Cassel et al v. Globerson et al

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
The following discussion constitutes the court’s	1
findings of fact and conclusions of law. Fed. R. Bankr. P. 7052
(incorporating by reference Fed. R. Civ. P. 52(a)).
-1-
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
THEODORE A. KOLB,
Debtor.
Case No. 97-32321
Chapter 11
ROBERT M. CASSEL, on behalf of
this Chapter 11 Estate,
Plaintiff,
v.
HILDE KOLB, Trustee, JONATHAN
KOLB, RICHARD KOLB and DOUGLAS
KOLB,
Defendants.
Adv. No. 99-3144
Status Conference
235 Pine St., 22d Flr.
May 11, 2006
1:30 p.m.
MEMORANDUM DECISION REGARDING JUDICIAL ESTOPPEL1
Judicial estoppel arises in several forms. It may be invoked
to prevent a party from gaining an advantage by taking
inconsistent positions, or to “protect against a litigant playing
fast and loose with the courts,” or because of “general
Signed and Filed: April 26, 2006
________________________________________
DENNIS MONTALI
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
April 26, 2006
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 99-03144 Doc# 141 Filed: 04/26/06 Entered: 04/26/06 12:25:08 Page 1 of
13

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28 In the Matter of the Estate of Dr. Leon Kolb, Deceased	2
(San Francisco Superior Ct. No. 217919).
-2-
consideration[s] of the orderly administration of justice and
regard for the dignity of judicial proceedings.” Russell v.
Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990) (citations and internal
quotation marks omitted), cert. denied, 501 U.S. 1260 (1991).
Judicial estoppel may be invoked sua sponte. Id. (“Because it is
intended to protect the integrity of the judicial process,
[judicial estoppel] is an equitable doctrine invoked by a court at
its discretion.”). For the reasons set forth below, the court
invokes judicial estoppel in this adversary proceeding.
I. Facts
A few days before filing his voluntary chapter 11 petition
debtor Theodore A. Kolb (“Ted”) disclaimed his contingent
remainder interest in the estate of his father Dr. Leon Kolb
(“Leon”). This court entered a judgment that Ted’s disclaimer was
effective and his contingent interest rightfully belonged to his
children not his creditors. The district court affirmed that
judgment, but the Court of Appeals for the Ninth Circuit later
reversed, holding that Ted’s disclaimer was ineffective and his
“contingent interest is an asset of the bankruptcy estate.” In re
Kolb, 326 F.3d 1030, 1041 (9th Cir. 2003).
Meanwhile Ted and his siblings had already liquidated Leon’s
assets and distributed the proceeds to Ted’s children, three adult
sons. In state court they filed two reports resulting in orders	2
that allegedly protect them and Ted’s children from liability.
The first report, filed on April 25, 2001 (the “First
Report”), petitioned the state court to appoint Ted and his
Case: 99-03144 Doc# 141 Filed: 04/26/06 Entered: 04/26/06 12:25:08 Page 2 of
13

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
The First Report was the first one filed by the	3
Successor Trustees in Leon’s estate but was filed on behalf of
Hilde as her second and final report. It is entitled “Second and
Final Report on Waiver of Account on Behalf of Hilde Kolb as
Trustee of the Trust Created Pursuant to Paragraph Fifth of the
Will of the Above-Named Deceased.”
This court has granted Cassel authority to bring this	4
adversary proceeding on behalf of Ted’s bankruptcy estate on a
contingency fee basis. Pursuant to Ted’s confirmed liquidating
plan the claims in this adversary proceeding and all other non-
exempt assets were transferred to a Liquidating Trust. Cassel has
continued to prosecute this action and on June 11, 2003, he filed
a motion that among other things sought to join the liquidating
trustee, Uecker & Associates, Inc. (the “Liquidating Trustee”), as
an additional plaintiff pursuant to Fed. R. Civ. P. 19(a)(2)(i),
21 and 25(c) (incorporated by Fed. R. Bankr. P. 7019, 7021 and
7025) (the “Post-Remand Motion”).
-3-
siblings as Successor Trustees to Hilde Kolb (“Hilde”), Leon’s
widow, who had been Trustee of Leon’s trust until she died on
September 18, 2000. The First Report claims that “[a]ll of the	3
beneficiaries” of Leon’s trust had waived the requirement of
filing of an account on behalf of Hilde and that pursuant to Ted’s
disclaimer “the one-third share of [Ted in Leon’s estate] evolved
[sic] upon his three children . . . in equal shares.” In a later
report entitled “Final Report on Waiver of Account and Petition
for Discharge by Successor Trustees” (the “Second Report”) the
Successor Trustees told the state court that “the beneficiaries”
had requested the distributions they had made and that “all of the
beneficiaries” had consented to the Successor Trustees’ discharge.
This was false and misleading. Ted’s creditors, represented
by Robert M. Cassel (“Cassel”), asserted and later established	4
that they and not Ted’s children were the true beneficiaries of
Ted’s share, and they certainly did not waive any accounting or
consent to the Successor Trustees’ distributions and discharge.
Case: 99-03144 Doc# 141 Filed: 04/26/06 Entered: 04/26/06 12:25:08 Page 3 of
13

