                                                                                                                           Opinions of the United
1996 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


4-15-1996

Ryan Operations GP v. Santiam-Midwest
Precedential or Non-Precedential:

Docket 95-3250




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                 UNITED STATES COURT OF APPEALS
                     FOR THE THIRD CIRCUIT

                           ----------
                          No. 95-3250
                           ----------

      RYAN OPERATIONS G.P., a Virginia General Partnership
         and NVR, L.P., a Virginia Limited Partnership,
      on behalf of its division, NVR BUILDING PRODUCTS CO.

                                 v.

       SANTIAM-MIDWEST LUMBER CO., an Oregon Corporation;
        FURMAN LUMBER, INC., a Massachusetts Corporation;
            BRIGHT WOOD CORP., an Oregon Corporation


                       BRIGHT WOOD CORP.,
                                        Third Party Plaintiff

                                 v.

         FORREST PAINT CO., INC., an Oregon Corporation;
        GUARDSMAN PRODUCTS, INC., a Delaware Corporation,
                                        Third Party Defendants


                         Ryan Operations G.P. and NVR, L.P. and
                         its division, NVR Building Products Co.,
                                        Appellants

                           ----------

         On Appeal from the United States District Court
            for the Western District of Pennsylvania
                     (D.C. Civ. No. 92-2480)

                           ----------

                    Argued: December 4, 1995

            BEFORE: SLOVITER, Chief Judge, STAPLETON
                  and SAROKIN, Circuit Judges

                           ----------

                 (Opinion filed April 15, 1995)

Robert B. Cave, Esq.
David G. Leitch, Esq. (ARGUED)


                                 1
Hogan & Hartson
555 13th Street, N.W.
Washington, DC 20004-1109
Richard F. Rinaldo, Esq.
Meyer, Unkovic & Scott
1300 Oliver Building
Pittsburgh, PA 15222

                    Attorneys for Appellants,
                    Ryan Operations G.P.;
                    NVR LP, and its division
                    NVR Building Products Co.


Stephen J. Poljak, Esq.
Anstandig, Levicoff, McDyer,
     Burdette & Yurcas
707 Grant Street
600 Gulf Tower
Pittsburgh, PA 15219

                    Attorney for Appellees,
                    Santiam-Midwest Lumber Co.


Louis C. Long, Esq.
Meyer, Darragh, Buckler,
     Beberick & Eck
2000 The Frick Building
Pittsburgh, PA 15219

                    Attorney for Appellees,
                    Furman Lumber Inc.


Louis C. Long, Esq.
Meyer, Darragh, Buckler,
     Beberick & Eck
2000 The Frick Building
Pittsburgh, PA 15219

Michael K. Atkinson, Esq.
Thomas M. Buchanan, Esq.
Michael L. Sibarium, Esq. (ARGUED)
Winston & Strawn
1400 L Street, N.W.
Washington, DC 20005

                    Attorneys for Third Party Plaintiff,
                    Bright Wood Corp.



                               2
Randy K. Hareza, Esq.
Burns, White & Hickton
120 Fifth Avenue
Suite 2400
Pittsburgh, PA 15222-3001

                     Attorney for Third Party Defendant,
                     Forrest Paint Co. Inc.


Norbert F. Kugele, Esq.
Warner, Norcross & Judd
111 Lyon Street, N.W.
900 Old Kent Building
Grand Rapids, MI 49503

                     Attorney for Third Party Defendant,
                     Guardsman Products Inc.


                            ----------

                       OPINION OF THE COURT

                            ----------

SAROKIN, Circuit Judge:


     This case raises issues concerning the application and scope

of the doctrine of judicial estoppel.    The district court, upon

recommendation of a United States Magistrate Judge, granted

summary judgment in favor of defendants on the theory that

plaintiff, having failed to disclose its claims against

defendants as a contingent asset in its Chapter 11 bankruptcy

proceedings, was judicially estopped from seeking to recover on

those claims.   For the reasons that follow, we will reverse.

                                I.




                                3
     Ryan Operations, plaintiff in this matter1, is in the

business of constructing homes.       This action arises out of a

commercial dispute between Ryan and the manufacturer and

suppliers of primed Fingerjointed Ponderosa Pine wood trim that

Ryan purchased between January 1988 and June 1991 and used in the

construction of several thousand new homes.       Ryan purchased the

wood trim from Santiam-Midwest Lumber Co. ("Santiam") from

January 1988 to March 1990, and from Furman Lumber, Inc. from

March 1990 to June 1991.   The trim was manufactured by Bright

Wood Corporation.

     In July 1989, Ryan began receiving complaints from

homeowners that the paint and underlying primer were peeling off

the Ponderosa Pine trim on their new homes.      Ryan informed

Santiam of the problem, and Santiam suggested that Ryan switch to

a different brand of primer.   Ryan did so, but the problems

continued and the complaints increased.       As a result, Ryan

instituted a consumer repair program in the fall of 1991,

pursuant to which it has repainted and/or replaced the wood trim

on hundreds of houses.   Ryan is currently engaged in the costly

process of replacing the trim on Ryan homes in several states.

