June 15, 2026 | Volume 33, Issue 15
This Report summarizes opinions issued on June 4 and 11, 2026 (Part I).
Opinions
Sripetch v. SEC, 25-466.
The Court unanimously held that the SEC may seek equitable disgorgement under 15 U.S.C. §§78u(d)(5) and (d)(7) without showing that investors suffered pecuniary harm. Section 78u(d)(5) provides that the SEC may obtain “any equitable relief that may be appropriate or necessary for the benefit of investors.” In Liu v. SEC, 591 U.S. 71 (2020), the Court interpreted this provision to permit the remedy of disgorgement—a court order directing those who violate federal securities laws to surrender their ill-gotten gains to wronged investors—so long as the remedy adheres to “traditional equitable principles.” Thereafter, Congress adopted §78u(d)(7), which expressly allows the SEC to seek disgorgement in enforcement proceedings “of any unjust enrichment” that results from a “securities-law violation.” Ongkaruck Sripetch “engage[d] in numerous fraudulent schemes . . . involving at least 20 penny stock companies.” In 2020, the SEC brought a civil enforcement action charging him with six counts of securities fraud and selling unregistered securities. Sripetch consented to judgment against him and initially “agreed that the court could order disgorgement.” But upon learning that the SEC sought over $4.1 million, he argued that “[t]he Commission lacked evidence that his schemes caused investors to suffer any ‘financial losses,’ so there were no ‘victims’ for whom disgorgement could be awarded under Liu.” The SEC maintained that investors could qualify as “victims” under Liu even if they lost no money. The district court did not address the question, instead concluding that the SEC presented sufficient evidence of pecuniary loss to support disgorgement. On appeal, the Ninth Circuit accepted the SEC’s position that “a finding of pecuniary harm is not required” before a court orders disgorgement. In an opinion by Justice Gorsuch, the Court affirmed.
The Court first noted the parties’ dispute regarding whether Congress’s enactment of §78u(d)(7) superseded Liu and expanded the scope of the SEC’s disgorgement powers beyond the traditional constraints of equitable relief. The Court determined, however, that it was unnecessary to resolve this issue because, even assuming that disgorgement under subsection (d)(7) “remains an equitable remedy,” “a showing of pecuniary loss is not required before an investor may qualify as a victim of an offender’s wrongdoing entitled to compensation.” The Court contrasted the legal remedy of damages, which seeks “to put the plaintiff in as good a position as he would have been in” absent the wrongdoer’s actions, with the historically distinct equitable remedy of disgorgement, which was designed to “depriv[e] wrongdoers of their net profits from unlawful activity.” The Court emphasized that a victim for purposes of disgorgement is not based on a showing of tangible loss, but rather on “invasion of the plaintiff’s legally protected interests.” Thus, “the final award to the plaintiff is not measured by his loss but by the defendant’s gain attributable to his wrongdoing against the plaintiff” and may result even with “no measurable loss whatsoever.” In support of this proposition, the Court compiled a list of illustrative state and federal cases dating back over 100 years in which equitable awards were given to victims who suffered no demonstrable financial damage.
The Court rejected four arguments advanced by Sripetch and amici. First, the Court explained that, although Liu held that disgorgement must be “awarded for victims,” it had not announced “a rule requiring the SEC to make a showing of pecuniary loss.” Rather, the victim-focus requirement was derived from “traditional equitable principles, and those principles do not demand a showing of pecuniary loss before a person may qualify as a ‘victim’ entitled to an award of a wrongdoer’s profits.” Second, the Court explained that Liu’s description of disgorgement as a remedy designed to “‘restor[e] the status quo’” was consistent with its conclusion here. That’s because where a defendant unjustly enriches himself without leaving the victim worse off financially, the remedy restores the defendant to his prior position by “stripping him of his unjust gains.” Third, the Court dismissed Sripetch’s concern that “without a pecuniary loss requirement, the SEC might lose sight of traditional equitable principles altogether.” The Court noted that the use of §78u(d)(7) to secure penalties exceeding a wrongdoer’s gains would contravene “what Liu held §78u(d)(5) tolerates.” Finally, the Court rejected amici’s argument that “a decision for the SEC in this case could risk transforming disgorgement into a penalty” unmoored from a victim’s interests. The Court explained that this case turned on the undisputed fact that victims “suffer[ed] a violation of their legally protected interests.”
