Cortlandt St. Recovery Corp. v. Hellas Telecommunications, S.À.R.L.

Full text

13‐3325 Cortlandt St. Recovery Corp. v. Hellas Telecommunications, S.à.r.l.

District Court for the Southern District of New York (J. Paul Oetken, Judge) dismissing the plaintiffʹs claims without prejudice. We conclude that the district court correctly decided that the plaintiff lacked Article III standing to bring the claims at issue. We further conclude that the district court did not err in denying the plaintiffʹs request to attempt to cure this standing defect under Fed. R. Civ. P. 17(a)(3). The judgment of the district court is therefore:

AFFIRMED.

with the caption above.

— 2 —

Judge Sack also files a separate concurring opinion.

the Southern District of New York (J. Paul Oetken, Judge) dismissing the plaintiffʹs claims without prejudice for lack of standing. The plaintiff appeals from that decision and from the district courtʹs denial of the plaintiffʹs request to attempt to cure the standing defect by having the real party in interest ʺratify,

— 3 —

join, or be substituted into the actionʺ pursuant to Fed. R. Civ. P. 17(a)(3). Because we agree that the plaintiff lacked standing to pursue its stated claims, and because we conclude that the district court did not abuse its discretion in declining to allow ratification, joinder, or substitution under Rule 17(a)(3), we affirm.

BACKGROUND

Cortlandt Street Recovery Corp. (ʺCortlandtʺ), a New York corporation, is attempting to collect approximately €83.1 million allegedly owed to it under defaulted ʺSubordinated Notesʺ (ʺSub Notesʺ) issued in 2006 by a now‐dissolved entity, Hellas Telecommunications (Luxembourg) II, S.C.A. (ʺHellas IIʺ). Cortlandt alleges that the holders of the Sub Notes, citizens severally of Greece, the British Virgin Islands, the Cayman Islands, and Gibraltar assigned Cortlandt a portion of the notes in 2011, thereby authorizing Cortlandt to bring the present action.1

— 4 —

Cortlandt contends, in substance, that the private equity firms TPG Capital, L.P. (ʺTPGʺ) and Apax Partners, LLP (ʺApaxʺ), which are not parties to the present suit, used the Sub Notes to defraud their creditors. According to Cortlandt, TPG and Apax owned a group of related foreign companies including Hellas II and defendants Hellas Telecommunications, S.à.r.l. and Hellas Telecommunications I, S.à.r.l., also Luxembourg entities (the ʺHellas Defendantsʺ). Cortlandt alleges that TPG and Apax issued promissory notes, in the name of one of the Hellas Defendants, pledging TPGʹs and Apaxʹs equity in the company and its subsidiaries as collateral. According to Cortlandt, the firms then used the proceeds from this sale to buy their own collateral, rendering the Hellas entities insolvent.

— 5 —

Cortlandt argues that this process—termed a ʺbleed‐outʺ—rendered both the Hellas Defendants and several now‐dissolved foreign investment funds that owned or financed the Hellas entities2 (the ʺSponsor Defendantsʺ) liable to the noteholders or their assignees. In November 2012, Cortlandt, as purported assignee of the Sub Notes, filed a complaint against both sets of defendants in the United States District Court for the Southern District of New York claiming, inter alia, the right to payment under the Sub Notes, breach of contract, violations of prohibitions on distributions, fraudulent conveyances, and unjust enrichment. Cortlandt requested relief in the form of payment of the amounts owed on the Sub Notes, plus interest, and fees, costs, and expenses.

Cortlandt also filed several other lawsuits in state and federal court seeking to collect on the Sub Notes and on another tranche of notes it claims it was assigned, the so‐called ʺPIK Notes,ʺ3 which are not at issue in this case. See, e.g., Cortlandt St. Recovery Corp. v. Aliberti, No. 12 CIV. 8686 JPO, 2014 WL 941900, 2014 U.S. Dist. LEXIS 32041 (S.D.N.Y. Mar. 11, 2014), on reconsideration, 2014 WL

(Bankr. S.D.N.Y. 2013).

— 6 —

6907548, 2014 U.S. Dist. LEXIS 170277 (S.D.N.Y. Dec. 9, 2014); Cortlandt St. Recovery Corp. v. Deutsche Bank AG, London Branch, No. 12 CIV. 9351 JPO, 2013 WL 3762882, 2013 U.S. Dist. LEXIS 100741 (S.D.N.Y. July 18, 2013), appeal dismissed (Sept. 16, 2013); Cortlandt St. Recovery Corp. v. Hellas Telecomms., S.à.r.l., 996 N.Y.S.2d 476 (N.Y. Sup. Ct. Sept. 16, 2014) (consolidating four actions initiated by Cortlandt on the Sub and PIK Notes).