     In April 1992, Ryan filed a voluntary petition for relief

under Chapter 11 of the Bankruptcy Code.      In re NVR L.P., No. 92-

1
Co-plaintiff in this matter is NVR, L.P., a limited partnership
suing on behalf of its division NVR Building Products Company.
Through a merger or series of mergers, a corporation entitled
NVR, Inc. has become the successor in interest of NVR, L.P. and
the parent corporation of NVR Homes, Inc. NVR Homes, Inc., also
through a merger, has become the successor in interest of Ryan
Operations. For simplicity's sake, we will refer to plaintiffs
in this matter simply as "Ryan" or "plaintiff."

                                  4
11704-T (Bankr. E.D. Va. Apr. 6, 1992).    The following month it

filed its Schedule of Assets and Liabilities and Statement of

Financial Affairs pursuant to Bankruptcy Code § 521.    Although

the Code requires the debtor to disclose all claims and causes of

actions as contingent assets, Ryan did not mention any potential

claims that it might have from the allegedly defective Ponderosa

Pine trim.

     In June 1992, the bankruptcy court entered an order

authorizing Ryan to retain counsel to represent Ryan in lawsuits

by and against it in the ordinary course of business.    Among the

"Routine Claims" that Ryan listed for the bankruptcy court were a

class of "homeowners claims," nonspecifically defined as claims

"by or against contractors or suppliers or relating to or arising

out of the provision of services or material to the Debtors."

App. 189-90.   The court authorized Ryan to pursue and/or defend

itself against such claims.

     Subsequently, in December 1992, while the bankruptcy

proceeding was still pending, Ryan filed suit in district court

against Bright Wood, Santiam and Furman Lumber, alleging various

breach of warranty claims arising out of the sale and manufacture

of the Ponderosa Pine trim and seeking to recover the costs

incurred in its consumer repair program.

     In July 1993, without ever having been specifically informed

of the pending lawsuit or the potential for recovery, the

bankruptcy court confirmed Ryan's reorganization plan.   Ryan

emerged from bankruptcy the following month.




                                5
     In September 1994, defendant Bright Wood moved for summary

judgment on judicial estoppel grounds, arguing that Ryan's

failure to inform the bankruptcy court of its warranty claims

against Bright Wood precluded Ryan from pursuing those claims in

the district court.   Santiam, Furman, and the third-party

defendants (who manufactured the primers used on the wood trim)

joined in Bright Wood's motion.       Upon recommendation of a United

States Magistrate Judge, the district court granted summary

judgment against Ryan on March 21, 1995, on the ground of

judicial estoppel alone.   From that ruling, Ryan appeals.

                                 II.

     The district court had jurisdiction pursuant to 28 U.S.C.

§1332(a)(1).   We have appellate jurisdiction pursuant to 28

U.S.C. § 1291.

                                 III.

     We exercise plenary review over the district court's order

granting summary judgment.     Mark v. Borough of Hatboro, 51 F.3d

1137, 1141 (3d Cir.), cert. denied, 116 S. Ct. 165 (1995).

                                 IV.

     Judicial estoppel, sometimes called the "doctrine against

the assertion of inconsistent positions," is a judge-made

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.      It is not intended to

eliminate all inconsistencies, however slight or inadvertent;

rather, it is designed to prevent litigants from "playing 'fast

and loose with the courts.'"    Scarano v. Central R. Co. of New


                                  6
Jersey, 203 F.2d 510, 513 (3d Cir. 1953)(citation omitted).    "The

basic principle . . . is 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."   18 Charles A. Wright, Arthur R. Miller

& Edward H. Cooper, Federal Practice and Procedure § 4477 (1981),

p.782.

     Ryan raises four issues regarding the scope and application

of judicial estoppel for our review: (1) whether the district

court erred in applying judicial estoppel at the request of one

who was neither a party to the prior proceeding nor in privity

with a party to that proceeding; (2) whether the district court

erred in applying judicial estoppel because Ryan derived no

benefit from its failure to disclose these potential claims in

the bankruptcy proceedings; (3) whether the district court erred

in concluding that Ryan's position in this lawsuit is

inconsistent with a position it took in the bankruptcy

proceedings; and (4) whether the application of judicial estoppel

in this case is inconsistent with principles of equity and

justice.   We will examine each in turn.

                                V.

