2004-816, BARRY COHOON & a. v. IDM SOFTWARE, INC. & a.

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THE SUPREME COURT OF NEW HAMPSHIRE
___________________________
Rockingham
No. 2004-816
BARRY COHOON & a.
v.
IDM SOFTWARE, INC. & a.
Argued: October 20, 2005
Opinion Issued: December 15, 2005
Cleveland, Waters and Bass, P.A., of Concord (William B. Pribis on the
brief and orally), for the plaintiffs.
Cook, Little, Rosenblatt & Manson. P.L.L.C., of Manchester (Arnold
Rosenblatt and Michael S. Owen on the brief, and Mr. Rosenblatt orally), for
defendant IDM Software, Inc.
McLane Graf Raulerson & Middleton, P.A., of Manchester (Wilbur A.
Glahn, III and Andrea L. Daly on the brief, and Mr. Glahn orally), for
defendants John H. Leggett and Stuart J. Sheppard.
NADEAU, J. The defendants, IDM Software, Inc. (IDM), John H. Leggett
(Leggett), Stuart J. Sheppard (Sheppard), J. Tracy Emerick, Dana W. Leggett
and Robert Sheppard appeal orders of the Trial Court (McHugh, J.) granting
summary judgment to the plaintiffs, Barry Cohoon and Joseph McCarran. The

2
plaintiffs cross appeal. We affirm in part, reverse in part, vacate in part and
remand.
The following facts were either found by the trial court or are supported
in the record before us. Leggett is the president and majority shareholder, as
well as a director, of IDM. Sheppard is also a director and shareholder of IDM.
Cohoon and McCarran purchased shares of IDM, each paying $30,000. The
shares had not been registered or properly noticed in compliance with RSA
421-B:11 (Supp. 2005). As a result of errors made in registering its shares,
IDM sued its prior counsel for malpractice (the malpractice suit). Among the
damages asserted by IDM in that action was “exposure to shareholder claims.”
In its pretrial statement, IDM elaborated on this element of damages, alleging
“[l]iability for claims of rescission pursuant to N.H. RSA 421-B:25 totaling
$635,000, plus interest, costs and attorneys’ fees.”
The defendant-attorneys in the malpractice suit filed a motion in limine
to exclude evidence of rescission damages. In an order dated March 24, 2003,
the court ruled that it would “permit [IDM] as part of its damages, to include as
a separate component the amount of money that it would be required to return
to the investors pursuant to RSA 421-B.” Before the court issued the order,
however, the parties settled the malpractice suit for $900,000. By letter to its
shareholders dated May 19, 2003, IDM gave notice of a special meeting of
shareholders to consider approving a plan of dissolution of the corporation.
Subsequently, Cohoon and McCarran brought this action against IDM,
Leggett and Sheppard, among others. Their writ asserted causes of action for
rescission under RSA 421-B:25 against all principal defendants, breach of
majority shareholders’ duty against Leggett and others, and a claim captioned
“PLEA OF LAW – JUDICIAL ESTOPPEL” against IDM. All of the parties moved
for summary judgment.
The trial court initially granted the plaintiffs’ motion and denied the
defendants’, noting that it could not “imagine a case crying out for the
application of the doctrine of judicial estoppel more than the case at bar.” The
court ruled:
By claiming that the corporation had a legal obligation to pay its
[investors] $635,000, and by refusing to negotiate a lesser amount
with the investors in the context of settlement discussions in the
earlier case, the corporation obligated itself to fully refund to its
investors the amounts of money that it received from the law firm
defendant. By taking the position that the corporation did in the
earlier litigation, it would be a fraud on the Court now to seek to
withhold payment of the investors’ claims in full.

