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JUDICIAL ESTOPPEL AND EQUITABLE DISTRIBUTION
© 1997 National Legal Research Group, Inc.
The doctrine of judicial estoppel, also known as estoppel by inconsistent positions, basically precludes a party from asserting a position in a legal proceeding that is contrary to a position taken by him or her in a prior legal proceeding.
Given the ever-increasing proliferation of laws, lawyers, and lawsuits, the doctrine of judicial estoppel can be expected to come into play more and more frequently. The doctrine can have a particular impact on divorce clients, who are sometimes involved in separate litigation later on concerning marital assets.
Part I of this article provides a brief overview of the doctrine of judicial estoppel. Part II looks at how the doctrine has been applied in some cases involving former spouses.
I. General Principles
Judicial estoppel is a common-law rule that a party will not be allowed to maintain inconsistent positions in judicial actions and proceedings. It applies not only in the course of the same proceeding, but also in supplemental proceedings and separate actions. See generally 28 Am. Jur. 2d Estoppel and Waiver 69 (1966 & Supp. 1997); 31 C.J.S. Estoppel and Waiver 138 (1996); Mark Plumer, Note, Judicial Estoppel: The Refurbishing of a Judicial Shield, 55 Geo. Wash. L. Rev. 409 (1987); Note, The Doctrine of Preclusion Against Inconsistent Positions in Judicial Proceedings, 59 Harv. L. Rev. 1132 (1946). The contours of the doctrine and how it applies are somewhat unclear, however. See Lowery v. Stovall, 92 F.3d 219, 223 (4th Cir. 1996) (noting that courts have had difficulty formulating a specific test for determining when judicial estoppel should be applied); Patriot Cinemas, Inc. v. General Cinema Corp., 834 F.2d 208, 212 (1st Cir. 1987) (specific requirements of doctrine are rather vague and vary from state to state and circuit to circuit); Allen v. Zurich Insurance Co., 667 F.2d 1162, 1166 (4th Cir. 1982) (circumstances under which judicial estoppel may appropriately be invoked are probably not reducible to any general formulation).
Objectives. Unlike equitable estoppel, which is designed to ensure fairness in the relationship between the parties, judicial estoppel is meant to protect the judicial system. First, the doctrine seeks to preserve the sanctity of the oath by demanding truth and consistency in sworn positions. Second, the doctrine seeks to preserve judicial integrity by avoiding the risk of inconsistent results in two proceedings. Bates v. Long Island Railroad, 997 F.2d 1028, 1037 (2d Cir. 1993); see also Rand Boyers, Comment, Precluding Inconsistent Statements: The Doctrine of Judicial Estoppel, 80 Nw. U. L. Rev. 1244 (Spring 1986).
In the words of the United States Court of Appeals for the Sixth Circuit, the doctrine of judicial estoppel serves the purpose of protecting the integrity of the courts by preventing the system from being manipulated by "chameleonic litigants." Blanton v. Inco Alloys International, Inc., 108 F.3d 104, 108 (6th Cir. 1997).
South Carolina's high court emphasized that the doctrine protects the truth-seeking function of the judicial process by precluding litigants from changing their version of the facts when that version no longer suits them. Hayne Federal Credit Union v. Bailey, No. 24678 (S.C. Aug. 11, 1997).
Elements. Different courts describe the elements of the doctrine somewhat differently:
Two elements The United States Court of Appeals for the Second Circuit stated that the doctrine has two elements: First, the party against whom the estoppel is asserted must have argued an inconsistent position in a prior proceeding, and, second, the prior inconsistent position must have been adopted by the court in some manner. Bates v. Long Island Railroad, 997 F.2d at 1038.
Three elements The United States Court of Appeals for the Fourth Circuit described the doctrine as including not only the two elements discussed above, but a third element: The party sought to be estopped must have intentionally misled the court to gain unfair advantage. Hence, judicial estoppel does not apply when the party's prior position was based on inadvertence or mistake. Lowery v. Stovall, 92 F.3d at 224.
