May 2017

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Manion Gaynor & Manning LLP (“MG+M”) has obtained a summary judgment on behalf of client HealthPort Technologies (“HealthPort”) in Basil Crookshanks, on behalf of himself and all others similarly situated, v. HealthPort and Charlestown Area Medical Center (“CAMC”).  On Wednesday, May 25, 2017, the Supreme Court of Appeals of West Virginia issued a writ of prohibition ordering the trial court to dismiss a class action case against HealthPort and CAMC brought in the Circuit Court of Kanawha County for lack of subject-matter jurisdiction.  The Supreme Court held that the representative plaintiff, Basil Crookshanks, lacked Article 3 standing to assert a claim because his purported injury was contingent upon a future event.

Plaintiff’s complaint alleged that HealthPort and CAMC (collectively, “Defendants”) had violated W.Va. Code § 16-29-2(a) by overcharging for the production of medical records.  Plaintiff sought to certify a state wide class comprised of all similarly-situated individuals that had requested their records from CAMC or other providers serviced by HealthPort, who had been similarly charged purportedly excessive fees under West Virginia law.

The case arose from Plaintiff’s retention of a law firm (“Plaintiff’s Firm”) to prosecute a medical malpractice claim against a nursing home.  Plaintiff entered into a contingent fee agreement with Plaintiff’s Firm, whereby it would front all litigation expenses and only receive reimbursement, if there was a recovery on Plaintiff’s behalf.

Plaintiff’s Firm requested his medical records from CAMC.  HealthPort, which served as CAMC’s health information management provider, processed Plaintiff’s Firm’s request and invoiced it for the records.  Plaintiff’s Firm paid HealthPort’s invoice and filed the class action on Plaintiff’s behalf soon thereafter. At the time the class action complaint was filed, Plaintiff’s medical malpractice claim was pending and no money had been recovered on his behalf.

Defendants moved for summary judgment on the grounds that Plaintiff’s claims were not ripe and that he did not have standing because not only had he not yet paid for his medical records, but he may never pay for them.  The trial court denied Defendants’ motion for summary judgment.  Defendants petitioned the Supreme Court of Appeals of West Virginia for a writ of prohibition to stop the circuit court from exercising jurisdiction over the case.

The Supreme Court of Appeals of West Virginia agreed with Defendants’ argument that Plaintiff lacked standing, thereby depriving the circuit court of jurisdiction.  The Court summarized standing as “[a] party’s right to make a legal claim or seek judicial enforcement of a duty or right,” Findley v. State Farm Mut. Auto. Ins. Co., 213 W.Va. 80, 94, 576 S.E.2d 807, 821 (2002) (quoting Black’s Law Dictionary 1413 (7th ed. 1999)), and reviewed the three elements of standing as follows:

 

First, the party attempting to establish standing must have suffered an “injury-in-fact” – an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent and not conjectural or hypothetical.  Second, there must be a causal connection between the injury and the conduct forming the basis of the lawsuit.  Third, it must be likely that the injury will be redressed through at favorable decision of the court.”

Id.

 

The Court determined that Plaintiff could not satisfy the first prong of the standing analysis because the record demonstrated that he had not suffered an injury-in-fact.  The Court found that it was Plaintiff’s Firm that had suffered a “direct pocketbook injury.” Further, the Court noted that, “Mr. Crookshanks may become contractually liable to his lawyers for this allegedly unlawful expense at a future date, but until he does, his loss is contingent and conjectural.”

MG+M Partner, Javier Flores, a member of the firm’s class action litigation practice group, served as lead counsel for the Defendants.

 

DelawareUnder Delaware law, when a derivative plaintiff loses its stockholder status as the result of a merger, the plaintiff usually also loses its standing to pursue a derivative suit on behalf of the corporation.  This rule is subject to only two limited exceptions: (1) when “the merger itself is the subject of a claim of fraud, being perpetrated merely to deprive shareholders of the standing to bring a derivative action,” and (2) when “the merger is in reality merely a reorganization which does not affect plaintiff’s ownership in the business enterprise.”  Lewis v. Ward, 852 A.2d 896, 902 (Del. 2004) (clarifying exceptions identified in Lewis v. Anderson, 477 A.2d 1040 (Del. 1984)).  In a decision revisiting a 2010 mining tragedy in which dozens of miners were killed, the Delaware Court of Chancery recently concluded that neither exception applied to preserve the standing of stockholders of Massey Energy Company (“Massey”) to bring derivative claims, and that plaintiffs had not brought direct claims for an “inseparable fraud.”  In re Massey Energy Co. Derivative & Class Action Litig., Consol. C.A. No. 5430-CB (May 4, 2017).

