Not necessarily. In May 2024 the Appeals Court held that a judge abused his discretion by throwing out a worker’s sexual harassment and retaliation claims because she had not listed them in her pending Chapter 13 bankruptcy. She corrected the omission while the bankruptcy was still open, and the bankruptcy court accepted the correction and let her lawyer pursue the claims for the benefit of the bankruptcy estate. This is a published decision of the Appeals Court and is binding statewide.
What happened
The town fired the worker from her job as a janitor in November 2017. About seven weeks later, she filed a Chapter 13 bankruptcy case. Her bankruptcy schedules answered “no” to a question asking about claims against others, including employment disputes. In October 2019 she sued the town and several individuals in Superior Court for sexual harassment under G.L. c. 214, § 1C, a sexually hostile work environment under G.L. c. 151B, § 4 (16A), and retaliatory discharge under G.L. c. 151B, § 4 (4), among other claims. She did not update her bankruptcy schedules. About three years into the lawsuit, defense counsel discovered the omission and moved for judgment on the pleadings. Within weeks, the bankruptcy court allowed her to amend her schedules to disclose the lawsuit, and it later appointed her lawyer to pursue the claims for the bankruptcy estate. The Superior Court judge still ruled that judicial estoppel barred her claims, relying only on the late disclosure.
What the court decided
In Mahabir v. Crocker, 104 Mass. App. Ct. 242 (2024), the Appeals Court reversed and sent the case back.
What judicial estoppel is. Judicial estoppel stops a party from taking a position that is directly inconsistent with one a court accepted in an earlier proceeding. Otis v. Arbella Mut. Ins. Co., 443 Mass. 634 (2005). Its purpose is to protect the integrity of the courts. There is no fixed formula. Judges weigh the equities, and a good faith reason for a change in position can matter.
The disclosure was late, but that was not the end of the question. Both sides agreed the worker should have disclosed her claims once she sued, and the court agreed the disclosure was not timely. The real question was whether barring the claims was needed to protect the bankruptcy process. The court held it was not, because the bankruptcy case was still open, she was still making the required plan payments, no discharge had entered, the bankruptcy court accepted her amended schedule, and that court appointed her lawyer to pursue the claims for the estate. Failing to consider how the bankruptcy court itself treated the late disclosure was an abuse of discretion.
Dismissal can hurt creditors. The court found persuasive Slater v. United States Steel Corp., 871 F.3d 1174 (11th Cir. 2017) (en banc), which held that a trial court should consider the bankruptcy court’s treatment of a nondisclosure. The Appeals Court explained, quoting that decision, that throwing out the claim can make a potentially valuable asset worthless and harm innocent creditors.
No harm shown, but no endorsement either. The defendants identified no harm from the delay. The court stressed that it did not endorse late disclosure, especially since the worker had lawyers in both cases. It also faulted both sides for not telling the Superior Court judge about the bankruptcy court’s later order. On remand, the judge may take up the defendants’ request to reconsider, in part, the earlier denial of their summary judgment motion.
What this means for you
If you are in bankruptcy, a claim against your employer is property that must be listed, even before you file a lawsuit. Leaving it off can give the other side a way to end your case.
This decision shows a late fix can work, but the facts mattered. The bankruptcy case was open, no discharge had entered, and the bankruptcy court approved the correction. The court distinguished cases where the bankruptcy ended without the claim ever being properly disclosed.
Also understand who may benefit. Here the bankruptcy court appointed the worker’s lawyer to pursue the claims for the bankruptcy estate, which means creditors may share in any recovery.
What to do now
- If you have an open bankruptcy case, tell your bankruptcy lawyer about any possible claim against an employer.
- Tell your employment lawyer about any bankruptcy, past or present.
- If a claim was left off your schedules, ask about amending them right away, while the case is still open.
- Keep copies of amended filings and bankruptcy court orders, and make sure the judge in your employment case sees them.
If this is your situation, call Doubleday Law at (617) 575-2006 or tell us what happened. Deadlines for discrimination and employment claims can be short.
