The California General Corporation Law providers that the corporate existence begins upon filing of the articles. Cal. Corp. Code § 200(c). However, some California corporations have been birthed without the filing of articles. Perhaps the most notable example is the State Bar of California. Section 6001 of the Business & Professions Code established the State Bar by proclamation: "The State Bar of California is a public corporation."
It is one thing to declare the State Bar to be a "public corporation", it is quite another to define what a "public corporation" actually is - something that the Business & Professions Code fails to do. The want of a definition isn't just a matter of semantics, it actually can have constitutional implications.
The Eleventh Amendment to the United States Constitutions provides: "The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State." Thus, one question is whether the State Bar as a public corporation entitled to immunity under the Eleventh Amendment from suit in federal court as an "arm of the state"?
In an en banc opinion issued earlier this month, the Ninth Circuit Court of Appeals applied a three factor test for determining whether the State Bar was an arm of the state:
- the state's intent as to the status of the entity, including the functions performed by the entity;
- The state's control over the entity; and
- The entity's overall effects on the state treasury.
Kohn v. State Bar of California, 2023 WL 8441781 (9th Cir. Dec. 6, 2023). Then Judge Brent Kavanaugh fashioned this test while sitting on the D.C. Circuit. Puerto Rico Ports Auth. v. Fed. Mar. Comm'n, 531 F.3d 868, 873 (D.C. Cir. 2008).
Judge Patrick J. Bumatay agreed with the majority's adoption of the three factor test but disagreed with the application of that test to the State Bar:
California law lays out a structure for the State Bar like an independent municipality. By creating that structure, California has shown an intent not to clothe the State Bar with the immunity that California enjoys. More than that, California has treated the State Bar as a separate entity by allowing it to operate without significant control or direction. And finally, the State Bar's liabilities are independent of the State. Each of these factors strongly points to concluding no immunity for the State Bar.
My sympathies are with Judge Bumatay's analysis.