     Both parties agree that federal law should govern our

disposition of this case, and we accept their agreement.2    Having

2
Judge Sarokin, the author of this opinion, would not accept the
agreement of the parties as to whether federal or state law
governs in this case, because he believes that the question must
be analyzed under the doctrine of Erie Railroad v. Tompkins, 304
U.S. 64 (1938), and that the parties cannot stipulate as to the
applicable law as they might in a choice-of-law situation. The

                                7
following comments are the opinion of Judge Sarokin, not the
court:    It is well established that federal courts sitting in
diversity must generally apply state substantive law and federal
procedural law. Erie, 304 U.S. 64. This doctrine is rooted in
the Constitution; the Supreme Court reasoned that "declar[ing]
substantive rules of common law" in diversity cases is "'an
unconstitutional assumption of powers by courts of the United
States.'" Erie, 304 U.S. at 78, 79; see also Charles A. Wright,
Arthur R. Miller & Edward H. Cooper, 19 Federal Practice and
Procedure § 4505. Because the question of whether federal or
state law should govern issues of judicial estoppel in diversity
cases is a question of the constitutional powers of the federal
courts, we cannot simply accept the parties' recommendation that
federal law governs without first ensuring that applying federal
law would be constitutional under the circumstances. We can
ensure that the application of federal law is constitutional in
one of two ways: (1) by determining, as I would, that the Erie
doctrine does not apply; or (2) by determining under Erie that
the law of judicial estoppel is procedural rather than
substantive in nature.
     Although I believe that judicial estoppel is substantive in
nature, I am persuaded by the reasoning of the Sixth Circuit in
Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 598 n.4 (6th Cir.
1982), and the Fourth Circuit in Allen v. Zurich Ins. Co., 667
F.2d 1162, 1167 n.4 (4th Cir. 1982), that Erie does not require
us to apply state law. The Erie doctrine is not absolute;
exceptions can be made where, as here, there are "affirmative
countervailing considerations" that implicate "strong federal
policy" considerations. Byrd v. Blue Ridge Rural Elec.
Cooperative, Inc., 356 U.S. 525, 537-38 (1958); see also AFN,
Inc. v. Schlott, Inc., 798 F. Supp. 219 (D.N.J. 1992). A federal
court's ability to protect itself from manipulation by litigants
should not vary according to the law of the state in which the
underlying dispute arose. I would therefore conclude that a
federal court sitting in diversity must apply federal law to
questions regarding the doctrine of judicial estoppel.
     There is an additional reason why I think it important to
reach this matter. This court has never addressed this issue
directly. While we have tended in the past to rely on federal
law of judicial estoppel in diversity cases, we have occasionally
applied state law or a combination of state and federal law.
Compare Scarano, 203 F.2d 510 (applying federal law) with Linan-
Faye Construction Co. v. Housing Auth. of Camden, 49 F.3d 915 (3d
Cir. 1995)(applying New Jersey law) and with Gleason v. United
States, 458 F.2d 171 (3d Cir. 1972)(applying both federal and
state law). In some cases, there may be no relevant difference
in terms of result between federal and state law of judicial
estoppel. In other cases, however, the decision as to which law
to apply may be dispositive of the outcome. As a result, I
believe that we should take this opportunity to clarify the law


                               8
determined that federal law controls, we turn to the first issue

presented for our review: whether the doctrine of judicial

estoppel is available only to those who were parties or in

privity with a party to the prior proceeding.   Ryan argues that

the doctrine as expounded in this circuit has a privity

requirement which prevents its being enforced by "strangers to

the earlier litigation."   Appellant's Br. at 29.   As it is

undisputed that none of the defendants in the instant action was

a party to the bankruptcy proceeding, Ryan contends that the

district court erred in applying judicial estoppel for their

benefit.

     We first articulated the doctrine of judicial estoppel in

the seminal case of Scarano v. Central R. Co. of New Jersey, 203

F.2d 510 (3d Cir. 1953).   The plaintiff in that case, following a

work-related injury, sought damages from his employer on the

ground that he was completely incapacitated.    After winning a

damages award, he proceeded to sue his employer for reinstatement

under the terms of a collective bargaining agreement.     We

concluded that plaintiff was estopped from seeking reinstatement,

explaining our reasoning as follows:
     The 'estoppel' of which, for want of a more precise
     word, we here speak is but a particular limited
     application of what is sometimes said to be a general
     rule that "a party to litigation will not be permitted
     to assume inconsistent or mutually contradictory
     positions with respect to the same matter in the same
     or a successive series of suits."




of the circuit, especially since this issue has been properly
briefed and presented to us.


                                9
Id. at 512-13.   We expressly declined to decide "[w]hether the

correct doctrine is that broad," however; instead, we stated that

the
      rule we apply here need be and is no broader than this.
      A plaintiff who has obtained relief from an adversary
      by asserting and offering proof to support one position
      may not be heard later in the same court to contradict
      himself in an effort to establish against the same
      adversary a second claim inconsistent with his earlier
      contention.


Id. at 513 (emphasis added).
      Ryan argues that the language underlined above indicates our

intention to instill a privity requirement into our newly

articulated doctrine of judicial estoppel.   The above excerpts

make clear, however, that we did not hold that the doctrine was

limited to circumstances in which a party asserted incompatible

positions against the same adversary.   On the contrary, we

explicitly stated that we so articulated the rule because the

facts of the case did not require us to determine whether a

broader rule might apply in other circumstances.