3
The defendants moved for reconsideration and the court held an
evidentiary hearing. The court then ruled that its previous order finding that
the requirements for judicial estoppel had been met was erroneous. It
nevertheless affirmed its grant of summary judgment to the plaintiffs “on the
grounds that [rescission] is available to the plaintiffs both under the terms of
RSA 421-B and also under the doctrine of equitable estoppel.”
Upon motion of the individual defendants for clarification and/or
reconsideration, the court clarified that its findings were applicable to Leggett
and Sheppard, but not to the other individual defendants. IDM, Leggett,
Sheppard, J. Tracy Emerick, Dana W. Leggett and Robert Sheppard appeal and
the plaintiffs cross appeal.
“In reviewing a trial court’s summary judgment ruling, we consider the
affidavits and other evidence, and all inferences properly drawn from them, in
the light most favorable to the non-moving party.” Furbush v. McKittrick, 149
N.H. 426, 429 (2003). “We review the trial court’s application of the law to the
facts de novo.” Id.
IDM first argues that the trial court erred in applying equitable estoppel
because the plaintiffs failed to prove the elements of that doctrine. We need
not address this argument, however, because we find merit in the plaintiffs’
cross-appeal. Cf. Sherryland v. Snuffer, 150 N.H. 262, 267 (2003) (where trial
court reaches correct result on mistaken grounds, we will affirm if valid
alternative grounds support the decision). Specifically, the plaintiffs argue that
the trial court “erred when it ultimately ruled that judicial estoppel did not
apply to the facts of this case.”
“The doctrine of judicial estoppel generally prevents a party from
prevailing in one phase of a case on an argument and then relying on a
contradictory argument to prevail in another phase.” In re Pack Monadnock,
147 N.H. 419, 425-26 (2002) (quotation omitted); see Kelleher v. Marvin
Lumber & Cedar Co., 152 N.H. ___, ___ (decided December 15, 2005). We have
noted three factors that “typically inform the decision whether to apply the
doctrine in a particular case.” New Hampshire v. Maine, 532 U.S. 742, 750
(2001); see Pack Monadnock, 147 N.H. at 426.
One factor to consider in deciding whether to apply the doctrine of
judicial estoppel is whether the party’s later position is clearly
inconsistent with its earlier position. Courts also regularly inquire
whether the party has succeeded in persuading a court to accept
that party’s earlier position. A third consideration is whether the
party seeking to assert an inconsistent position would derive an
unfair advantage or impose an unfair detriment on the opposing
party if not estopped.

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Pack Monadnock, 147 N.H. at 426 (quotations and citations omitted); see
Kelleher, 152 N.H. at ___.
In reversing its decision on judicial estoppel, the trial court upheld its
finding that the first factor had been met. With regard to the second factor,
however, the court noted that the malpractice case settled before trial and that
“the issue under consideration, namely whether or not the shareholders of IDM
were entitled to [rescission] pursuant to RSA 421-B:25, was not formally
decided by the Court until after the first lawsuit was settled.” The court then
interpreted our decision in Pack Monadnock as “saying . . . that before the
doctrine of judicial estoppel is implemented in this state there has to be a
showing that the Court adopted the first position of the party and that that
adoption induced the other party to take certain action to its detriment.”
The trial court found that the plaintiffs here could not make that
showing. Specifically, it stated:
The bottom line is this. The inducement for the defendant in
the original lawsuit to settle could not have been this Court’s
acceptance of the plaintiffs’ position in the original lawsuit to the
effect that [rescission] was available to the shareholders because in
fact the Court’s ruling on that issue postdated the settlement itself.
The trial court read into the doctrine of judicial estoppel an element of
reliance by the alleged wronged party that is not required. See, e.g., Edwards
v. Aetna Life Ins. Co., 690 F.2d 595, 598 (6th Cir. 1982). The court misread
Pack Monadnock as requiring “that the change in position did not induce the
alleged wronged party to take action.” What Pack Monadnock actually says is
that the earlier position taken by the State “did not induce either the probate
court or superior court to take action.” Pack Monadnock, 147 N.H. at 426
(emphasis added). That is just another way of saying that the party against
whom estoppel is asserted did not “succeed[] in persuading a court to accept
that party’s earlier position.” Id. (quotation omitted). Thus, the factors we
noted in Pack Monadnock do not contain a requirement that the alleged
wronged party be induced to act.
The plaintiffs contend that the second factor in the general judicial
estoppel inquiry is satisfied because the trial court clearly accepted IDM’s
position in the court’s order on the malpractice defendant-attorneys’ motion in
limine to exclude evidence of rescission damages. They argue, “The fact that
the Court did not publish this decision does not matter in the context of a
judicial estoppel analysis.” IDM, on the other hand, asserts that “[t]he trial
court never issued any order or decision adopting IDM’s position in the prior
case, whatever the court may have thought or believed about IDM’s position in

