Opinions of the United
2002 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


1-30-2002

Coast Auto Grp Ltd v. VW Credit Inc
Precedential or Non-Precedential:

Docket 0-5200




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"Coast Auto Grp Ltd v. VW Credit Inc" (2002). 2002 Decisions. Paper 71.
http://digitalcommons.law.villanova.edu/thirdcircuit_2002/71


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                                                NOT PRECEDENTIAL

               UNITED STATES COURT OF APPEALS
                   FOR THE THIRD CIRCUIT
                        ___________

                        No. 00-5200
                        ___________

             COAST AUTOMOTIVE GROUP, LTD.,
     a Delaware Corporation d/b/a/ TSE MOTOR CARS,

                                 Appellant

                            v.

  VW CREDIT, INC., a Corporation; VOLKSWAGEN OF AMERICA,
a Corporation; AUDI OF AMERICA, a Corporation; MARGE YOST;
            MICHAEL RUECKERT; STEPHEN JOHNSON

                        ___________

     On Appeal from the United States District Court
              for the District of New Jersey

 District Court Judge: The Honorable Garrett E. Brown, Jr.
                (D.C. Civil No. 97-2601(GEB)
                        ___________

                Argued on December 7, 2001

   Before: MANSMANN, ROTH, and FUENTES, Circuit Judges

           (Opinion Filed:   January 29, 2002)
                 ________________________

                    OPINION OF THE COURT
                  ________________________
FUENTES, Circuit Judge:
     This is an appeal by Plaintiff Coast Automotive Group, Ltd. ("Coast")
from a
grant of summary judgment in favor of Defendant VW Credit, Inc and several
of its
employees. (collectively "VCI"). Coast's primary contention on appeal is
that the
District Court improperly invoked judicial estoppel to dismiss its claims.
Because we
conclude that the District Judge failed to apply the standards for the use
of judicial
estoppel in accordance with this Court's decision in Montrose Med. Group
Participating
Sav. Plan et al. v. Bulger, 

(3d Cir. 2001), we vacate as to
claims dismissed
on the basis of judicial estoppel. However, we hold that the District
Court did not err in
any of its other findings, and therefore affirm the grant of summary
judgment on claims
dismissed on a basis independent of judicial estoppel.

                                I
     Coast owns new vehicle dealership franchises in Toms River, New
Jersey. VCI
provided Coast with floor plan financing beginning in 1991. Under a
series of Master
Security Agreements ("Agreements"), VCI advanced funds to Coast for the
purchase of
vehicle inventory and Coast granted VCI a security interest in the
vehicles, the proceeds
from sale of the vehicles, and in other assets of Coast. Coast paid
interest on the
advances to VCI, and the agreements stated that when Coast sold a vehicle
from
inventory, the principal on the advance would be "promptly and fully paid
off" to VCI.
The agreements dictated that Coast would hold any unpaid and past due
indebtedness "in
trust" for VCI, but they did not specify a deadline or time period for
payment of
principal. The agreements contained default provisions under which VCI
had the right to
terminate the Agreement, refuse to advance additional funds, and
accelerate and declare
all debt immediately due if Coast defaulted on its obligations.
     On December 12, 1995, VCI called Coast into default and, under the
default
provisions, terminated its credit line with Coast and accelerated the
remaining
outstanding balance of Coast's debt to VCI, a debt totaling over $6
million. VCI also
filed a complaint in the Superior Court of New Jersey, Chancery Division
against Coast,
Coast President Tamim Shansab, and others. VCI alleged that Coast had
failed to pay off
48 vehicles in a timely fashion, and VCI sought to force Coast to repay
its total debt and
enjoin Coast from disposing of VCI's collateral. Three days later on
December 15, 1995,
Coast filed a Chapter 11 petition in the United States Bankruptcy Court
for the District of
New Jersey.
     On December 13, 1995, at a hearing in the New Jersey Superior Court
matter, the
court engaged in a colloquy regarding Coast's debt status with Coast's
counsel Richard
S. Mazawey:
                          THE COURT:     Well, isn't the company out of
trust as they say?
                     MAZAWEY: Yes it is, Judge, at the present.
     ...
                     MAZAWEY: And, what we're saying is, is that due to
the diligent notice
               and the good faith of the Defendant, in light of that
               circumstance, in light of there being a short fall in
trust,
               which we disagree, your Honor, as to the extent of the
short
               fall.
                          THE COURT:     I know, but if you say there's
300,000 but it's a million-four,
                     well that still leaves a million-one.
                     MAZAWEY: Well, in actuality, Judge, there's just
about 700,000...

