Simon PLC Attorneys & Counselors – October 2026 Memorandum
SWORD OR SHIELD? JUDICIAL ESTOPPEL IN THE CONTEXT OF UNSCHEDULED BANKRUPTCY PRE-PETITION CLAIMS ASSERTED IN A LATER STATE COURT ACTION
Troy, MI. Can a plaintiff’s failure to schedule pre-petition claims as assets of the bankruptcy estate preclude it from asserting those claims in a subsequent state-court action? Recently, in the case of Mission Point Healthcare Holdings, LLC, et al. vs. Mitchell, et al. 26-221238-CB, the Oakland County Circuit Court (“OCCC”) found that “yes”, judicial estoppel can provide an effective defense against claims that were required to be identified as assets in the Plaintiff’s prior bankruptcy case but were not. The failure to disclose a pre-petition cause of action as an asset of the bankruptcy estate may preclude the debtor from later asserting that claim in state court because judicial estoppel bars the debtor from taking a position inconsistent with its previously filed bankruptcy schedules.
Plaintiff, Mission Point of Detroit LLC (“MP Detroit”) filed a voluntary Chapter 11 bankruptcy petition on April 16, 2025. It is undisputed that MP Detroit did not disclose the claims asserted against the moving Defendants in the instant action in its bankruptcy petition or schedules. It is likewise undisputed that MP Detroit never amended its petition, schedules or any other bankruptcy filing to disclose the existence of the claims at any time during the pendency of its bankruptcy proceedings.
It is further undisputed that, with one exception, MP Detroit did not identify any of the moving Defendants as “creditors” in the bankruptcy proceedings. Indeed, MP Detroit even acknowledged in its pleadings that the Defendants were creditors within the meaning of the Bankruptcy Code. Nor did MP Detroit list these Defendants in its bankruptcy mailing matrix from which the bankruptcy court primarily generates notices to creditors and other interested parties.
In reaching its decision to partially grant the Defendants’ motion for partial summary disposition under MCR 2.116(C)(7) and(10), the OCCC, relying extensively on Spohn v Van Dyke Pub Sch, 296 Mich App 470 (2012), reasoned that Judicial estoppel is an equitable doctrine that generally precludes a party from asserting a position in one legal proceeding and later asserting a contrary position in another proceeding to obtain an advantage. Spohn, 296 Mich App at 479. The doctrine is intended to preserve the integrity of the judicial process by preventing a party from abusing the courts through “cynical gamesmanship.” Id. at 479-480.
Notably, within the bankruptcy context, the Court of Appeals has held that judicial estoppel applies when: (1) the plaintiff assumed a position in the subsequent litigation that is contrary to a position asserted under oath in the bankruptcy proceedings; (2) the bankruptcy court adopted the contrary position either as a preliminary matter or as part of a final disposition; and (3) the omission did not result from mistake or inadvertence. Spohn, 296 Mich App at 480-481.
The disclosure requirements imposed by the Bankruptcy Code are fundamental to the integrity of the bankruptcy process. Creditors and the bankruptcy court rely upon complete and accurate disclosure of a debtor’s assets in evaluating and administering the bankruptcy estate. Spohn, 296 Mich App at 482. A debtor may not obtain the benefits of bankruptcy by representing that no claims exist and later pursue undisclosed claims for the debtor’s own benefit in subsequent litigation. Spohn, 296 Mich App at 481-482. A debtor’s duty to disclose is continuing and requires disclosure of 11 potential causes of action throughout the pendency of the bankruptcy proceedings. Id. at 482.
Applying these principles, the Court of Appeals has recognized that the first element of judicial estoppel is satisfied where a debtor files a sworn bankruptcy petition that omits a known potential cause of action; the second element is satisfied when the bankruptcy court confirms a plan based upon the debtor’s disclosures; and the third element is satisfied where omission, made before dismissal of the bankruptcy proceeding, was not the result of mistake or inadvertence. Jarrett-Cooper v Rosett, 2014 WL 1118007, lv den, 497 Mich 904 (2014) *2-4.
The OCCC rejected MP Detroit’s argument that application of judicial estoppel would constitute an impermissible collateral attack on the Bankruptcy Court’s Order confirming its Chapter 11 Plan, which broadly reserves all causes of action not expressly waived, including causes of action “whether or not specifically listed in the Plan or Disclosure Statement.” MP Detroit also relies upon the language of the Confirmation Order itself, which provides ”All property of the estate is hereby vested in the Reorganized Debtor, including all Causes of Action, whether arising before or after the Petition Date, except as explicitly set forth in this Confirmation Order or in the Plan. Failure of Debtor to list or disclose any Cause of Action shall not be a defense in any action, suit, demand, counter-claim, cross-claim, assertion of set-off or recoupment rights, or arbitration action brought by the Reorganized Debtor.
Of primary importance is the fact that the Defendants were not identified as creditors in MP Detroit’s Chapter 11 proceeding and therefore did not receive notice of the bankruptcy filing or the proposed Plan. The record contains no evidence that the moving Defendants ever received notice of the bankruptcy proceedings, the proposed Plan, or the confirmation hearing. The Bankruptcy Code and principles of due process require that known creditors receive notice reasonably calculated to apprise them of the pendency of the bankruptcy proceedings and afford them an opportunity to protect their interests. Geno Enterprises, Inc v Newstar Energy USA, Inc., 280 BR 623, 626-627 (Bankr WD Mich 2002), citing Reliable Elec. Co. v. Olson Constr. Co., 726 F.2d 620, 622–23 (10th Cir.1984). Accordingly, to the extent Defendants were not identified as “creditors” and did not receive notice of the bankruptcy proceedings, they are not bound by the Confirmation Order or its provisions concerning undisclosed causes of action.
