Dzakula v. McHugh, No. 5:2010cv05462 - Document 29 (N.D. Cal. 2011)
Court Description: ORDER GRANTING MOTION TO DISMISS by Judge Paul S. Grewal granting 14 Motion to Dismiss (psglc1, COURT STAFF) (Filed on 4/22/2011)
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Dzakula v. McHugh Doc. 29 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 SAN JOSE DIVISION 11 MAIDA DZAKULA, 12 13 14 15 16 ) ) Plaintiff, ) v. ) ) ) JOHN MCHUGH, SECRETARY OF THE ) ARMY, ) ) Defendants. ) ___________________________________ ) Case No.: C 10-05462 PSG ORDER GRANTING MOTION TO DISMISS (Docket No. 14) 17 18 Defendant John McHugh, Secretary of the Army (the “Army”), moves to dismiss the 19 complaint pursuant to Rules 12(b)(1) and 12(b)(6). Plaintiff Maida Dzakula (“Dzakula”) opposes 20 the motion. On April 19, 2011, the parties appeared for hearing. Having reviewed the papers and 21 considered the arguments of counsel, the Army’s motion to dismiss is GRANTED. 22 23 I. BACKGROUND In 2002, Dzakula was hired as an Assistant Professor for the Army in the Serbian/Croatian 24 Department of the European and Latin American Language School of the Defense Language 25 Institute (“DLI”) at the Presidio of Monterey. In or around February 2008, Dzakula was granted 26 tenure there. Beginning in or around March 2009, Dzakula alleges that she faced an abusive and 27 hostile working environment based on her status as a Bosnian Muslim. She complained to her 28 supervisor regarding her discovery of Serbian music containing offensive lyrics referencing the ORDER, page 1 Dockets.Justia.com 1 ethnic war in Bosnia on a department computer. The Serbian music that Dzakula had complained of 2 was removed from the department computer but Dzakula began to experience hostility and 3 harassment from her supervisor and other faculty members. Dzakula alleges that the pattern of 4 hostility and harassment continued until she was removed from her teaching position on October 26, 5 2009. DLI later denied Dzakula tuition assistance to complete her doctoral program. 6 7 On October 11, 2010, Dzakula and her husband, Bozo Dzakula, filed a voluntary petition for bankruptcy pursuant to Chapter 7.1 8 On December 2, 2010, Dzakula filed a complaint against the Army alleging a violation of the 9 Civil Rights Act of 1964, 42 U.S.C. §§ 2000e, et seq. (the “pending action”). Specifically, Dzakula 10 brings claims for (1) unlawful discrimination based on her religion and national origin; (2) a hostile 11 work environment; and (3) unlawful retaliation for engaging in prior protected Equal Employment 12 Opportunity (“EEO”) activity. 13 14 On January 17, 2011 and February 14, 2011, Dzakula amended Schedules B and C of her Chapter 7 petition. On neither occasion, however, did she list the pending suit as an asset. 15 On February 3, 2011, the Bankruptcy Trustee issued a Report of No Distribution. 16 On March 1, 2011, the Army moved to dismiss the pending action on the grounds of judicial 17 18 estoppel. On March 2, 2011, Dzakula again amended Schedules B and C of her Chapter 7 petition. 19 The new amendments reflected the pending action as an asset. A few days later, on March 7, 2011, 20 Dzakula was granted discharge and the bankruptcy case closed. 21 II. LEGAL STANDARD 22 A debtor has a duty to file a schedule of assets and liabilities.2 A schedule may be amended 23 by the debtor as a matter of course at any time before the case is closed.3 “It goes without saying 24 that the Bankruptcy Code and Rules impose upon bankruptcy debtors an express, affirmative duty to 25 26 1 See In re Bozo and Maida Dzakula, Case No. 10-60560 SJL (Bankr. N.D. Cal. 2010). 2 See 11 U.S.C. § 521 (a)(1)(B)(i). 3 See Federal Rules of Bankruptcy Procedure Rule 1009(a). 