COLUMBUS, Ohio (Legal Newsline) - The Ohio Supreme Court ruled Tuesday that the authority to appoint a receiver for a dissolved foreign corporation is subject to constitutional limitations.
In the case against The Sager Corporation, the Court said a receiver could not be appointed for the company for the purpose of accepting service of process and marshaling assets, which consisted of unexhausted liability insurance policies, for asbestos-related claims filed against Sager.
An Illinois corporation since 1921, Sager manufactured protective clothing and other industrial products containing asbestos, such as gloves, aprons, leggings, jackets and curtains, some of which were sold to United States Steel in Lorain, Ohio.
In June 1998, Sager ceased its operations and filed for dissolution in Illinois, commencing a five-year post-dissolution period during which Illinois law permitted claims to be asserted against it. That period ended on June 17, 2003.
In September 2007, Commodore Bowens, suffering from mesothelioma, and executors of the estates of two deceased victims of mesothelioma filed suit in Ohio against Sager and more than 200 other entities for personal injury, loss of consortium and wrongful death, alleging that their injuries stemmed from exposure to asbestos products.
On July 1, 2008, after having appeared and participated in discovery in the litigation, Sager moved for summary judgment.
The company asserted that because it had been dissolved and because the five-year period for filing claims against it had expired, it was no longer amenable to suit.
In response, the law firm of Bevan and Associates, on behalf of all clients with asbestos-related claims pending against Sager, sought the appointment of a receiver to wind up Sager's corporate affairs in Ohio, asserting that "Sager has insurance policies which have
not been exhausted, and are assets of Sager."
The company opposed the motion, urging that the trial court lacked jurisdiction to appoint a receiver for a foreign corporation and arguing that even if it had jurisdiction, it should apply Illinois law, which provides that Sager is no longer amenable to suit.
Sager also argued that the appointment violated the due process, commerce, and full faith and credit clauses of the U.S. Constitution.
The trial court, in appointing a receiver for Sager, concluded that the company's conduct in Ohio vested the court with jurisdiction to wind up its affairs in Ohio and found that the company had the capacity to be sued under Ohio law.
The Cuyahoga County Court of Appeals affirmed that the trial court had the authority to appoint a receiver for a dissolved corporation.
The state's high court reversed the appeals court's ruling.
"The authority to appoint a receiver for a dissolved foreign corporation is subject to constitutional limitations, notably the full faith and credit clause, obliging us to recognize Illinois corporation law as barring claims filed against Sager that were not pending on June 17, 2003," Justice Terrence O'Donnell wrote for the Court majority.
"Thus, the court is without authority to appoint a receiver to 'accept the process of claims, process defenses and marshal assets' on behalf of the Sager Corporation, as the trial court ruled."
The majority explained in its 15-page ruling that because the claims had not been commenced against Sager as of June 17, 2003, and no judgment had been entered against it, and because the claimants are precluded from obtaining a judgment against Sager, the appointment of a receiver is barred.
"In conformity with constitutional requirements of due process and the full faith and credit clause, the law of the state of incorporation controls whether a corporation is amenable to suit," O'Donnell wrote.
"Here, we apply Illinois corporate law and conclude that claims filed against a dissolved Illinois corporation more than five years after dissolution are barred."
From Legal Newsline: Reach Jessica Karmasek by email at email@example.com.