United States District Court, E.D. Pennsylvania
WILLARD E. BARTEL Administrator for Estate of William A. Lawrence, ET AL., Plaintiffs,
A-C PRODUCT LIABILITY TRUST, ET AL., Defendants. E.D. PA Civil Action No. 5:11-45628-ER
EDUARDO C. ROBRENO, J.
case was transferred in August 2011 from the United State
District Court for the Northern District of Ohio to the
United States District Court for the Eastern District of
Pennsylvania, where it became part of the consolidated
asbestos products liability multidistrict litigation (MDL
875) . The case was assigned to the Court's maritime
e. Bartel and David E. Peebles ("Plaintiffs"),
Administrators of the Estate of William A. Lawrence, allege
that Mr. Lawrence ("Decedent" or "Mr.
Lawrence") was exposed to asbestos while working aboard
various ships. Plaintiffs assert that Decedent developed an
asbestos-related illness as a result of his exposure to
asbestos aboard those ships.
reasons that follow, the Court will deny Defendants'
August 28 1996, Mr. Lawrence brought claims for non-malignant
asbestos-related disease (now pursued by Plaintiffs after the
death of Mr. Lawrence) against various defendants, including
shipowners represented by Thompson Hine LLP
("Defendants" or the "Thompson Hine
Shipowners"). A little over two months later, on
December 11, 1996, Mr. Lawrence filed for bankruptcy pursuant
to Chapter 7 of the bankruptcy code, without listing his
asbestos claims as an asset in the bankruptcy filing (the
"First Bankruptcy"). By way of Order dated March
14, 1997, Judge Charles Weiner dismissed those claims
administratively, leaving open the possibility for the action
to be pursued at a later, unspecified date. Mr. Lawrence was
discharged from bankruptcy in the First Bankruptcy action
very shortly thereafter, on March 27, 1997. Approximately
eight years later, on February 1, 2005, Mr. Lawrence again
filed for bankruptcy pursuant to Chapter 7 of the bankruptcy
code, again without listing his asbestos claims as an asset
in that bankruptcy filing (the "Second
Bankruptcy"). He was discharged from bankruptcy in the
Second Bankruptcy action on May 9, 2005. Approximately four
years later, on or about December 8, 2009, Mr. Lawrence was
diagnosed with colon cancer, giving rise to claims for a
malignant asbestos-related disease. On August 1, 2011, the
MDL Court reinstated the asbestos action (now being pursued
by Plaintiffs), which had been dismissed by Judge Weiner in
1996. A summary of this timeline of events is as follows:
■ August 28, 1996 - Asbestos action filed
■ December 11, 1996 - First Bankruptcy action filed
■ March 14, 1997 - Asbestos action administratively
■ March 27, 1997 - First Bankruptcy action discharge
■ February 1, 2005 - Second Bankruptcy action filed
■ May 9, 2005 - Second Bankruptcy action discharge
■ December 8, 2009 - Cancer diagnosis (malignancy
■ August 2011 - Asbestos action reinstated by MDL Court
Thompson Hine Shipowners have moved for summary judgment,
arguing that (1) Plaintiff's claims are barred by way of
judicial estoppel because Plaintiff failed to disclose the
asbestos action as an asset in his bankruptcy filings, and
(2) Plaintiff does not have standing to pursue the asbestos
action because it is now owned by one (or both) of the
Summary Judgment Standard
judgment is appropriate if there is no genuine dispute as to
any material fact and the moving party is entitled to
judgment as a matter of law. Fed.R.Civ.P. 56(a). "A
motion for summary judgment will not be defeated by 'the
mere existence' of some disputed facts, but will be
denied when there is a genuine issue of material fact."
Am. Eagle Outfitters v. Lyle & Scott Ltd., 584
F.3d 575, 581 (3d Cir. 2009) (quoting Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 247-248 (1986)).
is "material" if proof of its existence or
non-existence might affect the outcome of the litigation, and
a dispute is "genuine" if "the evidence is
such that a reasonable jury could return a verdict for the
nonmoving party." Anderson, 4 77 U.S. at 248.
undertaking this analysis, the court views the facts in the
light most favorable to the non-moving party. "After
making all reasonable inferences in the nonmoving party's
favor, there is a genuine issue of material fact if a
reasonable jury could find for the nonmoving party."
