Wilson v. Louisiana-Pacific Resources

Starting with its 1879 Constitution, California has required California-incorporated companies to use cumulative voting for shareholder votes. Section 2115 of California’s Corporation Code extended the cumulative-voting requirement to companies that were incorporated outside California (foreign corporations) if (1) the foreign corporations’ property, payrolls, and sales in California exceeded 50 percent and (2) more than 50 percent of the foreign corporations’ voting-eligible shareholders resided in California. Louisiana-Pacific Resources, Inc. (LP) (defendant) was incorporated in Utah; however, its principal place of business was California, its shareholders and directors met in California, and its employees and bank accounts were in California. LP shareholder Ross A. Wilson (plaintiff) sued LP in California state court, seeking a declaratory judgment that § 2115 required LP to utilize cumulative voting. The district court determined that LP met § 2115’s applicability thresholds and issued the requested declaration. LP appealed, arguing that § 2115 violated the United States Constitution’s Full Faith and Credit and Commerce Clauses. With respect to Full Faith and Credit, LP contended that California courts had to apply Utah law because LP was incorporated in Utah, which did not require cumulative voting. With respect to the Commerce Clause, LP argued that § 2115 unduly interfered with interstate commerce.