Opinion ID: 2180171
Heading Depth: 1
Heading Rank: 11

Heading: Internal Affairs Require Uniformity

Text: In McDermott, this Court noted that application of local internal affairs law (here California's section 2115) to a foreign corporation (here Delaware) is apt to produce inequalities, intolerable confusion, and uncertainty, and intrude into the domain of other states that have a superior claim to regulate the same subject matter .... [24] Professor DeMott's review of the differences and conflicts between the Delaware and California corporate statutes with regard to internal affairs, illustrates why it is imperative that only the law of the state of incorporation regulate the relationships among a corporation and its officers, directors, and shareholders. [25] To require a factual determination to decide which of two conflicting state laws governs the internal affairs of a corporation at any point in time, completely contravenes the importance of stability within inter-corporate relationships that the United States Supreme Court recognized in CTS. [26] In Kamen v. Kemper Fin. Serv ., the United States Supreme Court reaffirmed its commitment to the need for stability that is afforded by the internal affairs doctrine. [27] In Kamen, the issue was whether the federal courts could superimpose a universal-demand rule upon the corporate doctrine of all states. [28] The United States Supreme Court held that a federal court universal-demand rule would cause disruption to the internal affairs of corporations and that its holding in Burks [29] had counseled against establishing competing federal  and state  law principles on the allocation of managerial prerogatives within [a] corporation. [30] In Kamen v. Kemper , the Restatement (Second) of Conflict of Laws was cited for the proposition that [u]niform treatment of directors, officers and shareholders is an important objective which can only be attained by having the rights and liabilities of those persons with respect to the corporation governed by a single law. [31] If a universal-demand rule in federal courts would be disruptive because the demand rule in a state court would be different, a fortiori, it would be disruptive for section 2115's panoply of different internal affairs rules to operate intermittently within corporate relationships under either the law of California or the law of the state of incorporation  dependent upon the vissitudes of the ever-changing facts.