Just because you forfeit your corporate charter in California, and cease to do business in the State, does not mean your corporation cannot be sued and served in California.
In Real v. St. Jude Med., Inc., 2017 U.S. Dist. LEXIS 47081 (C.D. Cal. Mar. 29, 2017) a Minnesota corporation, St. Jude Medical, Inc., in 1996, qualified with the California Secretary of State’s office to transact intrastate business under the name St. Jude Medical Products, Inc. In order to qualify St. Jude designated a California agent for service of process in California. Later, St. Jude failed to file its annual statement of information and, as a result, its corporate powers, rights and privileges as a foreign corporation in California were, by law, forfeited.
In 2016, a putative class action lawsuit was filed against St. Jude in Los Angeles Superior Court. Plaintiffs served the complaint on St. Jude’s designated resident California agent despite the forfeiture of St. Jude’s right to do business in the state. An affiliated corporation then removed the case to the federal court and Plaintiffs sought to have the case remanded to state court.
St. Jude claimed it had not been properly served since it had forfeited its charter in California. The Court determined St. Jude had been validly served with Summons and Complaint. It held forfeiture of the right to transact business in California does not prevent service on the company in the State of California. It instructed that, unless a forfeited entity has also “fil[ed] a certificate of surrender” the designated agent’s appointment to receive process on behalf of the forfeited entity is not revoked. Neither the fact that the agent rejected service, nor the fact that it failed to forward the Summons and Complaint to St. Jude made a difference. Service was deemed sufficient and complete upon delivery of the Summons and Complaint to a company’s agent for service of process. What happens thereafter is of no relevance.
The fact that the Secretary of State has forfeited a foreign corporation’s rights to transact intrastate business does not necessarily mean that the corporation has been dissolved or defunct. Thus, unless the charter is surrendered the corporation will continue to be subject to service on the designated agent for service of process.
Based on this ruling, if a corporation decides no longer to conduct business in the State of California it should not just rely on permitting its qualification to lapse. Rather, seek legal counsel to help the corporation surrender its California charter. Otherwise you may find your corporation has been served, defaulted and had judgment entered against it and have no ability to contest the judgment.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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