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Can we get this suit dismissed? A former employee sued us and then filed for bankruptcy

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in Discrimination and Harassment,Human Resources

Q. One of our former employees filed a discrimination lawsuit against the company. She subsequently filed for bankruptcy, but failed to include the pending lawsuit as an asset in the bankruptcy estate. She eventually obtained a bankruptcy discharge. Will the company now be able to have her discrimination lawsuit dismissed?

A. Most likely, no. Both federal and Florida courts have consistently held that, once a bankruptcy petition has been filed, a discrimination claim routinely becomes an asset of the bankruptcy estate. In turn, the bankruptcy trustee becomes the real party in interest in the discrimination lawsuit.

The fact that the discrimination claim might have inadvertently been left out of the bankruptcy proceeding before the discharge (e.g., because of a mistake by the employee, causing the trustee to be unaware of it) will not generally preclude it from the bankruptcy estate. Thus the trustee will be allowed to reopen the estate to prosecute the monetary claims, settle them for the benefit of the creditors or determine the discrimination was not of sufficient economic value and abandon it as an asset.

Under these circumstances, courts have not been inclined to involuntarily dismiss pending discrimination claims that are assets of a bankruptcy estate, even if a bankruptcy discharge is initially obtained before the lawsuit is included as an asset.

 

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