5
that case.” Thus, the parties frame the dispositive question as whether IDM
“succeeded in persuading [the trial] court to accept [its] earlier position.” Pack
Monadnock, 147 N.H. at 426.
Before addressing that question, we note that the factors recited in Pack
Monadnock and Kelleher are not fixed elements to be applied blindly in every
case. Indeed, in New Hampshire v. Maine, the Supreme Court restated the
observation of other courts that “the circumstances under which judicial
estoppel may appropriately be invoked are probably not reducible to any
general formulation of principle.” New Hampshire v. Maine, 532 U.S. at 750
(quotation and brackets omitted). “In enumerating these factors, we do not
establish inflexible prerequisites or an exhaustive formula for determining the
applicability of judicial estoppel. Additional considerations may inform the
doctrine’s application in specific factual contexts.” Id. at 751.
In particular, courts have taken a number of different approaches with
respect to the second factor. One court has observed:
If there is an uncertain aspect of the doctrine of judicial estoppel it
is whether a party can be estopped only when its inconsistent
assertion was actually adopted by the court in the prior action or
at least was successfully maintained in that action without
necessarily having been judicially adopted, or whether the
offending party need only have played “fast and loose” with the
court even if ultimately unsuccessful in the prior action.
AFN, Inc. v. Schlott, Inc., 798 F. Supp. 219, 224-25 (D.N.J. 1992) (footnote
omitted). Thus, at one end of the spectrum is the view that without the first
court’s acceptance of the party’s position, “application of the rule is
unwarranted because no risk of inconsistent results exists. Thus, the integrity
of the judicial process is unaffected; the perception that either the first or the
second court was misled is not present.” Edwards, 690 F.2d at 599. At the
other end is the view that “if what is at issue is the integrity of the court,
whether a court is asked to rely or has in fact relied on a prior inconsistent
position should be a distinction without a difference.” AFN, 798 F. Supp. at
225.
We need not now determine whether judicial estoppel always requires
that the party to be estopped succeed in the first action, either by persuading
the first court to accept its position or in some other way, or to define success
for such purposes. We believe that under the unique facts of this case, IDM
sufficiently asserted its position to the first court, and sufficiently succeeded in
persuading the first court to accept its position, that judicial estoppel should
apply.

6
IDM’s attorney represented to the court in the malpractice suit that the
corporation had an outstanding liability on its books to its shareholders for
their rescission rights. He further represented that since IDM was no longer in
business, the shareholders did not have to sue the corporation: “They – they’re
entitled to get their money out of liquidation. And what they’re entitled to
under [RSA] 421-B(25) is the – is – is what they paid in, the $635,000 plus
costs attorney’s fees and interest.” In ruling on the motion in limine, the court
stated: “Upon reflection, the Court accepts the position of [IDM] on this issue.”
We conclude this is sufficient judicial acceptance of IDM’s position to now
apply the doctrine of judicial estoppel. As we have already determined that
reliance by the wronged party is not a required factor, we attach no significance
to the court’s failure to issue the order.
IDM next argues that the third factor in the judicial estoppel analysis is
not met because it gained no unfair benefit and the plaintiffs suffered no unfair
detriment. In particular, IDM argues that because the malpractice settlement
“provided the ‘pool’ from which plaintiffs are trying to collect . . . plaintiffs
benefited from the [malpractice] settlement and were not in any way hurt by it.”
IDM’s argument misses the point. The plaintiffs would be hurt not by
the initial settlement itself, but by now allowing IDM to maintain the
inconsistent position that the plaintiffs have no rescission rights after IDM
used those rights to obtain a settlement from the defendant-attorneys in the
malpractice suit. If the plaintiffs were to succeed in a rescission suit against
IDM, they would elevate their priority in the corporate liquidation from
shareholder to judgment creditor. Cf. Jenot v. White Mt. Acceptance Corp.,
124 N.H. 701, 706 (1984) (“We subscribe to the general rule that after the
dissolution of a corporation its property passes to its stockholders subject to
the payment of the corporate debts.” (Quotation omitted.)). As the corporation
had proposed to pay the outside shareholders $.132 per share, while paying
100% of its outstanding liabilities to creditors, including Sheppard as an
employee and Leggett as a debt holder and employee, the plaintiffs would suffer
unfair detriment if prohibited from achieving creditor status in IDM’s
liquidation.
Having concluded that judicial estoppel is appropriate in this case, we
affirm the trial court’s grant of summary judgment against IDM on that
alternative ground. Cf. Sherryland, 150 N.H. at 267. Because IDM is estopped
from denying that the plaintiffs are entitled to rescission under RSA 421-B:25,
we need not address its arguments regarding the proper interpretation of that
statute, federal preemption, and the admission into evidence of deposition
testimony allegedly based on privileged communications to which IDM was
denied access during discovery.