VCI App. at 304-05. In a hearing in the Bankruptcy Court on January 18,
1996, Shansab
testified concerning the state of Coast's indebtedness to VCI in response
to questioning
by the Bankruptcy Judge, the Honorable Stephen A. Stripp:
                          THE COURT:     You didn't   you didn't testify
because you weren't asked
                    whether    the Debtor was in default to VCI on the
floor
                    plan line when    VCI took the action that it took in
State
                    Court, was it?
                          SHANSAB:       Was I in default, sir?
                          THE COURT:     Yes.
                          SHANSAB:       Yes.
     ...
                          THE COURT:     ...What was the nature of the
default?
                          SHANSAB:       Principal payments had not been
made on units. ...
                          THE COURT:     Have you ever heard the term, "out
of trust?"
                         SHANSAB:       Yes, Your Honor
     ...
                         THE COURT:     What does it mean to you?
                         SHANSAB:       It means that you have    sold a
car and you have not remitted
                    payment in time.
                         THE COURT:     Is that what transpired? Was that
part of the default here of
                    the Debtor with respect to this   working capital
line?
                         SHANSAB:       To the floor plan line you mean?
                         THE COURT:     Floor plan line.
                         SHANSAB:       Yes, Your Honor.
                         THE COURT:     And how much were you out of
trust?
                         SHANSAB:       The day I sat down with the    with
the gentleman from VCI,
                    the calculations that we came up with were in the
700,000
                    range.

VCI App. at 324-25. The next day, Shansab and his bankruptcy counsel Gary
Marks
made further statements regarding Coast's debt status under cross-
examination by VCI
counsel Stephen Ryan:
                          RYAN:         Okay. In fact, you'd sold some
cars to customers, Coast had
                    received payment from third party finance sources or
from the
                    buyer directly for those purchases, is that right?
                          SHANSAB:      That is correct.
                          RYAN:         Coast didn't make any payment to
VCI for the sale of those
                    cars did it?
                          THE COURT:    Isn't it stipulated that there is
$700,000 out of trust, Mr.
                    Marks?
                          MARKS:        I believe that was Mr. Shansad's
[sic] testimony yesterday. I
                    don't know that they have stipulated to that amount,
but that
                    was his testimony.
                          THE COURT:    All right.
                          RYAN:         Judge, we would stipulate that
there are out of trust sales and
                    that is what I'm trying to establish
                          THE COURT:    Well, it is stipulated. So let's
not waste time going over facts
                    that are stipulated. He stipulates that he is out of
trust.
                          RYAN:         You were out of trust with VCI
before you filed your petition
                    in Bankruptcy?
                         SHANSAB:       That is correct.

