Opinion
CA No. 3:00-CV-1187-R.
April 26, 2002
MEMORANDUM OPINION
Walter M. Heckler ("Heckler") filed suit against Product Development Corporation ("PDC") for reverse discrimination under Title VII, 42 U.S.C. § 2000e et seq. and 42 U.S.C. § 1981. Defendant's Motion for Summary Judgment (filed January 15, 2002) is now before the Court. Defendant's Motion for Summary Judgment is GRANTED in full for the reasons herein stated.
I. FACTUAL BACKGROUND
In 1996, Walter M. Heckler ("Heckler") began distributing telephone books for the Product Development Corporation ("PDC"). Heckler submitted requests for specific routes to PDC; later he would receive a list of his assigned distribution routes. After completing delivery of the telephone books pursuant to PDC's policies, Heckler provided PDC with the required proof of delivery paperwork in order to receive his payment. PDC paid Heckler per delivery route; PDC did not withhold taxes from Heckler's compensation. PDC provided Heckler with Internal Revenue Service ("IRS") 1099-MISC Forms, not IRS W-2 Forms at the end of each year. Heckler delivered telephone books for PDC approximately from 1996 until at least the middle of 2001.
The IRS 1099-MISC Form is used to report miscellaneous income. The form shows the amount of nonemployee compensation paid, and that the employer did not withhold taxes from the employee's compensation. An IRS W-2 Wage and Tax Statement Form shows the amount of compensation paid to the employee and the amount of taxes withheld by the employer.
On September 10, 1999, Heckler filed for Chapter 7 Bankruptcy. See 11 U.S.C. § 727 (outlining provisions for a bankruptcy liquidation proceeding). In his Bankruptcy Petition, Heckler declared that his assets were less than $50,000, and that he had no pending or contingent claims of any kind. J.A. at 61-85. Heckler contemporaneously filed the required Schedules and Statement of Financial Affairs. At no time during his bankruptcy proceedings did Heckler disclose any potential claims that he may have had against PDC.
The Bankruptcy Trustee filed his report that "there is no property available for distribution from the estate over and above that exempted by [Heckler]." J.A. at 86 (Trustee's Report of No Distribution). Subsequently, the United States Bankruptcy Court of the Eastern District of Texas, Tyler Division, issued its Discharge of Debtor on December 30, 1999. J.A. at 87. On January 7, 2000, approximately one week after the bankruptcy discharge, Heckler filed a discrimination charge against PDC with the EEOC.
In the EEOC charge, Heckler alleged that PDC did not discriminate against him before November 26, 1999. On March 8, 2000, Heckler amended his discrimination charge; however, he continued to allege that the earliest of PDC's discrimination against him took place on November 26, 1999. On March 8, 2000, the EEOC dismissed Heckler's claim for want of jurisdiction. The EEOC found that Heckler was an independent contractor; thus, he was not covered by the Title VII provisions. See 42 U.S.C. § 2000e et seq. On March 8, 2000, the EEOC issued Heckler a right to sue letter for the alleged discrimination by PDC. Heckler then filed the present action against PDC for reverse racial discrimination.
II. ANALYSIS
A. STANDARD OF REVIEW
Rule 56(c) of the Federal Rules of Civil Procedure allows summary judgment only when the moving party demonstrates it is entitled to judgment as a matter of law because there is no genuine issue as to any material fact. See FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Melton v. Teachers Ins. Annuity Assoc. of Am., 114 F.3d 557, 559 (5th Cir. 1997). The moving party bears the initial burden of identifying those portions of the pleadings, depositions, answers to interrogatories, admissions on file, and any affidavits that it believes demonstrate the absence of a genuine issue of material fact. See Celotex Corp., 477 U.S. at 323.
Once the movant has discharged its initial burden under Rule 56, the nonmovant must set forth specific facts, by affidavits or otherwise, showing that there is a genuine issue for trial. See Topalian v. Ehrman, 954 F.2d 1125, 1132 (5th Cir. 1992), cert. denied, 506 U.S. 825 (1992). In weighing the evidence, the court must decide all reasonable doubts and inferences in the light most favorable to the nonmovant. See Walker v. Sears, Roebuck Co., 853 F.2d 355, 358 (5th Cir. 1988); Thornbrough v. Columbus Greenville R.R. Co., 760 F.2d 633, 640 (5th Cir. 1985). As long as there appears to be some support for the disputed allegations such that "reasonable minds could differ as to the import of the evidence," the motion for summary judgment must be denied. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).
