Commercial Litigation and Arbitration

Court May Take Judicial Notice of Document Filed in Another Case Not for the Truth of the Matters Asserted But Only to Establish Fact of Filing and What Is Asserted — Judicial Estoppel: Factors

United States v. First Am. Title Ins. Co., 2016 U.S. Dist. LEXIS 175617 (N.D. Ill. Dec. 20, 2016):

II. Judicial Estoppel

Patel also argues that the doctrine of judicial estoppel bars the SBA from bringing this action. Judicial estoppel "generally prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase." New Hampshire v. Maine, 532 U.S. 742, 749, 121 S. Ct. 1808, 1814 (2001) (internal quotation marks omitted) (quoting Pegram v. Herdrich, 530 U.S. 211, 227 n.8, 120 S. Ct. 2143, 2153 n.8 (2000)). Judicial estoppel further "aims to prevent a party that prevails in one lawsuit on one ground from repudiating that same ground in another lawsuit." Jarrard v. CDI Telecomm., Inc., 408 F.3d 905, 914 (7th Cir. 2005). In determining whether judicial estoppel applies, we first consider whether the party's position is "clearly inconsistent with a position earlier taken." Id. (citing New Hampshire, 532 U.S. at 750, 121 S. Ct at 1815). Second, we consider whether the party "prevailed on the basis of its 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.'" Id. at 915 (quoting New Hampshire, 532 U.S. at 750, 121 S. Ct at 1815). Third, we consider "whether the party asserting the inconsistent position 'would derive an unfair advantage or impose an unfair [*9]  detriment on the opposing party if not estopped.'" Id. (quoting New Hampshire, 532 U.S. at 751, 121 S. Ct at 1815). Finally, we consider "whether the operative facts remain the same in both cases." Id. (citing Ogden Martin Sys. of Indianapolis, Inc. v. Whiting Corp., 179 F.3d 523, 527 (7th Cir. 1999)).

Patel argues that SBA "cannot seek relief beyond the funds held in the escrow" from American Chartered Bank's election to proceed with a private sale of the property in the Illinois state court foreclosure action, because the SBA "was in a second position and did not object to the sale" in that case. (Def.'s Mtn. ¶ 17.) Patel also argues that an email exchange between the SBA and American Chartered Bank relating to the private sale of the property "reflects an agreement to allow the Patel sale closing to go forward if funds were held in escrow," (id.), and so the SBA "cannot agree to look to the fund [in escrow] in one case" and then pursue foreclosure of Patel's real estate in this case, (id. ¶ 19).

The SBA argues that "there is no final order by which [it] prevailed" in the Illinois state court case, because "the Property was ultimately sold in a private sale, mooting the need for a judicial foreclosure of the SBA's lien against D&R Real Estate Holdings." (Def.'s Resp. at 5.) The SBA further denies having an agreement with [*10]  American Chartered Bank concerning the private sale of the property in the Illinois state court case. (Id. at 6.) Regardless, it argues that "the United States' position regarding the priority of SBA's lien on the Property is consistent in both cases." (Id. at 5.) That is, the SBA "asserted that it holds a consensual lien in both cases," and the "fact that [American Chartered Bank] released its lien on the Property, which moved SBA's lien into a first priority position does not create 'shenanigans' judicial estoppel is intended to prevent." (Id.)

First, it is unclear whether the SBA is in fact adopting a position in this case that is clearly inconsistent with its position in the Illinois state court foreclosure case. Jarrard, 408 F.3d at 914 (citing New Hampshire, 532 U.S. at 750, 121 S. Ct at 1815). Patel asks us to take judicial notice of an email exchange between the SBA and American Chartered Bank regarding whether the SBA would consent to a private sale of the property in the previous case, and then accept whatever payment remained after American Chartered Bank's first priority lien and qualifying expenses were satisfied. (Def.'s Reply at 2; see Def.'s Mtn. ¶¶ 17-19.) However, as the SBA argues, we may take judicial notice of that email exchange to establish that it [*11]  was in fact filed as an exhibit in the state court case, but not for "the truth of the matter asserted." Sledge v. Bellwood Sch. Dist. 88, No. 09 CV 4186, 2012 WL 1579920, at *4 (N.D. Ill. April 20, 2010) (citation omitted); see Opoka v. I.N.S., 94 F.3d 392, 395 (7th Cir. 1996) (citing Liberty Mutual Ins. Co. v. Rotches Pork Packers, Inc., 969 F.2d 1384, 1388 (2d Cir. 1992) ("A court may take judicial notice of a document filed in another court 'not for the truth of the matters asserted in the other litigation, but rather to establish the fact of such litigation and related filings.'" (citation omitted)). We may not infer from the fact that the email exchange was filed as an exhibit in the Illinois state foreclosure case that the SBA intended to release its lien against the property altogether, and certainly not that it represented that position to the court.

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