron’s while his bankruptcy case was pending and did not disclose them to the

bankruptcy court in any manner until after Aaron’s raised the issue on summary

judgment. Further, as discussed above, Espinosa’s explanation that he did not

disclose his claims against Aaron’s to the bankruptcy court because he believed

that the statute of limitations had passed is not included in any of the affidavits

submitted to the trial court and is nowhere in the record. (See CR 173-174, 184-

188.) Accordingly, Espinosa’s purported testimony (which is nowhere to be found

in the record) cannot be considered as grounds for reversal. Regardless, as

discussed above, reliance on his attorney’s alleged “advice” does not make the

non-disclosure inadvertent.

Again, the Texas Supreme Court’s decision in Ferguson is factually

2014, no pet.); Bhatia v. Woodlands North Houston Heart Center, PLLC, 396 S.W.3d 658 (Tex. App.—Hou. [14th Dist.] 2013, pet. for review denied); Range v. U.S., 256 B.R. 868 (S.D. Tex. 2000). 16 Espinosa also did not argue at the trial court (and does not argue in this appeal) that his misrepresentations to the bankruptcy court were due to mistake, fraud, or duress. See Garcia, 387 S.W.3d at 766 n.1.

36 distinguishable from this case because the Fergusons clearly intended to and did

disclose their claims to the bankruptcy court in their bankruptcy filings and at the

creditor’s meeting, but omitted to list the claims in one portion of the bankruptcy

filings. 295 S.W.2d at 643. Thus, there was no non-disclosure in that case. As

discussed, Espinosa never disclosed his claims against Aaron’s anywhere in his

bankruptcy filings or otherwise made the bankruptcy court aware of his claims

while his case was pending. Thus, the trial court’s decision to apply judicial

estoppel in this case is entirely consistent with Ferguson.

Furthermore, the Ferguson decision did not reject the notion of applying

judicial estoppel based on failure to disclose claims in bankruptcy filings, as

suggested by Espinosa. Rather, the court in Ferguson held that judicial estoppel

did not apply because the Fergusons did not take an inconsistent position in that

they did disclose their claims to the bankruptcy court. See 295 S.W.3d at 643-633.

Since Ferguson, this Court has continued to apply judicial estoppel in the context

of bankruptcy proceedings. See Flores, 2014 Tex. App. LEXIS 9318, at *13;

Thomas, 2014 Tex. App. LEXIS 8183, at *6; Siller, 2013 Tex. App. LEXIS 4520,

at *10; Tow, 312 S.W.3d at 756.

Application of judicial estoppel in this case likewise does not conflict with

the Texas Supreme Court’s decision in Long v. Knox, 155 Tex. 581 (Tex. 1956).

Knox convinced his creditors in a prior proceeding that he owned no interest in

37 certain properties and asserted in a subsequent proceeding that he owned a one-half

interest in those properties. Id. at 584-585. Similarly, Espinosa represented to the

bankruptcy court that he had no contingent or unliquidated claims and then

subsequently brought claims against Aaron’s.17 Thus, the trial court’s decision is

consistent with Long.

iv. Espinosa’s statements to the bankruptcy court were deliberate, clear, and unequivocal.

Espinosa characterization of his statements to the bankruptcy court as

“omissions” rather than deliberate, clear, and unequivocal statements is highly

inaccurate. Question 21 of Schedule B of Espinosa’s bankruptcy petition asked

him to list “[o]ther contingent and unliquidated claims of every nature.” (CRS

235.) In response to Question 21, Espinosa checked “none.” (Id.) With respect to

Schedule B, Espinosa signed a “Declaration Concerning Debtor’s Schedules”

indicating that “I declare under penalty of perjury that I have read the foregoing

summary and schedules consisting of 17 sheets, and that they are true and correct

to the best of my knowledge, information, and belief.” (CRS 247.) Thus, Espinosa

deliberately, clearly, and unequivocally represented to the bankruptcy court that he

had no contingent or unliquidated claims of any nature and that the information in

17 As discussed above, Espinosa’s creditors do not stand to benefit from his claims against Aaron’s because the trustee did not intervene in the case and subsequently abandoned Espinosa’s claims against Aaron’s. Espinosa has brought this appeal without the apparent knowledge or authorization of the trustee.

