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Abstract: When I am trying to convince my students to take a bankruptcy class, I’ll often mention the possibility (threat?) that bankruptcy law will one day intrude into their lives, even if they don’t choose bankruptcy practice as a career. Although I hope that none of my students experience personal bankruptcy, I stress that someday, a client, vendor, partner, or even a loved one may file for bankruptcy. If that happens, our future lawyer will need a basic understanding of how bankruptcy will change their business or personal relationship.
This same argument holds for students wanting to pursue a career on the bench: knowledge of bankruptcy, and its impact on non-bankruptcy law and practice, are equally important to these students. A recent trade-secret misappropriation case illustrates this well.
The plaintiff in the case had allegedly purchased trade secrets and related claims as part of a bankruptcy asset sale. However, the debtor had failed to list those trade secrets and claims on its bankruptcy schedules. When the plaintiff-purchaser later sued the defendant for trade-secret misappropriation, the defendant argued that the plaintiff-purchaser should be judicially estopped from asserting the claim because of the debtor-seller’s failure to disclose the claim on its bankruptcy schedules.
This Bankruptcy Law Letter takes a close look at this case, along with a couple of related decisions from the D.C. Court of Appeals. Although these cases were all decided by non-bankruptcy courts sitting in Washington, D.C., they deal directly with the intersection of bankruptcy and non-bankruptcy law. The trade-secret misappropriation case at the heart of this Law Letter appears to have settled; however, prior to settlement, the trial court issued a number of important decisions that, if applied by other courts, raise important questions about the treatment of unscheduled claims, the purposes of judicial estoppel in bankruptcy, and the finality of § 363 sales. If nothing else, these cases also serve as a good vehicle by which to revisit and reinforce basic bankruptcy principles, such as what constitutes property of the estate, in a way that is meaningful for scholars and practitioners of bankruptcy and non-bankruptcy law alike.
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