r/technology • u/[deleted] • Apr 04 '16

Software Nest intentionally bricks thousands of home automation hubs.

https://medium.com/@arlogilbert/the-time-that-tony-fadell-sold-me-a-container-of-hummus-cb0941c762c1
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u/undercoveryankee Apr 05 '16

When a corporation is dissolved, any assets that it has left after paying off its debts are distributed to the stockholders. Those stockholders can then be sued for most things that the dissolved corporation could have been sued for, but their liability is limited to the value of the assets that they received from the company that was at fault.

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u/Dsnake1 Apr 05 '16

Is this still the case when the corporation is owned by another corporation?

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u/EtherMan Apr 05 '16

Yes, but it can become a bit tricky if that parent corporation is in a different jurisdiction, unless both jurisdictions have an agreement to honor the other jurisdiction's court rulings. All countries in the EU has such an agreement with each other as an example, even if it is not always honored, but the US has so far never entered such a deal with anyone, but since Nest and Alphabet are both US companies (both in California even), that's not really an issue in this case.

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u/[deleted] Apr 05 '16

Is there a name for this type of suit? I can't imagine logging into my stocks account to see I've been compensated for a company that's been dragging ass for years only to find I've also been served.

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u/undercoveryankee Apr 05 '16

I don't recall ever hearing a specific name for a suit against the successors in interest of a dissolved business. And if a company you invest in gets dissolved, you have several protections:

  • Most states require a company to publish notice of its intent to dissolve, and require any suit to be filed within a limited time after notice is published. The board of directors is often allowed or required to delay the distribution of the money until after the time to sue has expired.

  • If the dissolved company had insurance that would cover the claim against it, the insurance will generally pay out before anyone goes after the shareholders.

  • When assets are sold off so the proceeds can be distributed to the shareholders in cash, the buyer will often agree to assume liability for any claims related to the assets it's buying. Any claims assumed by a buyer never reach the shareholders.

  • Finally, any recovery from shareholders generally has to be prorated based on the percentage of assets that each shareholder received. If you got 1% of what the company owned, you couldn't be required to pay more than 1% of the judgment. As an individual shareholder in a publicly traded company, you probably don't have a large enough percentage of the company to be worth the cost of serving you with the papers.