      Ryan correctly points out that we have never applied the

doctrine of judicial estoppel for the benefit of parties who were

not involved in the prior judicial proceeding.     See, e.g.

Scarano, 203 F.2d 510; Oneida Motor Freight, Inc. v. United

Jersey Bank, 848 F.2d 414 (3d Cir.)(holding that plaintiff is

judicially estopped from asserting position in post-bankruptcy

proceeding against a bankruptcy creditor that is inconsistent

with position asserted in prior bankruptcy proceeding), cert.

denied, 488 U.S. 967 (1988); Fleck v. KDI Sylvan Pools, Inc., 981



                                10
F.2d 107 (3d Cir. 1992)(holding that plaintiffs who promised

bankruptcy court they would not seek recovery against debtor in

excess of insurance coverage are judicially estopped from

subsequently attempting to do so), cert. denied sub nom Doughboy

Recreational, Inc., Div. of Hoffinger Indus., Inc. v. Fleck, 507

U.S. 1005 (1993); Delgrosso v. Spang & Co., 903 F.2d 234 (3d Cir.

1990).   However, 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.

     The absence of an express rule notwithstanding, plaintiff

argues that language in Gleason v. United States, 458 F.2d 171

(3d Cir. 1972), reveals that privity is required.   The plaintiff

in that case filed a Workers' Compensation petition following his

exposure to radioactive material in a work-related accident,

alleging prospectively that he had suffered injury.   When injury

from the radiation actually materialized four years later,

plaintiff sued his employer for damages.   Although plaintiff

testified in deposition that he had not actually experienced an

injury at the time of the Workers' Compensation petition, the

trial court dismissed the case on statute of limitations grounds,

reasoning that plaintiff's Workers' Compensation petition

indicated that he knew about the injury well within the

limitations period.   On plaintiff's appeal, the employer argued

that plaintiff should be judicially estopped from relying on

deposition testimony which directly contradicted his Workers'

Compensation petition.




                                11
     In reaching our conclusion that judicial estoppel was

inappropriate under the circumstances, we noted that the doctrine

of judicial estoppel "has not always been applied, but has

usually been applied where the same parties are involved and

where one of the parties has changed his position or given

something of value relying on the statement of his opponent." Id.

at 175.   Ryan now argues that this language evidences a rule that

privity is required for the application of judicial estoppel.       We

disagree, for two reasons.     First, we neither stated a rule in

Gleason that these equitable characteristics were requirements

for the application of judicial estoppel nor rested our decision

on that basis.    Rather, our decision rested on our conclusion

that the plaintiff "did not play fast and loose with the courts

or with the defendants."    458 F.2d 176.   Second, although Gleason

did not attempt to distinguish between equitable estoppel and

judicial estoppel, we have since emphasized the importance of

that distinction and more clearly articulated the border between

the two doctrines.     See Oneida, 848 F.2d at 419. Ryan cannot now

extrapolate legal principles from any conflation of judicial and

equitable estoppel that may have existed prior to our

clarification of the distinction between the two.

     In addition, we note that the purpose of the judicial-

estoppel doctrine militates against the imposition of a privity

requirement.     Judicial estoppel "is intended to protect the

courts rather than the litigants."     Fleck v. KDI Sylvan Pools,

Inc., 981 F.2d 107, 121-22 (3d Cir. 1992).     As we explained in

Oneida,


                                  12
     [j]udicial estoppel looks to the connection between the
     litigant and the judicial system while equitable
     estoppel focuses on the relationship between the
     parties to the prior litigation.


Oneida, 848 F.2d 414, 419 (3d Cir. 1988).   Unlike equitable

estoppel, therefore, judicial estoppel does not require that the

party urging estoppel demonstrate that she believed or relied

upon the plaintiff's prior inconsistent statement.   Scarano, 203

F.2d at 512.   While privity and/or detrimental reliance are often

present in judicial estoppel cases, they are not required.

     Our conclusion that privity is not required for the

application of judicial estoppel accords with the majority view.

See Patriot Cinemas, Inc. v. General Cinema Corp., 834 F.2d 208,

214 (1st Cir. 1987)("harm to an opponent is not an invariable

prerequisite to judicial estoppel"); Edwards v. Aetna Life Ins.

Co., 690 F.2d 595, 598 (6th Cir. 1982)("judicial estoppel may be

applied even if detrimental reliance or privity does not exist");

Konstantinidis v. Chen, 626 F.2d 933, 937 (D.C. Cir. 1980)(same);

Total Petroleum, Inc. v. Davis, 822 F.2d 734, 737 n.6 (8th Cir.

