Bar Journal - Summer 2006
Estopped in the Name of the Law
By: David Hall
The Very Real and Very Harsh Consequences of
“Prior Success" and Playing “Fast and Loose” in New Hampshire
“Summary judgment granted.” Months of work have just vanished because of something the judge referred to as judicial estoppel. You have no idea what that is and your client is looking to you for an explanation. Every lawyer dreads being in such a position, yet this is now what potentially awaits New Hampshire lawyers who carelessly, or knowingly, assert a position of fact in a current proceeding that is irreconcilable with one asserted in an earlier proceeding. The doctrine of judicial estoppel seeks to prevent a party from taking such inconsistent positions and “making a mockery of justice.”1 The result is that a party is precluded from bringing the action altogether —a harsh result indeed. Adding further concern and complication is that the earlier position does not need to have been asserted by the current attorney, since application of judicial estoppel is tied to the party.2
The New Hampshire Supreme Court recently adopted the doctrine of judicial estoppel. While the Court was silent on what prompted it to do so, it has wasted no time in employing judicial estoppel, applying the doctrine to two cases in 2005.3 Thus, it is time for New Hampshire practitioners to learn about, guard against, and, in appropriate cases, invoke judicial estoppel. In Part I of this article, I will distinguish judicial estoppel from other forms of estoppel; discuss the origins of judicial estoppel; explain its various permutations; discuss the mechanics of its application; and present the conflict over applying the state or federal version in federal courts. Part II will trace the emergence and progression of judicial estoppel in New Hampshire case law. Finally, Part III will present and discuss the practical effects and consequences of adopting judicial estoppel.
Judicial estoppel is an equitable doctrine, but a relatively uncommon one.4 More so than its better known cousins, collateral estoppel (issue preclusion), res judicata (claim preclusion) and equitable estoppel, judicial estoppel is misunderstood and misapplied.5 However, practitioners should be aware of its possible application as it can just as easily prevent a party from bringing or defending a claim as its more well-known relatives. It is being used frequently in bankruptcy cases, but has also seen service “in property, tort, contract, and commercial and business law cases,” and even criminal cases.6
Additionally, unlike these other related equitable doctrines, judicial estoppel does not need to be pled by an adverse party and can be invoked sua sponte by the court.7
Bankruptcy provides a good example of how judicial estoppel is employed.8 Those who declare bankruptcy must file petitions for relief and corresponding schedules.9 In doing so, the debtor asserts a position that is relied upon by creditors and the bankruptcy court.10 Frequently, however, debtors do not list pending or possible causes of action against third-parties, and seek to pursue these claims after the bankruptcy court has relied on the debtor’s factual assertions to reach its decision.11 The third-parties then use the debtor’s failure to include the future action on the petition for relief and schedules as the basis for invoking judicial estoppel.12 The result is that the debtor cannot pursue the claim.
I. Judicial Estoppel
The doctrine of judicial estoppel prevents a party from asserting a factual position that is directly contrary to another taken in the same or a previous judicial proceeding.13 It is intended to prevent litigants from playing “fast and loose” with the courts and to protect the integrity of the judicial process by preventing manipulation by “chameleonic litigants” who, “deliberately shift positions to suit the exigencies of the moment.”14 Applying the doctrine is especially justified when withholding it would prejudice the non-contradicting party.15
While judicial estoppel is applied in narrow circumstances, its use demands a high price because it limits the justice-seeking and truth-seeking purposes of the courts.16 By not allowing a party to assert a position contrary to a previous one, neither the truth of the first or second statement is thoroughly examined.17 These sacrifices are seen as too harsh to permit a liberal application of the doctrine.18 As a result, the doctrine should be applied cautiously and only when the facts of the particular case require.19
There are limitations to the use of judicial estoppel. It should not be used when a party is now asserting an inconsistent opinion or legal position.20 Neither should it be used when a party has adjusted its position as a result of a change in the law.21 Finally, it should not be applied in cases where a party was forced to advocate its earlier position on account “of mistake, inadvertence, or fraud.”22 Thus, applying the doctrine against a party who took a position it ostensibly would not have otherwise taken would be inappropriate. In order to apply judicial estoppel, the two factual positions must be “truly inconsistent” so that “the truth of one must necessarily preclude the truth of [the] other.”23 The mere appearance of inconsistency is not sufficient.
A. Other Forms of Estoppel and Preclusion
Judicial estoppel is appropriate in circumstances where other forms of estoppel do not apply.24 However, because it is relatively unknown, the purposes it serves and its proper application are often misunderstood. Some of this can be attributed to confusion between judicial estoppel and its more well-known cousins.25 Regardless, judicial estoppel has the same debilitating effect on a party’s ability to pursue litigation as do collateral estoppel, res judicata, and equitable estoppel.
