The Bankruptcy Code provides that a debtor is required to file with the bankruptcy, among other things, “a list of [its] creditors,” a “schedule of [its] assets and liabilities,” and “a statement of [its] financial affairs.” With the filing of its schedules, the debtor asserts a position with respect to its assets, liabilities, and financial affairs, which is relied on by the bankruptcy court, the debtor’s creditors, and the other parties in interest. Accordingly, various circuit courts have recognized that “the success of our bankruptcy laws requires a debtor’s full and honest disclosure,” and that there needs to be “necessary incentive [for the debtors] to provide the bankruptcy court with a truthful disclosure of the debtors’ assets.” Courts employed have refused to allow a debtor “to back-up, re-open the bankruptcy case, and amend his bankruptcy filings” under the equitable doctrine of judicial estoppel.
Courts have applied judicial estoppel, in bankruptcy cases, to bar a debtor from pursuing a different position later in the bankruptcy proceeding; similarly, courts apply judicial estoppel to bar a litigation trustee to the same effect. Courts have reasoned that the doctrine of judicial estoppel protects the integrity of the judicial system, not the litigants; therefore, numerous courts have concluded that “[w]hile privity and/or detrimental reliance are often present in judicial estoppel cases, they are not required.”
This Article discusses the application of the equitable doctrine of judicial estoppel to bar a litigation trust from asserting a different position made in prior bankruptcy proceedings and its general implications. Part I analyzes the doctrine of judicial estoppel generally. Part II discusses the doctrine of judicial estoppel in the bankruptcy context and focuses on a recent Second Circuit decision that applies the doctrine to bar a litigation trust’s claim. Finally, Part III concludes by identifying implications for parties involved in bankruptcy proceedings.