Court Opinion

ID: 4702051
Source: CourtListenerOpinion
Date Created: 2021-07-08 15:01:55.003528+00
Date Added: 2024-06-11T08:06:22.057891
License: Public Domain

United States Court of Appeals
                            For the Eighth Circuit
                        ___________________________

                                No. 20-3034
                        ___________________________

                              Certon Sofware, Inc.

                                      Plaintiff - Appellee

                                Timothy Stockton

                                Intervenor Plaintiff - Appellant

                                        v.

                         EaglePicher Technologies, LLC

                                    Defendant - Appellee
                                 ____________

                    Appeal from United States District Court
                   for the Western District of Missouri - Joplin
                                 ____________

                            Submitted: April 13, 2021
                               Filed: July 8, 2021
                                 ____________

Before GRUENDER, BENTON, and SHEPHERD, Circuit Judges.
                          ____________

GRUENDER, Circuit Judge.

      Timothy Stockton intervened in a lawsuit brought by Certon Software, Inc.
against EaglePicher Technologies, LLC, arguing that Certon had assigned to him the
rights that it was asserting against EaglePicher. The district court 1 granted
EaglePicher’s motion to dismiss Stockton’s intervenor complaint for lack of
standing. Stockton appeals, and we affirm.

                                         I.

       Stockton was the sole shareholder of Certon until January 23, 2017, when
Cyient, Inc. purchased all shares of Certon from Stockton pursuant to a Stock
Purchase Agreement (“SPA”). Cyient also hired Stockton pursuant to a Seller
Employment Agreement. The SPA, which is governed by Delaware law, included
the following language pertaining to a dispute between Certon and EaglePicher:

      Section 6.16 Disputed Receivable. Upon Closing, [Certon] shall
      automatically, and without any further action by [Certon], assign to
      [Stockton] the right to collect and receive, for [Stockton’s] own
      account, the amounts owed by EaglePicher to [Certon] for services
      provided by [Certon] to EaglePicher in connection with the EaglePicher
      MAR-9516 DO-178 Software Project, which amount is approximately
      $1,700,000, provided, that [Stockton] must utilize commercially
      reasonable practices in such collection efforts and shall in no event
      (i) cause any harm, including reputational harm, to [Certon] or
      (ii) detract or interfere with [Stockton’s] duties pursuant to the Seller
      Employment Agreement.

       On September 29, 2017, Stockton caused a lawsuit to be filed in Certon’s
name against EaglePicher, claiming more than $1.3 million in damages. EaglePicher
filed a counterclaim against Certon for breach of contract, claiming $2.5 million in
damages. EaglePicher alleged, among other things, that “Certon was unable to
perform its contractual responsibilities,” thereby “materially harming
[EaglePicher]’s ability to satisfy the requirements of its third-party customer” and
ultimately leading to the loss of this customer’s business.

      1
        The Honorable Brian C. Wimes, United States District Judge for the Western
District of Missouri.

                                        -2-
         Cyient learned about the lawsuit for the first time in early 2019. In an email
chain from early 2019, Cyient’s legal counsel told Stockton that the lawsuit
“should’ve been in your name and not the company’s” because Certon “assigned the
right to the receivables to you.” Stockton replied, “I now understand the plaintiff in
the case against [EaglePicher] should be changed from Certon Software, Inc. to
Timothy Stockton immediately and that I do not have authority to act on behalf of
Certon Software, Inc.” He also communicated his “sincerest apologies for not
communicating the filing of this suit with (all of) you.” Cyient terminated
Stockton’s employment in April 2019 after “Cyient and Stockton were unable to
agree on a resolution regarding the lawsuit” and “Cyient discovered . . . that
Stockton had also not disclosed the existence of [EaglePicher’s] counterclaim.”

       In July 2019, Stockton moved to substitute himself for Certon as the plaintiff
in the lawsuit under Federal Rule of Civil Procedure 25(c) or, in the alternative, to
intervene as of right under Federal Rule of Civil Procedure 24(a). In support of his
motion, Stockton attached a few excerpts from the SPA, including section 6.16.

      The district court denied Stockton’s motion to substitute under Rule 25(c)
because it doubted that the assignment under section 6.16 was in effect. However,
noting that a court must resolve all doubts in favor of the would-be intervenor when
deciding a motion to intervene as of right, see South Dakota ex rel. Barnett v. U.S.
Dep’t of Interior, 317 F.3d 783, 785 (8th Cir. 2003), the district court granted
Stockton’s motion to intervene under Rule 24(a). At the time, the parties did not
raise and the district court did not address the question whether Stockton had
standing.

       Subsequently, EaglePicher moved to dismiss Stockton’s intervenor complaint
under Federal Rule of Civil Procedure 12(b)(1) for lack of subject-matter
jurisdiction. EaglePicher pointed out that it was impossible for both Certon and
Stockton to have standing because at most one of them had the right to litigate the
case against EaglePicher. EaglePicher then argued that Stockton had failed to show
by a preponderance of the evidence that the right was his. In opposition, Stockton

                                         -3-
argued that the evidence he had attached to his motion to substitute or intervene was
sufficient to carry his burden to establish standing. The district court granted
EaglePicher’s motion to dismiss, and Stockton appeals.

                                          II.

