Brett W. Houghton v. Malibu Boats, LLC

04/12/2024

IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

February 14, 2024 Session

BRETT W. HOUGHTON, ET AL. v. MALIBU BOATS, LLC

Appeal from the Circuit Court for Loudon County

No. 2018-CV-12 Michael S. Pemberton, Judge

No. E2023-00324-COA-R3-CV

This appeal concerns standing and subject matter jurisdiction. Brett and Ceree Houghton

(“Plaintiffs”) were the sole shareholders of Great Wakes Boating, Inc. (“GWB”), a Malibu

Boats, LLC (“Defendant”) dealership. Defendant ended its dealership agreement with

Plaintiffs, and GWB failed. Plaintiffs sued Defendant in the Circuit Court for Loudon

County (“the Trial Court”) for intentional misrepresentation, fraudulent concealment, and

promissory fraud. The jury awarded Plaintiffs $900,000 in damages for loss of equity in

certain real property owned by GWB. Defendant filed a motion for judgment

notwithstanding the verdict and/or for a new trial. At a hearing on the motion, Defendant

argued for the first time that Plaintiffs lacked standing. The Trial Court agreed and entered

an order dismissing Plaintiffs’ complaint for lack of subject matter jurisdiction, deeming

the other issues in Defendant’s motion moot. Plaintiffs appeal. We hold that Defendant’s

challenge to Plaintiffs’ standing went to the merits and did not implicate subject matter

jurisdiction. Defendant’s challenge to Plaintiffs’ standing is waived as untimely raised.

We reverse the judgment of the Trial Court and remand for further proceedings consistent

with this Opinion.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Reversed;

Case Remanded

D. MICHAEL SWINEY, C.J., delivered the opinion of the court, in which THOMAS R.

FRIERSON, II, and KRISTI M. DAVIS, JJ., joined.

Dale J. Montpelier and Katherine A. Young, Knoxville, Tennessee, for the appellants, Brett

W. Houghton and Ceree A. Houghton.

Taylor A. Williams, Kyle A. Baisley, and W. Michael Baisley, Knoxville, Tennessee, for

the appellee, Malibu Boats, LLC.

OPINION

Background

GWB operated as a boat dealership from 2009 until 2016. GWB failed after

Defendant terminated its dealership agreement with Plaintiffs, who declared personal

bankruptcy. In February 2018, Plaintiffs sued Defendant in the Trial Court. Plaintiffs filed

an amended complaint in October 2018 and a second amended complaint in March 2019.

In their second amended complaint Plaintiffs asserted, as relevant, claims of intentional

misrepresentation, fraudulent concealment, and promissory fraud. Plaintiffs state that

Defendant misled them into believing their business relationship would continue, and

Plaintiffs incurred damages by relying upon that false impression. With respect to

damages, Plaintiffs alleged, in part:

398. As a result of the foregoing, Great Wakes lost customers, new

boat sales, the ability for trade-in transactions, the ability to sell Malibu parts,

the ability to provide warranty service, other dealer benefits, the ability to

make payroll, the ability to pay bills as they came due, the ability to pay on

the floor plans, and the ability to service its debts, all of which directly caused

damage to Plaintiffs by virtue of the destruction of their business, the loss of

their livelihood, the loss of the value of their stock, and the loss of their

personal assets to the extent invested in the business.

399. Great Wakes has been sued by several Floor Plan financing

companies, including Northpoint. All Floor Plan financing providers have

accelerated all amounts due from Great Wakes and repossessed financed

boats, and several had judgments entered against Great Wakes and one or

both of the Plaintiffs as personal guarantors.

400. As a further result of these developments, Plaintiffs’ credit

ratings have been effectively destroyed.

Defendant filed a partial motion to dismiss, arguing among other things that it had

no duty to disclose that it had no intention of entering into the 2014-15 dealer agreements

with Plaintiffs. Defendant also filed a motion to dismiss with respect to Ceree Houghton

for failure to state a claim. In addition, Defendant filed an answer to Plaintiffs’ second

amended complaint. Defendant asserted various affirmative defenses such as failure to

state a claim, failure to plead fraud with particularity, the statute of limitations, unclean

hands, and justification. The Trial Court denied Defendant’s motions. Additional

procedural history unfolded, and in September 2022, this case was tried by jury.

