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CALIFORNIA CORPORATE & SECURITIES LAW

9th Circuit Holds Subsidiary Could Be The General Manager Of Its Parent

Section 2110 of the California Corporations Code governs service of process on a foreign corporation.  One means of valid service under the statute is by delivering process by hand to the corporation’s general manager in California.  The California General Corporation Law, however does not define “general manager”.  In Miller v. The Public Warehousing Company KSC (9th Cir. Case No. 15-55312, Feb. 1, 2016), the plaintiff contended that it had validly served a foreign corporation by serving process on its U.S. subsidiary as the foreign corporations general manager.

The Ninth Circuit noted that the California Courts of Appeal are divided on whether service on a parent corporation may be effected through its subsidiary.  Compare, e.g., General Motors Corp. v. Superior Court, 15 Cal. App. 3d 81 (1971) (service not permitted) and Yamaha Motor Co., Ltd. v. Superior Court, 174 Cal. App. 4th 264 (2009) (service permitted).  The Ninth Circuit noted that cases permitting services identified to requirements.  First, that the corporation was a foreign corporation.  Second that the subsidiary had a “sufficiently close” connection with the parent.  In this case, the Ninth Circuit found that the first requirement had been met – the defendant was a foreign corporation, but the record was unclear as to whether the second requirement had been satisfied.  Accordingly, the case was remanded to the District Court to consider “whether service was adequate on other grounds.”

“I’m my own grandpa!”

Personally, I’m surprised that a subsidiary would ever be considered the “general manager” of the parent.  The only other time that the term is used in the General Corporation Law is Section 312(a) which contemplates that the “general manager” is an individual: “The president, or if there is no president the chairperson of the board, is the general manager and chief executive officer of the corporation, unless otherwise provided in the articles or bylaws.”  The Ninth Circuit notes that the California Supreme Court in Cosper v. Smith & Wesson Arms Co., 53 Cal. 2d 77  (1959) had interpreted the predecessor of Section 2110 to permit service on a corporate agent, but that case involved service on an individual acting as agent directly for the foreign corporation.  The Ninth Circuit’s opinion is short and the Court determined that it is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3.

Finally, I note that Section 2110 makes no sense when the GCL’s definitions are applied.  The statute provides that delivery by hand of a copy of any process against a foreign corporation to “any officer of the corporation or its general manager in this state”.   Under the GCL, “corporation” is not a generic term.  Section 162 defines “corporation” and Section 174 defines  “foreign corporation”.  Under these definitions, a foreign corporation cannot be a corporation.  Therefore, it makes no sense to say that process against a foreign corporation may be delivered by hand to the corporation’s officer or general manager.

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