In one of these other actions, Cortlandt brought suit on the Sub Notes against Deutsche Bank AG, London Branch (ʺDeutsche Bankʺ), alleging it to be an underwriter of the Sub Notes. Cortlandt St. Recovery Corp. v. Deutsche Bank AG, London Branch, No. 12 CIV. 9351 JPO, 2013 WL 3762882, 2013 U.S. Dist. LEXIS 100741 (S.D.N.Y. July 18, 2013) (the ʺDeutsche Bank Opinionʺ), appeal dismissed (Sept. 16, 2013); see also Complaint at 2, Cortlandt St. Recovery Corp. v. Deutsche Bank AG, London Branch, No. 12 CIV. 9351 JPO (S.D.N.Y. 2013). In both the Deutsche Bank action and the present one, the defendants moved to dismiss on several grounds, including that the court lacked subject matter jurisdiction over the action. See Fed. R. Civ. P. 12(b)(1). Specifically, the defendants argued that Cortlandt lacked title to the Sub Notes and therefore lacked Article III

— 7 —

standing to bring claims related to those notes. See Deutsche Bank Op., 2013 WL 3762882, at *1 & n.1, 2013 U.S. Dist. LEXIS 100741, at *1 & n.1.

The district court granted the defendantsʹ motions to dismiss in both cases. In July 2013, the court issued an order and opinion in the Deutsche Bank case concluding that Cortlandt had failed adequately to plead title to claims arising under the Sub Notes and that Cortlandt had therefore failed adequately to plead facts on which Article III standing could be based. See Deutsche Bank Op., 2013 WL 3762882, at *3, 2013 U.S. Dist. LEXIS 100741, at *9‐10. In August 2013, the court issued an order in the present action explaining that the action was dismissed without prejudice ʺ[f]or the reasons set forth in [the Deutsche Bank Opinion].ʺ Order, Cortlandt St. Recovery Corp. v. Aliberti, No. 12 Civ. 8685 JPO (S.D.N.Y. Aug. 2, 2013).⁴

Cortlandt appealed.

motion to dismiss its complaint for lack of subject matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1). Cortlandt further asserts that the district court erred in

— 8 —

failing to grant to it the opportunity to cure any standing defect under Fed. R. Civ. P. 17(a)(3), which allows for ʺthe real party in interest to ratify, join, or be substituted intoʺ a pending action. We disagree with both contentions.

for lack of subject matter jurisdiction if the court ʺlacks the statutory or constitutional power to adjudicate it,ʺ Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000), such as when (as in the case at bar) the plaintiff lacks constitutional standing to bring the action. See W.R. Huff Asset Mgmt. Co., LLC v. Deloitte & Touche LLP, 549 F.3d 100, 104, 106 (2d Cir. 2008); see also Alliance for Envtl. Renewal, Inc. v. Pyramid Crossgates Co., 436 F.3d 82, 88 n.6 (2d Cir. 2006) (ʺ[T]he proper procedural route [for standing challenges at the pleadings stage] is a motion under Rule 12(b)(1).ʺ). On appeal from a dismissal under Rule 12(b)(1), we review the courtʹs factual findings for clear error and its legal conclusions de novo. Makarova, 201 F.3d at 113.

The plaintiff bears the burden of ʺalleg[ing] facts that affirmatively and plausibly suggest that it has standing to sue.ʺ Amidax Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 145 (2d Cir. 2011). In assessing the plaintiffʹs assertion of

— 9 —

standing, ʺwe accept as true all material allegations of the complaint[] and . . . construe the complaint in favor of the complaining party.ʺ W.R. Huff, 549 F.3d at 106 (internal quotation marks omitted). In deciding a Rule 12(b)(1) motion, the court may also rely on evidence outside the complaint. Makarova, 201 F.3d at 113.

ʺ[A] district courtʹs decision whether to dismiss pursuant to Rule 17(a) is reviewed for abuse of discretion.ʺ Stichting Ter Behartiging Van de Belangen Van Oudaandeelhouders In Het Kapitaal Van Saybolt Intʹl B.V. v. Schreiber, 407 F.3d 34, 43‐44 (2d Cir.), certified question accepted, 5 N.Y.3d 730, 832 N.E.2d 1185 (2005), certified question withdrawn sub nom. Intʹl B.V. (Found. of Sʹholdersʹ Comm. Representing Former Sʹholders of Saybolt Intʹl B.V.) v. Schreiber, 421 F.3d 124 (2d Cir. 2005).

the plaintiff has made out a ʹcase or controversyʹ between himself and the defendant within the meaning of Art. III.ʺ Warth v. Seldin, 422 U.S. 490, 498 (1975). To have such Article III standing, ʺthe plaintiff [must have] ʹalleged such a personal stake in the outcome of the controversyʹ as to warrant [its] invocation of federal‐court jurisdiction and to justify exercise of the courtʹs remedial powers

— 10 —

on [its] behalf.ʺ Id. at 498‐99 (quoting Baker v. Carr, 369 U.S. 186, 204 (1962)). Others may benefit ʺcollaterallyʺ from a resolution favorable to the plaintiff, id. at 499, or suffer from an unfavorable one, but the plaintiffʹs genuinely personal stake ensures the presence of ʺthat concrete adverseness which sharpens the presentation of issues upon which [a] court so largely depends.ʺ Baker, 369 U.S. at 204.

A plaintiff claiming such a stake must establish, first, that it has sustained an ʺinjury in factʺ which is both ʺconcrete and particularizedʺ and ʺactual or imminent,ʺ Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992) (internal quotation marks omitted); second, that the injury was in some sense caused by the opponentʹs action or omission, id.; and finally, that a favorable resolution of the case is ʺlikelyʺ to redress the injury, id. at 561. These elements form an ʺirreducible constitutional minimumʺ without which a federal court may not proceed to the merits of a claim. Id. at 560. ʺ[T]he jurisdictional issue must be resolved before the merits issue . . . .ʺ Alliance For Envtl. Renewal, 436 F.3d at 85.

