Contact us with your California corporate & securities law questions (949) 353-6347 or Contact us here

Interstate Versus Intrastate Business - What's The Difference?

Some words are easily confused such as hyperthermia and hypothermia.  In the case of the former, one is overheated and in the case of the latter, one is not warm enough.  The difference becomes more understandable when one knows the roots of these two words.  Both use "thermia" which is derived from the Greek word for heat - θέρμη (therme) but the problem is with the prefixes.  "Hyper" is derived from the Greek word ὑπέρ which means over while "hypo" is derived from the Greek word ὑπό meaning under.

A similar confusion often arises with two common Latin prefixes - inter and intra.  The former means between while the latter means within.  The distinction was important in a ruling issued this week by Judge Beth Labson Freeman.  The case involved a plaintiff's efforts to reverse the removal of his case from state to federal court.  Among other things, the plaintiff argued that the defendant could not remove the case because it was no longer registered with the California Secretary of State to transact intrastate business.  In support, the plaintiff cited Section 2203 of the California Corporations Code which provides that a foreign corporation may not "maintain any action or proceeding upon any intrastate business so transacted in any court of this state" (emphasis added).  The defendant countered that even if it were considered a foreign corporation, it need not register with the California Secretary of State because its business consists exclusively of interstate commerce.

Judge Freeman concluded:

To succeed on his claim under Cal. Corp. Code § 2203, Plaintiff bears the burden of proving that "the action arises out of the transaction of intrastate business by a foreign corporation." United Sys. of Ark. v. Stamison, 63 Cal. App. 4th 1001, 1007, 74 Cal. Rptr. 2d 407 (1998).  Plaintiff has not satisfied his burden—PHEAA [the Defendant] claims that it conducts its student loan business out of Pennsylvania, and thus, any contact with California borrowers falls exclusively in interstate commerce. Opp'n 6-7. Captain Wellisch [the Plaintiff] does not contest this assertion, but does emphasize that PHEAA was previously registered in this state, and thus it is barred from taking any litigation action. Mot. 7. At the hearing, however, PHEAA explained that it used to conduct business from California and have employees in California, and thus registered with the Secretary of State. Because it no longer conducts business from California and no longer has any employees in the state, PHEAA allowed its registration to lapse. The Court finds this argument compelling. Thus, for the aforementioned reasons, the Court concludes that PHEAA is not barred from litigating this case.

Wellisch v. Pa. Higher Educ. Assistance Agency, 2017 U.S. Dist. LEXIS 40831 (N.D. Cal. Mar. 21, 2017).  The inter/intra distinction arises in other contexts.  Many firms, for example, use both an internet and an intranet.

Share on:

Pseudo-Foreign Corporations, California Secretary of State, interstate business, intrastate business, Judge Beth Freeman, Section 2203, Wellisch v. Pennsylvania Higher

ANY QUESTIONS REGARDING CALIFORNIA CORPORATE AND SECURITIES LAW? CONTACT US DIRECTLY

We offer expert advice with the intricacies of California law.

Our years of experience and expertise allow us to help clients navigate the business laws in California.

CONTACT US

Get the latest news and analysis about California Corporate & Securities law. Subscribe to our newsletter today!

We respect your email privacy

ABOUT OUR AUTHOR

30172DBAB0084D3A8F39D7AF0A8E79BC.ashx Keith Paul Bishop
Partner at Allen Matkins
(949) 353-6328
 Contact me
Learn More About Keith

nominee-badge

Get the latest news and analysis about California Corporate & Securities law. Subscribe to our newsletter today!

We respect your email privacy

CATEGORIES

see all

RECOGNITION

YOUTUBE

FACEBOOK