1. Collateral Estoppel (Issue Preclusion)
The differences between collateral estoppel and judicial estoppel are fairly clear. Collateral estoppel bars a party from relitigating an issue of ultimate fact.26 Because these issues have already been fully litigated, collateral estoppel’s bar on repetitive litigation serves to conserve judicial resources.27
Hoult v. Hoult28 illustrates the application of collateral estoppel. In Hoult, the defendant was successful in an earlier action in which she claimed the plaintiff, her father, had committed assault and battery.29 The defendant gave descriptions of the abuse and rapes she had suffered.30 After the verdict, the defendant made several claims that her father raped her, which prompted the father to sue for defamation.31 The daughter maintained that the verdict in her earlier assault action required the jury to determine that her father had raped her, and the defamation claim was now barred by collateral estoppel.32 Despite the fact that the jury made no explicit finding of rape, the Court stated that “an issue may be ‘actually’ decided [for collateral estoppel purposes] even if it is not explicitly decided, for it may have constituted, logically or practically, a necessary component of the decision reached.”33 The court found that “the rape charges were the centerpiece of” the earlier assault action and upheld the application of collateral estoppel.34 According to the Hoult court, “[w]hether the jury was right or wrong” was not open to relitigation.35
In contrast, judicial estoppel prevents a party from asserting inconsistent positions, whether or not they have been fully considered in either proceeding.36 The difference between the two is that collateral estoppel precludes a party from taking the same position on an issue that has been fully adjudicated, while judicial estoppel only limits a party from taking clearly inconsistent positions on a particular issue.37 Thus, judicial estoppel does not necessarily bar re-litigation of an issue.38
2. Res Judicata (Claim Preclusion)
The differences between res judicata and judicial estoppel are more pronounced. Res judicata prevents a party from relitigating a claim that has been fully adjudicated.39 Because all litigants, in theory, had an opportunity to bring claims arising out of the same transaction or occurrence in the first proceeding, subsequent claims based on that same transaction or occurrence are barred.40 Similar to collateral estoppel, the bar on subsequent litigation serves to conserve judicial resources, but also to protect the finality of judgments.41 Res judicata requires privity between the parties and a final adjudication on the merits of the case.42 In contrast, judicial estoppel does not require privity and the prior and subsequent actions can stem from wholly different transactions or occurrences.43
3. Equitable Estoppel
The distinction between equitable estoppel and judicial estoppel is less clear. In fact, courts frequently confuse the two doctrines.44 This is because they are both directed toward sanctioning parties who take inconsistent positions.45 However, they differ in their elements and ultimate goals. Equitable estoppel focuses on ensuring fairness between parties in litigation and preventing prejudice that may result from a change in position.46 Judicial estoppel, on the other hand, seeks to protect the integrity of the judicial system by preventing the “intentional assertion of an inconsistent position that perverts the judicial machinery,”47 irrespective of prejudice.
In New Hampshire, “[e]quitable estoppel serves to forbid one to speak against his own act, representation or commitments communicated to another who reasonably relies upon them to his injury.”48 A party seeking to prove equitable estoppel must show: “(1) a knowingly false representation or concealment of material facts; (2) a recipient who was intentionally, or through culpable neglect, induced to rely upon the false representation or concealment, ignorant of the truth; and (3) a resultant injury.”49 Thus, equitable estoppel requires privity, reliance, and prejudice, none of which are required under judicial estoppel.50
B. Origin of Judicial Estoppel
The Tennessee Supreme Court developed and first applied the doctrine of judicial estoppel in 1857.51 In Hamilton v. Zimmerman,52 the parties made conflicting statements in regards to an alleged partnership. Hamilton claimed that he was a secret partner of Zimmerman, while Zimmerman disavowed any partnership relationship and claimed Hamilton was only a clerk.53 The Court noted that both parties had made frequent public statements that contradicted the positions they were then asserting.54 The Court did not rely on these out-of-court statements in its decision, however. In deciding that Hamilton could not now assert that he was a partner, the Court instead relied on statements he had made in a prior court proceeding with Zimmerman.55 In those statements, Hamilton affirmatively agreed to the truth of Zimmerman’s statement that Hamilton was employed as a clerk. The Court, in explaining its decision, placed the roots of the doctrine
in the policy of the law to suppress the mischiefs from the destruction of all confidence in the intercourse and dealings of men, if they were allowed to deny that, which by their solemn and deliberate acts, they have declared to be true. And this doctrine applies with peculiar force, to admissions or statements made under the sanction of an oath, in the course of judicial proceedings.56
In developing the doctrine, the Hamilton Court placed emphasis on protecting the sanctity of the oath of the court,57 the integrity of, and the public’s faith in the judicial system.58 Judicial estoppel has since been adopted throughout the country,59 However, even the courts that recognize the doctrine have difficulty agreeing on what triggers its application.60
When considering whether to apply judicial estoppel, courts generally examine three factors: (1) whether a party’s later position is “clearly inconsistent” with its earlier position; (2) whether the party has succeeded in persuading a court to accept that party’s earlier position; and (3) whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.61 These factors are not exhaustive and others may be considered, depending on the factual circumstances.62 Indeed, deciding whether to apply judicial estoppel is “probably not reducible to any general formulation of principle.”63
C. The Three Versions of Judicial Estoppel
Not only is the doctrine fluid, but jurisdictions do not apply it uniformly.64 In evaluating the second factor, most jurisdictions either look to whether a prior position was judicially accepted, or to whether a party is trying to play “fast and loose” with the court.
1. The Absolute Rule
The Hamilton court crafted judicial estoppel as an absolute rule.65 Because the reason for creating the doctrine was to protect the sanctity of the judicial oath, any factual position taken in a prior judicial proceeding could be used to bar a later, inconsistent position.66 By creating an absolute rule, the Court hoped to instill an appreciation for honesty in participants in the judicial process and ensure that parties do not maintain inconsistent positions.67 This goal could not be achieved with inconsistent application and the absolute rule was necessary.68
The absolute rule, although still used by the Tennessee courts, has not been adopted by any other jurisdiction.69 Its broad implications and harsh consequences do not always comport with equitable principles.70 Sacrificing the courts’ essential truth-seeking function and the loss of the parties’ legal rights may be too high a price for any increase in judicial integrity.71 Jurisdictions that have embraced the doctrine of judicial estoppel have thus opted to narrow its application.
