Commercial Litigation and Arbitration

Prudential vs. Constitutional Standing — Circuit Split as to Whether Prudential Standing Can Be Waived — Prudential Standing Principles

G&S Holdings LLC v. Continental Cas. Co., 2012 U.S. App. LEXIS 19728 (7th Cir. Sept. 20, 2012):

There are both constitutional and prudential limitations on the jurisdiction of the federal courts. Warth v. Seldin, 422 U.S. 490, 498 (1975). Under Article III of the Constitution, the jurisdiction of the courts is limited to claims presenting a case or controversy between the plaintiff and the defendant. Id. In order to establish a case or controversy, the party invoking federal jurisdiction must demonstrate "a personal injury fairly traceable to the defendant's allegedly unlawful conduct and likely to be redressed by the requested relief." Allen v. Wright, 468 U.S. 737, 751 (1984); FMC Corp. v. Boesky, 852 F.2d 981, 987 (7th Cir. 1988); Scanlan, 669 F.3d at 841-42. The allegations in the complaint are sufficient to meet this minimal standard because the plaintiffs allege that they suffered economic harm as a result of Continental's failure to pay GSMC and that the injury could be redressed by the payment of damages. See generally RK Co. v. See, 622 F.3d 846, 851 (7th Cir. 2010); Rawoof v. Texor Petroleum Co., Inc., 521 F.3d 750, 756 (7th Cir. 2008).

Even if constitutional standing is established, however, there are also prudential limitations of the court's exercise of jurisdiction. FMC Corp., 852 F.2d at 987. A complaint may meet the standards for constitutional standing, yet fail to overcome the prudential standing hurdles. FMC Corp, 852 F.2d at 988. Although the court on its own may raise unpreserved questions of either constitutional or prudential standing, the court is not obligated to do so with respect to prudential standing questions. Rawoof, 521 F.3d at 757. We have held that matters of prudential standing can be waived if not preserved. RK Co., 622 F.3d at 851, but see Lewis v. Alexander, 685 F.3d 325, 340 n.14 (3d Cir. 2012)(recognizing a split in the circuit as to whether objections to prudential standing can be waived, and listing circuit cases). Here, the standing objection was properly raised.

Among the prudential limitations on the exercise of federal jurisdiction, are: (1) when the harm alleged in the complaint is a generalized one shared in substantially equal part by a large class of citizens, that harm alone normally will not warrant the exercise of federal jurisdiction; and (2) in general, the plaintiffs must assert their own legal rights and interests, and cannot rest their claims to relief on the legal rights or interests of third parties. Warth, 422 U.S. at 499; RK Co., 622 F.3d at 851; FMC Corp., 852 F.2d at 988. The latter requirement is similar to the requirement of Federal Rule of Civil Procedure 17 that every action must be prosecuted in the name of the real party in interest. Rawoof, 521 F.3d at 756-57 (stating that the requirements of standing should not be confused with Rule 17, but noting that some courts have described Rule 17's real-party-in-interest requirement as essentially a codification of the prudential limitation on standing).

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