B. JUDICIAL ESTOPPEL
PDC argues that Heckler's claims are barred by judicial estoppel. The Fifth Circuit has defined judicial estoppel as "a common law doctrine by which a party who has assumed one position in his pleadings may be estopped from assuming an inconsistent position." In re Coastal Plains, Inc., 179 F.3d 197, 205 (5th Cir. 1998) (citing Brandon v. Interfirst Corp., 858 F.2d 266, 268 (5th Cir. 1988)). The purpose of the judicial estoppel doctrine is "to protect the integrity of the judicial process" by "prevent[ing] parties from playing fast and loose with the courts to suit the exigencies of self interest." Id. (internal quotation marks, parentheses and citations omitted). This system is not intended to protect the litigants, but rather the judicial system as a whole. Id. (citing In re Cassidy, 892 F.2d 637, 641 n. 2 (7th Cir. 1990).
1. The Significance of Heckler's Bankruptcy Discharge
The Bankruptcy Code imposes an express duty upon debtors to disclose all assets, including contingent claims. See I.R.C. § 521(1). Courts have held that: 1) the duty to disclose is a continuing one; 2) that a debtor does not have to know the specific legal requirements of a cause of action for disclosure to be required; and 3) the debtor must only know that she may have a possible cause of action in order to be required to disclose the claim in a bankruptcy proceeding. See Youngblood Group v. Lufkin Fed. Sav. Loan Ass'n, 932 F. Supp. 859, 867 (E.D. Tex. 1996). This duty to disclose extends to any potential claim, including those that may be "contingent, dependent, or conditional." Id. The purpose behind this full disclosure requirement is the preservation of the integrity of the bankruptcy system. See Rosenshein v. Kleban, 918 F. Supp. 98, 104 (S.D.N Y 1996). Several courts have precluded cases by former debtors on the ground that the debtor had knowledge of the potential claims during their bankruptcy proceedings and did not disclose those claims. See e.g., Payless Wholesale Distributors, Inc. v. Alberto Culver (P.R.) Inc., 989 F.2d 570 (1st Cir.), cert. denied, 510 U.S. 931, (1993).
2. Coastal Plains Synopsis
PDC argues that Heckler's claims are barred by judicial estoppel. The Fifth Circuit defines judicial estoppel as "a common law doctrine by which a party who has assumed one position in his pleadings may be estopped from assuming an inconsistent position." Coastal Plains, 179 F.3d at 205. In Coastal Plains, the Fifth Circuit held that judicial estoppel: (1) may be applied only where the position of the party to be estopped is clearly inconsistent with its previous one; (2) that a party must have convinced the court to accept that previous position; and (3) that the party to be estopped must have acted intentionally not inadvertently. Id. at 206 (emphasis in original). Inadvertent disclosures are those where "the debtor either lacks knowledge of the undisclosed claims or has no motive for their concealment." Id. at 210 (emphasis in original). "[D]etrimental reliance by the party seeking judicial estoppel is not required . . . the purpose of judicial estoppel is not to protect the litigants; it is to protect the integrity of the judicial system."Id. at 210 (emphasis omitted).
In Coastal Plains, the bankruptcy debtor, Coastal Plains ("Coastal"), did not disclose a potential $10 million claim on their Schedules and Statement of Financial Affairs. Id. at 207. According to the Bankruptcy Court, after its assets were liquidated, Coastal would have still owed approximately $5 million to their creditors (excluding any potential value in the undisclosed claim). The Bankruptcy Court found that despite Coastal's failure to disclose the potential claim, there was insufficient proof of fraud. See id. Therefore, the Bankruptcy Court held that judicial estoppel did not bar Coastal's claim. Coastal Plains, 179 F.3d at 205-13. The United States District Court for the Northern District of Texas affirmed the Bankruptcy Court's Ruling and the Fifth Circuit reversed. See id. at 205. In applying the test outlined above, the Fifth Circuit held that Coastal was judicially estopped from pursuing their claim.