VCI App. at 330-31.
     Several months later, in a deposition for the New Jersey Superior
Court
proceedings on July 23, 1996, Shansab attempted to explain that his prior
testimony to
the Bankruptcy Court was based on information provided to him by VCI and
did not
reflect his personal understanding that Coast had defaulted or was "out of
trust":
                          STEWART:      Do you understand "out of trust"
to mean you sold a car and
                    you have not remitted payment in time? Is that your
                    understanding of "out of trust," sir?
                          SHANSAB:      My understanding is that I have a
line of credit with VCI, and
                    I don't believe I've ever been out of trust.
                          STEWART:      Do you recall testifying under
oath on January 18, 1996?
     ... [Shansab reviews a transcript of the Bankruptcy Court testimony]
...
                          SHANSAB:      To me out of trust in this case is
when you can't trust your
                    lender, and in this case I'm certainly   VCI is
certainly out of
                    trust with me.
                          STEWART:      Sir, is this the answer that you
gave to Judge Stripp? [reads
                    Shansab the bankruptcy testimony]... You said that
right? ...
                          SHANSAB:      This happened under extreme
pressure, and at that time I had
                    no information as to what VCI's actions had been up to
that
                    point, and, you know, when I testified here, all I had
to rely
                    on was what Steve Johnson and VCI had been telling me
up
                    to that point.
                          STEWART:      Based on what Steve Johnson had
been telling you up to that
                    point, did you understand that you were out of trust?
                          SHANSAB:      I have never been out of trust,
period...
     ...
                          STEWART:      Sir, the sworn testimony that you
gave to Judge Stripp ... with
                    respect to out of trust, that's not accurate, is it?
                          SHANSAB:      I didn't say that, Mr. Stewart. I
said that everything I had to
                    rely on at that point is the word of a Steven Johnson
from
                    VCI...
     ...
                         STEWART:       Did you state anywhere in your
testimony to Judge Stripp that
                    you were relying upon the information provided by
Steve
                    Johnson?
                         SHANSAB:       I don't believe that that question
ever came up...
               ...
                         STEWART:       But you did testify to Judge
Stripp under oath that the
                    calculations that you came up with Steve Johnson, that
it was
                    that you were out of trust in the $700,000 range?
                         SHANSAB:       I never calculated that. That was
Steven Johnson -- I've
                    answered the question that we came up with that. I
never sat
                    down with Steven Johnson and came up with that
calculation
                    like that...
                                        I did not sit down with Steven
Johnson, go over any figures.
                    He sat down, went over his own figures.

Coast App. at 602a-606a.
     On January 21, 1997, Coast filed an adversary proceeding in the
Bankruptcy Court
against VCI, several VCI employees, and VCI's parent companies Volkswagen
of
America (VOA) and Audi of America (AOA). Because Coast demanded a jury
trial, the
case was referred to the District Court for the District of New Jersey.
Coast's Complaint
contained 16 claims against VCI, all stemming from the basic allegation
that VCI's call
of Coast into default was wrongful and constituted a breach of the
Agreements.
     VCI filed a motion for summary judgment on all claims against it on
November
11, 1997. Among other filings in response to VCI's motion, Coast
submitted a
Certification of Tamim Shansab in which Shansab reiterated the explanation
of his
Bankruptcy Court testimony that he provided in his state court deposition.
See Coast
App. at 135a-139a (Certification of Tamim Shansab).
     In an order issued on April 24, 1998, the District Court granted VCI
summary
judgment on Counts 1-13 and 16 of Coast's complaint. Judge Brown invoked
the
doctrine of judicial estoppel to find Coast had defaulted on its
obligations under the
Agreements. The parties did not brief judicial estoppel, nor did the
issue arise in oral
argument before the District Court. Yet the court applied judicial
estoppel to bar Coast
from claiming that it was not in default because Shansab and Coast's
counsel had
represented in the bankruptcy hearing and the state court hearing that it
was in default
and "out of trust."
     The court concluded that "[t]he record clearly indicates that Coast
had defaulted
on the agreements by failing to make payments to VCI and was consequently
'out of
trust.'" Coast Automotive Group v. VW Credit, Inc. et al., Civ. No. 97-
2601(GEB), at 5-
6 (D.N.J. Apr. 24, 1998) (hereinafter "Coast I") (citing Shansab's
testimony before the
Bankruptcy Court and counsel's statements to the Bankruptcy Court and the
New Jersey
Superior Court). In a footnote, the court considered Shansab's
explanation of his
Bankruptcy Court statements in his state court deposition and in the
summary judgment
certification, but decided that because Shansab contradicted himself on
the meaning of
"out of trust," such inconsistent statements could not be used to create
material issues of
fact sufficient to preclude summary judgment. 