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At the close of Plaintiffs’ proof, Defendant moved for a directed verdict. One issue

at trial concerned damages related to real property owned by GWB. Despite not owning

the real property themselves, Plaintiffs sought damages for it. Plaintiffs’ counsel used an

analogy to describe Plaintiffs’ theory:

MR. MONTPELIER: . . . It’s very simple. I owned an apple. Because of

what they did, I lost my apple. They had a building -- and I misspoke, Your

Honor. The appraised value of the testimony was 2.6 million. I misread my

notes.

That was the value. They had a building worth 2.6 million. And

because of these --

THE COURT: Okay. But Malibu didn’t make them go buy the building.

MR. MONTPELIER: That’s not the point. It was an asset. They had the

building. In reliance of these representations, they --

THE COURT: Well, they had the building after it.

MR. MONTPELIER: They ended up losing the building.

THE COURT: Well, okay. But --

MR. MONTPELIER: The testimony is because of the actions of Malibu,

caused them to make fundamentally different business decisions, and it’s for

the jury to decide whether that resulted in the loss of the building. And if it

did, then they can recover the difference in what they lost.

THE COURT: Okay.

MR. MONTPELIER: And I would add this, make it a separate line item on

the jury verdict form. If the Court of Appeals disagrees, they can just strike

that line.

The Trial Court denied Defendant’s motion. At trial’s end, the jury returned a

verdict in Plaintiffs’ favor. The jury concluded that Plaintiffs had proven by a

preponderance of the evidence that Defendant committed intentional misrepresentations,

fraudulent concealment, and promissory fraud. The jury awarded Plaintiffs $900,000 for

loss of equity in the dealership buildings. The jury declined to award Plaintiffs damages

for boat show expenses incurred, diminution of value of business, or pain and suffering.

The jury also concluded that Plaintiffs had not proven by clear and convincing evidence

that they were entitled to punitive damages. In November 2022, judgment was entered.

In December 2022, Defendant filed a motion for judgment notwithstanding the

verdict, or in the alternative, for a new trial. Regarding its motion for judgment

notwithstanding the verdict, Defendant argued that Plaintiffs failed to meet their burden

under the benefit of the bargain rule and that the record did not support the jury’s award of

$900,000. With respect to its motion for a new trial, Defendant argued that the evidence

did not preponderate in favor of the jury’s verdict. At oral argument on Defendant’s

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motion, Defendant argued for the first time that the Trial Court lacked subject matter

jurisdiction. Defendant asserted that Plaintiffs were required to bring claims related to

diminution of value of the real property at issue under a statute governing derivative claims.

The Trial Court asked the parties for additional briefing.

In February 2023, the Trial Court entered an order dismissing Plaintiffs’ complaint

for lack of subject matter jurisdiction. In its order, the Trial Court stated, in part:

1. The causes of action alleged in this matter, and resulting

damages awarded by the jury in this matter, belong to Great Wakes Boating,

Inc., a Tennessee corporation (hereinafter, “GWB”).

2. GWB is not, and has never been, a party to this action.

3. The causes of action alleged in this matter may be brought by

GWB in its own name, or by the shareholders of GWB, on behalf of GWB,

as a shareholder derivative suit pursuant to Tenn. Code Ann. § 48-56-401 et

seq.[1]

4. The causes of action alleged in this matter may not be brought

by the individual shareholders of GWB in their own names. As such,

Plaintiffs do not have standing to bring this action in their own names.

5. In reliance on Keller v. Estate of McRedmond, 495 S.W.3d 852

(Tenn. 2016), this Court finds the doctrine of constitutional or statutory

standing applies to this matter.

6. Matters of constitutional or statutory standing are non-

waivable, and thus the issue of standing is timely and properly before this

Court.

1

Tenn. Code Ann. § 48-56-401 is part of the Tennessee Nonprofit Corporation Act. GWB is a for-profit

entity. Defendant acknowledges the Trial Court’s error in citing the wrong statute but points out that

questions of law are reviewed by this Court de novo without any presumption of correctness. Defendant

cites Tenn. Code Ann. § 48-17-401 of the Tennessee Business Corporation Act as the applicable statute

instead, which provides as relevant:

(a) A person may not commence a proceeding in the right of a domestic or foreign

corporation unless the person was a shareholder of the corporation when the transaction

complained of occurred or unless the person became a shareholder through transfer by

operation of law from one who was a shareholder at that time.

(b) A complaint in a proceeding brought in the right of a corporation must be verified and

allege with particularity the demand made, if any, to obtain action by the board of directors

and either that the demand was refused or ignored or why the person did not make the

demand. Whether or not a demand for action was made, if the corporation commences an

investigation of the charges made in the demand or complaint, the court may stay any

proceeding until the investigation is completed.

