One of the most effective—but often overlooked—defenses in business litigation is judicial estoppel.

A recent published decision from the New Jersey Appellate Division, Hacker v. Jaime-Valdez (A-2886-22, decided June 13, 2025), serves as an important reminder that litigants cannot tell one court one thing to obtain a favorable ruling and then take the exact opposite position later when it becomes advantageous. Although Hacker arose from an automobile accident and bankruptcy proceeding, the court’s analysis has significant implications for commercial litigation, particularly shareholder and LLC member disputes.

The Case

The defendant filed for Chapter 7 bankruptcy after a personal injury lawsuit had already been filed against him. To continue pursuing the state court litigation, the plaintiff asked the bankruptcy court to lift the automatic stay. Importantly, however, the plaintiff repeatedly represented to both the bankruptcy court and the Superior Court that he was seeking recovery only up to the defendant’s available insurance coverage—$200,000. Those representations mattered. The bankruptcy court relied upon them and modified the automatic stay solely to permit litigation up to the available insurance limits. The state court likewise allowed the litigation to proceed. The case eventually went to trial. The jury returned a verdict of approximately $1.6 million. Suddenly, the plaintiff changed positions. Instead of limiting recovery to the insurance proceeds as he had represented to both courts, he attempted to collect the entire verdict directly from the defendant. The Appellate Division held that he could not.

Judicial Estoppel

The court reaffirmed New Jersey’s doctrine of judicial estoppel: A litigant who successfully persuades one court to accept a particular position cannot later adopt an inconsistent position in related litigation simply because it has become more advantageous. The doctrine exists to protect the integrity of the judicial process—not merely the opposing litigant. As the Appellate Division explained, judicial estoppel prevents parties from “playing fast and loose with the courts.” It applies when: a party asserts a position in one proceeding; the court accepts or relies upon that position; and the party later attempts to take an inconsistent position arising out of the same events. Because the plaintiff obtained relief in bankruptcy by promising to limit his recovery to insurance proceeds, he was judicially estopped from later seeking personal recovery beyond those limits. The court ordered the verdict molded to $200,000.

Why This Matters in Shareholder and LLC Member Litigation

Although judicial estoppel can arise in virtually any civil case, it has particular significance in shareholder oppression and LLC member disputes. Unlike some jurisdictions, New Jersey generally does not permit multiple lawsuits involving the same underlying controversy. Under the Entire Controversy Doctrine, R. 4:30A, parties are ordinarily required to assert all claims arising from a single controversy in one action. As a result, it is relatively uncommon to find separate New Jersey lawsuits in which parties take inconsistent positions regarding the same business dispute. That does not mean judicial estoppel is unavailable. Business owners often become involved in other legal proceedings that touch on the same facts, ownership interests, or financial issues that later arise in an oppression action. Those proceedings may include matrimonial actions, bankruptcy cases, prior commercial litigation involving the business, or even sworn testimony given in unrelated matters.

For example, a shareholder may represent in a bankruptcy proceeding that his ownership interest in a closely held company has a particular value, only to later advocate for a dramatically different valuation in an oppression action. A business owner may take a position during a divorce regarding ownership, control, or income generated by the company that is directly inconsistent with the position advanced later in litigation among the company’s owners. Likewise, sworn testimony or certifications filed in prior litigation concerning management authority, ownership percentages, or the company’s finances may become highly relevant if a party later attempts to take a contradictory position in a shareholder dispute.

These prior representations should never be overlooked. Before defending the merits of an oppression claim, counsel should carefully examine whether the opposing party has made sworn statements in other proceedings that are inconsistent with the positions now being advanced. If a court accepted those earlier representations, judicial estoppel may provide a powerful defense—not simply because the prior statements undermine credibility, but because the doctrine exists to protect the integrity of the judicial process itself.

A Defense That Should Never Be Overlooked

Business litigators often focus on traditional affirmative defenses such as waiver, estoppel, laches, accord and satisfaction, or res judicata.

Judicial estoppel deserves equal attention. It is particularly powerful because the defense is grounded not simply in fairness between the parties, but in protecting the integrity of the judicial system itself. The first question defense counsel should ask whenever a client is sued is not simply: “What happened?” It should also be: “What has the plaintiff already said under oath—and where?” Prior certifications, verified complaints, bankruptcy filings, sworn discovery responses, injunction applications, arbitration submissions, regulatory filings, and prior court arguments may all contain statements that limit an opposing party’s ability to change positions later in the litigation.

Practical Lessons for Business Owners

Business owners should recognize that statements made during litigation can have lasting consequences. Representations made to obtain temporary relief, emergency injunctions, or favorable procedural rulings are not simply advocacy. If a court relies upon those representations, they may later prevent a party from advancing a contrary position.

Consistency matters.

Once a litigant successfully persuades one court to accept a factual or legal position, changing course later may not simply undermine credibility—it may eliminate an otherwise viable claim.

The published decision in Hacker v. Jaime-Valdez is therefore much more than a bankruptcy opinion. It is a reminder that judicial estoppel remains a potent defense in New Jersey litigation, particularly where complex business disputes involve multiple proceedings, multiple courts, and evolving litigation strategies.

For attorneys handling shareholder oppression, LLC member disputes, or other business divorce matters, the lesson is clear: before defending the merits of the claims, examine what the opposing party has already told another court. Those prior representations may become one of the strongest defenses available.