Hatmaker v. Papa John's Ohio, LLC

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

WESTERN DIVISION AT DAYTON

TAMMY HATMAKER, et al., : Case No. 3:17-cv-00146

:

Plaintiffs, : District Judge Thomas M. Rose

: Magistrate Judge Sharon L. Ovington

vs. :

:

PAPA JOHN’S OHIO, LLC, et al.,

:

Defendants. :

:

REPORT AND RECOMMENDATION1

Plaintiff Stephen Hatmaker worked as a pizza-delivery driver at a Papa John’s

restaurant in Dayton, Ohio. (Doc. No. 84, ¶ 187). He claims that Defendants failed to

compensate him, and others similarly situated to him, with the minimum wages required

by the Fair Labor Standards Act (FLSA) and Ohio wage laws. The case is now before

the Court upon Defendants’ Motion to Dismiss Mr. Hatmaker’s claims (Doc. No. 157),

Mr. Hatmaker’s Memorandum in Opposition (Doc. No. 161), Defendants’ Reply (Doc.

No. 164), and the record as a whole.

The questions presented concern the impact, if any, Mr. Hatmaker’s past

bankruptcy case has on his claims in the present case.

I.

Plaintiffs filed their Complaint on April 27, 2017. Nearly three weeks later, on

1Attached is a NOTICE to the parties regarding objections to this Report and Recommendations.

May 15, 2017, Mr. Hatmaker filed a Chapter 7 bankruptcy petition in the U.S.

Bankruptcy Court for the Southern District of Ohio. (Doc. No. 157, PageID 3018-65).

That case wrapped up expeditiously: The Discharge of Debtor issued in September 2017,

and the bankruptcy court terminated the case in early October 2017. Id. at 3065-69.

During his bankruptcy proceedings, Mr. Hatmaker did not disclose the existence

of the claims he asserts in this case. He instead reported in his petition that he had no

claims pending against third parties. Id. at 3030 (Item 33). He also represented that he

had no contingent or unliquidated claims. Id. (Item 34). And he electronically signed his

petition declaring under penalty of perjury that the information he provided was true and

correct. Id. at 3049.

After Defendants filed their Motion to Dismiss Mr. Hatmaker’s FLSA and other

claims in the instant case, Plaintiffs’ attorney emailed the bankruptcy Trustee notifying

her about his FLSA and other claims. (Doc. No. 161, PageID 3142). This occurred on

August 12, 2020, more than three years after the present case began and almost three

years after Mr. Hatmaker’s bankruptcy case closed. The Trustee responded to Plaintiffs’

attorney that she was “not inclined to reopen…” Mr. Hatmaker’s bankruptcy case. Id. at

3140.

Mr. Hatmaker states in his sworn declaration (attached to his Memorandum in

Opposition), “I did not mean to mislead anyone through my bankruptcy filing.” Id. at

3148. He explains:

3. Before filing bankruptcy, I answered questions from a staff member

working for my bankruptcy attorney. When that staff member asked me the

questions, I did not realize she was asking me about a claim about vehicle

costs or reimbursements.

4. Later, my bankruptcy attorney’s office asked me to sign documents for

the bankruptcy case. I trusted my bankruptcy attorney’s office to prepare

those forms correctly.

Id.

Defendants seek dismissal of Mr. Hatmaker’s FLSA and other claims under Fed.

R. Civ. P. 12(b)(1) or, alternatively, under Rule 12(c).

II.

Defendants argue that dismissal of Mr. Hatmaker’s claims is proper under Rule

12(b)(1) because for lack of subject matter jurisdiction. Defendants point out that his

claims are assets of his bankruptcy estate and, consequently, he lacks standing to pursue

them in this case.

A Chapter 7 bankruptcy trustee “collect[s] and reduce[s] to money the property of

the estate for which the trustee serves....” 11 U.S.C. § 704(1)). Property of the estate

includes “all legal or equitable interests of the debtor in property as of the

commencement of the case.” Id. § 541(a)(1); see In re RCS Engineered Products Co.,

Inc., 102 F.3d 223, 225 (6th Cir. 1996). “It is ‘well settled that the interests of the debtor

in property’ includes ‘causes of action.’” In re Van Dresser, 128 F.3d 945, 947 (6th Cir.

1997) (quoting Bauer v. Commerce Union Bank, 859 F.2d 438, 441 (6th Cir. 1988)); see

RCS Engineered Products, 102 F.3d at 225; see also In re Graham Square Inc., 126 F.3d

823, 831 (6th Cir. 1997).