1987)(judicial estoppel does not require reliance or prejudice,

because it seeks to protect the courts); Muellner v. Mars, Inc.,

714 F. Supp. 351, 356 (N.D. Ill. 1989).

     There are many instances in which the assertion of

inconsistent positions can work to the advantage of a party but

where there is no identity or relationship between those against

whom the claim (or defense) is asserted.    Where the contentions

are mutually exclusive, it is irrelevant that they are asserted

against diverse parties for the purposes of determining judicial


                                13
estoppel.    The integrity of the court is affronted by the

inconsistency notwithstanding the lack of identity of those

against whom it is asserted.

     The defendants in this case thus were not barred from

seeking judicial estoppel by the fact that they were not parties

to Ryan's bankruptcy proceeding.

                                VI.

     We reach the same conclusion with respect to Ryan's related

argument that "judicial estoppel should be applied only where the

party resisting it benefited from the statement."   Appellant's

Br. at 44.   Ryan contends that the district court erred in

applying judicial estoppel in this case because, by Ryan's own

estimation, Ryan did not benefit from its failure to disclose the

instant claims in the bankruptcy court.

     Putting aside for a moment the question of whether Ryan

benefitted from its nondisclosure, we begin by determining

whether as a general rule a party must have benefitted from her

prior position in order to be judicially estopped from

subsequently asserting an inconsistent one.   We readily conclude

that the doctrine of judicial estoppel in this circuit contains

no such requirement.3   We have noted on several occasions that

"application of the doctrine of judicial estoppel is particularly


3
We note that the Sixth and Seventh Circuits have reached the
opposite conclusion. See Edwards v. Aetna Life Ins. Co., 690
F.2d 595, 599 (6th Cir. 1982); Astor Chauffered Limousine Co. v.
Runnfeldt Investment Corp., 910 F.2d 1540, 1548 (7th cir.
1990)("The offense is not taking inconsistent positions so much
as it is winning, twice, on the basis of incompatible
positions.").


                                 14
appropriate in situations . . . where the party benefitted from

its original position."   Delgrosso v. Spang & Co., 903 F.2d 234,

242 (3d Cir.), cert. denied, 498 U.S. 967 (1990); Murray v.

Silberstein, 882 F.2d 61 (3d Cir. 1989).   In such cases, the

tribunal has acted in reliance on the party's initial assertion,

and thus the threat to the integrity of the judicial process from

subsequent assertion of an incompatible position is more

immediate.

     Stating that benefit to the party from its prior position

makes application of the doctrine "particularly appropriate,"

however, is not the equivalent of stating that such benefit is a

necessary precondition to application of the doctrine.    As we

stated in Lewandowski v. National Railroad Passenger Corp.

(Amtrak), 882 F.2d 815 (3d Cir. 1989), "the critical issue is

what the [party] contended in the underlying proceeding, rather

than what the jury found."   Id. at 819.   Whether the party sought

to be estopped benefitted from its earlier position or was

motivated to seek such a benefit may be relevant insofar as it

evidences an intent to play fast and loose with the courts.       It

is not, however, an independent requirement for application of

the doctrine of judicial estoppel.

                               VII.

     As judicial estoppel is intended to prevent parties from

playing fast and loose with the courts by asserting inconsistent

positions, any application of the doctrine must rest upon a

finding that the party against whom estoppel is sought asserted a

position inconsistent with one she previously asserted in a


                                15
judicial proceeding.   The third issue that Ryan raises on appeal

is whether Ryan has in fact asserted inconsistent positions

within the meaning of the judicial-estoppel doctrine.     This

entails a two-part inquiry: (1) is Ryan's present position

inconsistent with a position it asserted in its Chapter 11

proceedings; and (2) if so, did Ryan assert either or both of the

inconsistent positions in bad faith--i.e., with intent to play

fast and loose with the court.    Only if both prongs are satisfied

is judicial estoppel an appropriate remedy.

     The district court found that Ryan's failure to list its

potential claims arising from the Ponderosa Pine trim on its

schedule of assets in the Chapter 11 proceeding constituted a

statement that Ryan had no such claim, which the current lawsuit

contradicts.   Ryan contends that its present claims are not

inconsistent with any position it took in the bankruptcy

proceeding because it neither affirmatively represented that it

had no claim against defendants arising from the Ponderosa Pine

Trim situation nor misled the court with regard to the existence

and/or prosecution of those claims.

                                  A.

     As a preliminary matter, we will set forth the disclosure

requirements of the United States Bankruptcy Code in order to

place Ryan's alleged prior inconsistent statement in context. The

Code imposes on debtors an affirmative duty of full disclosure.

Section 521 requires the debtor to file with the court "a

schedule of assets and liabilities . . . and a statement of the

debtor's financial affairs."     11 U.S.C. § 521(1).   The schedule


                                  16
must disclose, inter alia, "contingent and unliquidated claims of

every nature" and provide an estimated value for each one.

Official Forms, Schedule B, App. 41.

