Court Opinion

ID: 3001541
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:17:45.261652+00
Date Added: 2024-06-11T11:45:45.760682
License: Public Domain

In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

Nos. 06-1720 & 06-1767
RAHEEMUNISA RAWOOF, Representative
of the Estate of Mohammed Rawoof,
                               Plaintiff-Appellant/Cross-Appellee,

                                  v.

TEXOR PETROLEUM COMPANY, INCORPORATED,
                           Defendant-Appellee/Cross-Appellant.
                          ____________
            Appeals from the United States District Court
        for the Northern District of Illinois, Eastern Division.
             No. 02 C 5892—George M. Marovich, Judge.
                          ____________
     ARGUED JANUARY 19, 2007—DECIDED APRIL 7, 2008
                          ____________

 Before RIPPLE, KANNE, and SYKES, Circuit Judges.
  SYKES, Circuit Judge. Mohammed Rawoof filed this
lawsuit against Texor Petroleum Company (“Texor”)
alleging that Texor violated the Petroleum Marketing
Practices Act (“PMPA”) by terminating his gas station’s
“Marathon” brand motor-fuel franchise without the
statutorily required notice and cause. Almost two years
into the litigation, on the day discovery was to close,
Rawoof brought a motion to substitute plaintiffs, asserting
2                                   Nos. 06-1720 & 06-1767

that his corporation, SHL 95, Inc. (“SHL 95”), was the
real party in interest. Rawoof maintained that the PMPA
claim belonged to the corporation, not to him personally,
because the corporation conducted the gas station’s
business activities, owned its real estate and fixtures,
and sustained the losses associated with the termination
of the franchise. The district court denied the motion
because Rawoof knew all along that SHL 95 was the real
party in interest and substituting parties at that late stage
of the litigation would prejudice Texor. Texor then
moved for summary judgment on standing grounds. The
district court granted the motion, reasoning that Rawoof
had admitted that the PMPA claim belonged to the corpo-
ration and that he could not bring suit in his own name
because his only injury was the indirect, derivative
injury of a shareholder. Rawoof appeals, and we affirm.

                      I. Background
  The parties have a rather loose and informal contractual
history that has been the subject of litigation in both state
and federal court. In the present suit, Rawoof alleged that
in February 1998 he entered into an oral agreement with
Texor whereby Texor would supply gasoline to Rawoof’s
Chicago gas station. This agreement was to last for seven
years. In addition to other provisions, Rawoof alleged
that Texor agreed to provide and install a Marathon sign
at the station, and in return Rawoof was required to sell
under the Marathon brand and purchase his petroleum
products exclusively from Texor. In 2000 a dispute arose
between the parties over prices Texor charged for gasoline
it delivered to Rawoof’s station. Rawoof thought he
was being overcharged and protested Texor’s invoices.
On April 20, 2001, Texor suspended gasoline deliveries
Nos. 06-1720 & 06-1767                                     3

due to nonpayment; on July 11, 2001, Texor filed suit
against Rawoof in Cook County Circuit Court for money
due for gasoline previously sold and delivered. Rawoof
appeared in that suit on August 16, 2001. On August 29,
2001, the parties signed a settlement agreement establish-
ing a payment schedule for the balance due, and Rawoof
was informed that his station’s relationship with Texor
was being terminated and the Marathon signs would be
removed immediately.
  On August 19, 2002, Rawoof filed suit in federal district
court alleging that Texor violated the PMPA by terminating
his franchise without the required statutory notice and
cause. See 15 U.S.C. §§ 2802, 2804. Texor moved to dis-
miss on statute-of-limitations grounds, arguing that the
PMPA’s one-year limitations period began to run on
July 11, 2001, when it filed suit in Cook County Circuit
Court, or at the latest on August 16, 2001, when Rawoof
appeared in that suit. By then, Texor argued, Rawoof
knew or had reason to know that his gas station’s rela-
tionship with Texor was terminated. Rawoof filed a
response to this motion and also filed a breach-of-contract
action against Texor in Cook County Circuit Court, evi-
dently hedging his bets against a statute-of-limitations
dismissal of his federal PMPA claim. The district court
denied Texor’s motion, holding that the PMPA’s one-year
limitations period began to run when Rawoof and Texor
entered into the settlement of Texor’s state-court litigation
and Texor advised Rawoof his station was being
debranded immediately. According to the district
court, Rawoof had gotten his PMPA action in just
under the wire.
  Discovery proceeded, but not without some difficulty,
eventually necessitating a motion to compel by Texor. The
4                                      Nos. 06-1720 & 06-1767

motion was heard by a magistrate judge on July 27,
2004, the day discovery was set to close; the judge granted
the motion in part and denied it in part, and extended
discovery for an additional 30 days to accommodate
compliance with his order. In the meantime, on that same
day, Rawoof filed his motion to substitute plaintiffs.
Rawoof argued that his Illinois S-corporation, SHL 95,
was the real party in interest, not Rawoof individually.
Rawoof told the court that the gas station’s revenue and
tax liabilities were reported through SHL 95, which also
held legal title to the service station’s real property and
fixtures. The corporation operated the station and suf-
fered the losses resulting from the termination of the
Marathon franchise. Rawoof was SHL 95’s sole stock-
holder, officer, and director, but in his motion he acknowl-
edged “the well-settled rule that a plaintiff-stock-
holder may not seek relief on his own behalf when the
plaintiff has not been injured” other than in his capacity
as a stockholder. Accordingly, Rawoof asserted, the
PMPA claim belonged to the corporation and not to him
personally, and he asked leave to substitute SHL 95 as the
plaintiff. Rawoof died in September 2004 while the sub-
stitution motion was pending.1
  The district court denied Rawoof’s motion for substitu-
tion. The court explained that Rawoof had known SHL 95
was the real party in interest since the commencement of
the litigation and there was no reason why the suit could
not have been prosecuted by the corporation from the

