Q: Enforcing a judgment on a dissolved corporation

I sued my employer (it's a nonprofit organization) a couple of years ago, but since then, it has sold some of its assets to a third party and transitioned to a new corporation under a different name, but the executives and the board of directors remain the same. How will this transition impact my lawsuit? And should I change my legal strategy?

2 Lawyer Answers
Neil Pedersen
Neil Pedersen
  • Westminster, CA
  • Licensed in California

A: Yes, this will significantly complicate things. Far more information would need to be known about the situation to provide any solid guidance. If you have not yet procured a judgment, there are things you will need to do now to try to wrangle the new entity into the lawsuit, and depending on the nature of the claims, you might be able to get the individuals into the lawsuit as well. If there is already a judgment, there are post-judgment actions that can be taken to attempt to have the judgment apply to the new company. It is very complicated. You really should not try to do this yourself.

Locate and consult with an attorney familiar with collection efforts to give you assistance.

Good luck to you.

James L. Arrasmith
James L. Arrasmith pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
  • Sacramento, CA
  • Licensed in California

A: Under California law, if a corporation has been properly dissolved, it generally cannot be sued. However, there are some exceptions and considerations in your case:

1. Timing: If the lawsuit was filed before the corporation was dissolved, the case can typically proceed. The corporation's dissolution does not automatically terminate pending legal actions.

2. Successor liability: If the new corporation is a "mere continuation" of the previous one (same business, same management, etc.), it might be possible to argue that the new corporation should be held liable for the obligations of the previous one under the doctrine of successor liability.

3. Fraudulent transfer: If the assets were sold to the new corporation for less than fair market value to avoid liability, it could be argued that this was a fraudulent transfer. In such cases, the court might disregard the transfer.

4. "Alter ego" theory: If the executives and board members are using the corporate form to shield themselves from liability, a court might "pierce the corporate veil" and hold them personally liable.

Given the complexity of your situation, it is highly advisable to discuss your case with your attorney. They can review the specific details of the corporate transition and advise you on the best legal strategy moving forward. You may need to amend your complaint to add the new corporation as a defendant, argue successor liability, or pursue other legal theories depending on the exact circumstances.

Remember, this response is for informational purposes only and is not a substitute for professional legal advice tailored to your specific situation.

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