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July 12 — An employee who orally disclosed one of three pending bias charges to a bankruptcy trustee but didn't include them in her bankruptcy petitions can't proceed with her discrimination case against Honeywell Technology Systems Inc. and two other firms, a federal appeals court ruled 2-1 ( Marshall v. Honeywell Tech. Sys. Inc. , D.C. Cir., No. 14-7190, 7/12/16 ).
Employers may use the doctrine of judicial estoppel to dismiss claims by employees who fail to disclose their legal actions to the bankruptcy trustee. Applying judicial estoppel means an employee who files for bankruptcy can't claim that he or she doesn't have any pending or future discrimination claims and then later seek to recover monetary relief on those claims.
Here, Honeywell, L-3 Communications Government Services Inc. and SGT Inc. are entitled to judicial estoppel because Sandra Marshall didn't disclose on her bankruptcy petition her pending discrimination charges against the companies filed with the Equal Employment Opportunity Commission and the Maryland Commission on Human Relations.
Although she later orally disclosed the charges to the bankruptcy trustee, the U.S. Court of Appeals for the District of Columbia Circuit found that the disclosure didn't meet the requirements of the bankruptcy code. Nor did it provide notice to her creditors or correct the incomplete information disclosed in her petitions, it said.
The majority granted summary judgment to Honeywell, L-3 and SGT in Marshall's subsequent lawsuit alleging age, race and sex bias, and retaliation. Judge A. Raymond Randolph wrote the July 12 opinion, joined by Judge Karen L. Henderson.
Dissenting, Judge Thomas B. Griffith said dismissal was inappropriate because a jury must decide whether Marshall's oral disclosure establishes that she made a mistake on her bankruptcy forms.
Marshall's bankruptcy petition required her to disclose “all suits and administrative proceedings” to which she “is or was a party within one year” preceding her bankruptcy petition, the court said.
She failed to do so and still pursued a discrimination lawsuit to the disadvantage of her bankruptcy creditors and “despite having sworn, under penalty of perjury, that no such lawsuit or legal claims existed,” the court said.
It rejected Marshall's argument that judicial estoppel shouldn't apply because she orally disclosed one of her claims to the trustee and her attorney disclosed the remaining claims. The disclosure was insufficient to save her case from dismissal, the court said.
It also rejected Marshall's argument that her failure to list her pending administrative claims was a mistake, given evidence that she listed civil suits and an Internal Revenue Service action in which she was the defendant.
Griffith dissented, arguing that Marshall's oral disclosure creates a triable factual dispute about whether she lied or made a mistake on her bankruptcy petition.
“And because judicial estoppel is inappropriate in cases of mistake, whether she lied or made a mistake is material,” Griffith said, explaining why he wouldn't dismiss the suit.
The Law Office of JoAnn P. Myles represented Marshall. Ogletree Deakins, LeClairRyan and PilieroMazza represented the companies.
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The opinion is available at http://www.bloomberglaw.com/public/document/Sandra_Marshall_et_al_v_Honeywell_Technology_Systems_et_al_Docket.
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