Friday, November 22, 2013

Brown v. McLanahan case brief

Brown v. McLanahan case brief summary
148 F.2d 703 (1945)

Plaintiff appealed from an order of the United States District Court for the District of Maryland that dismissed her class action against the defendants for breach of their fiduciary duty as voting trustees.

Plaintiff brought an action against defendants alleging breach of fiduciary duty after defendants amended the corporate charter to vest voting power in debentures. Plaintiff contended that this action diluted the voting power of the stock and deprived voting trust certificate holders of their right to control the management of the corporation. Defendants successfully dismissed the action, and plaintiff appealed.


  • The court reversed on the grounds that defendants were trustees in the equitable sense by their ownership of voting stock, and that as trustees, they owed a fiduciary duty to other certificate holders. 
  • By giving voting rights to debentures, defendants abused their power, and an action against them was valid.
  • The court further held that defendants' good faith belief that their actions were proper does not relieve them of liability.

Order dismissing plaintiff's complaint was reversed on the grounds that defendants were trustees who owed plaintiff fiduciary duty which they breached by depriving her of vital rights as a certificate holder.

Recommended Supplements for Corporations and Business Associations Law

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