Justice Thomas authored an opinion concurring in judgment. He fully joined the Court’s conclusion that, under the assumption that disgorgement is an equitable remedy, the SEC was not required to show that victims suffered pecuniary harm to obtain it. But he wrote separately to opine that “[i]n a future case, we should recognize that disgorgement is now a legal remedy for which the Seventh Amendment requires a jury trial.” As he sees it, Congress’s enactment of §78u(d)(7) following Liu expanded the SEC’s disgorgement authority beyond the realm of equity and transformed it into an “enumerated legal remedy.” He further maintained that the SEC’s use of this power “more closely resembles legal restitution than any equitable remedy” and thus “bears all the hallmarks of a legal remedy that requires a jury trial.”
FCC v. AT&T, Inc., 25-406.
By an 8-1 vote, the Court held that the Communications Act does not violate the Seventh Amendment by authorizing the FCC to order the payment of monetary penalties for violating communications laws through “an administrative process in which no jury is available.” The FCC brought administrative actions and assessed civil penalties against Verizon and AT&T (the Carriers) under the Act for failing to reasonably safeguard customer data. 47 U.S.C. §503(b). Under the Act, a penalty recipient has two options. First, it can do nothing and wait for the FCC to bring a civil suit for a “trial de novo,” §504, or it can pay the penalty and seek review in a court of appeals, §402(a). The Carriers took the second path. Verizon appealed to the Second Circuit, asserting that the Act’s procedures violate Article III and its Seventh Amendment right to jury trial. AT&T appealed to the Fifth Circuit under the same theory. The Fifth Circuit ruled for AT&T, relying on SEC v. Jarkesy, 603 U.S. 109 (2024), which held that the SEC cannot impose certain securities fraud penalties without a jury trial. In contrast, the Second Circuit ruled against Verizon, distinguishing Jarkesy and noting that the “forfeiture order . . . does not, by itself, compel payment.” Verizon and the FCC sought certiorari, and the Court consolidated the cases. In an opinion by Chief Justice Roberts, the Court held for the FCC, reversing the Fifth Circuit and affirming the Second Circuit.
The Court found no Seventh Amendment violation because the FCC’s forfeiture orders “do not definitively resolve the parties’ legal obligations,” and the FCC’s “factual findings are not conclusive.” The Court compared the FCC’s orders to a “right-to-sue letter.” The Court examined several precedents where it “upheld nonjury adjudications making initial findings of fact that are subject to de novo review in a subsequent jury trial.” And it found “several features of the statute [which] demonstrate that forfeiture orders do not obligate payment.” First, “[t]he statute no where gives the Commission the authority to execute on a forfeiture order; it cannot, for example, seize the carriers’ assets or obtain liens on their property.” Second, “the Commission’s factual findings have no effect in a subsequent enforcement suit.” Discussing Jarkesy, the Court noted that the penalties there were “immediately enforceable” with no jury available if the SEC sought enforcement. Finally, the Court rejected the Carriers’ arguments that the “forfeiture orders cause reputational and practical harms,” noting that such harms can befall parties at any stage of litigation―such as defendants after a complaint is filed or after the indictment of a criminal defendant.