2. The “Prior Success” Rule
The “prior success” rule is the majority position.72 It applies to a party who is attempting to contradict previous statements that it was successful in maintaining in a previous proceeding.73 That does not mean that the party had to have been successful in the first lawsuit.74 Instead, the court in the first proceeding merely had to accept the assertion as true.75 This rule differs from the absolute form in that it is primarily concerned with preserving the integrity of the judicial process by preventing “injuries to the court’s integrity that arise from inconsistent results.”76 Inconsistent results indicate that one of the courts has been “led astray” and underscores the deficiencies in our adversarial system.77
Although this more restricted application eliminates some of the overbreadth of the absolute rule, the “prior success” variant has its own shortcomings.78 The most significant is determining what actually constitutes prior success, since it can mean anything from total victory on the merits to merely the adoption of a party’s factual assertion during a preliminary court proceeding.79 Since juries and courts do not always explain what positions and assertions they relied upon in reaching their decisions, it is difficult for a later court to determine what was accepted.80 The benefit of this rule, however, is that it is more discriminating in its application than the absolute rule.81 Its narrower application assures that the harsh consequences associated with the doctrine are only exacted when there is risk of inconsistent results,82 as opposed to the non-discriminating application of Tennessee’s absolute rule.
3. Playing “Fast and Loose” with the Court
The minority position does not require prior judicial acceptance of a party’s statement.83 Instead, it looks to whether a party has played “fast and loose with the court.”84 What constitutes “playing fast and loose” is clarified in Patriot Cinemas Inc. v. General Cinema Corp., which held that this form of judicial estoppel seeks to bar “self-serving self-contradiction.”85
In Patriot Cinemas, the plaintiff lodged a four-count complaint against General Cinemas.86 Through various procedural maneuvers, Partriot’s original four-count complaint had been split into a three-count claim in state court, with the remaining count on appeal to the First Circuit.87 The issue for the First Circuit was whether the one-count state antitrust claim was properly dismissed or should it have been remanded to state court.88 In order to avoid a stay of the state proceedings, Patriot Cinemas represented to the state court that it would not pursue a separate state claim, regardless of the outcome of the pending federal appeal.89 The state court denied General Cinema’s stay request, but did not explain why.90 On this basis, General Cinema moved to dismiss the federal appeal as moot.91 Since Patriot Cinemas asserted that it would not pursue the underlying state antitrust claim, whether the claim on appeal should have been remanded to state court was moot and, thus, so was the appeal.92 Patriot Cinemas, in federal court, then repudiated its assertion that it would not pursue the three-count state antitrust claim.93
In finding that judicial estoppel applied, the court stated:
Patriot can be said to have made a bargain with the superior court. It traded its chance for success on the antitrust claim for an increased pace in the proceedings on the remaining three counts. . . .
Now, however, Patriot wants to have it the other way: it wants to revive its antitrust claim and have it remanded to the state court while enjoying the benefit of the increased pace of its current state action . . . . This is the sort of self-serving self-contradiction, or “playing fast and loose with the courts,” that is barred by the doctrine of judicial estoppel.94
The First Circuit recognized that this was not a “classic” case of judicial estoppel, but noted that the district courts were applying judicial estoppel increasingly in cases where a party declares an intention not to pursue a claim.95
The “fast and loose” approach in Patriot Cinemas highlights the shortcomings of the “prior success” rule. Because the state court did not provide its reasoning as to why it denied General Cinema’s stay request, it was impossible for the First Circuit to determine on which positions or assertions the state court had relied.96 The use of the “fast and loose” approach has been justified in order to maintain a level judicial playing field and to enforce “bargains” made between a litigant and the court.97 However, the reasoning behind the “fast and loose” approach has been criticized as insufficient justification for the harsh sanctions of judicial estoppel.98 Instead, some urge that whether a party has bargained with the court should be only a factor in deciding whether or not to invoke judicial estoppel, and then only in cases of intentional self-contradiction.99
D. The Mechanics of Judicial Estoppel
Judicial estoppel can be raised either by a party or sua sponte by the court.100 Since the focus of judicial estoppel is the party,101 its target should be the party alleged to be asserting the contrary factual position, not a witness or counsel. More specifically, the target is the party’s factual position, not his opinion or legal argument.102 Additionally, the factual position should be one of legal relevance and directly contradictory to the prior claim.103 Finally, judicial estoppel can be applied regardless if the prior inconsistent statement occurred in state or federal court.104 However, if the subsequent proceeding takes place in federal court, then that court must resolve whether to apply the state or federal version of judicial estoppel under Erie Railroad v. Tompkins.105
E. The Erie Factor
In Erie, the Supreme Court held that federal courts must apply substantive state laws in diversity actions.106 The issue here, then, is whether federal courts consider judicial estoppel a substantive rather than a procedural law. There is a split among the circuits.107 Those in favor of regarding judicial estoppel as substantive and applying the state version in federal court point to the inconsistent results that derive from the application of different versions of the doctrine.108 Additionally, applying the federal circuit’s version could promote forum shopping, which is exactly what Erie sought to curtail.109 Those that regard judicial estoppel as procedural, and thus favor applying the federal version, point to the countervailing interest in preserving the judicial integrity of the federal courts,110 which must be allowed to develop principles that best serve that interest.111
