We have an interesting decision out of a California appellate court regarding the intersection of inspection rights and forum selection clauses.

California grants shareholders an unwaivable inspection right for any company with its principal office in California, even if the company is organized elsewhere.

An 11% shareholder of privately-held Orchid – organized in Delaware, headquartered in California – sought to exercise his California inspection right.  Orchid refused, claiming it would only recognize a Delaware inspection right, and the request was invalid under Delaware law.  The shareholder sued in California. At which point, Orchid did two things.

First, it filed a declaratory judgment action in Delaware seeking an order that it was not obligated to comply with the California statute; and second, it moved to stay in California, claiming the applicability of its forum selection bylaw – which required any “internal affairs” claim to be litigated in Delaware.

The California trial court granted the stay, but Delaware dismissed the Orchid action, on the ground that it did not have personal jurisdiction over the shareholder.

So, the whole thing gets to the California appellate court. And the first question is, are California inspection rights “internal affairs” such that the forum selection bylaw applies?

And through a combination of plaintiff concessions and waivers, the court essentially assumes that Delaware law governs the interpretation of the meaning of the bylaw.  And since under Delaware law, inspection rights are an internal affairs matter, then – even though California might treat inspection rights differently – the plaintiff’s inspection claim was an internal affair issue governed by the bylaw.

However, the court went on to hold that forum selection provisions will not be enforced if they contravene California’s public policy.  And here, California had an unwaivable public policy of allowing shareholders to inspect records, even of foreign corporations.  That meant it was Orchid’s burden to show the shareholder would get the same records if he litigated in Delaware – and Orchid did not make that showing.  Orchid conceded (correctly) that a Delaware court would not apply California’s statute, but Delaware’s. Leading to the question, is Delaware’s inspection right comparable to California’s? And the court held – no! Because California’s inspection right is broader than Delaware’s.  Among other things, Delaware recently amended its statute to require a showing of compelling need for documents beyond those in the enumerated categories, and California’s inspection statute does not require such a high threshold.  Plus, California permits shareholders to recover attorneys’ fees in a books-and-records action; Delaware does not, absent bad faith conduct.

Which meant, the forum selection clause was unenforceable, the trial court should not have granted a stay, and the whole case was remanded.

And I’ll just finish with, I just posted an essay arguing that, as the category of “internal affairs” is broadened, and as states use their corporate governance laws to effectuate more distinct (and controversial) public policies, other states are going to push back.  And that is exactly what happened here; the California court engaged in an extensive discussion of the recent amendments to DGCL 220 and how they would impede California’s public policy. Which, I should add, is especially strong given the number of startups headquartered in California that pay California residents in private stock, which is apparently what happened here. (I will also plug my paper, Inside Out (or, One State to Rule them All): New Challenges to the Internal Affairs Doctrine, where I pointed out California might have a particular interest in protecting its worker-shareholders at privately-held startups).

Nope, no other thing. Once again, no new Shareholder Primacy podcast this week but we will be back soon!

Professor Kish Parella at Washington & Lee School of Law announces the 2026–2027 lineup for the International Business Transactions Virtual Seminar Series, this year organized around the theme “Asia at the Center of Global Business.”

The series brings together scholars working on contemporary issues in international business transactions, corporate governance, finance, regulation, and private ordering, with a particular focus this year on developments in and involving Asia. The seminars are virtual and scheduled to facilitate participation across Asia, Australia, and the United States.

The 2026–2027 Schedule:

September — Umakanth Varottil (National University of Singapore): “Flipping Companies”

October — Virginia Harper Ho (City University of Hong Kong): “Regulatory Partitioning, Corporate Veil-Peeking, and the (Un)bounding of Chinese Firms”

November — Gen Goto (The University of Tokyo): “Corporate Scandals in Japan”

January — Lin Lin (National University of Singapore): “Artificial Intelligence in China’s Banking Sector: Promises, Perils, and Regulation”

February — Ruoying Chen (Australian National University): “Law and Finance of Local Special Development-Purpose Vehicles: Australia, China and Beyond”

March — Giuliano Castellano (The University of Hong Kong): “Getting Credit Across Borders: How Legal Reform Templates Travel—and Why Results Diverge”

April — Ernest Lim (National University of Singapore): “Directors’ Duties and Climate Change”

The series is designed to create a regular forum for conversation among scholars, practitioners, and others interested in the legal and institutional questions shaping cross-border business. All are welcome.  We usually do not circulate papers for these sessions. Instead, presenters share their research for approx.15 minutes and we spend the remainder of the time in conversation among the participants.

