A Oregon District Court Considers Whether A Dissolved Corporation's Liability Policy Constitutes An Undistributed Asset
The issue of whether a liability policy of a dissolved corporation is an undistributed corporate asset capable of being distributed has not been addressed by Oregon’s state appellate courts. In the recent Oregon District Court opinion, Ironwood Homes, Inc. v. Bowen, 2010 U.S. Dist. LEXIS 59933 (D. Or. June 14, 2010), Oregon District Court Judge Anna Brown examined a dissolved corporation’s motion to dismiss claims against it for failure to state a claim based on the plaintiffs’ failure to allege that the dissolved corporation holds any undistributed assets, and thus lacks the capacity to be sued. The Ironwood court’s opinion is of interest because the court considered the fact that the dissolved corporation’s liability insurer was paying the attorney representing the dissolved corporation as a factor in its denial of the motion.
In Ironwood, the plaintiffs sought partial relief for environmental response costs under CERCLA. The dissolved corporation, Linke Enterprises, Inc. (“Linke”), apparently represented by an attorney paid by its liability insurer, moved to dismiss the claims against Linke on the ground that the plaintiffs did not allege that Linke holds any undistributed assets and, accordingly, lacks the capacity to be sued. Linke asserted that it is a “dead and buried” corporation under Oregon law with no undistributed assets and thus not able to be sued or held liable for environmental response costs. Noting that Fed. R. Civ. P. 17(b) (2) provides that the capacity of a corporation to sue or to be sued is determined by the law under which it was organized, and also noting that the Ninth Circuit has held that FED. R. Civ. P. 17(b) (2) requires the court to apply state law when deciding whether the dissolved corporation may be sued for damages, the Ironwood court looked to apply Oregon law.
Oregon statutes provide that the dissolution of a corporation does not prevent the commencement of a proceeding against it in its corporate name, and also provide that a claim against a dissolved corporation may be enforced to the extent of its undistributed assets unless the corporation complies with specified notice provisions, which, while not addressed in the opinion, Linke likely did not fulfill. The Ironwood court noted that the parties did not cite, and the court did not find, any Oregon authorities helpful in addressing the issue as to whether a liability policy is a corporate asset capable of being distributed when a corporation is dissolved, but also noted that courts of other jurisdictions have found that liability policies should be listed as assets of a bankruptcy estate.
In light of the lack of Oregon law on the central issue, the court found it reasonable to infer that Linke’s liability insurance policies are an asset of the company because an attorney paid by the insurer is representing Linke’s interests in this case. That inference, together with the court’s finding that the plaintiffs were not required to allege that Linke has undistributed assets to satisfy a judgment, resulted in the court’s denial of Linke’s motion to dismiss.
