Secretary Of State Filing Does Not Create Citizenship

Corporations do not enjoy all the rights of citizenship, but in some cases a corporation's citizenship can be important.  For example, the diversity jurisdiction of the federal courts depends upon establishing two facts.  First, that the amount in controversy exceed $75,000.  Second, complete diversity of citizenship must exist between the parties. 28 U.S.C. § 1332. 

In a recent decision, U.S. District Court Judge Cormac J. Carney rejected an argument that a professional corporation became a citizen of California when it filed a statement of designation with the California Secretary of State's office:

"Nevertheless, Plaintiffs argue that because CKC filed a 'Statement and Designation by Foreign Professional Corporation' with the California Secretary of State, it is now a California professional corporation under California Corporations Code § 13404.5(d). (SeeMot. at 8.)  However, Section 13404.5(d) does nothing to establish a professional corporation's citizenship, but rather merely subjects any professional corporation doing business in California to the state's laws and regulations concerning that profession as well as its courts. This is a registration requirement for 'foreign' corporations doing business in California and — to state the obvious because they are — 'foreign' to California they are not citizens of the state. That CKC has an office in California and does some business here is not sufficient to establish citizenship in this state.  Accordingly, CKC is a citizen of Texas for diversity jurisdiction purposes."

Mueller v. Clarke, 2020 U.S. Dist. LEXIS 178261.

Tags: jurisdiction