Of the two arguments, the one in favor of regarding judicial estoppel as procedural appears to have more force. Judicial estoppel does not give litigants substantive rights; its purpose is to protect the courts, not litigants;112 and proponents have offered more convincing reasoning for their position.113 This issue has not been raised in the First Circuit.114
II. Judicial Estoppel and New
The doctrine of judicial estoppel has only recently been adopted by the New Hampshire Supreme Court. The development of judicial estoppel in New Hampshire’s common law can be traced through four recent cases: New Hampshire v. Maine, In re Pack Monadnock, Kelleher v. Marvin Lumber & Cedar Co., and Cohoon v. IDM Software, Inc.115
A. New Hampshire v. Maine
In New Hampshire v. Maine, the United States Supreme Court confronted the issue of where the boundary lies between the two states. A 1740 decree by King George II stated that the boundary was located at the “Middle of the [Piscataqua] River.”116 In a 1977 proceeding in the United States Supreme Court, New Hampshire agreed that the boundary ran along the main channel of navigation in the Piscataqua River.117 Because of the judicial acceptance of its prior factual position, New Hampshire was judicially estopped from claiming in 2001 that the boundary ran along the Maine shore as marked by low tide.118
In deciding to apply the “discrete doctrine” of judicial estoppel, the Court noted the unsuitability of res judicata or collateral estoppel to “the unusual circumstances” of the case.119 The Court analyzed a three-factor test to decide whether to determine whether judicial estoppel barred New Hampshire from asserting its 2001 position. “First, a party’s later position must be ‘clearly inconsistent’ with its earlier position.”120 Second, the party had to have “succeeded in persuading a court to accept that party’s earlier position.”121 Third, “the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.”122 However, the Court noted that these three factors are not “inflexible prerequisites or an exhaustive formula” and “[a]dditional consideration may inform . . . in specific factual contexts.”123
In deciding that the application of judicial estoppel was appropriate, the Court made three points. First, New Hampshire’s claim that the boundary now ran along the Maine low-tide coast was clearly inconsistent with its previous position. In the 1977 litigation, New Hampshire offered two interpretations of “Middle of the River.”124 One was that it meant the main channel of navigation, and the other was that it meant the geographic middle of the river.125 Both of these were different than Maine’s low-tide coast.126 Second, a joint agreement between New Hampshire and Maine that “Middle of the River” denoted the middle of the main navigable channel had been accepted by the Court in 1977.127 Third, New Hampshire did benefit from the settlement of the earlier dispute.128 In the joint agreement, New Hampshire stated that the settlement was “in the best interest of each State.”129
Under these circumstances, the Court could not allow New Hampshire to “[urge] an inconsistent interpretation to gain an additional advantage at Maine’s expense” and “risk . . . inconsistent court determinations” that would “[undermine] the integrity of the judicial process.”130 The Court recognized the inapplicability of judicial estoppel to cases of “inadvertence or mistake,” but found that New Hampshire had ample access, opportunity, and incentive to engage in an enquiry of the term “Middle of the River.”131 Although a United States Supreme Court decision, the test in New Hampshire v. Maine was later adopted by the New Hampshire Supreme Court.
B. In re Pack Monadnock
The New Hampshire Supreme Court first recognized judicial estoppel in In re Pack Monadnock.132 However, in Pack Monadnock, because of the specific facts of the case, the Court did not have to decide whether to adopt the doctrine.133 In Pack Monadnock, based on the State’s reference to a charitable trust in its petition for instructions to the probate court, the plaintiff sought to judicially estop the state from later asserting to the Court that a charitable trust had not been created.134 The petition for instructions requested the probate court to advise the state whether it could continue to use a tract of land “conveyed to it in 1891 as a charitable trust.”135
In examining the three-factor test from New Hampshire v. Maine, the court noted that even if the Court did adopt judicial estoppel, it would not have benefited the plaintiff.136 The state did not “unequivocally assert that the deed created a charitable trust,” and there was a lack of evidence to show “that the State succeeded in persuading . . . the . . . court to accept its earlier representation that the deed created a charitable trust.”137 Thus, the plaintiff could not have satisfied the first two factors of the New Hampshire v. Maine test.138 Because neither court acted on the basis of the state’s characterization of the trust as a charitable trust, there was no risk of inconsistent results.139
C. Kelleher v. Marvin Lumber & Cedar Co.
The Court’s next chance to consider whether to adopt judicial estoppel came more than three years later in Kelleher v. Marvin Lumber & Cedar Co.140 Without fanfare or explanation, the Court adopted the doctrine.141 The Court also adopted the three factors expounded by the United States Supreme Court in New Hampshire v. Maine.142
The Court found that the defendant, a window manufacturer, was judicially estopped from asserting that a one-year warranty applied to a wood preservative used in its windows.143 In a prior proceeding, the defendant had asserted that a warranty longer than one year applied to the wood preservative.144 The Court found these positions to be “clearly inconsistent.”145
The Court also found that the defendant had succeeded in persuading the Court in the earlier proceeding to accept its position.146 The defendant prevailed in the first proceeding because the Court had relied on representations that the preservative used to treat the windows would last longer than the one-year warranty the defendant argued for in the second proceeding.147 Because the defendant prevailed in the first proceeding and collected over $100 million in damages, the Court held that it had “prior success” with its earlier position at the later proceeding.148
The third factor was also satisfied. The Court concluded that the defendant would derive an unfair advantage by allowing it to deny liability for leaky and rotten windows under the shorter warranty, while it had recovered damages for similar problems under the greater than on-year warranty in the first proceeding.149 Thus, all three factors of the New Hampshire v. Maine test were met and the defendant could not introduce evidence of the one-year warranty in the later proceeding.150
D. Cohoon v. IDM Software
