Case 1:12-cv-05198-NRB Document 20 Filed 07/30/13 Page 1 of 23
- against -
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
BNY MELLON, BANK OF NEW YORK
MELLON CORP., BANK OF NEW YORK CORP.,
and John Doe Corporations 1-10,
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE
MEMORANDUM AND ORDER
12 Civ. 5198 (NRB)
Plaintiff Okey Azuike commenced this action against
defendants BNY Mellon, Bank of New York Mellon Corp., Bank of
New York Corp., and John Doe Corporations 1-10, asserting
discrimination, harassment, and retaliation in employment on the
basis of his color, race, and national origin. He also asserted
claims for intentional and negligent infliction of emotional
distress. Presently before the Court are defendants’ motion to
dismiss plaintiff’s complaint and defendants’ motion to impose
sanctions against plaintiff and his former counsel. For the
reasons stated below, defendants’ motion to dismiss is granted
and their motion for sanctions is denied.
In 1998, plaintiff “was hired by The Bank of New York
Corporation as a Night Shift Console Operator.” Compl. ¶ 7. In
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July 2008, he was allegedly promoted to a Software Systems
Specialist III. Id. ¶ 10. Throughout his tenure working for
defendants, plaintiff allegedly “never once received a
disciplinary report or warning” and “never received a negative
performance evaluation.” Id. ¶ 11. Nonetheless, plaintiff was
allegedly compensated less than similarly situated coworkers,
see id. ¶¶ 16-18, passed over for a promotion that many
allegedly less-qualified colleagues received, see id. ¶¶ 21-24,
and subjected to a hostile work environment, see id. ¶¶ 42-44.
discriminatory treatment allegedly not only continued, see id.
¶¶ 25-31, 44, but also intensified in retaliation for
plaintiff’s complaints, see id. ¶¶ 45-47. On September 21,
2009, plaintiff’s employment was terminated. See id. ¶ 33.
On January 6, 2010, plaintiff filed a Charge of
Discrimination against defendants with the Equal Employment
Opportunity Commission (the “EEOC”), claiming that defendants
discriminated against him based on race and national origin and
that he was subject to retaliation. See EEOC Charge of
Discrimination, Ex. A. Kirschner Aff. in Supp. of Rule 11 Mot.
[hereinafter Kirschner Aff.]. Plaintiff’s allegations of
discrimination and retaliation in his EEOC Charge were
substantially similar to his allegations in the present
Complaint. See id.
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On July 23, 2010, plaintiff filed a Voluntary Bankruptcy
Petition pursuant to Chapter 7 in the United States Bankruptcy
Court for the District of New Jersey. See Voluntary Petition,
Ex. B, Kirschner Aff. Plaintiff was represented by counsel in
the filing of this petition. See id. In response to the
instruction, “List all suits and administrative proceedings to
which the debtor is or was a party within one year immediately
preceding the filing of this bankruptcy case,” plaintiff failed
to disclose his pending EEOC claim. Id. at 27. Further, in the
schedule for personal property, plaintiff did not disclose his
EEOC claim, and placed a checkmark for “None” next to “Other
contingent and unliquidated claims of every nature, including
tax refunds, counterclaims of the debtor, and rights to setoff
claims.” Id. at 10. The bankruptcy court issued a discharge
order on October 29, 2010, and the case was closed on November
5, 2010. See Bankruptcy Docket, Ex. C, Kirschner Aff.
On April 6, 2012, the EEOC sent plaintiff a “right to sue
letter,” stating: “Based upon its investigation, the EEOC is
unable to conclude that the information obtained establishes
violations of the statutes.” EEOC Dismissal and Notice of
Rights, Ex. D, Kirschner Aff. Plaintiff then commenced the
present action on July 3, 2012. At that time, plaintiff’s
counsel, Mr. Michael J.P. Schewe, was unaware of plaintiff’s
prior bankruptcy. See Certification of Counsel in Opp’n to
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Defs.’ Mot. for Rule 11 Sanctions Against ScheweLaw, LLC Only
¶¶ 4, 12(a) [hereinafter Schewe Aff.]; Defs.’ Reply Mem. of Law
in Further Supp. of Their Mots. to Dismiss and for Rule 11
Sanctions 7 [hereinafter Defs.’ Reply].