1
  Following Rawoof’s death, this action has been prosecuted
by his widow, Raheemunisa Rawoof, as representative of his
estate. For simplicity, we will continue to refer to Rawoof as the
plaintiff.
Nos. 06-1720 & 06-1767                                      5

beginning. The court noted that the motion was filed
nearly two years after the action was commenced and
on the day discovery was scheduled to close, and held
that Texor would be prejudiced if substitution were
allowed so late in the litigation. The court noted in particu-
lar that with Rawoof’s death, Texor could no longer
conduct a corporate-officer deposition according to
Rule 30(b)(6) of the Federal Rules of Civil Procedure.
  Texor then moved for summary judgment, arguing that
Rawoof’s admissions in his motion to substitute and the
court’s order denying that motion suggested Rawoof
lacked standing to bring the suit because he had not
suffered any direct, personal injury from the termination
of the franchise. In response, Rawoof changed course and
argued that he was indeed entitled to pursue the PMPA
claim in his own name.
   The district court granted Texor’s summary-judgment
motion, holding that constitutional standing was estab-
lished but prudential standing was not. Noting the
shareholder-standing rule, see Franchise Tax Bd. of Cal. v.
Alcan Aluminum Ltd., 493 U.S. 331, 336 (1990), which
prohibits shareholders from suing to enforce the rights
of the corporation, the district court held Rawoof
lacked prudential standing because he suffered only an
indirect, derivative injury as SHL 95’s sole shareholder.
The court found no evidence of a direct, personal injury
distinct from that of a shareholder that would allow
Rawoof to sue in his own name. The court also gave little
weight to shareholder resolutions adopted in February
2005 (months after Rawoof died and the motion to sub-
stitute was denied) purporting to ratify Rawoof’s prosecu-
tion of the corporation’s claims. According to the court,
it was too late for SHL 95 to proffer a Rule 17(a)
6                                      Nos. 06-1720 & 06-1767

ratification.2 Although it granted Texor’s motion for
summary judgment, the court declined to award Texor
attorney’s fees as a prevailing franchisor under the PMPA.
Rawoof appealed from the order granting summary
judgment, and Texor cross-appealed the denial of its
motion to dismiss on statute-of-limitations grounds and
the denial of its motion for attorney’s fees.

                        II. Discussion
A. Rawoof’s Appeal
  Rawoof does not directly challenge the district court’s
denial of his motion to substitute plaintiffs. Instead, his
appeal focuses on the court’s summary-judgment ruling
dismissing his case on standing grounds. We review
de novo the district court’s grant of summary judgment
and will construe all facts and inferences drawn from
them in the light most favorable to the nonmoving party.
Squibb v. Mem’l Med. Ctr., 497 F.3d 775, 780 (7th Cir. 2007).
Summary judgment is appropriate if “the pleadings,
depositions, answers to interrogatories, and admissions

2
  Rule 17(a) of the Federal Rules of Civil Procedure provides, in
part, that:
    Every action shall be prosecuted in the name of the real
    party in interest. . . . No action shall be dismissed on the
    ground that it is not prosecuted in the name of the real party
    in interest until a reasonable time has been allowed after
    objection for ratification of commencement of the action
    by . . . the real party in interest; and such ratification,
    joinder, or substitution shall have the same effect as if the
    action had been commenced in the name of the real party
    in interest.
Nos. 06-1720 & 06-1767                                          7

on file, together with the affidavits, if any, show that there
is no genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of law.”
FED. R. CIV. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S.
317, 322-23 (1986). Standing questions are reviewed
de novo. Winkler v. Gates, 481 F.3d 977, 982 (7th Cir. 2007);
Wis. Right to Life, Inc. v. Schober, 366 F.3d 485, 489 (7th
Cir. 2004).
  Rawoof argues that he is entitled to bring SHL 95’s
PMPA claim in his own name, either because he is a party
in interest or because he stands in the shoes of SHL 95. The
PMPA requires notice and cause before a motor-fuel
franchise may be terminated; “franchise,” “franchisor,”
“franchisee,” and “franchise relationship” are defined
terms under the PMPA, and the statute’s notice and cause
requirements differ according to the circumstances. See
15 U.S.C. §§ 2801 et seq. The merits of the PMPA claim are
not before us on this appeal, so we may omit any further
discussion of the statute’s requirements. It is enough to
note that the statute grants motor-fuel franchisees the
right to bring a civil action for equitable relief, actual
and exemplary damages, and reasonable attorney’s and
expert witness fees for a violation of the PMPA. 15 U.S.C.
§ 2805.
  Rawoof’s arguments begin with Rule 17(a) of the Federal
Rules of Civil Procedure, which requires federal lawsuits
to be brought by the real party in interest, but identifies
certain persons who are authorized to prosecute an
action for the benefit of another. See supra n.2. Executors,
guardians, and trustees are the most common examples.
See FED. R. CIV. P. 17(a). Rawoof fashions three arguments
as to why he is entitled to pursue the PMPA claim belong-
ing to his corporation: First, he claims that he is an agent
8                                     Nos. 06-1720 & 06-1767