Finally, in Cohoon v. IDM Software,151 the Court made it clear that the application of the doctrine was not limited to the facts of Kelleher. In prior litigation, IDM filed a malpractice suit against its former counsel, because he had not properly registered or noticed purchase by the plaintiffs of $60,000 worth of shares of IDM in compliance with RSA 421-B:11.152 IDM claimed that this left it exposed to shareholder claims of rescission pursuant to RSA 421-B:25.153 IDM’s former counsel filed a motion in limine to exclude evidence of rescission damages, but the trial court issued an order that IDM would be allowed to claim these damages.154 However, prior to the Court’s formal publication of the order, the parties settled the suit.155
In the action brought by Cohoon, the plaintiffs asserted causes of action for rescission under RSA 421-B:25, breach of majority shareholders’ duty, and a claim of judicial estoppel against IDM.156 Both parties moved for summary judgment and the trial court granted the plaintiff’s motion.157 It commented that “it could not ‘imagine a case crying out for the application of the doctrine of judicial estoppel more than the case at bar.’”158 By previously claiming that IDM had a legal obligation to pay its investors in the malpractice suit, IDM could not take an inconsistent position in the subsequent action to avoid paying its investors.159 After a motion for reconsideration by the defendants, the court reversed its earlier decision to apply judicial estoppel.160 However, the court affirmed its decision on both statutory (RSA 421-B) and equitable estoppel grounds.161
On the appeal of the equitable estoppel issue,162 the Court declined to address the defendant’s argument that the trial court erred in granting summary judgment based on equitable estoppel.163 Instead, the Court found merit in the plaintiff’s cross-appeal, which claimed that the trial court erred in finding that judicial estoppel did not apply.164 The Court applied the three-factor test first propounded in New Hampshire v. Maine, and echoed in Pack Monadnock and Kelleher,165 but noted that other unspecified factors could be incorporated into the test.166
In the trial court’s reversal of its initial decision to apply judicial estoppel, it upheld the first factor and this factor was not analyzed on appeal.167 The trial court reversed itself on finding that the second factor was met,168 however, it did so in error. The trial court incorrectly read a reliance element into judicial estoppel.169 According to the trial court, judicial estoppel required not only judicial acceptance of a party’s position or assertion, but that the acceptance induced the other party to act to its detriment.170 The trial court ruled that there was no reliance by the defendant in the malpractice case because the settlement agreement was reached prior to the trial court’s order allowing contemplation of rescission damages.171 Thus, according to the trial court, the defendant could not have relied on the court’s decision.
On appeal, the Court clarified that judicial estoppel does not have a reliance element.172 Noting that the second factor has been the subject of different approaches, particularly “prior success” and playing “fast and loose,” the Court examined the purposes of each approach.173 “Prior success” requires the possibility of inconsistent results,174 while playing “fast and loose” does not.175 The Court declined to decide whether to require a party to succeed in gaining judicial acceptance of its position in the first action, but found sufficient success to merit the application of judicial estoppel on the unique facts of Cohoon.176 The trial court’s acceptance of IDM’s position on the rescission issue was sufficient judicial acceptance to apply the doctrine, regardless of the fact that the trial court had not published the decision.177
The third factor was also met. According to the Court, IDM’s argument that the plaintiffs would benefit from the malpractice suit settlement “misse[d] the point.”178 If the plaintiffs succeeded in a rescission suit, they would have elevated their priority from shareholder to judgment creditor.179 As a judgment creditor, they would have received substantially more money in the corporate liquidation of IDM.180 Accordingly, the plaintiffs would have suffered injury not as a result of the initial settlement, but by allowing IDM’s inconsistent position that the plaintiffs had no rescission rights.181 The Court thus affirmed the trial court’s grant of summary judgment on the alternative ground of judicial estoppel.182
It is difficult to predict the ramifications of Kelleher and Cohoon. However, questions remain regarding further development of the doctrine in the New Hampshire courts, its impact on litigants, and its effect on the truth-seeking and ethical aspects of practicing law.
A. Adopting a Position
While Kelleher opened the door to judicial estoppel, it only furnished the bare bones of the doctrine. Cohoon has put flesh on those bones, but there is much left bare. The most significant issue is whether New Hampshire will adopt the majority position and require judicial acceptance of a prior assertion, adopt the minority position and enquire as to whether a party is playing “fast and loose” with the court, or possibly take an altogether different approach. This, more than anything else, will have the most significant impact on New Hampshire practitioners.
The Cohoon majority noted the different approaches to the second factor. It declined, however, to take a definitive stance on whether judicial acceptance was necessary to support a claim of judicial estoppel. An examination of the three New Hampshire cases, however, supports the position that the New Hampshire Supreme Court may have a preference for the majority rule.
Significantly, New Hampshire has adopted the test as laid out in New Hampshire v. Maine. This test applies the majority position of requiring a showing of judicial acceptance.183 While the Court has not stated that it will require a showing of judicial acceptance in a prior proceeding, it is the better choice. As it stated in Cohoon while discussing the “fast and loose” approach, “if what is at issue is the integrity of the court, whether a court is asked to rely or has in fact relied on a prior inconsistent position should be a distinction without a difference.”184 What this seems to indicate is that adopting the “fast and loose” approach would require an almost absolute application of the doctrine. However, as we have seen, only Tennessee has adopted such an approach, which is theoretically and analytically distinct from the New Hampshire v. Maine test the Cohoon court seemed to prefer. Additionally, the loss of parties’ rights and the corresponding deprivation of the primary truth-seeking and justice-seeking functions of the courts that result with absolute application are difficult to justify.
