Ninth Circuit Creates New Standard to Determine Whether to Apply Judicial Estoppel

By: Joshua Nadelbach

St. John’s Law Student

American Bankruptcy Institute Law Review Staff


Rejecting the majority view, in Ah Quin v. County of Kauai Dept. of Transp.,[1]  the Ninth Circuit reversed the District Court for the District of Hawaii and held that the district court applied the judicial estoppel doctrine too broadly.[2] Specifically, the Ninth Circuit held that if a plaintiff-debtor (1) claims that her failure to list a pending lawsuit in a bankruptcy schedule was due to a “mistake” or “inadvertence” and (2) seeks to reopen the bankruptcy proceeding, then the court must first examine the plaintiff-debtor’s subjective intent regarding how he or she filled out the schedule before deciding that the judicial estoppel applies.[3] The court explained that if a plaintiff-debtor’s omission occurred by accident or was made without the intent to conceal the pending lawsuit, judicial estoppel should not bar the plaintiff-debtor’s pending lawsuit.[4]

 In Ah Quin, the debtor filed for chapter 7 bankruptcy after she had initiated an employment-discrimination suit in the district court.[5] The debtor, however, failed to list the lawsuit as an asset in her bankruptcy schedules and denied having the discrimination claim when asked at her 341 meeting.[6] At some point, the debtor’s attorney in the discrimination suit became aware of the potential effect of the bankruptcy case on the debtor’s claim and informed the defendant of the bankruptcy case.[7] Soon thereafter, the debtor was permitted to reopen her bankruptcy case, set aside the discharge, and amend her schedules to list her pending discrimination claim as an asset.[8] About a month after the bankruptcy case was reopened, the defendant moved for summary judgment in the discrimination case, on the ground that judicial estoppel barred the debtor from proceeding with her claim.[9] The district court presiding over the discrimination case granted the defendant’s motion, reasoning that it was bound to apply judicial estoppel because the debtor (1) knew of her claim and (2) had a motive to conceal the claim from the bankruptcy court.[10] The Ninth Circuit reversed, agreeing with the debtor that the district court applied the wrong legal standard for applying judicial estoppel.[11]   

“Judicial estoppel is an equitable doctrine invoked by a court at its discretion.”[12] The purpose of judicial estoppel is to “protect the integrity of the judicial process by prohibiting parties from deliberately changing positions according to the exigencies of the moment.”[13] While there is no strict formula for determining the applicability of judicial estoppel, the Supreme Court, in New Hampshire v. Maine,[14] identified several factors that a court should consider, including whether a party’s later position was clearly inconsistent with its earlier position; whether the party has succeeded in persuading a court that acceptance of an inconsistent position would create the perception that either the first or the second court was misled; and “whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.”[15] Further, the Supreme Court opined that judicial estoppel may not apply if a party’s prior position was based on mistake or inadvertence.[16]

In the bankruptcy context, judicial estoppel applies if a debtor omits a pending lawsuit from his schedules and receives a discharge.[17] The majority of Circuit Courts narrowly interpret the exception for “mistake” and “inadvertence,” simply asking whether the plaintiff-debtor was aware of the pending lawsuit at the time of filing his schedules and whether the debtor had a motive to conceal the claim.[18] Consequently, these courts will apply judicial estoppel broadly to bar any claim that the plaintiff-debtor knew of prior to his bankruptcy case because he will always have the motive to conceal claims from the bankruptcy court.[19] However, in Ah Quin, the Ninth Circuit held that the narrow interpretation of the exception for “mistake” and “inadvertence” should not apply because the plaintiff-debtor reopened her bankruptcy proceeding and corrected the initial filing.[20] Instead, the court opined that judicial estoppel requires an inquiry into a plaintiff-debtor’s subjective intent at the time of initiating the bankruptcy proceeding to determine whether the initial incomplete filing was truly inadvertent or mistaken, as those terms are commonly understood.[21] The court reasoned that without a specific finding that the plaintiff-debtor’s omission was not mistaken or inadvertent, judicial estoppel should not apply.[22]

