Opinion ID: 1540447
Heading Depth: 1
Heading Rank: 8

Heading: Statutory Consent to Jurisdiction and the Commerce Clause

Text: In Bendix Autolite Corp., the Court held that [s]tate interests that are legitimate for equal protection or due process purposes may be insufficient to withstand Commerce Clause scrutiny. 108 S.Ct. at 2222. [12] Therefore, in the present case, although GenCorp's consent to the general personal jurisdiction of Delaware courts by qualifying as a foreign corporation satisfies due process, we must also determine if the Delaware statute places an unreasonable burden on interstate commerce. Id. In Bendix Autolite Corp., the Court was called upon to review an Ohio registration statute which tolled the statute of limitations for any period of time that the foreign corporation was not present in the state. To be present in Ohio, a foreign corporation had to appoint an agent for service of process which, by statute, made the corporation subject to the general jurisdiction of the Ohio courts. Id. at 2221 n. 2. Thus, the Ohio tolling statute forced a foreign corporation to choose between exposure to the general jurisdiction of the Ohio courts, if it appointed an agent to receive process, and forfeiture of the statute of limitations defense if it did not make the appointment. Id. at 2221. The Court concluded that the tolling provision placed an undue burden on interstate commerce and thus violated the Commerce Clause. Id. at 2222. Specifically, the Court found that the burdens imposed on interstate commerce by Ohio's coercive statutory scheme were not outweigned by Ohio's interest in protecting its citizens from out-of-state corporations. Id. It is clear after Bendix Autolite Corp. that any statute which causes a foreign corporation to register and thereby consent to the general jurisdiction of a state, or in the absence of that registration and consent, to be subjected to regulations that are inconsistent with those for domestic corporations, is a burden that violates the federal commerce clause. [13] Id. However, the Delaware statutory scheme contains no coercive penalties or inconsistent regulations for foreign corporations that chose not to register. The penalty for failure to qualify as a foreign corporation in Delaware is set forth in 8 Del.C. § 383(a), which provides: (a) A foreign corporation which is required to comply with [sections] 371 and 372 of this title and which has done business in this State without authority shall not maintain any action or special proceeding in this State unless and until such corporation has been authorized to do business in this State and has paid to the State all fees, penalties and franchise taxes for the years or parts thereof during which it did business in this State without authority. This prohibition shall not apply to any successor in interest of such foreign corporation. Thus, a nonqualified foreign corporation which should have complied with Section 371 is simply prevented from maintaining any action in Delaware until it has complied. Farmers Bank v. Sinwellan Corp., Del.Supr., 367 A.2d 180, 182 (1976). More importantly, the same statute provides that the failure of a foreign corporation to obtain authority to do business in Delaware shall not impair the validity of any act or contract and shall not prevent the foreign corporation from defending an action in Delaware. See also Model Heating Co. v. Magarity, Del.Supr., 81 A. 394 (1911). 8 Del.C. § 383(b) states: (b) The failure of a foreign corporation to obtain authority to do business in this State shall not impair the validity of any contract or act of the foreign corporation or the right of any other party to the contract to maintain any action or special proceeding thereon, and shall not prevent the foreign corporation from defending any action or special proceeding in this State. The right of an unregistered foreign corporation to defend an action in Delaware and to raise a statute of limitations defense deserves particular attention in view of Bendix Autolite Corp. In Delaware, the statute of limitations continues to run even with respect to foreign corporations that transact business in this State and have not qualified to do business under Section 371. This Court has specifically held that there is no tolling effect on the applicable statute of limitations in any action when the nonresident defendant in the suit is subject to substituted service of process. Hurwitch v. Adams, Del.Supr., 155 A.2d 591, 593 (1959). Substituted service of process on nonqualifying foreign corporations is provided for in 8 Del.C. § 382(a). [14] Therefore, a foreign corporation which transacts business in this State and does not qualify to do business under Section 371, still has an absolute right to raise the statute of limitations as a defense in any action. Cf. Red Men's Fraternal Accident Ass'n of America v. Merritt, Del. Super., 117 A. 284, 285 (1921). It is clear that, unlike Midwesco in Bendix Autolite Corp., GenCorp faced no Hobson's choice in the Delaware statutory scheme which caused it to decide to qualify as a foreign corporation. In fact, GenCorp did not argue that it had been coerced into qualifying as a foreign corporation, even though, following the oral argument in this case, the parties were directed to address the implications for this appeal of the decision of Bendix Autolite Corp..