The Court also rejected the Carriers’ challenge under the unconstitutional conditions doctrine. That doctrine “vindicates the Constitution’s enumerated rights by preventing the government from coercing people into giving them up.” The Court found this argument “counterintuitive” and a “poor fit for this case” because the jury trial right never attaches if the FCC never brings a civil suit to enforce the penalty. Instead, the Carriers asserted that the FCC “will use the existence of the order and the fact of nonpayment against them,” and that they will suffer “reputational harm” while awaiting an enforcement suit. On the former, the Court noted that counsel for the FCC acknowledged at argument that an unpaid penalty has no “preclusive effect” and the facts given no “special weight.” The Court also found that the Act “prohibits the [FCC] from using unresolved forfeiture proceedings to a regulated party’s prejudice in subsequent [FCC] proceedings.” On the latter (reputational harm), the Court found that if plea bargains “do[] not impermissibly burden the Sixth Amendment right [to a jury trial], it is hard to see how the uncertain prospect of reputational harm unduly burdens the Seventh Amendment right.”
Justice Thomas dissented. He emphasized the FCC’s changing position on the enforceability of its penalties and argued that the parties should have “an opportunity to proceed under a correct understanding of the law.” Justice Thomas noted that the FCC sent the Carriers a “Notice of Apparent Liability,” received responses, and issued an “order” that was “structured like a judicial opinion” which commanded “AT&T and Verizon to pay $57 million and $47 million, respectively.” The “orders” described the penalty payment as mandatory and could be imposed without a jury trial. The Carriers paid the amounts “under protest,” understanding that was “a precondition to their ability to file petitions for review in federal court.” Moreover, Justice Thomas asserted that the Carriers had no way to know the FCC’s orders were nonbinding, particularly when no carrier has ever received a trial for an FCC enforcement action. Indeed, the statute forming the basis for the Court’s jurisdiction to hear the case treats the FCC’s penalties as “final orders.” 28 U.S.C. §2342. Justice Thomas concluded that the Court had punished the Carriers “for complying with a government order that they in good faith believed was obligatory, diligently preserving their objection to that order, and then litigating that objection so effectively as to cause the Government to change its position years later.”
Abouammo v. United States, 25-5146.
The Court unanimously held that a defendant charged with violating 18 U.S.C. §1519―which makes it a crime to knowingly falsify a document with the intent to obstruct a federal investigation―“must be tried in the district where the falsification occurred; he cannot be tried in a different district where the investigation was located.” Petitioner Ahmad Abouammo was a former Twitter employee and also an agent for Saudi Arabia. Using Twitter databases, he provided confidential information to the Saudi government about a Saudi dissident who was then detained and tortured. In return, a Saudi official wired Abouammo $300,000. Abouammo resigned from Twitter in May 2015 and moved from Northern California to Seattle. During their investigation, FBI agents from California interviewed Abouammo at his Seattle home during which he purportedly created a fictitious invoice for the money he received. He was indicted in the Northern District of California and convicted of various crimes, including falsifying a record with the intent to obstruct a federal investigation. The district court rejected Abouammo’s venue-based challenge to the falsification charge. The Ninth Circuit upheld the conviction, noting that California was where the “obstructed federal investigation was taking place.” In an opinion by Justice Kagan, the Court reversed and remanded.
The Court explained that venue in criminal cases was an important issue to the Founding Fathers. Among the “injuries and usurpations” listed in the Declaration of Independence was an act of Parliament to try allegedly treasonous colonists in England, rather than in their home colonies. Both Article III of the Constitution (§2, cl. 3) and the Sixth Amendment therefore mandate that crimes be prosecuted where they were “committed.” Courts have interpreted that to be “the place of the crime’s conduct elements―the acts that the prosecution must prove to secure a conviction.” The Court held that the venue for trying a §1519 offense must be where a document’s falsification happened—which here was in Seattle. The Court reasoned that the “only prohibited act in [§1519] is the falsification of a document. Once a person has committed that act (with the requisite intent), he need do nothing more to violate the law.”
The Court rejected the Government’s argument that the intended direction of the falsified document matters. The Government asserted that venue was appropriate in California because that was where the investigation Abouammo intended to obstruct was occurring. The Government analogized “its proposed approach to the venue rule used in conspiracy cases, which allows trial wherever an overt act furthering the conspiracy has taken place.” But the Court noted that §1519 is an independent crime, not an inchoate offense. Moreover, a §1519 crime has no transmission requirement and can occur even if the defendant never uses the falsified document to obstruct an investigation. The Court concluded that because the Government need prove nothing more than the falsifying of a document, “a §1519 offense is relatively easy to prove” but with that ease is the cost that “its venue options are confined.”