       When reviewing a district court’s conclusion that it lacks subject-matter
jurisdiction, we review the district court’s legal determinations de novo and its
resolution of disputed factual issues for clear error. ABF Freight Sys., Inc. v. Int’l
Brotherhood of Teamsters, 645 F.3d 954, 958 (8th Cir. 2011). Stockton concedes
that, as the party invoking the court’s jurisdiction, he had the burden of establishing
standing by a preponderance of the evidence. See Iowa League of Cities v. E.P.A.,
711 F.3d 844, 870 (8th Cir. 2013) (“Parties seeking to litigate in federal court have
the burden of establishing jurisdiction, including standing, by a preponderance of
the evidence.” (internal quotation marks omitted)).

       EaglePicher makes two arguments in support of its position that Stockton’s
only piece of evidence—the excerpts from the SPA—failed to establish standing.
First, EaglePicher argues that the district court could not rely on the excerpts because
Stockton failed to authenticate them. Second, EaglePicher argues that even if the
district court could rely on the excerpts, they failed to establish by a preponderance
of the evidence that Stockton had standing.

       The district court adopted EaglePicher’s second argument as its basis for
granting EaglePicher’s motion to dismiss. It concluded that Stockton had standing
only if the assignment was in effect, and it found that, even considering the excerpts,
Stockton had failed to establish by a preponderance of the evidence that the
assignment was in effect. We agree. Accordingly, we do not reach EaglePicher’s
argument that the district court could not rely on the excerpts because Stockton failed
to authenticate them.

                                          -4-
       The district court correctly concluded that Stockton had standing only if the
assignment was in effect. A plaintiff-intervenor must satisfy the same standing
requirements as any other plaintiff. North Dakota ex rel. Stenehjem v. United States,
787 F.3d 918, 920 (8th Cir. 2015). Among these is the requirement that the plaintiff
must have suffered “an invasion of a legally protected interest,” Lujan v. Defenders
of Wildlife, 504 U.S. 555, 560 (1992), with the caveat that “the assignee of a claim
has standing to assert the injury in fact suffered by the assignor,” Vt. Agency of Nat.
Res. v. United States ex rel. Stevens, 529 U.S. 765, 773 (2000). Here, the complaint
Stockton filed in Certon’s name alleges injuries suffered by Certon rather than
Stockton. Therefore, the district court did not err in concluding that Stockton had
standing to litigate these injuries only if the assignment of Certon’s claim against
EaglePicher to Stockton was in effect.

       The district court also correctly concluded that, even considering the excerpts
from the SPA, Stockton failed to show by a preponderance of the evidence that the
assignment was in effect. Under Delaware law, a contractual right is void upon the
obtaining of a condition subsequent to the right. See Cont’l Airlines Corp v. Am.
Gen. Corp., 575 A.2d 1160, 1169 (Del. 1990). Here, section 6.16 of the SPA
enumerates three conditions subsequent whose obtaining would void the
assignment: (1) Stockton’s failing to “utilize commercially reasonable practices” in
his efforts to collect from EaglePicher; (2) Stockton’s causing “any harm, including
reputational harm,” to Certon; and (3) Stockton’s handling the lawsuit in a way that
“detract[s from] or interfere[s] with [his] duties pursuant to the Seller Employment
Agreement.” See “Condition Subsequent,” Black’s Law Dictionary (11th ed. 2019)
(explaining that the term “provided” typically introduces a condition subsequent).
For the reasons explained below, not only one but all of these conditions obtained.

       First, Stockton failed to “utilize commercially reasonable practices” in his
efforts to collect from EaglePicher. The email chain indicates that, when Stockton
filed the lawsuit, EaglePicher’s purchase of Certon had closed and the assignment
was in effect. Thus, Stockton had no authority to file suit on behalf of Certon, and
Certon had no rights to assert against EaglePicher anyway. See Sprint Commc’ns

                                         -5-
Co. v. APCC Servs., Inc., 554 U.S. 269, 285 (2008) (indicating that assignees “alone”
have “legal title” to bring assigned claims). Consequently, filing and prosecuting
the lawsuit in Certon’s name was not a commercially reasonable means of collecting
from EaglePicher. Cf. Hicklin v. Onyx Acceptance Corp., 970 A.2d 244, 249-50
(Del. 2009) (interpreting the undefined term “commercially reasonable” in the
Uniform Commercial Code to require conformity with norms “among reputable and
responsible business and commercial enterprises”).

      Second, Stockton caused harm to Certon in his efforts to collect from
EaglePicher. The complaint Stockton caused to be filed in Certon’s name prompted
a $2.5 million counterclaim from EaglePicher alleging that Certon’s failure to
deliver on its contractual obligations caused EaglePicher to lose business. This
claim resulted in “harm, including reputational harm,” to Certon.

      Third, it appears that Stockton handled the lawsuit in a way that “detract[ed
from] or interfere[d] with [his] duties pursuant to the Seller Employment
Agreement.” Although the Seller Employment Agreement is not in the record,
Cyient terminated Stockton’s employment because he “not only . . . had filed the
lawsuit in [Certon’s] name without authorization and without notifying Cyient of the
same, but . . . had also not disclosed the existence of [EaglePicher]’s counterclaim.”

       For all three reasons, even considering the excerpts from the SPA, it is at least
as likely as not that the circumstances required for the assignment to be in effect
were not present by the time Stockton sought to intervene. Therefore, the district
court correctly concluded that Stockton failed to show by a preponderance of the
evidence that the assignment was in effect.

                                          III.

     Accordingly, we affirm the district court’s dismissal of Stockton’s intervenor
complaint.
                    ______________________________

                                          -6-