道奇诉福特案case brief.docx

Case Brief第五小组：陈勇 罗洲洋 徐易 张瑾月 张萍 Title: Dodge v. Ford Motor Co.Citation: 170 N.W. 668 (Mich. 1919)I. PARTIES:Plaintiffs: John F. Dodge and Horace E. Dodge (“the Dodge brothers”) Defendants: The Ford Motor Company (“FMC”) & Henry FordAppellants: The Ford Motor Company (“FMC”) & Henry Ford Appellees: John F. Dodge and Horace E. Dodge (“the Dodge brothers”)II.FACCTS: FMC was founded in 1903 by a number of investors, including Henry Ford and the Dodge brothers. Henry Ford, who held a 58% interest in FMC, was also FMCs President and a director on its board. The Dodge brothers held a 10% interest, were not on the board of directors nor employed by FMC. Beginning in 1911, regular annual dividends were $1.2M.The business of company continued to expand, so in addition to regular quarterly dividends equal 5% monthly, its board of directors declared and the company paid special dividends, so between 1913 and 1915 the company paid special dividends of $10-11M each year. Then, in 1916, Henry Ford announced that FMC would no longer pay special dividends and that profits would be retained to pay for the new River Rouge plant, which will allow FMC to expand its production capacity; to double employees salaries; and to cut the price of cars. So the plaintiffs ask for an injunction to enjoin the construction of the River Rouge plant, and for a decree require the distribution to stockholders of at least 75% of the accumulated cash surplus, and to distribute in the future all of its earnings except such as may be reasonably required for emergency purposes.III.PROCEDURAL: The lower courts decree was that a dividend must be paid, and have made an injunction against building the smelting plant, although the lower court rejected the plaintiffs arguments that FMC violated a state law ceiling on a corporations capital; that FMC exceeded the activities it was authorized to conduct (ultra vires); or that FMC violated antitrust laws. Because the lower court thought if he alleged policy of the company successfully carried out, will involve a monopoly other than such as accrues to a concern which makes what the public demands and sells it at a price which the public regards as cheap or reasonable, the case for plaintiffs must rest upon the claim, and the proof in support of it, that the proposed expansion of the business of the corporation, involving the further use of profits as capital, ought to be enjoined because inimical to the best interests of the company and its shareholders, and upon the further claim that in any event the withholding of the special dividend asked for by plaintiffs is arbitrary action of the directors requiring judicial interference.Defendants have appealed, and plaintiffs have not appealed.IV. ISSUES: 1. Whether the plaintiffs can require the special dividend?2. Whether the plaintiffs can ask for a decree to enjoin the construction of the River Rouge plant?V. HOLDINGS:The holding for the first issue is YES. Because the defendants could not took from the public the money required for the execution of its plan.The holding for the second issue is NO. Because the judges are not business experts and the experience of the defendants is evidence of capable management of its affairs.VI. REASONING: The Court held that a business corporation is organized primarily for the profit of the stockholders, as opposed to the community or its employees. The discretion of the directors is to be exercised in the choice of means to attain that end, and does not extend to the reduction of profits or the nondistribution of profits among stockholders in order to benefit the public, making the profits of the stockholders incidental thereto. Because this company was in business for profit, Ford could not turn it into a charity. Plaintiffs are entitled to a more equitable-sized dividend, but the court will not interfere with Defendants business judgments regarding the price set on the manufactured products or the decision to expand the business. The purpose of the corporation is to make money for the shareholders, and Defendant is arbitrarily withholding money that could go to the shareholders. Notably, Ford did not deny himself a large salary for his position with the company in order to achieve his ambitions. However, the court will not question whether the company is better off with a higher price per vehicle, or if the expansion is wise, because those decisions are covered under the business judgment rule.VII. OUTCOME: The court upholds the lower courts decree that a dividend must be paid, but reverses the lower courts injunction against building the smelting plant.Plaintiffs will recover interest at 5