FS Credit Opportunities Corp. v. Saba Capital Master Fund, Ltd., 24-345.
By a 6-3 vote, the Court held that §47(b) of the Investment Company Act does not “impliedly empower[] private parties to sue for rescission of any contract that allegedly violates the Act.” The Investment Company Act (ICA) comprehensively regulates the business practices of investment companies to prevent fraud and abuse in the industry. The ICA “designates the Securities and Exchange Commission as its primary enforcer and expressly permits shareholders and issuers of securities to enforce two of its provisions” (not at issue here) through private suits. As originally enacted in 1940, §47(b) of the ICA provided that every contract made or performed in violation of the ICA “shall be void”—mirroring language contained in §215 of the Investment Advisers Act (IAA). But in 1980 Congress amended §47(b), which now provides that contracts violating the ICA are “‘unenforceable by either party,’” and that if such a contract has been performed, “a court may not deny rescission” of the contract “at the instance of any party” unless the equities counsel otherwise.
In 2023, Saba Capital Master Fund, Ltd. and Saba Capital Management, L.P. (Saba) sued FS Credit Opportunities Corp. and other entities (the Funds) in federal district court. Saba objected to the Funds’ adopting “control-share” provisions under the Maryland Control Share Acquisition Act, which limited the voting rights of large shareholders. Saba claimed these provisions violated §18(i) of the ICA, which guarantees equal voting rights (“one-share, one-vote”) to fund shareholders. Saba sought rescission of these resolutions under §47(b). The district court, bound by Second Circuit precedent, ruled that §47(b) creates an implied private right of action and granted summary judgment for Saba on the merits. The Second Circuit summarily affirmed. In an opinion by Justice Barrett, the Court reversed and remanded.
The Court began with the fundamental principle that “Congress, not the Judiciary, decides who may enforce the law.” The Court explained that in the past it had liberally inferred private rights of action from federal statutes that did not expressly authorize them. But “we have since rejected the practice of fashioning rights of action as we see fit” because doing so contravenes the Constitution’s separation-of-powers principles and the concept that courts interpret statutes rather than amending them. Now, “[i]f a statute does not spell out a right of action,” the Court will “examine the statute’s text and structure to determine whether it implicitly provides one.” In this inquiry, the Court examines (1) whether Congress has used “rights-creating language” that is “‘phrased in terms of the persons benefited’” rather than focused “on the person regulated”; and (2) whether Congress has provided an alternative “remedial schem[e]” or “enforcement provisions” to vindicate any substantive private rights.
Applying these principles to the ICA, the Court ruled that §47(b) does not create a private right of action. The Court found that §47(b) “is a mandate directed to . . . courts, rather than a provision that confer[s] a right on a specified class of persons.” It emphasized that rescission was traditionally understood as a remedy, rather than an independent cause of action. Thus, §47(b) merely provides a contractual remedy that was generally unavailable at common law to parties who were already authorized to be before the court. The Court further concluded that “Congress’s decision to create a comprehensive agency enforcement scheme supports the conclusion that private parties generally cannot enforce the ICA.” The statute gives the SEC authority as its “primary enforcer” to bring actions for injunctive relief or civil monetary penalties. Further, the statute explicitly authorizes private rights of action by shareholders and securities-issuers in two other circumstances, demonstrating that “‘when Congress wished to provide a private . . . remedy’ to enforce the ICA, ‘it knew how to do so and did so expressly.’”
