Supreme Court Holds California’s Survival Statute Inapplicable To Delaware Corporation

Section 278 of the Delaware General Corporation in effect limits suits against dissolved corporations to a period of three years from dissolution. In contrast, Section 2010 of the California Corporations Code sets no time limitation for suing a dissolved corporation. As the Supreme Court explained in Peñasquitos, Inc. v. Superior Court, 53 Cal. 3d 1180, 1190 (1991):

Under our statutory scheme, the effect of dissolution is not so much a change in the corporation’s status as a change in its permitted scope of activity. . . . Thus, a corporation’s dissolution is best understood as its death, but merely as its retirement from active business.

So what law applies when a dissolved Delaware corporation is sued in California? In dicta included in two opinions from the 1980s, the Court of Appeal said that California’s survival law does not apply to suits against dissolved foreign corporations. North American Asbestos Corp. v. Superior Court, 128 Cal. App. 3d 138, 143 (1982) and Riley v. Fitzgerald, 178 Cal. App. 3d 871, 875-877 (1986). In another opinion from the same decade and with the same name, the Court of Appeal held that Section 2010 applied to an Illinois corporation. North American Asbestos Corp. v. Superior Court, 180 Cal. App. 3d 902, 905 (1986). Now, more than two decades later, the California Supreme Court has decided to resolve this split. In Greb v. Diamond Int’l Corp., 2013 Cal. LEXIS 1114 (Feb. 21, 2013), the Supreme Court in an opinion by Chief Justice Tani Cantil-Sakauye concluded that Section 2010 does not apply to foreign corporations.

 

Topics:  Dissolution, Foreign Corporations, Limitation Periods

Published In: Bankruptcy Updates, Business Organization Updates, Civil Procedure Updates, Conflict of Laws Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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