When a company shuts down operations, pays off creditors and steps away, those involved may believe that’s the end of it and begin moving onto other endeavors. However, if the company has products that may have caused injury to others, the firm could be subject to litigation well after the doors are closed.
In Florida, F.S. 607.1407 is known as the “corporate survival statute,” and it allows plaintiffs in tort actions to bring claims against the company for up to four years after it formally dissolves.
That assumes the company has properly dissolved – and not simply stopped operations – and that there was proper notification of that dissolution, either via public notice or personally to known creditors or claimants.
In the case of Williams v. Clark Sand Company, Inc., the Mississippi Supreme Court was asked to weigh several issues pertaining to Florida’s corporate survival statute, and whether claims regarding latent injuries could be brought more than four years after the corporation dissolved.
The Mississippi Supreme Court ruled they could not. Unlike statutes of limitations, which can be tolled under certain circumstances (such as when injuries aren’t discovered right away), the corporate survival statute is inflexible. Dissolution creates a situation where the corporation no longer exists, and therefore cannot be a party in a lawsuit. The statute can’t be tolled, so four years is the firm cut-off date in Florida.
The products liability lawsuit stemmed from 16 latent-injury silicosis cases filed by workers in Mississippi against a now-defunct Florida company. Silicosis is a respiratory disease that is caused by exposure to silica dust. Silica is a component of sand, so glass workers and sand-blasters may frequently be exposed. Similar to asbestos-related diseases like mesothelioma and asbestosis, its existence is often not revealed until years after exposure.
The Florida sand company filed its articles of dissolution and notice of corporate dissolution in June 2009. At that time, the 16 plaintiffs were unknown to the company. Then in 2013 – more than four years later – plaintiffs sued the company, alleging defective products that caused silicosis. The claims were filed in Mississippi, but defendants argued they were barred under Florida’s corporate-survival law.
Trial court granted a defense request for summary judgment, and plaintiff appealed.
Plaintiff argued the corporate survival statute is actually a statute of limitations, that Mississippi discovery rules should apply, that the company failed to send written notice requirements to known claimants and that Mississippi law should apply because the “center of gravity” of the lawsuit was in Mississippi.
In a split opinion, the state high court rejected all of these arguments.
The court noted that numerous other state supreme courts had ruled that similar corporate survival statutes were not, in fact, statutes of limitation. Essentially, common law holds that once a corporation is dissolved, “it is dead in the eyes of the law, and no claim could be maintained against it.”
Many states recognize the harshness of this, and thus have adopted corporate survival lawsuits. But once that window closes, that’s it.
The state high court found none of the other arguments had merit.
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Williams v. Clark Sand Company, Inc., Oct. 1, 2015, Mississippi Supreme Court
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