38 his schedules was true and correct, with the knowledge that he had potential claims

against Aaron’s.

Even assuming arguendo that Espinosa’s representation to the bankruptcy

court is characterized as an omission rather than a statement, Texas courts make no

distinction between the two. See Cricket Commcn’s, Inc., 235 S.W.3d at 306

(holding that appellees conclusively established that Cricket failed to disclose his

claim to the bankruptcy court, “which is the equivalent of an affirmative

representation that no such claim existed”). None of the cases cited by Espinosa

stand for the proposition that judicial estoppel cannot be applied to a purported

omission (nor do any of the cases cited discuss judicial estoppel in the context of a

bankruptcy proceeding). See, e.g., Galley v. Apollo Associated Servs., Ltd., 177

S.W.3d 523, 529 (Tex. App.—Hou. [1st Dist.] 2005, no pet.) (judicial estoppel did

not apply because the contrary position was asserted in the same proceeding);

Spera v. Fleming, Hovenkamp & Grayson, P.C., 25 S.W.3d 863, 871-872 (Tex.

App.—Hou. [14th Dist.] 2000, no pet.) (judicial estoppel not applied because

statement was not sworn); Vinson & Elkins v. Moran, 946 S.W.2d 381, 396-397

(Tex. App.—Hou. [14th Dist.] 1997, writ dism'd by agr. and mot. dismissed)

(judicial estoppel not applied because statement not made under oath, statement

was not unequivocal, and statement was made by attorney as an alternative

argument in response to the possibility that assignments were valid); Vitale v.

39 Keim, 1997 Tex. App. LEXIS 4719, at *31-35 (Tex. App.—Hou. [1st Dist.] Aug.

29, 1997, review denied) (judicial estoppel not appropriate because none of the

statements were clearly inconsistent); Balaban v. Balaban, 712 S.W.2d 775, 778-

779 (Tex. App.—Hou. [1st Dist.] 1986, writ ref'd n.r.e) (judicial estoppel not

applied because statements not made under oath).

The decision in Bunnell v. Lewis, 1993 WL 290781 (Tex. App.—Hou. [14th

Dist.] July 27, 1993), cited by Espinosa, is also distinguishable. In Bunnell, this

Court held that Bunnell’s failure to disclose a partnership agreement in his

bankruptcy proceedings was not deliberate, clear, and unequivocal in light of the

absence of controlling authority on whether the agreement should have been

disclosed. Id. at *4.

In the instant case, Espinosa does not dispute that his claims against Aaron’s

should have been disclosed to the bankruptcy court. Furthermore, Espinosa cannot

rely on his alleged belief that his claims against Aaron’s did not need to be

disclosed to the bankruptcy court because they were barred by the statute of

limitations, since there was no evidence or argument to that effect in the record

before the trial court and because this alleged explanation would not bar the

application of judicial estoppel in any event.

v. Espinosa gained an unfair advantage by failing to disclose his claims against Aaron’s.

Espinosa gained an unfair advantage because his creditors were prevented

40 from attempting to collect on their debts before his bankruptcy case was closed.

See Jackson, 245 S.W.3d at 51 (holding that “the Jacksons derived an unfair

advantage by their failure to disclose their claims against H&C because, while the

bankruptcy was pending, the Jacksons’ creditors were prevented from attempting

to collect on their debts”); Brown, 178 S.W.3d at 381 (holding that “Brown

benefitted, at least temporarily, by filing the inconsistent bankruptcy petition”

because “while the bankruptcy was pending, Brown’s creditors were prevented

from attempting to collect on their debts”).

