Judge Bruce G. Iwasaki

Department 58

Hearing Date: August 9, 2022

Case Name: Melisa Dominguez v. United Parcel Services, Inc., et al.

Case No.: 21STCV11484

Matter: Motion for Judgment on the Pleadings

Moving Party: Defendants United Parcel Service, Inc., and Amanda Kelley

Responding Party: Plaintiff Melisa Dominguez

Tentative Ruling: The Motion for Judgment on the Pleadings is denied.

In this employment action, Defendants move for judgment on the pleadings based on Plaintiff’s failure to disclose the instant claim in a prior bankruptcy case that has since been discharged. After the motion was filed, Plaintiff reopened the bankruptcy case and notified the trustee, who stipulated to Plaintiff prosecuting the claim on the estate’s behalf. Because judicial estoppel requires consideration of factual evidence, the Court denies the Motion for Judgment on the Pleadings on that ground. In addition, the stipulation is sufficient to confer standing for Plaintiff to continue prosecuting this claim on the bankruptcy estate’s behalf.

Background and Procedural History

On May 22, 2020, Melisa Dominguez (Plaintiff or Dominguez) filed a petition to open a bankruptcy case. The bankruptcy trustee determined there were no assets and Dominguez received a discharge on September 9, 2020.

On March 25, 2021, Dominguez filed this case against Defendants United Parcel Service, Inc., Derek Ptak, and Amanda Kelley, alleging 15 causes of action which include sexual harassment, sexual discrimination, retaliation, failure to provide a reasonable accommodation, unpaid overtime, assault, battery, false imprisonment, negligent hiring, and intentional infliction of emotional distress. The events giving rise to the Complaint occurred between July 2019 through November 2020.

On April 2, 2022, counsel for both parties contacted the bankruptcy trustee and informed her of this pending lawsuit. (Miller Decl., ¶¶ 5, 6.) The trustee moved to reopen the bankruptcy case on May 10, 2022. (Request for Judicial Notice, Ex. 1.) The trustee and Dominguez also stipulated that Dominguez would prosecute this lawsuit on behalf of the bankruptcy estate. The bankruptcy court approved the stipulation. (Id. at Ex. 2, 3.)

On May 4, 2022, United Parcel Service, Inc. and Amanda Kelley (Defendants) moved for judgment on the pleadings against Dominguez. They argue that Dominguez failed to disclose her employment claims in the bankruptcy action and therefore, she is judicially estopped from pursuing this lawsuit. They also contend she lacks standing because the claims belong to the bankruptcy estate.

Dominguez opposes. She argues that applying estoppel would not protect the integrity of the bankruptcy process and that the circumstances here are not egregious. Moreover, she states that the non-disclosure was inadvertent, and any claim of wrongdoing is a factual issue inappropriate on a motion for judgment on the pleadings.

In their reply, Defendants reiterate that all elements of judicial estoppel are met and that the facts suggest that Plaintiff intentionally failed to disclose the claims.

Defendants’ counsel met and conferred with Plaintiff’s counsel through e-mail on April 26 and during a mediation on April 27, 2022. (Witt Decl., ¶¶ 3-4.)

Request for Judicial Notice

Defendant requests judicial notice of three documents filed in bankruptcy Case No. 2:20-bk-14737-NB: the voluntary petition, Chapter 7 Trustee’s Report of No Distribution, and Order of Discharge.

Legal Standard

The standard for granting “ ‘a motion for judgment on the pleadings is essentially the same as that applicable to a general demurrer[;] that is, under the state of the pleadings, together with matters that may be judicially noticed, it appears that a party is entitled to judgment as a matter of law.’ ” (Bezirdjian v. O'Reilly (2010) 183 Cal.App.4th 316, 321-322.) “All allegations in the complaint and matters upon which judicial notice may be taken are assumed to be true.” (Rippon v. Bowen (2008) 160 Cal.App.4th 1308, 1313.)

Discussion

Upon filing a petition for bankruptcy, any causes of action previously possessed by that person become the property of the bankruptcy estate. (Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 1001 (Cloud); 11 U.S.C. §§ 541(a)(1).) This includes causes of action that the debtor may possess. (Bostanian v. Liberty Savings Bank (1997) 52 Cal.App.4th 1075, 1083.) “ ‘It is of course indisputable that any causes of action which accrue to a debtor who has filed for relief under the Bankruptcy Act before the filing of the bankruptcy petition become the property of the bankruptcy estate and may thereafter be prosecuted only by the trustee or a duly appointed representative of the estate.’ ” (Haley v. Dow Lewis Motors, Inc. (1999) 72 Cal.App.4th 497, 504; see also Cloud, supra, 67 Cal.App.4th at p. 1001.)