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
The conduct and statements of attorneys can be imputed	5
to parties for purposes of judicial estoppel. See Hall v. GE
Plastic Pacific PTE, Ltd., 327 F.3d 391, 396 (5th Cir. 2003)
(citing cases).
The State Disclaimer Order is entitled “Order Settling	6
Second and Final Report of Trustee on Waiver of Account on Behalf
of Hilde Kolb as Trustee.”
-4-
The Successor Trustees do not deny that when they filed the
First and Second Reports they had notice of Cassel’s claims. On
September 22, 2000, Cassel had filed a Notice of Pendency of
Action Challenging Validity of Disclaimer (the “Cassel Notice”)
which noted that this adversary proceeding had been commenced to
set aside Ted’s disclaimer, disclosed that a judgment adverse to
Cassel had been entered, and stated that “[t]he matter has been
appealed . . . .” In addition, the same lawyers who represented
the Successor Trustees and Ted’s children in state court had been
arguing for years in federal court over whether Ted’s disclaimer
was effective, and that issue had not yet been resolved by the
Ninth Circuit.5
The Successor Trustees nevertheless executed verifications of
the First and Second Reports and Ted’s children each executed a
Waiver of Filing of An Account in which each claimed to have
received assets to which he “is entitled.” In reliance on the
First Report the state court issued an order on June 13, 2001,
repeating word for word the statements that “all beneficiaries”
had waived an accounting and that Ted’s interest had “evolved”
upon his children pursuant to his disclaimer (the “State
Disclaimer Order”). In reliance on the Second Report the state	6
court issued an Order Terminating Trust and Discharge of Successor
Case: 99-03144 Doc# 141 Filed: 04/26/06 Entered: 04/26/06 12:25:08 Page 4 of
13

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
-5-
Trustees, on June 27, 2002, stating that “all beneficiaries” had
once again waived an accounting, that Leon’s trust “is
terminated,” and that the Successor Trustees “be discharged” (the
“State Discharge Order”).
The Successor Trustees and Ted’s children did not notify the
Ninth Circuit or Cassel of these developments. They did not argue
to the Ninth Circuit that the issue before it -- the validity of
Ted’s disclaimer -- had been mooted by the State Disclaimer Order,
the State Discharge Order, or both. Had they done so they would
have had to serve Cassel with whatever notice they gave to the
Ninth Circuit, which would have alerted Cassel to the proceedings
in state court.
Instead Ted’s children waited until June 23, 2003, after the
Ninth Circuit ruled against them and had remanded to this court,
to assert in a motion for summary judgment (“Ted’s Children’s
MSJ”) that this court is powerless to enter any judgment against
them because of the state court orders, notwithstanding the Ninth
Circuit’s determination that Ted’s disclaimer was invalid. They
also argue, as part of their opposition to Cassel’s Post-Remand
Motion, that this court is powerless to enter any judgment against
the Successor Trustees because they were “validly discharged” by
the state court.
II. Procedural history
The Ninth Circuit “den[ied] without prejudice to renewal
after remand to the Bankruptcy Court [Cassel’s] motion for
substitution contained in the suggestion of [Hilde’s] death filed
under Federal Rule of Appellate Procedure 43(a).” Kolb, 326 F.3d
at 1041 n. 12. Cassel’s Post-Remand Motion renews this request to
Case: 99-03144 Doc# 141 Filed: 04/26/06 Entered: 04/26/06 12:25:08 Page 5 of
13

