• Foreign Corporation Which Loses Its Certificate of Authority To Transact Business in NJ May Not File Suit to Enforce Claims
  • February 19, 2015 | Author: Betsy G. Ramos
  • Law Firm: Capehart & Scatchard, P.A. - Mount Laurel Office
  • In Seven Caesars, Inc. v. Dooley House, 2014 N.J. Super. Unpub. LEXIS 2222 (Sept. 11, 2014 App. Div.), Seven Caesars was a subcontractor to Dooley House which entered into a contract with the City of Camden to rehabilitated the Hogan House. After the contract was underway, the City maintained that Dooley House was not complying with the terms of the agreement and declined to release any further installment payments. Seven Caesars sued the City of Camden due to its failure to release those funds. The City argued that this suit should be dismissed because Seven Caesars, a Delaware corporation, had its corporate charter revoked in Delaware, making it ineligible to transact business in New Jersey and unable to file suit in New Jersey.

    Seven Caesar’s corporate status had lapsed in Delaware because of its failure to file an annual report and pay the annual franchise tax. As a result, New Jersey revoked its registration certificate to do business in the state. Under N.J.S.A. 14A:13-11(1), a foreign corporation transacting business in the state may not maintain any action in any court of the state until it obtains a certificate of authority. After filing this lawsuit, Seven Caesars did restore its corporate status in Delaware and was able to produce a certificate of authority showing New Jersey restored its corporate registration.

    Thus, the Appellate Division had to decide whether a foreign corporation whose certificate of authority to conduct business in New Jersey had expired, can cure that lapse and, upon issuance of a newly issued certificate of authority, retroactively validate a complaint filed when it had lost authority to do business.

    The court noted that N.J.S.A. 14A:13-11(1) is jurisdictional as it defines the right of a foreign corporation to use the state courts. This statute specifically restricts access to those foreign corporations transacting business in New Jersey if they fail to comply with the provisions of the Act and register to do business in the state.

    Thus, the Appellate Division found that the lapse in valid corporate status deprived Seven Caesars of its ability to file suit. Curing the defect and obtaining a retroactive certificate to conduct business will not retroactively validate the prior action. Therefore, the Appellate Division held that its suit should have been dismissed.