“Under federal decisional authority, a chapter 7 debtor may not prosecute on his or her own a cause of action belonging to the bankruptcy estate unless the claim has been abandoned by the trustee.” (Bostanian v. Liberty Savings Bank, supra, 52 Cal.App.4th at p. 1081.) Therefore, the trustee in bankruptcy is the real party in interest and has standing to pursue those claims, unless the trustee chooses to abandon them. (Ibid.; Cloud, supra, 67 Cal.App.4th at p. 1004.)

Here, Defendants argue that judicial estoppel applies because Plaintiff failed to disclose this lawsuit and that she lacks standing given the bankruptcy case has been reopened.

Judicial estoppel is not properly evaluated on a motion for judgment on the pleadings.

The elements of judicial estoppel are: “(1) the same party has taken two positions; (2) the positions were taken in judicial . . . proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake.” (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 183.) The party must have taken the inconsistent positions in bad faith in order to gain an unfair advantage. (Cloud, supra, 67 Cal.App.4th at pp. 1016-1018.)

The Cloud case is factually similar to this case. In Cloud, the defendants moved for judgment on the pleadings, arguing that plaintiff was judicially estopped from pursuing her wrongful termination claims because she failed to disclose those claims in a prior bankruptcy case. (Cloud, supra, 67 Cal.App.4th at pp. 998-999.) The trial court agreed and granted the motion without leave to amend. (Id. at p. 1000.)

The Court of Appeal reversed the trial court. The reviewing court held that the defense of judicial estoppel raised a factual issue that could not be decided solely by reviewing the plaintiff's complaint and judicially noticed documents. (Ibid.) In relying on a federal case, Ryan Operations G.P. v. Santiam-Midwest Lumbar Co. (3d Cir. 1996) 81 F.3d 355, 364-365, the Court of Appeal concluded that judicial estoppel should be limited only to egregious cases where the prior inconsistent position was intentional, adopted in bad faith, or a fraud on the court. (Cloud, supra, 67 Cal.App.4th at p. 1019.) Thus, “nondisclosure in bankruptcy filings, standing alone, is insufficient to support the finding of bad faith intent necessary for the application of judicial estoppel.” (Ibid.)

Under the Cloud ruling, this Court is tasked with evaluating “ ‘evidence that [the debtor] acted in bad faith’ ” and which is “ ‘attributable to intentional wrongdoing’ and ‘ “tantamount to a knowing misrepresentation to or even fraud on the court.” ’ ” (Cloud, supra, 67 Cal.App.4th at p. 1019.) A “ ‘good faith mistake’ cannot support judicial estoppel.” (Ibid.) This inquiry necessitates consideration of the evidence, which is improper on a motion for judgment on the pleadings. (Id. at p. 1020.)

Here, there is no dispute that Plaintiff should have disclosed these claims in the bankruptcy case. Defendants contend that the nondisclosure was intentional, and Plaintiff should be barred by judicial estoppel from prosecuting this action.

The fifth element of the requisite intent is at issue here. The gravamen of judicial estoppel “is the intentional assertion of an inconsistent position that perverts the judicial machinery.” (Jackson v. County of Los Angeles, supra, 60 Cal.App.4th at p. 183.) Thus, the culpable mental state is essential. “ ‘Asserting inconsistent positions does not trigger application of judicial estoppel unless “intentional self-contradiction is . . . used as a means of obtaining unfair advantage.” ’ ” (Haley v. Dow Lewis Motors, supra, 72 Cal.App.4th at p. 509.) As such, judicial estoppel does not apply “ ‘ “when the prior position was taken because of a good faith mistake rather than as part of a scheme to mislead the court.” ’ ” (Ibid.; Johnson v. Oregon (9th Cir.1998) 141 F.3d 1361, 1369 [“If incompatible positions are based not on chicanery, but only on inadvertence or mistake, judicial estoppel does not apply”]; see also Cloud, supra, 67 Cal.App.4th at p. 1020.)

Here, Defendants’ motion and reply merely points to Plaintiff’s failure to disclose the lawsuit in the bankruptcy case. But as noted, mere nondisclosure is insufficient to invoke judicial estoppel. (Cloud, supra, 67 Cal.App.4th at p. 1019.) Whether Plaintiff’s omission was in bad faith or an innocent mistake is a question of fact. Dominguez contends that her subsequent actions in reopening the bankruptcy estate and communicating with the trustee suggests that the nondisclosure was inadvertent. (Opposition, p. 9:14-21.) In contrast, Defendants assert that a variety of circumstances indicate the nondisclosure was intentional – for example, the Complaint alleges outrageous conduct for which Plaintiff should have been aware of, prior to the bankruptcy petition. (Reply, pp. 4:20-5:4.) These are issues of fact that the Court cannot decide “solely by reviewing plaintiff’s complaint and matters that could be judicially noticed.” (Cloud, supra, 67 Cal.App.4th at p. 1000.)

