Coble v. DeRosia et al, No. 1:2010cv00259 - Document 45 (E.D. Cal. 2011)
Court Description: ORDER GRANTING IN PART and DENYING IN PART Defendants' Motion to Dismiss 37 , signed by Chief Judge Anthony W. Ishii on 5/13/11: Defendants' motion to dismiss Parker's claims based on judicial estoppel is DENIED. (Hellings, J)
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Coble v. DeRosia et al Doc. 45 1 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT FOR THE 8 EASTERN DISTRICT OF CALIFORNIA 9 10 11 12 13 14 15 LISA COBLE, et al., ) ) Plaintiffs, ) v. ) ) MARK DEROSIA, et al., ) ) ) Defendants. ) ____________________________________) 1:10-CV-00259 AWI JLT ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [Doc. #37] 16 17 18 19 INTRODUCTION Plaintiffs Lisa Coble (“Coble”) and Randell Parker (“Parker”) filed a First Amended 20 Complaint (“FAC”) against Defendants Mark DeRosia and the City of Delano on February 14, 21 2011. Defendants move to dismiss the FAC pursuant to Rule 12(b)(1) and Rule 12(h)(3) of the 22 Federal Rules of Civil Procedure. In their motion, Defendants argue, inter alia, that Coble lacks 23 standing to bring her claims and that Parker, as bankruptcy trustee, is judicially estopped from 24 pursuing Coble’s claims. Defendants frame their judicial estoppel argument as part of their 25 motion to dismiss for lack of subject matter jurisdiction under Rules 12(b)(1) and 12(h)(3). 26 Judicial estoppel, however, is an affirmative defense and does not attack jurisdiction. See Fed. 27 R. Civ. P. 8(c). Therefore, Defendants’ judicial estoppel argument is more properly considered 28 under Rule 12(b)(6). See Jones v. Bock, 549 U.S. 199, 215 (2007) (a complaint may be subject Dockets.Justia.com 1 to dismissal under Rule 12(b)(6) if the face of the pleadings establish the affirmative defense). 2 For the reasons that follow, the motion is granted in part and denied in part. 3 LEGAL STANDARD 4 A motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) or 12(h)(3) 5 challenges the Court’s subject matter jurisdiction. “It is a fundamental precept that federal courts 6 are courts of limited jurisdiction. The limits upon federal jurisdiction, whether imposed by the 7 Constitution or by Congress, must not be disregarded nor evaded.” Owen Equip. & Erection Co. 8 v. Kroger, 437 U.S. 365, 374 (1978). A challenge to jurisdiction “can be either facial, confining 9 the inquiry to allegations in the complaint, or factual, permitting the court to look beyond the 10 complaint.” Savage v. Glendale Union High Sch., Dist. No. 205, Maricopa Cnty., 343 F.3d 11 1036, 1039 n.2 (9th Cir. 2003). Thus, the Court is not restricted to the face of the pleadings and 12 “may review any evidence, such as affidavits and testimony, to resolve factual disputes 13 concerning the existence of jurisdiction.” McCarthy v. United States, 850 F.2d 558, 560 (9th 14 Cir. 1988) (citation omitted). 15 A defendant may raise an affirmative defense by motion to dismiss under Rule 12(b)(6) 16 of the Federal Rules of Civil Procedure. Jones, 549 U.S. at 215. “When ruling on a Rule 17 12(b)(6) motion to dismiss, if a district court considers evidence outside the pleadings, it must 18 normally convert the 12(b)(6) motion into a Rule 56 motion for summary judgment, and it must 19 give the nonmoving party an opportunity to respond.” United States v. Ritchie, 342 F.3d 903, 20 907 (9th Cir. 2003). “A court may, however, consider certain materials-documents attached to 21 the complaint, documents incorporated by reference in the complaint, or matters of judicial 22 notice-without converting the motion to dismiss into a motion for summary judgment.” Id. at 23 908. 24 25 26 BACKGROUND Beginning April 24, 2008, Coble was employed as a jailer with the City of Delano. FAC at ¶ 8. On September 12, 2008, Coble was terminated. Id. at ¶ 8. Subsequently, on October 7, 27 28 2 1 2008, Coble filed an administrative complaint with the California Department of Fair 2 Employment and Housing. (Doc. 40-1 at 9.) In the administrative complaint, Coble alleged that 3 she was subjected to “sex/pregnancy discrimination” when she was denied accommodations and 4 discharged from her employment by the City of Delano. Id. 5 On January 9, 2009, Coble filed for bankruptcy. (Doc. 40-2 at 2.) Coble did not disclose 6 in her bankruptcy petition that she had filed the October 7, 2008 administrative complaint. Id. at 7 31. Thereafter, the Bankruptcy Court issued a Final Decree and Coble’s debts were discharged. 8 (Doc. 40-3 at 2 and 5.) 