In Salamon v. Orchid Global, Inc., Case No. A173959, 2026 Cal. App. LEXIS 466 (Cal. App. 1st Dist. July 31, 2026) (Richman, J.), a unanimous three-judge panel of the California Court of Appeal reversed a trial court order that had stayed a minority shareholder’s California books-and-records proceeding in favor of Delaware. The Court of Appeal held that even though a forum selection clause in a corporation’s bylaws designating Delaware as the exclusive forum for claims “governed by the internal affairs doctrine” applies to shareholder inspection demands, enforcement of such a clause in connection with an inspection demand under Sections 1600 and 1601 of the California Corporations Code is nevertheless barred as against California public policy. The decision is significant because it underscores that Delaware corporations with principal operations in California remain subject to California’s broader and more shareholder-protective inspection regime notwithstanding contrary forum selection provisions in their governing documents.
Orchid Global, Inc. and its subsidiary are Delaware corporations with their principal places of business in San Francisco, California. Petitioner is a California resident and 11.11% shareholder of Orchid. In April 2025, petitioner demanded to inspect an array of Orchid’s corporate books and records pursuant to Sections 1600 and 1601 of the California Corporations Code, including five years of board minutes, financial statements, tax returns, off-balance-sheet loan records and communications, allegedly regarding whether Orchid’s business violated gambling laws. Orchid rejected the demand in its entirety, asserting that as a Delaware corporation it was not subject to California’s inspection statutes. Petitioner sought a writ of mandate in the Superior Court of California for the County of San Francisco, and Orchid responded by filing a declaratory action in the Delaware Court of Chancery and simultaneously moving to stay the California proceedings based upon its bylaw exclusive Delaware forum selection clause.
The trial court granted the stay. While the appeal was pending, however, the Delaware Court of Chancery dismissed Orchid’s declaratory action for lack of personal jurisdiction over petitioner, noting that stock ownership alone is insufficient to establish personal jurisdiction and that the forum selection clause plainly applied only to claims asserted against the corporation, not by the corporation against a minority stockholder. Orchid Global, Inc. v. Salamon, C.A. No. 2025-0605-LWW, 2026 Del. Ch. LEXIS 171 (Del. Ch. Apr. 10, 2026).
The California Court of Appeal addressed two questions: (1) whether the forum selection clause applied to Salamon’s claims under Sections 1600 and 1601, and (2) whether the forum selection clause was unenforceable as against California public policy. On the first question, the Court applied Delaware law to interpret the forum selection clause — a point petitioner conceded — and held that under Delaware law stockholder inspection rights are a core matter of internal corporate affairs. Petitioner’s inspection demand thus fell within the scope of the clause.
On the second question of enforceability, the Court applied a burden-shifting framework under which, when a forum selection clause implicates unwaivable statutory rights, the burden shifts to the party seeking enforcement to show that litigating in the designated forum “will not diminish in any way the substantive rights afforded under California law.” Sections 1600 and 1601 both provide that the rights they grant “may not be limited by the articles or bylaws,” and Orchid conceded those rights were unwaivable. The dispositive question was whether Orchid had carried its burden of demonstrating parity between the two statutory regimes.
Comparing the two statutes, the Court found material differences. It held that Section 1600 establishes a broad, absolute right of inspection that imposes no requirement on a shareholder to show a proper purpose, whereas Section 220 of the Delaware General Corporation Law requires the stockholder to demonstrate that the demand is made in good faith, for a proper purpose and that the records sought are specifically related to that purpose. Further, the Court noted that in March 2025, the Delaware legislature amended Section 220 to narrow the definition of “books and records” to enumerated categories of formal corporate documents, including only three years of board minutes and three years of annual financial statements, and to require a showing of compelling need by clear and convincing evidence for any records beyond those categories. Orchid conceded that these differences exist and, in its Delaware complaint, had alleged that “almost all of the categories of documents and time frames that Salamon requested to inspect in California and under California law are prohibited by Section 220.” The Court also noted that Section 1604 of the California Corporations Code permits a successful shareholder to recover attorneys’ fees, whereas Delaware follows the “American Rule” that assumes no fee-shifting for a successful Section 220 demand. On this record, the Court of Appeal held that Orchid failed to meet its burden to avoid inspection under California law.
Salamon has immediate practical significance for Delaware corporations that maintain their principal offices in California and whose bylaws contain Delaware exclusive forum provisions. Delaware corporations operating in California should anticipate that their exclusive forum bylaws will not foreclose California inspection proceedings, and accordingly should assess their obligations under Sections 1600 and 1601.
It is worth noting that Salamon arguably is in tension with a line of authority in California and Delaware holding that shareholder inspection rights are governed exclusively by the law of the state of incorporation under the internal affairs doctrine. In Juul Labs, Inc. v. Grove, 238 A.3d 904 (Del. Ch. 2020), the Delaware Court of Chancery held that a stockholder of a Delaware corporation headquartered in California could not seek inspection under Section 1601 of the California Corporations Code, emphasizing that subjecting a corporation to the inspection provisions of multiple jurisdictions would undermine the uniformity that the internal affairs doctrine is designed to protect. When the matter returned to the California courts, the Court of Appeal in Grove v. Juul Labs, Inc., 77 Cal. App. 5th 1081, 293 Cal. Rptr. 3d 202 (1st Dist. 2022), declined to second-guess the Delaware court’s ruling on this point and held that the Delaware judgment regarding the stockholder’s inspection rights was entitled to full faith and credit in California notwithstanding California public policy. How the Salamon court’s public policy rationale can be reconciled with Juul Labs remains an open question, suggesting further appellate review or legislative clarification.