Summary
holding that a Chapter 7 debtor lacked standing and could not pursue claim because he failed to schedule it in bankruptcy proceeding
Summary of this case from Zapotocky v. Cit BankOpinion
04 CV 7274 (GBD).
April 27, 2005
MEMORANDUM DECISION AND ORDER
In the complaint, plaintiffs asserts claims for age discrimination and retaliation in violation of the Age Discrimination in Employment Act ("ADEA"), as well as in violation of both New York State Human Rights Law and New York City Human Rights Law. Defendants moved to dismiss the complaint and plaintiffs cross-moved to amend the complaint. Those motions are not fully submitted. Although the case was referred to mediation, the parties have yet to engage in mediation. Defendants are now moving to dismiss plaintiff Joseph Farrino's causes of action on the ground that he lacks standing because of his bankruptcy proceeding.
By letter dated March 29, 2005, defendants informed the Court that they recently learned that plaintiff Joseph Farrino had filed for bankruptcy shortly before filing this action. Defendants contend that on June 9, 2004, less than two weeks before the Equal Employment Opportunity Commission ("EEOC") found no probable cause and issued Mr. Farrino a Right to Sue Letter, Mr. Farrino filed a voluntary petition in the United States Bankruptcy Court for the District of New Jersey seeking protection under Chapter 7 of the Bankruptcy Code. Defendants maintain that Mr. Farrino failed to include his EEOC claim in his bankruptcy petition as required. Defendants, relying primarily on Second Circuit and New York State case law, argue that as a result of Mr. Farrino's non-disclosure, he lacks standing to maintain this action, and hence this Court lacks jurisdiction to entertain his claims. Accordingly, in the event that Mr. Farrino does not withdraw his claims with prejudice, defendants asks this Court to dismiss his claims.
Although defendants' application was not raised by way of formal motion practice, Mr. Farrino submitted a response thereto fully setting forth his legal arguments in opposition to the request to dismiss. Mr. Farrino acknowledges that he filed for bankruptcy on June 9, 2004, that he received the Right to Sue Letter on June 19, 2004, and that he was discharged in bankruptcy in September of 2004. Mr. Farrino alleges that he mistakenly failed to indicate the existence of his EEOC and his New York City Commission on Human Rights ("NYCCHR") administrative claims in his "Statement of Financial Affairs," which he filed with the bankruptcy court. He explains that this oversight was due to the fact that he believed that, since such claims pertained to his work, they were inapplicable to his personal bankruptcy, and he was unaware of the status of the claims at the time of his filing.
Conspicuously absent, from Mr. Farrino's representations, is the exact date in September of 2004 that he was discharged from bankruptcy. He commenced the instant action on September 13, 2004.
Mr. Farrino argues that since he filed for bankruptcy in New Jersey, the Third Circuit and New Jersey State law is controlling. Mr. Farrino asserts, relying on Third Circuit law, that because this action involves "an ongoing cause of action that is repetitive in nature," Mr. Farrino's "personal bankruptcy would not affect his standing to bring this suit or this Court's jurisdiction to hear his claim based on the repetition exception to mootness." (Letter from Abrams to Court of 4/13/05, at 2). He further argues that since the claims against the defendants are continual, he could still bring suit against defendants for alleged wrongful acts that arose after he was discharged in bankruptcy. Mr. Farrino also notes that he is not the sole plaintiff in this action. He maintains that the complaint includes a cause of action based on similarly situated plaintiffs who are subjected to the same hostile work environment. He, therefore, concludes that his claims should survive.
On December 20, 2002, Mr. Farrino filed a charge for age discrimination against defendants with the EEOC. In his EEOC complaint, Mr. Farrino alleged the discriminatory conduct complained of began in March of 2000, and was of a continuing nature. He claimed that he was subjected to disparate treatment including demeaning him in the presence of workers and clientele, attempting to take unwarranted disciplinary action against him, and pressuring him to resign. Mr. Farrino also indicated that he had previously filed a complaint with the NYCCHR. Mr. Farrino requested that the matter proceed forward with the EEOC because the NYCCHR does not enforce claims based on violations of the ADEA. In the NYCCHR complaint, Mr. Farrino set forth similar factual allegations as contained in the EEOC complaint, and additionally alleged that he, unlike younger similarly situated employees, was required to produce medical documentation for a single's day absence from work.