n.2.
     In finding that Coast defaulted under the Agreements, the court
stated:
                     Thus, under default provisions in the agreements, VCI
was entitled to
           declare all of Coast's indebtedness payable on demand.
Plaintiff avers that
           Coast had a grace period in which to make its payments under the
           agreements, and that in the past, Coast had made payments on
principal
           advanced between 5 to 28 days from the date of a vehicle's sale.
However,
           as the record clearly indicates, plaintiff had defaulted on the
agreements
           with VCI and plaintiff may not now contradict its prior
assertions and
           stipulations in an attempt to defeat summary judgment.

"Coast I" at 6 (emphasis added). In a footnote appended to end of this
passage, the court
explained that it made this finding of default under the doctrine of
judicial estoppel:
                    The doctrine of judicial estoppel "serves a
consistently clear and undisputed
          jurisprudential purpose: to protect the integrity of the
courts." See
          McNemar v. Disney Store, Inc., 

, 616 (3d Cir. 1996),
cert.
           denied 

(1997). This doctrine, which "is an
equitable doctrine
           invoked by a court at its discretion," see 

precludes
a party from
           assuming a position in a legal proceeding that contradicts or is
inconsistent
           with a previously asserted position. See Ryan Operations G.P.
v. Santiam-
           Midwest Lumber Co., 

, 358 (3d Cir. 1996). While
judicial
           estoppel is not intended to eliminate all inconsistencies, it is
designed to
           prevent litigants from "playing fast and loose with the courts."
See 

plaintiff had stipulated in the Bankruptcy proceedings
that Coast
           was out of trust, plaintiff may not assert a contrary position
before this
           Court at this time.

Coast I at 6 n.3 (emphasis added).
     The judicial estoppel finding of default served as the basis for
dismissal of several
of Coast's claims, while summary judgment was granted on other claims on a
basis
independent of judicial estoppel. In a second summary judgment order on
October 6,
1999, the District Court granted VCI summary judgment on the remaining two
claims
against VCI    Counts 14 and 15. See Coast Automotive Group v. VW Credit,
Inc. et al.,
Civ. No. 97-2601(GEB), at 6 (D.N.J. October 6, 1999) (hereinafter "Coast
II"). In
dismissing these discrimination claims, the court relied heavily on the
finding in its
previous order that based on the application of judicial estoppel, Coast
had defaulted on
the Agreements and therefore VCI had the right to accelerate Coast's debt
and terminate
future lending under the default provisions.
     VCI filed a motion for certification of the two summary judgment
orders as a final
judgment under Federal Rule of Civil Procedure 54(b). The court granted
this motion on
January 26, 2000, and denied Coast's motion to stay this order on February
25, 2000.
This appeal followed, and because the summary judgment orders were
properly certified
as a final judgment, we have jurisdiction under 28 U.S.C.   1291.
                                II
                                A.
     Coast primarily argues on appeal that the District Court erred in
applying judicial
estoppel sua sponte and without making the necessary findings and analysis
under the
settled law of this Court. While we exercise plenary review over grants
of summary
judgment, we examine the use of judicial estoppel for abuse of discretion.
"Though a
district court's ultimate decision to invoke the doctrine is reviewed only
for abuse of
discretion... a court 'abuses its discretion when its ruling is founded on
an error of law or
a misapplication of law to the facts.'" Montrose Med. Group Participating
Sav. Plan v.
Bulger et al., 

, 780 (3d Cir. 2001) (Becker, J.) (quotations
omitted).
     In Montrose, we reiterated and explained the requirements which must
be met
before a district court may properly invoke judicial estoppel:
                     Judicial estoppel may be imposed only if: (1) the
party to be estopped is
           asserting a position that is irreconcilably inconsistent with
one he or she
           asserted in a prior proceeding; (2) the party changed his or her
position in
           bad faith, i.e., in a culpable manner threatening to the court's
authority or
           integrity; and (3) the use of judicial estoppel is tailored to
address the
           affront to the court's authority or integrity.

