Commercial Division Blog

Posted: January 28, 2014 / Categories Commercial, Res Judicata/Collateral Estoppel/Entire Controversy Doctrine

Judicial Estoppel Does Not Apply When the Argument Made Does Not Lead to a Judgment

On January 23, 2014, the First Department issued a decision in Wells Fargo Bank N.A. v. Webster Business Credit Corp., 2014 NY Slip Op 00412, explaining the scope of the doctrine of judicial estoppel.

In Wells Fargo Bank, the trial court dismissed the defendant's claim for "indemnification from plaintiffs for attorneys' fees incurred in" defending the action. The First Department affirmed that decision, explaining that the plaintiffs were not estopped from opposing the defendant's claim for indemnification even though they also had argued that indemnification was required under the contract at issue:

Contrary to defendant's argument, plaintiffs' previous assertion of their own claim for contractual indemnification does not judicially estop them from denying that defendant is entitled to indemnification of attorneys' fees under the agreement. The doctrine of judicial estoppel precludes a party who assumed a certain position in a prior legal proceeding and who secured a judgment in his or her favor from assuming a contrary position in another action simply because his or her interests have changed. As plaintiffs did not prevail on their contractual indemnification claim, the doctrine of judicial estoppel does not apply.

Nor does plaintiffs' prior claim for contractual indemnification, standing alone, constitute a judicial admission that attorneys' fees are recoverable in inter-party disputes. On the contrary, plaintiffs' former construction of the agreement was a legal argument, and not a fact amenable to treatment as a formal judicial admission.

(Internal quotations and citations omitted) (emphasis added).

Doctrines such as judicial estoppel and judicial admission can be useful tools.  However, this decision shows their limitations.