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gains, coupled with her statutory disclosure duties, were sufficient to constitute bad faith. With
respect to the exclusivity argument, the panel held that state courts have jurisdiction over whether
judicial estoppel applies to claims filed with them. See also Dailey v. Smith, 292 Ill.App.3d 22
(1997).

Moving to the merits, the panel noted that judicial estoppel in other
contexts has five separate elements which it found equally applicable in the
instant context: “(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 benefit thereby; and (5) the two positions must
be ‘totally inconsistent.’” See also Ceres Terminals, Inc. v. Chicago City Bank
& Trust Co., 259 Ill.App.3d 836 (1994).

The panel found each of the elements present, and, noting the “paucity of state cases directly
addressing the issue,” relied heavily on federal cases to hold the doctrine applicable in the present
context. The court rejected as inconsequential (a) a claim that Ms. Berge had told her attorney
about the suit and it was his fault it was not disclosed and (b) her attempt to have the
bankruptcy reopened so that the claim could be belatedly disclosed.

When such a claim is disclosed in the bankruptcy case, the trustee generally
has the right to pursue it for the benefit of creditors. In Reed, the claim was
belatedly disclosed, the trustee attempted to take it over, and defendant
contended that the estoppel which would apply against the bankrupt should
apply against the trustee, under the theory that the trustee stood in the
bankrupt’s shoes. Finding that such use of the estoppel doctrine would be
inequitable, the 5th Circuit rejected the defendant’s argument. In so doing, it
relied in part on suggestions in 7th Circuit precedent – Biesek v. Soo Line R.R,
440 F.3d 410 (7th Cir. 2006), and Cannon-Stokes v. Potter, 453 F.3d 446 (7th
Cir. 2006). Hundley

A couple of observations may be offered in light of these developments.

First, Berge largely reiterates prior precedent on the judicial estoppel issue
itself, but it does break ground in two areas: (1) in flatly rejecting the contention
that state courts can’t decide the issue, and (2) in establishing an apparent per
se rule that failure to disclose constitutes bad faith.

Second, the court’s refusal to let the Berge plaintiff off the hook by
reopening her case is sound bankruptcy policy. Bankruptcy courts, trustees
and creditors have a right to a full disclosure at the outset of the case; the
common practice of reopening cases makes for wasteful use of resources that
are often spread too thin in the first place.

John\SharpThinking\#57.doc
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