Cortlandt does not allege that it has suffered direct injury as a result of the defendantsʹ actions. It points instead to the well‐established principle that ʺ[l]awsuits by assignees . . . are ʹcases and controversies of the sort traditionally

— 11 —

amenable to, and resolved by, the judicial process.ʹʺ Sprint Commcʹns Co., L.P. v. APCC Servs., Inc., 554 U.S. 269, 285 (2008) (quoting Vt. Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 777–78 (2000)). The defendants, for their part, do not dispute that an assignment of claims from the noteholders to Cortlandt would allow Cortlandt to ʺstand in the place of the injured partyʺ and satisfy constitutional standing requirements. W.R. Huff, 549 F.3d at 107. Neither do they dispute that the noteholders could have assigned their claims to Cortlandt. See Advanced Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11, 17 (2d Cir. 1997) (ʺIn general, claims or choses in action may be freely transferred or assigned to others.ʺ). Instead, the parties dispute whether the noteholders actually did assign the claims such that Cortlandt has standing to bring suit on the Sub Notes.

To assign a claim effectively, the claimʹs owner ʺmust manifest an intention to make the assignee the owner of the claim.ʺ Id. (internal quotation marks and brackets omitted). A would‐be assignor need not use any particular language to validly assign its claim ʺso long as the language manifests [the assignorʹs] intention to transfer at least title or ownership, i.e., to accomplish ʹa completed transfer of the entire interest of the assignor in the particular subject of

— 12 —

assignment.ʹʺ Id. (emphasis added) (citations omitted). An assignorʹs grant of, for example, ʺʹthe power to commence and prosecute to final consummation or compromise any suits, actions or proceedings,ʹʺ id. at 18 (quoting agreements that were the subject of that appeal), may validly create a power of attorney, but that language would not validly assign a claim, because it does ʺnot purport to transfer title or ownershipʺ of one. Id.

Cortlandt has not carried its burden of showing a valid assignment of a claim. First, Cortlandtʹs complaint does not allege ʺa completed transferʺ of the noteholdersʹ ʺentire interestʺ in any claim arising under the Sub Notes. Id. at 17. The complaint alleges that Cortlandt was assigned ʺfull rights under the assignments to collect principal and interest due and to pursue all remedies,ʺ Pl.ʹs First Am. Compl. ¶ 12 (J.A. 60), and that Cortlandt is ʺauthorized to sue and collect on the Sub Notesʺ on behalf of the assignors, id. ¶ 108 (J.A. 82). It does not, however, indicate that Cortlandt was assigned ownership of the claims. Cortlandt argues that an ʺassignment of full rights to collect is sufficientʺ to satisfy the injury‐in‐fact requirement. Appellantʹs Br. at 11. But, as we have explained,

[a] provision by which one person grants another the power to sue on and collect on a claim confers on the grantee a power of attorney

— 13 —

Wright et al., Fed. Prac. & Proc. Civ. § 1545 (3d ed. 2014) (ʺ[T]he mere transfer of a general power of attorney . . . does not create a sufficient interest or right in the chose and the grantor of the power remains the only real party in interest.ʺ).

Nor has Cortlandt pointed to anything in the assignment, or to other evidence in the record, suggesting that title to claims arising under the Sub Notes was assigned to it.5 The assignment reads:

— 14 —

authorized to collect payment on behalf of the noteholders, but it does not so much as hint that title to the claims at issue was being transferred. An assignment such as the one in issue, which does not transfer ownership of claims, is, on its own, ʺinsufficient to permit [a purported assignee] to sue on those claims in its name.ʺ Advanced Magnetics, 106 F.3d at 18.

Cortlandt urges us to reconsider the approach of Advanced Magnetics in light of Sprint Communications Co., L.P. v. APCC Services, Inc., 554 U.S. 269 (2008). We think Advanced Magnetics remains persuasive. In Sprint, payphone operators had assigned their right to collect specified payments from telephone carriers to collection firms called ʺaggregators.ʺ Id. at 271‐72. Through a separate agreement, the aggregators agreed to remit any payments obtained from the carriers to the payphone operators, less a fee for the aggregatorsʹ services. Id. at 272. The aggregators brought suit against the carriers. Id. The carriers moved to dismiss the complaint on the ground that the remittance agreement deprived the aggregators—mere ʺassignees for collectionʺ—of any real interest in the claims and, therefore, of standing to pursue them, despite the valid assignment. Id.

— 15 —

The Court rejected the carriersʹ challenge, recognizing the longstanding ʺhistorical tradition of suits by assignees, including assignees for collection.ʺ Id. at 285. Whatever the aggregators did with their payments post‐lawsuit, the Court reasoned, was of no constitutional moment. After all, the aggregatorsʹ ʺinjuries would be redressed whether the aggregators remit[ted] the litigation proceeds to the payphone operators, donate[d] them to charity, or use[d] them to build new corporate headquarters.ʺ Id. at 287.

