Last week, the California Supreme Court decided that Corporations Code Section 2010, which governs the winding-up and survival of dissolved corporations, does not apply to foreign corporations.
The case stemmed from Walter and Karen Greb's 2008 asbestos lawsuit against Diamond International Corporation and several other entities. Although Diamond had been dissolved for many years, the Grebs sought recovery from unexhausted liability insurance that covered Diamond during the decades when it did business in California.
Diamond demurred, alleging that more than three years earlier, it had obtained a corporate dissolution pursuant to the laws of Delaware, where it was incorporated. Pursuant to Delaware's three-year survival statute, Diamond lacked the capacity to be sued. The Grebs opposed the motion, arguing their action was permitted under California's own survival statute, Section 2010.
Both the trial court and the appellate court sided with Diamond, concluding that Delaware's corresponding statute applied.
Section 2010 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 enabling it to collect and discharge obligations, dispose of and convey its property and collect and divide its assets, but not for the purpose of continuing business except so far as necessary for the winding up thereof." The section sets no time limitation for suing a dissolved corporation for injuries arising from its pre-dissolution conduct; the sole limitation is the applicable statute of limitations relating to each cause of action.
In deciding that the survival statute did not apply to foreign corporations, the court resolved a split among California appellate courts on the matter. The Supreme Court's ruling overturns the Third Appellate District's North American Asbestos Corp. v. Superior Court II decision. The court noted, "The policy question concerning whether the provisions of California's survival statute should apply to foreign as well as domestic corporations is properly a matter to be determined by the Legislature, not this court."
- Greb v. Diamond International (FindLaw's CaseLaw)
- Court Clarifies Mixed-Motive Termination Burden Shifting (FindLaw's California Case Law Blog)
- An End to the Cartel? Board Contemplating New Class of Legal Pros (FindLaw's California Case Law Blog)