Judicial estoppel is an equitable doctrine that allows the courts to use their inherent discretion to prohibit litigants from engaging in fraudulent activities. While the doctrine is fundamentally intended to protect the integrity of the courts, it serves as an important shield for defendants that may otherwise be forced to defend against fraudulent claims.

In New Hampshire v. Maine, 532 U.S. 742 (2001), the U.S. Supreme Court identified three factors that will typically determine whether judicial estoppel applies:

  • Whether a litigant's position is clearly inconsistent with an earlier position;
  • Whether successfully persuading the court to accept the litigant's current position would create the perception that either the court in the instant case or the litigant's prior case was misled; and,
  • Whether the litigant would derive an unfair advantage or impose an unfair detriment on the opposing party if not judicially estopped.

These are discretionary factors, not required elements. The Supreme Court also recognized that additional considerations "may inform" state and federal court's application of the doctrine. Thus, different courts apply their own tests, and application of the doctrine is not uniform.

This issue most commonly arises when an employee has failed to disclose his or her claim as a contingent asset in bankruptcy. If an employee knows of a potential claim and has a motive to conceal it from the bankruptcy court, this can potentially trigger the application of judicial estoppel in a subsequent lawsuit based on the claim. As a result, companies and their counsel should check the bankruptcy docket and conduct discovery regarding the employee's bankruptcy filings. Counsel must be sure to plead estoppel as an affirmative defense to pursue judicial estoppel.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.