The California Court of Appeal recently issued a significant ruling in the case of David Salamon v. Orchid Global, Inc. (A173959), which addresses the rights of shareholders to inspect corporate records. This decision could have far-reaching implications for shareholders and corporations alike, particularly those operating in California but incorporated elsewhere.
In this case, David Salamon, a shareholder of Orchid Global, Inc., sought to inspect the company's corporate records under California law. His request was denied by Orchid, which cited a forum selection clause in its bylaws that designated Delaware as the exclusive forum for any claims related to the internal affairs of the corporation. The trial court initially sided with Orchid, granting a motion to stay Salamon's petition. However, Salamon appealed the decision, arguing that the trial court erred in its interpretation of the forum selection clause and its implications for his rights as a shareholder.
Background
David Salamon has been a shareholder of Orchid Global, Inc. since 2019, holding 11.11% of the company's outstanding voting shares. He was previously a contractor for the company from 2017 to 2019. In December 2024, Orchid offered to purchase all of Salamon's shares for $1,372,880. In April 2025, Salamon's attorney sent a letter to Orchid requesting access to various corporate records, including shareholder names, financial statements, and board meeting minutes, under California Corporations Code sections 1600 and 1601.
Orchid, a Delaware corporation with its main office in San Francisco, rejected Salamon's request, claiming it was invalid under California law and asserting that any inspection demand must comply with Delaware law. Orchid then filed a motion in the San Francisco Superior Court to stay the proceedings based on its bylaws' forum selection clause, which stated that Delaware would be the exclusive forum for any claims governed by the internal affairs doctrine.
The Ruling
The California Court of Appeal ultimately ruled in favor of Salamon, reversing the trial court's decision to grant Orchid's motion to stay. The court found that while Salamon's claims did fall under the scope of the forum selection clause, enforcing that clause would violate California public policy. The court stated, "Enforcing the forum selection clause does not offend California public policy," acknowledging that Salamon's rights to inspect corporate records under California law are unwaivable.
Judge [Name] presided over the case, and the court emphasized that the rights provided under sections 1600 and 1601 cannot be limited by a corporation's bylaws. The ruling highlighted that California law provides broader inspection rights compared to Delaware law, which could potentially diminish Salamon's rights if the case were heard in Delaware.
Impact
This ruling has significant implications for shareholders in California, particularly those holding shares in corporations incorporated in other states. It reinforces the notion that California shareholders have robust rights to access corporate records, which cannot be waived or limited by corporate bylaws. This decision may encourage more shareholders to assert their rights to inspect corporate records, knowing that California courts will uphold these rights against attempts to enforce restrictive forum selection clauses.
Moreover, the ruling sets a precedent that could influence future cases involving shareholder rights and corporate governance. It clarifies the balance between a corporation's right to designate its forum for legal disputes and the statutory rights of shareholders under California law.
What's Next
Following this ruling, Orchid may consider appealing the decision to a higher court. However, the current ruling stands as a strong affirmation of shareholder rights in California. There are no related cases pending that directly address this issue, but the implications of this ruling will likely be felt in future corporate governance disputes.