McDermott Inc. v. Lewis
531 A.2d 206 (Del. 1987)

  • McDermott was a Delaware corporation that was a subsidiary of a Panamanian corporation. They underwent a reorganization that changed the voting power of the shares in a way that would be probably be prohibited by Delaware law, but was allowable under Panamanian law.
  • Lewis, a shareholder, sued in Delaware in order to block the reorganization. There was a question over which law to apply.
    • In general, the internal affairs doctrine, says that the law of a State of incorporation should govern any disputes regarding that corporations’ internal affairs.
      • So if a corporation is incorporated in Texas, Texas law applies, no matter what State the suit is being heard in.
  • The Trial Court applied the law of Delaware. McDermott appealed.
  • The Appellate Court reversed.
    • The Appellate Court found that the internal affairs doctrine should be applied. Therefore the law of Panama should be applied and the merger was allowable.
      • The Court found that Delaware’s conflict of laws principles require that the laws of the jurisdiction of incorporation should govern corporate disputes.
    • The Court found that corporations had a constitutional due process right to be sure of what law would be applied to their actions.
    • The Court found that the Commerce Clause of the Constitution would be violated by applying Delaware law, because it would allow Delaware to interfere in the internal affairs of a foreign corporation having no relationship to Delaware.
  • Contrast this decision to Ross A. Wilson v. Louisiana-Pacific Resources, Inc. (1187 Cal.Rptr. 852 (1982)), where California decided that it would not be unconstitutional to apply their law to a corporation not incorporated in California.