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A person or company must have standing (the legal right to assert a claim) to file a lawsuit at the commencement of the case. In other words, a party cannot file a lawsuit based on a contract until it has been assigned those contractual rights.  Businesses often have multiple corporate entities that act interchangeably, however, only the corporate entity with contractual rights may assert a claim. Peter Mavrick is a Fort Lauderdale business litigation lawyer, and also represents clients in business litigation in Miami, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

“A party must have standing to file suit at its inception and may not remedy this defect by subsequently obtaining standing.” Matthews v. Fed. Nat. Mortg. Ass’n, 160 So. 3d 131 (Fla. 4th DCA 2015). Standing in business litigation may be established by an assignment of contractual rights prior to the filing of the complaint. In foreclosure lawsuits standing may also be established by show of an equitable transfer of the mortgage before the lawsuit was commenced. In Matthews, the appellate court held that Fannie Mae failed to establish standing at the beginning of the lawsuit because there was no assignment that pre-dated the lawsuit and the promissory note attached to the complaint was not made payable to Fannie Mae. The promissory note also was not endorsed in blank, so that it would be actionable by whomever possessed it. Matthews reversed the final judgment of foreclosure because there were no apparent contractual rights.

Court’s construe the individual circumstances of each case in business litigation to determine whether standing exists. “Officers, directors, or stockholders of the client, and others not in privity with the [contractual party], lack standing to maintain an action for breach of contract.” Mulligan v. Wallace, 349 So. 2d 745 (Fla. 3d DCA 1977). In Mulligan, after an intracorporate conflict for management of a corporation, the former corporate officers and directors filed a lawsuit against the company’s accounting firm for, among other things, breach of contract. The trial court dismissed the breach of contract count and found that these former officers and directors did not have standing to sue the accounting firm. The former officers and directors immediately appealed and contended that they were third-party beneficiaries of the accounting contract. The appellate court disagreed. The appellate court held that because 1) accountants are liable to their clients, which was the corporation, and 2) the primary injury of the breach of contract was to the corporation, therefore, those former officers and directors’ circumstances did not establish their standing for a breach of contract claim.

Mulligan did not exclude all other causes of action that a third-party beneficiary may assert. Courts have held that privity to a contract is not the only basis for standing in business litigation. “Privity” is a term used to describe the relationship of parties to a contract. Under narrowly defined circumstances, a third-party beneficiary may file a lawsuit despite the absence of direct contractual privity. Baskerville-Donovan Engineers, Inc. v. Pensacola Executive House Condo. Ass’n, Inc., 581 So. 2d 1301 (Fla. 1991). The Florida Supreme Court in Baskerville-Donovan Engineers, Inc., held that a duty of care exists between a third party and a professional despite the lack of direct contractual privity.

“The concept of standing has been defined in a broad sense as having a sufficient stake in an otherwise justiciable controversy to obtain judicial resolution of that controversy.” Robert C. Malt & Co. v. Carpet World Distributors, Inc., 861 So. 2d 1285 (Fla. 4th DCA 2004). Robert C. Malt & Co. held that the trial court erred in deciding that Robert C. Malt & Co. had no standing to make a claim on the monies in the court registry. Robert C. Malt & Co.’s claims to the money in the court registry had not yet been determined. The appellate court held that based on the parties’ dispute Robert C. Malt & Co. had a sufficient stake in the outcome of the proceeding.

Persons and businesses in business litigation must clearly establish their standing to file a lawsuit.  A business litigator that is well-versed in the requirements of the doctrines of standing and privity can avoid unwanted consequences that come from asserting a lawsuit by improper party. Peter Mavrick is a Fort Lauderdale business litigation attorney who also practices business litigation in Miami, Boca Raton, and Palm Beach.  This article does not serve as a substitute for legal advice tailored to a particular situation.

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