Friday, February 15, 2013

Rosenfeld v. Fairchild Engine & Airplane Corp. case brief

Rosenfeld v. Fairchild Engine & Airplane Corp. case brief summary
309 N.Y. 168

SYNOPSIS: Appellant sought review of an order of the Appellate Division of the Supreme Court in the second judicial department (New York) that affirmed a judgment of the Supreme Court in favor of appellee entered upon a decision of an official referee that dismissed appellant's stockholder derivative action.

-Appellant brought a stockholder's derivative action where he sought to compel the return of funds paid out of the corporate treasury to reimburse both sides in a proxy contest for their expenses. 
-The lower courts affirmed the judgment of the official referee that dismissed appellant's complaint. The court affirmed the dismissal. 
-The court noted that appellant did not argue that the funds were fraudulently extracted from the corporation, but instead admitted that the charges were fair and reasonable.

The court held that since appellees acted in good faith in a contest over policy, they had the right to incur reasonable and proper expenses for the solicitation of proxies and in defense of their corporate policies, and were not obliged to sit idly by.

-The court also noted that stockholders had the right to reimburse successful contestants for reasonable and bona fide expenses incurred by them in any such policy contest, subject to court scrutiny.
-Thus, the dismissal of appellant's complaint was proper.

OUTCOME: The court affirmed the dismissal of appellant's stockholder derivative action, holding appellees correctly looked to the corporate treasury for the reasonable expenses of soliciting proxies to defend their position in a bona fide policy contest.

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