Nobody would confuse this morning’s Supreme Court decision in Keathley v. Buddy Ayers Construction with a big case. In yesterday’s roundup of the 22 cases left on the docket, I ranked it dead last in importance. The opinion was unanimous, and given to the junior justice, Justice Ketanji Brown Jackson, to write. The Court was asked to decide “whether the doctrine of judicial estoppel can be invoked to bar a plaintiff who fails to disclose a civil claim in bankruptcy filings from pursuing that claim simply because there is a potential motive for nondisclosure, regardless of whether there is evidence that the plaintiff in fact acted in bad faith.” It was the first time the Court decided when and how judicial estoppel applies in bankruptcy cases. As I explained:
Jackson’s opinion for the Court ended up eschewing any sort of bright-line legal rule in favor of a “holistic” standard for looking at “the totality of the circumstances” (translation: lots of billable hours for lawyers, few standards for appellate courts to review decisions) in order to determine whether it was inadvertent or mistaken for a debtor to not mention that he had a claim for a lawsuit against somebody else that he didn’t list when filing for bankruptcy. So, an equitable standard will be used to police debtors who may seem to be playing fast and loose. (Justice Sonia Sotomayor wrote separately to argue that this standard should rarely if ever apply because these disputes usually arise while the bankruptcy case is still ongoing, so the debtor’s case can be adjusted accordingly.)
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