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Whitacre Partnership v. Biosignia2/6/2004
ubvert the truth because it encourages litigants to tell the truth in the first place by "`rais the cost of lying.'" Int'l Union, UMW v. Marrowbone Dev. Co., 232 F.3d 383, 391 (4th Cir. 2000) (quoting Chaveriat v. Williams Pipe Line Co., 11 F.3d 1420, 1427-28 (7th Cir. 1993)). Third, the doctrine expressly guides our trial courts to consider whether a party's prior position was innocently asserted. We follow the lead of the United States Supreme Court in stressing that "it may be appropriate to resist application of judicial estoppel `when a party's prior position was based on inadvertence or mistake.'" New Hampshire, 532 U.S. at 753, 149 L.Ed. 2d at 979 (quoting John S. Clark Co., 65 F.3d at 29); see also Ryan Operations, 81 F.3d at 364 (court unwilling to administer "strong medicine" of judicial estoppel "to treat careless or inadvertent nondisclosures"). Thus, while we do not impose any particular scienter requirement on what must remain an inherently flexible equitable doctrine, we remind our trial courts to carefully balance the equities in applying judicial estoppel, and emphasize that a reasonable justification for a party's change in position may militate against its application in a particular case. See, e.g., Morris v. California, 966 F.2d at 453; In re Corey, 892 F.2d 829, 836 (9th Cir. 1989), cert. denied sub nom. Kulalani, Ltd. v. Corey, 498 U.S. 815, 112 L.Ed. 2d 31 (1990).
Plaintiff next argues that Whitacre was acting in his individual capacity, and not as a general partner of Whitacre Partnership, when he filed his bankruptcy petition and gave testimony at the 341 meeting with the bankruptcy trustee and his creditors. According to plaintiff, North Carolina partnership law precludes an estoppel against Whitacre Partnership based on representations made by Whitacre during the bankruptcy proceeding. Because Whitacre was not "apparently carrying on in the usual way the business of the partnership of which he is a member," plaintiff argues, his representations at the bankruptcy proceeding cannot "bind the partnership." N.C.G.S. § 5939(a) (2003). The Court of Appeals found this argument persuasive, holding that summary judgment was precluded because a genuine issue of material fact remained as to whether Whitacre's statements at the 341 hearing were "`for the purposes of [the partnership's] business,' and were made for `carrying on in the usual way the business of the partnership' so as to bind the partnership." Whitacre P'ship, 153 N.C. App. at 615, 574 S.E.2d at 480 (quoting N.C.G.S. § 59-39(a) (2001)).
The issue in the instant case, however, is not whether Whitacre was acting within his authority as a general partner of Whitacre Partnership when he represented to the bankruptcy court that Whitacre Partnership's shares could never vest. Rather, the issue is whether plaintiff can be judicially estopped from asserting a position in one legal proceeding contradictory to representations made by its general partners in an earlier legal proceeding. This issue, in turn, raises two additional questions: (1) whether judicial estoppel may be applied not just to the parties to a prior action but also to their "privies" and (2) whether plaintiff and its general partners are in "privity" with one another in this case. Plaintiff suggests that under New Hampshire v. Maine, judicial estoppel applies only against a "party" who asserts inconsistent positions in subsequent legal proceedings. Because Whitacre Partnership was a not a party to the Whitacres' bankruptcy proceeding, plaintiff appears to argue, Whitacre Partnership cannot be judicially estopped on the basis of the Whitacres' representations in that proceeding. Plaintiff bases this argument on its observation that the United States Supreme Court
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