Legal Question in Business Law in California

Re: Can business owners be liable based on citizenship

Hello,

All of the U.S. courts (State & Federal) use geography as a basis for determining jurisdiction over a potential case. If an "act" occurs within the geography of the court's jurisdiction or if the persons affected by the "act" reside in that geographic jurisdiction it is likely that the court would go forward with the case. In this case I'm assuming that the "act" would be related to the marketing of products and services in the U.S.

For example, if the foreign company markets the "X Package" to California residents through the internet, or by other source of information available in CA, or if a CA resident suffers some loss due to the purchase of "X Package" in CA, that resident would be able to bring an action in CA Superior Court (and possibly in Federal Court depending on other jurisdictional factors).

In theory the CA resident could also hire an attorney in the foreign country and pursue their remedies there but that would be unlikely and it would depend on the jurisdictional laws of that country.

The citizenship of the owner is not going to play a role under these facts. If the owner of the company was foreign the result would be the same in terms of bringing the case. Where it would play a part is in the collection of judgments against the company if the U.S. citizen lives in the U.S. or has assets in the U.S. A smart lawyer would name the U.S. Citizen owner as co-defendant in the lawsuit and go against the assets of the owner in satisfaction of the judgment.

Of course there are certain defenses available that the owner could use in this situation throughout the trial. These defenses are unlikely to stop the case from going forward if the U.S. resident bought some good or service based on information available in the U.S.

Another consideration would be the way the business entity is set up. If it's a foreign corporation it is going to be harder to go after the assets of the owner without piercing the corporate veil. This has nothing to do with the owner's citizenship and would have to be based on the foreign country's corporate laws (this is where it gets even more complicated).

To summarize: if the "loss" or injury occurs in the U.S. to a U.S. resident, the resident can properly bring an action in a U.S. court. It is very unlikely that the citizenship of the owner would play a role. The U.S. court won't care where the company is registered since the "loss" or injury occurred in the U.S. to a U.S. resident so it has proper jurisdiction. Basically a foreign company doing business in the U.S. is not shielded from the U.S. court's jurisdiction, regardless of the owner's citizenship.