The bankruptcy court in San Antonio has rejected an attempt to bring an unscheduled legal malpractice claim post-confirmation:

It is undisputed that a bankruptcy debtor is required to schedule all assets and that there is a duty to amend which continues throughout the case. It is also undisputed that none of the Debtors scheduled a potential cause of action against Defendant in their bankruptcy schedules, even though Plaintiffs claim that their causes of action relate solely to prepetition conduct of Defendant. Although Plaintiffs contend that Defendant would not have scheduled causes of action against itself, the undisputed evidence shows that Plaintiffs were also represented by counsel other than Defendant at all relevant times. Not only were there outside counsel prior to and at the commencement of the bankruptcy cases, but on June 10, 2004, the Debtors filed an Application to Employ the Law Firm of Langley & Banack as Co-Counsel for the Debtors. The employment of Langley & Banack was approved by this Court's Order on July 15, 2004. The Plan and Disclosure Statement were filed by Langley & Banack on or about December 29, 2004, and the confirmation hearing took place on March 2, 2005. If the directors, officers and non-Defendant attorneys of the Plaintiffs wished to assert claims against Defendant, they had ample opportunity to schedule such an asset and specifically reserve it in the Plan. Instead, a general retention clause was merely placed in the Plan and Disclosure Statement which purported to retain any claims which the Plaintiffs might have against any of their professionals.

The leading case on judicial estoppel is Browning Mfg. v. Mints (In re Coastal Plains, Inc.), 179 F.3d 197 (5th Cir. 1999). Coastal Plains described judicial estoppel as a common law doctrine by which a party who has assumed a position in its pleadings may be estopped to later assume an inconsistent position. Detrimental reliance by the opponent is not necessary because the doctrine is intended to protect the judicial system rather than the litigants. Coastal Plains at 205.

The record is replete with references to purported knowledge on the part of directors, officers and non-Defendant attorneys of alleged wrongdoing by Defendant. By failing to disclose and schedule the causes of action, the Debtors are judicially estopped to take a different position, postconfirmation, that there are claims and causes of action arising out of Defendant's prepetition conduct.

The Plaintiffs claim inadvertence or lack of knowledge should preclude the application of judicial estoppel. The Court does not find that the failure to disclose the alleged causes of action was inadvertent because the Plaintiffs knew of the facts giving rise to the potential claims and chose to keep their potential claims "under the radar" until well after confirmation. In the Plan of Reorganization, in which all of the Debtors were proponents, the Debtors vigorously pursued confirmation as being in the best interest of the creditors and the Debtors. The Plan contains a general reservation of causes of action against professionals of the Debtors, while not specifically listing any claims against particular professionals or the nature of any claims. After confirmation, the Debtors changed their positions, deny benefit as a result of confirmation of the Plan of Reorganization, and claim breach of duties by the Defendant. Judicial estoppel prohibits the assertion of such inconsistent positions. In re Coastal Plains, Inc., 179 F.3d 197, 210 (5th Cir. 1999).

The National Benevolent Association of The Christian Church (Disciples of Christ) vs. Weil, Gotshal & Manges, LLP, Adversary No. 05-5134-RBK, 2007 Bankr. Lexis 372 (Bankr. W.D. Tex. 2007).

The court also held that the claims were barred by the res judicata effect of the two final orders in the Chapter 11 case.

These two Orders constitute res judicata on all issues which were or could have been litigated in the Motion to Sell or the Plan of Reorganization. Plaintiffs' contentions that the Chapter 11 cases were unnecessary, ill-conceived and never should have been filed constitute a collateral attack on both the sale Order and the Order Confirming the Plan.