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The local law of the state of incorporation applies to internal affairs, except in the unusual case where, with respect to the particular issue, some other state has a more significant relationship to the occurrence and the parties, in which case, the local law of the other state will be applied. Where "internal affairs" are concerned--the relations among the corporation, its shareholders, directors, officers, or agents--the local law of the state of incorporation will be applied unless application of the local law of some other state is required by reason of the overriding interest of that other state in the issue to be decided. Neb. Rev. Stat. § 21-20,172(3).
Western Securities, a Delaware corporation, was the owner of all the stock of Modern Equipment Company, Inc., a Nebraska corporation. Richard “***” Johnson incorporated and was originally the sole shareholder and director of Western Securities. In 1998, *** transferred shares of stock in Western Securities to his five children, including plaintiff Michael Johnson. ***'s stated intent was that defendant Richard Johnson would succeed *** as president and chief executive officer of Modern Equipment and that Michael would in turn succeed Richard. *** became ill in 2011 and resigned as president of Modern Equipment. Subsequently, Richard was elected to succeed *** as president. *** died, and his will provided that Michael and Richard were each to receive one-half of ***'s shares of Western Securities stock. After ***’s death, Richard fired Michael and barred him from the premises of Modern Equipment. Since then, Michael has been denied any participation in the operation of Modern Equipment and has not shared in its earnings. Michael filed suit against Richard, Western Securities, and Modern Equipment (collectively the defendants). According to Michael, Richard had oppressed Michael and misapplied the corporate assets of Western Securities and Modern Equipment. Defendants filed motions to dismiss Michael’s complaint, alleging that the court lacked jurisdiction to dissolve Western Securities, as a Delaware corporation, or to order Western Securities to redeem Michael's interest. The court granted the defendants' motions. The court reasoned that it could not dissolve or wind up the affairs of Western Securities because it was a Delaware corporation. Michael appealed, alleging that the district court erred in concluding that Delaware law applied to the facts of this case and in granting the defendants' motions to dismiss on that basis.
Did the trial court err in concluding that Delaware law applied to the facts of the case and in granting the defendants' motions to dismiss on that basis?
The court affirmed the decision of the trial court and held that if the plaintiff stated a cause of action for which relief could be granted, a Nebraska court would have the power to grant at least some of the relief sought by the complaint, including the appointment of a receiver, and the district court erred in determining otherwise. However, the plaintiff was focused on Nebraska public policy and Nebraska's relative interest as the location of the alleged events giving rise to the action, and the court held that this overlooked the weight of factors against interference with the internal affairs of a foreign corporation. Even if Delaware law would regard the corporations to be one and the same, the plaintiff had not stated a cause of action against either corporation. Whether the corporations were alter egos, and the legal effect of such a finding, was determined by Delaware law.