Keathley v. Buddy Ayers Construction, Inc.

Summary

Justice Jackson, writing for a unanimous Court, held that courts assessing whether a debtor’s failure to disclose a claim was inadvertent or mistaken for judicial-estoppel purposes must consider the totality of the circumstances. The Court rejected the Fifth Circuit’s restriction of that inquiry to knowledge of the underlying facts and a hypothetical motive to conceal, vacated its judgment, and remanded. The Court assumed without deciding that judicial estoppel applies in bankruptcy and that inadvertence or mistake supplies an exception; it did not decide whether bad faith is required. Justice Thomas, joined by Justice Gorsuch, concurred to question judicial estoppel’s legal foundation and urge future reconsideration. Justice Sotomayor concurred to question its application during pending bankruptcies, emphasize potential harm to creditors and windfalls to defendants, and advocate a totality-of-the-circumstances approach in every context.