. A district court may not invoke judicial
estoppel without
conducting these three inquiries. 

n.4 (discussing third
element). In Montrose
we also held that "a party has not displayed bad faith for judicial
estoppel purposes if the
initial claim was never accepted or adopted by a court or agency." 

We further
elaborated on the bad faith requirement and explained that a specific
finding of bad faith
must be made:
                     Inconsistencies are not sanctionable unless a litigant
has taken one or both
          positions "in bad faith--i.e., with intent to play fast and
loose with the
          court." Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 

, 361 (3d Cir.1996). A finding of bad faith "must be based
on more
          than" the existence of an inconsistency, Klein v. Stahl GMBH &
Co.
          Maschinefabrik, 

, 111 (3d Cir.1999) (emphasis added);
indeed,
          a litigant has not acted in "bad faith" for judicial estoppel
purposes unless
          two requirements are met. First, he or she must have behaved in
a manner
          that is somehow culpable. See Ryan 

(stating that
          judicial estoppel may not be employed unless "'intentional self
          contradiction is ... used as a means of obtaining unfair
advantage'" (quoting
          Scarano v. Central R. Co. of N.J., 

, 513 (3d
Cir.1953)
          (emphasis added))); 

argument sufficient to
invoke
          judicial estoppel must be attributable to intentional
wrongdoing." (emphasis
          added)); see also In re Chambers Dev. Co. Inc., 

,
229 (3d
          Cir.1998) (quoting this language from Ryan Operations).

                    Second, a litigant may not be estopped unless he or
she has engaged in
          culpable behavior vis-a-vis the court.... Accordingly, judicial
estoppel may
          not be employed unless a litigant's culpable conduct has
assaulted the
          dignity or authority of the court.

(emphasis added).

     With regard to the third prong   tailoring application of the
doctrine to the specific
harm    we stated:
                    Observing that judicial estoppel "is often the
harshest remedy" that a court
          can impose for inequitable conduct, we have held that a district
court may
          not invoke the doctrine unless: (1) "no sanction established by
the Federal
          Rules or a pertinent statute is up to the task of remedying the
damage done
          by a litigant's malfeasance;" and (2) "the sanction [of judicial
estoppel] is
          tailored to address the harm identified." Klein v. Stahl GMBH &
Co.
          Maschinefabrik, 

, 108, 110 (3d Cir.1999) (internal
quotation
          marks and citations omitted).

.
     Finally, we expressed particular concern in Montrose with the sua
sponte
application of judicial estoppel:
                    We have held that a district court need not always
conduct an evidentiary
           hearing before finding the existence of bad faith for judicial
estoppel
           purposes... but two precepts are nevertheless clear.   First, a
court
           considering the use of judicial estoppel should ensure that the
party to be
           estopped has been given a meaningful opportunity to provide "an
           explanation" for its changed position. Cleveland v. Policy
Management
           Sys., 

, 807 (1999). Second, though a court may
sometimes
           "discern" bad faith without holding an evidentiary hearing, it
may not do so
           if the ultimate finding of bad faith cannot be reached without
first resolving
           genuine disputes as to the underlying facts.

n.5.

