In Auday v. Wet Sale Retail, Inc., the Sixth Circuit considered an action by a former individual debtor who sued for an age discrimination claim. The district court barred the plaintiff from litigating the claim because she failed to identify it as an asset in the bankruptcy court, and the claim had arisen by that point in time. The plaintiff argued that the bankruptcy trustee conferred standing on her by giving her permission to continue to litigate the lawsuit on behalf of the estate, but the Sixth Circuit could find no record evidence on this point. As a result, it vacated the judgment of the district court and remanded the case to the district court for the purpose of either dismissing the case without prejudice or allowing the plaintiff to amend the complaint to substitute the trustee as the plaintiff.
This case illustrates some of the issues that need to be considered when litigating on behalf of or against an individual who previously was in bankruptcy when the claim could arguably be an asset of the bankruptcy estate. The Sixth Circuit is insisting on clear record evidence that either the trustee allocated the claim to the plaintiff to pursue or took other formal action. Failing to provide that could result in a substantial amount of wasted effort.