On August 21, 2012, defendants’ counsel, Kenneth Kirschner,
sent a letter to Mr. Schewe informing him of plaintiff’s failure
to disclose his EEOC claim in his prior bankruptcy proceeding.
See Letter from Kenneth Kirschner to Michael J.P. Schewe (Aug.
21, 2012), Ex. E, Kirschner Aff. The letter explained why that
omission deprived plaintiff of standing to pursue the present
action and stated that if plaintiff’s complaint was not
withdrawn within fourteen days –- by September 4, 2012 --
defendants would seek sanctions against plaintiff and his
counsel. See id.
On August 31, 2012, Mr. Schewe sent an email to Mr.
Kirschner stating that he was looking into the issue of standing
and requesting an additional two weeks to respond.1 Letter from
Michael J.P. Schewe to Kenneth Kirschner (Aug. 31, 2012), Ex. F,
Kirschner Aff. On September 5, 2012, Mr. Kirschner sent Mr.
Schewe an email stating that, unless plaintiff’s complaint was
withdrawn with prejudice by September 7, 2012, defendants would
oppose any stipulation of dismissal “unless some provision for
1 That same day, Ms. Vi T. Vu, counsel for defendants, sent Mr. Schewe a copy
of plaintiff’s bankruptcy petition and the bankruptcy docket. See Letter
from Vi T. Vu to Michael J.P. Schewe (Aug. 31, 2012), Ex. G, Kirschner Aff.
Case 1:12-cv-05198-NRB Document 20 Filed 07/30/13 Page 5 of 23
[their] costs and fees [was] made.” Letter from Kenneth
Kirschner to Michael J.P. Schewe (Sept. 5, 2012), Ex. H,
Kirschner Aff. On September 6, 2012, Mr. Schewe wrote to Mr.
Kirschner that he would have a response by the following
morning. Letter from Michael J.P. Schewe to Kenneth Kirschner
(Sept. 6, 2012), Ex. I, Kirschner Aff.
On the afternoon of September 7, 2012, not having received
a response from Mr. Schewe, see Kirschner Aff. ¶ 11, Mr.
Kirschner sent him an email stating that, if he did not receive
a response that day, he would “proceed with drafting an
appropriate motion to dismiss and/or for sanctions.” Letter
from Kenneth Kirschner to Michael J.P. Schewe (Sept. 7, 2012),
Ex. I, Kirschner Aff. On September 10, 2012, Mr. Schewe sent
Mr. Kirschner an email stating that he was waiting to hear back
from plaintiff’s bankruptcy attorney and would respond to Mr.
Kirschner once he had. Letter from Michael J.P. Schewe to
Kenneth Kirschner (Sept. 10, 2012), Ex. J, Kirschner Aff. Later
that day, Mr. Kirschner sent Mr. Schewe a letter stating that,
if plaintiff did not withdraw his complaint with prejudice by
5:00 p.m., defendants would move for Rule 11 sanctions. Letter
from Kenneth Kirschner to Michael J.P. Schewe (Sept. 10, 2012),
Ex. K, Kirschner Aff. That evening, not having heard from Mr.
Schewe, see Kirschner Aff. ¶ 14, Mr. Kirschner sent him a draft
Rule 11 Motion and stated his intention to file it twenty-one
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days later, on October 1, 2012. Letter from Kenneth Kirschner
to Michael J.P. Schewe (Sept. 10, 2012), Ex. L, Kirschner Aff.
On September 18, 2012, Mr. Schewe sent Mr. Kirschner a
letter which sought to distinguish the case cited by defendants
in support of their position that plaintiff lacked standing.
See Letter from Michael J.P. Schewe to Kenneth Kirschner (Sept.
18, 2012), Ex. M, Kirschner Aff. Three days later, after
reviewing further authority, Mr. Schewe sent Mr. Kirschner an
email stating that, even if plaintiff lacked standing, the
appropriate course of action would not be dismissal, but rather
substitution of the bankruptcy trustee as plaintiff. See Letter
from Michael J.P. Schewe to Kenneth Kirschner (Sept. 21, 2012),
Ex. N, Kirschner Aff. Plaintiff did not withdraw his complaint
by October 1, 2012, and, indeed, has not done so to date. Thus,
on November 6, 2012, defendants filed a motion to dismiss as
well as a motion for sanctions against both plaintiff and Mr.