     Once the bankruptcy proceeding is underway, the debtor may

not solicit approval of a plan of reorganization from a claim-

holder unless "at the time of or before such solicitation, there

is transmitted to such holder the plan or a summary of the plan,

and a written disclosure statement approved, after notice and a

hearing, by the court as containing adequate information."   11

U.S.C. § 1125(b). Adequate information is defined as
     information of a kind, and in sufficient detail, as far
     as is reasonably practicable in light of the nature and
     history of the debtor and the condition of the debtor's
     books and records, that would enable a hypothetical
     reasonable investor typical of holders of claims or
     interests of the relevant class to make an informed
     judgment about the plan . . . .


11 U.S.C. § 1125(a).

     These disclosure requirements are crucial to the effective

functioning of the federal bankruptcy system.   Because creditors

and the bankruptcy court rely heavily on the debtor's disclosure

statement in determining whether to approve a proposed

reorganization plan, the importance of full and honest disclosure

cannot be overstated.   See Oneida, 848 F.2d at 417-18.
                                B.

     It is undisputed that by failing to list its claims against

defendants on its § 521 schedule of assets, Ryan violated these

statutory duties of full disclosure.   However, this court has

expressly left open the question of whether such nondisclosure,



                                17
standing alone, can support a finding that a plaintiff has

asserted inconsistent positions within the meaning of the

judicial-estoppel doctrine.    Oneida Motor Freight, Inc. v. United

Jersey Bank, 848 F.2d 414, 419 (3d Cir. 1988)("[W]e stop short of

finding that . . . [plaintiff's] prior silence is equivalent to

an acknowledgment that it did not have a claim against the

bank.").4     We need not decide this issue here, and we decline to

do so, because we conclude that judicial estoppel would be

inappropriate in any event as there is no evidence that Ryan

acted in bad faith.

     Asserting inconsistent positions does not trigger the

application of judicial estoppel unless "intentional self-

contradiction is . . . used as a means of obtaining unfair

advantage."    Scarano, 203 F.2d at 513.   Thus, the doctrine of

4
In that case, as here, the plaintiff sought to pursue claims
that it had failed to disclose on its § 521 schedule of assets in
a prior bankruptcy proceeding. Unlike Ryan, however, the
plaintiff in Oneida had not only failed to disclose its potential
claim against a bank for $7.7 million as a contingent asset on
its § 521 schedule of assets and liabilities, but simultaneously
claimed the corresponding $7.7 million debt to the bank as a
liability on the same schedule. Because the plaintiff had
claimed the debt in the bankruptcy proceeding without disclosing
the potential offset, we found that the plaintiff's "current suit
speaks to a position clearly contrary to its Chapter 11 treatment
of the bank's claim as undisputed." Id. As a result, we
concluded that judicial estoppel was appropriate under the
circumstances, because "Oneida's failure to list its claim
against the bank worked in opposition to preservation of the
integrity of the system which the doctrine of judicial estoppel
seeks to protect." Id.
     In this case, Ryan did not treat the homeowners' claims
arising from the Ponderosa Pine trim debacle as undisputed; in
fact, it did not specifically mention those claims at all. As a
result, Oneida does not compel a conclusion that Ryan's
subsequent assertion of those claims was inconsistent with its
Chapter 11 treatment of them.

                                  18
judicial estoppel does not apply "when the prior position was

taken because of a good faith mistake rather than as part of a

scheme to mislead the court."    Konstantinidis v. Chen, 626 F.2d

933, 939 (D.C. Cir. 1980).     An inconsistent argument sufficient

to invoke judicial estoppel must be attributable to intentional

wrongdoing.   See Chaveriat v. Williams Pipe Line Co., 11 F.3d

1420, 1428 (7th Cir. 1993); see also Total Petroleum, Inc. v.

Davis, 822 F.2d 734 (8th Cir. 1987)(holding that the doctrine

only applies to deliberate inconsistencies that are "tantamount

to a knowing misrepresentation to or even fraud on the court.").

     Defendants contend that in a bankruptcy proceeding, a

debtor's failure to satisfy its statutory duty of full disclosure

gives rise to an inference of bad faith sufficient to satisfy the

requirements of the judicial-estoppel doctrine.     They rely for

support on our decision in Oneida, in which we applied judicial

estoppel without an express finding of intentional misconduct. In

reaching our conclusion that plaintiff's failure to list its

claims as assets in the underlying Chapter 11 proceeding

precluded it from asserting them in a post-bankruptcy proceeding,

we stated that "Oneida's failure to list its claim against the

bank worked in opposition to preservation of the integrity of the

judicial system which the doctrine of judicial estoppel seeks to

protect."   848 F.2d at 419.