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Like several of the documents filed in this adversary	7
proceeding the actual title of this motion filed by Ted’s children
is confusing: “Motion in Support of Kolb Beneficiaries’ Motion
[meaning the Successor Trustees’ Motion?] for Reconsideration of
Denial of Motion for Summary Judgment.” Although “[t]he rules do
not recognize a motion for reconsideration” as such (In re Captain
Blythers, Inc., 311 B.R. 530, 539 (9th Cir. BAP 2004)) the court
has the inherent discretion to reconsider its orders prior to
final judgment, as Ted’s children and the Successor Trustees point
out. Moses H. Cone Mem. Hosp. v. Mercury Const. Corp., 460 U.S.
1, 12 (1983); City of Los Angeles, Harbor Div. v. Santa Monica
Baykeeper, 254 F.3d 882, 886 (9th Cir. 2001). In addition, the
court would reach the same result set forth in this memorandum
decision under Fed. R. Civ. P. 52(b), 59(a), or 60(b) (made
applicable in bankruptcy by Fed. R. Bankr. P. 7052, 9014(c), 9023,
-6-
substitute the Successor Trustees as defendants in place of Hilde
and also (a) seeks to join the Liquidating Trustee as an
additional plaintiff and (b) requests entry of judgments against
Ted’s children and the Successor Trustees “decreeing that the
property sought to be disclaimed by [Ted] was property of this
bankruptcy estate, as mandated by the Ninth Circuit Court of
Appeal, and directing each of the defendants to turn over and
deliver said property or the value thereof.” The Post-Remand
Motion and Ted’s Children’s MSJ (collectively, the “2003 Motions”)
came on for hearing on July 25, 2003. The court ruled in favor of
Cassel but no written orders were issued because the parties
disputed the form of such orders and then engaged in protracted
attempts to settle their disputes. No settlement was reached.
On November 15, 2005, the Successor Trustees filed a motion
to set aside the court’s oral ruling permitting Cassel to
substitute them as defendants and a motion in support of Ted’s
Children’s MSJ. Ted’s children also filed a motion on December
19, 2005, for reconsideration of the court’s oral denial of their
MSJ. Meanwhile, on December 2, 2005, Cassel filed a counter-	7
Case: 99-03144 Doc# 141 Filed: 04/26/06 Entered: 04/26/06 12:25:08 Page 6 of
13

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28 and 9024).
-7-
motion for summary judgment (the “Cassel MSJ”). These various
motions (collectively, the “2005 Motions”) came on for hearing on
February 6, 2006, and at the end of the hearing the court directed
the parties to file briefs on the issue of judicial estoppel and
took the motions under advisement. On February 17, 2006, Cassel
and the defendants filed briefs regarding judicial estoppel and
the 2005 Motions were submitted.
III. Discussion
The Successor Trustees and Ted’s children argue that Cassel’s
exclusive remedy is in state court, but that is not the law.
First, the doctrine of judicial estoppel is not limited to
proceedings before the same court. It is regularly applied to
incompatible statements and positions before different courts and
in different cases. Rissetto v. Plumbers & Steamfitters Local
343, 94 F.3d 597, 605 (9th Cir. 1996). Indeed, judicial estoppel
may be even more appropriate in such situations because
“[i]nconsistent positions in different suits are much harder to
justify” than inconsistent pleading within one suit. Astor
Chauffeured Limousine Co. v. Runnfeldt Inv. Corp., 910 F.2d 1540,
1548 (7th Cir. 1990) (cited with approval by Rissetto, 94 F.3d at
605).
Second, California might “have a more limited or different
view of judicial estoppel” but whether or not that is so it “does
not preclude [a federal court] from determining what rule is
appropriate for [federal] purposes.” Russell, 893 F.2d at 1038.
This court assumes without deciding that the defendants would
Case: 99-03144 Doc# 141 Filed: 04/26/06 Entered: 04/26/06 12:25:08 Page 7 of
13

