Michael Thornton, Harry Lembeck, and the Law Office of Michael Thornton, P. C. collectively “Thornton” seek review of the trial court’s partial denial of their motion for summary judgment. At issue is whether DT&S Enterprises, Inc. may bring a legal malpractice and breach of fiduciary duty action against Thornton following DT&S’s involuntary Chapter 7 bankruptcy proceeding at which the bankruptcy trustee settled the estate. We find that the trustee’s settlement of the estate resulted in the corporation being classified as “defunct.” And, since a defunct entity lacks standing to sue, we find the trial court erred in denying Thornton’s motion for summary judgment as to DT&S. The trial court’s order as to DT&S is reversed. The material facts in this case are not disputed. The record shows that Thornton was retained by DT&S and Frank Mankovitch, CEO of DT&S, to represent them in a lawsuit against the United States Postal Service “USPS”. Subsequently, creditors of DT&S filed an involuntary Chapter 7 bankruptcy petition, and Martha Miller was appointed as trustee. Thornton was hired as special counsel to the trustee to pursue the estate’s claim against USPS, which claim was the sole asset of the corporation. The Eleventh Circuit ordered DT&S and USPS to mediation, and the parties agreed to terms of settlement. According to the terms, USPS would pay $575,000 to the estate and withdraw its general, unsecured claim against the estate. The settlement would pay creditors $.92 on the dollar.
The trustee filed a motion to approve the settlement with the bankruptcy court. Mankovitch, on behalf of DT&S, filed an objection to the settlement. Following two hearings, the bankruptcy court approved the settlement. Mankovitch and DT&S then filed the present legal malpractice and breach of fiduciary duty claim against Thornton, contending Thornton settled the breach of contract action against USPS without permission and for an amount not in their best interests. Because it was DT&S’s bankruptcy trustee who settled the claim with USPS, which settlement was approved by the bankruptcy court, Thornton moved for summary judgment. The trial court granted summary judgment as to Mankovitch individually because there was no evidence that he would be entitled to any surplus of the bankruptcy estate.1 However, the trial court denied summary judgment as to DT&S, finding a cause of action for malpractice and breach of fiduciary duty was potentially viable since those entitled to any surplus of the estate would have a residual interest that could have been compromised by Thornton’s dual representation of DT&S and the bankruptcy estate. We granted interlocutory review. Following a thorough review of the applicable case law, we find that DT&S lacked standing to sue Thornton. We therefore reverse the trial court’s order.