Cortlandt argues that ʺ[n]othing in Sprint suggests that ʹtitleʹ or ʹownershipʹ must be recitedʺ in an assignment to confer standing upon an assignee. Appellantʹs Reply Br. at 4. But Sprint did not focus on the aggregatorsʹ title to the claims because there was ʺno reason to believe the assignment [was] anything less than a complete transfer to the aggregator[s] of the injury and resulting claim.ʺ Sprint, 554 U.S. at 286 (internal quotation marks omitted). The assignment at issue in Sprint ʺassign[ed], transfer[red] and set[] over to [the aggregator] for purposes of collection, all rights, title and interest of the [payphone operators] in [the operatorsʹ] claims, demands, or causes of action.ʺ Id. at 272 (emphases added). The assignment here, by contrast, confers only ʺfull rights to collect amounts of principal and interest due on the Notes, and to pursue all

— 16 —

remedies with respect to the Notes,ʺ making no mention of title to, or ownership of, the claims. Whereas the payphone operators in Sprint ʺassigned their claims to the aggregators lock, stock, and barrel,ʺ id. at 286, the noteholders in the case at bar assigned to Cortlandt only the ability to collect under the claims. Although Sprint confirms that an assignee need not possess more than title to a claim to bring suit upon that claim, nothing in that case suggests that an assignee may proceed with less.

If there was any doubt about the continuing relevance of Advanced Magnetics in light of Sprint, it was settled by W.R. Huff Asset Management Co., LLC v. Deloitte & Touche LLP, 549 F.3d 100 (2d Cir. 2008). There we concluded that Sprint ʺimplicitly supports the holding of Advanced Magnetics that a mere power‐ of‐attorney . . . does not confer standing to sue in the holderʹs own right.ʺ Id. at 108. It is still true that ʺthe minimum requirement for an injury‐in‐fact is that the plaintiff have legal title to, or a proprietary interest in, the claim.ʺ Id.

Cortlandt argues, finally on this score, that an assignment of rights to collect payments under the Notes and to pursue all remedies under the notes confers an interest ʺat least as broad asʺ that conferred by an assignment of title. Appellantʹs Br. at 12. The dispositive inquiry does not go to the breadth of the

— 17 —

assignment, however, but rather to its nature. ʺThere is an important distinction between simply hiring a lawyer and assigning a claim to a lawyer . . . . The latter confers a property right (which creditors might attach); the former does not.ʺ Sprint, 554 U.S. at 289. Our caselaw confirms that a purported assignee of a claim must plead a proprietary interest in that claim, and not simply the ability to pursue the claim on behalf of another, to bring the claim in his or her own name and satisfy the requirements of constitutional standing.

district court erred by not providing Cortlandt with the opportunity to cure this deficiency under Fed. R. Civ. P. 17(a)(3). As noted above, ʺa district courtʹs decision whether to dismiss pursuant to Rule 17(a) is reviewed for abuse of discretion.ʺ Schreiber, 407 F.3d at 43‐44.

Rule 17(a)(1) requires that an action ʺbe prosecuted in the name of the real party in interest.ʺ In Part II of our opinion, above, we concluded that the district court was correct in deciding that, absent an assignment of the claims in issue, this lawsuit was not brought or prosecuted in the name of the real party in interest. But Rule 17(a)(3) prohibits a court from dismissing an action for failure

— 18 —

to comply with subsection (a)(1) ʺuntil, after an objection, a reasonable time has been allowed for the real party in interest to ratify, join, or be substituted into the action.ʺ

The real party in interest principle embodied in Rule 17 ensures that only ʺa person who possesses the right to enforce [a] claim and who has a significant interest in the litigationʺ can bring the claim. Schreiber, 407 F.3d at 48 n.⁷ (quoting Va. Elec. & Power Co. v. Westinghouse Elec. Corp., 485 F.2d 78, 83 (4th Cir. 1973)); see also Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d 186, 193 (2d Cir. 2003) (ʺ[A]n action must be brought by the person who, according to the governing substantive law, is entitled to enforce the right.ʺ (internal quotation marks omitted)). The rule was initially adopted to ensure that assignees could bring suit in their own names, contrary to the common‐law practice. See Fed. R. Civ. P. 17 advisory committeeʹs notes, 1966 Amendment. However, ʺthe modern function of the rule . . . is [] to protect the defendant against a subsequent action by the party actually entitled to recover, and to insure generally that the judgment will have its proper effect as res judicata.ʺ Id.; see also Gogolin & Stelter v. Karnʹs Auto Imports, Inc., 886 F.2d 100, 102 (5th Cir. 1989) (ʺThe purpose of the rule is to prevent multiple or conflicting lawsuits by persons such as assignees,

— 19 —

executors, or third‐party beneficiaries, who would not be bound by res judicata principles.ʺ). The dismissal provision in Rule 17(a)(3) was added later ʺto avoid forfeiture and injustice when an understandable mistake has been made in selecting the party in whose name the action should be brought.ʺ 6A Charles Alan Wright et al., Fed. Prac. & Proc. Civ. § 1555 (3d ed. 2014). That provision codifies the modern ʺjudicial tendency to be lenient when an honest mistake has been made in selecting the proper plaintiff.ʺ Id.