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
-8-
prevail in state court on the various arguments that they raise
here -- that Cassel was not entitled to notice of the First and
Second Reports because he did not properly request such notice,
that the state court orders have become final and can no longer be
challenged, and so on. Whatever the outcome would be in state
court, this court has an independent obligation to protect the
integrity of proceedings before it. Russell, 893 F.2d at 1038
(“Each court, state and federal, is entitled to have whatever
rules of judicial estoppel it considers necessary to protect its
dignity and it[s] system of justice.”).
The circumstances under which judicial estoppel may
appropriately be invoked “are probably not reducible to any
general formulation of principle” but the decision to apply
judicial estoppel, or at least the preclusion of advantage from
inconsistent positions, is typically informed by three factors:
(a) whether there was a “clearly inconsistent” position,
(b) whether the first position was accepted by a court so that
acceptance of a second position would create the perception that
one of the courts was misled, and (c) whether an unfair advantage
or unfair detriment would result without an estoppel. New
Hampshire v. Maine, 532 U.S. 742, 750-51, reh. den., 533 U.S. 968
(2001) (citations and internal quotation marks omitted)
(“Additional considerations may inform the doctrine’s application
in specific factual contexts.”). See also Hamilton v. State Farm
Fire & Cas. Co., 270 F.3d 778, 783 (9th Cir. 2001) (inconsistent
position must be “accepted” by the first court, at least
initially).
Judicial estoppel is appropriate in this case under the
Case: 99-03144 Doc# 141 Filed: 04/26/06 Entered: 04/26/06 12:25:08 Page 8 of
13

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
-9-
foregoing principles. After years of litigation in this adversary
proceeding over the proper beneficiaries of Leon’s estate, the
Successor Trustees and Ted’s children argue that the dispute has
been mooted by the state court orders. Yet those orders were
obtained by misrepresenting to the state court that no such
dispute existed -- that all the beneficiaries had waived any
accounting and consented to the Successor Trustees’ distributions
and discharge and that Ted’s children were “entitled” to those
distributions, all of which ignores the Cassel Notice while
failing to advise the state court that in fact the effectiveness
of Ted’s disclaimer and the propriety of distributions to Ted’s
children were still very much at issue in this adversary
proceeding by virtue of the pending appeal to the Ninth Circuit.
The defendants cannot have it both ways: they cannot misrepresent
to the state court that everyone is in agreement and then argue to
this court that the parties’ disagreements have been conclusively
resolved by the state court. That would (a) reward an
inconsistent position that (b) was relied upon by the state court
in issuing the State Discharge Order and (c) the advantage that
this would give the Successor Trustees and Ted’s children, and the
detriment to Cassel, would be unfair because the state court
orders are based on false and misleading statements to the state
court. Moreover, judicial estoppel is appropriate in this case on
both of the other traditional grounds, viz., to protect against
the Successor Trustees and Ted’s children playing fast and loose
with the courts, and because of general considerations of the
orderly administration of justice and regard for the dignity of
judicial proceedings. Russell, 893 F.2d at 1037.
Case: 99-03144 Doc# 141 Filed: 04/26/06 Entered: 04/26/06 12:25:08 Page 9 of
13