In the present case, Mr. Hatmaker claims that Defendants violated the FLSA and

state-law claims based on alleged events during his employment from about November

2015 to July 2016. (Doc. No. 157, PageID 3007). These alleged events—and therefore

his claims in the present case—arose before he filed his Chapter 7 bankruptcy proceeding

in May 2017. Indeed, Mr. Hatmaker knew about these claims the month before—April

2017 at the latest—when he became a plaintiff in the present case. These claims were

therefore the property of the bankruptcy Trustee who held “the exclusive right to

assert [them].” In re Van Dresser, 128 F.3d at 947. Mr. Hatmaker consequently lacks

standing to pursue his FLSA and state-law claims in the present case. Id.; see Siler v.

Wal-Mart Stores Inc., No. 3:03cv31, 2005 WL 1185805, at *3 (S.D. Ohio 2005) (Rose, J;

Ovington, MJ).

Plaintiffs contend that the Trustee abandoned Mr. Hatmaker’s present claims when

his attorney contacted her by email. As noted above, this occurred after Defendants filed

their pending Motion to Dismiss and after the Trustee responded that she was “not

inclined to reopen…” Mr. Hatmaker’s bankruptcy case. (Doc. No. 161, PageID 3140).

Abandonment of property by a bankruptcy trustee is not a pure fact question

because it is strictly governed by the Bankruptcy Code. Abandonment occurs in three

situations governed by statute: First, “[a]fter notice and a hearing, the trustee may

abandon any property of the estate that is burdensome to the estate or that is of

inconsequential value and benefit to the estate.” 11 U.S.C. § 554(a). Second, “[o]n

request of a party in interest and after a notice and a hearing, the [bankruptcy] court may

order the trustee to abandon any property ... that is burdensome ... or that is of

inconsequential value and benefit to the estate.” Id. § 554(b). Third, property that has

been “scheduled” in the bankruptcy case but that is “not otherwise administered at the

time of the closing of a case” is deemed abandoned by the debtor. Id. § 554(c). The

Bankruptcy Code specifically provides that property of the estate that is not abandoned in

one of these three situations remains property of the estate unless the bankruptcy court

orders otherwise. Id. § 554(d). In addition:

The language of [11 U.S.C. § 554(c)] deems abandoned to the debtor any

scheduled asset of the estate that remains unadministered at the close of the

case. Any asset concealed from the trustee or not scheduled by the debtor,

however, will not be deemed to have been abandoned.... The word

‘scheduled’ in § 554(c) has a specific meaning and refers only to assets listed

in a debtor’s schedule of assets and liabilities....

In re McCoy, 139 B.R. 430, 431-32 (Bkrtcy. S.D. Ohio 1991) (emphasis added); Rowland

v. The Mutual Life Ins. Co. of N.Y., 689 F.Supp. 793, 797 (S.D. Ohio 1988) (Spiegel, J)

(“As a general rule, there can be no abandonment by mere operation of law of property

that was not listed in the debtor’s schedule or otherwise disclosed to the creditors....”).

Indeed, “a cause of action that was never scheduled cannot be abandoned to the debtor …

pursuant to 11 U.S.C. § 554(d).” Anderson v. Acme Markets, Inc., 287 B.R. 624, 629

(E.D. Pa. 2002); see Rowland, 689 F.Supp. at 797. Because Mr. Hatmaker’s claims in

the present case were not scheduled in his bankruptcy case and because the Trustee has

not reopened, and is not inclined to reopen, his bankruptcy case, his claims were not

abandoned pursuant to § 554(d).

Plaintiffs oppose this conclusion. They contend—based on Hardesty v. Haber [In

re Haber], No. 2:16cv247, 2017 WL 1017731, at *2 (S.D. Ohio 2017)—that the

Trustee’s email message expressly abandoned Mr. Hatmaker’s FLSA and state-law

claims. But Haber does not assist Mr. Hatmaker. The issue in Haber concerned whether

the trustee abandoned surplus proceeds from the sale of real property that he had

effectively abandoned. Id. at *2-*3. Unlike the present case, there was no concern in

Haber over whether the Trustee had abandoned the real property itself in one of the three

situations delineated in 11 U.S.C. § 554(a)-(c). This is seen both in Haber and in the

underlying bankruptcy court’s decision, which reports, “the Trustee in this case

abandoned the Real Property pursuant to 11 U.S.C. § 554(a) as evidenced by the

Abandonment that was filed.” In re Haber, 547 B.R. 252, 259 (Bkrtcy. S.D. Ohio 2016).

No similar abandonment occurred in Mr. Hatmaker’s bankruptcy case, and as a result,

Haber provides no support for Plaintiffs’ argument that the Trustee has abandoned Mr.

