Don’t forget that ….

judicial estoppel can require dismissal of a claimant’s suit for ERISA-governed long term disability (LTD) benefits if the claimant failed to list the “potential cause of action” in bankruptcy filings.

The key is to determine when the “potential cause of action” accrued. And a recent case says those claims “accrue” when the claimant receives the initial benefit denial letter.

Here’s the case of Byrd v. Wellpoint Flexible Benefit Plan and Anthem Life Insurance Co., 2017 WL 1633204 (E.D. Missouri May 2, 2017).

FACTS: Byrd worked for Anthem, and sued after her claim for ERISA-governed long term disability benefits was denied. Wellpoint and Anthem moved to dismiss the suit contending Byrd’s LTD claim had not been disclosed during her bankruptcy proceeding and was therefore barred by the equitable doctrine of judicial estoppel.

ISSUE: Whether Judicial Estoppel Barred Byrd’s LTD Claim Because She Failed to List the Potential Claim as an Asset in her Bankruptcy?

DISTRICT COURT HELD: No, because the LTD claim “accrued” after she filed for bankruptcy and therefore was a “post-petition asset.”

RATIONALE:

  1. When filing for bankruptcy, “all assets of the debtor, including potential causes of action, become assets of the bankruptcy estate.” Op. at 4.
  2. “[A] party ‘may be judicially estopped from asserting a cause of action not raised in a reorganization plan or otherwise mentioned in the debtor’s schedules or disclosure statements. A debtor’s failure to list a claim in the mandatory bankruptcy filings is tantamount to a representation that no such claim existed.’” Op. at 5.
  3. Plaintiff’s ERISA claim accrued when she received Anthem’s September 21, 2016 letter initially denying her application for LTD benefits. This took place more than three months after Byrd filed her bankruptcy petition, and two months after she filed her bankruptcy disclosures. Op. at 6.
  4. The Court denied the Motion to Dismiss, concluding the ERISA lawsuit “accrued” after her bankruptcy petition and was therefore a “post-petition asset of Plaintiff and not part of the [bankruptcy] estate.” Op at 7.
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Photo of Mike Reilly Mike Reilly

Mike Reilly is a nationally recognized labor, employment and employee benefits attorney, named one of the “Top 100 Most Powerful Employment Attorneys in the Nation” for the past five consecutive years by Human Resource Executive®. He has decades of experience providing strategic employment…

Mike Reilly is a nationally recognized labor, employment and employee benefits attorney, named one of the “Top 100 Most Powerful Employment Attorneys in the Nation” for the past five consecutive years by Human Resource Executive®. He has decades of experience providing strategic employment advice, and has represented clients in more than 75 jury trials, arbitrations, bench trials and claims before the EEOC and Washington State Human Rights Commission.

Small and large employers retain Mike for his strategic advice and decades of experience in employment issues and litigation, business decisions and litigation avoidance. Mike provides advice in claims involving discrimination, retaliation, wrongful discharge, disability accommodation, ERISA and non-ERISA employee benefit claims, and wage/hour claims. He served as lead counsel in an employee raiding/trade secret case as reported in the Wall Street Journal, and defends employers in class action claims.

Mike’s remarks on employment issues have been quoted in NewsweekCorporate Legal TimesSeattle TimesEmployee Relations Law JournalPuget Sound Business JournalCFO.com, and other professional journals and management publications. Chambers USA’s Guide to America’s Leading Lawyers for Businessrates Mike in the top ranking (band one) for his work in labor and employment law, and has described him as “one of Seattle’s top-rate attorneys” who is “truly phenomenal [with] superb legal instincts” and “an amazingly assertive litigator.” His clients include Nordstrom, Seattle Seahawks, Home Depot, KeyBank, Starbucks, Fred Hutchinson Cancer Research Center, Red Robin and Seattle Chamber of Commerce, among others.