Yesterday’s post mentioned the recent Delaware Supreme Court decision in United Techs. Corp. v. Treppel, 2014 Del. LEXIS 608 (Del. Dec. 23, 2014).  The case involved an inspection demand under Section 220 of the Delaware General Corporation Law.  The corporation sought to require the stockholder to agree to a confidentiality provision that essentially required that all disputes with respect to the inspection be resolved in Delaware.  The Supreme Court held that the Court of Chancery erred in ruling that it did not have the authority to impose such a condition.

According to the opinion, the shareholder previously had been a plaintiff in three other shareholder suits against different companies, none of which were brought in the corporation’s state of incorporation or even his own home state of California.  It also appears that he wasn’t bothered by the distance:

Treppel’s opposition to suing in Delaware does not appear to be an issue of personal or logistical inconvenience: Treppel appeared in Delaware in person for his deposition in October, joking that he considered it easier to fly to Delaware than to drive to Los Angeles from his home in San Diego.  App. to Opening Br. at 287.  He then returned to Delaware for the trial in January.  App. to Opening Br. at 433.

Professor Bainbridge also wrote about the case stating:

But while California courts thus would be entitled to apply California law in a case in which a California resident sued in California court seeking to inspect the books and records of a Delaware corporation, I don’t see why a shareholder who invokes the Delaware courts to seek inspection should not be required to litigate any resulting disputes in Delaware court.  After all, setting [a]side the effect of the case on the plaintiff in this case, future plaintiffs who want to avoid bringing their substantive claims in delaware courts can simply file their books and records claims in their home state.

If a plaintiff seeks to enforce his inspection right in California, the Superior Court does have the authority to “enforce the right of inspection with just and proper conditions”.  Cal. Corp. Code § 1603(a).  It would be interesting to see if a Superior Court would conclude that a choice of forum provision similar to that in United Techs. v. Treppel would be a just and proper condition.