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
In Russell the state of Washington opposed a prisoner’s	8
federal habeas corpus petition by arguing that the prisoner had
“adequate and available” remedies in state court, which the Ninth
Circuit held was “tantamount to advising the federal district
court that [the prisoner] would be given a hearing in state court
on the merits of his claims.” Russell, 893 F.2d at 1038 (emphasis
added). The prisoner then sought relief in the state courts, but
the state successfully argued to the state court of appeals that
the prisoner was “procedurally barred at that level . . . .” Id.
at 1035 (emphasis added). The Washington Supreme Court affirmed.
The prisoner then filed a second habeas corpus petition in federal
court which the state opposed on the basis that a procedural
disposition is not reviewable on habeas corpus and that the
federal court was bound by the state courts’ determination as to
the procedural issue. The Ninth Circuit held that judicial
estoppel barred the state from making this argument. Id. at 1037-
39.
-10-
As stated at the start of this discussion, the Successor
Trustees and Ted’s children contend that Cassel should take his
problems to the state court, but they also argue that the state
court proceedings are final and the time to challenge the state
court orders has long since passed. Whether or not the state
court would apply judicial estoppel in these circumstances, this
court will do so. The appropriate remedy is to preclude the
defendants from relying in this court on the advantage they gained
from their incorrect and inappropriate statements to the state
court. The Ninth Circuit applied this remedy in Russell:
The state prevailed by telling the state court the
opposite of what it told the federal court. The
proposition that the state can be estopped from
relying on the advantage it gained by doing so
seems unremarkable.
Russell, 893 F.2d at 1038.8
As a consequence of their actions, the Successor Trustees
will be judicially estopped in this court to raise the state court
orders as a bar to any liability they may have for distributing to
Ted’s children the proceeds that belonged to Ted’s creditors.
Case: 99-03144 Doc# 141 Filed: 04/26/06 Entered: 04/26/06 12:25:08 Page 10 of
13

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
-11-
Ted’s children will be judicially estopped in this court to raise
the state court orders as a bar to returning the distributions
they received, or as a bar to any liability for not returning
those distributions. The court expresses no view as to the extent
of defendants’liability for those distributions, but only holds
that they cannot use the State Disclaimer Order and the State
Discharge Order as a shield to any such liability.
IV. Conclusion
The Successor Trustees told the state court that all
beneficiaries had consented to the distribution of Ted’s share of
Leon’s trust and to their discharge. In fact, they knew that
Ted’s creditors claimed to be the true beneficiaries and did not
consent to the distribution or the discharge.
Ted’s children told the state court that they were “entitled”
to receive proceeds of Leon’s estate as beneficiaries. In fact,
they knew that this was very much in dispute.
The state court relied on these false and misleading
statements in issuing the State Disclaimer Order and the State
Discharge Order. The Successor Trustees and Ted’s children are
judicially estopped from using those orders to evade the Ninth
Circuit’s final determination that the proceeds of Leon’s estate
belonged to Ted’s bankruptcy estate.
Because of the number of pending motions, the complex
procedural history, and past disputes as to the form of orders,
the court will hold a status conference on May 11, 2006, at 1:30
p.m. to discuss the forms of orders disposing of the 2003 Motions
and the 2005 Motions and the future proceedings in this case.
Counsel may but are not required to serve and upload proposed
Case: 99-03144 Doc# 141 Filed: 04/26/06 Entered: 04/26/06 12:25:08 Page 11 of
13

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
-12-
orders before that time.
* END OF MEMORANDUM DECISION *
Case: 99-03144 Doc# 141 Filed: 04/26/06 Entered: 04/26/06 12:25:08 Page 12 of
13

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
-13-
COURT SERVICE LIST
John Poppin, Esq. for Robert M. Cassel
Law Offices of John Poppin
600 California St., 14th Floor
San Francisco, CA 94108
Matthew J. Shier, Esq. for Robert M. Cassel
Pinnacle Law Group LLP
425 California St., Suite 1800
San Francisco, CA 94104
Neil R. Bardack, Esq. for Theodore M. Kolb,
Naz Roudiani, Esq. Ruth Globerson, Felix
McQuaid Bedford & Van Zandt LLP Kolb, Jonathan Kolb,
221 Main St., 16th Floor Richard Kolb, and
San Francisco, CA 94105 Douglas Kolb
Iain A. Macdonald, Esq. bankruptcy counsel to
Law Offices of Iain A. Macdonald Theodore M. Kolb
Two Embarcadero Center, Suite 1670
San Francisco, CA 94104
Robert A. Franklin, Esq. for Uecker and Assoc’s,
19330 Stevens Creek Blvd., Suite 100 Inc.
Cupertino, CA 95014
Case: 99-03144 Doc# 141 Filed: 04/26/06 Entered: 04/26/06 12:25:08 Page 13 of
13