Keathley v. Buddy Ayers Construction, Inc.
The Court holds that whether a debtor's failure to disclose a claim in bankruptcy was "inadvertent or mistaken" — the showing that can excuse applying judicial estoppel to bar a later lawsuit on that claim — must be judged from the totality of the circumstances surrounding the omission. The Fifth Circuit erred by confining that inquiry to just two factors: whether the debtor knew the facts underlying the claim and whether he had a potential motive to conceal it.
Case background
Thomas Keathley and his wife filed a Chapter 13 bankruptcy petition in December 2019. The Bankruptcy Code requires debtors to file schedules listing their property, including claims against third parties, and to swear under penalty of perjury that the information is true and correct. Based on the Keathleys’ disclosures, the Bankruptcy Court confirmed an amended plan in April 2020 providing for interest-free repayment of 100% of creditors’ claims over five years. In August 2021, while the bankruptcy case remained open, Keathley was involved in a car accident in Mississippi with a driver employed by Buddy Ayers Construction, Inc. He retained a personal-injury attorney and told his bankruptcy counsel that he intended to sue, but neither disclosed the potential claim to the Bankruptcy Court, and in December 2021 Keathley filed a negligence action in federal district court without notifying that court. After Buddy Ayers Construction moved for summary judgment on grounds of judicial estoppel, Keathley amended his schedules and submitted affidavits explaining that the omission had been inadvertent. The District Court, relying on Fifth Circuit precedent, found that Keathley knew the facts underlying his claims and hypothetically had a motive to conceal them, held that the omission was therefore not inadvertent or a mistake, and entered summary judgment for the company. The Fifth Circuit affirmed, with one judge concurring but expressing doubt that judicial estoppel’s goals were served by applying it given evidence the omission was an “honest mistake.”
Questions Presented
- 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.
Holding
To determine whether an omission of a claim in the bankruptcy context was inadvertent or mistaken for purposes of judicial estoppel, courts should look to the totality of the circumstances surrounding the omission. The Fifth Circuit erred by artificially narrowing its inquiry to whether the debtor had knowledge of the underlying facts or a potential motive to conceal the claim — a rule that is at once too rigid, because judicial estoppel is an equitable doctrine that “eschews mechanical rules” and depends on a case-by-case weighing of all relevant facts and circumstances, and too broad, because a debtor will almost always know the underlying facts and stand to benefit from nondisclosure. Vacated and remanded.
The Court
Justice Jackson delivered the opinion for a unanimous Court. Justice Thomas filed a concurring opinion, in which Justice Gorsuch joined. Justice Sotomayor filed a concurring opinion.
What this episode contains
This episode is an AI-narrated reading of the majority opinion in Keathley v. Buddy Ayers Construction, Inc., written by Justice Jackson.
AI disclosure: The voice in this episode is AI-generated, using a machine learning model styled to loosely resemble the authoring justice. Tone, inflection, pacing, and emphasis are artifacts of the model and should not be attributed to Justice Jackson. The text being read is the Court’s published majority opinion, lightly adapted to improve readability for the spoken format.