Defendant’s reliance on non-binding, federal cases is unavailing. Several such cases were decided on a motion for summary judgment, where a court considers the evidence in deciding whether there is a triable issue of fact. (Callendar v. United States Postal Services (E.D.Cal. Aug. 2, 2018 No. 2:18-cv-00025-JAM-CKD PS) 2018 U.S.Dist. Lexis 130111, *8-9 [summary judgment]; Ortiz v. Sodexho Operations, LLC (S.D.Cal. Sept. 27, 2011 Nos. S.: 11-CV-1295 JLS (RBB); 10-CV-2224 JLS (RBB)) 2011 U.S.Dist. Lexis 111208, *1 [same]; see also International Engine Parts, Inc. v. Feddersen & Co. (1998) 64 Cal.App.4th 345, 347 [summary judgment]; cf. Cloud, supra, 67 Cal.App.4th at p. 1018 [criticizing the application of judicial estoppel on a motion for judgment on the pleadings].)

Defendants’ other cited California case, Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1608, was decided on demurrer, but the appellate court was careful to distinguish Cloud. The Hamilton case involved lender liability and the defendant was a creditor in the Chapter 13 bankruptcy case, whereas Cloud involved a noncreditor defendant. This was important because the policy of providing discharge to debtors in a Chapter 7 bankruptcy “could be frustrated by application of judicial estoppel ‘in the absence of any basis for a res judicata finding’: that is, where the later lawsuit is against a noncreditor.” (Hamilton, supra, 195 Cal.App.4th at pp. 1612-1613.) Here, the facts are similar to Cloud, rather than Hamilton.

Defendants attempt to distinguish Cloud by arguing that the plaintiff in that case produced a declaration averring that the non-disclosure of the claim was inadvertent. This argument fails. The Court of Appeal in Cloud expressly stated that the “plaintiff’s declaration asserting extrinsic facts was not a proper opposition to a motion for judgment on the pleadings.” Further, the allegations within the declaration “highlight[ed] the factual nature of the inquiry necessary to determine whether to invoke the doctrine of judicial estoppel.” (Cloud, supra, 67 Cal.App.4th at p. 1000.) In other words, the issue of judicial estoppel is a factual inquiry not appropriately decided on a motion for judgment on the pleadings. (Id. at pp. 1018-1019.)

Plaintiff has standing to pursue the claims pursuant to a stipulation authorizing her to prosecute the claim on the estate’s behalf.

A plaintiff debtor who unintentionally failed to disclose her wrongful termination claims in the bankruptcy case lacks standing to sue. (Cloud, supra, 67 Cal.App.4th at p. 1003.) However, the defect can be cured by substituting the bankruptcy trustee as the real party in interest or obtaining the trustee's abandonment of the claim. (Id. at pp. 1001-1003, 1011.) Thus,

courts should liberally grant leave to amend for plaintiff to substitute in the bankruptcy trustee. (Id. at pp. 1006-1011.)

Here, Dominguez filed the Complaint after the bankruptcy was discharged, but the claims alleged against the Defendants accrued prior to the bankruptcy petition. Therefore, the claims became part of the estate when the petition was filed, and the bankruptcy trustee is the real party in interest. (Haley v. Dow Lewis Motors, Inc., supra, 72 Cal.App.4th at p. 504.)

Defendants argue that despite the Bankruptcy Court’s Order approving the stipulation between the trustee and Plaintiff that authorizes Plaintiff to prosecute this case, this Court should interpret the order as merely providing “authority” to the Plaintiff. As Plaintiff has not amended her Complaint, they argue, she still lacks standing.

Defendants offer no authority for this argument. Many California cases have held that the trustee may permit the debtor to pursue an action without abandoning the property. (See Kaley v. Catalina Yachts (1986) 187 Cal.App.3d 1187, 1194 [“trustee may, among other things, allow the plaintiff to pursue the action and await the results”]; see also California Aviation, Inc. v. Leeds (1991) 233 Cal.App.3d 724, 729 [chapter 7 debtor may pursue action with trustee's authorization]; see also Robinson v. McGinn (1987) 195 Cal.App.3d 66, 78-79, disapproved on other grounds in Laird v. Blacker (1992) 2 Cal.4th 606, 617 [chapter 7 debtor may continue pending state court litigation absent affirmative conduct by trustee].)

As the bankruptcy trustee has stipulated to permit Plaintiff to pursue the action on her own behalf, Plaintiff has standing to prosecute the claims on this case.

Accordingly, the Court denies the Motion for Judgment on the Pleadings.