On November 7, 2012, Mr. Schewe submitted a letter to the
Court in which he requested to be relieved as plaintiff’s
attorney of record. See Letter from Michael J.P. Schewe to the
Court (Nov. 7, 2012). On November 20, 2012, we sent all counsel
a letter stating that the request to withdraw failed to comply
with Local Civil Rule 1.4. See Letter from the Court to Michael
J.P. Schewe, Kenneth Kirschner, and Vi T. Vu (Nov. 20, 2012).
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Following our receipt of a corrected application to withdraw by
Mr. Schewe, we issued an Order on December 20, 2012, granting
Mr. Schewe’s application but requiring him to respond to
defendants’ motion for sanctions as against him.2 Mr. Schewe
submitted an opposition on January 28, 2013, to which defendants
submitted a reply on March 1, 2013.3 Plaintiff has not submitted
an opposition either to defendants’ motion to dismiss or to
their motion for sanctions.
Finally, in a letter dated January 30, 2013, the trustee in
plaintiff’s bankruptcy, John W. Sywilok, informed us that, upon
motion by plaintiff’s counsel, the Bankruptcy Court had reopened
plaintiff’s bankruptcy proceedings on January 23, 2013. See
Letter from John W. Sywilok to the Court (Jan. 30, 2013). Mr.
Sywilok enclosed the Bankruptcy Court’s Order, which stated:
ORDERED that the debtor’s chapter 7 case is reopened;
that schedule B #21 is amended to reference a charge
of discrimination against Bank of NY $ unknown; that
schedules C is amended to claim the applicable
exemption that debtor statement of financial affairs
is amended to list a charge of discrimination against
Bank of NY $ unknown as an administrative proceeding
and that the chapter 7 trustee take appropriate action
to administer or abandon said asset.
In re Azuike, No. 10-32628DHS (Bankr. D.N.J. Jan. 23, 2013). On
April 25, 2013, Mr. Sywilok notified the Court that “[he] ha[d]
2 We also extended the deadline for plaintiff to respond to defendants’ Motion
to Dismiss and Motion for Sanctions.
3 By endorsement dated February 7, 2013, we had extended defendants’ time to
reply to March 1, 2013.
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abandoned [his] interest in the cause of action and the
bankruptcy case was closed on March 6, 2013.” Letter from John
W. Sywilok to the Court (Apr. 25, 2013).
A. Legal Standard
1. Motion to Dismiss
Under Rule 12(b)(6) of the Federal Rules of Civil
Procedure, a complaint may be dismissed for “failure to state a
claim upon which relief can be granted.” Fed. R. Civ. P.
12(b)(6). To avoid dismissal, a complaint must allege “enough
facts to state a claim to relief that is plausible on its face.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Where
plaintiffs have not “nudged their claims across the line from
conceivable to plausible, their complaint must be dismissed.”
Id. In applying this standard, a court must accept as true all
well-pleaded factual allegations and must draw all reasonable
inferences in favor of the plaintiff. See Erickson v. Pardus,
551 U.S. 89, 94 (2007) (per curiam); Kassner v. 2nd Ave.
Delicatessen, Inc., 496 F.3d 229, 237 (2d Cir. 2007). The Court
may also “properly consider ‘matters of which judicial notice
may be taken, or documents either in plaintiff['s] possession or
of which plaintiff had knowledge and relied on in bringing
suit.’” Halebian v. Berv, 644 F.3d 122, 130 n.7 (2d Cir. 2011)
Case 1:12-cv-05198-NRB Document 20 Filed 07/30/13 Page 9 of 23
(quoting Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d
2. Motion for Sanctions
Under Rule 11(b) of the Federal Rules of Civil Procedure,
“[b]y presenting to the court a pleading, written motion, or
other paper,” an attorney certifies “to the best of [his or her]
knowledge, information, and belief, formed after an inquiry
reasonable under the circumstances[,]” that:
(1) it is not being presented for any improper
purpose, such as to harass, cause unnecessary delay,
or needlessly increase the cost of litigation;
(2) the claims, defenses, and other legal contentions
are warranted by existing law or by a nonfrivolous
argument for extending, modifying, or reversing
existing law or for establishing new law;
(3) the factual contentions have evidentiary support
or, if specifically so identified, will likely have
evidentiary support after a reasonable opportunity for
further investigation or discovery; and
(4) the denials of factual contentions are warranted
on the evidence or, if specifically so identified, are
reasonably based on belief or a lack of information.
