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Delaware versus California and Choice of Law: JUUL Labs, Inc. v. Grove

By

Thomas E. Rudledge

An earlier article, Choice of Law/Forum and Waiving the Right to a Jury Trial: California Court Holds That the Former Cannot Do the Latter,[1] reviewed the William West v. Access Control Related Enterprises, LLC decision in which a California court held that a California citizen could not be required to litigate an action involving a Delaware LLC in the Delaware Chancery Court because that forum does not provide for jury trials. In a subsequent addition to the choice of law battle between California and Delaware, the Delaware Chancery Court in JUUL Labs, Inc. v. Grove held that the inspection of books and records of a Delaware corporation is governed by Delaware law notwithstanding a California statute to the contrary.[2]

Daniel Grove was a shareholder and employee of JUUL Labs, Inc. This corporation is organized in Delaware, but its principal place of business is in San Francisco. Grove demanded to inspect JUUL’s books and records under Section 1601 of the California Corporations Code, indicating that if he did not receive the requested books and records he would bring suit in California to compel inspection under California law. The California Corporations Code, at section 1601(a), purports to apply not only to corporations incorporated in California but also to “any foreign corporation keeping such records in this state or having its principal executive office in this state.” JUUL, in response, filed this action in the Delaware Chancery Court, seeking among other relief a declaration that it is Delaware, not California, law that governs Grove’s rights to inspect JUUL’s books and records. It sought further relief in the form of an injunction against Grove to prevent him from attempting to circumvent certain contractual limitations on his ability to inspect books and records. Thereafter, Grove filed an action in the Superior Court of California for the County of San Francisco seeking relief under California Corporations Code Section 1601. That action, Grove v. Adam Bowen,[3] was stayed by the California court.

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