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doctrine “is a matter of equitable judgment and discretion,” to be applied, or not, according to principles of
equity. See In re Knight-Celotex, LLC, 695 F.3d 714 (7th Cir. 2012). In that case, the Court of Appeals
refused to impute an alleged failure to disclose by the trustee and his counsel to a creditor to which the
trustee had assigned a claim.

Moreover, interpreting White v. Wyndham Vacation Ownership, Inc., 617 F.3d 472 (6th Cir. 2010), the
court in Stephenson v. Malloy, 700 F.3d 265 (6th Cir. 2012), said that to support judicial estoppel requires
(1) the plaintiff-debtor assumed a position that was contrary to the one asserted under oath in the
bankruptcy proceeding, (2) the bankrupty court adopted the contrary position,
and (3) the omission did not result from mistake or inadvertence. See also Love
v. Tyson Foods, discussed above; In re Vioxx Prod. Liab. Lit., __ F. Supp. 2d __,
2012 WL 4097200 (E.D. La. 2012). Further, on element (3) Stephenson said
the court considers whether (a) the debtor lacked knowledge of the factual basis
of the undisclosed claim, (b) the debtor had a motive for concealment, and (c)
the evidence indicates an absence of bad faith. On element (c), the decision
imposed the burden of proof on the debtor, looking at factors such as whether he disclosed the omitted
claim in other contexts (such as in discussions with the trustee or at the meeting of creditors). But see
Guay v. Burack and Love v. Tyson Foods, both cited above, discounting belated disclosures.

Adopting a similarly-flexible but distinguishable approaches were Guay and In re Knigge, 479 B.R.
500 (8th Cir. BAP 2012). According to Knigge, judicial estoppel may be held where (1) a party's later
position is clearly inconsistent with its earlier position, (2) the party has succeeded in persuading a court
to accept that party's earlier position, and (3) the party would derive an unfair advantage or impose an
unfair detriment on the opposing party if not estopped. See also Guay, indicating that the unfair-
advantage element is not essential.

Bankruptcy Filing Without Signed Petition Violates Rule 9011

A lawyer’s electronic filing of a bankruptcy petition without possession of an original thereof signed by
the debtor constitutes a violation of Federal Rule of Bankruptcy Procedure 9011 and justifies an order to
disgorge all fees received in the matter, a bankruptcy judge in Nevada has ruled.

The decision in In re Sponhouse, 2012 WL 3682982 (Bankr. D. Nev. 2012), follows earlier decisions
by other bankruptcy courts imposing hefty sanctions for filing of corporate and partnership bankruptcy
petitions without appropriate organizational authorization. See Sharp Thinking No. 71 (September 2012).

Creditors May Do Nothing At Their Peril When Stay Applies

As we pointed out in Sharp Thinking No. 47 (May 2011), sometimes creditors do nothing at their peril
when the bankruptcy stay applies. Now In re Herbst, 469 B.R. 299 (Bankr. W.D. Wis. 2012), has
reiterated that point, finding a bank in contempt for merely continuing to hold collateral lawfully possessed
prepetition. “In the Seventh Circuit, the act of passively holding an asset of the estate constitutes
‘exercising control’ over it in violation of [11 U.S.C.] § 362(a)(3), even when the asset was lawfully
repossessed prepetition,” the court opined. It said it would assess attorney fees and costs against the
bank for requiring that the contempt proceeding be brought.

– John T. Hundley, Jhundley@lotsharp.com, 618-242-0246

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