Tenn. Code Ann. § 48-17-401 (West eff. April 10, 2008).

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7. Based on the above, this Court finds that it lacks subject matter

jurisdiction over this matter because the Plaintiffs lack standing to pursue the

alleged causes of action. However, if this case were to be one in which the

doctrine of “judicially created” non-constitutional standing applied, the

Court finds that defendant has waived that standing argument.

8. As a result, Plaintiffs’ Second Amended Complaint is

dismissed with prejudice, and costs are taxed to the Plaintiffs.

9. The balance of the issues contained in Malibu’s Motion for

Judgment Notwithstanding the Verdict, or in the Alternative, Motion for a

New Trial are denied as moot.

10. Plaintiffs’ Motion for Post-And Pre-Judgment Interest and

Plaintiffs’ Motion for Discretionary Costs are also denied as moot.

Plaintiffs filed a motion to alter or amend. In March 2023, the Trial Court denied

Plaintiffs’ motion. The Trial Court stated, in pertinent part:

1. The evidence presented before this Court showed that the real estate at

issue in this case was owned by a non-party, Great Wakes Boating, Inc., of

which the Plaintiffs were the only shareholders of that corporation. The

Plaintiffs brought this lawsuit in their individual names.

2. The Amended Complaint does not state that the lawsuit was being brought

by the Plaintiffs on behalf of the corporation.

3. The Plaintiffs were personal guarantors in respect to the real estate owned

by the corporation.

4. After all the events took place that gave rise to the lawsuit, the Plaintiffs

took bankruptcy and were relieved of their personal guaranties as to the debt.

5. Therefore, before this Court is a lawsuit: (a) brought by the two individual

Plaintiffs seeking damages for three intentional torts; (b) in which damages

were awarded for loss of value of real estate not owned by the Plaintiffs, but

owned by the corporation, a non-party, albeit the Plaintiffs being the

guarantors of the corporation’s debt; (c) the lawsuit was not brought by the

corporation as the owner of the real estate; and (d) the damages awarded here

would have inured to the benefit of the non-party corporation had it been

named as a party or had the lawsuit been brought in the nature of a derivative

suit.

6. This Court previously ruled that the Plaintiffs lacked the requisite standing

to bring this lawsuit totally in their own individual names and capacities,

which this Court has been asked to reconsider. This Court has done so and

declined to alter or amend its prior ruling.

7. The Plaintiffs, among other cases, rely on Hall v. Tennessee Dressed Beef

Co., 957 S.W.2d 536 (Tenn. 1997) in support of the argument that a

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shareholder may bring both a derivative and a direct action. This Court read

Hall and the cases that cite Hall, and finds that the Hall case is very much

factually distinguishable from the instant case. Hall involved a shareholder

suing the corporation regarding a right of first refusal to buy shares. That is

obviously not the situation that we have here. The Court had previously

stated its reasoning when it ruled at the hearing in January, and this Court is

not going to recapitulate such reasoning here, other than to say that this Court

will not amend or alter its previous ruling.

Plaintiffs timely appealed to this Court.

Discussion

We restate and consolidate Plaintiffs’ multiple issues into the following dispositive

issue: whether the Trial Court erred in holding that it lacked subject matter jurisdiction

over this case. The Tennessee Supreme Court has discussed subject matter jurisdiction as

follows:

The concept of subject matter jurisdiction involves a court’s lawful authority

to adjudicate a controversy brought before it. Subject matter jurisdiction

involves the nature of the cause of action and the relief sought, and can only

be conferred on a court by constitutional or legislative act. Since a

determination of whether subject matter jurisdiction exists is a question of

law, our standard of review is de novo, without a presumption of correctness.

Northland Ins. Co. v. State, 33 S.W.3d 727, 729 (Tenn. 2000) (citations omitted).

Standing also is implicated in this case. The Tennessee Supreme Court has

discussed standing thusly:

Our jurisprudence recognizes two categories of standing that govern

who may bring a civil cause of action: non-constitutional standing and

constitutional standing. Non-constitutional standing focuses on

considerations of judicial restraint, such as whether a complaint raises

generalized questions more properly addressed by another branch of the

government, and questions of statutory interpretation, such as whether a

statute designates who may bring a cause of action or creates a limited zone

of interests. See In re Estate of Smallman, 398 S.W.3d 134, 148-49 (Tenn.

2013); State v. Harrison, 270 S.W.3d 21, 28 (Tenn. 2008); see also Ditto v.

