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Court Lacks Authority To Order Buyout Of Foreign Entities

When one partner or members seeks the dissolution of a California limited partnership or limited liability company, the other partners or members may keep the LP or LLC alive by purchasing, for cash, the interests owned by the party seeking dissolution. Corp. Code §  15908.02(b) (LP) and § 17707.03(c)(1) (LLC).  The Corporations Code includes no analogous buy out rights in the case of a general partnership.

The LP and LLC laws of Delaware, Hawaii and Texas do not afford similar buy out out rights but this did not deter the plaintiff in Boschetti v. Pacific Bay Investments, Inc., Boschetti v. Pacific Bay Investments, 2019 Cal. App. LEXIS 193.  Unfortunately for the plaintiff, there was not pending dissolution action against the LPs and LLCs but only the general partnership that owned them.  The plaintiff's difficulties were further compounded by the fact that the LPs and LLCs were organized in Delaware, Hawaii and Texas and the defendants argued that a California court had no authority to order their dissolution.  The Court of Appeal concluded that it need not decide whether a California court has jurisdiction to dissolve the foreign entities because, even assuming it does, the internal affairs doctrine would require it to apply to a dissolution claim the law of the state under which the entity was organized. 

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...

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