Those interested in receiving seminar invitations and updates can join the series here: forms.gle/MoJS47FAdu22PF2Y6

This week’s blog post is a plug: I had the pleasure of participating in the Irving L. Goldberg Symposium at SMU earlier this year, and this Essay was the result, forthcoming in the SMU Law Review and now posted to SSRN:

Anti-Woke Corporate Governance

In the modern era, corporate law has not been viewed as particularly partisan.  To some extent, this is likely due to the fact that Delaware, the dominant state for the generation of corporate law, has built nonpartisanship into its corporate law design.  Recently, however, Texas has begun to position itself as a competitor to Delaware by offering an explicitly conservative corporate governance platform.  The approach has had some success, drawing big name companies to the state such as Exxon, Dell Technologies, and Coinbase.  This Essay, written for SMU’s Irving L. Goldberg Symposium: Welcome to Y’all Street: Texas Corporations and Texas Shareholders, will discuss the background and nature of Texas’s strategy, as well as the risks and benefits of red state/blue state corporate governance, both to corporations and to the corporate chartering system in general.

So, that’s available for your reading pleasure.

And another thing. The Shareholder Primacy podcast is back! This week, me and Mike Levin talk about the shareholder lawsuit challenging the government’s 10% stake in Intel, plus a truly wild activist intervention at Voya Financial. Here at Spotify; here at Apple; and here at Youtube.

Here’s a scenario: Plaintiffs purchase a Simple Agreement for Future Equity (SAFE) in an AI startup. SAFEs are a contractual arrangement where the startup receives a certain amount of financing from the investor, but the parties do not determine exactly how much equity is being purchased at that time. Later, after the startup receives investment from someone else that prices the equity, the original investor’s contract is converted into equity on similar (or slightly improved) terms from the later investor. It allows the original investor to make a fast investment without engaging in the very difficult task of valuing an early stage company; the later investor does that, when more information is available. But SAFEs are risky because they remain outstanding, with no obligation by the issuer to the investor, until another round of financing comes along, and that round may never come.

So if you purchase a SAFE based on what you come to believe is fraudulent information, and you bring a subsequent Section 10(b) claim, how do you establish losses attributable to the fraud?

That was the problem in Lifevoxel Virginia SPV v. Lifevoxel.AI (hey, look, bonus SPV!). The Ninth Circuit, in an unpublished opinion, held that it was too much for the district court to demand that plaintiffs show the fraud was so bad as to render a conversion event impossible; the SAFE is a financial instrument, it may have been worth different amounts at different times, and its value could have fluctuated as a result of the fraud. Still, said the court, the plaintiffs here – who alleged various misrepresentations regarding, inter alia, the company’s financial condition, income, and capitalization – had not plausibly alleged that these misrepresentations specifically were responsible for the decline in the SAFE’s value, or even that there was a decline in value in the first place.

It’s a difficult problem, I suppose, since the whole point of a SAFE is that it’s hard to value an early stage company, so you don’t even try to do it! I suppose in a future attempt, there might be some options-value formula that can be used for a situation like this.

Interesting side note: Why are they suing under Section 10(b) at all, given that state law fraud claims are usually much easier to bring, and the plaintiffs here were not trying to use 10(b)’s fraud on the market presumption, which is usually the main reason to choose federal claims over state ones? I can’t tell from the record but I am reminded of when I had a similar question about a lawsuit against WeWork, and the answer was, a contractual anti-reliance clause that was likely binding under state law, but not federal law.

Edit: Turns out, Gad Weiss wrote a paper on this issue, here!

Registration is now open for the fall 2026 Law and Finance Workshop series. Please use this form to register. All workshops take place on Fridays from 1pm to 2pm ET via Zoom. Registered participants will receive the draft paper and zoom link one week before each workshop. 

Law & Finance Workshop Schedule 2026-27 

Fall 2026 

Friday, August 28: Jeffrey Zhang (Michigan) & Dan Awrey (Cornell) presenting Money Cop.

– Kate Judge (Columbia) discussing.

Friday, September 18: David Zaring (Wharton) presenting Financial Regulation’s New Paradigm. 

– Howell Jackson (Harvard) discussing.

