The Court of Appeals just published a whole set of business law opinions today so I probably will be posting a lot this week. The first case is a little bit outside what I normally cover because it is more of a caution to other lawyers than to business owners. But nevertheless it is a business law case so it is here.
Judges always like to talk about how the courts are overburdened with cases. Because there are too many cases and not enough judges and other court staff to manage them, judicial efficiency becomes a justification in itself as a reason to limit certain kinds of cases.
Judicial efficiency is one of the main justifications for a limit on lawsuits which is called “standing.” There are also Constitutional limits on standing which are not involved in this case. Standing means that in order for a case to be decided by a court, the plaintiff must have something to gain from winning the case. Otherwise the courts would just be deciding abstract questions with no point.
In a business law case, the plaintiff does not necessarily have to be, for instance, the same business entity that signed the contract. It just has to be able to show a connection between the entities so that the company bringing the lawsuit would benefit from winning the suit.
There is also another, lesser issue in this case. A company which does business under a name other than its official name must register this “fictitious name” in every county in which it does business. This is a consumer protection law, allowing consumers to figure out what the real name of the business is in order to investigate it and if necessary sue it.
When a company sues using its fictitious name, it must include in the lawsuit the location of a county in which the fictitious name is registered.
Today’s case is known as American Oil Company, Inc. v. Aan Real Estate, LLC. The name itself is a big part of the issue.
Anyway, a company called American Oil Group leased a property in Charlotte for use as a car wash and auto repair shop. After the property was allegedly not developed as called for in the lease, the plaintiff American Oil Company sued the defendant for breach of the lease.
There are two problems with this lawsuit. First and kind of incidentally, the court noted that there is no corporation registered in North Carolina under the name American Oil Company, Inc. Therefore, American Oil Company must be a fictitious name for some other kind of business entity and was required to tell the court in its suit where the fictitious name was registered. These problems, however, could have been solved fairly easily.
The main problem with the plaintiff’s suit is that the name under which it sued, American Oil¬†Company,¬†was different than the company that signed the lease, American Oil Group. The plaintiff had not alleged in its suit that the companies were the same or were connected in any way. The court could not assume merely because the names were similar that the companies are related. Just look up the number of companies that start with the word “American” and you will see why.
In the absence of any connection between the companies, the plaintiff had no standing to sue for breach of the lease. Therefore the case was dismissed.
The Bottom Line
Of course realistically, the two companies are almost certainly related. American Oil will just file another suit under the correct name. So why am I writing about this case? Because in order to take the case this far, the plaintiff has probably already spent tens of thousands of dollars in attorney fees. For that they got nothing except the opportunity to start over again. So my advice to my fellow attorneys is make sure you are suing in the correct name. And to any businessmen reading this, it never hurts to look over your attorney’s shoulder.