## Facts

- Ross A. Wilson, a shareholder of Louisiana-Pacific Resources, Inc. (LPR), sought a declaratory judgment that California Corporations Code § 2115 applied to LPR and required cumulative voting under § 708.
- LPR was incorporated in Utah but had its principal business operations and shareholder base centered in California.
- The trial court found LPR satisfied § 2115’s tests because (1) the average of its property, payroll, and sales in California exceeded 50%, and (2) more than 50% of its voting shareholders had California addresses.
- The trial court also found LPR had minimal connections to Utah beyond formal incorporation and a transfer agent; its principal place of business, meetings, employees, and bank accounts were in California.
- LPR did not dispute the operational facts but argued California’s application of § 2115 (and cumulative voting) was unconstitutional.
- The trial court entered judgment for Wilson, declaring cumulative voting applied to LPR as a mandatory governance term; LPR appealed.

## Issues

1. Whether California may constitutionally apply Corporations Code § 2115 (including § 708 cumulative voting) to a Utah-incorporated corporation whose business and shareholders are predominantly in California, consistent with the Full Faith and Credit Clause and the internal affairs doctrine.
2. Whether applying § 2115 to such a corporation violates the Commerce Clause by discriminating against or unduly burdening interstate commerce.

## Decision

- The Court of Appeal affirmed the judgment for Wilson.
- California could apply § 2115, including § 708’s cumulative voting requirement, to LPR based on LPR’s predominant California business and shareholder contacts.
- The court held the application did not violate the Full Faith and Credit Clause.
- The court held the statute did not violate the Commerce Clause because any interstate effects were incidental and the statute was non-discriminatory.

## Legal Principles

- The internal affairs doctrine operates primarily as a choice-of-law rule and may yield when a state has predominant contacts and a strong interest in regulating a corporation that is substantively local.
- A state may apply internal-governance provisions (including cumulative voting) to a foreign corporation when statutory criteria show the corporation’s business operations and voting shareholders are chiefly within the forum state.
- Extending the same governance rules to qualifying foreign corporations that apply to domestic corporations is not discriminatory under the Commerce Clause.
- A statute limited to corporations doing a majority of business in the forum state can be upheld where the burden on interstate commerce is incidental and outweighed by the forum state’s regulatory interest.
- When § 2115 applies, mandatory California governance terms may operate by law as binding provisions for the corporation’s director elections, benefiting all shareholders.

## Conclusion

The court upheld California’s application of § 2115 to require cumulative voting for a Utah-incorporated corporation whose operations and voting shareholders were predominantly in California, rejecting constitutional challenges under Full Faith and Credit and the Commerce Clause and affirming declaratory relief for the shareholder.


Wilson v. Louisiana-Pacific Res., Inc., 138 Cal. App. 3d 216 (Cal. Ct. App. 1982)