Gottfried v. Gottfried case brief

Gottfried v. Gottfried case brief summary
73 N.Y.S.2d 692 (1947)

CASE SYNOPSIS

Plaintiff minority stockholders filed suit to compel defendants, corporation, directors, and subsidiary, to declare dividends on its common stock.

CASE FACTS
The stockholders sought to compel defendants to declare dividends on common stock of a closely held corporation.

DISCUSSION

• The court held that the corporation's surplus was not so large as to demand the conclusion that the failure to declare dividends was motivated by other than sound business strategy, particularly in light of special circumstances, including the uncertainty of earning capacity during war years and heavy expenditures required to finance the company's growth. 
• The court noted that while there was evidence of strong hostility between the minority and majority stockholders, including the removal of two stockholders from the corporate payroll, that alone did not indicate a bad faith effort by defendants to force the stockholders' sale of their interest in the corporation. 
• The court also held that salaries and bonuses paid to majority stockholders were reasonable in light of their extraordinary service to the corporation, primarily in expanding the corporation. 
• The court noted that while the stockholders disagreed with this plan of expansion, there was no evidence that the plan was improper; the majority stockholders would suffer equally if their business plan failed.

CONCLUSION
The court directed a verdict in favor of defendants and dismissed the stockholders' complaint seeking to compel defendants to declare dividends on the corporation's common stock.

Recommended Supplements for Corporations and Business Associations Law