of SHL 95; second, he says he entered into the contract
with Texor for the corporation as a third-party beneficiary;
and, third, he alleges SHL 95 assigned its claims to him.
  A brief preliminary discussion of standing and the
requirements of FED. R. CIV. P. 17 is in order. Rawoof
maintained in his motion to substitute that the PMPA
claim belonged to the corporation, SHL 95, and not to
himself personally, and as such, the corporation, not he,
was the real party in interest. This can only be construed
as an admission by Rawoof; an “admission” for purposes
of summary judgment “includes ‘anything which is in
practical fact an admission,’ including statements made
in a brief presented to the district court.” Woods v. City of
Chicago, 234 F.3d 979, 989 (7th Cir. 2000) (citations omitted).
  Under Rule 17(a), as we have noted, “[e]very action shall
be prosecuted in the name of the real party in interest.”
This is a procedural rule requiring that the complaint be
brought in the name of the party to whom that claim
“belongs” or the party who “according to the governing
substantive law, is entitled to enforce the right.” Oscar
Gruss & Son, Inc. v. Hollander, 337 F.3d 186, 193 (2d Cir.
2003) (quoting 6A CHARLES ALAN WRIGHT, ET AL., FEDERAL
PRACTICE & PROCEDURE § 1543, at 334 (2d ed. 1990)); Frank
v. Hadesman & Frank, Inc., 83 F.3d 158, 159 (7th Cir. 1996).
Under Rule 17 we are concerned only with whether an
action can be maintained in the plaintiff’s name, Betar v.
De Havilland Aircraft of Can., Ltd., 603 F.2d 30, 32 (7th Cir.
1979), and that question is resolved in this case by fed-
eral law, Bagdon v. Bridgestone/Firestone, Inc., 916 F.2d 379,
382 (7th Cir. 1990). This case states a federal claim, and
federal rules of procedure and standing obviously
govern. Both parties, however, cite Illinois state-law
cases and Illinois contract principles, which we will
Nos. 06-1720 & 06-1767                                        9

address only to the extent not inconsistent with federal
law and relevant to the question of Rawoof’s standing to
pursue the corporation’s PMPA claim in his own name.
  The requirements of Rule 17 should not be confused
with the jurisdictional doctrine of standing. As part of
Article III’s case-or-controversy requirement, a party
must demonstrate standing to sue in federal court by
establishing (1) an injury in fact; (2) “a causal connection
between the injury and the conduct complained of”; and
(3) a likelihood that the injury will be redressed by a
favorable decision. Lujan v. Defenders of Wildlife, 504 U.S.
555, 560-61 (1992); see also Allen v. Wright, 468 U.S. 737, 750-
51 (1984). We agree with the district court that Rawoof
satisfies the minimum requirements of constitutional
standing by virtue of an asserted indirect injury as
SHL 95’s sole shareholder.
  In addition to constitutional-standing requirements,
however, there are prudential limitations on a federal
court’s power to hear cases. See Valley Forge Christian
Coll. v. Ams. United for Separation of Church & State, Inc., 454
U.S. 464, 474-75 (1982); Warth v. Seldin, 422 U.S. 490, 498
(1975); Mainstreet Org. of Realtors v. Calumet City, Ill.,
505 F.3d 742, 745 (7th Cir. 2007); Massey v. Helman, 196 F.3d
727, 739 (7th Cir. 1999). Prudential-standing doctrine “is
not jurisdictional in the sense that Article III standing is.”
Mainstreet Realtors, 505 F.3d at 747. That is, “if there is no
Article III standing, the court is obliged to dismiss the
suit even if the standing issue has not been raised,” but
“nonconstitutional lack of standing belongs to an interme-
diate class of cases in which a court can notice an error
and reverse on the basis of it even though no party has
noticed it and the error is not jurisdictional, at least in the
conventional sense.” Id. In other words, the court may
10                                   Nos. 06-1720 & 06-1767

raise an unpreserved prudential-standing question on its
own, but unlike questions of constitutional standing, it is
not obliged to do so. In this case, questions of stand-
ing—both constitutional and prudential—were raised in
the district court and argued on appeal.
  One well-established prudential-standing limitation
is the principle that a litigant cannot sue in federal court
to enforce the rights of third parties. Elk Grove Unified Sch.
Dist. v. Newdow, 542 U.S. 1, 17-18 (2004); Warth, 422 U.S.
at 499; Mainstreet Realtors, 505 F.3d at 746; Massey, 196 F.3d
at 739; Retired Chi. Police Ass’n v. City of Chicago, 76 F.3d
856, 862 (7th Cir. 1996). Some courts have described
Rule 17’s real-party-in-interest requirement as essentially
a codification of this nonconstitutional, prudential limita-
tion on standing. See, e.g., Warnick v. Yassian (In re Rodeo
Canon Dev. Corp.), 362 F.3d 603, 607-08 (9th Cir. 2004)
(withdrawn on other grounds); Ensley v. Cody Res., Inc.,
171 F.3d 315, 320 (5th Cir. 1999).
   Here, the district court granted Texor’s motion for
summary judgment because Rawoof ran afoul of a par-
ticular subset of third-party standing doctrine known as
the shareholder-standing rule. This rule holds that a
shareholder generally cannot sue for indirect harm he
suffers as a result of an injury to the corporation. See
Franchise Tax Bd. of Cal., 493 U.S. at 336; Warth, 422 U.S. at
499; Flynn v. Merrick, 881 F.2d 446, 449 (7th Cir. 1989);
Twohy v. First Nat’l Bank of Chi., 758 F.2d 1185, 1194 (7th
Cir. 1985). The rule does not apply if the corporation’s
management has refused to pursue the action for reasons
unrelated to good-faith business judgment. See Franchise
Tax Bd. of Cal., 493 U.S. at 336. Another exception to the
prohibition on shareholder suits allows a shareholder
to pursue an action originating from an injury to the
Nos. 06-1720 & 06-1767                                       11