On June 18, 2004, the EEOC issued a Right to Sue Letter wherein the EEOC noted that its investigation failed to establish that defendants had violated any statutes. Mr. Farrino had filed for bankruptcy on June 9, 2004. In connection with the bankruptcy case, he filed a personal property schedule wherein he represented that he did not have any contingent or unliquidated claims of any nature. Additionally, he filed a Statement of Financial Affairs dated June 9, 2004. Therein, Mr. Farrino was instructed to "List all suits and administrative proceedings to which the debtor is or was a party within one year immediately preceding the filing of this bankruptcy case." Mr. Farrino indicated, under penalty of perjury, that no such suits or administrative proceedings existed.
The complaint at bar alleges, as it specifically pertains to Mr. Farrino, that beginning in March of 2000, defendants subjected him to disparate treatment which included pressuring him to retire, requiring him to produce medical documentation for a single day's absence from work, demeaning him in the presence of co-workers and clientele, and attempting to take unwarranted disciplinary action against him. Additionally, it was alleged that on March 6, 2002, Mr. Farrino was subjected to physical and verbal abuse by a co-worker, and his pleas to management, to make this kind of behavior stop, were ignored.
DISCUSSION
A New York/New Jersey choice of law analysis is unnecessary because under the laws of either jurisdiction, Mr. Farrino lacks standing to maintain this action. Upon filing a petition for bankruptcy, "all legal or equitable interest of the debtor in property as of the commencement of the case" are assets that belong to the bankruptcy estate. 11 U.S.C. § 541(a)(1). Pre-petition causes of action belonging to the debtor are included among the estate's assets. Seward v. Devine, 888 F.2d 957, 963 (2d Cir. 1989); Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 417 (3d Cir. 1988); Fedotov v. Peter T. Roach Assocs., P.C., 354 F.Supp.2d 471, 475 (S.D.N.Y. 2005); Kunica v. St. Jean Financial, Inc., 233 B.R. 46, 52 (S.D.N.Y. 1999) Neville v. Harris, 192 B.R. 825, 829-30 (D.N.J. 1996). A trustee is appointed to administer the estate property for the benefit of the debtor's creditors. See, 11 U.S.C. § 704. Since claims belonging to the debtor becomes property of the estate, the trustee is empowered to pursue those claims in an attempt to maximize the estate assets thereby furthering the interests of the creditors.
Pursuant to 11 U.S.C. § 521(1), the debtor is required to disclose all of his actual and potential assets in a schedule of assets and a statement of financial affairs which would include any of his causes of action. Krystal Cadillac-Oldsmobile GMC Truck Inc. v. General Motors Corp., 337 F.3d 314, 322-23 (3d Cir. 2003) ("The [Bankruptcy] Code requires that a debtor list potential causes of action, not claims it actually intends to sue on at the time of the required disclosure."); Oneida, 848 F.2d at 417 ("It has been specifically held that a debtor must disclose any litigation likely to arise in a non-bankruptcy contest."); Von Feasel v. City of New York, 2003 WL 23018806, at *1 (S.D.N.Y. Dec. 22, 2003) (plaintiff was required to disclose he was a party to an administrative proceeding and had a contingent and unliquidated claim.); Kunica, 233 B.R. at 56 (open discussion of potential claims is insufficient and is not a substitute for the mandatory filing of schedules listing such potential claims.). It is incumbent upon the debtor to fully and candidly disclose all assets. Any property that was scheduled under § 521(1) which is not otherwise administered at the time of the closing of the bankruptcy case is deemed abandoned, and the property reverts back to the debtor. 11 U.S.C. § 554(c). On the other hand, property which was not scheduled by the debtor is not abandoned and remains the property of the bankruptcy estate.Hutchins v. Internal Revenue Service, 67 F.3d 40, 43 (3d Cir. 1995); Kunica, 233 B.R. at 53; Rosenshein v. Kleban, 918 F.Supp. 98, 102-03 (S.D.N.Y. 1996); In re Drexel Brunham Lambert, 160 B.R. 508, 514 (S.D.N.Y. 1993); see also, 11 U.S.C. § 554(d). Since the bankruptcy estate retains any unscheduled assets, only the trustee has authority to control such assets, and hence the debtor loses all rights to pursue an undisclosed cause of action in his own name. Hutchins, 67 F.3d at 43; Von Feasel, 2003 WL 23018806, at *1); Kunica, 233 B.R. at 53-57; Rosenshein, 918 F.Supp. at 103; Drexel, 160 B.R. at 514.
