Diversity Jurisdiction
and Dissolved Entities
A recent decision from Maryland
addresses how a dissolved corporation is assessed for purposes of diversity
jurisdiction. On the facts here at issue, you do it the same way you would with
a non-dissolved corporation. Stanback v.
Levitas, Civ. Act. No. WMN-15-3064, 2016 WL 893245 (D. Md. March 9, 2016).
Plaintiff Stanback brought suit
against a variety of dependents including State Real Estate, Inc., a
corporation whose charter had been forfeited some two years prior to the time
the complaint was filed. Levitas had been a director of State Real Estate and
became a trustee of its assets at the time the corporation’s charter was forfeited.
Levitas sought to remove the action to federal court on the basis of diversity
jurisdiction. Stanback would resist removal to federal court on the basis that,
notwithstanding its dissolution, State Real Estate’s citizenship in Maryland
would continue and would preclude diversity jurisdiction.
Looking to Maryland law,
notwithstanding a provision to the effect that corporate powers are rendered “inoperative,
null, and void” as of the forfeiture of the charter, it is otherwise provided
that “a corporation continues to exist, at least for some limited purposes
beyond forfeiture or dissolution of its charter.” From there, citing a variety
of authorities, the court was able to determine that a dissolved corporation
that remains in the winding up phase is still “alive” for purposes of suing and
being sued in order to satisfy its debts and liabilities. In that the court
found that State Real Estate still had certain assets, namely an insurance
policy, it was determined that it could be sued in its own name as a Maryland
corporation. As such, the corporation was a party to the action and would
continue to be deemed a citizen of its jurisdiction of organization and that in
which it had its principal place of business. That being Maryland, diversity
was absent and the case was remanded to state court.
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