Wednesday, July 8, 2020

Either Yes or No: Court Rejects Efforts to Change Positions as to Diversity Jurisdiction

Either Yes or No: Court Rejects Efforts to Change Positions as to Diversity Jurisdiction

            In a decision of the Sixth Circuit Court of Appeals from this January, it was held that judicial estoppel prevented a party from reversing its position to afford it another bite at the apple.  Han v. Hankook Tire Co., Ltd., 799 Fed App’x 347 (6th Cir. 2020).

            In the first lawsuit, Han filed suit against Hankook Tire.  Joining her as a plaintiff was Peninsula Asset Management (Cayman), Ltd., a Caymen Islands company.  The trial court awarded Hankook Tire a summary judgment on her complaint. Han appealed, and in an earlier decision the Sixth Circuit determined that diversity jurisdiction was lacking in that there were foreign corporations on both sides of the dispute.  509 F.3d 271 (6th Cir. 2007). On that basis the case was remanded to the trial court. On remand Hankook argued that Peninsula Management was a “nominal” or dispensable” party who should be dismissed, allowing the summary judgment against Han’s claim to remain in place. Part of that position was based upon the fact that Peninsula Management had ceased doing business and was being wound-down.  Han would argue that Peninsula Management was “essential” to the case and that it could no be dismissed. The trial court agreed with Han, and in February, 2008, the case was dismissed for lack of jurisdiction.

            Now a decade later, Han refiled the action against Hankook Tire, both for herself and as the “real party in interest” of the now dissolved Peninsula Management, described by Han as being “defunct.” 

As the district court was analyzing Hankook’s motion to dismiss, it discovered that Han avoided summary judgment in the prior case by arguing that her claims could not proceed without Peninsula. Based on that fact, the district judge concluded that “allowing Han to proceed on this action without the presence of Peninsula would give Han the unfair advantage of essentially having a second bite of the apple.” To prevent that “unseemly maneuver,” the court applied the doctrine of judicial estoppel and dismissed Han’s claims with prejudice. Han filed a motion for reconsideration, which the court denied. 799 Fed. App’x at 349 (citations omitted).

From there the Sixth Circuit would review the elements of judicial estoppel (a later position that is “clearly inconsistent” with the prior position, having prevailed in the prior argument such that if they prevailed again “judicial acceptance of an inconsistent position in a later proceeding would create ‘the perception that either the first or the second court was misled,’” and unfair advantage) and found that Han’s position fell within each element.  On that basis the trial court’s dismissal of the complaint was affirmed.

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