If the court is inclined to subscribe to the majority view, this is the logical choice. First, it is the more popular form of the doctrine. This may be significant for the parties that are in diversity actions in federal court, who may prefer having the same test in both New Hampshire and in federal court. Also, even though the First Circuit established the “fast and loose” test, many of its decisions still require a showing of judicial acceptance.185 Second, the tempered application of the “prior success” approach is more in line with the caution required with the resulting harsh effects of the doctrine. Third, the “fast and loose” standard is more ambiguous than “prior success.” True, neither standard offers a purely objective or concrete test. “Prior success,” however, does require some measure of acceptance that is observable either in a court’s actions or in the record. While not perfect, “prior success” is more readily discernable than whether a litigant’s judicial maneuverings constitute a “self-serving self-contradiction.”
B. Impact on Litigants
The Kelleher Court did not explain why it decided to adopt judicial estoppel. One possibility is that the Court needed a tool to prevent the type of manipulation of the courts that results when a party tailors facts to suit its present needs, regardless of past representations. In both Kelleher186 and Cohoon,187 judicial estoppel was applied against a party that benefited substantially in asserting its first position. To allow these parties to subsequently hide behind an inconsistent statement that would permit it to avoid an “anticipated obligation to remedy harm” is “manifestly unjust.”188 This suggests that parties engaging in this type of behavior will be subject to judicial estoppel claims.
But parties may also suffer the harsh effects of judicial estoppel for assertions made with less purposeful intent toward manipulating the courts. Although it is generally recognized that the doctrine should not be applied when a prior position was asserted as a result of fraud, inadvertence, or mistake, this does not excuse those who are merely careless or negligent. What does this mean for New Hampshire lawyers? For one, they will need to craft their assertions with a larger consideration of the consequences for possible future litigation. Positions will need to be thought through carefully in order to avoid placing a party in a situation that will result in a “manifestly unjust” consequence. Parties who assert a factual position for immediate gain may be better served instead by choosing the best position (perhaps the true position) at the beginning of litigation or else risk losing on summary judgment in a later, unforeseen proceeding.
A complicating factor is the uncertainty regarding how long a party can be bound to a prior position that has been judicially accepted. As New Hampshire v. Maine demonstrates, the time frame can be quite long. Since the party is the one bound to the factual position, it is logical that the effect would last for the natural life of the individual. For a business entity, it appears that as long as the position is still judicially relevant in a later proceeding, the party will continue to be bound to its prior assertion.
C. Truth and Ethics
While the party, not the lawyer, suffers the immediate consequences of judicial estoppel, failure to avoid such a situation may place the lawyer at risk for professional sanctions.189 Prosecutors may be especially at risk, as they have special obligations and arguing diametrically opposed positions in a criminal proceeding may bring about professional discipline.190 Attorneys who carelessly assert inconsistent facts may effectively be painting their client into a judicial corner for future litigation. Such short-sightedness may give rise to malpractice claims from frustrated ex-clients.
Another effect of judicial estoppel may be more favorable. Since the purpose of judicial estoppel is to protect the integrity of the judicial process, adopting the doctrine may reinforce a positive perception of the court. The image of a fast-talking lawyer who molds the facts to the needs of the moment without regard to prior assertions is wholly negative. By showing the public that self-serving manipulation of the courts will not be tolerated, faith in the fairness of the judicial system, and the lawyers who participate in it, can be bolstered. This does, however, seem to create tension between the zealous advocacy on behalf of clients that lawyers are taught and the restrained approach that is more appropriate with judicial estoppel.
Finally, in an ironic twist, lawyers are using judicial estoppel as a defense in legal malpractice claims.191 Here, the now-defendant lawyer argues that the ex-client was actually guilty, despite the fact that the lawyer previously argued vigorously against that claim.192 However, this tactic has been criticized. In Zuniga v. Groce, Locke & Hebdon, the Court stated:
For the law to countenance this abrupt and shameless shift of positions would give prominence (and substance) to the image that lawyers will take any position, depending upon where the money lies, and that litigation is a mere game and not a search for truth. It is one thing for lawyers in our adversary system to represent clients with whom they personally disagree; it is some-thing quite different for lawyers (and clients) to switch positions concerning the same incident simply because an assignment and the law of proximate cause have given them a financial interest in switching.193
The doctrine of judicial estoppel should prevent such claims from being brought.194 Perhaps more importantly, it would seem preferable for lawyers to recognize the damage to the reputation of the profession that results from engaging in such self-serving antics.
What effects the adoption of the doctrine of judicial estoppel into the common law of New Hampshire will have will remain to be seen. What we know is that the consequences of the doctrine are harsh. For the Court to adopt such a harsh remedy emphasizes the extreme inequity that must occur for the court to dispense with its truth-finding and justice-finding functions. Importantly, the effects of judicial estoppel are felt by the party, not the lawyer. Lawyers must now look toward the future consequences that asserting factual positions may have for their clients. Although, judicial estoppel is cautiously applied by the courts, that does not mean it can be ignored. To do so may place the client in jeopardy and, possibly, the lawyer as well.
1. Eric A. Schreiber, The Judiciary Says, You Can’t Have It Both Ways: Judicial Estoppel - A Doctrine Precluding Inconsistent Positions, 30 LOY. L.A. L. REV. 323, 323-24 (1996).
2. See 28 Am. Jur. 2d Estoppel and Waiver § 34 (2005).
3. Cohoon v. IDM Software, Inc., 891 A.2d 552 (N.H. 2005); Kelleher v. Marvin Lumber & Cedar Co., 152 N.H. 813 (2005).
4. Schreiber, supra note 1, at 324 (describing judicial estoppel as a “sleeper doctrine” which is rarely used by the courts).
5. Id. at 324. Judicial estoppel is considered controversial. Its purpose and elements have been construed differently by courts and some have rejected the doctrine outright.
