Internal Affairs

The internal affairs doctrine is a very important conflict of laws rule, pursuant to which the state of incorporation’s law governs questions of corporate governance. Many folks, including yours truly, believe that a combination of the dormant commerce clause and the full faith and credit clause raise the IA doctrine to the status of constitutional principle. Christine Hurt and Larry Ribstein are blogging about Friese v. Superior Court, in which a California appellate court held that California's state insider trading laws could be applied to insiders of a Delaware corporation. Larry thinks the IA doctrine should precule application of California law to a company incorporated in Delaware. I agree, although perhaps for slightly different reasons. As I've argued elsewhere at great length, insider trading is best understood as a species of property rights regulation effected via the fiduciary duties of directors and officers. As such, it is a core matter of corporate governance properly regulated by the law of the state of incorporation.