Del. Sav. Bank, No. E2006-01439-COA-R3-CV, 2007 WL 471146, at *3

(Tenn. Ct. App. Feb. 14, 2007) (discussing prudential considerations relevant

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to non-constitutional standing).2 Constitutional standing, the issue in this

case, is one of the “irreducible . . . minimum” requirements that a party must

meet in order to present a justiciable controversy. Lujan v. Defenders of

Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992); see

also City of Chattanooga v. Davis, 54 S.W.3d 248, 280 (Tenn. 2001); Norma

Faye Pyles Lynch Family Purpose LLC [v. Putnam Cnty.], 301 S.W.3d [196,]

202-03 [(Tenn. 2009)] (noting that Tennessee courts’ adoption of the various

justiciability doctrines, including standing, has a basis in the separation of

powers required under article II, sections 1 and 2 of the Tennessee

Constitution).

To establish constitutional standing, a plaintiff must satisfy “three

‘indispensable’ elements.” [ACLU of Tenn. v.] Darnell, 195 S.W.3d [612,]

620 [(Tenn. 2006)] (quoting Petty [v. Daimler/Chrysler Corp.], 91 S.W.3d

[765,] 767 [(Tenn. Ct. App. 2002)]). First, a party must show an injury that

is “distinct and palpable”; injuries that are conjectural, hypothetical, or

predicated upon an interest that a litigant shares in common with the general

citizenry are insufficient in this regard. Id. Second, a party must demonstrate

a causal connection between the alleged injury and the challenged conduct.

Id. (citing Mayhew v. Wilder, 46 S.W.3d 760, 767 (Tenn. Ct. App. 2001)).

While the causation element is not onerous, it does require a showing that

the injury to a plaintiff is “fairly traceable” to the conduct of the adverse

party. Id. (quoting DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 342, 126

S.Ct. 1854, 164 L.Ed.2d 589 (2006)). The third and final element is that the

injury must be capable of being redressed by a favorable decision of the

court. Id.; see also Davis, 54 S.W.3d at 280 (noting that the third standing

element requires an injury that “is apt to be redressed by a remedy that the

court is prepared to give” (quoting Metro. Air Research Testing Auth., Inc.

v. Metro. Gov’t of Nashville & Davidson Cnty., 842 S.W.2d 611, 615 (Tenn.

Ct. App. 1992))).

City of Memphis v. Hargett, 414 S.W.3d 88, 98 (Tenn. 2013) (footnote in original but

renumbered).

Plaintiffs argue that the Trial Court erred in concluding that it lacked subject matter

jurisdiction. According to Plaintiffs, their standing in this case is common-law based and

2

Ordinarily, issues of non-constitutional standing are not essential to subject matter jurisdiction and are

waived if not properly preserved. See In re Estate of Smallman, 398 S.W.3d at 148-49. However, “[w]hen

a statute creates a cause of action and designates who may bring an action, the issue of standing is

interwoven with that of subject matter jurisdiction and becomes a jurisdictional prerequisite.” Osborn v.

Marr, 127 S.W.3d 737, 740 (Tenn. 2004).

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any challenge thereto is subject to waiver. Plaintiffs state that, to the extent Defendant is

correct about Plaintiffs not being the proper parties to seek damages for real property

owned by GWB, Defendant waived that challenge by waiting until the last minute to raise

it. Plaintiffs note that Defendant never raised its standing defense before trial. The Trial

Court said that it would have found waiver on Defendant’s part had it not determined that

standing was jurisdictional and non-waivable.

In response, Defendant argues that Plaintiffs lack standing to recover damages for

alleged injury to GWB; that Plaintiffs’ claims could only have been brought as a derivative

action; that Plaintiffs failed to comply with the requirements of Tenn. Code Ann. § 48-17-

401 for a derivative action; and that permitting shareholders to individually gain from

corporate losses violates Article III constitutional standing. Defendant asserts that, in this

case, standing is statutory and a jurisdictional prerequisite that cannot be waived.

Both parties contend with Keller v. Estate of McRedmond, 495 S.W.3d 852 (Tenn.