6. Steve R. Johnson, The Doctrine of Judicial Estoppel, 11 Nev. Lawyer 8, 9 (2003).
7. Rand G. Boyers, Precluding Inconsistent Statements: The Doctrine of Judicial Estoppel, 80 Nw. U. L. Rev. 1244, 1269 (1986).
8. See generally 9 J. Bankr. L. & Prac. 487 (2000).
9. Id. at 492.
13. 28 Am. Jur. 2d Pleading § 67 (2005); Boyers, supra note 7, at 1245-46.
14. 28 Am. Jur. 2d Estoppel and Waiver § 74 (2005); Boyers, supra note 7, at 1245.
15. 28 Am. Jur. 2d § 67, supra note 13.
16. 28 Am. Jur. 2d Estoppel and Waiver § 75 (2005).
18. See id.
19. 28 Am. Jur. 2d § 75, supra note 16; Schreiber, supra note 1, at 338.
20. 28 Am. Jur. 2d § 75, supra note 16.
22. Boyers, supra note 7, at 1264.
23. Id. at 1263.
24. Id. at 1247.
25. See Boyers, supra note 7, at 1247.
26. Id.; see Restatement (Second) of Judgements § 27 (1982).
27. Boyers, supra note 7, at 1247-48.
28. Hoult v. Hoult, 157 F.3d 29 (1st Cir. 1998).
29. Id. at 30-31.
30. Id. at 31.
33. Id. at 32 (1st Cir. 1998) (quoting Dennis v. R.I. Hosp. Trust Nat’l Bank, 744 F.2d 893, 899 (1st Cir. 1984)).
34. Id. at 32-33. Both sides focused on rape in their closing and opening arguments and during direct and cross examinations.
35. Id. at 33.
36. See id. at 1247.
37. Id. at 1248.
39. Schreiber, supra note 1, at 329; see Restatement (Second) of Judgements § 17 (1982).
40. Schreiber, supra note 1, at 329.
42. Id. (finding either actual privity or representational/proxy privity sufficient, provided that the parties had a chance to bring their claims in the first trial).
44. Id. at 331.
46. Boyers, supra note 7, at 1249.
48. Cohoon, 891 A.2d at 559.
49. Cohoon, 891 A.2d at 559.
50. Boyers, supra note 7, at 1249.
51. Schreiber, supra note 1, at 325.
52. Hamilton v. Zimmerman, 37 Tenn. (5 Sneed) 39 (1857).
53. Id. at 40.
54. Id. at 43.
55. Id. at 46-47.
56. Id. at 48 (emphasis added).
57. Id.; Boyers, supra note 7, at 1246.
58. Johnson, supra note 6, at 8-9.
59. Boyers, supra note 7, at 1246.
60. David S. Coale, A New Framework For Judicial Estoppel, 18 Rev. Litig. 1, 1-2 (1999).
61. See New Hampshire v. Maine, 532 U.S. 742, 750-751 (2001); In re Pack Monadnock, 147 N.H. 419, 426 (2002).
62. New Hampshire, 532 U.S. at 751. Note that while the Supreme Court stated that “[a]dditional considerations may inform the doctrine’s application in specific factual contexts,” the Court did not give an example of these “additional considerations.”
64. Schreiber, supra note 1, at 326. Most modern courts accept judicial estoppel, but differ as to the underlying policies or as to its application. Policies include avoiding inconsistent results, preventing parties from “playing fast and loose with the courts,” and protecting the integrity of the judicial process.
65. Boyers, supra note 7, at 1246.
66. Schreiber, supra note 1, at 326 (excepting positions taken as a result of fraud, duress, or mistake).
67. Boyers, supra note 7, at 1254.
69. Boyers, supra note 7, at 1246; Schreiber, supra note 1, at 326.
70. See Boyers, supra note 7, at 1255.
71. Id. at 1254-55.
72. Schreiber, supra note 1, at 336 (stating that the doctrine is accepted in most federal courts).
73. Id. at 327. This does not include settlements, since there is no acceptance by the court of any factual positions.
76. Boyers, supra note 7, at 1256.
79. See id.
80. Id.at 1257.
81. Id. at 1256.
83. Schreiber, supra note 1, at 338.
84. Patriot Cinemas, Inc. v. General Cinema Corp., 834 F.2d 208, 212 (1st Cir. 1987).
85. Id. at 213.
86. Id. at 210.
89. Id. at 211.
94. Patriot Cinemas, 834 F.2d at 213.
95. Id. at 214.
96. But see Schreiber, supra note 1, at 341 (arguing that the denial could only result from the state court’s acceptance of Patriot Cinemas’ assertion that it would not pursue a separate state claim).
97. Douglas W. Henkin, Judicial Estoppel - Beating Shields into Swords and Back Again, 139 U. Pa. L. Rev. 1711, 1726-27 (1991).
98. Id. at 343.
99. Id. at 344.
100. Boyers, supra note 7, at 1269.
101. Id. at 1261.
102. See id. at 1262.
103. See id. at 1263.
104. Id. at 1267.
105. See id. at 1267-68.
106. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78-79 (1938).
107. Boyers, supra note 7, at 1267; Schreiber, supra note 1, at 351.
108. Boyers, supra note 7, at 1268.
109. See id.
110. Id.; Ashley S. Deeks, Raising the Cost of Lying: Rethinking Erie for Judicial Estoppel, 64 U. Chi. L. Rev. 873, 885-86 (1997).
111. Boyers, supra note 7, at 1268-69.
112. Schreiber, supra note 1, at 352.
113. Deeks, supra note 110, at 884-85 (finding the federal courts’ interest in protecting their integrity as more substantively reasoned than merely labeling judicial estoppel as substantive).
