No claim yet? Then no estoppel, either.

In ASARCO LLC v. Montana Resources, Inc., a case involving the interplay of a business’s bankruptcy with a later lawsuit for breach of contract by that business, the Fifth Circuit observed:

  • “[A] declaratory claim on its own typically will not preclude future claims involving the same circumstances (as noted, issue preclusion may still apply to any declaration the court issues). But in a case involving both declaratory claims and ones seeking coercive relief, the former will not serve as an antidote that undoes the preclusive force that traditional claims would ordinarily have.” (applying the “seminal case” on the point, Kaspar Wire Works, Inc. v. Leco Engineering & Machine, Inc., 575 F.2d 530 (5th Cir. 1978))
  • As to the damages claim, “ASARCO’s claim for failure to reinstate did not accrue until MRI rejected the tender in 2011. . . .  ASARCO may or may not have attempted to cure, and MRI may or may not have denied ASARCO’s reinstatement. Because the present breach of contract claim was contingent on future events, ASARCO could not have brought it during the adversary proceeding.”
  • For the same reasons, the plaintiff was not judicially estopped by allegedly inadequate disclosures during the earlier bankruptcy: “MRI cites no case requiring a party to disclose a potential claim for breach of contract when the contract had not yet been breached. This makes sense, because MRI’s position would require a debtor to scour its contracts looking for hypothetical claims that another party could maybe breach in the future.”

No. 16-40682 (June 2, 2017).

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