     While we did not expressly analyze plaintiff's intent in

Oneida, we did not discard that analysis entirely in light of

plaintiff's affirmative duty of full disclosure under the

Bankruptcy Code.   On the contrary, there was ample evidence in


                                  19
the record from which an inference of deliberate manipulation

could be drawn.    Oneida had listed its $7.7 million debt to the

bank on its schedule of liabilities without mentioning the

possibility of an offset.    As a result, the creditors as a whole

had a skewed sense of Oneida's financial condition and no

knowledge of a claim that could inure to their benefit.     Whereas

the creditors may have been entitled to the full amount of any

recovery had they known about the claim in advance, the

reorganization plan that they approved without knowledge of the

claim limited their potential recovery to one-third of the

debtor's gross recovery.    848 F.2d at 416 n.1.   In addition, had

the bank known that Oneida would subsequently seek restitution of

the amount paid under the plan, it might well have voted against

approval of the plan.    848 F.2d at 418.   It is therefore clear

that Oneida had ample motive to conceal its claim.     Moreover, as

the gravamen of Oneida's case against the bank was that the

bank's actions were responsible for forcing Oneida into

bankruptcy, it is clear that Oneida had knowledge of this

potential claim at the time it filed for bankruptcy.     This

combination of knowledge of the claim and motive for concealment

in the face of an affirmative duty to disclose gave rise to an

inference of intent sufficient to satisfy the requirements of

judicial estoppel.

     In contrast to Oneida, there is no basis in this case for

inferring that Ryan deliberately asserted inconsistent positions

in order to gain advantage--i.e., that it played fast and loose

with the courts.     There is no evidence that the nondisclosure


                                  20
played any role in the confirmation of the plan or that

disclosure of the potential claims would have led to a different

result.   Although it may generally be reasonable to assume that a

debtor who fails to disclose a substantial asset in bankruptcy

proceedings gains an advantage, the undisputed facts weigh

against such an inference in this case.      First, Ryan's failure to

list the instant claims as contingent assets was offset by its

failure to list the corresponding claims of homeowners against

Ryan resulting from the allegedly defective wood trim as

liabilities.   As a result, the balance of assets and liabilities

before the court and creditors when the reorganization plan was

approved may have been unaffected by the failure to list the

claims as assets.     Compare Oneida, 848 F.2d at 418 (finding

debtor who listed amount owed to creditor as a liability in

bankruptcy proceeding without any mention of possible offset

judicially estopped from pursuing post-bankruptcy claim against

that creditor).     Second, pursuant to the reorganization plan,

creditors will receive 91 percent of any future recovery on the

Ponderosa Pine Trim claims, and will suffer 91 percent of the

loss if Ryan is unable to recover the expenses incurred in the

repair and replacement program from defendants.      Affidavit of

Bruce W. Gilchrist, App. 191-92.       Thus, it appears that Ryan

derived and intended no appreciable benefit from its

nondisclosure.    Compare Payless Wholesale Distributors, Inc. v.

Culver, 989 F.2d 570, 571 (1st Cir.)(applying judicial estoppel

upon finding that plaintiff intended to "[c]onceal [its] claims

[in bankruptcy proceeding]; get rid of [its] creditors on the


                                  21
cheap; and start over with a bundle of rights"), cert. denied,

114 S. Ct. 344 (1993).

     Nor do Ryan's actions subsequent to the filing of its § 521

schedule support a finding that it sought to conceal the claims

deliberately.   In an order modifying the automatic stay to allow

for litigation of "routine claims," the bankruptcy court

specifically authorized Ryan to pursue "(i) homeowner claims,

including, but not limited to, warranty claims, . . . [and] (ii)

claims by or against contractors or suppliers or relating to or

arising out of the provision of services or materials to the

Debtors . . . ."   Order (i) Modifying the Automatic Stay to Allow

Litigation of Routine Claims to Proceed, (ii) Authorizing Debtors

to Settle Routine Claims, and (iii) Authorizing Debtors to Pay

Settlement Amounts or Judgments of $15,000 or Less Relating to

Routine Claims, July 1, 1992, App. 218-19.    Upon receipt of this

authorization, Ryan filed the instant action during the pendency

of the bankruptcy proceedings, albeit in a different

jurisdiction.   Ryan then submitted fee requests to the bankruptcy

court detailing, among other things, counsel's work in the

Ponderosa Pine Trim litigation, which the bankruptcy court

reviewed and approved for payment.    App. 231-40.   Finally, the

reorganization plan that the court and creditors approved

authorized Ryan to retain and enforce claims against any entity

and to adjudicate homeowner claims.    Second Amended Joint Plan of

Reorganization, §§ 4.09 & 7.02, App. 86 & 92.    While none of

these facts standing alone is sufficient to substitute for

disclosure under § 521, in combination they preclude a finding


                                22
that Ryan deliberately concealed its claims against defendants

from the bankruptcy court or otherwise sought to "obtain . . .