Espinosa asserts that judicial estoppel should not apply because neither the

creditors nor Aaron’s were harmed or prejudiced by his failure to disclose his

claims to the bankruptcy court. However, prejudice to the parties is not a

necessary element with respect to application of judicial estoppel. See Thomas,

2014 Tex. App. LEXIS 8183, at *7 (“Because the doctrine of judicial estoppel is

intended to protect the judicial system, rather than the litigants, detrimental

reliance by the opponent of the party against whom the doctrine is applied is not

necessary.”). The fact that Espinosa later disclosed his claims against Aaron’s to

the bankruptcy court (after Aaron’s filed its Motion for Summary Judgment

arguing judicial estoppel) likewise does not bar the application of judicial estoppel.

See Cricket Commcn’s, Inc., 235 S.W.3d at 309 (rejecting argument that judicial

estoppel should not apply because the non-disclosure was later corrected where the

41 correction occurred almost two months after the reorganization plan was confirmed

by the bankruptcy court.)

Again, Ferguson is distinguishable because the Fergusons’ claims were

disclosed to the bankruptcy court in their initial bankruptcy filings. See 295

S.W.3d at 643-644. Moreover, there is no evidence that the trustee, creditors, and

bankruptcy court were “indifferent” to Espinosa’s disclosure of his claims against

Aaron’s. The bankruptcy case was reopened and the trustee expressed his intent to

continue to pursue Espinosa’s claims against Aaron’s after Espinosa disclosed his

claims. (CR 195-196, 199.) In fact, the trustee participated in mediation held by

the parties. It was not until after the trial court granted summary judgment that the

reopened bankruptcy case was closed based on a finding that there were no assets

available for distribution. Presumably, this occurred because Espinosa’s claims

were dismissed by the trial court, however, it now appears that Espinosa has duped

the trustee and the creditors once again by pursuing this appeal (apparently without

the trustee’s knowledge) and for his own benefit.

Espinosa also argues that summary judgment was inappropriate because

there was no evidence of a motive to deceive the bankruptcy court. Motive or

intent to deceive is not a necessary element for the application of judicial estoppel

42 under Texas law.18 See Ferguson, 295 S.W.3d at 634; Garcia, 387 S.W.3d at 766

n.1. Furthermore, the undisputed facts show that Espinosa had a motive to conceal

his claims against Aaron’s from the bankruptcy court because any proceeds from

the undisclosed claims would have gone to Espinosa rather than to his creditors.

See Cricket Commcn’s, Inc., 235 S.W.3d at 307 (“If a debtor’s undisclosed claim

would have added assets to the bankruptcy estate . . . a debtor will usually be

deemed to have a motive to conceal those claims.”) Espinosa relies on his

purported testimony about his belief that his claims were barred by the statute of

limitations as alleged evidence precluding a grant of summary judgment; however

as discussed, no such testimony was ever submitted to the trial court on summary

judgment. It was entirely appropriate for the trial court to grant summary

judgment based on the undisputed facts in the record. See Dallas Sales Co., 134

S.W.3d at 932 (upholding grant of summary judgment based on judicial estoppel);

Jackson, 245 S.W.3d at 55 (affirming trial court’s grant of summary judgment on

judicial estoppel defense).

18 Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81 F.3d 355 (3rd Cir. 1996) and Stallings v. Hussman Corp., 447 F.3d 1041 (8th Cir. 2006), cited by Espinosa, are not in accord with Texas or Fifth Circuit law on judicial estoppel and are factually distinguishable. In Ryan Operations G.P., the Third Circuit held that the debtor’s actions did not support a finding of a deliberate motive to conceal his claims because the bankruptcy court had specifically authorized the debtor to pursue certain types of claims and the debtor submitted evidence to the bankruptcy court in the form of fee requests showing that he was pursuing those claims. 81 F.3d at 364. In Stallings, the Eighth Circuit held that judicial estoppel did not apply because the bankruptcy court never discharged Stallings’ debts based on the information he provided in his bankruptcy schedules and there was no evidence that Stallings clearly knew he had a viable claim at the time his bankruptcy was pending. 447 F.3d at 1049.