2016). In Keller, our Supreme Court explained that a corporation and its shareholders are

not the same; their rights and liabilities are distinct. Id. at 866. The High Court stated that,

generally, shareholders have no individual right against third parties for harms done to the

corporation. Id. at 867. When a corporation does not pursue a cause of action on its own

behalf, shareholders may file a derivative action on behalf of the corporation, with the

corporation being an indispensable party. Id. at 867-68. On the other hand, when

shareholders allege direct injury to themselves, they may file a lawsuit on their own behalf

provided the injury is distinct to them. Id. at 868-69. To determine whether a claim is

derivative or direct, the Keller Court adopted the analytical framework articulated in the

Delaware case of Tooley v. Donaldson, Lufkin, & Jenrette, Inc., 845 A.2d 1031 (Del. 2004),

which set out these essential questions:

We set forth in this Opinion the law to be applied henceforth in determining

whether a stockholder’s claim is derivative or direct. That issue must turn

solely on the following questions: (1) who suffered the alleged harm (the

corporation or the suing stockholders, individually); and (2) who would

receive the benefit of any recovery or other remedy (the corporation or the

stockholders, individually)?

Keller, 495 S.W.3d at 875 (quoting Tooley, 845 A.2d at 1033). Keller discusses the

direct/derivative distinction, adopts the Tooley framework, and applies Tooley for issues of

standing, but never states that shareholder standing implicates subject matter jurisdiction.

In fact, Keller does not mention subject matter jurisdiction at all.

A case from the Third Circuit discusses shareholder standing and concludes that it

is not constitutional in nature. In Potter v. Cozen & O’Connor, 46 F.4th 148 (3d Cir. 2022),

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the district court granted a motion to dismiss certain shareholders’ claims for lack of subject

matter jurisdiction on grounds that the injury they complained of was suffered only by the

corporate entities involved. Id. at 152, 154-55. The Third Circuit vacated the district

court’s judgment, stating in part:

The very nature of the injury to shareholders in the derivative context

confirms that, even when they are barred from suit under the shareholder

standing rule as a prudential matter, those shareholders have constitutional

standing, bringing them within the ambit of federal court jurisdiction. The

facts of this case are illustrative. The disadvantageous terms of the APA, the

below-market purchase price, and the disputed installment payments

resulting from the Lawyers’ alleged conflicted representation inflicted a

direct financial injury on the LLCs, but they also inflicted an indirect injury

on the LLCs’ shareholders: the diminution of value in their ownership

interests. And that injury meets all the requirements of Article III standing:

the loss of financial value in their investments constitutes an injury-in-fact in

that it is “actual,” “concrete[,] and particularized,” Lujan [v. Defs. of

Wildlife], 504 U.S. [555,] 560, 112 S.Ct. 2130 [119 L.Ed.2d 351 (1992)]

(quotations omitted), that injury was allegedly caused by the conflicted

Lawyers’ involvement in their sale, and that injury, if proven at trial, can be

redressed by the court through a damages award. The absence of prudential

“standing” under the shareholder standing rule thus does not alter the

Shareholders’ constitutional standing or the Article III jurisdiction that

attends it.

In sum, the shareholder standing rule is a prudential rule, not a

constitutional or jurisdictional one, and, just as in Hartig, because the

Shareholders “had Article III standing sufficient to give the District Court

subject matter jurisdiction, . . . a dismissal under Rule 12(b)(1) was not

legitimately in play.” Hartig [Drug Co. Inc. v. Senju Pharm. Co. Ltd.], 836

F.3d [261,] 273 [(3d Cir. 2016)]. The District Court therefore should have

treated the Lawyers’ motion to dismiss for lack of shareholder standing as a

motion under Rule 12(b)(6), instead of 12(b)(1).

Potter, 46 F.4th at 157.

Here, Plaintiffs sued Defendant for, as relevant, intentional misrepresentation,

fraudulent concealment, and promissory fraud. These were common law claims filed by

Plaintiffs as individuals. It is little wonder that Plaintiffs failed to comply with Tenn. Code

Ann. § 48-17-401 as they did not purport to file a derivative action. Defendant nevertheless

reasons that Plaintiffs were required to file a derivative action based on the kind of relief

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they sought. Defendant says that Tenn. Code Ann. § 48-17-401 is akin to the parental

rights termination statute at Tenn. Code Ann. § 36-1-113(b) in that it limits with exclusivity

who may bring an action. Once again, however, Plaintiffs did not pursue a derivative

action. They pursued individual claims. Had Plaintiffs purported to file a derivative claim

on behalf of GWB and failed to comply with the requirements of Tenn. Code Ann. § 48-

17-401, Defendant’s argument might have more salience. As it happens, Plaintiffs did not.