114. The issue was raised in two cases, Patriot Cinemas, 834 F.2d at 215, and Wang Laboratories, Inc. v. Applied Computer Sciences, Inc., 741 F. Supp. 992, 997 (D. Mass 1990). However, both cases dealt with a federal question and did not decide on whether the state or federal test for judicial estoppel should be applied.
115. New Hampshire, 532 U.S. 742; Cohoon, 891 A.2d 552; Kelleher, 152 N.H. 813; In re Pack Monadnock, 147 N.H. 419.
116. New Hampshire, 532 U.S. at 745.
118. See id. at 749.
120. Id. at 750.
123. Id. at 751.
127. Id. at 752.
130. Id. at 755.
131. Id. at 753-54.
132. In re Pack Monadnock, 147 N.H. 419 (2002).
133. See id. at 426.
134. Id. at 422.
138. See id.
140. Kelleher v. Marvin Lumber, 152 N.H. 813 (2005).
141. Id. at 848 (“[W]e now adopt and apply the doctrine of judicial estoppel.”).
143. Id. at 848-49.
144. Id. at 821.
145. Id. at 848-49.
146. Id. at 849.
151. Cohoon v. IDM Software, Inc., 891 A.2d 552 (2005).
152. Id. at 554.
155. Id. at 554-55.
156. Id. at 555.
158. Id. (“[I]t would be a fraud on the Court” to allow IDM to claim it had an obligation to pay its investors and recover $635,000 and later assert that it did not have an obligation to pay its investors”).
162. The appeal raised two other issues. One of these was whether the plaintiffs were entitled to individual judgment before all other shareholder claims were brought. The other was whether the trial court erred in applying equitable estoppel to Legget and Sheppard. Cohoon, et al. prevailed on the first issue because they brought suit solely on their behalf. On the second issue, the lower court’s ruling was vacated and the issue was remanded for further findings.
163. Cohoon, 891 A.2d at 555.
165. Id. at 555-56.
166. Id. at 557.
167. Id. at 556.
168. See id.
169. Id. As mentioned previously, see supra note 44, the courts often confuse equitable estoppel and judicial estoppel. Here, the trial court judge appeared to misread In re Pack Monadnack as requiring the reliance element that is part of the equitable estoppel analysis.
173. See id.
176. Id. Note, however, that the Supreme Court’s focus on acceptance may be because of the way the parties framed the dispositive issue. The Court noted, “Thus, the parties frame the dispositive question as whether IDM ‘succeeded in persuading [the trial] court to accept [its] earlier position.’” See Cohoon, 891 A.2d at 556-57.
177. Id. at 556-57. The plaintiffs argued that whether the court published its decision is irrelevant to judicial acceptance. IDM, on the other hand, asserted that the trial court could not have accepted IDM’s position without issuing an order or decision. The Supreme Court found the trial court did accept IDM’s position that it was subject to rescission claims. “Upon reflection, the Court accepts the position of [IDM] on this issue.” Id. at 557.
178. Id. at 557-58.
179. Id. at 558.
180. Id. For liquidation purposes, IDM proposed to pay outside shareholders only $0.132 per share, while creditors of IDM would be fully compensated for their interest in IDM’s liabilities.
183. While the Supreme Court left the test open to “[a]dditional considerations,” as of now, it still requires a showing of judicial acceptance of the prior position. See New Hampshire, 532 U.S. at 750.
184. Cohoon, 891 A.2d at 557.
185. SEC v. Happ, 392 F.3d 12, 20 (1st Cir. 2004); Fleet Nat’l Bank v. Gray (In re Bankvest Capital Corp.), 375 F.3d 51, 61 (1st Cir. 2004).
186. Kelleher, 152 N.H. at 823.The defendant in Kelleher received damages over $175,000.00.
187. Cohoon, 891 A.2d at 554-55. In Cohoon, IDM Software received $900,000 in settling the malpractice case. While the settlement was not a judicial decision, it is probable that the settlement was induced by the court’s acceptance of IDM’s rescission argument.
188. See Kelleher, 152 N.H. at 849.
189. See Restatement (Third) of the Law Governing Lawyers: Representing Clients in Litigation § 110 cmt. d (arguing diametrically opposed legal positions when prior position has been successfully maintained by ruling of court may be deemed frivolous).
190. Cf. Anne Bowen Poulin, Prosecutorial Inconsistency, Estoppel, and Due Process: Making the Prosecution Get Its Story Straight, 89 Calif. L. Rev. 1423, n.37 (2001) (“[N]oting . . . that the rules of professional responsibility impose special obligations on prosecutors.”).
191. Warren R. Trazenfeld, Legal Malpractice in Florida, 27 Nova L. Rev. 85, 119-21 (2002); see Laura Callaway Hart et al., From Offense to Defense: Defending Legal Malpractice Claims, 45 S.C. L. Rev. 771, 793 (1994) (stating that judicial estoppel is a better defense in malpractice cases than res judiciata because judicial estoppel does not require privity).
192. Michael Sean Quinn, The Lawyer’s Duties And Liabilities to Third Parties: Post Conference Reflections: On the Assignment of Legal Malpractice Claims, 37 S. Tex. L. Rev. 1203, 1231 (1996).
193. Zuniga v. Groce, Locke & Hebdon. 878 S.W.2d 313, 318 (Tex. 1994).
194. Quinn, supra note 192, at 1232.
David Hall is entering his third year at Franklin Pierce Law Center, and plans to obtain a Health Law Policy and Law Certificate in conjunction with his J.D. He interned with the New Hampshire Public Defender in the summer of 2005 and the State Employees Association in the summer of 2006.