Backstory: The Court of Chancery Refuses To Enjoin The Massey-Alpha Merger

In 2011, stockholder plaintiffs attempting to enjoin a merger between Massey and Alpha Natural Resources, Inc. (“Alpha”) argued that Massey should be forced to assume and transfer derivative claims against certain Massey fiduciaries to a trust for the benefit of Massey stockholders, rather than allowing the claims to pass to Alpha.  While finding “little doubt” that plaintiffs’ derivative claims could survive a motion to dismiss, the Court also concluded that plaintiffs were likely to lose standing to pursue those claims if the merger was consummated.

The Court of Chancery noted that a corporation reasonably may conclude that the risks arising from a lawsuit outweigh the potential risk-weighted recovery, even when the corporation clearly has been harmed.  As a practical matter, a corporation with strong claims against former executives may choose not to pursue those claims for valid reasons, including a wish to avoid pleading formal admissions that potentially could be used against the corporation by third parties, such as insurance carriers, government agencies, and employees and other individuals with personal injury and other claims.  Delaware courts have declined to hold that these kinds of dilemmas – which arise because the corporation itself is conflicted, and not because the directors suffer a personally disabling conflict of interest – justify excusing a would-be plaintiff from the requirement of a pre-suit demand.  In its injunction opinion, the Court in Massey similarly refused to create another exception to the general rule that a merger extinguishes the ability of a former stockholder plaintiff to pursue claims derivatively on behalf of the corporation.  In addition, the Court noted that if a potential buyer cannot rely on the fact that a merger will eliminate derivative claims, bids for troubled assets will be reduced, if not deterred completely, because the buyer must discount the value of the assets to reflect the uncertainty.  As a result, the Court could not conclude that the Massey-Alpha merger was unfairly priced.  “That Massey might be selling to Alpha at a price lower than it would have had the company been better managed is an idea one can embrace without also then concluding that there is a basis to conclude that the Merger with Alpha ought to be enjoined.”

Flash Forward:  The Court of Chancery Confirms Its Preliminary Analysis

On May 4, 2017, the Court of Chancery issued an opinion granting a post-bankruptcy motion to dismiss fiduciary duty claims in the Massey case.  Plaintiffs alleged that fourteen former directors and officers of Massey breached their fiduciary duties by “causing Massey to employ a deliberate and systematic business plan of willfully disregarding both internal and external safety regulations.”  Plaintiffs conceded that the merger deprived them of standing to pursue derivative claims, but argued they should be allowed to pursue claims directly, relying on dicta in Arkansas Teacher Retirement System v. Caiafa, 996 A.2d 321 (Del. 2010).  In Caiafa, the Delaware Supreme Court approved a settlement of claims against Countrywide directors and officers, which did not carve out derivative claims into a separate litigation trust.  The Court noted that the derivative claims – which were dismissed after a merger – were “functionally worthless.”  However, the Court also commented that “Delaware law recognizes a single, inseparable fraud when directors cover massive wrongdoing with an otherwise permissible merger,” and that “[a]n otherwise pristine merger cannot absolve fiduciaries from accountability for fraudulent conduct that necessitated the merger.”  The Supreme Court later clarified in another Countrywide opinion that this language did not create a new exception to the rule of Lewis v. Anderson, and concerned only direct claims, not derivative claims.

The Court in Massey found that plaintiffs had failed to state a direct claim under the dicta in Caiafa.  The Court read this language as requiring a plaintiff to plead facts showing that (1) a defendant engaged in serious pre-merger misconduct that would support a direct claim, and (2) the merger was “necessitated” or made “inevitable” by that misconduct.  The Court viewed plaintiffs’ claims as focusing on “prototypical examples of corporate harm that can be pursued only derivatively,” i.e., mismanagement, not direct harm to individual stockholders.  Defendants allegedly violated laws intended to protect third parties, but were not alleged to have acted to enrich themselves at the expense of other stockholders.  Moreover, defendants were alleged to have acted with open hostility to regulators and were not alleged to have attempted to conceal their actions.  As for the second prong of this standard, the Court referred to the 2001 finding that the Massey-Alpha merger was not “necessitated” by the alleged misconduct, but also concluded it did not need to reach this issue because the claims were clearly derivative.