                                B.
     In this case, the District Court applied judicial estoppel against
Coast sua sponte
and without the complete analysis required by this Court. At most, the
court found only
that the inconsistency prong of the judicial estoppel test was satisfied,
as the court held
that Shansab stated to the Bankruptcy Court that Coast was "out of trust"
and in default,
and that his later statements insufficiently explained that testimony.
The court
concluded that Coast could not argue on summary judgment that it was not
in default,
and therefore many of Coast's claims failed because VCI properly exercised
its rights
under the default provisions in the Agreement. However, to invoke
judicial estoppel, a
court must do more than merely find that a party advanced inconsistent
positions to the
court. The District Court here failed to engage in the requisite analysis
and make the
necessary findings that Coast changed its position in bad faith and that
the application of
judicial estoppel was specifically tailored to address the harm caused by
Coast's alleged
inconsistencies. Additionally, in raising the issue sua sponte, the court
failed to allow the
parties to brief the issue and inform the court's analysis, as suggested
by the Supreme
Court and by this Court. Therefore, we conclude that the District Court
abused its
discretion by invoking the doctrine sua sponte.
     The court made no finding that Coast changed its position in a bad
faith attempt to
"assault the dignity or authority" of the court. In its brief footnote
explaining its
invocation of judicial estoppel, the court indeed quoted our statement in
Ryan Operations
that judicial estoppel is designed to prevent litigants from "playing fast
and loose with the
courts." Coast I at 6 n.3 (quoting Ryan 

). We
have noted that
"playing fast and loose with the courts" is a factor in a finding of bad
faith. See

; Ryan 

. However,
simply
quoting this language without any explanation or analysis of how Coast's
actions rose to
the level of "playing fast and loose" is insufficient to invoke the harsh
sanction of judicial
estoppel. No finding of culpability, intentional self contradiction, or
intentional
wrongdoing was made. We counseled in Montrose that a mere finding of
inconsistency,
without more, fails to fulfill the bad faith requirement. See 

Furthermore, the
court also made no explicit finding that Shansab's and counsel's prior
statements were
accepted or adopted by the court. The District Court failed to apply the
law to the facts
here, and therefore abused its discretion.
     Secondly, the District Court did not consider whether its application
of judicial
estoppel was tailored to the harm caused by Coast and whether "no lesser
sanction would
adequately remedy the damage done by litigant's misconduct." 

. The court failed to assess whether a strong instruction to the jury
that it should
consider the prior inconsistent statements or some other measure short of
judicial
estoppel could have addressed the harm. We express no opinion whether the
court's
application was in fact narrowly tailored, but we find that the court
itself should have
conducted such an inquiry and provided its reasoning in the first
instance.
     Finally, the District Court invoked judicial estoppel to dismiss many
of Coast's
claims even though the parties did not brief the issue nor did it arise at
oral argument.
The parties were not on notice that judicial estoppel would be applied,
and Coast was not
allowed the opportunity to argue lack of bad faith or contest any other
factor in the
application of the doctrine. In Montrose, we warned that courts should be
wary of just
such a sua sponte application of the doctrine. See 

n.5.
Further, as we stated in Montrose:
                    Judicial estoppel "is an 'extraordinary remedy'" that
should be employed
          only "'when a party's inconsistent behavior would otherwise
result in a
          miscarriage of justice.'" Ryan Operations G.P. v. Santiam-
Midwest
          Lumber Co., 

, 365 (3d Cir.1996) (quoting Oneida Motor
          Freight, Inc. v. United Jersey Bank, 

, 419 (3d
Cir.1988)
          (Stapleton, J., dissenting)).

.   Especially because judicial estoppel is such
a harsh remedy
  as this case demonstrates   and should be used only in limited
circumstances, the court
should have invited briefing and argument before deploying the doctrine to
dismiss many
of Coast's claims.
     We understand that the District Court did not have the benefit of
this Court's
decision in Montrose when it issued its summary judgment orders here.
However,
Montrose was based squarely on other decisions of this Court which also
required the
same analysis and were available at the time of the District Court's
ruling.    See, e.g.,
Ryan 

(requiring finding that positions taken by
party to be
estopped are inconsistent and that the party changed her position in bad
faith). Indeed,
the District Court quoted from Ryan Operations but otherwise failed to
follow its
requirements. Because judicial estoppel is an "extraordinary remedy," it
should not be
invoked sua sponte without the detailed, multi-step analysis Montrose
specifically
requires. We find that the court erred in applying judicial estoppel in
this case.