Hatmaker’s causes of action.

Accordingly, Mr. Hatmaker lacks standing to proceed with his claims in the

present case. Even if Mr. Hatmaker has standing in this case, another stubborn barrier

blocks his way forward.

III.

Defendants contend that dismissal of Mr. Hatmaker’s claims is warranted under

Fed. R. Civ. P. 12(c) because he did not report their existence during his bankruptcy

proceedings. They reason that the doctrine of judicial estoppel bars his FLSA and other

claims due to his sworn representations to the bankruptcy court that no such claims

existed.

A Rule 12(c) motion for judgment on the pleadings generally animates the same

standards as its close cousin, Fed. R. Civ. P. 12(b)(6). Jackson v. City of Cleveland, 925

F.3d 793, 806 (6th Cir. 2019).

Courts must accept as true all well-pleaded factual allegations, but they need

not accept legal conclusions. And the well-pleaded factual allegations must

“plausibly give rise to an entitlement to relief.” Pleaded facts will do so if

they “allow[ ] the court to draw the reasonable inference that the defendant

is liable for the misconduct alleged.” Pleaded facts will not do so if they “are

‘merely consistent with’ a defendant’s liability.”

Bates v. Green Farms Condominium Ass'n, 958 F.3d 470, 480 (6th Cir. 2020) (quoting

Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009)).

“The doctrine of judicial estoppel ‘generally prevents a party from prevailing in

one phase of a case on an argument and then relying on a contradictory argument to

prevail in another phase.’” White v. Wyndham Vacation Ownership, Inc., 617 F.3d 472,

476 (6th Cir. 2010) (quoting New Hampshire v. Maine, 532 U.S. 742, 749 (2001)). Its

goal is “to preserve the integrity of the courts by preventing a party from abusing the

judicial process through cynical gamesmanship.” Browning v. Levy, 283 F.3d 761, 776

(6th Cir. 2002); see New Hampshire, 532 U.S. at 750 (“Because the rule is intended to

prevent ‘improper use of judicial machinery,’ judicial estoppel ‘is an equitable doctrine

invoked by a court at its discretion[.]’”).

In the bankruptcy context, “‘judicial estoppel bars a party from (1) asserting a

position that is contrary to one that the party has asserted under oath in a prior

proceeding, where (2) the prior court adopted the contrary position ‘either as a

preliminary matter or as part of a final disposition.’” White, 617 F.3d at 476 (quoting

Browning, 283 F.3d at 775-76).

Mr. Hatmaker’s circumstances fit well within these. First, he did not disclose his

extant FSLA and other claims in his bankruptcy proceedings even though he raised them

in this case less than one-month before filing his bankruptcy petition. “‘[A] cause of

action is an asset that must be scheduled under § 521[a](1).’ A debtor is required to

disclose all potential causes of action, and, because this duty to disclose is continuous,

this includes even those of which the party becomes aware after filing for bankruptcy.”

Couch v. Certified Flooring Installation, Inc., 439 F.Supp.3d 964, 971-72 (S.D. Ohio

2020) (Cole, J) (quoting Lewis v. Weyerhaeuser Co., 141 F. App’x 420, 424 (6th Cir.

2005)). Second, the bankruptcy court’s discharge accepted Mr. Hatmaker’s statement

that he had no potential causes of action. Holoman v. Stoneridge, Inc., No. 1:09 CV

1025, 2009 WL 10713888, at *5 (N.D. Ohio 2009) (“[plaintiff’s] pursuit of her claims

against defendant is ‘contrary to’ her sworn bankruptcy petition ... [and] the Bankruptcy

Court confirmed [the plaintiff’s] plan ... [and] thereby ‘accepted’ the prior assertions”);

Davis v. Fiat Chrysler Automobiles U.S., LLC, 747 F. App’x 309, 314 (6th Cir. 2018)

(“The bankruptcy court confirmed Davis’s bankruptcy plan without the potential claim

listed as an asset, which is sufficient to satisfy the second consideration.”).

The news so far has been foreboding for Mr. Hatmaker. But his claims might still

survive. When the party—the contrarian—did not act in bad faith, judicial estoppel is

nullified. White, 617 F.3d at 476. Thus, judicial estoppel does not apply “‘when the

conduct amounts to nothing more than mistake or inadvertence.’” Id. (quoting Browning,

283 F.3d at 776) (other citation omitted). “Two circumstances in which a debtor’s failure

to disclose might be deemed inadvertent are: (1) ‘where the debtor lacks knowledge of

the factual basis of the undisclosed claims,’ and (2) where ‘the debtor has no motive for

concealment.’” Id. (quoting Browning, 283 F.3d at 776) (omitting parenthetical).