The Court also stated that although plaintiffs would not be able to pursue viable derivative claims, the result was equitable because Alpha had in 2011 paid “a substantial sum” to acquire all of Massey’s assets, including the derivative claims at issue.

Finally, the Court in Massey remarked in dicta that it did not believe that stockholder ratification was at all relevant to the motion to dismiss:

The policy underlying Corwin, to my mind, was never intended to serve as a massive eraser, exonerating corporate fiduciaries for any and all of their actions or inactions preceding their decision to undertake a transaction for which stockholder approval is obtained.  Here, in voting on the Merger, the Massey stockholders were asked simply whether or not they wished to accept a specified amount of Alpha shares and cash in exchange for their Massey shares or, alternatively, to stay the course as stockholders of Massey as a standalone enterprise, which would have allowed plaintiffs to press derivative claims.  Massey’s stockholders were not asked in any direct or straightforward way to approve releasing defendants from any liability they may have to the Company for the years of alleged mismanagement that preceded the sale process.  Indeed, the proxy statement for the Merger implied just the opposite in stating that control over the derivative claims likely would pass to Alpha as a result of the Merger.  To top it off, if defendants’ view of Corwin were correct, it would have the disconcerting and perverse effect of negating the value of the derivative claims that Alpha paid to acquire along with Massey’s other assets.

 

Practice Point: Which Mergers Fail to Eliminate Claims?

The exceptions to the Lewis v. Anderson rule all concern mergers which are “otherwise permissible,” which generally means that they are mergers that comply with the statutory requirements of Delaware law.  Although every case is subject to its own analysis, and specific facts may lead to a different result in a particular case, certain generalizations are possible, and the following types of mergers should be viewed as more risky than others.

The “laundering” merger

Under the first exception to the rule of Lewis v. Anderson, a merger that is undertaken merely to deprive stockholders of standing will not, in fact, deprive stockholders of standing.  Importantly, none of the parties in Massey argued that the merger between Massey and Alpha was such a merger.  To the contrary, the Court referred to record evidence that Massey’s board of directors had considered several strategic alternatives, including a “standalone” plan in which Massey would continue to operate its business without a merger or other business combination.  The board concluded that the standalone plan was less preferable for reasons including Massey’s “tarnished reputation and history of missing management projections,” but still considered it to be “viable.”  Moreover, even if Massey had undertaken the merger because it had been weakened by the alleged misconduct of defendants, that is not the same as a merger undertaken for the purpose of limiting the liability of the directors approving it.

The “deja vu” merger

In the “mere reorganization” merger, a stockholder continues to have the same ownership interest as before, only in a newly reorganized corporation.  This issue did not arise in Massey.

The “fruits of fraud” merger

Under Caiafa as interpreted in Massey, a plaintiff may continue to pursue direct claims based on serious pre-merger misconduct, where that misconduct makes a merger “inevitable.”  (With the subsequent limitation to direct claims in Countrywide II, this observation has become somewhat obvious, as mergers generally do not extinguish standing to bring any claims directly.)  The merger between Massey and Alpha was not deemed to be an “inevitable” merger, despite the fact that, as noted above, Massey was seriously weakened by the alleged misconduct.  The Court was persuaded by the record that Massey’s board viewed the standalone plan as “a viable option,” even though it was “not the best choice available.”

Asbestos(Cropped)Travelers Casualty and Surety Company (“Travelers”) dodged a bullet when a $36 million judgment entered against it was unanimously overturned by a recent Third Circuit ruling in General Refractories Co. v. First State Ins. Co., 2017 WL 1416364 (3d. Circ. 2017). Significantly, the Third Circuit held that Travelers had no obligation to indemnify its policyholder, General Refractories Company (“GRC”), for any losses associated with underlying asbestos-related lawsuits based on a policy exclusion for losses “arising out of asbestos.” The crux of the Court’s decision is hinged on the interpretation of the language that shaped the asbestos exclusion in Travelers’ insurance policy, which provided:

“It is agreed that this policy does not apply to EXCESS NET LOSS arising out of asbestos, including but not limited to bodily injury arising out of asbestosis or related diseases or to property damage.”