Five elements The Colorado Supreme Court recently stated that while the doctrine of judicial estoppel precludes precise definition, the following five circumstances, at a minimum, are required for it to apply: (1) the two positions must be taken by the same party or parties in privity with each other; (2) the positions must be taken in the same or related proceedings involving the same party or parties in privity with each other; (3) the party taking the positions must have been successful in maintaining the first position and must have received some benefit in the first proceeding; (4) the inconsistency must be part of an intentional effort to mislead the court; and (5) the two positions must be totally inconsistent that is, the truth of one position must necessarily preclude the truth of the other. Estate of Burford v. Burford, 935 P.2d 943 (Colo. 1997).
An Illinois appeals court likewise identified five elements: (1) the two positions must be taken by the same party; (2) the positions must be taken in judicial proceedings; (3) the positions must be given under oath; (4) the party must have successfully maintained the first position and received some benefits; and (5) the two positions must be totally inconsistent. Bidani v. Lewis, 285 Ill. App. 3d 545, 675 N.E.2d 647 (1996).
Areas of Disagreement. Courts disagree on some key aspects of the doctrine. For example:
Legal positions versus factual positions Some courts apply the doctrine only to positions or assertions of fact. E.g., Lowery v. Stovall; Hayne Federal Credit Union v. Bailey. Others apply the doctrine to conclusions of law or legal theories as well as to factual assertions. E.g., Estate of Burford v. Budford.
South Carolina's high court explicitly adopted the doctrine of judicial estoppel as it relates to matters of fact, not law. It is certainly conceivable, the court explained, that parties may want to present novel legal theories, which may require changing one's previous legal theory. However, the truth-seeking function of the judicial process is undermined if parties are allowed to change positions as to the facts of the case, unless compelled by newly discovered evidence, the court said. Hayne Federal Credit Union v. Bailey.
Success in earlier proceeding Some courts require that the assertion in the earlier proceeding must have been successful. E.g., Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Georgiadis, 903 F.2d 109, 114 (2d Cir. 1990); Blanton v. Inco Alloys International, Inc. This requirement ensures that judicial estoppel is applied in narrow circumstances. Lowery v. Stovall, 92 F.3d at 224. Other courts hold that judicial estoppel may be applied even if the party was not successful in asserting his or her position in the prior judicial proceeding, if the court determines that the alleged offending party engaged in "fast and loose" behavior which undermined the integrity of the court. See United States v. Garcia, 37 F.3d 1359, 1367 (9th Cir. 1994) (discussing the two views without determining which one should be adopted); Levin v. Robinson, Wayne & LaSala, 246 N.J. Super. 167, 586 A.2d 1348 (Law Div. 1990).
If the prior action was settled, arguably the elements of judicial estoppel are not satisfied because "a settlement neither requires nor implies any judicial endorsement of either party's claims or theories, and thus a settlement does not provide the prior success necessary for judicial estoppel." Konstantinidis v. Chen, 626 F.2d 933, 939 (D.C. Cir. 1980); accord Bates v. Long Island Railroad. Contra Levin v. Robinson, Wayne & LaSala (settlement in prior action does not preclude application of doctrine of judicial estoppel).
Rejection of Doctrine. A minority of courts have refused to adopt the doctrine of judicial estoppel. For example, the United States Court of Appeals for the Tenth Circuit has rejected it as being inconsistent with the spirit of the Federal Rules of Civil Procedure, which permit alternative and inconsistent pleadings. See Chrysler Credit Corp v. County Chrysler, Inc., 928 F.2d 1509, 1520 n.10 (10th Cir. 1991); see also Douglas Henkin, Comment, Judicial Estoppel Beating Shields into Swords and Back Again, 139 U. Pa. L. Rev. 1711 (1991) (arguing that doctrine should be abandoned because it conflicts with goals behind systems that permit or encourage inconsistent and alternative pleadings and because Fed. R. Civ. P. 11 is adequate to sanction attorneys who have abused the oath).