Pignataro v. Port Auth. of H.Y. & N.J., 593 F.3d
265, 268 (3d Cir. 2010) (citing Reliance Ins. Co. v.
Moessner, 121 F.3d 895, 900 (3d Cir. 1997)) . While the
moving party bears the initial burden of showing the absence
of a genuine issue of material fact, meeting this obligation
shifts the burden to the non-moving party who must "set
forth specific facts showing that there is a genuine issue
for trial." Anderson, 477 U.S. at 250.
The Applicable Law
parties appear to assume that Defendants' legal arguments
regarding "judicial estoppel" and the "real
party in interest" are matters of federal law that
should be decided in the first instance by the Court. The
Court agrees with this approach. See Ryan Operations G.P.
v. Santiam-Midwest Lumber Co., 81 F.3d 355, 358
(3d Cir. 1996). In matters of federal law, the MDL
transferee court applies the law of the circuit where it
sits, which in this case is the law of the U.S. Court of
Appeals for the Third Circuit. Various Plaintiffs v.
Various Defendants ("Oil Field Cases"), 673
F.Supp.2d 358, 362-63 (E.D. Pa. 2009) (Robreno, J.).
Therefore, the Court will apply Third Circuit law in deciding
the issues raised by Defendants' motion.
THE PARTIES' ARGUMENTS
contend that all of Plaintiff's claims are barred on
grounds of judicial estoppel. Specifically, they contend that
Mr. Lawrence took irreconcilably inconsistent positions in
his bankruptcy proceedings and the instant proceeding.
Defendants state that Mr. Lawrence concealed the existence of
his asbestos claims when filing for bankruptcy (both times)
by not reporting them as pending or likely claims on
Schedule B ("Personal Property"), while
simultaneously asserting such claims in the current asbestos
action (which was filed less than three months
before the filing of the bankruptcy action). They further
assert that a finding of bad faith is warranted because Mr.
Lawrence had knowledge of the asbestos claims each time that
he filed for bankruptcy and had a motive to conceal the
claims from the Bankruptcy Court (i.e., to keep any proceeds
of the claims while reducing the amount of assets available
for distribution amongst the creditors - a motive Defendants
assert is common to nearly all debtors in
Defendants contend that no lesser remedy is warranted because
the sanction of barring the non-malignancy asbestos claims is
necessary to (1) keep Plaintiffs from profiting from the
omission and (2) preserve the integrity of the bankruptcy
clearly distinguishing between his non-malignancy claims and
his malignancy claims - and without explicitly acknowledging
that there were two separate bankruptcy actions pending
during the course of Mr. Lawrence's asbestos action -
Plaintiffs contend that the asbestos claims are not barred on
grounds of judicial estoppel. First, Plaintiffs contend that
Mr. Lawrence did not take inconsistent positions between his
bankruptcy filing(s) and the present asbestos action because
(1} his non-malignancy claim was dismissed by Judge
Weiner's May 1996 dismissal order (indirectly, by way of
the March 1997 dismissal order, which Plaintiffs appear to
suggest was made retroactive such that Plaintiff's case
was already dismissed in August of 19 96 when it was filed),
and (2) his colon cancer diagnosis was not made (and,
therefore, his colon cancer claims did not arise) until after
his bankruptcy action(s) had been closed, such that he was
not required to list these claims as assets in his bankruptcy
action(s). Moreover, Plaintiffs argue that even if Mr.
Lawrence should have identified the asbestos claims, the
failure to do so was a good faith mistake such that judicial
estoppel is not warranted.
Plaintiffs assert that Defendants bear the burden of
establishing bad faith, but have no evidence that Mr.
Lawrence acted in bad faith when he did not list his asbestos
claims as an asset in his bankruptcy filing(s).