43 3. No Alleged Equitable Considerations Weigh against Application of Judicial Estoppel.

None of the alleged equitable considerations advanced by Espinosa prevent

the application of judicial estoppel. Espinosa’s disclosure of his claims against

Aaron’s to the bankruptcy court after Aaron’s moved for summary judgment is not

an appropriate basis to deny application of judicial estoppel because “[j]udicial

estoppel was designed to prevent such abuses.” See In re Superior Crewboats,

Inc., 374 F.3d at 336; see also In re Coastal Plains, 179 F.3d at 205 (the purpose

of judicial estoppel is to “protect the integrity of the judicial process by preventing

parties from playing fast and loose with the courts to suit the exigencies of self

interest” and pleading “inconsistent positions”).

There was no evidence that the trustee or creditors lacked interest in

Espinosa’s claims against Aaron’s while they were pending at the trial court – on

the contrary, the bankruptcy trustee expressed his intent to continue to pursue

Espinosa’s claims against Aaron’s and authorized Espinosa’s trial counsel, Mark

Murray, to act as special counsel for the bankruptcy estate in connection with

Espinosa’s case against Aaron’s. (CR 195-196, 199.) Moreover, Espinosa’s

creditors do not stand to benefit from his claims against Aaron’s at this juncture

because the trustee abandoned Espinosa’s claims after the trial court granted

summary judgment and Espinosa is pursuing this appeal for his own benefit. See

Kane v. Nat’l Union Fire Ins. Co., 535 F.3d 380, 386-387 (5th Cir. 2008)

44 (distinguishing that case, where the trustee was pursuing the claims on behalf of

the Kane’s creditors, from In re Superior Crewboats where the trustee had

formally abandoned the debtor’s claims and the interest had reverted to the

debtors).

Moreover, even assuming that Espinosa’s creditors could potentially benefit

if his claims against Aaron’s were allowed to move forward, this is not a relevant

equitable consideration with respect to judicial estoppel according to this Court.

See Cricket Commcn’s, Inc., 235 S.W.3d at 309 (rejecting Cricket’s argument that

applying judicial estoppel would be inequitable because it would prejudice his

creditors). Likewise, the fact that Espinosa’s omission of his claims against

Aaron’s before the bankruptcy did not affect Aaron’s is irrelevant. See id. (“the

law of judicial estoppel in a bankruptcy context is to protect the integrity of courts,

not to punish adversaries or protect litigants”) (citing In re Coastal Plains, 179

F.3d at 213); see also Long, 155 Tex. at 585 (judicial estoppel “is to be

distinguished from equitable estoppel . . . because the elements of reliance and

injury essential to equitable estoppel need not be present”).

C. ESPINOSA’S MALICIOUS PROSECUTION CLAIM FAILS AS A MATTER OF LAW.

None of the issues raised by Espinosa on appeal warrant reversal of a grant

of summary judgment on the substantive elements of his malicious prosecution

claim. Aaron’s is entitled to summary judgment if it establishes that there is no

45 evidence of one or more of the elements of a pleaded claim. See Tex. R. Civ. P.

166a(i). Once Aaron’s identifies elements for which there is no evidence, the non-

movant (Espinosa) bears the burden of proof to raise a genuine issue of material

fact as to each challenged element. See id.; see also Dow Chem. Co. v. Francis, 46

S.W.3d 237, 242 (Tex. 2001); Praytor v. Ford Motor Co., 97 S.W.3d 237, 241

(Tex. App.—Houston [14th Dist.] 2002, no pet.). Espinosa’s evidence must be

sufficient to allow reasonable and fair-minded people to differ in their conclusions

on whether the challenged fact exists; evidence that raises only a speculation or

surmise is insufficient. See Forbes, Inc. v. Granada Biosciences, Inc., 124 S.W.3d

167, 172 (Tex. 2003).

