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Current Developments in the Commercial Divisions of the
New York State Courts
Posted: December 6, 2014

Lack of Standing Curable by Amendment

On November 20, 2014, Justice Friedman of the New York County Commercial Division issued a decision in Flintlock Construction Services, LLC v HPH Services, Inc., 2014 NY Slip Op. 33025(U), holding that a defect in standing was curable.

In Flintlock Construction Services, the plaintiff general contractor sued the defendant subcontractors for failing to pay suppliers. The defendants moved to dismiss the plaintiff’s Lien Law claim for, among other things, lack of standing. The defendants argued that at the time the compliant was filed, the plaintiff lacked standing because it had not made any payments to the defendants’ suppliers and that the plaintiff’s subsequent payments could did not cure the defect. The court disagreed and allowed the plaintiffs to file an amended complaint curing the defect, explaining:

Standing is an aspect of justiciability which, when challenged, must be considered at the outset of any litigation. In Cortlandt Street Recovery Corp. v. Hellas Telecommunications. S.A.R.L, 2014 NY Slip Op. 24268, 2014 WL 4650231 [Sept. 16, 2014], this court discussed the extensive conflicting appellate authority on the issue of whether a defect in standing is curable. The court incorporates that discussion here. The Cortlandt decision held, in accordance with the predominant and more persuasive authority, that a defect in standing is curable where it is not so
fundamental as to implicate the court’s subject matter jurisdiction or power to hear an action
.

[The moving defendant] does not argue that this court ever lacked subject matter jurisdiction to hear an action for breach of contract or diversion of trust assets. Nor could it persuasively do so. As this Department has reasoned: The question of subject matter jurisdiction is a question of judicial power: whether the court has the power conferred by the Constitution or statute, to entertain the case before it. Because New York’s Supreme Court is a court of original, unlimited and unqualified jurisdiction, it is competent to entertain all causes of action. The court accordingly holds that although Flintlock lacked standing to maintain the diversion cause of action at the time the action was commenced, this defect in standing was not so fundamental as to implicate the court’s subject matter jurisdiction to hear that cause of action.

(Internal quotations and citations omitted) (emphasis added).

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