Even assuming the Confirmation Order is binding upon all Defendants, MP Detroit’s argument nevertheless fails. The Confirmation Order recites that the causes of action were vested in the reorganized debtor and provided that nondisclosure shall not serve as a defense to actions brought by the debtor. The Order does not, however, eliminate the debtor’s statutory obligation to disclose assets and potential causes of action during the bankruptcy proceedings, nor does it prevent a court from applying an independent equitable doctrine based upon the debtor’s failure to satisfy those obligations.
Turning now to the three elements required for judicial estoppel to apply, the OCCC analyzed and found all necessary elements were present in the undisputed facts:
First Element
The first element of judicial estoppel requires a showing that “the plaintiff assumed a position that was contrary to the one asserted under oath in the bankruptcy proceedings.” Spohn, 296 Mich App at 481, quoting White v Wyndham Vacation Ownership, Inc, 617 F3d 472, 476 (CA 6, 2010).
The Court finds that this element is satisfied. It is undisputed that MP Detroit failed to disclose the claims asserted in Counts IV, V, and X of the Complaint/Amended Complaint in its bankruptcy petition or schedules, despite its obligations under the Bankruptcy Code to disclose all contingent and unliquidated claims and causes of action it held as of the commencement of the bankruptcy case. It is likewise undisputed that MP Detroit did not amend its bankruptcy filings to disclose those claims before the bankruptcy case was closed.
MP Detroit possessed knowledge of the facts underlying the claims asserted in Counts IV, V, and X before filing its bankruptcy petition. Nevertheless, MP Detroit’s sworn bankruptcy filings did not identify those potential claims as assets in its bankruptcy filings. By later pursuing those claims in this litigation, MP Detroit has taken a position inconsistent with the disclosures it made to the Bankruptcy Court concerning the assets of the estate. Accordingly, the first element of judicial estoppel has been established.
Second Element
The second element of judicial estoppel requires a showing that the bankruptcy court adopted the debtor’s contrary position, either as a preliminary matter or as part of the final disposition of the bankruptcy proceedings. Spohn, 296 Mich App at 483.
Confirmation of a bankruptcy plan that does not disclose the claims at issue is sufficient to satisfy this element. Id.
It is undisputed that MP Detroit’s bankruptcy petition, schedules, and confirmed Plan did not identify the claims asserted in this action as assets of the bankruptcy estate. Nevertheless, the Bankruptcy Court confirmed its Chapter 11 Plan and subsequently entered a Final Decree closing the bankruptcy case. By confirming the Plan based upon the disclosures submitted by MP Detroit, the Bankruptcy Court necessarily proceeded on the understanding that MP Detroit’s bankruptcy schedules and related filings accurately identified the assets and claims of the bankruptcy estate. The Bankruptcy Court’s confirmation of the Plan therefore constitutes adoption of the position reflected in MP Detroit’s bankruptcy filings, including the omission of the claims asserted in this action. Accordingly, the second element of judicial estoppel has been established.
Third Element
The third element of judicial estoppel requires a showing that MP Detroit’s failure to disclose the claims at issue did not result from mistake or inadvertence. Spohn, 296 Mich App at 483. In determining whether an omission was the result of mistake or inadvertence, the Court considers: (1) whether the plaintiff lacked knowledge of the factual basis for the undisclosed claims; (2) whether the plaintiff had a motive to conceal the claims; and (3) whether the evidence demonstrates an absence of good faith. Id.
The record establishes that MP Detroit possessed knowledge of the factual basis for the claims well before filing its Chapter 11 petition. As discussed above, MP Detroit does not dispute that it was aware of the factual basis underlying the claims asserted in Counts IV, V, and X no later than December 2023, more than one year before filing its Chapter 11 bankruptcy petition. Moreover, although MP Detroit commenced the instant action on February 26, 2026, while the bankruptcy proceedings remained pending, it did not amend its bankruptcy schedules or otherwise notify the Bankruptcy Court of these claims before the Bankruptcy Court confirmed its Plan and closed the case.
Next, MP Detroit had a motive to conceal the omitted claims: As the Court of Appeals recognized in Spohn, there is a presumption of motive to conceal in the bankruptcy context because minimizing income and assets of a bankruptcy estate may benefit a debtor by reducing assets available to creditors. Spohn, 296 Mich App at 485, quoting White v Wyndham Vacation Ownership, Inc, 617 F3d 472, 478-479 (CA 6, 2010). That presumption applies here. The omitted claims include Count X, which seeks recovery for statutory and common-law conversion with the possibility of treble damages. Despite the potential value of these claims, MP Detroit failed to disclose them to the Bankruptcy Court.
Finally, the record contains no evidence that the omission resulted from mistake or inadvertence. MP Detroit possessed knowledge of the factual basis of the claims before filing its bankruptcy petition, commenced this action while the bankruptcy proceedings remained pending, and never notified the Bankruptcy Court or amended its schedules to disclose the claims before the bankruptcy case closed. Nor has MP Detroit offered any explanation for its failure to comply with its continuing disclosure obligations. Under these circumstances, the Court finds that the omission was not the result of mistake or inadvertence but was inconsistent with the disclosure obligations imposed upon debtors in bankruptcy proceedings.
In sum, MP Detroit did not identify Defendants as creditors in the bankruptcy proceedings or provide evidence that they received notice of the bankruptcy case and an opportunity to participate in the administration of the estate. Under these circumstances, permitting MP Detroit to pursue claims that were omitted from the bankruptcy proceedings would undermine the integrity of both the bankruptcy process and Michigan’s judicial system.
Regardless of which side of the estoppel issue you may be on, we at Simon PLC Attorneys & Counselors are qualified and can provide a prompt and accurate assessment of the viability of a claim whether you are seeking to assert it or defend against it.
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