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How Bankruptcy Can Affect a Personal Injury Lawsuit

A federal judge in Atlanta recently granted summary judgment to the defendant in a personal injury lawsuit. The case is notable because the judge never reached the merits of the plaintiff’s arguments, but rather dismissed the case because she lacked standing to bring the suit in the first place. The standing question is what made this case unusual.

Job v. AirTran Airways, Inc.

The alleged injury took place in 2009. The plaintiff was traveling from West Palm Beach to Atlanta on a plane operated by AirTran Airways. A malfunction in the plane’s air conditioning system caused some fluid to leak, allegedly splashing the plaintiff in the eyes. As a result, she claims she suffered chronic inflammation of her eyelid.

Just under two years later, in July 2011, the plaintiff sued AirTran. The company moved for summary judgment. The judge granted the motion in an opinion dated February 3 of this year.

How did the plaintiff lack standing? It turns out that in between the time of the alleged incident and the filing of her lawsuit, the plaintiff filed for bankruptcy. In 2010 she filed a petition in California for liquidation of debts under Chapter 7 of the Bankruptcy Code. As part of that proceeding, she had to list any “contingent and unliquidated claims,” such as pending personal injury lawsuits. Obviously, she did not include the AirTran lawsuit, as it had not yet been filed. The Bankruptcy Court granted her discharge six months prior to the filing of the lawsuit.

In a Chapter 7 case, the bankruptcy court appoints a trustee to take possession of the debtor’s assets, pay off any creditors to the extent possible, and “abandon” any remaining property back to the debtor. AirTran, in its motion for summary judgment, pointed out that it was the bankruptcy trustee, not the plaintiff, who had standing to bring this case, as the alleged injury occurred before the filing of the bankruptcy case.

According to the trial judge, the plaintiff “never suggests that the cause of action was then abandoned back to her,” and that the trustee remains the “real party in interest” with standing to sue AirTran. (The plaintiff subsequently moved to reopen her bankruptcy case in California to add the lawsuit as a pending claim.) Accordingly, the judge granted AirTran summary judgment on this point.

Does Estoppel Apply?

AirTran also suggested that the plaintiff’s failure to list this personal injury lawsuit in her initial bankruptcy petition created a “judicial estoppel” situation. “Estoppel” is the legal doctrine that says a person cannot take contrary positions in different legal proceedings. In other words, since the plaintiff failed to list her potential lawsuit against AirTran in her bankruptcy petition–presumably to conceal a potentially valuable asset from the trustee–she could not now bring such a claim.

The judge disagreed with AirTran on this point (although it didn’t matter, since the judge agreed the plaintiff lacked standing.) Under Georgia law, which applies in this case, a plaintiff can proceed with a previously unlisted personal injury claim if she subsequently amends her bankruptcy petition–which the plaintiff did here. Federal law does not permit such amendments, but state law does.