- Court
- New York Supreme Court, Appellate Division, Second Department
- Case
- Rubin v. Hodes
- Docket
- 2021-00669
- Filed
- May 27, 2026
- Slip Op
- 2026 NY Slip Op 03328
- Citation
- 2026 NY Slip Op 03328 (N.Y. App. Div. 2d Dep’t 2026)
Background
Robert M. Rubin alleged that in 1993 he became the majority shareholder of UHP-Delaware, Inc., holding 85% of the stock. He made loans to UHP ($250,000) and a related entity, Patriot Health, Inc. ($100,000), evidenced by promissory notes. As of 2004, only a portion of each loan had been repaid. Cost Containment Group, Inc. was later created and became the parent company of UHP and Patriot. An Employee Stock Ownership Plan (ESOP) was formed and paid approximately $32 million for about 80% of Cost Containment stock. In 2017, Rubin and his wife were paid approximately $6 million for their equity interest.
In June 2013, Rubin filed a voluntary petition for Chapter 11 bankruptcy. In his Schedule B listing personal property, he did not include his UHP stock shares or the promissory notes. The bankruptcy proceeding was closed in 2017. In 2018, Rubin commenced this action seeking to recover damages for fraud and repayment of the loans, alleging that he had been misled about UHP’s value and relinquished his shares for substantially less than their worth.
The defendants moved to dismiss on the ground that Rubin lacked legal capacity to sue because the undisclosed assets belonged to the bankruptcy estate. The Supreme Court, Nassau County granted the motions. Rubin appealed.
Holding
The Appellate Division, Second Department affirmed the dismissal. The court applied the doctrine of judicial estoppel, which prevents a party from taking a position in litigation that is inconsistent with a position taken in a prior proceeding. Rubin’s failure to disclose his UHP stock shares and promissory notes in his bankruptcy schedules was fatal to his claims.
The court explained that upon the filing of a voluntary bankruptcy petition, virtually all of the debtor’s assets become property of the bankruptcy estate. A debtor who fails to disclose assets in bankruptcy may be judicially estopped from later asserting ownership of those assets or pursuing claims based on them. The integrity of the bankruptcy system depends on “full and honest disclosure by debtors of all of their assets.” Rubin’s omission of the stock shares and promissory notes from his bankruptcy schedules — assets that formed the basis of his fraud action — precluded him from pursuing the claims in state court.
Takeaways
This decision provides a clear application of the judicial estoppel doctrine in the bankruptcy context. Debtors who fail to disclose assets or claims in their bankruptcy proceedings may find themselves permanently barred from pursuing those assets or claims in subsequent litigation. The rule applies even when the bankruptcy proceeding has been closed and the debtor has received a discharge. The rationale is that allowing a debtor to conceal assets from bankruptcy creditors and then pursue those assets post-bankruptcy would undermine the integrity of the bankruptcy system.
Practitioners should note that the doctrine applies to claims as well as tangible assets. A fraud claim against former business associates, based on the alleged undervaluation of stock that was not disclosed in bankruptcy, is itself an asset that should have been listed on the bankruptcy schedules. The failure to disclose the claim — even if the debtor was unaware of its full scope at the time of filing — can bar later prosecution of the claim.
Why It Matters
For bankruptcy practitioners and commercial litigators, this case underscores the importance of complete and accurate disclosure in bankruptcy proceedings. Debtors must list all assets, including contingent and unliquidated claims, on their bankruptcy schedules. The failure to do so creates a risk that the debtor will be permanently estopped from pursuing those claims, even if the bankruptcy is closed and the debtor later discovers that the claims have significant value. For defendants facing claims by former bankruptcy debtors, the case provides a powerful defense that can result in dismissal at the motion to dismiss stage.