Real Party in Interest/Standing
All Claims (Non-Malignant and Malignant Claims)
alternative, Defendants contend that Plaintiffs have no right
to pursue the claims (either the non-malignancy claims or the
malignancy claims) because the claims no longer belong to
Plaintiffs and instead belong to the bankruptcy trustee.
Specifically, Defendants argue that, even though Mr. Lawrence
did not report these asbestos claims as assets in the
bankruptcy filings, as required by 11 U.S.C. §
541(a)(1), those claims automatically became part of the
corresponding bankruptcy estate(s) when the bankruptcy
petitions were filed. As a result, they assert that only the
bankruptcy trustees can administer the claims.
also argue that, because Mr. Lawrence did not reveal any of
the asbestos claims, such that they were never properly
scheduled as assets in either of the bankruptcy actions, the
trustees were incapable of passing those claims back to Mr.
Lawrence through abandonment of any remaining assets not
administered (as would normally happen pursuant to 11 U.S.C.
§ 554). As such, Defendants assert that, even though the
bankruptcy actions have both closed, the rights to the
asbestos claims did not revert back to Mr. Lawrence upon
those closures and instead remain with the trustee(s), such
that Plaintiffs may not now pursue them.
respect to the non-malignancy claims, Plaintiffs assert that,
because these claims were "uncertain" during his
bankruptcy, they were never assets of the bankruptcy estate
(regardless of whether or not they were disclosed).
Therefore, according to Plaintiffs, they (and not the
bankruptcy trustee) are the proper party to pursue these
respect to the malignancy claims. Plaintiffs assert that,
because the colon cancer diagnosis was not made (and,
therefore, the colon cancer claims did not arise) until after
Mr. Lawrence was discharged from bankruptcy, they were never
assets of the bankruptcy estate - and Mr. Lawrence could not
have been required to disclose them. In short, Plaintiffs
argue that the bankruptcy estate could not have an asset that
was not in existence at the time of the bankruptcy.
respect to the malignancy claims, Defendants also assert, as
another alternative, that Plaintiffs' claims for
malignant asbestos-related disease (based upon his diagnosis
of colon cancer, which occurred after both the First and
Second Bankruptcy actions had been closed) are property of
the estate, such that Plaintiffs also lack standing to pursue
these claims -despite the fact that the diagnosis of colon
cancer did not occur until after Mr. Lawrence's
bankruptcy actions were filed -because those claims are
sufficiently rooted in his pre- bankruptcy past to constitute
property of the estate.Specifically, Defendants argue that,
under Segal, any new claim that is
"sufficiently rooted in the pre-bankruptcy past"
should be included in the debtor's bankruptcy estate, 382
U.S. at 380, and that, since the asbestos exposures (and the
non-malignant asbestos injury) arose pre-bankruptcy, any
injuries arising therefrom (such as Mr. Lawrence's colon
cancer claims) should be considered part of the bankruptcy
estate because they are "sufficiently rooted in the
assert that the claims for malignant asbestos-related disease
(based upon the post-petition diagnosis of colon cancer) are
not property of the estate - and never were - because they
did not arise until after Mr. Lawrence had been discharged
from bankruptcy. In support of this argument, Plaintiffs cite
to this MDL's court's decision, Nelson v. A.W.
Chesterton, 2011 WL 6016990 (E.D. Pa. Oct. 27, 2011)
(Robreno, J.), holding that maritime law follows the
"two-disease rule" such that Mr. Lawrence's
colon cancer diagnosis gave rise to a malignant disease that
constitutes a second and separate cause of action from that
initially filed for his non-malignant asbestos-related
disease. As such, Plaintiffs seems to suggest that, even if
the Court should determine that the non-malignancy-claims are
property of the bankruptcy estate that Plaintiffs are now
barred from pursuing, the malignancy claims (for colon
cancer) are not property of the estate (and never were), such
that Plaintiffs may still pursue those claims free and clear
of any debts not fully paid to creditors in the bankruptcy
bankruptcy code requires debtors seeking benefits under its
terms to schedule, for the benefit of creditors, all his or
her interests and property rights. Oneida Motor Freight,
Inc. v. United Jersey Bank, 848 F.2d 414, 416 (3d Cir.
