Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—Tenn. Sup. Ct.: Franchisees’ standing in suit against boat manufacturer affirmed, (Oct 24, 2025)

By Christopher M. Longo, J.D.

The boat manufacturer’s standing challenge was untimely and was “subject to forfeiture.”

The Tennessee Supreme Court affirmed the reversal of a trial court’s dismissal in a lawsuit brought by owners of a recreational boat franchisee against boat manufacturer Malibu Boats, LLC. In the suit, the owners contended that the manufacturer had wrongfully terminated their franchise, causing the franchise to fail and the owners’ bankruptcy. After winning at trial, the trial court vacated the jury award, finding that the owners lacked standing to bring the lawsuit. After the Tennessee Court of Appeals reversed, the manufacturer appealed, arguing that the owners lacked standing to bring their suit. The Tennessee Supreme Court affirmed, finding that the owners had constitutional standing to pursue claims against Malibu, and that the manufacturer forfeited its challenge to standing by raising it only after trial (Houghton v. Malibu Boats, LLC, No. E2023-00324-SC-R11-CV (Tenn. Sup. Ct. Oct. 22, 2025)).

The dispute arose from a terminated franchise relationship between Malibu Boats (Malibu), a manufacturer of recreational watercraft, and Great Wakes Boating, Inc. (GWB), a Tennessee corporation formed by Brett and Ceree Houghton—the sole shareholders—which operated a boat dealership. GWB was an authorized dealer of Malibu. The parties entered into annual dealer agreements beginning in 2009. In 2012, GWB “expanded its original facility by purchasing adjacent property,” and in 2014, GWB refinanced the dealership’s real property and increased its floor plan financing “from $1.25 million to $2.0 million,” with the Houghtons personally guaranteeing the obligations.

In February 2015, Malibu terminated the dealership agreement with GWB and reassigned the territory to another dealer. Malibu “cut off access to its ‘dealer portal,’” leaving GWB “unable to order parts to service boats.” GWB attempted to continue operations, but it was unable to recover from the loss of Malibu’s business, and went out of business. Creditors obtained judgments against GWB and the Houghtons, and the real properties “were sold at foreclosure.” In 2016, the Houghtons declared bankruptcy.

In 2018, the Houghtons filed suit against Malibu in their individual capacities, alleging “intentional misrepresentation, fraudulent concealment, and promissory fraud.” They contended that in reliance upon Malibu’s statements, and actions, they were misled to believe that the franchise relationship would continue. The case proceeded to trial, and a jury awarded the Houghtons $900,000 for the loss of equity in the dealership’s real estate.

Following the verdict, Malibu filed a motion for judgment notwithstanding the verdict and, for the first time, raised a challenge to the Houghtons’ standing. Malibu argued that the damages awarded related to property owned by GWB, not the Houghtons individually, and that any claims should have been brought derivatively on behalf of the corporation. The trial court agreed, finding that the Houghtons lacked statutory standing and that this defect deprived the court of subject matter jurisdiction. The court dismissed the case with prejudice.

On appeal, the Court of Appeals reversed the dismissal. It concluded that the standing issue raised by Malibu—that “the trial court lacked subject matter jurisdiction due to [Houghtons] failure to comply with the statutory requirements of a shareholder derivative proceeding”—did not implicate subject matter jurisdiction. The court found that Malibu “waived the issue by not raising its challenge until the hearing on its post-trial motion for judgment notwithstanding the verdict.” The court remanded, and Malibu appealed the decision, arguing that the Houghtons lacked standing.

Constitutional standing. The Tennessee Supreme Court conducted a detailed analysis of standing doctrine. It held that the Houghtons had constitutional standing under Article I, Section 17 of the Tennessee Constitution, which guarantees access to courts for injuries to “one’s ‘lands, goods, person, or reputation.’” The Court found that the Houghtons had alleged injury to their legal rights, noting that for private rights cases, under Article I, Section 17, an injury “means an injury in law, regardless of the presence or absence of damages.” The court determined that the case involved private rights, noting that “Tennessee law recognizes certain private legal rights, among them property rights.” The court found that the Houghtons’ stock in GWB “clearly represented a cognizable private property right,” and that Malibu’s “alleged tortious conduct entailed the invasion of this legally protected ownership interest—that is to say, an injury in law.” The court found that the Houghtons had constitutional standing.

Statutory standing. The court rejected Malibu’s argument that the Houghtons lacked statutory standing under Tennessee’s corporate law, because they failed to pursue their claims through a derivative proceeding. The court noted that the Houghtons had not pursued a derivative action; rather, they “filed suit for alleged intentional torts, apparently believing that they had individual rather than derivative claims.” The Court emphasized that Tennessee law permits shareholders to bring individual actions when they suffer direct injuries, even if the corporation also has a cause of action arising from the same conduct.

Shareholder standing. Noting that courts should look to the nature of the wrong and to whom the relief should go, the court found that Malibu had not raised its shareholder standing challenge in its pleadings, pre-trial motions, or during trial. The issue was first presented orally at the hearing on the post-trial motion. As such, the Court stated that the “[t]he substance of [Malibu’s] issue [was] non-constitutional or prudential in nature” and was subject to forfeiture. The court held that Malibu’s standing challenge was untimely and had been forfeited. It affirmed the judgment of the Court of Appeals and remanded the case to the trial court for consideration of the remaining post-trial issues.

The Case is No. E2023-00324-SC-R11-CV.

Judge: Pemberton, M.

Attorneys: Dale J. Montpelier (Montpelier & Associates, P.C.) for Brett W. Houghton. Taylor A. Williams (Paine, Bickers, Elder, King & Williams, LLP) for Malibu Boats, LLC.

Companies: Malibu Boats, LLC

Cases: FranchisingDistribution TennesseeNews