Mr. Farrino's claims against defendants existed prior to the filing of his bankruptcy petition, and hence was property of the bankruptcy estate. He, therefore, lacks standing. Mr. Farrino focuses on the fact that the complaint alleges "an ongoing cause of action that is repetitive in nature." In support of his argument that he possesses the requisite standing, Mr. Farrino erroneously relies on the repetitive exception to the mootness doctrine. "The capable-of-repetition doctrine applies only in exceptional situations . . . where the following two circumstances are simultaneously present: (1) the challenged action is in its duration too short to be fully litigated prior to cessation or expiration, and (2) there is a reasonable expectation that the same complaining party will be subject to the same action again." Spencer v. Kemna, 523 U.S. 1, 17 (1998) (internal brackets, quotation marks and citations omitted). Mr. Farrino is precluded from litigating this action because he lacks standing, not because his legal claims are moot. The repetitive exception to the mootness doctrine goes to the issue of whether the controversy is justiciable. The repetitive exception does not apply with regard to standing. "[I]f a plaintiff lacks standing at the time the action commences, the fact that the dispute is capable of repetition yet evading review will not entitle the complainant to a federal judicial forum." Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 191 (2000). Moreover, even though Mr. Farrino lacks standing to prosecute this action in his own right, the defendants' alleged discriminatory conduct will not evade review. There are two other named plaintiffs who may continue to litigate this lawsuit. It should additionally be noted that, notwithstanding Mr. Farrino's contentions to the contrary, none of the asserted causes of action are on behalf of similarly situated employees. Every cause of action indicates that the defendants' alleged actions are causing each of the named plaintiffs to suffer irreparable injury and monetary damages.
Simply because Mr. Farrino contends that the alleged discriminatory conduct is of an ongoing nature, and hence involves post-bankruptcy wrongdoing, does not, standing alone, provide him with the requisite standing. Mr. Farrino charged defendants with such continuous discriminatory conduct in his administrative proceedings. Hence, the EEOC's Right to Sue Letter was premised on the same claims at issue in the case at bar. Neither the complaint nor the proposed amended complaint allege any specific discriminatory conduct, committed by defendants against Mr. Farrino, which arose after he filed his bankruptcy petition. Therefore, the present action existed when he filed for bankruptcy. It was for the trustee to determine whether to litigate this action for the benefit of Mr. Farrino's creditors. The trustee was denied the opportunity to do so as a result of Mr. Farrino's failure to disclose his causes of action against the defendants. A debtor, who conceals a cause of action during his bankruptcy case, is not entitled to then litigate those claims for his own benefit once the bankruptcy case is closed.
However, it cannot be determined whether Mr. Farrino's bankruptcy case is closed. Mr. Farrino indicates that in September of 2004, he was discharged from bankruptcy pursuant to 11 U.S.C. § 727. A discharge from bankruptcy does not constitute a closing of the case. Only after an estate is fully administered and the bankruptcy court has discharged the trustee, is the bankruptcy case closed. 11 U.S.C. § 350(a). If Mr. Farrino's bankruptcy case is still open, he lacks standing to litigate this discrimination action because it belongs to the bankruptcy estate, and therefore the trustee, not plaintiff, may maintain this action. If the bankruptcy case is closed, Mr. Farrino's similarly lacks standing as a result of his failure to schedule the causes of action as an asset in his bankruptcy proceedings.
Instead of dismissing the debtor's case, it is generally preferable to permit the bankruptcy trustee to be substituted, as the named plaintiff, in place of the debtor. See, Kohlbrenner v. Victor Belata Belting Co., Inc., 1998 WL 328639, *2 (W.D.N.Y. June 3, 1998). Accordingly, it is hereby ordered that no later than May 20, 2005, Mr. Farrino shall notify the bankruptcy trustee of this case, and provide the trustee with a copy of this Court's Memorandum Decision and Order.
Plaintiff Joseph Farrino's action is dismissed with leave to restore within ninety (90) days of the date of this Order upon application by the bankruptcy trustee if the trustee advises this Court that it wishes to pursue this claim.
SO ORDERED.