27 28 ORDER, page 2 1 2 disclose all assets, including contingent and unliquidated claims.”4 Judicial estoppel is an “equitable doctrine that precludes a party from gaining advantage by 3 asserting one position, and then later seeking an advantage by taking a clearly inconsistent 4 position.”5 “[A] court invokes judicial estoppel not only to prevent a party from gaining an 5 advantage by taking inconsistent positions, but also because of ‘general consideration[s] of the 6 orderly administration of justice and regard for the dignity of judicial proceedings,’ and to ‘protect 7 against a litigant playing fast and loose with the courts.’”6 “The application of judicial estoppel is 8 not limited to bar the assertion of inconsistent positions in the same litigation, but is also appropriate 9 to bar litigants from making incompatible statements in two different cases.”7 10 In determining whether to apply the equitable doctrine of judicial estoppel, a court generally 11 considers the following three factors: (1) a party’s later position must be clearly inconsistent with its 12 earlier position; (2) whether the party has succeeded in persuading a court to accept that party’s 13 earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would 14 create the perception that either the first or the second court was misled; and (3) whether the party 15 seeking to assert an inconsistent position would derive an unfair detriment on the opposing party if 16 not estopped.8 Notwithstanding the factors enumerated above, in Hamilton v. State Farm, the Ninth 17 Circuit noted that “we do not establish inflexible prerequisites or an exhaustive formula for 18 determining the applicability of judicial estoppel.”9 “Additional considerations may inform the 19 doctrine’s application in specific factual contexts.”10 20 21 22 4 23 5 24 See In the Matter of Coastal Plains, Inc., 179 F.3d 197, 208 (5th Cir. 1999). See Hamilton v. State Farm Fire & Casualty Co., 270 F.3d 778, 782 (9th Cir. 2001) (internal citations omitted). 6 See id. 7 See id. at 783. (internal citations omitted). 8 See id. at 782. 9 See id. at 783. 10 See id. 25 26 27 28 ORDER, page 3 1 III. DISCUSSION 2 The parties’ overall arguments are straightforward. The Army argues that Dzakula is 3 judicially estopped from raising the claims alleged in the pending action as a result of her repeated 4 failure to identify these claims on the schedules and amended schedules she filed in bankruptcy 5 court. Dzakula responds that, unlike the parties in Hamilton, she further amended the bankruptcy 6 schedules (as a matter of right) to include the pending action before her bankruptcy case closed. 7 The court specifically considers each of the three Hamilton factors below. 8 A. 9 The Plaintiff’s Inconsistent Positions The Army argues that Dzakula had knowledge of sufficient facts giving rise to the pending 10 action as early as October 26, 2009, when she was removed from her teaching position at DLI. Her 11 voluntary petition for bankruptcy was filed on October 11, 2010 and the pending action was filed on 12 December 2, 2010. In the interim, Dzakula amended her schedules twice (on January 17, 2011 and 13 February 14, 2011) but on neither occasion did she identify the pending action. Only after the Army 14 filed its motion to dismiss did Dzakula amend the schedules to include the pending action. The 15 Army argues that Dzakula directly contradicted her previous representations to the bankruptcy court 16 that the pending action did not exist. 17 In response, Dzakula points out that under Rule 1009(a), she was entitled to, and that she did, 18 amend the schedules to reflect the pending action before her bankruptcy was discharged and her case 19 closed. 20 Until Dzakula amended her bankruptcy schedules on March 2, 2011 to reflect the pending 21 action, her positions were clearly inconsistent. While Dzakula amended her schedules to reflect the 22 pending action, she has not provided any explanation whatsoever as to why the pending action was 23 not included on her schedules in the first place. She is silent on whether omission of the pending 24 action from the schedules was inadvertent or intentional. For example, in a declaration, Dzakula 25 could have stated whether or not she had knowledge of enough facts to know that she had a potential 26 cause of action against the Army or whether she was, or was not, able to engage counsel who 27 thought enough of her case to represent her and pursue such claims. Without such information, the 28 court cannot speculate as to Dzakula’s sophistication as a litigant and can only conclude that ORDER, page 4 1 Dzakula had inconsistent positions between the bankruptcy court and the pending action.11 2 B. 3 The Bankruptcy Court Was Misled Citing Hamilton v. State Farm, the Army argues that discharge of the debt by the bankruptcy 4 court before the March 2, 2011 amendment is not a prerequisite for the court to find judicial 5 estoppel. Rather, “judicial acceptance” by the bankruptcy court showing reliance on Dzakula’s 6 representations is enough. As proof as judicial acceptance, the Army refers to the February 3, 2011 7 trustee’s report of no distribution to show that Dzakula’s representations were accepted by the 8 bankruptcy court. 