                               III
     While we conclude that the District Court abused its discretion in
applying judicial
estoppel, we find no error in the District Court's consideration of any of
the other issues
decided on summary judgment. Therefore, we only vacate on those claims
for which the
judicial estoppel finding of Coast's default formed the sole basis for
dismissal. Those
claims on which the District Court granted summary judgment to VCI on
other grounds
are affirmed. Below we briefly explain the District Court's reliance on
judicial estoppel
with respect to each of Coast's claims.

         A. Claims Dismissed on Basis of Judicial Estoppel
     We find that seven of Coast's claims -- Counts One, Four, Six, Seven,
Thirteen,
Fourteen, and Fifteen -- were dismissed on the basis of the default
finding, and we
therefore vacate the grant of summary judgment on those claims.
     The dismissal of Count One, Breach of Contract, most clearly depended
on the
judicial estoppel finding. The court invoked judicial estoppel in its
discussion of this
Count, and the court's finding of default formed the only stated basis for
granting
summary judgment to VCI on this contract claim. See Coast I at 5-7. We
vacate the
grant of summary judgment as to the breach of contract claim.
           In dismissing Count Four, Lender Liability, the District Court
stated:
                     As this Court has granted summary judgment on
plaintiff's contract, good
           faith and fair dealing, and fiduciary duty claims, the Fourth
Count of
           plaintiff's complaint alleging lender liability will also be
dismissed as
           plaintiff has failed to show any breach of duty by the
defendants' actions.

Coast I at 8 n.5. Because the court dismissed the contract and good
faith/fair dealing
claims on the basis of judicial estoppel, this statement suggests that its
dismissal of the
lender liability claim was based on judicial estoppel as well. We vacate
as to this claim.
     On Count Six, Conversion and Concealment of Assets, the court stated
that:
                    the security agreements executed between the parties
provided the
          defendants with the paramount right to possess the collateral in
the event of
          a default, and that Coast would deliver such collateral to the
defendants.
          Thus, as a default had occurred, pursuant to the agreements
between the
          parties, defendants were entitled to a right of possession.

Coast I at 10-11 (emphasis added). Because this holding as to the
conversion claim
depended on the finding of default, we vacate.
     Count Seven alleged negligent supervision by VCI of its employees.
The court
stated that this count alleged acts of industrial espionage and tortious
interference similar
to those contained in other counts (namely Counts 8 and 9, discussed
below). The court
stated that "such claims must fail for the same reasons as previously
indicated." 

n.10. However, the court also stated that "as this Court has found that
defendants did not
breach the agreements, plaintiff's negligent supervision claim must also
fail." 

Thus, this claim was dismissed on the basis of the
judicial estoppel
default finding, which formed the basis for deciding that VCI did not
breach the
Agreements. We vacate as to this claim.
     In discussing Count Thirteen, Breach of Implied Contract and Duty of
Good Faith,
the court held that "the duty of good faith cannot be invoked by plaintiff
to preclude
defendants from exercising their rights under the agreements upon Coast's
default."
Coast I at 8 (emphasis added). Default thus formed the sole basis for
dismissal.   We
vacate as to this claim.
     Finally, Counts Fourteen and Fifteen alleged discrimination by VCI
under federal
and state law respectively, on the basis of Shansab's status as a native
of Afghanistan.
Coast alleged that VCI terminated Coast's line of credit because of
Shansab's race. In its
second summary judgment order, in which it dismissed these claims, the
court reviewed
its first order, and specifically recounted its judicial estoppel finding
of default. See
Coast II at 2-3. The court expressly relied on the default finding to
hold that Coast could
not make a prima face case of discrimination in both its federal and state
claims because
it could not prove that Coast was qualified to continue to receive credit.

The court stated at length that its finding of default barred Coast in its
discrimination
claim. 

also noted that even if Coast could make out a
prima facie case,
VCI had a race-neutral reason for its action: that Coast was in default,
as decided in
Coast I by judicial estoppel. 

