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October 2012

SF Office Wins California Appellate Ruling Limiting Suits Against Dissolved Out-of-State Corporations

Gordon & Rees won a published appellate decision that limits insurer liability in lawsuits against dissolved corporations.  The decision could help stem plaintiff forum-shopping and allow insurers to “close the books” on liabilities of such corporations.

In Robinson v. SSW, Inc. (2012)  -- Cal.App.4th --, California plaintiffs sued a Nebraska corporation that had voluntarily dissolved seven years prior to service.  Nebraska corporation law bars suit against a voluntarily dissolved corporation more than five years after dissolution.  (Neb. Rev. Stat. § 21-20,157.)  Plaintiffs argued that a California statute, not the Nebraska statute, governed.  (Cal. Corp. Code, § 2010.)  The California statute has no time limit on when a dissolved corporation may be sued: a dissolved corporation “nevertheless continues to exist for the purpose of … defending actions … against it and … to … discharge obligations.” The practical effect is often to drag insurers into suits on behalf of long-gone insureds. “Causes of action … may be enforced against the dissolved corporation … including, without limitation, insurance assets held by the corporation.” (Cal. Corp. Code, § 2011(a)(1)(A); see also Cal. Ins. Code, § 11580 ["insolvency or bankruptcy of the insured will not release the insurer"].)

Gordon & Rees persuaded the trial court on summary judgment, and thereafter the court of appeal, that the California statute applies only to corporations that are “organized under” the laws of California.  Thus, the Nebraska statute applied to the Nebraska corporation and barred suit.

Although, as the court recognized, its decision was in line with well-settled precedent that California generally looks to the law of the state of incorporation to determine the rights and duties of dissolved corporations, courts have been split on the specific issue in Robinson.  The First Appellate District in American Asbestos Corp. v. Superior Court ("North American I”) (1982) 128 Cal.App.3d 138, and the Second Appellate District in Riley v. Fitzgerald (1986) 187 Cal.App.3d 871, reached the same conclusion as did the First District in the present case – that Section 2010 does not apply to dissolved foreign corporations.  Surprisingly, the First Appellate District reached the opposite conclusion in North American Asbestos Corp. v. Superior Court (“North American II”) (1986) 180 Cal.App.3d 902.  More recently, the First Appellate District again concluded that Section 2010 did not apply to dissolved foreign corporations, but that case is now pending before the California Supreme Court in Greb v. Diamond Intl. Corp. (S183365, review granted on August 18, 2010).  Thus, although the weight of authority appears to be tilted away from applying Section 2010 to dissolved foreign corporations, the issue is not settled and the California Supreme Court will have the last say in the matter.

The Gordon & Rees lawyers involved in this win are Michael J. Pietrykowski, Don Willenburg, Peter Turcotte & Michael J. Plocki, all of the San Francisco office.  Mr. Plocki went to his first appellate oral argument and won.

Michael J. Pietrykowski
Peter J. Turcotte
Don Willenburg



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