Where a partner seeks to enforce his statutory right to inspect a foreign partnership’s records, the claim is one of those types that need not be brought in the partnership’s home jurisdiction. Albright v. Vining-Sparks Securities, Inc., et al., 2019 NCBC 80 (J.Gale). As a result, Plaintiff’s claim to inspect a Tennessee partnership’s books and records need not be brought in Tennessee, even if the Tennessee statute could be read to require all such inspection claims be brought in a Tennessee court.
Plaintiff is a limited partner in Defendant Vining-Sparks & Associates, L.P. (“Vining-Sparks”), a Tennessee limited partnership. At the time of his retirement, Plaintiff wanted to sell his interest in Vining-Sparks, but was told by the lawyer for Vining-Spark’s general partner that he was not allowed to do so. Plaintiff subsequently learned the same lawyer had helped other limited partners sell their interests. Over the course of several months, Plaintiff made several requests to inspect Vining-Sparks’ records, pursuant to both Tennessee statute and Vining-Sparks’ limited partnership agreement (“LPA”). All Plaintiff’s inspection requests were refused. Plaintiff filed suit in Mecklenburg County Superior Court, seeking to enforce his inspection rights. Vining-Sparks sought to dismiss the complaint, contending that Plaintiff could not maintain his North Carolina lawsuit because Tennessee statutes require any action seeking to “enforce a [statutory right] of inspection” be brought in Tennessee.
The Business Court disagreed. Finding the right to inspect business records was a “transitory claim” because it could take place in any jurisdiction (Opinion, ¶¶53,54), the Business Court relied on the U.S. Supreme Court’s reasoning in Tennessee Coal, Iron & Railroad Company v. George, 233 U.S. 354 (1914) to hold that one state could not divest another state of jurisdiction over a transitory claim absent certain conditions (which the Business Court determined did not exist with any statutory inspection claim). Id. As a result, a claim based upon a statutory right of inspection could be brought in a non-Tennessee court, notwithstanding the language of the Tennessee statute. Id. In reaching its decision, the Business Court recognized—but did not expressly overrule—the prior Business Court’s decision in Camacho v. McCallum, 2016 NCBC 79, at *7-10 (N.C. Super. Ct., Oct. 25, 2016) where a claim based upon a statutory right of inspection of a Delaware corporation was dismissed because the Delaware statute at issue required any claim for inspection of corporate records be brought only in the Delaware Chancery Court. (Id., ¶43). In this decision, the Business Court questioned the ability of any state—including Delaware—to constitutionally limit the jurisdiction of courts outside of its own borders to address a transitory claim like a records inspection. (Opinion, ¶44, fn.2).
Based upon this decision, a foreign business (even from Delaware) should understand that its shareholder can likely maintain a statutory right to inspect corporate documents in a North Carolina court, provided all other jurisdictional requirements are met.
Additional legal points from this decision:
- Even though a Rule 12(b)(3) motion is the proper vehicle to enforce a contractual forum selection clause, a party nonetheless preserves its ability to challenge venue without filing a motion so long as it denies the complaint’s allegation that venue is proper. (Opinion, ¶¶63, 64).
- The internal affairs doctrine does not require disputes over a corporation’s internal affairs be handled exclusively in the forum where the corporation was organized; rather, the doctrine only requires that state’s substantive law for internal affairs be applied. (Id., ¶75).
- A Court may only consider a document at the Rule 12(c) stage if: 1) it is attached to the moving party’s pleading; 2) the non-moving party has admitted the document’s existence; and 3) the non-moving party has not contested the document’s accuracy. (Id., ¶83, citing Weaver v. St. Joseph of the Pines, Inc., 187 N.C. App. 198, 205, 652 S.E.2d 701, 708 (2007)).
- In contrast, pursuant to Oberlin Capital, L.P. v. Slavin, 147 N.C. App. 52, 60-61, 554 S.E.2d 840, 847 (2001), the Court can consider a document at a Rule 12(b)(6) or 12(c) stage that is not attached to the moving party’s pleading so long as the document: 1) is specifically referred to in the complaint; 2) is the subject matter of the action; and 3) will not cause undue surprise to the non-moving party. (Opinion, ¶86).
Categories: Key Business Court Decisions