This difficult and tragic medical malpractice – bankruptcy – legal malpractice case is worth studying. on the issues of bankruptcy stays and equitable estoppel,

Not once but twice plaintiff has been non-suited based upon the statute of limitations. The underlying claim is that she was subjected to unnecessary bi-lateral mastectomy. 

Plaintiff’s medical malpractice case was started, and she then filed a petition in bankruptcy.  The trustee did not prosecute the medical malpractice case, and defendant personal injury attorneys arranged for it to be abandoned back to plaintiff,  Read the Supreme Court Decision of Justice Goodman  as well as the prior Supreme Court Decision for the facts. 

"For the reasons stated herein, the New Motion is denied. Most of the arguments merely rehash arguments already addressed and rejected by the Prior Decision, or, are not properly the subject of a motion to dismiss. For instance, Defendants [FN2] argue "[T]o justify equitable estoppel Plaintiffs were required to provide some evidence of a misrepresentation by Dr. Kaiser subsequent to the alleged malpractice … There is no evidence in the record regarding misrepresentations by Dr. Kaiser subsequent to Ms. Kremen’s post-surgery treatment … ." New Motion, ¶ 35.[FN3] Defendants also argue that based on the documents filed in the instant action and the medical malpractice action, "there is no question that Ms. Kremen’s underlying [medical malpractice] claim had no merit and that she was not entitled to equitable estoppel in her underlying action." Id. at ¶ 41-42. In essence, the Defendants would like the instant malpractice action dismissed on the theory that "Plaintiffs lost their [medical malpractice] lawsuit because it had no merit, not because there was any malpractice on the part of the Morelli Defendants." New Motion, ¶ 42.

Now the Appellate Division, First Department has issued its decision. 

"Plaintiffs allege negligence in legal representation in their original medical malpractice action, which was dismissed as untimely. Specifically, they allege failure to argue their entitlement to the "bankruptcy toll" of the statute of limitations. Title 11 USC § 108(a)(2) provides debtors a two-year toll of an existing statute of limitations period, but only if "such period has not expired before the date of the filing of the petition." Here, the bankruptcy toll was not triggered because the statute of limitations had already run. "

Defendants’ argument is consistent with both the explicit text of the statute and the estoppel theory underpinning fraudulent concealment. "To be entitled to an estoppel, the plaintiff must show, in addition to fraudulent conduct by the physician, that he was diligent in commencing the action once he learned of the malpractice" (Harkin v Culleton, 156 AD2d 19, 21 [1990], lv dismissed 76 NY2d 936 [1990]). Simply filing a bankruptcy petition, in which plaintiffs did not even include the possible medical malpractice claim on their initial schedule of assets, does not demonstrate diligent pursuit of this claim. To hold otherwise would alter the elements of fraudulent concealment so as to excuse the due diligence inquiry, thus changing, rather than applying, the applicable non-bankruptcy law.

Moreover, plaintiffs lack standing to bring this action. Once the bankruptcy estate was [*2]fully administered and the trustee abandoned the claim, the cause of action revested solely in plaintiffs’ names. When a trustee abandons a claim as to the debtor, the latter may no longer invoke the benefit of 11 USC § 108(a)(2) (see In re Marshall, 307 BR 517, 520 [ED Va 2003]). "