Distinction from Related Doctrines. Although closely related to collateral estoppel, judicial estoppel is dissimilar in that it does not require that the issue be actually litigated in the prior proceeding or that the parties meet the requirement of mutuality. See Lowery v. Stovall, 92 F.3d at 223 n.3. Judicial estoppel is also closely related to equitable estoppel, but a party asserting judicial estoppel does not have to prove detrimental reliance because judicial estoppel is intended to protect the integrity of the courts rather than any interests of the litigants. See Teledyne Industries, Inc. v. NLRB, 911 F.2d 1214, 1220 (6th Cir. 1990). Therefore, judicial estoppel may apply in a particular case where neither collateral estoppel nor equitable estoppel would apply. Allen v. Zurich Insurance Co., 667 F.2d at 1166-67; see also Levin v. Robinson, Wayne & LaSala (judicial estoppel seeks to preserve the integrity of the judicial process, while collateral estoppel concerns the finality of determinations, and equitable estoppel concerns the relationship of the parties); Hayne Federal Credit Union v. Bailey (purpose of judicial estoppel is to protect integrity of judicial process and courts rather than to protect litigants from allegedly improper or deceitful conduct by their adversaries).
II. Application of Doctrine
Judicial estoppel has been invoked quite frequently against former spouses in appellate cases during recent years. These decisions should cause a divorcing spouse to think twice before denying an interest in property that he or she might later want to claim, or valuing an asset at an amount lower than might be desirable later on.
Judicial Estoppel Held to Preclude Subsequent Position. Judicial estoppel has been applied to preclude a spouse's position in a divorce proceeding, to preclude a spouse's position in subsequent litigation between the divorced spouses, and to preclude a spouse's claim to property in litigation with a third party after a divorce action.
Doctrine Applied in Divorce Action Itself. A New York appeals court held that judicial estoppel barred a husband from contending in a divorce action that he had any interest in a farm titled in the wife's name, where he had testified to the contrary in an earlier action brought by a third-party creditor against him. In a deposition in the earlier action, he repeatedly stated that the former wife purchased the property with her own assets and that he had not contributed to the purchase or upkeep of the property. The husband "should not be permitted to play fast and loose with the court" by advocating contrary positions in different legal proceedings, the court said. Perkins v. Perkins, 226 A.D.2d 610, 641 N.Y.S.2d 396, 397 (1996).
However, two judges disagreed and contended that judicial estoppel did not apply because the issues in the two actions were different. They emphasized that in the creditor's action the husband had only an inchoate right to the property and his testimony related only to the question of title, not whether the farm was separate property for equitable distribution purposes. 641 N.Y.S.2d at 398-99 (Sullivan, J., and Pizzuto Jr., J., concurring in part and dissenting in part).
Doctrine Applied in Subsequent Litigation Between Divorced Parties. A New York appeals court held that the doctrine of judicial estoppel precluded a former husband from seeking to set aside a separation agreement which had been incorporated into the parties' divorce judgment, where in an earlier proceeding by the wife to set aside the agreement he had taken the position that the agreement should be preserved. Judicial estoppel applies where a party to an action has secured a judgment in his or her favor by adopting a certain position and then has sought to assume a contrary position in another action simply because his or her interests have changed, the court explained. Anonymous v. Anonymous, 137 A.D.2d 739, 524 N.Y.S.2d 823 (1988).
An Alabama appeals court held that judicial estoppel barred a former husband from claiming that the parties' divorce decree was invalid, where he had subsequently remarried and thus taken the position that the divorce judgment was valid. The law is settled in Alabama that a party who knowingly assumes a particular position in a judicial proceeding is estopped from assuming a position inconsistent with the first one to the prejudice of an adverse party, the court said. Kilpatrick v. Kilpatrick, 628 So. 2d 729 (Ala. Civ. App. 1993).
