The California Supreme Court recently resolved conflicting opinions from state appellate intermediary courts on the subject of whether, or under what circumstances, a plaintiff may sue a dissolved out of State corporation in California. In Greb v. Diamond International Company, 56 Cal. 4th 243 (2013) the Court held that dissolved foreign corporations are not subject to suit in California where a direct conflict exists between California Corporations Code Section 2010 (which permits Plaintiffs to sue dissolved corporations for an indefinite period of time), and the corporate survival laws of the dissolved company’s state of incorporation. See, Greb v. Diamond International Company, 56 Cal. 4th 243 (2013). (pdf download )
Factual Background of Case
In December of 2008, Plaintiff Greb filed an asbestos-related personal injury complaint in San Francisco Superior Court. His Complaint named Diamond International Company, a Delaware Corporation that had filed for dissolution in July of 2005, but which still had funds remaining on its liability insurance policy.
Defendant Diamond International Company, a dissolved Delaware corporation, filed a demurrer to the Complaint on the ground that, under Delaware’s corporate survival law, the action was not permitted because it was initiated more than three years after the corporation was dissolved. Plaintiffs opposed the demurrer, arguing that California Corporations Code 2010 took precedence over Delaware law, and citing prior appellate court decisions and choice-of-law analysis. (pdf download of North American Asbestos decision)
The trial sustained the demurrer without leave to amend. The Court of Appeal affirmed.
The Supreme Court’s Decision
On final appeal, published February 21, 2013, the California Supreme Court affirmed and held that California Corporations Code Section 2010 only applied to dissolved California Corporations, not to foreign corporations. Notably, the Supreme Court considered and expressly rejected Plaintiffs’ alternative argument that, because Defendant was qualified to and did in fact conduct a large portion of its business prior to dissolution in the State of California, that it was a quasi-California corporation subject to California corporate survival law. In rejecting Plaintiffs argument the Court stated: “We discern in the statutes no evidence that the Legislature intended…to accomplish the dramatic result ascribed to it by Plaintiffs – essentially, imposing on all…foreign corporations that are qualified to undertake repeated and successive business in California, the burden of complying with all provisions of…[California’s corporation code]…subject to what would often be a difficult choice of law analysis with regard to each California statutory provision that conflicts with a provision governing the corporation in its state of formation. As defendant suggests, such a scheme would require foreign corporations to “follow a litany of requirements regarding various corporate activities that their home state already regulates, creating innumerable, treacherous conflicts of law that the corporation would find impossible to navigate.”
Although not expressly referenced in the opinion, the California Supreme Court issued its ruling in the Greb within weeks of a seemingly related Delaware Court of Chancery decision holding that, even when funds remain on a dissolved Delaware corporation’s insurance policy, a plaintiff may not recover against the policy or initiate suit against the dissolved corporation outside of the time frame contemplated by Delaware’s corporate survival laws.
In recent years the California Supreme Court has published several decisions that are extremely favorable to the asbestos defense practitioner. In 2011 the Supreme Court limited a plaintiff’s medical expenses to those actually paid by his or her insurance company to a medical provider. (pdf download of Howell v. Hamilton Meats decision) In 2012, the Court held that an equipment manufacturer cannot be held liable for a plaintiff’s exposure to asbestos-containing replacement component parts used with the equipment, where it neither manufactured nor supplied the asbestos containing replacement part involved in the exposure. (pdf download of O’Neil v. Crane Co. decision)
As seen above, the Greb case is the third California Supreme Court decision issued in the past two years limiting either the amount of damages recoverable to an asbestos plaintiff in a civil suit, or the pool of available defendants from which a recovery can be made. Recent decisions from California’s intermediary appellate courts give defense practitioners reason to hope that this trend will continue. (pdf download of Campbell v. Superior Court)
Given the current favorable appellate climate, California defense practitioners should be on the lookout for issues to press on demurrer, summary judgment, or in limine at trial in cases where Plaintiff’s claims against the client are tenuous on issues of jurisdiction and duty.