In reaching its holding, the Court distinguished Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11 (1979) (TAMA), which Saba had argued supports finding a private cause of action here. In TAMA, the Court held that §215 of the IAA contained an implied private right of action because, by declaring that certain violative contracts “shall be void,” §215 “by its terms necessarily contemplates” litigating voidness via an affirmative suit “to have the contract rescinded.” The Court acknowledged here that this argument might have had merit back when the language of §47(b) tracked that of the IAA. Crucially, however, Congress had “entirely reworked” the statute to remove the operative voidness language analyzed in TAMA and replaced it with language that concerned the trial court’s remedial authority. The Court therefore viewed the 1980 amendment as a substantive change that “actually distinguishes [§47(b)] of the ICA from Section 215 of the IAA,” rather than codifies the right of action recognized in TAMA.
Finally, the Court rebuffed the principal dissent’s argument that legislative history from two Committee Reports demonstrates that Congress intended to create an implied right of action under §47(b). The Court interpreted these reports as merely expressing a “‘wish’ that courts liberally imply private rights of action” in the “‘federal securities laws’ generally, not the ICA specifically.” Conversely, the Committee Reports that address the “rescission” language used in §47(b) describe it as a remedy and ”nowhere mention[] a private right of action.” Further, the Court rejected “the fictional premise that hundreds of legislators (not to mention the President) shared a unified private view of how the statute should apply in a contested circumstance” and described attempts to “divin[e]” how Congress would subjectively have wanted this case resolved as “mission impossible.”
Justice Jackson wrote the principal dissenting opinion, joined in full by Justice Sotomayor and in part by Justice Kagan. She began by noting that because “‘Congress, not the Judiciary, decides who may enforce the law,’” the Court should “consult all reliable indicia of Congress’s intent when interpreting its statutes.” She admonished the Court for misreading the text of §47(b) in isolation and ignoring “compelling evidence of Congress’s actual intent” contained in the legislative history. As she saw it, Congress’s use of the phrase “recission at the instance of any party” in the 1980 amendments are best understood as an explicit acknowledgement of the private right of action found under the IAA in TAMA. And while the Court had previously held that Congress should explicitly authorize an action for monetary damages, it had affirmed that a private cause of action to enforce personal rights could be created by implication. Justice Jackson also she pointed to House and Senate Committee Reports which stated that “private rights of action under [the amendments] should be implied to and in its enforcement to the same extent that such causes of action [were] implied under the [original statute].” These reports further explained that Congress was concerned with the SEC’s practical limitations in enforcing all ICA provisions, and that it viewed “private lawsuits” as an “added deterrent” to fill the gap in holding violators accountable. Justice Jackson explained that such materials have long been understood to “be a relevant and reliable indicium of Congress’s intent” and criticized the majority’s “categorical unwillingness to accept the help of legislative history when interpreting statutes.”
Justice Kagan authored a brief separate dissent. According to her view on “the proper use of legislative history in statutory interpretation,” courts may rely on such materials only “when statutory text in context remains, after careful review, stubbornly ambiguous.” She did not view §47(b) as lacking clarity. Thus, she joined the portions of Justice Jackson’s dissent holding that the text and structure of the statute support a private right of action, and did not join the portion that relied on the House and Senate Reports.
Hikma Pharmaceuticals USA Inc. v. Amarin Pharma, Inc., 24-889.
The Court unanimously held that a generic drugmaker’s “skinny” label that “carved out” patented uses from its labels, and its public statements, did not actively induce patent infringement merely because a “physician could read” the relevant statements “as an instruction or encouragement to” infringe. In 2012, the FDA approved Vascepa—a drug developed by Amarin Pharma—for treatment of “severe hypertriglyceridemia.” In 2019, the FDA approved Vascepa for a “second, much more common use: as a treatment to reduce cardiovascular risk in hypertriglyceridemia patients who already take statins.” Hikma Pharmaceuticals, another drug manufacturer, sought to produce a generic version of Vascepa that used the same active ingredient. In 2020, the FDA approved a “skinny label” submitted by Hikma, which instructed on the drug’s use to treat “severe hypertriglyceridemia,” but not on the more common use as treatment for ordinary hypertriglyceridemia—the still-patented method of use owned by Amarin. Hikma’s skinny label “otherwise mirrored Vascepa’s” (as required by federal law); the FDA designated the generic drug as “therapeutically equivalent to Vascepa when used according to its labeling.” After Hikma began marketing its generic drug, Amarin filed suit in federal district court, alleging that Hikma had actively induced others to infringe upon Amarin’s patented method of use. Hikma did so, Amarin claimed, through “the totality of Hikma’s statements” across its label, a patient information leaflet, press releases, and descriptions on its website. The district court granted Hikma’s motion to dismiss, concluding that none of Hikma’s statements constituted “active steps” to encourage infringing Amarin’s method-of-use patent. The Federal Circuit reversed, reasoning that it was “at least plausible that a physician could read” the label, website, and press releases “as an instruction or encouragement to prescribe [Hikma’s generic] for any of the approved uses of [Vascepa’s active ingredient].” In an opinion by Justice Jackson, the Court reversed and remanded.
