Friday, February 15, 2013

Dodge v. Ford Motor Co. case brief

Dodge v. Ford Motor Co. case brief summary
204 Mich. 459

Plaintiffs objected to a decision of the lower court granting them a specified amount in dividends from defendant corporation but denying their request for additional interest payments on those dividends.

-Defendant corporation's directors decided to exercise their discretion and hold back part of the company's capital earnings for reinvestment, thereby denying certain expected dividend payments to plaintiffs.
-Plaintiffs contended that the reason defendant corporation was holding back dividends, partially to reinvest in the company and bring down the ultimate cost of buying a car, was semi-humanitarian and was not authorized by the company's charter.
-The trial court held that defendant corporation was entitled to reinvest surplus capital gains at their discretion and did not order further dividends paid out.

The appellate court reversed that decision and held that the accumulation of so large a surplus established that there was an arbitrary refusal to distribute funds to stockholders as dividends and ordered that such dividends, plus interest, should be paid by defendant corporation.

"It is not within the lawful powers of a board of directors to shape and conduct the affairs of the corporation for merely incidental benefit of shareholders and for the primary purpose of benefiting others."

OUTCOME: Plaintiffs' objections were sustained and the appellate court reversed the decision of the lower court and ordered that defendant corporation release additional stockholder dividends to plaintiffs.

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