The lower court did not have benefit of the circuit court’s subsequent decision in Slater v. U.S. Steel Corp. when it granted summary judgment to the employer based on a judicial estoppel defense.
A federal district court erred in granting a law firm’s motion for summary judgment against a legal assistant’s overtime and contract claims on judicial estoppel grounds because the employee had failed to amend a bankruptcy schedule, ruled the Eleventh Circuit. The appeals court vacated summary judgment as to the estoppel defense based on a decision issued after the lower court’s ruling. On the other hand, the appeals court affirmed summary judgment in the employer’s favor on her FLSA retaliation claim, finding that statements made to plaintiff’s counsel by defense counsel did not constitute a materially adverse action (Smith v. Haynes & Haynes P.C., October 15, 2019, Antoon, J., III).
In July 2011, the employee was hired for a second stint with the Haynes & Haynes law firm as an hourly “contract employee.” Although she had been a full-time employee previously, she now worked eight hours a day, with an hour off for lunch, and no benefits. On several occasions, she asked the firm to modify the terms of her employment to include payment for overtime.
Bankruptcy proceedings. In April 2011, an attorney filed a Chapter 13 bankruptcy petition on the employee’s behalf. She responded “none” when asked to list contingent and unliquidated claims–which was true at the time. In August 2011, a month after the employee resumed working for the employer, the bankruptcy court confirmed her Chapter 13 plan, which provided for 100 percent repayment of her unsecured creditors, and in January 2013, the bankruptcy court dismissed her Chapter 13 case for failure to make the required payments.
Wage suit. In 2014, attorney Russell Parker filed this lawsuit on the employee’s behalf claiming unpaid overtime. The complaint asserted that the employee was misclassified as a “contract employee” and was not paid overtime. The law firm knew that the employee had filed a Chapter 13 bankruptcy petition. After the employee filed this action, it discovered that she had never amended her bankruptcy schedules to include her request for overtime as a contingent or unliquidated claim. Thereafter, the law firm met with attorney John Saxon on how best to use this information against the employee.
Saxon and Parker met, but unbeknownst to Saxon, Parker recorded the conversation. The gist of Saxon’s message was that Parker should persuade the employee to voluntarily dismiss the lawsuit, and that if she did not the law firm would file defenses and counterclaims against her–for “stealing time,” tortious interference, and unpaid loans.
Retaliatory attacks. That conversation spawned a spate of filings, including a notice by a new law firm, the Frederick firm, that it was representing the employee because of retaliatory personal attacks orchestrated by the Haynes firm. Attached to the notice was a letter from the president of a state association of employment lawyers suspending Parker until the completion of the lawsuit. That same day, Saxon also filed an answer and affirmative defenses on behalf of the Haynes firm. Saxon filed a motion for judgment on the pleadings based on the judicial estoppel defense. Thereafter, the employee amended her complaint to add retaliation, breach of contract. and slander.
The district court determined that the employee’s overtime, breach of contract, and slander claims were barred by judicial estoppel because she failed to inform the bankruptcy court of her claims against the Haynes firm. Following a period of discovery, the district court also granted summary judgment against the employee’s retaliation claim, concluding that the conduct of the Haynes firm did not constitute an adverse action and was not attributable to it.
On appeal, the employee challenged the district court’s judicial estoppel ruling on her overtime and breach of contract claims, as well as its grant of summary judgment in the employer’s favor on her FLSA retaliation claim.
Judicial estoppel. Judicial estoppel is an equitable defense to a civil action “intended to protect courts against parties who seek to manipulate the judicial process by changing their positions to suit the exigencies of the moment.” It is frequently raised against plaintiffs who had earlier sought bankruptcy protection. When an individual files for bankruptcy, she must file sworn disclosures listing her debts and her assets, including any pending civil claims. In the Eleventh Circuit, the duty to amend applies to Chapter 13 petitioners even after confirmation of the petitioner’s plan.
In Slater v. U.S. Steel Corp., the Eleventh Circuit revisited how the doctrine of judicial estoppel should be applied. That en banc decision left in place the dual requirements—that the plaintiff took an inconsistent position under oath in an earlier proceeding and, in doing so, calculated to make a mockery of the judicial system. However, the appeals court added, in “determining whether the plaintiff’s inconsistent statements were calculated to make a mockery of the judicial system, a court should look to all the facts and circumstances of a particular case.”
When the district court made its judicial estoppel ruling in this case, it did not have the benefit of Slater II. Because it relied on the inference arising from inconsistent statements, it saw no need to conduct an evidentiary hearing to gauge the employee’s credibility in person. However, applying Slater II’s “all the facts and circumstances” test, it was far from clear that the district court could have applied judicial estoppel here.
The results of judicial estoppel are drastic—a party is deprived of the right to pursue a case regardless of the claim’s merits. On the other side, a party escapes potential accountability for wrongdoing without regard to the merits of the claim. Slater II acknowledges that such extreme measures must rest on the circumstances of the case and not on an inference.
Inconsistent pleadings. The district court also found that judicial estoppel applied because the employee filed inconsistent pleadings in this action. Her initial complaint referenced conversations with the employer in which she claimed entitlement to overtime pay. However, this allegation was absent from her amended complaint in which she claimed that she was not aware of her entitlement to overtime until after her employment ended. Because Slater II renounced the use of an inference regarding inconsistent positions, the district court must “consider the totality of the facts and circumstances of the case to determine whether the plaintiff intended to make a mockery of the judicial system.”
Retaliation claim. Finally, the appeals court turned to consider the employee’s challenge to the district court’s grant of summary judgment against her retaliation claim. She claimed that the lawyer association wrongfully suspended her attorney’s (Parker) membership, and that defendant’s counsel (Saxon) threatened Parker, stating that if she did not dismiss her lawsuit, the employer would file counterclaims. Here, the court ruled that the district court correctly granted summary judgment as to both of those purported adverse actions.
While the employee satisfied the first element of a retaliation claim, neither the suspension nor the discussion of possible counterclaims constituted an adverse action. Further, the appeals court concluded Parker’s suspension would not cause a reasonable worker to back off the prosecution of her case. Similarly, the court found that a reasonable worker would not abandon or compromise a pending lawsuit because her employer’s counsel promised counterclaims if the suit proceeded.
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