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The plaintiffs next contend that the trial court erred in declining to award
them a specific judgment and in ruling instead that they could not obtain a
judgment until the claims of all other shareholders had been asserted or were
barred by the statute of limitations. Specifically, the trial court ruled:
The plaintiffs’ entitlement to full recovery and [rescission] damages
under the statute is no greater than the entitlement of any other
similarly-situated shareholder. Thus, the Court cannot award a
specific verdict in favor of the plaintiffs until the Statute of
Limitations has expired and it is known how many claimants there
will be to the moneys available for payment.
The plaintiffs assert that this was error because, among other things, it
potentially compromises their judgment “based upon the rights of individuals
who have elected to take no action.” They argue that “[b]y fashioning its order
in the manner it did, the Trial Court essentially (and improperly) awarded a
judgment in an undetermined amount to non-parties.” We agree.
We have upheld a trial court’s “refus[al] to amend [a] petition to extend
the requested relief to persons who were not parties to the action,” citing with
approval the proposition that a “court may and should refuse to entertain [an]
action by one who seeks to invoke [a] remedy on behalf of another who seeks
no redress.” Real Estate Planners v. Town of Newmarket, 134 N.H. 696, 699-
700 (1991). We conclude that having brought suit solely on their own behalf,
the plaintiffs are entitled to an individual judgment in the amount owed to
them. The portion of their judgment that they may actually receive upon
liquidation of IDM is not an issue before us. Accordingly, we reverse this ruling
and remand for entry of a judgment in accordance with this opinion.
Finally, Leggett and Sheppard argue that the trial court erred in applying
equitable estoppel to them. In an order subsequent to its initial order on
judicial estoppel, the court stated that judicial estoppel could not be applied to
the individual defendants because “[n]one were parties to the malpractice
case.” However, the court’s later order affirming its grant of summary
judgment to the plaintiffs on grounds of equitable estoppel was unclear as to
whether it applied to the individual defendants as well as to IDM. The
individual defendants moved for clarification. The court ruled that its findings
were applicable to Leggett and Sheppard, but not to the other individual
defendants.
Equitable estoppel serves to forbid one to speak against his
own act, representations or commitments communicated to
another who reasonably relies upon them to his injury. The party
asserting estoppel must prove the following essential elements: (1)
a knowingly false representation or concealment of material facts;

8
(2) a recipient who was intentionally, or through culpable neglect,
induced to rely upon the false representation or concealment,
ignorant of the truth; and (3) a resultant injury.
Cadle Co. v. Bourgeois, 149 N.H. 410, 418 (2003) (citation omitted).
Leggett and Sheppard assert that the court erred in applying equitable
estoppel to them because, among other things, none of the representations
made in the underlying malpractice suit were made on behalf of them as
individuals. They argue that the trial court’s orders fail to identify the specific
representations made by them that serve to equitably estop them. As a result,
they contend that we are “left to guess at both the ‘specific facts’ required for
estoppel and the uncontested genuine issues of material fact required to meet
[the plaintiffs’] burden on summary judgment.” (Citation omitted). We agree.
Although the trial court ruled on IDM’s requests for findings of fact and
rulings of law, and provided narrative explanation for many of its rulings in its
various written orders, we are unable to determine what undisputed facts it
found to support the application of equitable estoppel to Leggett and Sheppard.
For instance, in one order the court stated: “It should be noted that during . . .
settlement discussions the attorneys representing the corporation as plaintiff
made it clear that their real client, the one making all of the decisions in terms
of settlement, was John Leggett.” In another order, it found that “[t]he
testimony at the evidentiary hearing strongly suggests that the principals of
IDM elected to keep the shareholders completely in the dark with respect to the
particulars of the original litigation and its settlement.” Thus, we are unsure
whether the representation that the trial court found to support estoppel was
made to the court or to the shareholders. We are similarly unsure what facts
the trial court found to support the other elements of equitable estoppel.
Where a party requests findings and rulings, “the court is obligated to
make findings of the ‘basic’ or ‘essential’ facts that are sufficient to support the
ultimate decision.” Crown Paper Co. v. City of Berlin, 142 N.H. 563, 571 (1997)
(quotation omitted); see RSA 491:15 (1997). “The object is to allow an
opportunity for adequate review in this court by providing us with the actual
basis for the trial court’s decision, in terms of facts found and law applied.”
Crown Paper, 142 N.H. at 571 (quotation omitted). Accordingly, we vacate the
order against Leggett and Sheppard and remand for further findings and
rulings.
Affirmed in part; reversed in part;
vacated in part; and remanded.
DUGGAN and GALWAY, JJ., concurred.