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June 21, 2004


U.S. Fifth Circuit Applies Judicial Estoppel

In a decision filed on June 18, the U.S. Fifth Circuit dismissed a personal-injury lawsuit, because in prior bankruptcy proceedings, the plaintiff-debtor had failed to disclose his potential lawsuit to his creditors.

Arthur Hudspeath claimed to have been injured while disembarking from a ship. A little over a year later, he and his wife filed for Chapter 13 bankruptcy. In the bankruptcy proceeding, they were required to report any pending litigation or potential lawsuits, but they filed a schedule that failed to disclose their potential claim against the ship. While their bankruptcy case was still pending, they filed a state-court suit against the ship owner, but withheld service for six months, during which time they failed to amend their bankruptcy filings to disclose their lawsuit. After being discharged in bankruptcy, Mr. Hudspeath intervened in the federal-court limitation action, pressing his personal-injury claim. The vessel owner moved the district court to dismiss Mr. Hudspeath's suit on grounds of judicial estoppel.

The district court denied the vessel owner's motion, but Fifth Circuit reversed. In an opinion by Judge Edith Jones, the Fifth Circuit criticized the district court for "allow[ing] these debtors to have their cake and eat it too, as they retain the enormous benefit of a bankruptcy discharge while standing in line to receive funds from the injury lawsuit after the creditors are paid. Because judicial estoppel is designed to prevent such guile, we reverse." In re: Superior Crewboats, Inc., No. 03-30692, slip op. (5th Cir. June 18, 2004).

Posted by RPW at June 21, 2004 02:16 PM
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