Mr. Hatmaker did not lack knowledge of his present FSLA claims or related state-

law claims. Instead, Plaintiffs—including Mr. Hatmaker—initiated this FLSA case less

than a month before he filed his bankruptcy petition. He also had a motive to conceal his

FLSA claims and related state-law claims during his bankruptcy proceedings. “[C]ourts

have repeatedly held that the financial incentive to avoid disclosing the claim in

bankruptcy (thus allowing the debtor potentially to keep the proceeds for him- or herself)

is sufficient evidence of a ‘motive for concealment’ (prong 2).” Couch, 439 F.Supp.3d at

972 (citations omitted).

Plaintiffs contend that Mr. Hatmaker’s sworn Declaration constitutes evidence that

establishes his lack of bad faith or, at a minimum, the presence of a genuine factual issue

regarding his bad faith. He first points to his statement, “I did not mean to mislead

anyone through my bankruptcy filing.” (Doc. No. 161, PageID 3184). Accepting this as

true does not counter the fact that he did mislead the bankruptcy court by not including

his FLSA and other claims in his petition. These omitted claims misled the bankruptcy

court even if he did not mean to mislead it. More significantly, he did nothing to correct

his petition during the pendency of his bankruptcy case. Such efforts might in some

instances show an absence of bad faith, but “[s]ince the bankruptcy system depends on

accurate and timely disclosures, the extent of these efforts, together with their

effectiveness, is important.” White, 617 F.3d at 480. Mr. Hatmaker attempted to correct

the bankruptcy record only once—and quite belatedly. He waited until well after his

bankruptcy case closed and his debts were discharged to contact the trustee (through his

attorney’s emails) to inform her about his FLSA and other claims. This occurred nearly

three years after his bankruptcy case closed and after Defendants asserted judicial

estoppel in their pending Motion to Dismiss his claims in this case. This limited and

belated effort provides no foundation for finding an absence of bad faith. “To allow a

party to avoid judicial estoppel by rectifying omissions after a motion to dismiss has been

filed ‘would encourage gamesmanship’ and defeat the purpose of the doctrine.” Newman

v. University of Dayton, 751 F. App’x 809, 815 (6th Cir. 2018) (citing White, 617 F.3d at

481).

Mr. Hatmaker also states, “Before filing bankruptcy, I answered questions from a

staff member working for my bankruptcy attorney. When that staff member asked me

the questions, I did not realize she was asking me about a claim about vehicle costs or

reimbursements. Later, my bankruptcy attorney’s office asked me to sign documents for

the bankruptcy case. I trusted my bankruptcy attorney’s office to prepare those forms

correctly.” (Doc. No. 161, PageID 3148, ¶s 3-4). Accepting these statements as true

does not assist Plaintiff in showing an absence of bad faith. See Newman, 751 F. App’x

at 815 (rejecting the plaintiff’s argument that he relied upon the advice of counsel when

he did not disclose his employment claims to the bankruptcy court); White, 617

F.3d at 483-84 (finding unpersuasive the plaintiff’s argument that the bankruptcy attorney

failed to include her harassment claim in the bankruptcy filings and that her attorney’s

mistake should excuse her omission of her harassment claim to be unpersuasive); Lewis,

141 F. App’x at 427 (holding that the plaintiff was bound by the errors of her attorney).

Tacking in another direction, Plaintiffs argue that Defendants have waived judicial

estoppel by not including it as an affirmative defense in their pleadings. “But judicial

estoppel is not an affirmative defense within the meaning of the federal rules, it is ‘an

equitable doctrine invoked by the court at its discretion.’” Green v. Liberty Insurance

Corp., 220 F.Supp.3d 842, 849 (E.D. Mich. 2016) (quoting New Hampshire, 532 U.S. at

750); see Mirando v. U.S. Dept. of Treasury, 766 F.3d 540, 544 (6th Cir. 2014) (applying

judicial estoppel when doctrine first raised by defendant in its reply brief for summary

judgment). Because of this, Defendants could not, and have not, waived judicial estoppel

as to Mr. Hatmaker’s claims. Green, 220 F.Supp.3d at 849.

