JUUL Labs, Inc. v. Grove

JUUL Labs, Inc. (JUUL) (plaintiff) was a Delaware corporation with its principal place of business in California. In December 2019, JUUL stockholder Daniel Grove (defendant) made a demand under California Corporations Code § 1601 to inspect JUUL’s books and records. Section 1601 provided inspection rights to any stockholder of a corporation with its principal place of business in California, no matter where the corporation was incorporated. Grove said that if JUUL refused his demand, Grove might sue JUUL in California state court to compel inspection. In January 2020, JUUL sued Grove in the Delaware Court of Chancery, seeking a declaration that (1) Delaware law governed whether Grove had the right to inspect JUUL’s books and records, and (2) under Delaware General Corporation Law § 220, JUUL was not obligated to make its books and records available to Grove for inspection. One day after JUUL filed its action, Grove sued JUUL in California state court to compel inspection under § 1601. JUUL argued in the Delaware action that Grove could not seek inspection under § 1601 because of the internal-affairs doctrine, a conflict-of-laws principle providing that a corporation’s state of incorporation is the only state with the authority to regulate the corporation’s internal affairs (i.e., relationships between or among the corporation and its officers, directors, and shareholders). JUUL and Grove cross-moved for judgment on the pleadings.