Brett W. Houghton et al. v. Malibu Boats, LLC

In this appeal, we address whether a defendant may obtain the dismissal of a lawsuit based on a challenge to the plaintiff’s standing asserted for the first time after the jury returned its verdict. Husband and wife Brett and Ceree Houghton were the sole shareholders of a corporation that operated a boat dealership. The company was an authorized dealer of manufacturer Malibu Boats, LLC. After that business relationship fell apart, the dealership went out of business, and the Houghtons each declared bankruptcy. Thereafter, the Houghtons successfully sued the manufacturer for intentional misrepresentation, fraudulent concealment, and promissory fraud. A jury awarded $900,000 in compensatory damages for the loss of equity in real property owned by the dealership that was sold at foreclosure when the dealership failed. The manufacturer filed a motion for judgment notwithstanding the verdict or new trial in which it raised various issues. At the hearing on the motion, however, the manufacturer orally raised a new issue: It questioned the Houghtons’ standing, given that the damages related to real property owned by the dealership instead of them. After the parties submitted briefing, the trial court determined that the Houghtons could not pursue the asserted claims in their own names. Instead, the claims belonged to the dealership and were available to the Houghtons only through a shareholder derivative proceeding. The Houghtons admittedly had not complied with the statutory mechanism for such a proceeding. Thus, the trial court concluded that the Houghtons lacked so-called “statutory standing.” Finding that the lack of statutory standing deprived it of subject matter jurisdiction, the trial court dismissed the suit. On appeal as of right, the Court of Appeals reversed. The intermediate appellate court determined that so-called “shareholder standing” principles govern this case. Importantly, the court concluded that shareholder standing limitations are not jurisdictional and, therefore, are subject to waiver. The court further concluded that the manufacturer waived its challenge by not timely asserting the issue. We granted permission to appeal. Based on our review of the record and the applicable law, we hold that the Houghtons had constitutional standing to bring their suit. We further hold that the trial court erred in relying on statutory standing principles to dismiss the suit. Instead, the substance of the standing challenge implicated shareholder standing limitations, and the manufacturer forfeited its challenge. Accordingly, we affirm the judgment of the Court of Appeals and remand this case to the trial court for further proceedings consistent with this opinion