Judicial vs. Equitable Estoppel — Second Circuit

The plaintiffs in In re Omnicom Group, Inc., Secs. Litig., 2007 U.S. Dist. LEXIS 60298 (S.D.N.Y. Aug. 10, 2007), moved to preclude the testimony of the defendants' principal expert on judicial and equitable estoppel grounds, contending that he relied on a set of facts that was inconsistent with the facts put forth by the defendants in opposing a motion to compel discovery earlier in the proceeding. The Omnicon Court applied the three-part test for judicial estoppel stated by the Supreme Court in New Hampshire v. Maine, 532 U.S. 742, 749 (2001) (“First, a party's later position must be ‘clearly inconsistent’ with its earlier position. Second, courts regularly inquire whether the party has succeeded in persuading a court to accept that party's earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create ‘the perception that either the first or second court was misled[.]’ ...A third consideration is whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.”).

Rejecting the plaintiffs’ judicial estoppel argument, Magistrate Judge Michael H. Dolinger stressed:

1. Necessity of Prior Action. “[T]he Second Circuit has consistently required as a prerequisite that the inconsistent position be in a ‘prior proceeding,’” but “[i]t is not entirely clear whether, under the relevant Second Circuit caselaw, the ‘prior proceeding’ may be within the same action.” Noting that it was “unaware of any case in which either the Second Circuit or the Supreme Court invoked the doctrine when the allegedly inconsistent positions were taken before the same tribunal in the same phase of a particular case,” the Omnicon Court concluded that the “prior proceeding” requirement contemplated a prior action because, if the inconsistency were asserted in the same proceeding, the judge would “have other adequate means of dealing with that behavior,” as, for example, by finding waiver or invoking the law of the case doctrine.

2. Reliance by the Court (Success). “[P]laintiffs cannot show that this court relied on defendants' attorney's representation ... because in fact we did not.”

3. Integrity of the Judicial Process. “[P]laintiffs fail to show any prejudice to the integrity of the judicial process by virtue of the claimed inconsistency.”

4. Judicial vs. Equitable Estoppel. “While judicial estoppel is designed to protect the integrity of the judicial process, equitable estoppel is intended to ensure fairness between the parties.... Thus, ‘a party may be [equitably] estopped from pursuing a claim or defense where: 1) the party to be estopped makes a misrepresentation of fact to the other party with reason to believe that the other party will rely on it; 2) and the other party reasonably relies upon it; 3) to her detriment.’”

Finding equitable estoppel equally inapt on the facts, the Court declined to preclude the testimony.

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