The Fifth Circuit reasoned that the first prong of the judicial estoppel test was satisfied because Coastal took "inconsistent positions" by omitting their potential claim from their bankruptcy schedules. Id. at 205-13. The second prong of the test was satisfied because the decision to lift the bankruptcy stay was based in part on Coastal's representations that their intangible assets were worth less than $20,000, an amount that was inadequate to satisfy their debts. See id. at 205-13. The Fifth Circuit also addressed the requirement of inadvertence, concluding that Coastal "knew of the facts giving rise to its inconsistent positions, and had a motive to conceal the claims." Id. at 212 (emphasis in original). As a result of these three findings, the Appeals Court reversed the District Court. See id. at 212. The Fifth Circuit held that Coastal was estopped from pursuing its previously undisclosed claim. Coastal Plains, 179 F.3d at 212.
3. Application of the Coastal Plains Judicial Estoppel Test
The instant case is analogous to Coastal Plains. Heckler, like Coastal, did not disclose his possible cause of action against PDC in his Schedules and Statement of Financial Affairs. Heckler does not deny that he knew before his bankruptcy was discharged that he was being discriminated against by PDC. Heckler argues that although he was aware of the discrimination, this awareness does not constitute a failure to disclose pending litigation under Coastal because: 1) the bankruptcy proceeding was not the proper forum for the discrimination claim; and 2) Heckler did not realize that he had a legally cognizable claim against PDC.
When Heckler first knew that he was being discriminated against is in dispute. PDC argues that Heckler was aware of the alleged discrimination as early as 1997. As evidence of this, PDC references excerpts of Heckler's deposition. However, in making all reasonable inferences in favor of the nonmovant, the Court finds that Heckler believed that the discrimination against him began on November 26, 1999.
The Bankruptcy Code requires a debtor to disclose all claims, and this has been held to be a continuous debtor duty. See I.R.C. § 521. The Fifth Circuit's decision in Coastal Plains is directly on point. Even when making all reasonable inferences in favor of Heckler as the nonmovant, Heckler's actions satisfy the first prong of the judicial estoppel framework because by not listing the claim against PDC, Heckler has taken inconsistent positions as outlined in Coastal Plains.
The Bankruptcy Court relied on Heckler's asset representations in his Schedules and Statement of Financial Affairs, as evidenced by the bankruptcy discharge issued on December 30, 1999. Similarly, in Coastal Plains, the Fifth Circuit found that a bankruptcy discharge was proof that the debtor convinced the bankruptcy court to accept his previous position. Thus, the second prong of the judicial estoppel test is met.
Heckler argues that his failure to disclose was inadvertent underCoastal Plains because he did not "contemplate and foresee a legal battle in which he would sue and win a $11 Million judgment." Pl.'s Resp. to Deny Def.'s Brief in Supp. of Mot. for Summ. 1. at 6. It has already been established that a debtor does not have to know a cause of action's specific legal requirements in order to make the required disclosures in a bankruptcy proceeding. The debtor need only know that a possible cause of actions exists. See Youngblood, 932 F. Supp. at 867. Just as in Coastal Plains, Heckler "knew of the facts giving rise to [his] inconsistent positions, and [he] had a motive to conceal the claims." Coastal Plains, 179 F.3d at 212 (emphasis in original). It is uncontroverted that Heckler knew of the alleged discrimination, and his discharge from bankruptcy is a motive for concealment of the claims. The Coastal Plains judicial estoppel test has been satisfied; therefore, Defendant's Motion for Summary Judgment is hereby GRANTED.
C. Title VII and 42 U.S.C. § 1981
Having found that Plaintiffs claims are barred by judicial estoppel, the Court does not address Defendant's Motion for Summary Judgment on Plaintiffs remaining Title VII and 42 U.S.C. § 1981 claims.
III. CONCLUSION
For the aforementioned reasons, Defendant's Motion for Summary Judgment is hereby GRANTED in full.