To avoid this conclusion, Plaintiffs rely on two district-court cases—Cotton v. City

of Cincinnati, No. 1:11cv00389, 2013 WL 1438030, at *4 (S.D. Ohio 2013) and E.E.O.C.

v. New Breed Logistics, 962 F.Supp.2d 1001, 1022 (W.D. Tenn. 2013)—which describe

judicial estoppel as an affirmative defense. Neither Cotton nor New Breed Logistics

mentions the equitable nature of judicial estoppel. Green, the case credited in the

previous paragraph, does by relying on the Supreme Court’s description of judicial

estoppel as “‘an equitable doctrine invoked by the court at its discretion.’” 220

F.Supp.3d at 849 (quoting New Hampshire, 532 U.S. at 750). Consequently, on this

point of law Green holds more water than Cotton or New Breed Logistics.

Lastly, Plaintiffs rely on laches—“the negligent and unintentional failure to

protect one’s rights ….” Elvis Presley Enterprises, Inc. v. Elvisly Yours, Inc., 936 F.2d

889, 894 (6th Cir. 1991). They contend that laches bars Defendants attempt to invoke

judicial estoppel to support dismissal of Mr. Hatmaker’s claims because Defendants

waited more than three years after filing this case to assert this defense. This prejudices

Mr. Hatmaker, according to Plaintiffs, due to the time and money he has spent litigating

this case as a representative of the conditionally certified collective.

To successfully apply laches, Plaintiffs must show: (1) a lack of diligence by

Defendants in asserting judicial estoppel, and (2) prejudice to them (Plaintiffs) caused by

Defendants’ lack of diligence. See Herman Miller, Inc. v. Palazzetti Imports & Exports,

Inc., 270 F.3d 298, 320-21 (6th Cir. 2001).

This case began in late April 2017. Defendants filed their present Motion

asserting judicial estoppel in August 2020. This three-plus-year gap in time seems too

long, and laches-like, at first glance. But the delay was due to the large size of this

conditionally certified FLSA collective action (Doc. No. 30), potentially involving “over

800 delivery drivers who have joined the case and, if certified, an Ohio Rule 23 Class.”

(Doc. No. 161, PageID 3128). This large size has led to an unusual procedural history

that has included an extensive period of time for delivery drivers to opt into the

conditionally certified collective, and two stays of the case (4 months in 2017; 2 months

in 2018) to give the parties time to mediate and possibly settle their disputes. More

significantly, Defendants’ Interrogatories in May 2018 asked Mr. Hatmaker if he had

ever been a party to other civil litigation, including bankruptcy. He did not reveal his

previous bankruptcy case when he answered the interrogatories on or about February 7,

2020. (Doc. No. 164, PageID 3172, 3188-89). It was not until May 12, 2020 that Mr.

Hatmaker informed Plaintiffs about his bankruptcy.2 See id. at 3194. Only three months

2Plaintiffs’ attorney’s letter on April 24, 2020 indicates that “Plaintiffs [sic] Hatmaker” (perhaps meaning

Tammy and Stephen Hatmaker) and “Plaintiff Hatmaker” filed for bankruptcy in 2017. (Doc. No. 164,

PageID 3194). Plaintiffs’ attorney clarified by email on May 12 that Tammy Hatmaker had not filed for

bankruptcy but Mr. Hatmaker had in 2017. Id. at 3196.

passed between the date Plaintiffs informed Defendants about Mr. Hatmaker’s

bankruptcy and the date Defendants asserted judicial estoppel against Mr. Hatmaker (in

their Motion to Dismiss). This relatively brief period of time fails to show a lack of

diligence by Defendants. Consequently, laches does not bar Defendants’ present reliance

on judicial estoppel.

IT IS THEREFORE RECOMMENDED THAT:

Defendants’ Motion to Dismiss Mr. Hatmaker’s claims (Doc. No. 157) be

GRANTED.

November 4, 2020 s/Sharon L. Ovington

Sharon L. Ovington

United States Magistrate Judge

NOTICE REGARDING OBJECTIONS

Pursuant to Fed. R. Civ. P. 72(b), any party may serve and file specific, written

objections to the proposed findings and recommendations within FOURTEEN days after

being served with this Report and Recommendations. Such objections shall specify the

portions of the Report objected to and shall be accompanied by a memorandum of law in

support of the objections. If the Report and Recommendation is based in whole or in part

upon matters occurring of record at an oral hearing, the objecting party shall promptly

arrange for the transcription of the record, or such portions of it as all parties may agree

upon or the Magistrate Judge deems sufficient, unless the assigned District Judge otherwise

directs. A party may respond to another party’s objections within FOURTEEN days after

being served with a copy thereof.

Failure to make objections in accordance with this procedure may forfeit rights on

appeal. See Thomas v. Arn, 474 U.S. 140 (1985); United States v. Walters, 638 F.2d 947,

949-50 (6th Cir. 1981).