Ross A. Wilson v. Louisiana-Pacific Resources, Inc.
138 Cal.App.3d 216, 187 Cal.Rptr. 852 (1982)
In general, the internal
affairs doctrine, says that that the
law of a State of incorporation should govern any disputes regarding that
corporations' internal affairs.
So if a corporation is
incorporated in Delaware, Delaware law applies, no matter what State the
suit is being heard in.
New York and California do
not strictly follow the internal affairs doctrine, and chose to exercise power over corporations
that are 'psuedo-foreign' because they conduct most of their activities
or have a majority of their shareholders in the State, but are
incorporated in another State.
See Cal. Corp. Code
Wilson sued LPR in a
California Court, over an issue involving cumulative voting.
Wilson wanted the Court to
apply California's cumulative voting
law (Cal. Corp. Code §708).
LPR argued that §708 did not apply because they were incorporated
The Trial Court found for
Wilson. LPR appealed.
The Trial Court found that
more than 50% of LPR's property, payroll, and sales were in California,
so §2115 meant that §708 applied.
The Appellate Court affirmed.
LPR argued that §2115 was unconstitutional because it violated the Commerce
Clause. However, the Appellate Court found that the law
imposed the same burden on California corporation as those domiciled
outside of California, so there was Commerce Clause issue.
Remember, the Dormant
Commerce Clause forbids States from
treating in State and out of State people (or corporations) differently.
The Court found that there
was no conflict from §2115
because a corporation could only ever do the majority of their business
in a single State, so there could never be a conflict between
California's laws and the laws of another State.
The Court found that §2115 had only an incidental effect on interstate
Contrast this decision to McDermott
Inc. v. Lewis (531 A.2d 206 (1987)),
where Delaware decided that it would be unconstitutional to apply their
law to a corporation not incorporated in Delaware.