The decision of the Ninth Circuit, in Ah Quin, was unexpected because it differed from the holdings in most other Circuits.[23] In particular the decision eliminates the presumption of deceit from plaintiff-debtors who claim that their failure to list pending lawsuits in their schedules was due to inadvertence or mistake and seek to reopen their bankruptcy cases and amend their schedules.[24] However, even under Ah Quin, the presumption of deceit will still apply in cases where the debtor fails to correct his omission after he receives a discharge.[25] Accordingly, while a plaintiff-debtor should seek to ensure that he accurately completes his schedules, Ah Quin demonstrates that if the plaintiff-debtor fails to list a lawsuit in his schedules, it is important that the debtor seek to reopen his case and amend his schedules as soon as possible because even under Ah Quin, the presumption of deceit will still apply in cases where the plaintiff-debtor fails to correct his omission. Yet, it is important to remember that even under the Ninth Circuit’s “subject intent” test, a court may still apply judicial estoppel after the debtor reopens his bankruptcy case if the court finds that the omission was intentional and did not result from mistake or inadvertence.[26] Ultimately, both creditors and the debtor may benefit if the court permits the lawsuit to proceed because any judgment obtained will be used to satisfy creditors’ claims, with any surplus being distributed to the debtor.[27]  Under the majority rule, however, the defendant-wrongdoer is the only party that benefits because judicial estoppel will most likely bar the omitted lawsuit.[28] 


[1] No. 10-16000, 2013 WL 3814916 (9th Cir. July 24, 2013).

[2] Id. at *3, *7.

[3] Id.

[4] See id. at *7.

[5] Id. at *1.

[6] Id.

[7] Id.

[8] Id.

[9] Id. at *2.

[10] Id. at *2–3.

[11] See Ah Quin, 10-16000, 2013 WL 3814916 at *4, *7 (holding District Court’s interpretation of “inadvertent” or “mistaken” was narrow and, therefore, too stringent).

[12] Id. at *2 (quoting New Hampshire v. Maine, 532 U.S. 742, 750 (2001)).

[13] Id. (quoting New Hampshire v. Maine, 532 U.S. 742, 749–750 (2001)).

[14] 532 U.S. 742, 750 (2001).

[15] Id. at 750–51.

[16] Ah Quin, No. 10-16000, 2013 WL 3814916 at *3 (quoting New Hampshire v. Maine, 532 U.S. 742, 753 (2001)).

[17]  Id. at *2 (citing Hay v. First Interstate Bank of Kalispell, N.A., 978 F.2 555, 557 (9th Cir. 1992). 

[18] Id. at *3 (citing Eastman v. Union Pas. R.R. Co., 493 F.3d 1151, 1157 (10th Cir. 2007); Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1286—87 (11th Cir.2002); Browning v. Levy, 283 F.3d 761, 776 (6th Cir.2002); Browning Mfg. v. Mims (In re Coastal Plains, Inc.), 179 F.3d 197, 206 (5th Cir.1999)).

[19] Id. (citing Jethroe v. Omnova Solutions, Inc., 412 F.3d 598, 601 (5th Cir.2005); Browning Mfg. v. Mims (In re Coastal Plains, Inc.), 179 F.3d 197, 206 (5th Cir.1999)).

[20] See id. at *4, *7.

[21] Id. at *7.

[22] See id. at *8–9. The court explained that in these circumstances, where a plaintiff reopens and amends the initial bankruptcy filing, the New Hampshire factors no longer apply. Although the plaintiff at first took inconsistent positions, the bankruptcy court ultimately did not accept the initial position. Second, plaintiff amended his initial filing and, therefore, did not obtain an unfair advantage. Id. at *5.In addition, the Court refuted other possible justifications. The argument that judicial estoppel should be applied because the creditors were not initially informed of the pending claim was insufficient because the judicial estoppel doctrine is concerned with the integrity of the court system and not its effect on parties. See id. at *5. The argument that judicial estoppel is necessary to incentivize future debtors to be honest was insufficient because judicial estoppel functions to protect the integrity of the judicial system with respect to the current litigant, not to discourage future litigants from being dishonest. Moreover, the bankruptcy system has its own protections. See id. at *6.

[23] Id. at *7 (“We recognize that, by adopting the ordinary understanding of ‘mistake’ and ‘inadvertence’ in this context, we differ from the test articulated by most of our sister circuits — whether the plaintiff knew of the claims and had a motive to conceal them”).

[24] See id. at *7.

[25] See id. at *4.

[26] See id. at *9.

[27] See id. at *6.

[28] Id