Fed. R. Civ. P. 11(b). Although, as a general matter, “Rule 11
does not impose a continuing obligation on the presenter to
update, correct or withdraw any pleading, written motion or
other paper which, when presented, satisfies the requirements of
the Rule,” Fuerst v. Fuerst, 832 F. Supp. 2d 210, 219 (E.D.N.Y.
2011) (quoting Carlton Group, Ltd. v. Tobin, No. 02 Civ. 5065
(SAS), 2003 WL 21782650, at *6 (S.D.N.Y. July 31, 2003))
Case 1:12-cv-05198-NRB Document 20 Filed 07/30/13 Page 10 of 23
(internal quotation marks omitted), Rule 11 is nevertheless
implicated “where an attorney or party declines to withdraw a
claim upon an express request by his or her adversary after
learning that [the claim] was groundless,” id. at 220
(alteration in original) (quoting Carlton Group, 2003 WL
21782650, at *7) (internal quotation mark omitted).
“If, after notice and a reasonable opportunity to respond,
the court determines that Rule 11(b) has been violated, the
court may impose an appropriate sanction on any attorney, law
firm, or party that violated the rule or is responsible for the
violation.” Fed. R. Civ. P. 11(c)(1). The Second Circuit has
held that “the standard for triggering sanctions under Rule 11
is ‘objective unreasonableness,’” Star Mark Mgmt., Inc. v. Koon
Chun Hing Kee Soy & Sauce Factory, Ltd., 682 F.3d 170, 178 (2d
Cir. 2012) (quoting Margo v. Weiss, 213 F.3d 55, 65 (2d Cir.
2000)), and has admonished district courts that any decision to
sanction a party or attorney must be “made with restraint and
discretion,” Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp.,
222 F.3d 52, 57 (2d Cir. 2000) (quoting Schlaifer Nance & Co. v.
Estate of Warhol, 194 F.3d 323, 334 (2d Cir. 1999)) (internal
quotation mark omitted). Finally, a sanction imposed pursuant
to Rule 11 “must be limited to what suffices to deter repetition
of the conduct or comparable conduct by others similarly
situated,” and “may include . . . , if imposed on motion and
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warranted for effective deterrence, an order directing payment
to the movant of part or all of the reasonable attorney's fees
and other expenses directly resulting from the violation.” Fed.
R. Civ. P. 11(c)(4).
1. Defendants’ Motion to Dismiss
Defendants have moved to dismiss plaintiff’s Complaint on
two grounds: (1) plaintiff lacks standing, and (2) plaintiff’s
Complaint is barred by judicial estoppel. Although it is not
clear whether plaintiff’s Complaint should be dismissed for lack
of standing,4 we need not resolve this issue because defendants
are correct that judicial estoppel bars plaintiff’s Complaint.
4 On the one hand, “a debtor [in bankruptcy protection] is obligated ‘to
disclose all his interests at the commencement of a case,’” Ibok v. Siac-
Sector Inc., No. 05 Civ. 6584 (GBD) (GWG), 2011 WL 293757, at *4 (S.D.N.Y.
