The Supreme Court Addresses Judicial Estoppel

In Keathley v. Buddy Ayers Construction, Inc., 608 U.S. __, 2026 WL 1686028, at *1 (June 11, 2026), the U.S. Supreme Court addressed judicial estoppel—a doctrine that bars litigants from taking inconsistent positions in different cases. Some see the opinion as a landmark signaling the demise of the doctrine in the bankruptcy context:¹ instead of acknowledging that the doctrine actually applies in bankruptcy, the majority explicitly “assumed without deciding” that it does, and Justice Sotomayor wrote in a concurrence that “it may not ever make sense to apply judicial estoppel when bankruptcy proceedings are pending.” By contrast, others regard the opinion as “a good candidate for least significant decision of the term”² in which the Court unremarkably employed the same “totality of the circumstances” framework that multiple circuits had already adopted prior to Keathley.

After Thomas Keathley filed for bankruptcy and while his case was ongoing, he brought a negligence suit against Buddy Ayers Construction, Inc. (“Buddy Ayers”) arising out of a car crash, but he and his bankruptcy counsel failed to amend his schedules of assets to reflect the claim. Buddy Ayers subsequently moved for summary judgment on grounds of judicial estoppel based on Keathley’s failure to disclose. Despite Keathley’s sworn statement that the nondisclosure was inadvertent, the district court granted the motion, and the Fifth Circuit affirmed. The Fifth Circuit applied a strict standard under which the omission of a claim on bankruptcy schedules could be deemed inadvertent or a 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.” Keathley, 2026 WL 1686028, at *3.

The Supreme Court vacated the decision, finding the Fifth Circuit’s rule was “simultaneously too rigid and too broad.” Id. at *4. The high Court reasoned that, as an equitable doctrine, judicial estoppel must be applied flexibly, but rather than affording such flexibility the Fifth Circuit’s test “required courts to view as purposeful nearly every bankruptcy omission:” “it is rare for a debtor to be unaware of the underlying facts of his claim, and a debtor will almost always hypothetically benefit from not revealing such a claim to his creditors.” Id. at *5. The Court rejected this “one size fits all” approach and declared that courts must weigh the “totality of the circumstances” surrounding the failure to disclose. Id. at *1.

In a concurrence, Justice Sotomayor called the applicability of judicial estoppel in bankruptcy into question, and in doing so, advanced arguments that litigants opposing estoppel will seize on going forward. She opined that applying judicial estoppel to prevent a debtor from pursuing claims is “more likely to hurt creditors than it is to help them” and gives tortfeasors a windfall. Id. at *9. She further noted that, if a debtor defrauds a bankruptcy court, that court already has tools to address the misconduct, such as sanctions or case conversion, which could be used for the benefit of creditors. Justice Sotomayor also endorsed the Eleventh Circuit’s approach in Slater v. United States Steel Corp., 871 F.3d 1174 (2017), which requires courts faced with a debtor’s failure to disclose claims to consider facts such as “the [debtor’s] level of sophistication, whether … the [debtor] corrected the disclosures, whether the [debtor] told his bankruptcy attorney about the civil claims …, whether the … creditors were aware of the civil lawsuit … before the [debtor] amended the disclosures, … and any findings or actions by the bankruptcy court after the omission was discovered.” Id. at 1187.

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1 Bill Rochelle, Supreme Court May Have Killed Judicial Estoppel in Bankruptcy and Everywhere Else, American Bankruptcy Institute(June 11, 2026), Supreme Court May Have Killed Judicial Estoppel in Bankruptcy and Everywhere Else | ABI.

2 Ronald Mann, Justices reject “rigid” rule punishing omissions by bankrupt debtors, SCOTUSBlog (June 12, 2026), Justices reject “rigid” rule punishing omissions by bankrupt debtors | SCOTUSblog.