Under Section 1030 of the California Code of Civil Procedure, a defendant may at any time apply to the court by noticed motion for an order requiring the plaintiff to file an undertaking to secure an award of costs and attorney’s fees which may be awarded in the action or special proceeding. The grounds for this motion are that the plaintiff resides out of state or is a foreign corporation, and there is a reasonable possibility that the moving defendant will obtain a favorable judgment. "Attorney's fees" for purposes of the statute means reasonable attorney’s fees a party may be authorized to recover by a statute apart from Section 1030 or by contract.
The statute does not define "foreign corporation". Although not necessarily controlling Section 171 of the California Corporations Code defines "foreign corporation" as any corporation other than a domestic corporation (i.e., a corporation formed under the laws of California). Although the statute does not refer to other types of foreign business entities, such as limited liability companies or limited partnerships, I am aware of at least one trial court order applying the statute to a limited liability company. First Motor Group of Encino v. Encino Motorcars Inc., No. LC106723, 2020 WL 1878762 (Cal. Super. Jan. 22, 2020).
Courts have observed that the purpose of Section 1030 is to protect a defendants ability to collect judgments from out of state plaintiffs. See, e.g., Guangzhou Yucheng Trading Co. v. DBest Prod., Inc., 2023 WL 2347086, at *3 (C.D. Cal. Feb. 17, 2023). However, the statute requires in the case of a corporation only that it be a foreign corporation. In many cases, a foreign corporation's principal office and/or a majority of its assets may be situated in California. Thus, status as a foreign corporation may, or may not, relate to a defendant's ability to collect.
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