Feb. 2, 2011) (quoting Chartschlaa v. Nationwide Mut. Ins. Co., 538 F.3d 116,
122 (2d Cir. 2008)); “undisclosed assets automatically remain property of the
estate after the case is closed,” id. (quoting Chartschlaa, 538 F.3d at 122)
(internal quotation marks omitted); and, “even after discharge of the
bankruptcy estate, the debtor ‘lacks standing to pursue’ a claim that he
failed to disclose,” id. (quoting Coffaro v. Crespo, 721 F. Supp. 2d 141,
148 (E.D.N.Y. 2010)). Here, even though the present action did not exist at
the time of plaintiff’s original bankruptcy proceedings, plaintiff was
obligated to disclose all potential claims that existed at the time he filed
for bankruptcy, and his failure to disclose his EEOC claim arguably deprives
him of standing to pursue the present action, which is based on the same
alleged pre-petition injuries. See Kassner v. 2nd Avenue Delicatessen Inc.,
No. 04 CV 7274 (GBD), 2005 WL 1018187, at *2-*4 (S.D.N.Y. Apr. 29, 2005); see
also Voluntary Petition at 10, Ex. B, Kirschner Aff. (requiring the debtor to
list “[o]ther contingent and unliquidated claims of every nature”).
Furthermore, although plaintiff’s bankruptcy case was reopened and his
petition was amended to record his EEOC claim, “[t]he existence of federal
jurisdiction ordinarily depends on the facts as they exist when the complaint
is filed.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 569 n.4 (1992)
(quoting Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 830 (1989))
(internal quotation marks omitted). On the other hand, there is authority
that “abandonment or exemption may restore a plaintiff's standing.”
Vanderheyden v. Peninsula Airport Com'n, No. 4:12cv46, 2013 WL 30065, at *14
(E.D. Va. Jan. 2, 2013).
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Judicial estoppel is often applied “to prevent a party who
failed to disclose a claim in bankruptcy proceedings from
asserting that claim after emerging from bankruptcy.” Ibok v.
SIAC-Sector Inc., 470 F. App’x 27, 28 (2d Cir. 2012) (quoting
Coffaro v. Crespo, 721 F. Supp. 2d 141, 148 (E.D.N.Y. 2010))
(internal quotation marks omitted). Specifically, the doctrine
applies when “1) a party's later position is clearly
inconsistent with its earlier position; 2) the party's former
position has been adopted in some way by the court in the
earlier proceeding; and 3) the party asserting the two positions
would derive an unfair advantage against the party seeking
estoppel.” Oklahoma Firefighters Pension & Retirement System v.
Student Loan Corp., No. 12 Civ. 895 (NRB), 2013 WL 3212297, at
*10 n.6 (S.D.N.Y. June 25, 2013) (quoting DeRosa v. Nat’l
Envelope Corp., 595 F.3d 99, 103 (2d Cir. 2010)) (internal
quotation marks omitted). Further, because “[t]he purpose of
judicial estoppel is . . . ‘to protect the integrity of the
judicial process by prohibiting parties from deliberately
changing positions according to the exigencies of the moment,’”
In re Adelphia Recovery Trust, 634 F.3d 678, 696 (2d Cir. 2011)
(quoting New Hampshire v. Maine, 532 U.S. 742, 749-50 (2001)),
the Second Circuit “limit[s] ‘judicial estoppel to situations
where the risk of inconsistent results with its impact on
judicial integrity is certain,’” DeRosa, 595 F.3d at 103
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(quoting Uzdavines v. Weeks Marine, Inc., 418 F.3d 138, 148 (2d
Here, judicial estoppel bars plaintiff’s Complaint. First,
plaintiff’s present position –- that he has a claim for
discrimination, harassment, and retaliation against defendants
based on injuries suffered during his pre-petition employment
with defendants -– is clearly inconsistent with his
representation to the bankruptcy court that no such claim
existed. See Ibok v. Siac-Sector Inc., No. 05 Civ. 6584 (GBD)
(GWG), 2011 WL 293757, at *7 (S.D.N.Y. Feb. 2, 2011) (applying
judicial estoppel where “[plaintiff]'s pursuit of this lawsuit
is entirely inconsistent with his position in the bankruptcy
court [omitting the instant action] inasmuch as his pursuit of
the lawsuit here is necessarily premised on his ownership of and
standing to pursue the claims against the defendants”). Second,
the bankruptcy court adopted plaintiff’s representation that
such a claim did not exist when it discharged his debts and
closed the bankruptcy case. See id. (“The bankruptcy court, in
discharging [plaintiff] and closing his case, adopted [his]
stated position that he did not have any outstanding legal
claims.”). Third, for the reasons presented in the discussion
below regarding bad faith, we find that plaintiff’s omission of
his EEOC claim was done in an attempt to obtain unfair
advantage, specifically, to prevent the trustee from pursuing
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his claim for the benefit of his creditors while preserving his
ability to recover on the claim himself. See id. at *8
(distinguishing cases cited by the plaintiff that did not apply
judicial estoppel by reasoning that, in those cases, “the courts
found that there was no evidence of plaintiff's intention, inter
alia, ‘to obtain unfair advantage.’” (quoting Reciprocal Merch.
