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Cloud v. Northrop Grumman Corp.11/12/1998
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Although the decisions in the initial judicial estoppel cases in the bankruptcy context were all equally explainable as instances of application of res judicata (inasmuch as they all concerned lenders whose claims had previously been adjudicated in the bankruptcy proceedings), subsequent cases extended the judicial estoppel concept beyond the scope of defendants who were previously creditors of the bankruptcy estate. Ryan Operations G.P. v. Santiam-Midwest Lumber Co. (3rd Cir. 1996) 81 F.3d 355, for example, came from the same Circuit that decided Oneida. Ryan considered whether a "privity" requirement was included in "our newly articulated doctrine of judicial estoppel." (Id. at p. 359.) Although the Ryan court noted that "we have never applied the doctrine of judicial estoppel for the benefit of parties who were not involved in the prior judicial proceeding," it also noted that "we have never expressly limited the doctrine's applicability to situations in which a litigant asserts an inconsistent position against the same party or its privy." (Ibid.)
The Ryan court concluded that since judicial estoppel "`is intended to protect the courts rather than the litigants,'" it would adopt the "majority view" that "privity" is not required for the application of judicial estoppel. (Ryan, supra, 81 F.3d at p. 360.) Hence Ryan determined that judicial estoppel could potentially apply to bar a subsequent suit against a non-creditor (whose rights therefore had not previously been adjudicated in the bankruptcy proceeding) if the claim against the non-creditor had not been scheduled in the bankruptcy. Ryan thus found that judicial estoppel could bar a claim even where res judicata could not apply, although the Ryan court went on to reject the specific claim of judicial estoppel raised in that case.
In International Engine Parts, Inc. v. Feddersen and Co. (1998) 64 Cal.App.4th 345, the court applied the theory of judicial estoppel to bar suit against a party who had not been a bankruptcy creditor and hence had not previously had its rights and obligations adjudicated. In International Engine, the debtor failed to schedule a claim against its accountants, who were not creditors of the bankruptcy estate. The trial court granted summary judgment on grounds of judicial estoppel. The Court of Appeal stated that " s the primary purpose of the doctrine of judicial estoppel is not to protect the litigants but to protect the integrity of the judiciary, the doctrine does not require reliance or prejudice before it may be invoked" (id. at p. 351) and " ecause it is intended to protect the integrity of the judicial process, it is an equitable doctrine invoked by a court at its discretion." (Id. at p.350.) The court then affirmed the summary judgment on grounds of judicial estoppel notwithstanding that the accounting firm had not been a party to the bankruptcy, and hence that there was no basis for a res judicata finding.
Cases such as Ryan and International Engine can thus be cited as authority for the proposition that judicial estoppel can be applied to bar a claim beyond the reaches of res judicata and can preclude suit even against a party whose legal liabilities have never previously been determined, that the doctrine is intended to protect the judiciary without regard to the rights of litigants, that it may be invoked at the discretion of the trial court, that it requires neither reliance nor prejudice, and that it may bar a claim without regard to the rights of the creditors of the bankruptcy estate involved -- in other words, that it is a very powerful and expansive doctrine indeed.
c. Retrenchment and limitation of the judicial estoppel theory.
Although the Ryan co
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