Under 35 U.S.C. §271(b), “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” The statutory elements for a claim of active inducement are: (1) direct infringement by a third party; (2) knowledge that “the induced acts constitute patent infringement”; and (3) “active steps” to “encourage direct infringement.” The Court explained that the question whether Amarin had plausibly stated a claim for relief turned on §271(b)’s third element: whether Hikma had taken “active steps” to encourage infringement by third parties. Relying on MGM Studios v. Grokster, Ltd., 545 U.S. 913 (2005), and Global-Tech Appliances v. SEB, 563 U.S. 754, 766 (2011), the Court explained that “inducement must involve the taking of affirmative,” as opposed to passive, “steps to bring about the desired result” of patent infringement. Conversely, “ordinary acts incident to product distribution” are insufficient to support liability, and inducement cannot be based only on “vague” language “combined with speculation about how [others] may act.” Rather, it must consist of implicit or explicit inducement that is “clear” to the relevant audience, purposeful, and proactive. In so holding, the Court rejected the Federal Circuit’s approach, which incorrectly required only a plausible showing that “statements made by [Hikma] could lead a healthcare provider . . . to prescribe or dispense Hikma’s drug to reduce a patient’s cardiovascular risk.”
Applying the appropriate standard, the Court ruled that Amarin’s complaint failed to allege “more than a sheer possibility” that Hikma actively induced infringement of its patent. In relevant part, Amarin had alleged that: (1) Hikma’s label omitted “Limitation of Use” language and retained information about a clinical study pertinent to the patented method-of-use; (2) the patient information leaflet that accompanied the label warned against possible side effects for “people who have heart (cardiovascular) disease” and noted that “[m]edicines are sometimes prescribed for purposes other than those listed”; (3) Hikma’s website listed the generic drug’s therapeutic category as “[h]ypertriglyceridemia”; and (4) Hikma’s press releases described the product as “‘generic Vascepa’ without mentioning that th[e] approved use was limited to” the less common treatment. The Court rejected each argument in turn. With regard to the label, Hikma was complying with the legal requirement that its “label must be identical to Amarin’s except for the carved-out use.” Its statements describing its product as “generic Vascepa” are consistent with “normal industry practice” to “truthfully describe” a generic drug as “‘equivalent’” to the brand-name comparator. With regard to alleged material omissions in the label and press release, the Court explained that mere “inactions, or nonfeasance” cannot demonstrate active inducement. And as for Amarin’s complaints about the patient information leaflet and website, the pertinent statements were too vague or speculative to constitute a plausible allegation that Hakima took “affirmative steps” to persuade medical providers to proscribe their generic drug in a manner that flouted Amarin’s patent protections. Thus, the Court concluded that “Amarin’s allegations, whether viewed together or separately, fail to establish that Hikma took any affirmative steps to encourage infringement.”
Keathley v. Buddy Ayers Construction, 25-06.