corporation if he has suffered a direct, personal injury
independent of the derivative injury common to all share-
holders. See id. at 337; Twohy, 758 F.2d at 1194; see also
Goldberg v. Michael, 766 N.E.2d 246, 251 (Ill. App. Ct. 2002);
Sterling Radio Stations, Inc. v. Weinstine, 765 N.E.2d 56,
60 (Ill. App. Ct. 2002); Small v. Sussman, 713 N.E.2d 1216,
1219 (Ill. App. Ct. 1999). Finally, a shareholder may sue
to vindicate an injury even where the corporation may
bring the action if “a special contractual duty exists be-
tween the wrongdoer and the shareholder.” Twohy, 758
F.2d at 1194; Eden v. Miller, 37 F.2d 8, 9-10 (2d Cir. 1930).
  Rawoof acknowledges the rule against shareholder
standing but argues he is nonetheless entitled to bring
this suit in his own name. He makes no effort, however,
to bring himself within any of the recognized exceptions
we have just listed. Instead, he invokes the agency doctrine
applicable to liability issues when an agent acts for an
undisclosed principal. See RESTATEMENT (THIRD) OF
AGENCY § 6.03 (2006). Rawoof asserts that if one accepts
the premise that he entered into the purported oral fran-
chise agreement with Texor but that SHL 95 alone suf-
fered the injury from its termination, Rawoof’s status as
an agent for SHL 95 as undisclosed principal follows “as
a matter of law.”
  Texor counters that Rawoof’s position on this point lacks
factual and legal support. We agree. “Agency is a consen-
sual, fiduciary relationship between two legal entities
created by law, where the principal has the right to con-
trol the activities of the agent, and the agent has the
power to conduct legal transactions in the name of the
principal.” Knauerhaze v. Nelson, 836 N.E.2d 640, 660 (Ill.
App. Ct. 2005) (quoting Caligiuri v. First Colony Life Ins. Co.,
742 N.E.2d 750, 756 (Ill. App. Ct. 2000)). Rawoof appears
12                                  Nos. 06-1720 & 06-1767

to argue that the district court’s denial of his motion to
substitute somehow requires the conclusion that he acted
as an agent for SHL 95, an undisclosed principal, in
connection with the franchise agreement with Texor. This
is certainly not true as a legal matter; Rawoof’s status as
sole shareholder, officer, and director of SHL 95 does
not automatically make him an agent of the corporation
for purposes of the transaction in question here. See, e.g.,
Knauerhaze, 836 N.E.2d at 669.
  Moreover, Rawoof cites no evidentiary support for
his agency claim, and our independent review of the
proposed findings of fact on summary judgment and
Rawoof’s responses to them yields none. See Ruffin-
Thompkins v. Experian Info. Solutions, Inc., 422 F.3d 603,
610 (7th Cir. 2005) (explaining that district court need
not scour the record to find evidence supporting a
party’s burden of production on an issue); see also Hammel
v. Eau Galle Cheese Factory, 407 F.3d 852, 859 (7th Cir.
2005) (quoting Schacht v. Wis. Dep’t of Corr., 175 F.3d 497,
504 (7th Cir. 2005) (explaining that summary judgment
is the “put up or shut up” moment in an action where a
party must identify the evidence it has that would con-
vince a trier of fact)). In any event, this particular agency
doctrine generally defines the rights and obligations of
the undisclosed principal vis-à-vis third parties with
whom an agent with actual authority contracts on behalf
of the undisclosed principal. See RESTATEMENT (THIRD) OF
AGENCY § 6.03 cmt. a. It is less commonly used as a basis
for the alleged agent to assert, in his own name, the
rights of the principal against a third party. More impor-
tantly, as we have noted, Rawoof has made no effort to
develop a factual basis for this claim, which requires,
among other things, that an agent have actual authority,
Nos. 06-1720 & 06-1767                                      13

see id. §§ 2.01, 2.02; act on behalf of an undisclosed princi-
pal, see id. §§ 1.04(2)(b), 6.03; and that the third party have
notice that the agent is acting on behalf of an undis-
closed principal, see id. § 4.
   Rawoof next argues that SHL 95 was a third-party
beneficiary to the alleged franchise agreement entered
into with Texor. Under Illinois law, which Rawoof
invokes for this argument, a third party may be an inten-
tional or incidental beneficiary of a contract entered into
between others. See Cont’l Cas. Co. v. Am. Nat’l Ins. Co.,
417 F.3d 727, 734 (7th Cir. 2005); Estate of Willis II v.
Kiferbaum Constr. Corp., 830 N.E.2d 636, 643 (Ill. App. Ct.
2005). “An intended beneficiary is intended by the
parties to the contract to receive a benefit for the perfor-
mance of the agreement and has rights and may sue
under the contract; an incidental beneficiary has no rights
and may not sue to enforce them.” Estate of Willis II,
830 N.E.2d at 643; MBD Enters., Inc. v. Am. Nat’l Bank of
Chi., 655 N.E.2d 1061, 1064 (Ill. App. Ct. 1995). There is a
strong presumption in Illinois law against the creation of
contractual rights in third parties, see Bates & Rogers Constr.
Corp. v. Greeley & Hansen, 486 N.E.2d 902, 906 (Ill. 1985);
any intent to benefit a third party must be discernible in
the language and circumstances of the contract, see Estate
of Willis II, 830 N.E.2d at 642-43.
  Here again, there is no factual or legal support for
Rawoof’s third-party beneficiary argument. The pur-
ported agreement between Texor and Rawoof made no
mention of SHL 95, see id., and there is no other evidence
to establish that Rawoof and Texor intentionally entered
into the franchise agreement for the benefit of SHL 95. To
the contrary, the evidence suggests Texor did not know
that Rawoof’s gas station was owned and operated by
14                                  Nos. 06-1720 & 06-1767

