197 So. 3d 829
La. Ct. App.2016Background
- KLL, Inc. sold assets to G.E.C., Inc. under a February 2011 Asset Purchase Agreement; G.E.C. executed a promissory note to KLL, Inc. in connection with the sale.
- KLL’s shareholders voluntarily dissolved KLL by affidavit under former La. R.S. 12:142.1 on December 26, 2012.
- In November 2013 the former shareholders (as plaintiffs) sued G.E.C. to enforce the promissory note; G.E.C. answered and filed reconventional demands and exceptions (including no right of action).
- The trial court sustained G.E.C.’s exception of no right of action as to the individual shareholders and allowed time to amend; plaintiffs refiled as KLL, Inc., but the court subsequently dismissed KLL’s suit with prejudice on a no-right-of-action exception.
- KLL appealed, arguing La. R.S. 12:1-1405 (effective Jan. 1, 2015) permits a dissolved corporation to continue to wind up, collect assets, and therefore KLL should be able to enforce the note despite having dissolved in 2012.
- The court treated La. R.S. 12:1-1405 as substantive and prospective, held it did not apply to a corporation dissolved in 2012, and affirmed dismissal because dissolution by affidavit under former La. R.S. 12:142.1 extinguished the corporation’s ability to pursue its inchoate claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether La. R.S. 12:1-1405 allows a corporation dissolved by affidavit (in 2012) to continue and sue to collect corporate claims | KLL: 12:1-1405 allows a dissolved corporation to continue to wind up and collect assets, so KLL may enforce the promissory note | G.E.C.: 12:1-1405 is not retroactive; KLL dissolved under former 12:142.1 and lacks capacity/right to bring corporate claims | Court: 12:1-1405 is substantive and prospective; it does not apply to corporations dissolved before Jan. 1, 2015; dismissal affirmed |
| Whether dissolution by affidavit under former La. R.S. 12:142.1 preserves the corporation’s inchoate claims against third parties | KLL: dissolution should not bar collection; result would unjustly enrich G.E.C. | G.E.C.: 12:142.1 provides dissolution shortcut but does not preserve the corporation’s own inchoate claims; shareholders assumed liabilities but not corporate claim survivability | Court: Following Gendusa/Robertson, 12:142.1 does not preserve the corporation’s inchoate claims; KLL knew of the claim when it dissolved and thus lost the right to sue |
Key Cases Cited
- Badeaux v. Southwest Computer Bureau, Inc., 929 So.2d 1211 (La. 2016) (exception of no right of action tests whether plaintiff is in class entitled to sue; reviewed de novo)
- Manuel v. Louisiana Sheriff's Risk Management Fund, 664 So.2d 81 (La. 1995) (distinguishes substantive from procedural/interpretive statutes for retroactivity)
- St. Paul Fire & Marine Ins. Co. v. E.R. Smith, 609 So.2d 809 (La. 1992) (principles on retroactivity of statutes)
- Gendusa v. City of New Orleans, 635 So.2d 1158 (La. App. 4th Cir. 1994) (holding shareholders cannot enforce dissolved corporation’s inchoate claims after affidavit dissolution under former 12:142.1)
- Robertson v. Weinmann, 782 So.2d 38 (La. App. 4th Cir. 2001) (affirming no-right-of-action dismissal where corporation dissolved by affidavit knew of claim before dissolution)
- Leader Buick, GMC Trucks, Inc. v. Weinmann, 841 So.2d 34 (La. App. 4th Cir. 2003) (similar application of Gendusa reasoning to deny shareholder standing to pursue corporate claims)