Servs., Inc. v. All Adver. Assocs., Inc., 163 B.R. 689,
697 (S.D.N.Y. 1994))).
Further, this is a situation where applying judicial
estoppel is necessary to protect judicial integrity. “[T]he
integrity of the bankruptcy system depends on full and honest
disclosure by debtors of all of their assets.” Id. at *6
(quoting Rosenshein v. Kleban, 918 F. Supp. 98, 104 (S.D.N.Y.
1996)) (internal quotation mark omitted). However, “allowing a
debtor to ‘back-up, re-open the bankruptcy case, and amend his
bankruptcy filings, only after his omission has been challenged
by an adversary, suggests that a debtor should consider
disclosing potential assets only if he is caught concealing
them’” –- an approach that “would only diminish a debtor's
incentive to provide a true and complete disclosure of her
assets to the bankruptcy courts.” Vanderheyden v. Peninsula
Airport Comm'n, No. 4:12cv46, 2013 WL 30065, at *14 (E.D. Va.
Jan. 2, 2013) (quoting Moses v. Howard Univ. Hosp., 606 F.3d
789, 800 (D.C. Cir. 2010)). Thus, despite the fact that
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plaintiff was permitted to reopen his bankruptcy case and amend
his filings to reflect his EEOC claim, it would violate the
integrity of the judicial system to allow him to pursue the
An exception to the normal application of judicial estoppel
applies “if the first statement or position at issue resulted
from a ‘good faith mistake or an unintentional error.’” Ibok,
2011 WL 293757, at *7 (quoting Mitchell v. Washingtonville Cent.
Sch. Dist., 190 F.3d 1, 6 n.2 (2d Cir. 1999)). Although the
Second Circuit has not established a standard for when to apply
this exception in cases like that at bar, several district
courts in this Circuit have ruled that “failure to disclose
assets will only be deemed inadvertent or due to mistake when
either the debtor has  no knowledge of the claims or  no
motive to conceal the claims.” Id. (quoting Coffaro v.
Crespo, 721 F. Supp. 2d 141, 146 (E.D.N.Y. 2010)).
Applying this standard here, we cannot conclude that
plaintiff’s omission of his EEOC claim resulted from a “good
faith mistake or an unintentional error.” First, at the time he
filed his bankruptcy petition, plaintiff clearly had knowledge
of his EEOC claim, as he had filed it only six-and-one-half
months earlier. Second, plaintiff plainly had a motive to
conceal his EEOC claim. “Had the trustee known about the claim,
[he] might have attempted to sell the claim or to have extracted
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a settlement from the defendants in this case for the benefits
of [plaintiff]'s creditors. The concealment of [plaintiff’s]
claim, by contrast, would put any recovery on the claim beyond
the reach of his creditors.” Id. at *8 (citations omitted). In
short, the circumstances of this case meet the standard for
applying judicial estoppel, and the “good faith omission”
exception does not apply. Therefore, plaintiff’s Complaint is
barred by judicial estoppel.
2. Defendants’ Motion for Sanctions
Defendants have moved for sanctions pursuant to Rule 11
against both plaintiff and Mr. Schewe. Sanctions are
appropriate, they argue, because “Plaintiff cannot assert any
reversing . . . existing law or for establishing new law” and
because “Plaintiff’s refusal to withdraw his Complaint is
objectively unreasonable and can only be construed as being done
for the purpose of harassment and increasing the cost of
litigation for Defendants.” Defs.’ Mem. of Law in Supp. of
Their Mot. for Rule 11 Sanctions 8-9 [hereinafter Defs.’ Mot.
for Sanctions]. With particular regard to Mr. Schewe,
defendants argue that “although [he] was not aware that
Plaintiff had filed for bankruptcy [at the time that plaintiff’s
Complaint was filed], Defendants brought that fact to his
attention on August 21, 2012,” and yet he “refus[ed] to withdraw
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the Complaint or take timely and appropriate action” and did not
request to withdraw as counsel until two-and-one-half months
later. Defs.’ Reply 7.
