When Out of State Companies Can’t Sue in Colorado

There is a scenario where an out of state company can’t sue in in Colorado. Colorado law prohibits an out of state company from defending or maintaining a lawsuit against a Colorado resident unless they have filed certain paperwork with the Secretary of State:

Out of State Companies Suing in ColoradoNo foreign entity transacting business or conducting activities in this state without authority, nor anyone on its behalf, shall be permitted to maintain a proceeding in any court in this state for the collection of its debts until a statement of foreign entity authority for the foreign entity is filed in the records of the secretary of state. C.R.S. § 7-90-802.

The statement of foreign authority is available at the website of the Secretary of State. A foreign general partnership that is not a foreign limited liability partnerships and unincorporated nonprofit associations are not required to file. Failure to file it results in a stay of any lawsuit until compliance and a possible fine up to $5,000. Following the filing, a periodic report will be due every year to maintain the authority to conduct business in Colorado.

However, there is an exception. The U.S. Supreme Court has held that a corporation cannot be compelled to file as a foreign corporation if it is engaged solely in interstate commerce in that state. Cement Asbestos Products Co. v. Hartford Acc. and Indem. Co., 592 F.2d 1144, 1146 (10th Cir. 1979), citing to, Eli Lilly & Co. v. Sav-On-Drugs, Inc., 366 U.S. 276, 278 (1961). C.R.S. § 7-90-801(1) tracks this exception for registration for purely interstate commerce and provides:

A foreign entity shall not be considered to be transacting business or conducting activities in this state within the meaning of subsection (1) of this section by reason of carrying on in this state any one or more of the following activities:

  • Maintaining, defending, or settling in its own behalf any proceeding or dispute (emphasis added).

Therefore, if an out of state company sues a Colorado resident, they will not be required to register as a foreign company if the company’s only connection is selling goods into Colorado.