The court concluded that
Coast's
discrimination claims were "bereft of any evidence that VCI intentionally
discriminated
against Coast... when it exercised its rights under the parties'
agreements and foreclosed
on its collateral." 

(emphasis added). Because the District
Court's dismissal of
these discrimination claims was based heavily on the judicial estoppel
finding of default,
we vacate as to these claims.

 B.  Claims Dismissed on Grounds Independent of Judicial Estoppel
     The District Court dismissed nine of Coast's claims against VCI
without reliance
on the judicial estoppel analysis. We do not find any error in the
court's treatment of the
following claims, and therefore we affirm the grant of summary judgment to
VCI on
these claims.
     With regard to Count Two, Breach of Fiduciary Duty, the court
concluded that "no
independent fiduciary duty is generally owed from a lender to a borrower"
and that
"plaintiff has failed to show that defendants owed plaintiff a separate
duty of care outside
of its obligations under the various loan agreements." Coast I at 8.
Although this
discussion occurred in the same section in which judicial estoppel was
invoked, the court
did not rely on the default finding for dismissal. We therefore affirm as
to this claim.
     The court held on Count Three, Fraud, that "a mere alleged breach of
contract
without more does not create the existence of a fraud claim" and that
plaintiff failed to
plead fraud with particularity under Federal Rule of Civil Procedure Rule
9(b). 

10. Default played no role, and we find no error, so we affirm. On Count
Five, Trespass,
the court similarly did not rely on the default finding but stated that
"if an individual has
a cognizable right to enter the property, no action for trespass may lie"
and that here
"defendants had a contractual right to enter Coast's premises in order to
inspect and
safeguard its collateral, as well as to review Coast's books and records."

To be
invoked, the contractual right to enter Coast's premises, inspect, and
review did not
require default by Coast. We affirm the dismissal of the trespass claim.
     Count Eight was dismissed because Coast did not meet the elements of
"industrial
espionage." The court construed Count Nine as alleging tortious
interference with
prospective economic advantage, and found that Coast presented no evidence
to support
several of the elements of that claim. The court dismissed Count Ten,
Unwarranted
Issuance of Subpoenas, because Coast presented no evidence that subpoenas
were issued
wrongly. On none of these counts did the court rely on the default
finding, and we find
no error in its consideration of these claims. 

We
therefore affirm as to these
claims.
     The court found that the bankruptcy remedy of Equitable
Subordination, which
Coast requested in Count Eleven, was not warranted here because Coast's
bankruptcy
case had been dismissed, Coast lacked standing to bring such a claim, and
because the
equitable remedy was not justified on the facts of this case. 

12. Default played
no role, and we find no error. We affirm the dismissal of Count Eleven.
     The court found that Coast presented no evidence of agreement to
support its
claim of Conspiracy between VCI and codefendants AOA and VOA. 

Again,
default played no role, and we affirm. Finally, the court dismissed Count
Sixteen,
Violation of 42 U.S.C.   1982, because   1982 does not protect contract
rights such as
those asserted to be violated here, and therefore Coast could not state a
claim under
1982. We affirm.

                                IV
     For the foregoing reasons, we hold that the District Court abused its
discretion in
invoking judicial estoppel to find that Coast defaulted on the Agreements.
We vacate the
District Court's grant of summary judgment in favor of VCI on claims
decided on the
basis of the court's application of judicial estoppel: Counts One, Four,
Six, Seven,
Thirteen, Fourteen, and Fifteen of Coast's Complaint. We affirm the grant
of summary
judgment in favor of VCI on the remainder of Coast's claims: Counts Two,
Three, Five,
Eight, Nine, Ten, Eleven, Twelve, and Sixteen. We remand to the District
Court for
further proceedings.


_____________________________
TO THE CLERK OF THE COURT:

Kindly file the foregoing Opinion.




                                        /s/ Julio M. Fuentes
                                            Circuit Judge