To establish a claim for malicious prosecution, the plaintiff must show: (1) a

criminal prosecution was commenced against him; (2) the defendant initiated or

procured that prosecution; (3) the prosecution terminated in the plaintiff’s favor;

(4) the plaintiff was innocent of the charges; (5) the defendant lacked probable

cause to initiate the prosecution; (6) the defendant acted with malice; and (7) the

plaintiff suffered damages. Kroger Tex. L.P. v. Suberu, 216 S.W.3d 788, 793 n.3

(Tex. 2006). Actions for malicious prosecution are not traditionally favored in

Texas based on the public policy interest favoring the exposure of crime. Wal-

Mart Stores, Inc. v. Medina, 814 S.W.2d 71, 73 (Tex. Ct. App.---Corpus Christi

1991, writ denied and reh’g of writ of error overruled). Furthermore, and most

46 significantly, when the decision to prosecute is based upon an independent

investigation by the authorities, the plaintiff must show that defendant intentionally

provided false information and the decision to prosecute would not have been

made absent such false representation. Davis v. Prosperity Bank, 383 S.W.3d 795,

803 (Tex. Ct. App.—Hou. [14th Dist.] 2012, no pet.) [Emphasis added.]

1. Aaron’s Did Not Act With Malice.

Espinosa failed to raise a genuine issue of material fact as to the element of

malice. In response to Aaron’s Motion for Summary Judgment, Espinosa

contended he threated to report Aaron’s to the Texas Workforce Commission

(“TWC”) for not paying him his bonus and speculated that these threats were the

reason Aaron’s went to the police. (See CR 187-188.) Even assuming Espinosa’s

allegation that he made these threats as true for purposes of the Motion for

Summary Judgment, there is an insufficient nexus between any dispute over his

bonus and reporting Espinosa to the police. According to Espinosa’s Wage Claim

filed with the TWC, Espinosa stated he was told he would not receive his bonus

because of too many non-paying accounts at his store, which is not even related to

the theft of merchandise. (CR 189-191.) Further, Espinosa acknowledged in his

Wage Claim that his claim had been partially paid by Aaron’s. (Id.) Further, when

the information known to Aaron’s about Espinosa’s potential involvement in theft

is considered, it is clear no reasonable jury could find this minor disagreement over

47 a bonus rather than the theft issue was the reason Aaron’s went to the police. (See

CRS 40-44.) Espinosa’s speculation was insufficient to raise a genuine issue of

material fact on the issue of malice. See Backman v. J.C. Penney Co., No. 14-03-

00436-CV, 2004 Tex. App. LEXIS 9003, at *9 (Tex. Ct. App.---Hou. [14th Dist.]

2004, no pet.) (holding that summary judgment was properly granted because the

plaintiff failed to raise a genuine issue of fact on the element of malice).

2. Espinosa Failed to Rebut the Presumption that Aaron’s Had Probable Cause to Make a Report to the Police.

Espinosa failed to present evidence to raise a genuine issue of material fact

as to probable cause. The probable cause element “asks whether a reasonable

person would believe that a crime had been committed given the facts as the

complainant honestly and reasonably believed them to be before the criminal

proceedings were instituted.” Kroger Tex. L.P., 216 S.W.3d at 792-93 (quoting

Richey v. Brookshire Grocery Co., 952 S.W.2d 515, 517 (Tex. 1997)); Akin v.