9 Coble filed a complaint against Defendants on February 15, 2010. (Doc. 1.) In her 10 complaint, Coble again alleged claims related to her termination. Defendants filed a motion to 11 dismiss on January 4, 2011, arguing that Coble lacked standing to bring her claims and was 12 judicially estopped from bringing her claims. (Doc. 21.) Coble filed a motion to amend the 13 complaint on January 5, 2011. (Doc. 24.) In the motion, Coble admitted that she was not a 14 proper party to the litigation and sought to amend her complaint in order to add Parker, 15 bankruptcy trustee of her estate, as a plaintiff. Id. at 1. The Magistrate Judge granted Coble’s 16 motion to amend the complaint on February 8, 2011. (Doc. 31.) Coble filed the FAC on 17 February 14, 2011, adding Parker as a plaintiff. (Doc. 32.) Defendants again move to dismiss 18 the FAC based on lack of subject matter jurisdiction and judicial estoppel. (Doc. 37.) 19 DISCUSSION 20 1. Coble’s Standing 21 Defendants contend that Coble has no standing to pursue her claims. Motion at 3:20. 22 Specifically, Defendants argue that Coble’s claims belong to the bankruptcy estate and only the 23 bankruptcy trustee has standing to assert those claims. Id. at 3:21-22. Coble agrees that the 24 claims belong to the bankruptcy estate and the trustee is the proper party plaintiff to prosecute the 25 claims. Opposition at 9:21-23. Coble “stipulates that she may be dismissed from this case and 26 does not oppose the motion to dismiss as to her.” Id. at 9:17-18. 27 28 3 1 Article III standing is a species of subject matter jurisdiction. Chandler v. State Farm 2 Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010). “Because standing and ripeness 3 pertain to federal courts’ subject matter jurisdiction, they are properly raised in a Rule 12(b)(1) 4 motion to dismiss.” Id. “A suit brought by a plaintiff without Article III standing is not a ‘case 5 or controversy,’ and an Article III federal court therefore lacks subject matter jurisdiction over 6 the suit.” Cetacean Cmty. v. Bush, 386 F.3d 1169, 1174 (9th Cir. 2004). 7 The Court agrees that Coble lacks standing to pursue her claims. Causes of action that 8 exist prior to a bankruptcy filing become assets of the bankruptcy estate. See 11 U.S.C. § 9 541(a)(1); Sierra Switchboard Co. v. Westinghouse Elec. Corp., 789 F.2d 705, 709 (9th Cir. 10 1986). Once causes of action become assets of the bankruptcy estate, only bankruptcy trustees, 11 debtors-in-possession, or bankruptcy court authorized entities have standing to sue on behalf of 12 the estate. McGuire v. United States, 550 F.3d 903, 914 (9th Cir. 2008). In this case, Coble’s 13 causes of action existed prior to her bankruptcy filing. This is evidenced by the fact that Coble 14 filed her administrative complaint on October 7, 2008 and then filed for bankruptcy on January 9, 15 2009. Therefore, Coble is dismissed due to lack of standing.1 Accordingly, with respect to 16 Coble, Defendants’ Rule 12(b)(1) motion to dismiss is GRANTED. 17 2. Judicial Estoppel against Parker 18 Defendants contend that Parker, as trustee for Coble’s bankruptcy estate, is judicially 19 estopped from pursuing Coble’s claims because Coble failed to disclose her claims during 20 bankruptcy proceedings. Defendants state that “dismissal with prejudice with respect to a trustee 21 is warranted where equitable considerations weigh against permitting the bankruptcy trustee to 22 pursue the claims.” Id. at 9:2-4. 23 24 “Judicial estoppel is an equitable doctrine that precludes a party from gaining an advantage by asserting one position, and then later seeking an advantage by taking a clearly 25 26 1 Because the Court concludes that Coble lacks standing to pursue her claims, it does not address Defendants’ remaining arguments against Coble. 27 28 4 1 inconsistent position.” Klamath Siskiyou Wildlands Ctr. v. Boody, 468 F.3d 549, 554 (9th 2 Cir. 2006). Judicial estoppel is invoked “not only to prevent a party from gaining an advantage 3 by taking inconsistent positions, but also because of general considerations of the orderly 4 administration of justice and regard for the dignity of judicial proceedings, and to protect against 5 a litigant playing fast and loose with the courts.” Hamilton v. State Farm Fire & Cas. Co., 270 F. 6 3d 778, 782 (9th Cir. 2001). Generally, judicial estoppel applies when: “(1) the party’s current 7 position is clearly inconsistent with its earlier position, (2) the party was successful in persuading 8 a court to accept its earlier position, and (3) the party would derive an unfair advantage or impose 9 an unfair detriment on the opposing party if not estopped.” Williams v. Boeing Co., 517 F.3d 10 11 1120, 1134 (9th Cir. 2008). In the bankruptcy context, judicial estoppel is applied to prevent a debtor who failed to 12 disclose a claim in bankruptcy proceedings from asserting that claim after emerging from 13 bankruptcy. Hamilton, 270 F.3d at 785. The rationale is that courts “will not permit a debtor to 14 obtain relief from the bankruptcy court by representing that no claims exist and then 15 subsequently to assert those claims for his own benefit in a separate proceeding.” Id. Applying 16 judicial estoppel against debtors serves to protect the integrity of the bankruptcy process, which 17 depends on full and honest disclosure by debtors of all their assets. Id. 18 Judicial estoppel does not apply to a bankruptcy trustee when the debtor’s conduct 19 occurred after the bankruptcy petition was filed. For example, in Parker v. Wendy’s International 20 Inc., 365 F.3d 1268, 1271-72 (11th Cir. 2004), the Eleventh Circuit held that judicial estoppel did 21 not apply to the bankruptcy trustee when the debtor took inconsistent positions in bankruptcy 22 court and district court. The court noted that the debtor’s discrimination claim became an asset 23 of the bankruptcy estate when the bankruptcy petition was filed. Id. at 1272. Once the 24 discrimination claim became part of the bankruptcy estate, all rights held by the debtor in the 25 claim were extinguished. Id. Thus, at the time the bankruptcy petition was filed, the trustee 26 became the real party in interest in the debtor’s discrimination suit. Id. The court emphasized 27 28 5 1 that any post-petition conduct by the debtor, including failure to disclose an asset during the 2 bankruptcy proceedings, was not attributable to the trustee because the debtor ceased to have any 3 interest in the discrimination claim. Id. at 1272 n.3. Therefore, the court held that judicial 4 estoppel did not apply to the trustee because “the trustee made no false or inconsistent statement 5 under oath in a prior proceeding” and was “not tainted or burdened by the debtor’s misconduct.” 6 Id. at 1273. 7 Similar to the Parker case, Coble’s claims became an asset of the bankruptcy estate when 8 she filed her bankruptcy petition on January 9, 2009.2 Parker, as bankruptcy trustee, then became 9 the real party in interest in Coble’s suit. Coble concedes that her claims were not found on her 10 bankruptcy schedules. Opposition at 9:18-21. However, Coble’s failure to disclose her claims 11 during bankruptcy proceedings is not attributable to Parker because Coble ceased to have an 12 interest in her claims upon the filing of her bankruptcy petition. Therefore, judicial estoppel does 13 not apply to Parker because Parker never took an inconsistent position with respect to Coble’s 14 claims. 15 Defendants argue that Parker’s claims should be dismissed with prejudice, citing to 16 Reed v. City of Arlington, 620 F.3d 477 (5th Cir. 2010). The Court is not persuaded that 17 Reed mandates a different result in this case. In Reed, a debtor failed to disclose a judgment 18 throughout his bankruptcy proceedings. Id. at 479. The Fifth Circuit applied judicial estoppel to 19 the trustee despite acknowledging that the trustee took no inconsistent legal positions. Id. at 482. 20 The Fifth Circuit emphasized that the trustee succeeded “to the debtor’s claim with all its 21 attributes, including the potential for judicial estoppel.” Id. The Fifth Circuit, unlike the 22 23 24 25 26 2 In connection with their motion to dismiss, Defendants filed a request for judicial notice of various court filings, including Coble’s bankruptcy petition. (Doc. 40.) The Court “may take judicial notice of court filings and other matters of public record.” Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006). The documents at issue here are all court filings or matters of public record. Therefore, judicial notice of these documents is taken. 27 28 6 1 Eleventh Circuit in Parker, failed to take into account that when the debtor filed for bankruptcy 2 he ceased to have any interest in his claim. Thus, the Fifth Circuit incorrectly attributed the 3 debtor’s post-petition conduct to the trustee for judicial estoppel purposes. Furthermore, Fifth 4 Circuit Rule 41.3 states that “the granting of a rehearing en banc vacates the panel opinion and 5 judgment of the court and stays the mandate.” On February 22, 2011, the Fifth Circuit vacated 6 the Reed panel opinion and judgment of the court when it granted a rehearing en banc. Reed v. 7 City of Arlington, 634 F.3d 769, 770 (5th Cir. 2011). Therefore, Reed is unpersuasive and the 8 Court declines to follow it. 9 10 Accordingly, Defendants’ motion to dismiss Parker’s claims based on judicial estoppel is DENIED. 11 12 13 CONCLUSION IT IS HEREBY ORDERED that Defendants’ motion to dismiss is GRANTED in part and DENIED in part consistent with this order. 14 15 IT IS SO ORDERED. 16 17 Dated: 0m8i78 May 13, 2011 CHIEF UNITED STATES DISTRICT JUDGE 18 19 20 21 22 23 24 25 26 27 28 7
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