Can My Company Sue in California?
     
    California Corporations Code §2203(c) is often cited by local attorneys attempting to exclude Non-Calfornia companies from filing suit in California. However, before a company becomes subject to §2203(c), it must be subject to§ 2100, which states:
"This chapter applies only to foreign corporations transacting intrastate business, except as otherwise provided."
     
    Intrastate business is defined in §191 of the Corporations Code, which provides, in part as follows:
(a) for the purpose of Chapter 21 (commencing with §2100), "transact intrastate business" means entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce.
(b) A foreign corporation shall not be considered to be transacting intrastate business merely because its subsidiary transacts intrastate business.
(c) (...) A foreign corporation shall not be considered to be transacting intrastate business (...) solely by reason of carrying on in this state any one or more of the following activities:
   
(1) Maintaining or defending any action or suit(...)
(6) Soliciting or procuring orders whether by mail or through employees or agents or otherwise, where such orders require acceptance without this state before becoming binding contracts.
    Further, the United States Constitution* delegates power to Congress to regulate commerce among the several states. Individual states are forbidden from imposing restrictions on commerce between the states. In Allenberg Cotton Company, Inc. v. Pittman, a Tennessee corporation brought suit for breach of contract in a Mississippi court. Relying on a Mississippi statute which is almost identical to §2203(c) the Mississippi Supreme Court ruled that the Tennessee corporation could not maintain its suit because "it failed to qualify to do business in the state of Mississippi. The US Supreme Court reversed and ruled that "Mississippi's refusal to honor and enforce contracts made for interstate or foreign commerce is repugnant" to the constitution.
     
    And, in W.W. Kimball v. Read, an Illinois corporation sold pianos to a California retail firm. When the Illinois corporation sued to recover the purchase price, Read argued that W.W. Kimball was without capacity to sue because it failed to comply with the then existing counterpart of Corporations Code §2203 (c). The court of Appeal ruled, "...The sales followed by the delivery of pianos in this state, upon orders sent from this state to the (...) state of Illinois, are transactions in interstate commerce and beyond the scope of California law.
     
    Therefore, foreign corporations engaged in interstate commerce do not have to register in California to do business. Merely approving contracts in a corporation's home state and shipping goods to customers in California does not constitute conducting "intrastate" business in California. A corporation which does not maintain an office or place of business in California, has no employees in the state, maintains no payroll or bank accounts in California and accepts orders for merchandise in its home state, would generally not be said to transact intrastate business within California. As such, its business is "interstate" commerce and virtually the opposite of engaging in "intrastate" commerce.
     
    " By excluding acts done by a foreign corporation in this state in interstate or foreign commerce from its definition of the words "transact intrastate business," the California Legislature clearly recognized that a corporation may do business in the state without transacting intrastate business." Carl F.W. Borgward, G.M.B.H. v. Superior Court.
     
    * Citations have been omitted to conserve space.
     
    The foregoing is offered for informational purposes only and should not relied upon as legal advice. Please seek the advice of a licensed, California attorney prior to deciding to institute litigation in California.
     
   
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