2:11-cv-02797
E.D. Cal.Sep 29, 2015Background
- Plaintiffs Thomas Aoki and Aoki Diabetes Research Institute moved to strike and dismiss counterclaims and seek default against Defendant Trina Health, LLC on grounds that Trina’s California registration was suspended.
- Defendant contends it dissolved its California LLC and now exists as a Nevada entity operating a clinic in Sacramento.
- Under Fed. R. Civ. P. 17(b)(3), California law governs an LLC’s capacity to sue or be sued in this federal court.
- California law requires a foreign LLC transacting intrastate business to obtain a certificate of registration and be in good standing with the California Secretary of State; the Secretary of State’s record showed Trina’s status as “FTB Suspended.”
- Cal. Corp. Code § 17708.07 bars a foreign LLC without registration from maintaining an action or proceeding in California but explicitly allows such an LLC to defend an action.
- The court reserved ruling on whether counterclaims qualify as an “action or proceeding” under § 17708.07, and ordered Defendant to file proof of reinstated registration with the California Secretary of State within 30 days; if not provided, the court will require further briefing on that statutory question.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Trina may maintain counterclaims while its California registration is suspended | Trina’s suspended registration bars it from maintaining any action or proceeding; strike answer, enter default, dismiss counterclaims | Trina says it dissolved CA LLC and now is a Nevada LLC; thus registration argument is inapplicable | Court reserved ruling on counterclaims; ordered Trina to show proof of valid CA registration within 30 days and deferred decision whether counterclaims are barred |
| Whether Trina must be registered in California to sue or be sued in federal court here | Plaintiff: unregistered foreign LLC transacting intrastate business lacks capacity to maintain actions | Trina: operates a clinic and disputes characterization; claims changed entity status (Nevada) | Court applied California law: unregistered foreign LLC cannot maintain an action, but may defend a proceeding per Cal. Corp. Code § 17708.07 |
| Whether county business license proves good standing with state | Plaintiff: county license insufficient; state registration controls | Defendant: submitted Sacramento county business license as proof of registration/good standing | Court held county license is insufficient; state Secretary of State registration required |
| Whether court should strike answer and enter default immediately | Plaintiff: suspension requires striking and default | Defendant: disputes premise and seeks opportunity to show registration | Court declined immediate striking/default; required proof of reinstatement and reserved further ruling |
Key Cases Cited
- Albers v. Guthy-Renker Corp., [citation="92 F. App'x 497"] (9th Cir.) (foreign LLC registration requirement affects capacity to sue)
- Grell v. Laci Le Beau Corp., 87 Cal. Rptr. 2d 358 (Cal. Ct. App.) (entities must be current on California taxes to maintain corporate rights)
- Timberline, Inc. v. Jaisinghani, 64 Cal. Rptr. 2d 4 (Cal. Ct. App.) (tax compliance requirement for California entities)