As a sanction for plaintiff’s and Mr. Schewe’s alleged
violations of Rule 11, defendants seek “reasonable attorneys’
fees incurred in connection with Defendants’ preparation and
filing of both motions.” Defs.’ Mot. for Sanctions 9.
Defendants have calculated that, from August 21, 2012, through
October 31, 2012, these fees equaled $36,939.50. See Defs.’
Mem. of Law in Supp. of Their Mot. to Dismiss Pl.’s Compl. 12
n.6 [hereinafter Defs.’ MTD]; see also Kirschner Aff. in Supp.
of Defs.’ Mot. to Dismiss Pls.’ Compl. ¶¶ 16-17 [hereinafter
Kirschner MTD Aff.]. Plaintiffs seek these sanctions not only
through their Rule 11 motion, but also through their Motion to
Dismiss, presumably relying on the Court’s inherent power to
a. Rule 11 Sanctions Against Plaintiff
The entry of Rule 11 sanctions against plaintiff is not
warranted. There is no basis to conclude that, at the time this
case was filed, plaintiff understood how the failure to report a
pending claim before the EEOC on his bankruptcy petition would
prevent him from pursuing a civil action against his employer.
Further, given that Mr. Schewe was not aware of plaintiff’s
bankruptcy at the time the Complaint was filed, he was not in a
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position to advise plaintiff on the issues addressed in this
At some point after August 21, 2012, when defendants
informed Mr. Schewe of plaintiff’s bankruptcy and presented
their argument for why the Complaint should be withdrawn, Mr.
Schewe discussed the issue with plaintiff. See Schewe Aff.
¶ 12(d). Given that Mr. Schewe “sincerely believed and
believe[s] that . . . [defendants’ counsel] has presented no
case law that compels a plaintiff to voluntarily dismiss his
complaint under facts similar to the instant matter,” id.
¶ 12(c), it seems plausible, even likely, that plaintiff
believed that his decision not to withdraw his Complaint was
legally justified. In light of these considerations, we cannot
conclude that plaintiff’s filing of or continued prosecution of
his case warrants Rule 11 sanctions.
b. Rule 11 Sanctions Against Mr. Schewe
We also decline to impose Rule 11 sanctions against Mr.
Schewe. As discussed above, Mr. Schewe was not aware of
plaintiff’s bankruptcy at the time the Complaint was filed.
After being informed of the bankruptcy on August 21, 2012, Mr.
Schewe kept Mr. Kirschner informed of his progress in reviewing
the issues raised, discussed those issues with his client, and
presented to Mr. Kirschner his objections to Mr. Kirschner’s
interpretation of relevant authority. See Schewe Aff. ¶ 12. On
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November 7, 2012, when he “felt [he] could no longer adequately
represent Mr. Azuike,” who had refused to voluntarily dismiss
his Complaint, Mr. Schewe sought to withdraw as counsel. Id.
¶ 12(f); see also id. ¶¶ 12(d), 16. On their face, Mr. Schewe’s
actions do not strike us as the objectively unreasonable conduct
by counsel that would merit sanctions pursuant to Rule 11.
Rather, Mr. Schewe took a measured and deliberate approach.
Moreover, although we find, as discussed above, that
judicial estoppel requires the dismissal of plaintiff’s
Complaint, we do not believe that Mr. Schewe adopted an
objectively unreasonable position in arguing, prior to the
bankruptcy case’s reopening, that the trustee should be afforded
an opportunity to intervene. See Letter from Michael J.P.