Doctrine Applied in Litigation with Third Parties After Divorce. In the following cases, judicial estoppel was applied against a former spouse who attempted to claim an interest in property or business entities contrary to his or her testimony or position in the earlier divorce litigation:
The United States Court of Appeals for the Seventh Circuit held that judicial estoppel barred a former husband from asserting an interest in a real estate investment partnership in a bankruptcy matter because he had denied any interest in the property during prior state court divorce proceedings. A party who prevails in one case by asserting some proposition may not seek to prevail in a later case by asserting its opposite, the court said. Although the divorce case ended with a property settlement rather than a judicial decision, "[p]ersons who triumph by inducing their opponents to surrender have `prevailed' as surely as persons who induce the judge to grant summary judgment." Kale v. Obuchowski, 985 F.2d 360, 362 (7th Cir. 1993). Having won a favorable allocation of property in the divorce case by insisting that he had no interest in real property other than the marital home, the former husband was stuck with that proposition in subsequent litigation, the court declared.
The South Carolina Supreme Court held that judicial estoppel barred a former husband in a mortgage foreclosure proceeding from claiming that he owned property pursuant to a resulting trust, where he swore in a prior divorce proceeding that he had no legal interest in the property and that his son owned the property. In the foreclosure action, the former husband admitted that he lied under oath in the divorce proceeding, the court noted. The truth-seeking function of the judicial process is undermined if parties are allowed to change positions as to the facts of the case unless compelled by newly discovered evidence, the court declared. Hayne Federal Credit Union v. Bailey.
A New Jersey court held that judicial estoppel barred a former husband from seeking additional funds from his former law partnership, because he had taken a contrary position in an earlier divorce proceeding. The former husband resigned from the firm before the divorce proceeding and took the position in the divorce action that a $25,000 payment which he had received from the firm was his complete entitlement under the firm's written partnership agreement. In his subsequent action against the firm, however, he claimed that there was no partnership agreement and that he was owed additional funds. The court granted summary judgment against the former lawyer, concluding that his cause of action was barred because the claim was based on positions which were entirely inconsistent with positions which he had previously taken in the divorce action. In a detailed and lengthy opinion, which should be reviewed by any lawyer who must deal with the subject of judicial estoppel, the court considered and rejected a list of reasons offered by the husband as to why the doctrine should not be applied in his case. Levin v. Robinson, Wayne & LaSala.
The Illinois Appellate Court held that the doctrine of judicial estoppel barred a former husband from claiming an interest in business entities contrary to his sworn testimony in earlier divorce proceedings, despite his stated intention to share any recovery with his former wife. The former husband should be viewed as having successfully advanced his position in the divorce proceeding, given that the trial court approved the spouses' settlement agreement and entered a final judgment without including his alleged interests in those companies, the court decided. Bidani v. Lewis.
The Illinois Appellate Court also held that where a former husband had obtained a favorable property division in a divorce proceeding by asserting that he did not own certain stock, the doctrine of judicial estoppel prevented him from claiming in later litigation that he, rather than his children, owned the stock. Finley v. Kesling, 105 Ill. App. 3d 1, 433 N.E.2d 1112 (1982).
The Wyoming Supreme Court held that judicial estoppel precluded a son from disputing his father's property rights under a deed in the son's name, where the son had testified in his prior divorce litigation that the property was transferred to him as merely a "straw man" to give him adequate property to secure a loan, and that upon satisfying the mortgage he would reconvey the property back to the father. The doctrine bars a party from playing "fast and loose" or "hanky panky" with the judicial system, the court said. Allen v. Allen, 550 P.2d 1137, 1142 (Wyo. 1976).
Judicial Estoppel Held Not to Bar Subsequent Position. Judicial estoppel was held not to apply in the following cases involving former spouses:
The Colorado Supreme Court held that judicial estoppel did not bar a former husband's estate from arguing that a dissolution decree was a final determination of marital status such that the former wife could not maintain claims against the estate as a former spouse, even though the husband had successfully argued in the dissolution action that the bifurcation order which resulted in entry of the decree was not final for purposes of appellate review. The positions asserted by the husband in the dissolution proceeding and by the estate later on were not totally inconsistent and were not part of an intentional effort to mislead the court, the court reasoned. Estate of Burford v. Burford.
The Iowa Supreme Court held that a former husband's testimony in his divorce proceeding that he had no ownership interest in a business did not judicially estop him from claiming in a subsequent action against third parties that he was the owner of the business and that the third parties had wrongfully converted it. As a general rule, the court decided, the party invoking the doctrine must show privity with the allegedly estopped party or prejudice from the allegedly inconsistent positions. It is a function of adversary litigation to ferret out the truth of conflicting positions, the court said.
