## Facts

- Coast-to-Coast Analytical Services, Inc. (CCAS) was incorporated in Delaware but maintained its principal executive office in Camarillo, California, and conducted substantial operations in California.
- Mary and Stephen Havlicek were directors and minority shareholders (40%) of CCAS; the remaining directors were affiliated with ISS International Service System, Inc. (ISS), the majority shareholder (60%).
- The Havliceks alleged they were constructively terminated as officers/employees and later opposed a proposed transaction combining CCAS assets with other entities to form “Pace Incorporated.”
- The Havliceks demanded access to corporate books and records; CCAS provided some materials but refused others based on concerns the Havliceks would use information to start a competing business.
- After the CCAS board approved the merger over the Havliceks’ dissent, the Havliceks sued in California superior court seeking (1) an order compelling inspection of CCAS records and (2) an injunction delaying the merger pending inspection.
- The Havliceks relied on California Corporations Code § 1602, which grants directors an “absolute” inspection right and expressly applies to directors of foreign corporations with a principal executive office in California.
- CCAS argued Delaware law controlled; under Delaware law, inspection requires a purpose reasonably related to the director role, and enforcement lies in the Delaware Court of Chancery.
- The trial court applied Delaware law, concluded it lacked authority to compel inspection, and denied relief.

## Issues

1. Whether the internal affairs doctrine required applying Delaware law to a director-inspection dispute involving a Delaware corporation headquartered in California, thereby precluding California court enforcement.
2. Whether California Corporations Code § 1602 grants directors of a foreign corporation with its principal executive office in California an “absolute” right to inspect corporate records, enforceable in California under § 1603 with appropriate conditions.
3. Whether applying California’s director-inspection statutes in these circumstances is barred by the Commerce Clause or Full Faith and Credit Clause.

## Decision

- The Court of Appeal reversed the order denying inspection and related relief and remanded.
- California Corporations Code § 1602 applied to CCAS because its principal executive office was in California, and it granted the Havliceks a statutory director inspection right.
- The superior court had authority under § 1603 to enforce inspection and could impose “just and proper conditions” to address confidentiality and misuse concerns.
- The internal affairs doctrine did not require exclusive application of Delaware law on these facts, and constitutional objections under the Commerce Clause and Full Faith and Credit Clause were rejected.
- The trial court erred by treating Delaware law and Delaware Chancery Court exclusivity as defeating California court enforcement and by denying inspection outright rather than considering conditional inspection.

## Legal Principles

- California Corporations Code § 1602 grants every director the right, at reasonable times, to inspect and copy all corporate books, records, and documents, and it expressly applies to directors of foreign corporations with a principal executive office in California (or customarily holding board meetings in California).
- California Corporations Code § 1603 authorizes California superior courts to enforce director inspection demands and to impose “just and proper conditions,” including measures protecting confidential information.
- The internal affairs doctrine is not an absolute bar to applying California statutes expressly regulating specified internal matters of foreign corporations that are effectively headquartered in California and substantially connected to the state.
- Applying California’s director-inspection statutes to a foreign corporation with a principal executive office in California does not, on these facts, violate the Commerce Clause or Full Faith and Credit Clause.

## Conclusion

The court held that California law governed and authorized enforcement of directors’ inspection rights against a Delaware corporation headquartered in California, requiring the trial court to order inspection (if necessary, subject to protective conditions) rather than denying relief based on Delaware law and forum exclusivity.


Havlicek v. Coast-to-Coast Analytical Services, Inc., 39 Cal. App. 4th 1844, 46 Cal. Rptr. 2d 696 (Cal. Ct. App. 1995)