Schewe to Kenneth Kirschner (Sept. 21, 2012), Ex. N, Kirschner
Aff. There is authority in this Circuit that “[w]here a former
debtor commences an action and asserts claims that belong to her
bankruptcy estate, the usual remedy is to substitute as the real
party in interest the trustee of the bankruptcy estate in the
place and stead of the former debtor.” Kohlbrenner v. Victor
Belata Belting Co., No. 94–CV–0915E(H), 1998 WL 328639, at *2
(W.D.N.Y. June 3, 1998); see also Kassner v. 2nd Avenue
Delicatessen Inc., No. 04 CV 7274 (GBD), 2005 WL 1018187, at
*4 (S.D.N.Y. Apr. 29, 2005) (“Instead of dismissing the debtor's
case, it is generally preferable to permit the bankruptcy
Case 1:12-cv-05198-NRB Document 20 Filed 07/30/13 Page 20 of 23
trustee to be substituted, as the named plaintiff, in place of
Further, as discussed above, courts in this Circuit have
reasoned that whether a claim omitted from a plaintiff’s
bankruptcy petition is barred by judicial estoppel depends on
whether the plaintiff acted in bad faith in failing to disclose
the claim. See Ibok v. Siac-Sector Inc., No. 05 Civ. 6584 (GBD)
(GWG), 2011 WL 293757, at *7 (S.D.N.Y. Feb. 2, 2011). Although
we do not agree with Mr. Schewe that “the omission of the EEOC
proceedings is at worst an innocent mistake,” Letter from
Michael J.P. Schewe to Kenneth Kirschner, at 2 (Sept. 18, 2012),
Ex. M, Kirschner Aff., we nonetheless recognize that the inquiry
into whether judicial estoppel applies “is inherently case-
specific,” Ibok, 2011 WL 293757, at *6, and we cannot conclude
that it was objectively unreasonable for Mr. Schewe to argue
that plaintiff omitted his EEOC claim in good faith. Thus,
because it was reasonable for Mr. Schewe to argue that plaintiff
was not required immediately to dismiss his Complaint, but
rather that the bankruptcy trustee should be given an
opportunity to intervene, Rule 11 sanctions against Mr. Schewe
are not warranted.
Case 1:12-cv-05198-NRB Document 20 Filed 07/30/13 Page 21 of 23
c. Sanctions Pursuant to the Court’s
In addition to moving for attorney’s fees pursuant to Rule
11, defendants seek attorney’s fees in their motion to dismiss,
presumably relying on our inherent power to sanction parties and
attorneys. As the Supreme Court recently explained:
“Notwithstanding the American Rule, . . . we have long
recognized that federal courts have inherent power to award
attorney's fees in a narrow set of circumstances.” Marx v. Gen.
Revenue Corp., 133 S. Ct. 1166, 1175 (2013). Specifically, “a
court has inherent power to award attorney's fees  to a party
whose litigation efforts directly benefit others,  to
sanction the willful disobedience of a court order, and  to
sanction a party who has acted in bad faith, vexatiously,
wantonly, or for oppressive reasons.” Id. (citing Chambers v.
NASCO, Inc., 501 U.S. 32, 45-46 (1991)).
Here, the first two grounds for awarding sanctions clearly
do not apply with regard to either plaintiff or Mr. Schewe. The
third ground also does not apply to plaintiff or Mr. Schewe, for
the reasons set out above in the discussion of Rule 11
sanctions. Thus, we decline to exercise our inherent power to
award attorney’s fees in favor of defendants.
Case 1:12-cv-05198-NRB Document 20 Filed 07/30/13 Page 22 of 23
For the reasons stated above, defendants' motion to dismiss
is granted and their motion for Rule 11 sanctions is denied.
erk of the Court shall close the case.
New York, NY
July 29, 2013
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE
Case 1:12-cv-05198-NRB Document 20 Filed 07/30/13 Page 23 of 23
mailed on this date to the
and Order have been
359 Yale Avenue
Hillside, NJ 07205
Former Counsel for PI
Michael J.P. Schewe, Esq.
16 Green Street, 3 rd Floor
Newark, NJ 07102-3616
Counsel for Defendants:
Kenneth Kirschner, Esq.
Vi T. Vu, Esq.
Hogan Lovells US LLP
875 Third Avenue
New York, NY 10022