Friday, October 9: Yuliya Guseva (Florida State), Irena Hutton (Florida State), Adam Pritchard (Michigan), & Joseph Grundfest (Stanford) presenting Judicial Review of SEC Rulemaking.

– Amanda Rose (Vanderbilt) discussing.

Friday, October 30: Andrew Tuch (WashU) presenting Conflict and Collapse: Goldman Sachs, Silicon Valley Bank, and the Myth of Information Barriers.

– Afra Afsharipour (UC Davis) discussing.

Friday, November 13: Elizabeth King (Boston University) presenting Debt’s Hidden Hand.

– George Georgiev (Miami) discussing.

Spring 2027 (discussants TBA)

Friday, January 22: Morgan Ricks (Vanderbilt) & Lev Menand (Columbia) presenting The Berle Curve.

Friday, February 19: Isabelle Zhang (Virginia) presenting Legalism Without Information: Foreign Issuers, U.S. Enforcement, and the Limits of Bonding.

Friday, March 19: Belisa Pang (Michigan), Matt Bruckner (Howard), & Dalié Jiménez (UC Irvine) presenting The Missing Cases: Student Loan Discharge in Bankruptcy After Reform. 

Friday, April 16: Andrew Granato (UT Austin) & Pranjal Drall (Yale) presenting Private Credit’s State Backstop: How Private Equity Socializes Risk Through Insurers. 

Friday, May 7: Maria Lucia Passador (Bocconi) presenting When Markets are Simulated: Synthetic Data in Corporate and Financial Law.

Before I get started on the meat of this week’s post, I just want to take a brief moment to say I am honored and delighted that, at the Journal of Corporation Law’s invitation, Steve Bainbridge wrote a response to my paper, The Legitimation of Shareholder Primacy.

Steve’s response, which you can find on SSRN here, is not so much as a rebuttal as it is a complement.  (He also has a couple of shorter blog posts, here and here.) I approach the recent controversies in corporate law – and DExit in particular – as arising out of an ongoing need among corporate actors to legitimate the power that corporations wield and the legal system that sustains that power; Steve approaches the matter through an interest group lens.  He characterizes Delaware lawmaking as an exercise in balancing the different interests of the legislature, bar, and judiciary, and analyzes the recent contretemps from that vantagepoint.  As he explains, our different takes are not mutually exclusive, and I think he is exactly right in terms of the delicate balancing act that the different Delaware actors must perform.  If I have anything to add, it’s only this: Steve recognizes that these three actors are all involved in the mutually-beneficial project of enhancing Delaware’s franchise, but also puts their specific interests at odds.  I tend to view the problem as more short-term/long-term; choices that immediately retain incorporations – like hasty legislation – may do longer term reputational damage, and hobble production of the cases Delaware needs to keep its law relevant. It’s not an easy problem to solve.

Moving on –

I am in no way a contracts expert but every now and then I kind of marvel at the contract catastrophes that come out of Delaware, and recently there were three doozys.  With the caveat that, as not-a-contracts-professor, I am not at all familiar with the background caselaw so any commentary of mine is just gut reaction, here we go.

And – whoops this got long, under the cut it goes.

What’s Working in Your Classroom? Experiential Exercises in Business Law

The AALS Section on Transactional Law & Skills is pleased to announce a session at the 2027 AALS Annual Meeting in New York City.

The Section invites submissions for a panel highlighting experiential exercises across the business law curriculum. We welcome exercises used in courses including Business Associations, Contracts, Securities Regulation, Tax, Intellectual Property, Commercial Law, Transactional Drafting, and other business law courses. Examples might include contract drafting workshops, transactional research assignments, mock negotiations, client counseling exercises, compliance exercises, deal simulations, or other experiential activities that develop students’ transactional lawyering and professional skills.

Selected presenters will describe their exercise, discuss how they facilitate and, where applicable, assess or grade it, and give attendees a sense of how it plays out in the classroom.

We anticipate selecting multiple presenters for this session, with the final number depending on the session length and the submissions received. A formal written paper is not required; a clear description of the exercise and how it is used is sufficient for submission.

To submit, please send a short description of your exercise to Professor David Lourie (dlourie@iu.edu) on or before Friday, September 11, 2026. Please include your name and contact information and include “AALS – Transactional Pedagogy” in the subject line.

Submissions will be reviewed and selected by the Executive Committee of the AALS Section on Transactional Law & Skills. Presenters are responsible for their own registration, hotel, and travel expenses.