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Law School Case Brief

McDermott, Inc. v. Lewis - 531 A.2d 206 (Del. 1987)

Rule:

Full faith and credit commands application of the internal affairs doctrine except in the rare circumstance where national policy is outweighed by a significant interest of the forum state in the corporation and its shareholders.

Facts:

Plaintiff shareholders,  Harry Lewis and Nina Altman, of defendant McDermott Incorporated, a Delaware Corporation, sought to enjoin or rescind a reorganization under which McDermott became a majority owned subsidiary of a Panamanian corporation and owned approximately 10 percent of the parent corporation's common stock. The trial court granted partial summary judgment in favor of plaintiffs, and defendant McDermott appealed.

Issue:

Does the internal affairs doctrine apply in the action filed by the plaintiff shareholders?

Answer:

Yes.

Conclusion:

The court reversed the grant of partial summary judgment to plaintiff shareholders in their action against defendant Delaware corporation, holding that the trial court erred as a matter of law in ignoring the uncontroverted Panamanian law, and in applying Delaware and/or Louisiana law to the internal affairs of defendant's parent corporation contrary to established Delaware law and important constitutional principles. The court held that Delaware conflicts law, due process, and the commerce clause mandated application of the internal affairs doctrine, under which Panamanian law governed the issue. Public policy did not mandate the application of Delaware law to the issue.

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