Cloud v. Northrop Grumman Corp

In Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, a terminated employee filed for chapter 7 bankruptcy protection. She later brought a wrongful termination and sexual harassment action against her former employer, but had not disclosed any such claim in her bankruptcy action. (Id. at pp. 998-999.) The trial court granted the defendants' motion for judgment on the pleadings in part on the ground that the employee was judicially estopped from pursuing her claim. (Id. at p. 1000.) In reversing the trial court, the Court of Appeal stated: "a defense of judicial estoppel raises factual issues. (See, e.g., Ryan Operations G.P. v. Santiam-Midwest Lumber Co. (3d Cir. 1996) 81 F.3d 355.) These factual issues could not be decided solely by reviewing plaintiff's complaint and matters that could be judicially noticed, and hence could not be decided on a motion for judgment on the pleadings." (Id. at p. 1000.) In particular, the court held that nondisclosure in bankruptcy filings, standing alone, was insufficient to support a finding of bad faith intent, which was necessary in that context to satisfy the fifth element of judicial estoppel--absence of ignorance, fraud, or mistake. (Cloud v. Northrop Grumman Corp., supra, 67 Cal.App.4th at p. 1019.) Accordingly, the court concluded that there was evidence which could negate the findings necessary to support the application of judicial estoppel (i.e., the debtor could have "made a mistake born of misunderstanding, ignorance of legal procedures, lack of adequate legal advice, or some other innocent cause," rather than "engaged in a deliberate scheme to mislead and gain unfair advantage"). (Id. at p. 1020.) Thus, the trial court should not have decided the issue on a motion for judgment on the pleadings. (Ibid.)