In Fca Us Llc v. Santander Bank, N.A., No. 19 C 1516, 2021 U.S. Dist. LEXIS 52353 (N.D. Ill. Mar. 17, 2021), Judge Lee estopped a dealership from asserting defenses against a Floorplan lender.
Here, Santander asserts that it is entitled to the funds held by FCA under the following logical sequence: (1) New City entered into and defaulted under the Floorplan Agreement; (2) in the event of New City’s default, the Floorplan Agreement authorizes Santander to repossess or sell its secured collateral; (3) Santander was the first to file a blanket UCC-1 Financing Statement with the Illinois Secretary of State, which perfected Santander’s first-priority security interest in all current and future assets of New City; and (4) Santander’s security interest encompasses the factory credits and incentive payments held by FCA. As outlined above, New City does not dispute that: it entered into the Floorplan Agreement; by exceeding the Floorplan Limit and failing to make payments, it defaulted under the Floorplan Agreement; Santander filed a blanket UCC-1 Financing Statement that ordinarily perfects a secured interest in the identified collateral;4 or that the UCC-1 statement adequately identified collateral that encompasses the funds held by FCA. In short, New City admits the facts that are essential to Santander’s claim to the funds. Nonetheless, New City argues that Santander’s claim to the funds in question is invalid, because Santander had allegedly breached a fiduciary duty it owed to New City, or because Santander tortiously interfered with New City’s business relationships. But these arguments are more appropriately asserted in the form of crossclaims against Santander, rather than defenses to Santander’s claims. See, e.g., Teachers Ins. & Annuity Ass’n of Am. v. LaSalle Nat’l Bank, 691 N.E.2d 881, 885 (Ill. App. Ct. 1998) (defendant alleged “theories of breach of fiduciary duty, breach of contract, unclean hands, fraud, constructive fraud, and estoppel” as affirmative defenses and counterclaims); New Planet Energy Dev. LLC v. Magee, — N.E. 3d —-, 2020 IL App (4th) 200043, ¶ 6 (defendant alleged “counterclaims for fraud, tortious interference, breach of contract, and breach of the covenant of good faith and fair dealing”). Cf. Roy v. Coyne, 630 N.E.2d 1024, 1032 (Ill. App. Ct. 1994) (a theory should be pleaded as an affirmative defense if it “confesse[s] the validity of the plaintiff’s prima facie case but assert[s] new matter which avoid[s] its legal effect”). And because New City failed to assert these claims prior to raising them in its opposition to Santander’s motion for summary judgment, they are deemed waived.5 The reason that New City did not previously assert these claims (and has offered them now in the guise of defenses) is not a mystery. This Court previously ruled that New City is judicially estopped from asserting any claims against interpleader Plaintiff FCA, due to New City’s representations to the bankruptcy court that it had no “contingent and unliquidated claims or causes of action of [any] nature” when it previously filed for Chapter 11 bankruptcy. See Tr. Proceedings on 3/5/20 at 4:8-14; New City’s Statement of Financial Affairs at 21; New City’s Schedule of Assets at 7. The same reasoning applies to New City’s efforts to assert its breach-of-fiduciary-duty and tortious-interference claims against Santander. “Judicial estoppel is a matter of equitable judgment and discretion,” In re Knight-Celotex, LLC, 695 F.3d 714, 721 (7th Cir. 2012), and the Court considers certain non-exhaustive factors to guide its discretion. “First, a party’s later position must be ‘clearly inconsistent’ with its earlier position.” New Hampshire v. Maine, 532 U.S. 742, 750 (2001). “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 the second court was misled.” Id. (cleaned up). “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.” Id. at 751. Additionally, the Seventh Circuit has held that “a debtor in bankruptcy who denies owning an asset, including a chose in action or other legal claim, cannot realize on that concealed asset after the bankruptcy ends.” Cannon-Stokes v. Potter, 453 F.3d 446, 448 (7th Cir. 2006). Here, in dismissing New City’s claims against FCA, this Court held that New City’s claims were clearly inconsistent with its position during the Chapter 11 proceedings, where it repeatedly represented under penalty of perjury that it possessed no “contingent and unliquidated claims or causes of action of [any] nature” against FCA or anyone else. See Tr. Proceedings on 3/5/20 at 4:8-14; New City’s Statement of Financial Affairs at 21; New City’s Schedule of Assets at 7; see also Cannon-Stokes v. Potter, 453 F.3d 446, 448 (7th Cir. 2006) (affirming the dismissal of a claim on the basis of judicial estoppel where Plaintiff had earlier asserted in a bankruptcy petition that she had no “contingent and unliquidated claims of [any] nature”). Moreover, it was clear that the bankruptcy court had accepted New City’s presentations. See Tr. Proceedings on 3/5/20 at 5:24-6:16. And, finally, the Court found that New City would reap an unfair advantage if it were allowed to assert new claims now. Id. at 6:17-7:1; see also Williams v. Hainje, 375 F. App’x 625, 627-28 (7th Cir. 2010) (noting that “[t]o hold otherwise would give debtors an incentive to game the bankruptcy system” encouraging a “wait-and-see approach to disclosure,” that would “undermine both the primary aim of judicial estoppel, which is to protect the integrity of the judicial process,” and “the bankruptcy law’s goal of unearthing all assets for the benefit of creditors”). For these same reasons, the Court finds that New City is judicially estopped from asserting that Santander breached some fiduciary duty it owed to New City, or that Santander tortiously interfered with New City’s business relationships to oppose summary judgment. To do otherwise would allow New City to reap the benefit of claims and potential assets that it had disavowed before the bankruptcy court.