Dahl, 661 S.W.2d 917, 921 (Tex. 1983). There is a presumption that the defendant

acted reasonably and had probable cause to initiate criminal proceedings. Kroger

Tex. L.P., 216 S.W.2d at 793. The plaintiff can rebut this presumption only by

producing evidence that “the motives, grounds, beliefs, or other information upon

which the defendant acted did not constitute probable cause.” Id. If the plaintiff

produces such evidence, then the defendant has the burden to offer proof of

probable cause. Richey, 952 S.W.2d at 518. When the facts underlying the

48 plaintiff’s arrest and prosecution are undisputed, the question of probable cause is a

question of law to be decided by the court. Id.

Espinosa contended in response to Aaron’s Motion for Summary Judgment

that Aaron’s lacked probable cause to go to the police because it conducted what

Espinosa describes as a “minimal investigation” and did not interview Espinosa.

Aaron’s engaged in a significant amount of investigative activities before calling

the police. (See CRS 25-26.) Regardless, any failure on the part of Aaron’s to

conduct a more complete internal investigation prior to contacting the police does

not demonstrate a lack of probable cause. See Kroger Tex. L.P., 216 S.W.3d at

794 (holding that the fact that no one investigated the plaintiff’s explanation before

initiating criminal proceedings against the plaintiff is not evidence of a lack of

probable cause). The Texas Supreme Court has stated “[i]t is well settled that a

private citizen has no duty to investigate a suspect’s alibi or explanation before

reporting a crime.” Id.

In sum, the undisputed facts established Aaron’s had a reasonable belief

Espinosa had stolen merchandise at the time it reported the incident to the police

and summary judgment was appropriate on the element of probable cause. See

Arrendondo v. Rodriguez, No. 14-09-00857-CV, 2011 Tex. App. LEXIS 584, at

*20-22 (Tex. Ct. App.---Hou. [14th Dist.] 2011, no pet.) (affirming grant of

49 summary judgment because “the undisputed evidence conclusively shows that

appellees had probable cause to initiate or procure the prosecution” of plaintiff).

3. Aaron’s Did Not Initiate or Procure the Prosecution of Espinosa.

Espinosa failed to raise a genuine issue of material fact showing that

Aaron’s initiated or procured the prosecution against him. A defendant “initiates”

a criminal prosecution by making a “formal charge” to law enforcement

authorities. Lewis v. Continental Airlines, 80 F. Supp. 2d 686, 699 (S.D. Tex.

1999) (quoting Browning-Ferris Indus. v. Lieck, 881 S.W.2d 288, 292 (Tex.

1994)). Where the decision to prosecute is left to another individual, to establish

the defendant “procured” the prosecution, the plaintiff must show that the

defendant knowingly provided false information and that the decision to prosecute

would not have been made but for the false information. Davis, 383 S.W.3d at 803

(emphasis added).

Espinosa does not contend on appeal that Aaron’s knowingly provided false

information to the authorities, but rather asserts that Aaron’s initiated the chain of

events that resulted in Espinosa’s prosecution by reporting their suspicions to the

police. This is insufficient to raise a genuine issue of material fact as to whether

Aaron’s initiated or procured the prosecution. It is undisputed that Aaron’s did not

file formal charges against Espinosa and that the decision to prosecute Espinosa

was made by the police and District Attorneys’ office. Over a period of months,

50 the police and DA conducted an independent investigation which involved

interviewing numerous witnesses and examining voluminous documents relating to

the allegations. Therefore, as a matter of law, naming Espinosa as a suspect to the

police cannot be what initiated or procured the charges against him.19 See Lewis v.

Continental Airlines, 80 F. Supp. 2d 686, 699 (S.D. Tex. 1999); Davis, 383 S.W.3d

at 80.

D. ESPINOSA’S INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS CLAIM FAILS AS A MATTER OF LAW.

Espinosa does not dispute that intentional infliction of emotional distress

(IIED) is a “gap-filler” tort and is duplicative of his malicious prosecution claim,

but argues that if the grant of summary judgment on his malicious prosecution

claim is upheld, this would create a gap to allow him to assert an IIED claim. As

an initial matter, Espinosa waived this argument because he did not assert it in

response to Aaron’s Motion for Summary Judgment. (See CR 180-181.) Tex. R.