SHL 95 until late in this litigation. More fundamentally,
as a legal matter, Rawoof’s argument has things back-
ward. If a contract is entered into intentionally for the
benefit of a third party, the third-party beneficiary
would have standing to sue on the contract. Rawoof is
attempting to use this doctrine to support his own stand-
ing—not that of the alleged third-party beneficiary—in an
effort to get around his admission that the third party,
SHL 95, is in fact the real party in interest.
  Rawoof’s third argument occupies much of his briefing;
he claims he is the assignee of SHL 95’s PMPA claim. This
is the point at which Rawoof’s attempt to fit this case
into a legal theory reaches the breaking point. Although
his briefing is lengthy on this point, Rawoof does not
come close to developing a meaningful assignment argu-
ment, perhaps because there is no evidence whatsoever
of any actual assignment. Rather, he asserts that SHL 95
acquiesced in or ratified his pursuit of the PMPA claim
(either implicitly or explicitly), and then he proceeds to
use the terms “assignment” and “ratification” interchange-
ably. As best we can tell, the “ratification” argument
appears to consist of two separate contentions. First,
Rawoof argues that because he was SHL 95’s sole share-
holder, his filing of the PMPA claim was tantamount to
ratification of that action by the corporation. Second,
he claims that SHL 95 actually ratified, by after-the-fact
resolutions, his bringing of the action in his own name.
Neither of these claims has merit.
  Rawoof has not cited any case announcing a rule that
a suit brought by a sole shareholder for harm done to the
corporation is itself evidence of either an assignment or
ratification by the corporation. He cites several cases
regarding the ability of creditors to reach corporate assets
Nos. 06-1720 & 06-1767                                          15

diverted to shareholders in closely held corporations,
see, e.g., Scholes v. Lehmann, 56 F.3d 750, 754 (7th Cir.
1995); Dannen v. Scafidi, 393 N.E.2d 1246, 1250-51 (Ill. App.
Ct. 1979), but we fail to see the relevance of this line of
cases to the question presented here.3 Rawoof’s claim
that the corporation explicitly (as opposed to implicitly)
ratified his filing of this suit is based on the following
events: (1) in September 2002 (and one month after the
filing of the complaint in this action), Rawoof and his
wife created a trust, of which they were both cotrustees;
(2) in February 2003, Rawoof issued all of SHL 95’s autho-
rized stock to the trust; (3) in February 2005, well after
Rawoof’s death, the trust, acting through his wife (now
the sole trustee), issued a resolution ratifying Rawoof’s
having brought suit in his own name and his substitu-
tion of the estate in that suit; and (4) as SHL’s sole director,
Rawoof’s wife later issued another “ratification” resolution
identical to the resolution issued by the trust.
  Texor raises the potentially alarming prospect that
Rawoof either manufactured documents to support the
foregoing factual scenario in order to stave off summary
judgment, or withheld them in disregard of previous

3
   We have no disagreement with our dissenting colleague
regarding the state of Illinois law on shareholder ratification and
corporate assignment of corporate assets. None of the cases
cited, however, supports the proposition that the act of filing
suit is itself evidence of an assignment of the action or an
implicit or explicit ratification by the corporation of the share-
holder’s appropriation of the action, and Rawoof has developed
no other factual basis for this argument. Indeed, as we dis-
cuss further infra, the attempt to substitute the corporation for
Rawoof as plaintiff undermines Rawoof’s assignment/ratifica-
tion theory.
16                                  Nos. 06-1720 & 06-1767

discovery requests. There may be something to at least
the latter of these admittedly serious allegations. When
arguing his substitution motion before the district court in
July and August 2004, Rawoof represented he “is, and
has been, the sole officer, director and stockholder of the
S-corporation since its inception.” However, Rawoof’s
wife submitted an affidavit in response to Texor’s motion
for summary judgment attaching documents that pur-
ported to show that all of SHL’s stock was transferred to
a trust in 2003—a trust of which she and her husband
were cotrustees.
  We need not attempt to reconcile these conflicting
representations or determine whether they amount to
discovery violations. While it is true that ratification is a
legitimate way to cure an initial failure to prosecute
an action in the name of the real party in interest under
FED. R. CIV. P. 17(a), here, Rawoof attempted to use it as a
means of escaping the consequences of the denial of his
motion to substitute plaintiffs. The district court held
that the purported “ratification” in this case came too
late—in response to Texor’s motion for summary judg-
ment and long after the court had denied the substitu-
tion motion. The court understandably considered the
belated ratification effort as an end run around its prior
order denying substitution of plaintiffs. Rawoof claims
that the ratification resolutions by the trust simply “rein-
forced” the initial, implicit ratification. As with Rawoof’s
other arguments, there is no support for this proposition.
  Rawoof is barred by the shareholder-standing rule from
pursuing this PMPA claim. He lacks a direct, personal
injury independent of the derivative injury of a share-
holder generally, and has otherwise failed to bring him-
self within one of the recognized exceptions to the
Nos. 06-1720 & 06-1767                                     17

shareholder-standing rule. Accordingly, the district court
properly dismissed this case for lack of prudential stand-
ing.

