Judicial Estoppel

Gabarick v. Laurin Maritime, No. 13-30739 (5th Cir. May 21, 2014)

By: Kevin Phillips

Edited by: Molly MacKenzie

Inthis decision, the Fifth Circuit upheld a district court’s dismissal of a declaratory judgment action based on the doctrine of judicial estoppel. The controversy arose when the MEL OLIVER, a tugboat owned by American Commercial Lines (“ACL”) but operated by D.R.D. Towing Company, LLC (“DRD”) as a result of two charter agreements between the parties, struck another vessel in the Mississippi River, causing an oil spill. Multiple civil and criminal actions were brought. Thiscase concerns a declaratory judgment brought by ACL in which it sought to have the charter agreements declared invalid ab initio. The declaratory judgment action initially ran in conjunction with an action to limit liability amongst the interested parties, but the court granted a stay for the declaratory judgment. In the action to limit liability for the damages caused by the oil spill, ACL successfully argued that the charters were valid and that DRD was therefore liable as owner pro hac vice of the tugboat. Because that argument was accepted in the limitations action, the court found that ACL was judicially estopped from making a contradictory argument in the declaratory judgment action, a related proceeding.Judicial estoppel is a doctrine which prohibits parties from asserting contrary positions in related proceedings. It is “an equitable doctrine that defies ‘inflexible prerequisites or an exhaustive formula.’ New Hampshire v. Maine, 532 U.S. 742, 751 (2001).” Yet in the Fifth Circuit, “at least two requirements must be met before a party’s argument may be judicially estopped. [United States ex rel. American Bank v. C.I.T. Constr. Inc. of Texas, 944 F.2d 253, 258 (5th Cir. 1991)]. First, the estopped party’s position must be ‘clearly inconsistent with its previous one,’ and second, ‘that party must have convinced the court to accept that previous position.’ [Hall v. GE Plastic Pac. PTE Ltd., 327 F.3d 391, 396 (5th Cir. 2003)].” As to the first element, ACL unsuccessfully argued that there was no inconsistency because: 1) in the first proceeding, ACL merely maintained that the charters had been intended to be valid, 2) they had always argued in the alternative that the charterswere invalid, and 3) an invalid charter in the declaratory action would have produced the same outcome in the limitations action. In rejecting the party’s first claim, the court quoted ACL to show that it did in fact argue for valid charters, not merely an intent to have valid charters. In rejecting the second claim, the court found that because the primary argument asserted by ACL was ultimately adopted by the court, it could no longer advance its alternative positions. In rejecting ACL’s third claim, the court held that desired outcomes are distinct from the arguments one uses to reach them, and the argument, not the outcome, is what matters for judicial estoppel.ACL also argued that the court’s stay of the declaratory judgment is what prevented it from claiming that the charters were void. ACL relied on precedent stating that when a court stops a party from making a particular argument, that party can make a contradictory argument in later proceedings. This argument was unsuccessful as the Fifth Circuit found that the district court did not prevent ACL from arguing that the charters were invalid in the limitations proceeding, nor did the district court’s stay create a situation where ACL was forced to make a particular argument.