## Facts

- Nxegen Holdings, Inc. (Nxegen) was incorporated in Delaware and maintained its principal place of business in Connecticut.
- Other than being incorporated in Delaware, Nxegen did not do business in Delaware.
- John Carbone, a Connecticut resident, was a shareholder of Nxegen.
- Carbone filed an action in the Connecticut Superior Court against Nxegen (and additional defendants identified as “et al.”) seeking to inspect Nxegen’s corporate records.
- Carbone also sought to inspect the records of one of Nxegen’s subsidiaries.
- Nxegen opposed the requested inspection on choice-of-law grounds, arguing that under the internal affairs doctrine the law of Delaware (the state of incorporation) governed shareholder inspection rights.
- In assessing the choice-of-law dispute, the court noted that Delaware’s and Connecticut’s statutory provisions governing shareholder inspection of corporate records were not significantly different.

## Issues

1. In a Connecticut action seeking shareholder inspection of records of a Delaware-incorporated corporation headquartered in Connecticut, does the internal affairs doctrine require application of Delaware law?
2. If Delaware and Connecticut inspection statutes are not significantly different, does any potential choice-of-law dispute affect the shareholder’s ability to pursue inspection?

## Decision

- The court treated a shareholder’s demand to inspect corporate books and records as a matter tied to the corporation–shareholder relationship and therefore within the scope of internal corporate governance analysis.
- The court considered the internal affairs doctrine in evaluating Nxegen’s argument that Delaware law governed because Nxegen was incorporated in Delaware.
- The court identified that the relevant Delaware and Connecticut inspection statutes were not significantly different, limiting the practical impact of the choice-of-law dispute on the inspection claim.

## Legal Principles

- Under the internal affairs doctrine, disputes involving internal corporate governance and the corporation–shareholder relationship are generally governed by the law of the state of incorporation.
- In resolving a choice-of-law question, a court may examine whether there is an actual conflict between the competing legal rules; if the rules do not differ in a meaningful way on the issue presented, the choice-of-law question may not change the analysis.
- Shareholder inspection rights are commonly created and defined by statute, and differences between jurisdictions matter only to the extent they alter the standards or scope of inspection in the case at hand.

## Conclusion

John Carbone v. Nxegen Holdings, Inc., et al. involved a Connecticut shareholder’s effort to obtain inspection of corporate and subsidiary records from a Delaware corporation headquartered in Connecticut, with the defendants invoking the internal affairs doctrine; the court addressed the choice-of-law framework and recognized that Delaware and Connecticut inspection statutes were not significantly different, reducing the practical importance of the governing-law dispute for the inspection analysis.


John Carbone v. Nxegen Holdings, Inc., et al., No. HHDCV136039761S (2013)