Friday, June 29, 2012

Practice Pointer 2.0: Bankrupt Plaintiffs

Not too long ago we advised that it’s a good idea to check whether your plaintiffs were actually alive when they filed their suits.  We’d like to amend that to add that it’s also a good idea to check whether your plaintiffs were financially alive as well.

By that, we mean plaintiffs should be checked for bankruptcy filings.  The quite lengthy and well-reasoned opinion in Fair v. Biogen IDEC, Inc., 2012 WL 2417722, slip op. (Mass. Super. June 13, 2012), explains why.  If a plaintiff has an accrued but unfiled personal injury claim and does not list it as an “asset” in a personal bankruptcy, then it passes to the bankruptcy estate as property and the plaintiff loses standing to assert it.  Fair, slip op. at 12-13.  In addition, or in the alternative, to the no-standing rule, a plaintiff who omits an unfiled personal injury claim from his/her list of assets in bankruptcy is judicially estopped from pursuing it following discharge in bankruptcy.  Id. at 14.

[N]otwithstanding that she may have some form of personal stake in the outcome of this litigation, [plaintiff’s] failure to disclose to the bankruptcy court nevertheless extinguishes her standing to pursue personal compensation.

[I]n reaching this conclusion to apply judicial estoppel in this case this court is acting in accordance with the doctrine’s primary purpose to protect the integrity of the bankruptcy process and to promote finality of confirmed reorganization orders.

Id. at 15 (findings 4 and 5).

As the numerous case citations in Fair indicate, the preclusive effect of a plaintiff’s bankruptcy on accrued but unfiled personal injury claims is the general rule.  There’s lots of law out there, for almost any jurisdiction, for the proposition that plaintiffs can’t hide claims during bankruptcy and then pursue them afterwards.  We recall filing similar motions in both the Bone Screw and Diet Drug mass torts − we even had templates prepared.  So, if you don’t already have “plaintiff bankruptcy” on your to do list with respect to mass tort (indeed, any) plaintiffs, we’d recommend adding it.

Finally, we’d like to thank Joe Blute, of Mintz Levin, a member of Biogen’s defense team, for passing along the win.