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 §2115.
  • 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 in Utah.
  • 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 commerce.
  • 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.