Civ. P. 166a(c). Moreover, this argument is illogical and contrary to Texas law.

19 Espinosa argues, relying on Bennett v. Grant, 2014 Tex. App. LEXIS 8849 (Tex. App.— Austin Aug. 13, 2014) and First Valley Bank of Los Fresnos v. Martin, 55 S.W.3d 172 (Tex. App.—Corpus Christi 2001), that it is sufficient to show that the defendant’s conduct is “the determining factor in the prosecutor's decision to prosecute” without showing that the defendant knowingly provided false information to the authorities. The Texas Supreme Court, however, reversed the Court of Appeals’ decision in First Valley Bank of Los Fresnos. In so doing, the Texas Supreme Court noted that “[w]e have expressly held that fair disclosure is relevant to malice and causation, ‘but has no bearing on probable cause.’ Once a citizen has probable cause to report a crime, there can be no malicious prosecution, even if the subsequent report fails to fully disclose all relevant facts.” First Valley Bank v. Martin, 144 S.W.3d 466, 470 (Tex. 2004). Thus, Espinosa would have to show that Aaron’s affirmatively and knowingly made false statements to the authorities, which he cannot do.

51 The Texas Supreme Court has held that where the gravamen of a plaintiff’s

complaint is another claim (in this case, malicious prosecution), plaintiff cannot

maintain an IIED claim regardless of whether he succeeds on, or even asserts that

claim. Hoffmann-La Roche, Inc. v. Zeltwanger, 144 S.W.3d 438, 448 (Tex. 2004).

Thus, Espinosa is not entitled to assert an IIED claim even if he does not ultimately

succeed on his malicious prosecution claim.20

E. ESPINOSA’S DEFAMATION CLAIM FAILS AS A MATTER OF LAW.

Espinosa argues that any grant of summary judgment on the substantive

merits of his defamation claim was in error because the alleged defamatory

statements were not hearsay since he claims they were not offered for the truth of

the matter asserted. The Court should reject this argument. The only evidence

submitted by Espinosa in support of his defamation claim – his own testimony

about what others allegedly heard and reported to him – is not admissible summary

judgment evidence. See Trostle v. Combs, 104 S.W.3d 206, 213-214 (Tex. App.---

Austin 2003, no pet.) (holding affidavit stating that “Mr. Shields told me that he

had a telephone conversation with Susan Combs and had been told that [Plaintiffs]

20 In addition, “[t]here is no liability for intentional infliction of emotional distress when an actor does no more than insist on his legal rights.” Torres v. GSC Enters., Inc., 242 S.W.3d 553, 563 (Tex. Ct. App.---El Paso 2007, no pet.) (affirming grant of summary judgment on IIED claim where the evidence established the defendants merely asserted their legal right when they reported to law enforcement authority that they believed a crime had been committed). Reporting a suspected crime to the police absent showing that false information was intentionally provided for the purpose of harming plaintiff is not the type of outrageous conduct reserved for a claim of IIED.

52 committed a crime” was hearsay and not competent evidence to support

defamation claim on summary judgment); Davis v. Household International, Inc.,

No. 05-90-01553-CV, 1991 Tex. App. LEXIS 3301, at *5-7 (Tex. App.---Dallas

1991, no writ) (holding that plaintiff’s testimony that another individual told the

plaintiff what a third person had said about plaintiff was inadmissible hearsay that

could not support defamation claim on summary judgment).21

Furthermore, as discussed in Aaron’s summary judgment brief, even if these

statements were not hearsay, the facts known to Aaron’s at the time establish

Aaron’s acted without negligence, which defeats Espinosa’s defamation claim.

(See CRS 40-44.) WFAA-TV, Inc. v. McLemore, 978 S.W.2d 568, 571 (Tex. 1998)

(to establish a defamation claim, the plaintiff must show, among other things, that

“the defendant acted with negligence regarding the truth of the statement”).

