On Friday, the Sixth Circuit reinstated a $15.6 million jury verdict awarded to Cranpark, Inc. in its promissory estoppel suit against Rogers Group, Inc. (“RGI”). In 1998, representatives from RGI and James Sabatine, the owner of Hardrives Paving and Construction, Inc. (“Hardrives”), for whom Cranpark is the successor-in-interest, met to discuss a possible joint venture between the companies. However, after Hardrives has purchased a new plant in Youngstown, Ohio, RGI told Sabatine that RGI would no longer be able to participate in the joint venture. Following the collapse of the venture, Hardrives began losing money and, in 2001, Sabatine was forces to enter into an asset purchase agreement with McCourt Construction Company (“McCourt”). Cranpark brought suit against RGI for breach of contract and promissory estoppel.

At the close of evidence, RGI moved for judgment as a matter of law, arguing that Cranpark was not the proper party to the case because Cranpark had sold its rights to bring a cause of action against RGI to McCourt during the asset sale. The district court denied the motion and the jury awarded a verdict in favor on Cranpark on the promissory estoppel claim, awarding $15.6 million in damages. On post-trial motions, however, district court agreed that Cranpark lacked Article III standing and vacated the jury verdict.

On appeal, the Sixth Circuit addressed Cranpark’s claim that when a party transfers its interest in a cause of action, it is not Article III standing that is implicated, but instead Civil Procedure Rule 17’s “real-party-in-interest” requirement. The Sixth Circuit notes that the distinction between the two is significant because the real-party-in-interest requirement is generally viewed as an affirmative defense that can be waived, whereas Article III standing is a plaintiff’s burden and can be raised at any time. The Sixth Circuit concluded that “one who sells his interest in a cause of action is not deprived of Article III standing, but he is susceptible to a real-party-in-interest challenge, at least if the challenge is timely raised.” Because Cranpark’s Article III standing was unaffected by the asset purchase agreement, the district court’s decision was reversed

This case provides a direct answer to the often confused question of whether standing remains despite the fact that a party’s interest in bringing a claim is transferred. The Sixth Circuit held that yes, standing remains, but that the party may be subject to a real-party-in-interest challenge.

Justin Jennewine is the author of this article.