9 Dzakula again responds that she had a right to amend the schedules and that she did so in a 10 timely manner. She argues therefore that any defects in her schedules have been addressed and 11 cured. 12 The court agrees with the Army. On February 3, 2011, the Chapter 7 trustee made a report 13 of “no distribution” to the bankruptcy court. That report was submitted not only before Dzakula’s 14 March 3, 2011 third amendment but even before Dzakula had amended her schedules for a second 15 time on February 14, 2011. The fact that Dzakula was permitted under the rules to amend the 16 schedules up to the point of discharge does not justify misleading the Trustee - and therefore the 17 bankruptcy court - before the Trustee declared that no assets were available to satisfy the creditors. 18 This is especially so where, as here, the plaintiff amended the schedules not once, but twice, after 19 filing this suit, and before the Trustee’s report was prepared, eliminating any question that she was 20 aware of her claims in this suit at the time of her representations. 21 C. 22 23 The Plaintiff Derives An Unfair Benefit The Army argues that, by failing to disclose the pending action in her earlier schedules, Dzakula is attempting to derive an unfair benefit. It argues that Dzakula can discharge her 24 11 25 26 27 28 See Scoggins v. Arrow Trucking Co., 92 F.Supp.2d 1372, 1373-4 (S.D. Ga. 2000) (noting that plaintiff tendered no affidavit or other explanation to negate the obvious inference that his adversary here is compelling him to honor his bankruptcy obligations.”); Galloway v. Stringer Wellhead Protection, Inc., 446 F.Supp.2d 655, 658 (S.D. Miss. 2006) (noting that plaintiff “makes no attempt whatsoever to explain or excuse [her] blatant omission in this regard.”). Cf. White v. Wyndham Vacation Ownership, Inc., 617 F.3d 472, 476 (6th Cir. 2010) (“Two circumstances in which a debtor’s failure to disclose might be deemed inadvertent are: (1) ‘where the debtor lacks knowledge of the factual basis of the undisclosed claims,’ and (2) where ‘the debtor has no motive for concealment.’”) (citing Browning v. Levy, 283 F.3d 761, 776 (6th Cir. 2002)). ORDER, page 5 1 outstanding debts for a fraction of the amount while shielding a potentially lucrative asset from her 2 creditors. 3 Dzakula responds that her bankruptcy schedules now include disclosure of the pending 4 action and that nothing has now been hidden from creditors. Pursuant to 11 U.S.C. § 350(b) and 5 Federal Rules of Bankruptcy Procedure 5010, she also argues that the creditors may move to re-open 6 her bankruptcy case. 7 Absent estoppel, Dzakula would clearly derive an unfair benefit by proceeding with this 8 case. The unfairness was not mitigated by her telling the Trustee about this case after the Trustee’s 9 report was issued and just days before the case was closed.12 Nor is the possibility of re-opening the 10 bankruptcy case based on her after-the-fact amendment sufficient. “[A]fter-the-fact amendments 11 still burden courts by disrupting the orderly administration of bankruptcy estates. The offending 12 litigants, not courts, should be made to bear the consequence of non-disclosure. It is the court 13 system, after all, that judicial estoppel aims to protect.”13 14 15 In sum, the factors tip the balance of equities in favor of the Army. Accordingly, the Army’s motion to dismiss is granted. 16 17 IV. CONCLUSION “This court joins the multitude of courts recognizing the doctrine of judicial estoppel as a bar 18 to a debtor’s assertion of a claim not identified as an asset in an earlier bankruptcy proceeding.”14 19 The Army’s motion to dismiss is GRANTED. 20 21 IT IS SO ORDERED. Dated: April 22, 2011 _________________________ 22 PAUL S. GREWAL United States Magistrate Judge 23 24 25 26 12 Cf. Chandler v. Samford University, 35 F.Supp.2d 861, 863, 865 (S.D. Ala. 1999). 13 Scoggins, 92 F.Supp.2d at 1376. 14 Chandler, 35 F.Supp.2d at 864. 27 28 ORDER, page 6
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