The Court unanimously held that before judicial estoppel can be invoked to bar a plaintiff from pursuing a civil claim that he failed to disclose in bankruptcy filings, the court must determine “whether the omission was inadvertent or mistaken” and do so by “look[ing] to the totality of the circumstances surrounding the omission.” Bankruptcy debtors must disclose all their assets, including legal claims that arise while the bankruptcy case is pending. 11 U.S.C. §1306(a)(1). The debtor must also avow to the court that he has no other assets. Petitioner Thomas Keathley filed for Chapter 13 bankruptcy in 2019, and the court approved his repayment plan. In 2021, a trucker employed by Buddy Ayers Construction collided with Keathley, causing injuries. Keathley informed his bankruptcy counsel of the accident, but counsel did not inform the bankruptcy court. Later that year, Keathley sued Buddy Ayers in a different federal district court. Keathley’s bankruptcy counsel later filed several amended plans with the bankruptcy court without disclosing the lawsuit against Buddy Ayers. Based on this disclosure failure, Buddy Ayers moved for summary judgment in the civil case asserting judicial estoppel. Keathley argued that the omission had been inadvertent and that judicial estoppel was therefore inappropriate. The district court granted Buddy Ayers’s motion, applying circuit precedent that “the omission of a claim on the bankruptcy schedules will be considered the result of inadvertence or mistake only if (1) the debtor did not know the facts underlying the claim, or (2) there was no potential motive to conceal the claim.” The district court found neither condition met here. The Fifth Circuit affirmed. In an opinion by Justice Jackson, the Court vacated and remanded.
As an initial matter, the Court assumed “without deciding that judicial estoppel can apply in the bankruptcy context and that ‘inadvertence or mistake’ can function as an exception to that application.” The Court emphasized that judicial estoppel is an “equitable doctrine” intended “to protect the integrity of the judicial process,” both by “prohibiting parties from deliberately changing positions according to the exigencies of the moment” and by preventing the “risk of inconsistent court determinations.” The Court found the Fifth Circuit’s understanding of “inadvertence or mistake” both “too rigid and too broad.” The Fifth Circuit improperly limited itself to two factors when equity eschews mechanical rules and depends on flexibility. Moreover, its rule will almost never be met because a bankruptcy debtor will usually be aware of the facts of his own claim and “almost always hypothetically benefit from not revealing such a claim to his creditors.” Instead, held the Court, courts must examine the totality of the circumstances surrounding a failure to report a civil claim as a bankruptcy asset.
Justice Thomas wrote a concurring opinion, which Justice Gorsuch joined. Justice Thomas “express[ed] doubt about the foundation of the doctrine of judicial estoppel,” which he suggested “merits a closer look” in a future case. Justice Thomas charted the doctrine’s history, from its inception in an 1857 Tennessee Supreme Court decision to the present where it is now “commonplace.” But the Supreme Court has enforced judicial estoppel only once, in an unusual original-jurisdiction case. New Hampshire v. Maine, 532 U.S. 742 (2001). He found that “the doctrine appears to have no basis in any statute, any Federal Rule of Civil Procedure, or any traditional inherent power of federal courts.” Moreover, Justice Thomas found it difficult to see how the doctrine served “any equitable purpose” here.
Justice Sotomayor wrote a concurring opinion suggesting that judicial estoppel may never apply when bankruptcy proceedings are pending and that, in any context, “judicial estoppel should always turn on the totality of the circumstances.” She observed that applying judicial estoppel to bankruptcy debtors “is more likely to hurt creditors than it is to help them” and allow uninvolved parties to “escape liability.” Justice Sotomayor asserted that the facts of Keathley’s case support this position, for “any judgment he received could have been used in turn to pay creditors.” Thus, applying judicial estoppel eliminates potential assets and gives the alleged tortfeasor a “windfall.” That would not be equitable, said Justice Sotomayor. She noted that the courts possessed other equitable tools, particularly the bankruptcy courts, which are “well positioned to mitigate any harms.” Justice Sotomayor also emphasized that any judicial estoppel test “must ensure that it captures the totality of the circumstances and consistently leads to equitable applications.”
NAAG Center for Supreme Court Advocacy Staff
- Dan Schweitzer, Director and Chief Counsel
- Kevin Morrow, Supreme Court Fellow
- Michael Butera, Supreme Court Fellow
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