By way of background, GRC was a manufacturer and supplier of refractory products, some of which contained asbestos. The historical use of asbestos in some of GRC’s products resulted in over 30,000 lawsuits alleging injuries from exposure to asbestos starting in the late 1970s. While GRC’s primary liability insurers handled these claims, it also obtained excess insurance policies for additional coverage from a number of insurers, including Travelers. GRC began tendering the claims to its excess insurers in 2002, after its liabilities had far exceeded the limits of its primary insurance coverage, and the primary insurers could no longer defend and indemnify the company for these claims. All of GRC’s excess insurers, including Travelers, denied coverage based on their policies’ asbestos exclusions. As such, GRC initiated a lawsuit in the Eastern District of Pennsylvania, Gen. Refractories Co. v. First State Ins. Co., 234 F.R.D. 99, 100 (E.D. Pa. 2005), seeking to recover its losses from the underlying asbestos matters against its excess insurers, alleging that the asbestos exclusion did not preclude it from recovering under the policies. Through the course of the litigation, all of the excess insurers, with the exception of Travelers, resolved with GRC.

The District Court endeavored to interpret Travelers’ asbestos exclusion with a one-day bench trial, and considered argument and evidence from both parties. GRC held strong with its narrow interpretation of the asbestos exclusion, arguing that it only applied to raw mineral asbestos, not asbestos-containing products. In support of its position, GRC presented evidence of: (1) comparable insurance policies that clearly stated asbestos-containing products were excluded; (2) comparable insurance policies with definitions of “asbestos” that failed to include asbestos-containing products; (3) Travelers’ consecutive policies containing less ambiguous language; (4) the definition of asbestos-related claims from outside sources; and (5) expert testimony distinguishing between asbestos and asbestos-containing products. Travelers’ interpretation, however, was much broader, asserting that all asbestos-related claims were precluded under the asbestos exclusion.

The District Court agreed with GRC’s narrow interpretation of the word “asbestos” — concluding that it should be interpreted to mean raw mineral asbestos only. The Court explained that its interpretation was supported by GRC’s evidence of industry custom at the time, and that Travelers failed to show otherwise. Consequently, it considered the asbestos exclusion to be riddled with a latent ambiguity and deemed it “ambiguous” and “unenforceable.” Accordingly, a judgment was entered against Travelers for $36,273,705.00 to indemnify GRC for its losses in the underlying asbestos lawsuits.

On appeal, the Third Circuit unanimously reversed the District Court, when it held that Travelers’ asbestos exclusion was “unambiguous” and “enforceable” as a matter of law. To reach this monumental decision, the Court interpreted the language in the asbestos exclusion, and determined that any debate over the meaning of the word “asbestos” was completely nullified by the preceding phrase “arising out of” in the exclusion. In fact, U.S. Circuit Judge Thomas I. Vanaskie, in writing for the panel, notably stated “[t]he phrase ‘arising out of,’ when used in a Pennsylvania insurance exclusion, unambiguously requires ‘but for’ causation.” (emphasis added). And, then explained that “[b]ecause the losses relating to the underlying asbestos suits would not have occurred but for asbestos, raw or within finished products, [the Court] reverse[s] the judgment of the district court.” Simply put, the phrase “arising out of” in effect broadens the asbestos exclusion to include any injuries caused by asbestos and asbestos-containing products.

Lastly, even if GRC’s narrow interpretation was correct, the Court states that its decision would not be any different. Rather, the Court purposefully points out that GRC’s claims would still be excluded, because it could not overlook the blatant fact that the fiber released from asbestos-containing products is the same as that from raw mineral asbestos, and that the plaintiffs in the underlying asbestos lawsuits were exposed to GRC’s asbestos-containing products.

Ultimately, there is no question that this broad interpretation will have far-reaching effects on other similarly situated manufacturers and/or suppliers of asbestos-containing products, like GRC. The Court even acknowledged the widespread implications of it decision, which U.S. Circuit Judge Thomas I. Vanaskie predicted to have “immediate” significance “to the parties at hand and those insurers and insureds” with policies like Travelers. In fact, he even went so far as to call the Court’s decision “PRECEDENTIAL”- leaving asbestos defendants, particularly manufacturers and suppliers of asbestos-containing products, in a vulnerable situation.

 

lawjUSTICEBWIn its recent decision in Williams v. Yamaha Motor Co., 851 F.3d 1015 (9th Cir. 2017), the Ninth Circuit affirmed dismissal against a Japanese manufacturer because it was not “at home” in the forum. This consistent application of Daimler provides the benefit of predictable results.

