## Facts

- Alexander Lidow served for decades at International Rectifier Corp. (IR), ultimately as CEO and a director, without a written employment contract.
- IR was incorporated in Delaware but headquartered and operated substantially in California; its bylaws provided officers served at the board’s pleasure and could be removed with or without cause.
- In 2007, IR initiated an internal investigation into accounting irregularities at a Japanese subsidiary; employees complained about investigation tactics.
- Lidow traveled to Japan, criticized the investigation’s tactics and the outside law firm’s role, and expressed concern about the situation.
- The investigation report attributed responsibility for irregularities to Lidow; the board placed him on paid administrative leave.
- Lidow later resigned as CEO and director under a separation agreement stating the resignation was at the company’s request and signed voluntarily, without a liability release.
- Lidow sued, including a tort claim for wrongful termination in violation of public policy, alleging retaliatory removal or constructive discharge for complaining about harmful or unethical conduct.

## Issues

1. Whether the internal affairs doctrine required applying Delaware law to a corporate officer’s California tort claim for wrongful termination in violation of public policy.
2. Whether California law could govern a retaliatory-discharge claim by a CEO of a Delaware corporation headquartered and operating substantially in California.

## Decision

- The Court of Appeal granted Lidow’s petition for writ of mandate.
- It held California law, not Delaware law, applied to the wrongful-termination-in-violation-of-public-policy claim under the alleged circumstances.
- It directed the trial court to vacate its order granting summary adjudication for IR on that claim and to enter a new order denying summary adjudication.

## Legal Principles

- The internal affairs doctrine generally applies the law of the state of incorporation to matters of corporate governance, but it is limited to issues central to internal corporate relationships and structure.
- The doctrine does not automatically govern every dispute involving officers or directors; claims resembling ordinary employment or tort disputes may fall outside its core scope.
- A retaliatory wrongful-termination claim based on complaints about possible harmful or unethical activity implicates California’s strong public policies against retaliatory discharge.
- When a foreign corporation operates substantially in California and the alleged retaliatory removal or constructive discharge is closely tied to California’s regulatory interests in workplace conduct, California law may apply without materially impairing the incorporating state’s interest in uniform governance rules.

## Conclusion

California law governed a CEO’s claim that a Delaware corporation headquartered and operating in California retaliated against him for complaining about potentially harmful or unethical conduct, because the internal affairs doctrine did not extend to bar application of California’s public-policy wrongful-termination tort in those circumstances.


Lidow v. Superior Court, 206 Cal. App. 4th 351 (Cal. Ct. App. 2d Dist. 2012)