A new entry in my ongoing series on the internal affairs doctrine

The useful part

We have an interesting decision out of a California appellate court regarding the intersection of inspection rights and forum selection clauses. California grants shareholders an unwaivable inspection right for any company with its principal office in California, even if the company is organized elsewhere. An 11% shareholder of privately-held Orchid – organized in Delaware, headquartered in California – sought to exercise his California inspection right.

How it works

• Orchid refused, claiming it would only recognize a Delaware inspection right, and the request was invalid under Delaware law.
• The California trial court granted the stay, but Delaware dismissed the Orchid action, on the ground that it did not have personal jurisdiction over the shareholder.
• The first question is, are California inspection rights "internal affairs" such that the forum selection bylaw applies?
• Through a combination of plaintiff concessions and waivers, the court essentially assumes that Delaware law governs the interpretation of the meaning of the bylaw.
• Since under Delaware law, inspection rights are an internal affairs matter, then – even though California might treat...

Details worth keeping

So, the whole thing gets to the California appellate court.