In 2013, George Williams filed suit, on behalf of himself and others similar situated, against Yamaha Motor Co. Ltd (“YMC”), a Japanese corporation, and Yamaha Motor Corporation, U.S.A. (“YMUS”), YMC’s wholly-owned subsidiary. Those plaintiffs were purchasers of outboard motors, which were designed and manufactured by YMC, then, marketed and imported in California by YMUS. Despite being properly serviced and maintained, the motors failed after 500 to 700 hours of use, far less than the expected motor life of 2,000 hours. Williams alleged that YMC had knowledge of the defect, but failed to remedy the issue because the defect did not typically manifest until after the three-year warranty period expired.

After multiple amendments to the initial complaint, the district court dismissed Williams’ only remaining claim, granting YMC’s motion to dismiss for lack of personal jurisdiction and YMUS’s motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6). Williams appealed and the Ninth Circuit affirmed the dismissal, finding that the district court lacked general jurisdiction of YMC and that Williams failed to adequately plead the elements of his claim against YMUS.

The Ninth Circuit relied on Daimler AG v. Bauman, 134 S. Ct. 746 (2014) in reviewing the jurisdiction issue. The court stated that the analysis for general jurisdiction is whether “corporation is essentially ‘at home’ in the forum state.” The court applied this analysis and expressly considered the following facts: Japan was YMC’s principal place of business; YMC had no offices or employees in California; and YMC’s total sales in North America made up only 17% of YMC’s total net sales. Accordingly, the Ninth Circuit was persuaded that YMC was not “at home” in California.

The Ninth Circuit acknowledged that its decisions after Daimler applied the alternative “alter ego test for ‘imputed’ general jurisdiction.” Under this theory, a foreign company would need to be so intertwined with its subsidiary that neither would have a separate identity and would merely function as alter egos of each other. However, even under this theory, the Ninth Circuit found no facts regarding the “nature of the parent-subsidiary relationship. “ Accordingly, the court declined to find support for the “alter ego” theory of jurisdiction.

This case is another example of a post-Daimler court strictly following the “at home” rule of general jurisdiction over a foreign business. Some argue that Daimler’s “at home” rule is inconsistent with historical trends and serves to “shrink the jurisdiction” where suits may be brought against corporations.[1] However, these concerns are outweighed by the benefits of a clear and predictable alternative to the previous “minimum [or substantial] contacts” analysis set forth by International Shoe and its progeny.

The “at home” rule is a straightforward analysis as compared to the previous analysis. See Daimler, 134 S. Ct. at 761 (holding that the jurisdictional analysis under International Shoe and its progeny was “unacceptably grasping.”). Jurisdictional rules which employ a straightforward and understandable analysis “promote greater predictability.” Hertz  Corp. v. Friend, 559 U.S. 77, 94 (2010).

Predictability yields two key benefits. First, a court’s resources are preserved from lengthy inquiries into whether a defendant’s contacts were “minimal” enough as under the former rule for general jurisdiction. The previous analysis, which gave “prime place to reason and fairness,” involved a highly fact-specific inquiry into the details of the relationship between the defendant and the forum in each case. See J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 903 (2011). Now, as is demonstrated in Williams v. Yamaha, a question of general jurisdiction may be simply resolved based on a review of the principal place of business, location of offices, and amount of revenue generated in the forum. Second, predictable results also allow litigants to better understand the merits of their respective cases before pursuing legal remedies through litigation. See Hertz, 559 U.S. at 94 (“Predictability also benefits plaintiffs deciding whether to file suit in state or federal court.”). Specifically, plaintiffs can better predict the one forum in which they can seek recourse for their claims. Therefore, the “at home” approach to questions of general jurisdiction is an analysis with predictable outcomes, which benefits all parties involved in complex litigation. See Stouffer Corp. v. Breckenridge, 859 F.2d 75, 77 (8th Cir. 1988) (noting the favorability of a rule that “enhances predictability of result and promotes judicial economy”).

Whether Daimler’s “at home” rule will continue to be consistently applied with the longevity of International Shoe will remain to be seen. However, the benefits of the predictability of this clearer rule of jurisdiction will continue to benefit courts and litigants in resolving this important procedural question.

