September 21, 2012
Corporations Formed Other than in California Which Have Dissolved May Be Able to Win Summary Judgment in California Asbestos CasesRobinson v. SSW, Inc.
California Court of Appeal, First District
(September 21, 2012
Douglas Robinson died from mesothelioma and his family filed a wrongful death action. SSW, Inc., a Nebraska corporation, sought summary judgment on the ground that it had dissolved in accordance with Nebraska law more than five years before it was named as a defendant in the lawsuit, and under Nebraska law, a dissolved corporation cannot be sued more than five years after its dissolution. The plaintiffs resisted on the ground that the action was venued in San Francisco, California, SSW had qualified and registered to do business in California, and California law does not include a corporate survival limitation on bringing suit. Judge Harold Kahn granted summary judgment and the Court of Appeal affirmed.
Many states include in their corporate laws a corporate survival statute of limitations. Such statutes basically say that after a certain number of years after the dissolution of a corporation formed under the laws of that state, the corporation is no longer subject to suit. These statutes operate regardless of the availability of insurance for the dissolved corporation. In Nebraska, the corporate survival statute of limitations is five years. However, corporations organized under California law do not enjoy the advantage of a corporate survival statute of limitations – in fact, California law includes a statute to the opposite effect: California Corporations Code section 2010(a) states, “[a] corporation which is dissolved nevertheless continues to exist for the purpose of winding up its affairs, prosecuting and defending actions by or against it …,” and section 2010(b) states even more directly, “No action or proceeding to which a corporation is a party abates by the dissolution of the corporation or by reason of proceedings for winding up and dissolution thereof.” Thus, a California corporation can be sued any number of years after it has dissolved, and if it has insurance applicable to the claimed loss, the insurer will probably have to defend the company and pay any loss covered by the policy.
In Robinson, the Court of Appeal noted that there is a split in California authority on the subject of whether a non-California corporation is entitled to the protection of its home-state corporate survival statute of limitations, and that the issue is currently before the California Supreme Court, which has not yet issued a decision. In North American Asbestos Corp. v. Superior Court (1986) 180 Cal.App.3d 902 (“North American II”), the First District applied a conflict-of-laws analysis and determined that because California policy is to protect and compensate injured persons, that policy would prevail over a foreign-state policy that was different. But a few months earlier, in Riley v. Fitzgerald (1986) 178 Cal.App.3d 871 (“Riley”), the Second District had decided the issue on a statutory construction basis, finding that California’s statute which effectively dispenses with the possibility of a California corporate survival statute of limitations (Corporations Code section 2010) did not apply to a corporation formed under Texas law, where there is a corporate survival statute of limitations. The Robinson court found no need for a conflict-of-laws analysis and proceeded under a statutory construction analysis, coming to the same result as the Riley court.
The Robinson court’s statutory construction analysis turned on the fact that Corporations Code section 2010 applies to corporations “organized” under California’s corporation law. Interpreting the term “organized” in its traditional fashion, the court determined that a corporation is organized under the law of the state where it is created. The court further determined that qualifying to do business and registering to do business under California law are distinct from being organized under California law. Since SSW was not organized under California law, Corporations Code section 2010 did not apply to it, leaving Nebraska’s corporate survival statute of limitations in effect for purposes of the case, and ultimately entitling SSW to entry of summary judgment.
COMMENT AND EVALUATION:
Many states’ corporate laws contain a corporate survival statute of limitations, including the law of Delaware, the most popular state for corporate formation (primarily because Delaware offers so many protections for corporations organized under its laws). If you have a client that is a dissolved corporation organized under the law of a state other than California, it would pay to educate yourself regarding any corporate survival statute of limitations that may exist under the law of the state of the corporation’s formation.
While a split of authority technically still exists on this issue in California, the district that had previously found this issue to be one for conflict-of-laws analysis is the First District, which has now issued this opinion explicitly disagreeing with its prior opinion and offering a well-reasoned statutory construction analysis. The weight of authority in California therefore currently favors enforcing a foreign state’s corporate statute of limitations. Of course, the issue remains pending before the California Supreme Court, which could render a different (and controlling) opinion. Watch this space for updates!
For the full decision, click here.
Low, Ball & Lynch’s Environmental and Toxic Torts Team has been successfully representing defendants in asbestos-related litigation for over 25 years. The Environmental and Toxic Torts Team also handles cases involving chemical spills and toxicity, lead, silica, and Proposition 65.
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