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Court Nixes Discrimination Claims by Worker Who Didn't Reveal Them in Bankruptcy Filing

Wednesday, July 24, 2013
By Chris Opfer

A Texas credit union manager waived his right to sue his former employer for age and disability discrimination by failing to list these claims in bankruptcy proceedings initiated shortly after he was fired, a federal court in the state ruled July 18 (Johnson v. First Tech. Fed. Credit Union, S.D. Tex., No. 4:11-cv-03812, 7/18/13).

The U.S. District Court for the Southern District of Texas held that judicial estoppel barred Joe Johnson from bringing the claims against First Technology Federal Credit Union. While Johnson said he was unsure whether he had a claim against the company at the time he filed for bankruptcy protection, the court found that he was sufficiently aware of the facts underlying his later allegations.

As a result, the court granted summary judgment to FTFCU on Johnson's claims under the Age Discrimination in Employment Act and the Americans with Disabilities Act Amendments Act.

“Plaintiff had reason not to disclose his claims against his employer in order to avoid the use of his recovered damages to pay his unsecured debts,” Judge Ewing Werlein Jr. observed. 

Fired Shortly After Surgery

Johnson was 56 years old when he was fired July 23, 2009, from his job as branch manager at a Houston credit union owned by FTFCU.

He had recently returned to the job after undergoing heart surgery. According to Johnson, he rushed back to work--against his doctor's recommendation--three days after the surgery because he knew the company had previously fired a co-worker who took similar medical leave.

After Johnson filed for bankruptcy protection the following month, his debts were discharged Feb. 12, 2010. In a bankruptcy schedule, Johnson answered “none” when asked to list “[o]ther contingent and unliquidated claims of every nature, including tax refunds, counterclaims of the debtor, and rights to setoff claims.”

Johnson filed an Equal Employment Opportunity Commission charge of discrimination against the company April 30, 2010, alleging it discriminated against him based on age and disability. EEOC later issued a right-to-sue letter and Johnson filed an action against the company, asserting claims under the ADEA and ADAAA Oct. 27, 2011. 

Focus on Facts

The court found that Johnson was precluded from bringing the action against FTFCU because he did not list the claims on the personal property schedule in the bankruptcy proceedings.

Noting that judicial estoppel prohibits a litigant from taking inconsistent positions in pleadings, the court said it is “particularly appropriate” in situations where a party fails to disclose a claim as an asset in bankruptcy court and later proceeds with the claim in another tribunal.

The court rejected Johnson's argument that he did not take an inconsistent position in the bankruptcy filing because he had not yet filed the EEOC charge at the time. Werlein explained that the focus of the estoppel inquiry was whether Johnson was aware of the facts giving rise to the claims at the time of the bankruptcy filing, rather than whether he had actually moved forward with the claims.

“When Plaintiff filed his bankruptcy petition, the basic facts and circumstances giving rise to his employment discrimination claims had already occurred and were known to Plaintiff, namely, that he was over 40 years of age and therefore in ADEA's protected class when he was discharged and that, less than one month before his discharge, he had undergone a heart procedure, following which he returned to work in only three days notwithstanding his physician's advice to take long-term disability or at least a few weeks off work to recover,” Werlein wrote.

While Johnson argued that he was not sure at the time whether he had a viable claim against FTFCU, the court said he need not have known all of the facts or even have identified a specific legal basis for an action in order to be required to disclose the potential claims. 

Considered Claims Shortly After Firing

Indeed, Johnson retained counsel and discussed possible claims against his former employer with the attorney before he filed for bankruptcy, according to the court.

He also complained to the company about his termination in an email sent five days after the firing, the court observed, and specifically pointed out that it came shortly after he took time off for the surgery.

“This is the exact factual predicate for his present disability discrimination claim,” Werlein explained.

Yet Johnson took no action to amend the property schedule during the roughly six months in which the bankruptcy was pending. He therefore could not claim that his failure to later list the potential claims in the schedule was inadvertent, the court said.

Delana G. Cline and S. Nasim Ahmad of Cline Ahmad in the Woodlands, Texas, and Joseph Y. Ahmad of Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing in Houston represented Johnson. FTFCU was represented by A. Kevin Troutman and Mauro Ramirez of Fisher & Phillips in Houston and Mitchell C. Baker of the firm's Portland, Ore., office.

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