Espinosa also argues that Aaron’s alleged statements to its employees during

its internal investigation were not subject to a qualified privilege. Espinosa waived

this argument since he did not assert it in his Response to Aaron’s Motion for

Summary Judgment. (See CR 180-181.) Tex. R. Civ. P. 166a(c). Furthermore,

since these statements were made during the course of an internal investigation to

individuals who had a direct interest in the investigation as possible witnesses,

21 Although Espinosa apparently could not find any Texas appellate decision upholding or rejecting a grant of summary judgment on the basis of hearsay, both Trostle and Davis upheld the grant of summary judgment on defamation claims on the grounds that the only evidence submitted in support of those claims was based on inadmissible hearsay.

53 these statements are subject to a qualified privilege. See Randall’s Food Markets

v. Johnson, 891 S.W.2d 640, 646-647 (Tex. 1995) (“an employer has a conditional

or qualified privilege that attaches to communications made in the course of an

investigation following a report of employee wrongdoing”).

Espinosa’s assertion that malice for purposes of the qualified privilege is not

an appropriate determination to make on summary judgment is also incorrect. A

defendant can invoke the qualified privilege on summary judgment when it

establishes that the statements were made with an absence of malice. See id. at

646. Aaron’s presented evidence on summary judgment that Hooker and Newton,

the individuals who allegedly defamed Espinosa during Aaron’s internal

investigation, did not act with malice and were simply investigating suspected theft

by Espinosa and were required to inform relevant witnesses about what Aaron’s

believed Espinosa had done. (CRS 189.) Espinosa failed to rebut this evidence.

III. CONCLUSION AND PRAYER For the foregoing reasons, the Court should affirm the trial court’s grant of

summary judgment to Aaron’s on all of Espinosa’s claims and award costs because

Espinosa is judicially estopped from pursuing his claims against Aaron’s based on

his failure to disclose them during his bankruptcy proceedings. In the alternative,

the Court should affirm the trial court’s grant of summary judgment and costs to

Aaron’s with respect to the substantive elements of Espinosa’s claims for

54 malicious prosecution, intentional infliction of emotional distress, and defamation.

In sum, Appellees respectfully request that the judgment be affirmed in all respects

and for such additional and further relief, at law or in equity, to which they are

justly entitled.

Respectfully submitted,

JACKSON LEWIS P.C.

/s/ Virginia Mixon Swindell Virginia Mixon Swindell Texas Bar No. 00794711 Wedge International Tower 1415 Louisiana, Suite 3325 Houston, TX 77002-7332 (713) 650-0404 (Telephone) (713) 650-0405 (Facsimile) swindelv@jacksonlewis.com

Dion Y. Kohler Admitted Pro Hac Vice Georgia Bar No. 427715 1155 Peachtree Street, Suite 1000 Atlanta, Georgia 30309-3600 (404) 525-8200 (Telephone) (404) 525-1173 (Facsimile)

ATTORNEYS FOR APPELLEES

55 CERTIFICATE OF COMPLIANCE

As required by Texas Rule of Appellate Procedure 9.4(i), I certify that this document was produced on a computer using Microsoft Word 2010 and contains 13,401 words, as determined by the computer software’s word-count function, excluding the sections of the document listed in Texas Rule of Appellate Procedure 9.4(i)(1).

/s/ Virginia Mixon Swindell Virginia Mixon Swindell

56 CERTIFICATE OF SERVICE

I certify that on April 2, 2015, I served a copy of this document, Brief of Appellees, on the parties listed below by electronic service and that the electronic transmission was reported as complete. My email address is virginia.swindell@jacksonlewis.com.

Robert Teir Robert Teir, PLLC 845 FM 517 W, Suite 200 Dickinson, Texas 77539 (832) 365-1191 [Telephone] (832) 550-2700 [Facsimile]

4841-7319-1714, v. 3