Lord, Lewis & Coleman, LLC v. Bellaco, Inc., et al.

The Petitioner, a Texas limited liability company, failed to pay a $50 franchise tax. As a result, the Texas Comptroller gave notice that it was forfeiting the LLC’s “corporate privileges” under the Texas Tax Code, which defines the effects as, among other things, prohibiting the LLC from suing and defending in state courts. Texas Tax Code § 171.252. The Comptroller certified the failure to pay franchise taxes to the Texas Secretary of State, who forfeited the LLC’s certificate of formation under the Tax Code in a letter dated January 28, 2011. The LLC brought suit about four-years later on a breach of contract claim for over $1 million in damages. The trial court and Texas Court of Appeals ruled that the Secretary of State’s action in 2011 had the effect of terminating the existence of the LLC, such that it had to wind up its affairs and bring suit on all existing claims within three years or the claims would be extinguished, under the Texas Business Organizations Code. The LLC received no notice, other than the letter of forfeiture from the Secretary of State, that these actions were being taken against it. The Texas courts ruled the cause of action had been extinguished by operation of law before the lawsuit was filed. QUESTION PRESENTED FOR REVIEW Whether a Texas statute, which extinguishes a business entity’s choses in action without notice, violates the Due Process clause of the U.S. Constitution?