Texaz Star Turbines, Inc. v. Turbine Powered Technology LLC

• Court: Court of Appeals for the Ninth Circuit
• Decided: January 11, 2023
• Docket: 21-17120
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JAN 11 2023 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

TEXAZ STAR TURBINES, INC., No. 21-17120

Plaintiff-Appellant, D.C. No. 3:20-cv-08071-SMB

v. MEMORANDUM* TURBINE POWERED TECHNOLOGY, LLC, a Louisiana limited liability company; TED MCINTYRE,

Defendants-Appellees.

Appeal from the United States District Court for the District of Arizona Susan M. Brnovich, District Judge, Presiding

Argued and Submitted December 5, 2022 Phoenix, Arizona

Before: WARDLAW and BUMATAY, Circuit Judges, and SCHREIER,** District Judge.

Texaz Star Turbines, Inc. (“Texaz Star”) appeals the district court’s grant of

the motion to dismiss its complaint against Turbine Powered Technology, LLC

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Karen E. Schreier, United States District Judge for the District of South Dakota, sitting by designation. (“Turbine Powered”) and Ted McIntyre.

In October 2019, Texas Star Turbines, Inc. (“Texas Star”) filed a breach of

contract suit against appellees, Turbine Powered and Ted McIntyre, in Arizona

state court. The complaint alleges that appellees failed to make all of their

payments on an airplane equipment sales contract they entered into with Texas Star

in 2013. After appellees moved to dismiss the lawsuit in state court, Texaz Star

filed an amended complaint, replacing Texas Star as the plaintiff and alleging that

Texas Star had assigned its rights to Texaz Star. Appellees then removed the case

to the United States District Court for the District of Arizona. The district court

later dismissed Texaz Star’s first amended complaint for failure to state a claim

because “the contract, entered 15 years after [Texas Star] was terminated, is not

valid.” It further reasoned that “[s]ince the original contract entered by [Texas

Star] was not valid, then [Texaz Star] cannot assert a cause of action for its

breach.” Texaz Star moved to reconsider its dismissal and to extend the deadline

to file a second amended complaint. The district court denied both motions.

Texaz Star now appeals.

We have jurisdiction under 28 U.S.C. § 1291, and we remand the case to the

district court to (1) determine whether Texaz Star has Article III standing to bring

its suit against appellees; and (2) if so, whether Texaz Star has the capacity to sue

in a federal district court in Arizona.

2 1. Standing. Article III, § 2, of the Constitution restricts the federal “judicial

Power” to resolving “Cases” and “Controversies.” Sprint Commc’ns Co., v. APCC

Servs., Inc., 554 U.S. 269, 273 (2008). For there to be a case or controversy, the

plaintiff must have standing to sue. See, e.g., Spokeo, Inc. v. Robins, 578 U.S. 330,

338 (2016). Standing is a jurisdictional requirement, and thus federal courts must

determine whether a plaintiff has standing at any and every point in the litigation

before addressing the arguments on the merits. See Steel Co. v. Citizens for a

Better Env’t, 523 U.S. 83, 93 (1998). Parties can never waive jurisdictional

defects, and federal courts are obligated to consider them sua sponte. Gonzalez v.

Thaler, 565 U.S. 134, 141 (2012).

For an assignee to have standing, it must show that its assignor had Article

III standing. Spinedex Physical Therapy USA Inc. v. United Healthcare of Ariz.,

Inc., 770 F.3d 1282, 1291 (9th Cir. 2014). That is because an assignee simply

“stands in the shoes of the assignor[.]” Misic v. Bldg. Servs. Emps. Health &

Welfare Tr., 789 F.2d 1374, 1378 n.4 (9th Cir. 1986).

Here, the district court did not determine Texas Star’s precise status under

Texas law. Specifically, the record is unclear whether Texas Star is a forfeited or

dissolved corporation according to Texas law. Although we make no

determination on Texas Star’s Article III standing, such standing may be affected

by its status as a forfeited or dissolved corporation. We remand to the district court

3 to determine Texas Star’s status under Texas law and whether it, as an assignor,

had Article III standing to confer standing on assignee Texaz Star.

2. Capacity to Sue. Even if Texaz Star has Article III standing, Appellees

argue that Texaz Star lacks capacity to sue because Texas Star, its assignor, could

not sue in Texas state courts due to its forfeited status. See Tex. Tax Code Ann.

§ 171.252 (denying forfeited corporations “the right to sue or defend in a court of

this state.”). A party’s capacity to sue is different from standing. See In re Krause,

546 F.3d 1070, 1072 n.2 (9th Cir. 2008). If Texaz Star can establish standing, then

the district court must determine whether Texaz Star, as assignee of Texas Star, has

capacity to sue in Arizona federal district court. We do not limit consideration of

the capacity-to-sue issue and allow Texaz Star to raise defenses to that issue, such

as waiver.

3. Capacity to Contract. The district court dismissed Texaz Star’s first

amended complaint based on its view that Texas Star had no capacity to enter into

contracts. Texaz Star moved the district court to reconsider its decision, citing

Transamerica Corp v. Braes Woods Condo Ass’n, Inc., 580 S.W.3d 733 (Tex.

App. 2019) and Ross Amigos Oil Co. v. State, 138 S.W.2d 798 (1940). The district

court denied appellant’s motion to reconsider on the ground that appellant failed to

raise and argue these two cases in its original opposition to appellees’ motion to

dismiss. On remand, if the district court finds that Texaz Star has Article III

4 standing, the district court should reconsider its original analysis in light of these

two cases.

We vacate the dismissal of Texaz Star’s complaint and remand to the district

court for consideration consistent with this decision

VACATED AND REMANDED.