B. Texor’s Cross-appeal
  Texor cross-appealed the district court’s denial of its
motion to dismiss on statute-of-limitations grounds and
the court’s denial of its request for attorney’s fees. Because
we are affirming the district court’s order dismissing
the case for lack of standing, we need not address the
question of the PMPA’s statute of limitations. That leaves
Texor’s request for attorney’s fees. A grant or denial of
attorney’s fees under the PMPA is reviewed for abuse of
discretion. See Four Corners Serv. Station, Inc. v. Mobil Oil
Corp., 51 F.3d 306, 315 (1st Cir. 1995). The PMPA permits
an award of attorney’s fees to a prevailing franchisor if
the action is deemed frivolous. See 15 U.S.C. § 2805(d)(3).
The district court did not abuse its discretion in declining
to find this action frivolous. We agree with the district
court that Rawoof’s prolonged neglect of SHL 95’s status
as the real party in interest is inexplicable under the
circumstances. But the price of that neglect was the denial
of his motion to substitute plaintiffs. Rawoof’s argu-
ments regarding his personal standing to pursue this
action, while belated and ultimately meritless, were not
so unreasonable as to be frivolous.
                                                  AFFIRMED.
18                                  Nos. 06-1720 & 06-1767

  RIPPLE, Circuit Judge, dissenting. I agree with my col-
leagues that Mr. Rawoof has established constitutional
standing to pursue this action against Texor. However,
I do not believe that principles of prudential standing
counsel against exercising federal jurisdiction under
these circumstances. I therefore respectfully dissent.
  A party seeking to invoke the power of the federal
judiciary must establish that he has standing to bring
the action. Standing consists of both constitutional re-
quirements, flowing from the Article III limitation on
judicial power to “cases” and “controversies,” and pruden-
tial limitations on the exercise of federal jurisdiction. See
Franchise Tax Bd. of California v. Alcan Aluminum Ltd.,
493 U.S. 331, 335 (1990). Among the prudential limita-
tions on standing is the prohibition against third-party
standing. Id. at 336. This prohibition bars a person from
asserting the claims of a third party not before the court,
even when the constitutional requirements for stand-
ing—injury in fact, causation and redressability—have
been met. See id.; see also Erwin Chemerinsky, Federal
Jurisdiction § 2.3.4 at 83 (4th ed. 2003). The rule against
third party standing serves a number of goals, including
avoiding officious intermeddling by ensuring that the
court does not adjudicate rights an individual does not
wish to assert and ensuring that a party has a concrete
interest in the rights he is asserting. See Chemerinsky,
Federal Jurisdiction § 2.3.4 at 83.
  The shareholder standing rule is a corollary to the rule
against third-party standing and generally prohibits
shareholders from asserting claims that belong to the
corporation. Franchise Tax Bd., 493 U.S. at 336. This gen-
eral rule applies even when the shareholder in question
is the sole shareholder and officer of the corporation.
Nos. 06-1720 & 06-1767                                       19

Carney v. Gen. Motors Corp., 23 F.3d 1154, 1157 (7th Cir.
1994).
   Under the shareholder standing rule, injuries to the
shareholder which are derived solely from injuries to the
corporation, for instance, diminution of share price, be-
long to the corporation. A shareholder only may bring
an action for such injuries in the form of a derivative
action on behalf of the corporation. See 12B William
Meade Fletcher, Fletcher Cyclopedia of the Law of Private
Corporations § 5911 (Perm. ed. 2000) [hereinafter Fletcher
Cyclopedia of Corporations]. Limiting these actions to deriva-
tive actions serves a number of interests. First, the rule
avoids multiplicitous litigation by various shareholders
which, in addition to straining the resources of the
courts and potential defendants, may bar an action by
the corporation itself or subject the defendant to double
liability if the corporation were to sue on its own behalf.
See Massey v. Merrill Lynch & Co., Inc., 464 F.3d 642, 647
(7th Cir. 2006); 12B Fletcher Cyclopedia of Corporations § 5910.
Additionally, restricting such actions to derivative actions
directs any recovery to the corporation and thus protects
the interests of the corporation’s creditors and other
shareholders. See Massey, 464 F.3d at 647; 12B Fletcher
Cyclopedia of Corporations § 5910. Further, procedural
requirements that govern derivative actions, particularly
the requirement that the shareholder first must demand
that the corporation’s directors take action, prevent share-
holders from interfering with the business judgment of
the directors in whom the corporation’s management
is entrusted. See Massey, 464 F.3d at 647; 13 Fletcher
Cyclopedia of Corporations § 5963.
  There is an exception to the shareholder standing rule
for shareholders who are injured as individuals rather
20                                    Nos. 06-1720 & 06-1767

than as shareholders. 12B Fletcher Cyclopedia of Corporations
§ 5911. In such cases, the shareholder may be said to
hold a “direct, personal interest,” and may pursue a di-
rect action even if the wrongful act also implicates the
corporation’s rights. Id.; see also Franchise Tax Bd., 493 U.S.
at 336; Ronald D. Rotunda & John E. Nowak, Treatise on
Constitutional Law § 2.13 at 259 (3d ed. 1999). The most
common example of such an injury is when the share-
holder is a party to the contract upon which the action is
based. See 12B Fletcher Cyclopedia of Corporations § 5911.
  Although federal law generally controls the question of
standing, whether the shareholder’s claims are derivative
or direct for purposes of the shareholder standing rule
is controlled by the law of the state of incorporation, in
this case, Illinois. See Massey, 464 F.3d at 645. Illinois
follows the general approach to the shareholder standing
rule stated above, including the exception to the rule
that permits a shareholder to assert a direct action
when the shareholder suffers an individual injury apart
from his status as a shareholder. See Zokoych v. Spalding,
344 N.E.2d 805, 813 (Ill. App. Ct. 1976); Mann v. Kemper Fin.
Cos., Inc., 618 N.E.2d 317, 323 (Ill. App. Ct. 1992). The
question thus becomes whether, under Illinois law,
Mr. Rawoof’s claims are direct rather than derivative.
  Mr. Rawoof advances three theories in support of his
contention that his claim against Texor is direct rather
than derivative. His first argument is that his claim is not
barred because he and Texor were the parties to the fuel
contract, with SHL 95 merely as a third-party beneficiary.
This argument is not meritorious. Mr. Rawoof did not
present any evidence in support of this theory before the
district court and therefore raised no genuine issue of
material fact in support of this theory that would pre-
clude summary judgment.
Nos. 06-1720 & 06-1767                                       21