We are thus unpersuaded by Defendant’s argument that the Trial Court lacked subject

matter jurisdiction on the basis of Plaintiffs’ failure to comply with Tenn. Code Ann. § 48-

17-401. What is more, there are instances when individuals may file direct claims in the

corporate context. As Plaintiffs point out in their reply brief, “a fair reading of Keller is

that there are exceptions when an individual can sue in their own name instead of in the

corporate name.” (Emphasis in original). It would be curious if trial courts lacked subject

matter jurisdiction to even parse that distinction.

Continuing its argument, Defendant says that allowing Plaintiffs to reap a windfall

for damages incurred by GWB would violate Article III standing. To determine whether

that is so, we apply the minimum requirements of Article III standing to Plaintiffs’ claims.

Plaintiffs alleged as pertinent (1) that they were injured by their loss of equity in the real

property at issue—a concrete, particularized injury; (2) that the injury was caused by

Defendant’s fraud and misrepresentations; and (3) that the injury is capable of being

redressed by an award of damages. Thus, Plaintiffs have established the bedrock

requirements of Article III standing. All the same, Defendant argues that under Keller and

the Tooley test, Plaintiffs are not the proper parties to bring this lawsuit. However, even if

that is so, it does not implicate Article III standing. See Miller v. Brightstar Asia, Ltd., 43

F.4th 112, 125-26 (2d Cir. 2022) (“Here, the inquiry into whether a claim is direct, and a

plaintiff therefore has ‘standing’ to bring it, is not an Article III standing inquiry. Even if

the district court were right that Miller’s claims had to be brought in a derivative suit, it

should have dismissed the complaint for failure to state a claim.”) (Footnote omitted); see

also Culverhouse v. Paulson & Co. Inc., 813 F.3d 991, 993 (11th Cir. 2016) (“Although

the district court correctly concluded that Culverhouse’s claims are derivative, it

incorrectly described this defect as jurisdictional.”); Potter, 46 F.4th at 155 (“We hold

today that the shareholder standing rule is non-jurisdictional, implicating only a plaintiff’s

power to bring claims, not the Court’s power to hear them.”). We conclude that the Trial

Court had subject matter jurisdiction to hear this case.3 Therefore, Defendant’s challenge

to Plaintiffs’ standing was subject to waiver.

Issues not timely raised before a trial court can be waived. The Tennessee Supreme

Court has stated: “It is well settled in this state that a party cannot raise a new issue . . . on

3

This does not eliminate the burden on Plaintiffs to prove each element of their cause of action including

damages.

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motion for a new trial[ ] that was not within the scope of the pleadings and was not

presented to the court at the trial of the case.” Borne v. Celadon Trucking Servs., Inc., 532

S.W.3d 274, 294 (Tenn. 2017) (quoting Serv-U-Mart, Inc. v. Sullivan Cnty., 527 S.W.2d

121, 124 (Tenn. 1975)). In addition, the High Court has stated that “[w]e are of the opinion

that there is little difference between an issue improperly raised before the trial court at the

last minute and one that was not raised at all.” In re Adoption of E.N.R., 42 S.W.3d 26, 32

(Tenn. 2001). The rationale for waiver is evident—it would be unjust to permit a party to

spring a new theory on an opposing party at the last minute after the time and expense of

trial when there is no basis shown for why the defense was not raised earlier.

Defendant argues that it “challenged [Plaintiffs’] proof supporting the award of

damages related to the building . . .” and that the case proceeded to a verdict over

Defendant’s objections. However, our review of the transcripts reflects that Defendant did

not object to Plaintiffs’ standing on the basis of GWB’s ownership of the buildings.

Defendant first raised that issue of subject matter jurisdiction and standing at the hearing

on its post-trial motions. The Trial Court stated that, but for its conclusion on subject

matter jurisdiction, it would have found waiver on Defendant’s part. Regarding waiver,

we agree with the Trial Court. Defendant waited too long to assert its defense. Thus, the

issue of whether Plaintiffs have standing is waived.

Defendant asks that, in the event we reverse, this case should be remanded for the

Trial Court to consider those issues in Defendant’s post-trial motions that were deemed

moot because of the subject matter jurisdiction ruling. We agree that the remaining issues

in Defendant’s post-trial motions, and all other issues previously deemed moot by the Trial

Court, require resolution. We reverse the judgment of the Trial Court and remand for

further proceedings consistent with this Opinion.

Conclusion

The judgment of the Trial Court is reversed, and this cause is remanded to the Trial

Court for collection of the costs below and further proceedings consistent with this

Opinion. The costs on appeal are assessed against the Appellee, Malibu Boats, LLC.

____________________________________

D. MICHAEL SWINEY, CHIEF JUDGE

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