If a party successfully moves for ratification, joinder, or substitution, ʺthe action proceeds as if it had been originally commenced by the real party in interest.ʺ Fed. R. Civ. P. 17(a)(3). Crucially for statute of limitations purposes, the claim of the real party in interest therefore dates back to the filing of the complaint. Cortlandt argues that although its lawsuit was dismissed for lack of subject matter jurisdiction, the dismissal was based solely on the fact that Cortlandt was not the real party in interest. It should therefore have been permitted either to amend the complaint to substitute the parties who actually held the claims at issue as plaintiffs in the lawsuit, or to amend its agreement with the real parties in interest to transfer title to the claims to Cortlandt, thereby making it the real party interest.

— 20 —

The defendantsʹ first argument to the contrary is that Cortlandt forfeited any Rule 17(a)(3) objection by failing to raise the issue before the district court. ʺ[I]t is a well‐established general rule that an appellate court will not consider an issue raised for the first time on appeal.ʺ Bogle‐Assegai v. Connecticut, 470 F.3d 498, 504 (2d Cir. 2006) (internal quotation marks omitted). Cortlandt asserts that it preserved the objection by requesting the opportunity to amend its complaint ʺif the [c]ourt conclude[d] there [were] any defects or deficiencies.ʺ Mem. in Oppʹn to the Sponsor Defs.ʹ Mot. to Dismiss at 25 n.21, Dkt. No. 68, Cortlandt St. Recovery Corp. v. Aliberti, No. 12 Civ. 8685 JPO (S.D.N.Y. Apr. 22, 2013); Mem. in Oppʹn to the Mot. to Dismiss of [the Hellas Defs.] at 24 n.22, Dkt. No. 77, Cortlandt St. Recovery Corp. v. Aliberti, No. 12 Civ. 8685 JPO (S.D.N.Y. May 31, 2013).

Cortlandt did not explicitly refer to Rule 17 or specify a means by which it hoped to remedy any standing deficiency in the action as filed. But it did invoke Rule 17 in the context of the defendantʹs standing objection in the Deutsche Bank action, arguing that it should have been given the opportunity to substitute the noteholders as the real parties in interest or to obtain a new assignment. Deutsche Bank Op., 2013 WL 3762882, at *3, 2013 U.S. Dist. LEXIS 100741, at *10‐

— 21 —

11. And the district court squarely addressed those arguments, denying the requests. Id., 2013 WL 37628827, at *3 & n.4, 2013 U.S. Dist. LEXIS 100741 at *11‐ 12 & 12 n.4. Because the district court dismissed the present action ʺ[f]or the reasons set forthʺ in the Deutsche Bank Opinion, Order, Cortlandt St. Recovery Corp. v. Aliberti, No. 12 Civ. 8685 JPO (S.D.N.Y. Aug. 2, 2013), thus reaching and rejecting Cortlandtʹs implied 17(a)(3) objection, and because we may in any event exercise our discretion to consider an issue raised for the first time on appeal ʺwhere the argument presents a question of law and there is no need for additional fact‐finding,ʺ Bogle‐Assegai, 470 F.3d at 504 (internal quotation marks omitted), we decline to conclude that Cortlandt has forfeited its rights under Rule 17.

The question then is whether the district court abused its discretion in denying an amendment request under Rule 17. We have had few occasions on which to address this issue. See Schreiber, 407 F.3d at 43 (noting that as of 2005 ʺthis [C]ircuit appears never to have stated the proper standard of review for a district courtʹs application of the curative procedures set forth in that ruleʺ). In Advanced Magnetics, our Circuitʹs leading case interpreting the Rule, we concluded that the assignment agreements in issue ʺwere insufficient to transfer

— 22 —

to [the plaintiff] ownership of the claims of the [assignors] and hence were insufficient to permit [the plaintiff] to sue on those claims in its name.ʺ 106 F.3d at 18 (emphasis added).

We nonetheless returned the case to the district court directing ʺthat leave to file the proposed amended complaint substituting the [assignors] as plaintiffs to pursue their own claims [be] granted under Rule 17(a).ʺ Id. at 21. We reasoned that such substitution was warranted for three reasons: First, ʺ[t]he complaintʹs only pertinent flaw was the identity of the party pursuing those claims.ʺ Id. at 20. In other words, the proposed amended complaint sought only to substitute one name for another; the factual and legal allegations of the complaint would remain unaltered. Second, there was no indication of ʺbad faith or . . . an effort to deceive or prejudice the defendants.ʺ Id. at 21. Finally, the proposed substitution did not threaten to prejudice the defendants, who had timely notice of the substance of the allegations, the relevant parties, and their claims. Id.

But the facts underlying our decision in Advanced Magnetics differ from those in the case at bar in at least one significant respect: There, unlike here, the named plaintiff had standing irrespective of any amendment under Rule 17 to

— 23 —

pursue at least some of its claims against the defendants; Cortlandt did not. The district court here followed the lead of several other district courts in this Circuit by distinguishing Advanced Magnetics based on that difference.6 See, e.g., Clarex Ltd. v. Natixis Sec. Am. LLC, No. 12 CIV. 0722 PAE, 2012 WL 4849146, at *8, 2012 U.S. Dist. LEXIS 147485, at *20‐21 (S.D.N.Y. Oct. 12, 2012); In re SLM Corp. Sec. Litig., 258 F.R.D. 112, 115 (S.D.N.Y. 2009).