  In addition to his third-party beneficiary argument,
Mr. Rawoof offers two other arguments that warrant
more extended discussion. First, he maintains that he is
an implied assignee of SHL 95’s cause of action against
Texor. Second, he claims that he negotiated the contract
with Texor on behalf of a partially disclosed princi-
pal—SHL 95; consequently, he may pursue the action in
his individual capacity. These arguments are explored
more fully below.

                               I
   Mr. Rawoof argues that SHL 95 assigned to him its cause
of action against Texor at the time he brought this suit by
implicitly ratifying his appropriation of SHL 95’s rights
against Texor under the franchise agreement. Under
Illinois law, a chose in action is assignable personal prop-
erty, Saltzberg v. Fishman, 462 N.E.2d 901, 905 (Ill. App. Ct.
1984). An assignment transfers “to the assignee all the
right, title or interest of the assignor in the thing assigned.”
A.J. Maggio Co. v. Willis, 738 N.E.2d 592, 596 (Ill. App. Ct.
2000). Following a valid assignment, the assignee may
bring an action in his own name. See 735 ILCS 5/2-403(a);
Kennedy v. Deere & Co., 492 N.E.2d 199, 202 (Ill. App. Ct.
1986); Saltzberg, 462 N.E.2d at 905. Further, an assignment
divests the assignor of all rights in the property assigned
and places the assignee in the shoes of the assignor with
respect to the property. See People v. Wurster, 422 N.E.2d
650, 652 (Ill. App. Ct. 1981). Thus, following a valid assign-
ment of a chose in action, a corporation may not bring an
action to enforce the rights assigned. Because the corpora-
tion itself may not bring the action, it cannot be brought as
a derivative action either. See Mann, 618 N.E.2d at 326.
22                                     Nos. 06-1720 & 06-1767

  Under Illinois law, shareholders may ratify the appro-
priation of corporate assets by a corporate officer or
director for non-corporate purposes if such ratification is
unanimous and the appropriation does not prejudice the
rights of creditors, see Scholes v. Lehmann, 56 F.3d 750,
754 (7th Cir. 1995); Steinberg v. Buczynski, 40 F.3d 890, 892
(7th Cir. 1994); Dannen v. Scafidi, 393 N.E.2d 1246, 1250 (Ill.
App. Ct. 1979); the same rule applies even if there is only
one shareholder, see Scholes, 56 F.3d at 754. Shareholder
ratification may be found by implication, see Roth v.
Ahrensfeld, 27 N.E.2d 445, 447 (Ill. 1940); Forkin v. Cole,
548 N.E.2d 795, 807 (Ill. App. Ct. 1989), and Illinois courts
will find unanimous shareholder approval “obvious” when
the corporate officer appropriating the asset for non-
corporate purposes is the sole shareholder of the corpora-
tion, Dannen, 393 N.E.2d at 1251. Thus, under Illinois
law, a valid assignment of a corporate asset to a corpo-
ration’s sole shareholder for his own purposes may be
found without an express assignment when he takes
the action for his own purposes and the ratification
works no prejudice to the corporation’s creditors.1

1
   As noted above, a valid assignment of a corporation’s chose in
action divests the corporation of its interest in that action. For
that reason, an action by a corporation’s sole shareholder in
his individual capacity asserting rights assigned to him by the
corporation does not implicate the shareholder standing rule.
It is clear, also, that an assignment of a chose in action under
such circumstances does not threaten the interests advanced
by the shareholder standing rule. First, the ratification must
be unanimous, thus it does not provide the shareholder to whom
the chose in action is assigned with an unfair advantage over
other shareholders. Second, because the ratification is only
                                                    (continued...)
Nos. 06-1720 & 06-1767                                          23

  Given the state of Illinois law, I believe Mr. Rawoof may
pursue the present action against Texor. It is undisputed
that, at the time he brought this action, Mr. Rawoof was
the sole officer, director and shareholder of SHL 95. Thus,
under Illinois law, unanimous approval of the assign-
ment is assumed. Because there is no suggestion that
the assignment would prejudice SHL 95’s creditors, the
assignment is ratified. Further, we may assume such
implicit ratification happened, at the latest, when
Mr. Rawoof filed this action, ensuring that the share-
holder standing rule posed no bar from the very outset
of this litigation.2 For these reasons, Mr. Rawoof had