unfair advantage."   Scarano, 203 F.2d at 513.5

     We note in addition that while plaintiff cites district

court decisions from various jurisdictions that support its

position,6 defendant cites no case in which a court held that

intent to mislead or deceive could be inferred from the mere fact

of nondisclosure, and we are aware of none.   We are persuaded,

however, that policy considerations militate against adopting a

rule that the requisite intent for judicial estoppel can be


5
 Defendants cite several district court cases from other
jurisdictions in support of their position that a debtor's
failure to disclose a claim as an asset in bankruptcy precludes
later assertion of that claim under the doctrine of judicial
estoppel. See Pako Corp. v. Citytrust, 109 B.R. 368 (D. Minn.
1989); In re Hoffman, 99 B.R. 929 (N.D. Iowa 1989); In re Louden,
106 B.R. 109 (E.D. Ky. 1989); In re Galerie des Monnaies, 62 B.R.
224 (S.D.N.Y. 1986), aff'd, 1986 WL 6230 (S.D.N.Y. 1986); In re
Caro Area Services for the Handicapped, 53 B.R. 438 (E.D. Mi.
1985). Several of these cases are clearly distinguishable from
the instant case. See, e.g., Pako, 109 B.R. at 377 (finding that
debtor knowingly concealed claim in light of pre-bankruptcy
testimony of General Counsel/Chief Administrative Officer that he
thought debtor had been wronged by defendant). To the extent
that some are not, we note simply that these cases are not
binding on this court, and we are not persuaded by their
analysis.
6
 See Guenther v. Snap-On Tools Corp., 1995 WL 137061, *11 (N.D.
Ill. 1995)(unreported decision)(holding that judicial estoppel on
the basis of bankruptcy nondisclosure is inappropriate because
"there is no basis for finding any misconduct or injustice"); In
re TGX Corp., 168 B.R. 122, 132 (W.D. La. 1994)(finding
nondisclosures "not sufficiently egregious" to justify judicial
estoppel); Reciprocal Merchandising Services, Inc. v. All
Advertising Associates, Inc., 163 B.R. 689, 697 n.11 (S.D.N.Y.
1994)(finding that "intentional misconduct is a necessary element
in a claim for judicial estoppel" even in bankruptcy context); In
re Neptune World Wide Moving, Inc., 111 B.R. 457 (S.D.N.Y.
1990)(stating that judicial estoppel does not apply where
inconsistency was based on inadvertence or mistake).

                                23
inferred from the mere fact of nondisclosure in a bankruptcy

proceeding.   Such a rule would unduly expand the reach of

judicial estoppel in post-bankruptcy proceedings and would

inevitably result in the preclusion of viable claims on the basis

of inadvertent or good-faith inconsistencies.    While we by no

means denigrate the importance of full disclosure or condone

nondisclosure in bankruptcy proceedings, we are unwilling to

treat careless or inadvertent nondisclosures as equivalent to

deliberate manipulation when administering the "strong medicine"

of judicial estoppel.   Chaveriat v. Williams Pipe Line Co., 11

F.3d 1420, 1428 (7th Cir. 1993).

     Defendants argue that rejecting their proposed "inferred

intent" rule "would invite prolonged discovery into the motives

of the debtor."   Bright Wood's Br. at 25.   We disagree.   For

purposes of judicial estoppel, we require a showing of intent in

other contexts; we see no reason why the process of discerning

that intent should be unworkable in the bankruptcy context when

it is workable elsewhere.   We therefore reject defendant's

argument that intent may be inferred for purposes of judicial

estoppel solely from nondisclosure notwithstanding the

affirmative disclosure requirement of the Bankruptcy Code.

     Because Ryan did not act with the intent to play fast and

loose with the courts that is required for application of the

judicial-estoppel doctrine, we conclude that the district court

erred in granting summary judgment against Ryan on judicial

estoppel grounds.

                               VIII.


                                24
       As we have already concluded that the district court erred

in granting summary judgment against Ryan on judicial estoppel

grounds, we need not reach Ryan's argument that application of

judicial estoppel under the circumstances of this case would

violate principles of equity and justice.     We nonetheless state

briefly our belief that judicial estoppel is an "extraordinary

remed[y] to be invoked when a party's inconsistent behavior will

otherwise result in a miscarriage of justice."     Oneida, 848 F.2d

at 424 (Stapleton, J., dissenting).     It is not meant to be a

technical defense for litigants seeking to derail potentially

meritorious claims, especially when the alleged inconsistency is

insignificant at best and there is no evidence of intent to

manipulate or mislead the courts.     Judicial estoppel is not a

sword to be wielded by adversaries unless such tactics are

necessary to "secure substantial equity."     Gleason, 458 F.2d at

175.    In this case, application of judicial estoppel would be

unduly harsh and inequitable.    While we need not and do not

decide whether we would reverse the district court's order on

this ground alone, our equitable concerns lend support to our

overall conclusion.

                                IX.

       For the foregoing reasons, we will reverse the order of the

district court granting summary judgment in favor of defendants

and remand for further proceedings.




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