In Cortlandtʹs case, absent a complete assignment of the only claims on which the lawsuit was based, there was no valid lawsuit pending before the district court in which to permit an amended complaint. The district court reasoned that ʺ[s]tanding . . . ʹis to be determined as of the commencement of suit.ʹ Lujan, 504 U.S. at 570 n. 5. A court may not permit an action to continue, even where the jurisdictional deficiencies have been subsequently cured, ʹif jurisdiction [was] lacking at the commencement of a suit . . . .ʹ Disability Advocates, Inc. v. N.Y. Coal. for Quality Assisted Living, Inc., 675 F.3d 149, 160 (2d Cir. 2012).ʺ Deutsche Bank Op., 2013 WL 3762882, at *3, 2013 U.S. Dist. LEXIS 100741, at *11 (second ellipsis in original). The court also noted that ʺʹwhere

— 24 —

courts in this Circuit have used [] Rule 17(a)(3) to remedy defects in standing, they have generally done so where the plaintiff clearly had standing on another claim that it brought.ʹʺ Id., 2013 U.S. Dist. LEXIS 100741, at *11‐12 (quoting Clarex Ltd., 2012 WL 4849146, at *8, 2012 U.S. Dist. LEXIS 147485, at *22) (brackets in original). In other words, in the absence of a plaintiff with standing, this lawsuit was a nullity, and there was therefore no lawsuit pending for the real party in interest to ʺratify, join, or be substituted intoʺ under Rule 17(a)(3) or otherwise.

The question whether a plaintiff may use Rule 17(a)(3) to remedy a standing deficiency when it lacks standing as to all of its claims – as is the case here – appears to be an issue of first impression in this Court, if not the district courts in this Circuit. See W.R. Huff, 549 F.3d at 104 n.3 (avoiding Rule 17(a) question where only issue on appeal was constitutional standing); Lunney v. United States, 319 F.3d 550, 556‐57 (2d Cir. 2003) (avoiding Rule 17(a) question by affirming dismissal on other jurisdictional grounds). At least one other circuit has addressed the question, see Zurich Ins. Co. v. Logitrans, Inc., 297 F.3d 528, 531 (6th Cir. 2002) (plaintiff that ʺhad no standing to bring th[e] action [had] no standing to make a motion to substitute the real party in interestʺ), although this decision has met with some criticism, see, e.g., Park B. Smith, Inc. v. CHF Indus.

— 25 —

Inc., 811 F. Supp. 2d 766, 773‐74 & n.3 (S.D.N.Y. 2011) (declining to follow Zurich Insurance Co. based on the district courtʹs view that that case adopted an unnecessarily ʺrigidʺ approach); 13A Charles Alan Wright et al., Fed. Prac. & Proc. Civ. § 3531 n.61 (3d ed. 2014) (characterizing Zurich Insurance Co. as ʺparticularly troublingʺ).

We need not, however, resolve this question to dispose of Cortlandtʹs request to attempt to cure the standing defect under Fed. R. Civ. P. 17(a)(3). We affirm because neither of the requests made by Cortlandt in its effort to cure the standing problem would have been consistent with Rule 17(a)(3). Therefore, the district courtʹs decision to deny relief under that rule was not an abuse of discretion.

Cortlandt made two specific, alternative requests: first, to substitute the noteholders for it as plaintiffs, or, second, for leave to obtain a new assignment from the noteholder vesting in Cortlandt sufficient title to maintain this lawsuit.7

— 26 —

We conclude that neither provides the plaintiff with a means of employing the provisions of Rule 17(a)(3) to solve its standing problems.

— 27 —

17(a) . . . does not extend or limit the subject matter jurisdiction of a federal courtʺ by conferring subject matter jurisdiction when it would ʺnot otherwise exist.ʺ Airlines Reporting Corp. v. S & N Travel, Inc., 58 F.3d 857, 861 n.4 (2d Cir. 1995) (internal quotation marks omitted); see also Lunney, 319 F.3d at 556‐57. Because the noteholders Cortlandt sought to substitute would have lacked subject matter jurisdiction to bring the claims, the district court did not abuse its discretion by denying Cortlandtʹs request to substitute those entities under Rule 17(a)(3). See 4 Mooreʹs Federal Practice 3D § 17.12[1][c] (ʺIf joinder or substitution of, or ratification by, a real party in interest would destroy the courtʹs jurisdiction, the action must be dismissed.ʺ).

If Cortlandtʹs second request—for leave to obtain a new assignment—were pursued, diversity jurisdiction would not appear to present a barrier. The diversity jurisdiction that now obtains between the plaintiff and the defendants would survive. But while granting Cortlandtʹs request to create and execute a new assignment transferring complete title and ownership of the claims in issue to Cortlandt might theoretically create a claim litigable by Cortlandt, it would not enable Cortlandt to alter its complaint in the district court pursuant to Rule 17(a)(3) to reflect the contents of the revised transfer.