1
  (...continued)
effective if it does not prejudice the rights of creditors, such an
assignment does not threaten to bypass normal rules of priority
with respect to corporate obligations. Third, because the
assignment divests the corporation of its interests in the chose
in action and the ratification is unanimous, the assignment
does not unfairly deprive the corporation of its own cause of
action or expose the alleged wrongdoer to multiple lawsuits.
Lastly, the assignment does not threaten the autonomy of the
corporation’s officers in business judgments because the sole
officer appropriates the asset in the first instance and that
ratification is unanimously approved by the shareholders,
thereby removing any taint of self-dealing.
2
  Because I believe that there was an effective assignment of the
chose in action at the outset of this litigation, I do not have to
reach the question whether SHL 95 later ratified Mr. Rawoof’s
actions. Although the majority concludes that the documents
submitted by Mr. Rawoof in support of his ratification argu-
ment cannot be used “as a means of escaping the consequences
of the denial of his motion to substitute plaintiffs,” slip op. at
                                                     (continued...)
24                                     Nos. 06-1720 & 06-1767

standing to bring this action in his own name from the
outset of the litigation.3

                               II
  The other ground Mr. Rawoof asserts to establish his
standing to bring this action is that, even if SHL 95 did not
assign him its chose in action, as the agent of a partially

2
  (...continued)
16, the majority does not address definitively the authenticity
of the underlying documents, nor the effectiveness of these
documents in transferring ownership of SHL 95 stock to a living
trust. Similarly, the district court did not address these issues
directly when it granted Texor’s motion for summary judgment.
Were this matter remanded to the district court, I believe that
the authenticity of the documents, and their bearing on the
ownership of SHL 95 stock, would be appropriate issues for the
district court to address.
3
  Although this result may appear at first inconsistent with
our holding in Carney v. General Motors Corp., 23 F.3d 1154, 1157
(7th Cir. 1994) (holding that the shareholder standing rule
applies even when there is only one shareholder), such is not
the case. Carney did not involve Illinois law. Moreover, the
plaintiff in Carney did not argue that the action was brought
following an implicit assignment of a chose in action, and we
had no occasion to address the issue. Thus, although there may
appear to be some superficial tension between our holding
in Carney and the present case, such tension is simply
that—superficial. We are not bound by prior jurisdictional
rulings where the present issue was not raised or was passed
sub silentio. Cf. Hibbs v. Winn, 542 U.S. 88, 126-27 (2004);
Fed. Election Comm’n v. NRA Political Victory Fund, 513 U.S. 88,
97 (1994).
Nos. 06-1720 & 06-1767                                    25

disclosed or undisclosed principal, he was a party to the
franchise agreement, and thus he may assert this action
in his own name. As noted above, Illinois recognizes the
exception to the shareholder standing rule that permits a
shareholder to assert a direct action when the alleged
wrongful acts both injure the corporation and violate
“a duty owed directly to the shareholder.” Mann, 618
N.E.2d at 323. Such is the case when the duty owed to the
shareholder arises from a contract to which the share-
holder is a party. Zokoych, 344 N.E.2d at 813.
  Under general principles of agency law, an agent acting
on behalf of a partially disclosed or undisclosed principal
is a party to the contract. See Restatement (Second) of
Agency §§ 321-22 (1958). In either case, the agent be-
comes a promisee on the contract and may bring an
action on the contract in his own name unless, in the case
of an agent acting on behalf of a partially disclosed princi-
pal, the contract excludes the agent as a party. Id. § 364 &
cmt. b. Illinois follows these general principals of agency
law. See Rosen v. DePorter-Butterworth Tours, Inc., 379
N.E.2d 407, 410 (Ill. App. Ct. 1978) (“[I]f an agent does not
disclose the existence of an agency relationship and the
identity of his principal, he binds himself to the third
party . . . .”); Lake Shore Mgmt. Co. v. Blum, 235 N.E.2d
366, 368 (Ill. App. Ct. 1968) (“The agent of a partially
disclosed principal is a party to the agreement and cap-
able of bringing suit in his own right.”). We have noted
that, applying these principles, an agent may bring such
an action as a real party in interest. See American Nat’l
Bank & Trust Co. of Chicago v. Weyerhaeuser Co., 692 F.2d
455, 464 n.19 (7th Cir. 1982).
  In the present action, it is undisputed that Texor con-
tracted to supply gasoline, see R.6, Ex. 2 at 1, but that it
was not aware of SHL 95’s identity until after this litiga-
26                                   Nos. 06-1720 & 06-1767

tion commenced, see R.57 at 1. Although it is disputed
now whether Texor knew that Mr. Rawoof was acting on
behalf of an undisclosed, as opposed to a partially dis-
closed, principal, this fact is not material to whether
Mr. Rawoof may assert an action in his own name to
enforce the franchise agreement. Because the undisputed
facts establish that Mr. Rawoof acted as the agent of either
a partially disclosed or undisclosed principal, under
Illinois law and general principles of agency law he is a
party to the contract. Indeed, Texor itself benefitted
from Mr. Rawoof’s status as a party to the franchise
agreement by bringing an action directly against him in
state court for failing to pay for the March 2001 fuel
deliveries. See R.6, Ex. 2.
  Thus, Mr. Rawoof’s status as a party to the franchise
agreement exposes Mr. Rawoof “to a unique harm, differ-
ent than general diminution of share price,” Massey,
464 F.3d at 646, and entitles him to bring a direct action
against Texor as a party to the contract. As such, Mr.
Rawoof has standing under the shareholder standing
rule to bring this action.

                        Conclusion
  Mr. Rawoof, both as an implicit assignee of the rights
of SHL 95 and also as an agent of a partially disclosed
principal, has suffered a direct injury as a result of Texor’s
alleged violation of the PMPA. He, therefore, does not
fall within the general rule prohibiting shareholder stand-
ing. Therefore, I respectfully dissent and would remand
the case to the district court for further proceedings on
the merits of Mr. Rawoof’s claims.

                    USCA-02-C-0072—4-7-08