1988); 11 U.S.C. §§ 521, 1125. This duty of
disclosure includes not only pending lawsuits or lawsuits the
debtor intends to bring, but even any potential and likely
causes of action. See Krystal Cadillac-Oldsmobile GMC
Truck, Inc. v. Gen. Motors Corp., 337 F.3d 314, 322 (3d
Cir. 2003); Oneida, 848 F.2d at 417 (providing that
*[i]t has been specifically held that a debtor must disclose
any litigation likely to arise in a non-bankruptcy
contest"). However, debtors are not required to list
"every 'hypothetical, ' 'tenuous, ' or
'fanciful' claim on an asset disclosure form."
Freedom Med., Inc. v. Gillespie, No. 06-3195, 2013
WL 2292023, at *23 (E.D. Pa. May 23, 2013) (quoting
Krystal Cadillac, 337 F.3d at 323).
the debtor has filed his bankruptcy petition, the bankruptcy
estate - which in a Chapter 7 case is controlled by the
trustee - "encompasses everything that the debtor owns
upon filing a petition, as well as any derivative rights,
such as property interests the estate acquires after the case
commences." In re O'Dowd, 233 F.3d 197, 202
(3d Cir. 2000). "While a bankruptcy case is pending, it
is the trustee, and not the debtor, who has the capacity to
pursue the debtor's claims." In re Kane, 62
8 F.3d at 63 7 (internal quotation marks and citations
omitted). Additionally, "[p]ursuant to 11 U.S.C. §
554(d), a cause of action which a debtor fails to schedule,
remains property of the estate because it was not abandoned
and not administered." Allston-Wilson v.
Philadelphia Newspapers, Inc., No. 05-4056, 2006 WL
1050281, at *i (E.D. Pa. Apr. 20, 2006); see also In
re Kane, 628 F.3d at 637 ("an asset must be properly
scheduled in order to pass to the debtor through abandonment
under 11 U.S.C. § 554") (quoting Hutchins v.
IRS, 67 F.3d 40, 43 (3d Cir. 1995)).
the only interests that a bankruptcy estate owns are those
that a plaintiff has at the time the petition is filed.
In re O'Dowd, 233 F.3d 197, 202 (3d Cir. 2000)
(concluding that the bankruptcy "estate
encompasses everything that the debtor owns upon
filing a petition") (emphasis added); 11 U.S.C. §
541(a)(1). However, any new, post-petition interest (such as
a legal claim) that is "sufficiently rooted in the
pre-bankruptcy past" can also constitute part of the
debtor's bankruptcy estate. See Segal v.
Rochelle, 382 U.S. 375 (1966).
estoppel is a "doctrine that seeks to prevent a litigant
from asserting a position inconsistent with one that she has
previously asserted in the same or in a previous
proceeding." Ryan Operations G.P. v. Santiam-Midwest
Lumber Co., 81 F.3d 355, 358 (3d Cir. 1996) (internal
quotation marks and citations omitted). At the heart of
judicial estoppel is the idea that "absent any good
explanation, a party should not be allowed to gain an
advantage by litigation on one theory, and then seek
an inconsistent advantage by pursuing an incompatible
theory." Id. (quoting 18 Charles A. Wright,
Arthur R. Miller & Edward H. Cooper, Federal Practice
and Procedure § 4477 (1981), p. 782). However, this
doctrine is "not intended to eliminate all
inconsistencies no matter how slight or inadvertent they may
be." Id. It "should only be applied to
avoid a miscarriage of justice" and "is only
appropriate when the inconsistent positions are tantamount to
a knowing misrepresentation to or even fraud on the
court." Krystal Cadillac, 337 F.3d at 319, 324
(internal quotation marks and citations omitted). The
"doctrine of judicial estoppel does not apply 'when
the prior position was taken because of a good faith mistake
rather than as part of a ...