Internal Affairs Doctrine: California Versus Delaware in a Fight for the Right to Regulate Foreign Corporations

Abstract

The Internal Affairs Doctrine ("IAD") has traditionally been a categorical rule mandating that in corporate conflict-of-laws scenarios, only the incorporating state has the right to regulate a corporation's internal affairs. California has created a statutory exception to the IAD, however, that allows regulation of the internal affairs of out-of-state corporations in limited circumstances. In 2005, in VantagePoint Venture Partnets 1996 v. Examen, Inc., the Supreme Court of Delaware rejected California's statutory exception and its associated public policy in an attempt to reestablish the status quo of the IAD as an absolute mandate. This Note offers a critique of the VantagePoint opinion and argues that California's statutory exception should be universally accepted. This Note also suggests that the real motivation driving the VantagePoint court's decision to reject an exception to the IAD may have been to protect Delaware's lucrative corporate chartering business and annual franchise tax revenues.