"Although harsh consequences should attend the giving of false testimony, we see no need to include among such consequences an arbitrary forfeiture of property to the benefit of third persons who were in no way prejudiced by the falsehoods." Ezzone v. Hansen, 474 N.W.2d 548, 550 (Iowa 1991). Moreover, to apply the doctrine in this case could work to the disadvantage of innocent third parties who might have been prejudiced if the testimony in the prior proceeding was in fact false. These parties may now be in a position to lay claim to assets that the husband may have concealed, the court noted.
The Arizona Court of Appeals held that a husband in a dissolution proceeding was not judicially estopped from claiming that promissory notes he signed during the marriage were a community debt, even though he had denied that the debt was a community obligation in earlier litigation when the parties were sued on the notes. Essential to the concept of judicial estoppel is the principle that a party has gained an advantage obtained judicial relief in one action by asserting one position, and that in view of his having gained that advantage he must accept the burdens of that position in any subsequent litigation, the court said. Judicial estoppel applies only when the party has successfully asserted a contrary position in an earlier judicial proceeding, and in the earlier litigation here the husband was not successful in his assertion that the debt was a separate obligation, the court reasoned. Hrudka v. Hrudka, 186 Ariz. 84, 919 P.2d 179 (Ct. App. 1995).
The California Court of Appeal held that a husband was not judicially estopped from claiming a community interest in a corporation formed during the marriage whose stock had been issued to the new wife, even though he had denied any ownership interest in the corporation when his former wife found out about the corporation and filed a motion to increase her child support. The evidence in the dissolution action showed that the new wife had helped the husband draft a declaration in opposition to the former wife's motion for an increase in child support in which the husband denied under penalty of perjury that he owned any interest in the corporation. The appeals court upheld a decision not to apply judicial estoppel under these circumstances. "The purpose of judicial estoppel is to prevent injury to an innocent litigant," the court declared. In re Marriage of Dekker, 17 Cal. App. 4th 842, 21 Cal. Rptr. 2d 642, 646 (1993) (emphasis added).
The Wisconsin Court of Appeals held that a husband's failure to list a note payable to him as an asset in a divorce proceeding did not judicially estop him from suing to collect on the note later on. The husband's position in the divorce action was not inconsistent with his position in the action to collect on the note, the court decided. "Failure to include an asset on a financial disclosure statement does not amount to a position by [the husband] regarding the legal validity and enforceability of the note," the court declared. Coconate v. Schwanz, 165 Wis. 2d 226, 477 N.W.2d 74, 75 (Ct. App. 1991).
A bankruptcy court held that in a debtor's Chapter 7 proceeding his former wife was not judicially estopped from asserting that a $75,000 marital obligation was nondischargeable as support, even though she had asserted in prior state court civil contempt proceedings that the obligation was a property settlement. In order to invoke judicial estoppel, a party must show that the opponent took a contrary position under oath in a prior proceeding and that the prior position was accepted by the court, the bankruptcy court said. Judicial estoppel should be cautiously applied, the court added, in order to avoid impinging upon the truth-seeking function of the court because the doctrine precludes the contradictory statement without investigating the truth of either statement. The debtor here failed to demonstrate that any of the conflicting statements were ever relied upon by the state court in any material respect when making its civil contempt determination, the court said. In re Miller (Miller v. Willett), 154 B.R. 987 (Bankr. N.D. Fla. 1993).
Other Contexts. Judicial estoppel is frequently invoked in the context of paternity claims to preclude a mother or father who has taken a particular position regarding the father's paternity from subsequently adopting the contrary position. E.g., In re Donna M., 33 Conn. App. 632, 637 A.2d 795 (1994); N.M. v. J.G., 255 N.J. Super. 423, 605 A.2d 709 (App. Div. 1992); Hunter v. Christian, 191 W. Va. 390, 446 S.E.2d 177 (1994); In re Paternity of J.R.W., 814 P.2d 1256 (Wyo. 1991).
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