 

[1] See Judy M. Cornett & Michael H. Hoffheimer, Goodbye Significant Contacts: General Personal Jurisdiction After Daimler AG v. Bauman, 76 Ohio St. L.J. 101, 105-07 (2015).

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On Friday, April 28, 2017, the United States District Court for the Southern District of New York dismissed, in its entirety, John and Michele Clark’s asbestos personal injury action based on the doctrine of judicial estoppel. In short, the Court ruled that the Plaintiffs’ lawsuit could not proceed without damaging the integrity and proper functioning of the judicial system. The reason: Plaintiffs did not disclose their personal injury claims before receiving their Chapter 13 Bankruptcy discharge.

The background of Plaintiffs’ personal injury lawsuit is entwined with two other actions. First, Plaintiffs filed for a Chapter 13 bankruptcy petition in Connecticut in February 2010. A Bankruptcy Plan was confirmed approximately five months later, in July 2010. In March 2016, Plaintiffs declared that they had made all their payments as prescribed by their bankruptcy plan and requested that the bankruptcy court issue an order discharging their debts. The bankruptcy court entered such an order in August 2016.

Second, in August 2015—a year before the Chapter 13 petition was discharged—Plaintiffs filed an asbestos-related personal injury action in Illinois state court. The Illinois suit came about one month after Mr. Clark was diagnosed with mesothelioma. Plaintiffs alleged that Mr. Clark’s illness was caused by exposure to asbestos during his service in the United States Air Force as well as his employment with an aircraft manufacturer. Plaintiffs, however, did not inform the bankruptcy court of their asbestos claims, as bankruptcy law requires. Indeed, in a Chapter 13 bankruptcy, petitioners have an ongoing obligation to disclose any asset that accrues between the initiation and closing of their bankruptcy case as “[e]very conceivable interest of the debtor, future, nonpossessory, contingent, speculative, and derivative, is within the reach of [the bankruptcy estate].” Chartschlaa v. Nationwide Mut. Ins. Co., 538 F.3d 116, 122 (2d Cir. 2008). Thus, by not amending their Chapter 13 schedules, Plaintiffs, in effect, were concealing an asset that rightfully belonged in their bankruptcy trustee’s care. Accordingly, after a defendant informed Plaintiffs of its intention to file a motion to dismiss based on judicial estoppel owing to their failure to disclose the existence of their Illinois action, Plaintiffs’ voluntarily dismissed the Illinois lawsuit.

Then, in July 2016—again, while Plaintiffs’ bankruptcy case was still open—Plaintiffs filed a second asbestos personal injury suit raising the same claims as those raised in Illinois, but this time in New York state court. Shortly thereafter, the defendants in the New York action removed the case to the Southern District and Plaintiffs’ bankruptcy case closed, without Plaintiffs ever amending their Chapter 13 schedules. The New York defendants then promptly filed their motion to dismiss based on judicial estoppel.

The defendants argued that Plaintiffs’ claims had to be judicially estopped as a matter of law because Plaintiffs took inconsistent positions before the Bankruptcy Court and the Southern District. On the one hand, Plaintiffs, by not fulfilling their statutory obligation to amend their schedule of assets in the bankruptcy case, declared that they had no foreseeable assets owing to them. On the other hand, Plaintiffs claimed in their New York action that they were entitled to monetary damages as a result of Mr. Clark’s asbestos exposure. In granting the defendants’ motion, the Southern District noted that “judicial estoppel is a harsh rule.” Clark, et al. v. Advanced Composites Group, et al., No. C.A. 16 Civ. 6422 (GBD), *10 (S.D.N.Y., Apr. 28, 2017). But, its application was appropriate and essential. The Court explained that:

Plaintiffs’ duty to disclose assets did not terminate upon confirmation of their bankruptcy plan or when payments were completed. Rather, the disclosure duty was a ‘continuing one’ which continued until the bankruptcy case was closed.

Id. at *8.

To allow Plaintiffs to continue with their personal injury action after failing to disclose potential assets to the bankruptcy court would be intolerable as they unfairly would have benefitted from a windfall. For example, “had Plaintiffs’ cause of action been disclosed during the bankruptcy proceeding, their creditors might have pursued a higher interest rate, or taken a different view of the appropriateness and viability of the [bankruptcy plan].” Id. at *9. Moreover, because the integrity of the bankruptcy system predominately relies on debtors’ “full and honest disclosures,” Plaintiffs were not permitted to change their story.