— 28 —

As we have discussed, Cortlandtʹs First Amended Complaint alleges that it was assigned ʺfull rights under the assignments to collect principal and interest due and to pursue all remedies.ʺ Pl.ʹs First Am. Compl. ¶ 12 (J.A. 60). In order to have standing, however, Cortlandt would have to allege that it was assigned title to the claims, not merely a power of attorney. A new assignment would ʺalter[] the original complaintʹs factual allegations as to the events or the participants,ʺ Advanced Magnetics, 106 F.3d at 20, because the language of the new complaint, to cure the standing bar, would necessarily reflect the contents of the new assignment.

We have ordinarily allowed amendments under Rule 17 only ʺwhen a mistake has been made as to the person entitled to bring suit and such substitution will not alter the substance of the action.ʺ Park B. Smith, Inc., 811 F. Supp. 2d at 773. Cortlandtʹs legal claims might remain unaltered if a new assignment were substituted for the old one, but the factual allegations supporting them would not. Unlike a substitution, such as the one requested in Advanced Magnetics or Zurich Insurance Co., pleading the existence of a new and substantively different assignment would require more than a ʺmerely formalʺ alteration of the complaint. See Advanced Magnetics, 106 F.3d at 20. Such an

— 29 —

attempt to employ Rule 17(a)(3) to cure the standing problem here would thus be fated to fail.

We cannot rule out the possibility that Cortlandt might have avoided these challenging procedural pitfalls through a request for leave to obtain a valid assignment under some other rule of civil procedure. It did not. It has relied upon only Rule 17 in the present appeal. For the reasons set forth above, its request falls outside the bounds of the proper application of that rule. 8

— 30 —

Conclusion For the foregoing reasons, the district court did not err in concluding that the plaintiff lacked standing nor did the court abuse its discretion in denying the plaintiff relief under Rule 17(a)(3). It therefore did not err in dismissing the complaint without prejudice. The judgment of the district court is therefore

AFFIRMED.

— 1 —

SACK, Circuit Judge, concurring: Unsurprisingly, I concur in the foregoing opinion – I am, after all, its author. I add this brief concurrence, though, to explain my view that a decision referred to in that opinion, Zurich Insurance Co. v. Logitrans, Inc., 297 F.3d 528 (6th Cir. 2002), is not the law of this Circuit, and also to express some doubt that it should be. My colleagues point out that the resolution of this issue is not necessary to our resolution of this appeal, and decline, therefore, to express their views on the subject.

In Zurich Insurance Co., the Sixth Circuit affirmed the denial of a motion that had been brought in an attempt to cure a standing defect under Fed. R. Civ. P. 17(a)(3). An insurance company subsidiary, Zurich Switzerland, initially thinking itself to be the subrogee of certain claims, requested leave of the district court to substitute the proper subrogee of all of those claims, a parallel subsidiary* referred to as American Guarantee. Zurich Ins. Co., 297 F.3d at 530. The district court denied the motion, see id. at 530‐31, and the court of appeals affirmed, id. The court of appeals concluded that because the plaintiff ʺhad no

— 2 —

standing to bring th[e] action, [it had] no standing to make a motion to substitute the real party in interest.ʺ Id. at 531. The court explained:

320 (5th Cir. 1999), and Whelan v. Abell, 953 F.2d 663, 672 (D.C. Cir. 1992) – in which courts first determined that a plaintiff had standing independent of any requested substitution before addressing the Rule 17 inquiry, Zurich Ins. Co., 297 F.3d at 532. Those cases did not address whether that order of operations was constitutionally required.

As our opinion notes, some courts and commentators have criticized Zurich Insurance Co. See ante at 25. I think this criticism has some merit. It was undisputed in Zurich Insurance Co. that an entity, waiting in the wings and willing to become a party to the action, had a claim that could be ʺappropriately resolved through the judicial process.ʺ Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992) (internal quotation marks omitted). The Zurich Insurance Co. court declined to permit the substitution, even though the kinds of concerns typically *3 raised by a standing challenge, such as the risk that ʺa plaintiff raising only a generally available grievance about government—claiming only harm to his and every citizenʹs interest in proper application of the Constitution and laws, and seeking relief that no more directly and tangibly benefits him than it does the public at large,ʺ id. at 573‐74 — would inadequately present or defend his claim, would have been absent had the substitution been allowed. The only bar to the courtʹs jurisdiction was a complaint heading containing the wrong clientʹs name.

To be sure, the Supreme Court has frequently said that a federal courtʹs constitutional authority to hear the merits of a case must be established at the outset of the litigation. See, e.g., Mollan v. Torrance, 22 U.S. 537, 539 (1824) (ʺ[J]urisdiction . . . depends upon the state of things at the time of the action brought.ʺ). This is said to be so both with respect to standing, see, e.g., Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 189 (2000) (standing ʺmust exist at the commencement of the litigationʺ), and with respect to other aspects of subject matter jurisdiction, see, e.g., Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 570‐71 (2004) (ʺTh[e] time‐of‐filing rule . . . measures all challenges to subject‐matter jurisdiction premised upon diversity of citizenship against the state of facts that existed at the time of filing.ʺ).

