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Courts take stance in standing cases

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Although rarely invoked, the doctrine of standing is a threshold matter in litigation. Without it, a claimant cannot proceed. Under federal law, standing is an essential element of the “Cases or Controversies” requirement under Article III, sec. 2 of the U.S. Constitution.

In state court proceedings, the principle is not constitutionally enshrined, but it is a vital part of the litigation process.

The issue of standing was central to three high-profile cases decided during the 2012-2013 term of the U.S. Supreme Court. Because the high court issued written decisions in only 73 cases, standing was at the core of nearly 5 percent of the tribunal’s cases this year.

In Clapper v. Amnesty International USA, journalists lacked standing to challenge secret wiretapping of the government because they were not targets of the surreptitious activity. In the two concluding same-sex marriage cases, standing also was a vital issue. In Hollingsworth v. Perry, the court refused to rule on the merits of a ruling of the 9th Circuit Court of Appeals invalidating a referendum in California banning same-sex marriages on grounds that the challengers, a group of same-sex marriage opponents, lacked standing after state officials did not appeal the lower court determination. In U.S. v. Windsor, the Court, before deeming the Federal Defense of Marriage Act unconstitutional, ruled that a group of Republicans in the House of Representatives had standing to challenge a lower court ruling invalidating DOMA, after the Justice Department refused to defend the measure.

While these significant cases were being resolved by the justices of Washington, D.C., the federal and state appellate courts in Minnesota wrestled this spring with standing in a trio of cases, holding that the claimants lacked the ability to pursue the lawsuit in two of them, while upholding standing in the other.

Federal focus

The 8th Circuit focused on standing in a pair of cases, finding it lacking in both of them. In Longaker v. Boston Scientific Corp., it upheld a ruling by U.S. District Court Judge Ann Montgomery of Minnesota barring an employee from suing for unpaid wages under an employment contract after he had filed for bankruptcy.

The case was brought by a salesman with a three-year contract, including an annual base salary and a guaranteed minimum commission schedule, who was fired a week after filing for bankruptcy in Minnesota. He then sued for breach of contract, along with a claim of retaliation under the Minnesota Human Rights Act. Judge Montgomery dismissed the case on grounds that the employee lacked standing to assert a breach of contract claim because his interest in the guaranteed payments were part of the bankrupt estate, which belonged to his creditors. The statutory claim also was dismissed on grounds of lack of standing and the statute of limitations.

The 8th Circuit affirmed, rejecting the claim that the salesman had standing to sue for the guaranteed payments because they were excluded from the bankrupt estate section under 11 U.S.C. sec. 541(a)(6), which excludes post-bankruptcy earnings. The exclusion does not apply because the future payments are “neither attributable to nor conditioned on [the] post-petition services.” Rather, they are “analogous” to a severance payment “having no relation to the [employee’s] post-petition services. Because the guaranteed payments were “rooted in” the [bankrupt’s] pre-petition past,” they do not fall within the exclusion. Rather, those funds belong to the bankruptcy estate, and cannot be sought by the employee who lacks standing.

A partial dissent by Judge Donald Bye would have allowed the employee to seek the remaining compensation on his employment contract. He criticized the majority because it “confused the issue of … standing” with the merits of the claim, which he thought had validity.

Health hiatus

The hiatus of payments by a health insurance carrier of medical bills to an employer who had advanced the expenses for an employee’s surgery could not be challenged due to lack of standing in Indigo LR LLC v. Advanced Insurance Brokerage, Inc. The insurance carrier went into receivership without reimbursing the expenses, which the receiver later paid in two installments.

The trial court dismissed the employer’s claim because it lacked standing, and the 8th Circuit affirmed. The employer failed to satisfy the three prongs for standing: (1) injury, that is (2) “fairly” traceable to the defendant’s conduct and (3) a likelihood of redress “by a favorable decision.” The employer had been fully reimbursed, albeit belatedly, and it “presented no evidence” of any out-of-pocket damage.

In addition to lack of standing, the case was moot because the employer “failed to show having any injury has arisen, or might arise in the future, from the [insurer’s] alleged conduct.”

Redemption ruling

The six-month period for redemption of foreclosed residential property furnished standing to a Duluth couple whose home was in foreclosure in Erickson v. Bothwell. The homeowners sued the seller of the house for undisclosed defects. The St. Louis County District Court held that they had standing to pursue the claim even though their house had been foreclosed upon by the mortgagee.

The Court of Appeals affirmed on interlocutory review. The trial court correctly ruled that the homeowners had standing because the suit was brought while their six-month redemption right under Minn. Stat. sec. 580.12 was in effect. Because they “retained their right of ownership in the property during the redemption period.” The homeowners “did not lack standing to pursue their claims” against the individuals who sold them the home.

For the same reason, the seller’s “mootness agreement failed” by the sellers, who advanced “no case law to support that defense.”

Standing is an essential element of a civil lawsuit in both state and federal court systems. These cases show that it is an obstacle that occasionally can be hard to hurdle.

PERSPECTIVE POINTERS:

Some key Supreme Court standing cases

  • Frothingham v. Mellon, (1923): Taxpayers cannot challenge federal spending measure
  • Ex parte Levitt, (1937): Citizen cannot sue to force government to comply with law
  • Flast v. Cohen, (1968): Taxpayer can sue for violation of Establishment clause under First Amendment
  • Wreath v. Seldin, (1975): No standing for people not affected by exclusionary zoning practices
  • Lujan v. Defenders of Wildlife, (1992): Citizens may not pursue “generalized” suit under Endangered Species Act

 

Originally published by MinnLawyer; August 22, 2013.