Alter Ego And The Internal Affairs Doctrine
The internal affairs doctrine is a conflict of laws principle that recognizes that only one state should have the authority to regulate a corporation’s internal affairs. Under the internal affairs doctrine, that special state is the state of incorporation. But what exactly constitutes a corporation’s ”internal affairs”? Many lawyers, particularly those in Delaware, take a broad view of what constitutes an internal affair. However, Read more...
Is FDIC v. Van Dellen California’s Smith v. Van Gorkom?
Last Friday, the jury in FDIC v. Van Dellen (C.D. Cal. Case No. CV 10-4915 DSF (SHx)) returned a verdict totalling nearly $169 million against three former officers of the home builder division of IndyMac Bank, F.S.B. The Office of Thrift Supervision closed the bank in 2008. As the receiver for the bank, the Federal Deposit Insurance Corporation filed suit against the three former officers. Read more...
Delaware Court of Chancery “Overrules” Federal Court
I’ve often heard the claim that one reason to incorporate in Delaware is that the courts won’t surprise you. When I hear this, I recall the surprise, and even outrage, in the aftermath of Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985) . See, e.g., Fischel, The Business Judgment Rule and the Trans Union Case, 40 Bus. Law. 1437, 1455 (1985) Read more...
California Court Distinguishes Delaware’s VantagePoint Opinion
Typically, corporate bylaws provide that officers serve at the pleasure of the Board of Directors and any officer may be removed, either with or without cause, by the Board of Directors. This right of removal is consonant with the notion that an officer’s relationship with the corporation is the subject of corporate law. However, another body of law can, and does, intrude. If Read more...
Court Rules Choice Of Law Provision Takes Precedence Over Internal Affairs Doctrine
To say that the Delaware courts and bar are very fond of the internal affairs doctrine is about as controversial as wearing white before Labor Day. If you have any doubts about the sacred status of the doctrine in Delaware, I refer you to the Delaware Supreme Court’s decision in Vantagepoint Venture Partners 1996 v. Examen, Inc., 871 A.2d 1108 (2005). Read more...
Federal Judge Refuses To Find That California “Can Have No Real Interest” In Loans Closed Out Of State
The geographic reach of California’s statutes continues to be tested in the courts. In a recent class action lawsuit challenging the defendants’ mortgage marketing and sales practices, the plaintiffs sued under, among other statutes, California’s unfair competition law, Business & Professions Code Section 17200. Interestingly, the plaintiffs are residents of South Carolina and their loan was secured by property in that Read more...
Comparing Books And Records Stockholder Inspection Rights In California, Delaware and Nevada
The right of a stockholder to inspect a corporate books and records was originally a common law right. California, Delaware and Nevada have since codified stockholder inspection rights. However, as summarized by the table below, these rights differ significantly amongst the three states. (This table doesn’t address what may be inspected which is a subject for another post.) It should Read more...
Another Fissure In The Internal Affairs Doctrine?
In this post from last November, I mentioned two New Jersey decisions applying New Jersey law rather than the law of the state of incorporation. Krzastek v. Global Resource Industrial & Power, Inc., No. A-1815-06T2 (N.J. Super. Ct. App. Div. Sept. 11, 2008) and Conway v. DialAmerica Marketing, Inc., No. BER-C-116-08 (N.J. Super. Ct. Ch. Div. Sept. 30, 2008). Last Read more...
The Internal Affairs Doctrine – California May Not Be Standing Alone
Delaware lawyers undoubtedly regard the Delaware Supreme Court’s decision in VantagePoint v. Examen, Inc., 871 A. 2d 1108 (Del. 2005) as the last word on the internal affairs doctrine. In that case, the Delaware Supreme Court held that the internal affairs doctrine trumps a California statute, Corp. Code § 2115, imposing specified provisions of the California General Corporation Law on foreign corporations whose most Read more...
Court of Appeal Applies Delaware Law to Sustain Demurrer to California Action
In the last few weeks, the various appellate districts of the Court of Appeal have been pumping out corporate law opinions. The most recent, Fox v. JAMDAT Mobile, Inc., involves a stockholder lawsuit against a Delaware corporation, JAMDAT, and its directors for breach of fiduciary duty. Unlike Kruss v. Booth (See June 22, 2010 Blog), the issue was not whether the court Read more...
