In its recent opinion in Southern California Darts Association v. Zaffina (Case No. 13-55780), the Ninth Circuit Court of Appeals held that a business entity that had its corporate powers suspended by the State of California nevertheless could sue for infringement of its trademarks.
For forty years or more, the plaintiff has promoted the competitive play of the game of darts and has coordinated league play of this game. For a time, beginning in the 1960s, members of the plaintiff formed and ran a corporation named “Southern California Darts Association, Inc.” The corporate powers of the original corporation were suspended by the State of California in 1977, apparently for nonpayment of the corporate franchise tax. Thereafter, the plaintiff continued to use a number of trademarks including its full name (“Southern California Darts Association”); the acronym “SCDA”; the nickname “SoCal Darts”; and a logo featuring the organization’s full name and a dart board.
A main issue in Zaffina was whether the plaintiff had capacity to sue because its corporate powers had been suspended in 1977. Under California law, a delinquent corporation whose powers have been suspended may not bring suit and may not defend a legal action.
However, in Zaffina, the Ninth Circuit held that the suspension of the original corporation’s powers does not necessarily extinguish the plaintiff’s capacity to pursue federal trademark claims in federal court. To reach this conclusion, the Ninth Circuit relied on Rule 17(b)(3)(A) of the Federal Rules of Civil Procedure, which states that a “partnership or other unincorporated association” that lacks the capacity to sue under the law of the state in which the court is located “may sue or be sued in its common name to enforce a substantive right existing under the United States Constitution or laws.” Because the plaintiff was pursuing a federal trademark infringement claim in federal court, it had the capacity to sue.