Court: United States Bankruptcy Court, E.D. Michigan; October 27, 2014; Us Bankruptcy; United States Bankruptcy Court
Defendant’s motion for summary judgment on grounds of judicial estoppel and lack of standing has been granted by the Court, resulting in the dismissal of Plaintiff Brandon Barefield’s complaint without prejudice. Barefield, an employee of Hanover Insurance Company since May 2012, was terminated on February 28, 2013. He filed for Chapter 7 bankruptcy on June 3, 2013, but did not disclose any claims against the Defendant as assets. Although his bankruptcy was initially closed on September 10, 2013, it was reopened and ultimately discharged on October 10, 2013. Barefield filed the discrimination lawsuit on March 25, 2014, alleging violations under Michigan law for discrimination based on disability and weight. The Court converted Defendant's motion from one for judgment on the pleadings to a motion for summary judgment due to the introduction of evidence outside the pleadings by both parties. The Court determined that there was no genuine dispute of material fact and that the Defendant was entitled to judgment as a matter of law, with the evidence viewed favorably towards Barefield.
Defendant contends that Plaintiff's complaint should be dismissed based on judicial estoppel, as Plaintiff did not disclose potential discrimination claims in his bankruptcy petition, referencing **White v. Wyndham Vacation Ownership, Inc.** as precedent. Alternatively, Defendant argues for dismissal due to Plaintiff's lack of standing, emphasizing that this issue must be addressed first. The crux of Defendant's argument is that the claims belong to the bankruptcy trustee, not Plaintiff, highlighting the importance of the real party in interest under **Federal Rule of Civil Procedure 17**. When a debtor files for bankruptcy, all property, including potential causes of action that arose prior to the bankruptcy, becomes part of the bankruptcy estate under **11 U.S.C. 541(a)(1)**. Therefore, the trustee, not the debtor, has the authority to pursue these claims, as established in **Bauer v. Commerce Union Bank** and further clarified in **Auday v. Wet Seal Retail, Inc.** For a trustee to abandon such claims, proper notice must be given to creditors, and any objections require a bankruptcy court hearing. The case of **Auday** serves as a pertinent example, where an employee was barred from bringing a discrimination claim post-bankruptcy filing because the claim belonged to the estate, affirming that absent abandonment, only the trustee has standing to sue.
Plaintiff's claims for disability and weight discrimination arose on the termination date, February 28, 2013, and became part of his bankruptcy estate upon filing for bankruptcy in June 2013. As a result, the Plaintiff is not the real party in interest for these claims, which can only be pursued by the bankruptcy trustee. Plaintiff’s argument that he was unaware of his claims against the Defendant during bankruptcy does not alter the fact that the claims accrued prior to the bankruptcy filing. The case law, particularly Auday, supports that all property, including tort claims that accrued before bankruptcy, transfers to the bankruptcy estate upon filing.
Although the Plaintiff is not the proper party to bring the claims, dismissal is not automatic. Federal Rule of Civil Procedure 17(a)(3) allows for a reasonable period for the real party in interest to ratify, join, or be substituted into the action before dismissal occurs. This rule aims to prevent forfeiture in cases of difficult determinations regarding the proper party or understandable mistakes. Courts have indicated that dismissal is appropriate when the proper party is clear and there is no understandable mistake. While the Sixth Circuit lacks extensive case law on this issue, existing precedents suggest that courts should consider substitution over dismissal but are not bound to do so if it would not further the goals of Rule 17(a)(3).
In Van Sickle v. Fifth Third Bancorp, the court dismissed the plaintiff's claims because the bankruptcy trustee was determined to be the real party in interest for pre-bankruptcy claims, and the plaintiff failed to demonstrate an excusable mistake that would allow for the application of Rule 17(a)(3). Similarly, in Rodriguez v. Mustang Mfg. Co., dismissal occurred because two years had elapsed since the plaintiff's bankruptcy was closed, and the plaintiff made no reasonable mistake in pursuing the claims under his name despite clear law indicating the trustee’s role. Courts typically allow for trustee substitution instead of dismissal when a statute of limitations would bar the trustee from later pursuing the claim. In Auday II, the court ruled against dismissal to prevent unfairly precluding the trustee from claiming the plaintiff's rights, which could harm creditors and allow defendants to escape liability. In the present case, the court concluded that dismissal, rather than substitution, was appropriate since the statute of limitations would not impede the trustee's ability to act, and the determination of the proper plaintiff was clear. The court found no binding authority to support the plaintiff's standing to sue, as multiple Sixth Circuit cases established the trustee as the real party in interest. Consequently, the court granted the defendant’s motion for summary judgment and dismissed the complaint without prejudice, noting that the issue of judicial estoppel would not be addressed since the real party in interest question was a threshold matter.
