“The decision below—if left to stand—will carry the federal judiciary far beyond its constitutional role of adjudicating concrete disputes and remedying actual injuries.”
—Cory Andrews, WLF General Counsel & Vice President of Litigation
Click HERE for WLF’s brief.
(Washington, DC)—Earlier today, Washington Legal Foundation (WLF) urged the U.S. Supreme Court to review, and ultimately to overturn, a decision of the U.S. Court of Appeals for the Second Circuit requiring federal trial courts to exercise jurisdiction in cases brought by non-existent plaintiffs who have no stake in the outcome of the litigation.
The case arose from a putative class action by two Cayman Islands investment funds. The complaint alleged that the defendant banks injured the plaintiffs by conspiring to manipulate interest rates. But the plaintiffs’ attorneys who filed the complaint held a secret. Although the complaint asserted that the investment-fund plaintiffs were going concerns, both entities had in fact been dissolved years earlier. For more than 14 months, plaintiffs’ counsel concealed from the district court and the defendants that the only named plaintiffs in the suit had ceased to exist before the suit was filed. When the second amended complaint revealed this true state of affairs, the defendants moved to dismiss for lack of a true “case or controversy” under Article III.
The district court agreed, holding that a lawsuit initiated by non-existent entities must be dismissed because a fully dissolved corporation, like a deceased natural person, has no legal interest in the outcome of the suit under Article III. The court also rejected the attempt to substitute the original plaintiffs’ alleged assignee because, having lacked jurisdiction from the outset, the district court was powerless to do anything other than dismiss the case. But the Second Circuit reversed, finding that, although the originally named plaintiffs lacked Article III standing, the mere existence of their alleged assignee, who was neither named in the complaint nor a party to the action, satisfied Article III.
WLF’s amicus brief urging review advances three arguments. First, the Second Circuit’s decision contravenes the Supreme Court’s standing jurisprudence by virtually eliminating the case-or-controversy requirement as a meaningful check on federal-court jurisdiction. Second, if left to stand, the Second Circuit’s holding will severely erode the Constitution’s careful separation of powers. And third, the Second Circuit’s decision elevates a procedural rule above a bedrock constitutional duty, in violation of the Rules Enabling Act and Federal Rule of Civil Procedure 82.