— 4 —

But the jurisdiction‐at‐commencement rule is not absolute. ʺIn cases where the plaintiff lacked initial standing or the case suffered from some other jurisdictional defect at the time suit is commenced, the Supreme Courtʹs cases are less than clear as to whether and how a jurisdictional defect can be remedied in the course of litigation.ʺ Schreiber Foods, Inc. v. Beatrice Cheese, Inc., 402 F.3d 1198, 1203 (Fed. Cir. 2005). In some cases, a jurisdictional defect existing at the outset of litigation can be cured by subsequent events. In the case of diversity jurisdiction, for example, the dropping‐out of a nondiverse plaintiff whose presence would otherwise defeat diversity confers diversity jurisdiction upon a federal court, provided other jurisdictional requirements are satisfied. See, e.g., Grupo Dataflux, 541 U.S. at 572 (ʺ[D]ismissal of [a] party that had destroyed diversity . . . [as a] method of curing a jurisdictional defect ha[s] long been an exception to the time‐of‐filing rule.ʺ). And several courts have held that a loss of standing after commencement of a litigation but prior to trial may be cured by reacquisition of standing or by joinder of a party with standing. See, e.g., Schreiber Foods, 402 F.3d at 1204 (collecting cases); Corbin v. Blankenburg, 39 F.3d 650, 654 (6th Cir. 1994) (en banc); but see id. at 655 (Celebrezze, J., dissenting).

— 5 —

Moreover, in the case of a substitution request such as in Zurich Insurance Co., allowing substitution may be ʺʹthe wiser answer to the problem of expediting trials and avoiding unnecessary delay and expense of requiring an action to be started anew where a substitution is desired though the subject matter of the actions remains identical.ʹʺ Park B. Smith, Inc. v. CHF Indus. Inc., 811 F. Supp. 2d 766, 774 (S.D.N.Y. 2011) (quoting Natʹl Mar. Union of Am. v. Curran, 87 F. Supp. 423, 426 (S.D.N.Y. 1949)). The cases cited by the Advisory Committee in the note explaining the adoption of Rule 17(a)(3), Levinson v. Deupree, 345 U.S. 648 (1953), and Link Aviation, Inc. v. Downs, 325 F.2d 613 (D.C. Cir. 1963), take a similarly pragmatic approach. In the latter case, for example, parties who had subrogated their interests in a given claim mistakenly brought suit in their own names, rather than in the names of the subrogees. Link Aviation, 325 F.2d at 613‐14. The court reasoned that this error, while significant, did not render the suit ʺa nullity.ʺ Id. at 615. It concluded that substitution of the subrogees was merited. Id. The court explained:

— 6 —

Id.

Of course, jurisdictional requirements imposed by the Constitution cannot be cast aside because they are onerous or require expense, or because the results of their application appear unfair or unduly technical. But here the concerns animating a constitutional principle are absent, so it seems to me that practical considerations may ultimately prevail.

Concededly, the plaintiffʹs request in the case at bar to obtain a post‐ commencement assignment may implicate different concerns than the type of substitution request at issue in Zurich Insurance Co. The latter entails a change in name only, while the former seems to involve a change in the status quo ante, in that Cortlandt would have to obtain title to claims to which it currently lacks title. Even so, having considered this issue in the course of reaching a result on other legal grounds, I have come to doubt that our Court should, when directly confronted by the issue, adopt the categorical approach taken the by the Sixth Circuit.

Footnotes

[4] Defendant Giancarlo Aliberti was voluntarily dismissed from the action.

[7] As the district court described it: During a recent telephone conference, Cortlandt suggested that, were the [c]ourt to hold that Cortlandt lacked standing, it should be permitted to cure the deficiency by ʺinterven[ing] the real party . . . or establish[ing] authorizationʺ through a new agreement. (Trans. at 5:16‐18; see also id. at 5:18‐22 (Plaintiffʹs Counsel: ʺIf [Defense Counsel] is questioning whether the authorization is sufficient, rather than to say that this is sufficient As to Cortlandtʹs first request, substitution of the noteholders as plaintiffs would cure the standing defect. Simultaneously and necessarily, though, it would create a different, fatal jurisdictional defect. Cortlandt conceded at oral argument that the noteholders, foreign citizens, are not diverse from the defendants, also foreign entities. While diversity is present when the action is between ʺcitizens of a State and citizens or subjects of a foreign state,ʺ 28 U.S.C. § 1332(a)(2), or between ʺcitizens of different States and in which citizens or subjects of a foreign state are additional parties,ʺ id. § 1332(a)(3)[,] diversity is lacking within the meaning of these sections where the only parties are foreign entities. Universal Licensing Corp. v. Paola del Lungo S.p.A., 293 F.3d 579, 580‐81 (2d Cir. 2002). It is undisputed that the only potential basis for federal subject matter jurisdiction in this case is diversity. We have explained that ʺ[t]he procedural mechanisms set forth in Rule 17(a) for ameliorating real party in interest problems may not, under the Rules Enabling Act, 28 U.S.C. § 2072(b), be employed to expand substantive rights.ʺ Schreiber, 407 F.3d at 49. Thus, ʺRule where he says it isnʹt, he is just giving me language that he wants to see, why donʹt I just go out and get it?ʺ). Deutsche Bank Op., 2013 WL 3762882, at *3, 2013 U.S. Dist. LEXIS 100741, at *10‐11.