Bayer v. Beran - Case Brief Bus Org I PDF

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Case Brief Bus Org I...

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BAYER v. BERAN 49 N.Y.S.2d 2 (Sup. Ct. 1944) FACTS: Parties: Appellant: Appellee: Procedural History:  Relevant Facts: 

Directors charged with negligence, waste and improvidence in embarking the corporation upon a radio advertising program beginning in 1942 and costing $1 million per year

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When corporation’s product was forced to change from Celanese to rayon the directors decided to expand to radio advertising Directors did not start the radio program immediately, it was acted on after studies made by the advertising department, a radio consultant was employed to advise An advertising agency of national repute was engaged

  

The commitments were subject to cancellation every 13 weeks and therefore the company was not liable for more than $250,000

ISSUE: 

Whether the directors violated their fiduciary duty by advertising bought by the corporation that the president’s wife was an indirect beneficiary of

PARTIES’ ARGUMENTS: Plaintiff: 

Directors were negligent in selecting the type of program and in renewing the radio contract for 1943

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Radio advertising was for the benefit of Miss Jean Tennyson, the wife of the president of the company

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The advertising was undertaken to further, foster and subsidize her career; to furnish a vehicle for her talents

Defendant:

 DISPOSITION OF THE COURT: 

Dismissed

RULE OF LAW: 

Questions of policy of management, expediency of contracts or actions, adequacy of consideration, lawful appropriation of corporate funds to advance corporate interests, are left solely to their honest and unselfish decisions, for their powers therein are without limitation and free from restraint, and the exercise of them for the common and general interests of the corporation may not be questions, although the results show that what they did was unwise or inexpedient

HOLDING: 

There was no breach of fiduciary duty as long as the advertising served a legitimate and a useful corporate purpose and the company received the full benefit thereof

COURT’S REASONING:         

Generally not the court’s place to review business decisions Directors acted with care, diligence and prudence The expenditure was not reckless or unconscionable President’s wife was a competent singer but not shown to be indispensible or essential to the success of the program It is unlikely the directors had the company undertake large expenditures so the president’s wife could make $20k a year The evidence fails to show that the program was designed to foster or subsidize the career of Miss Tennyson as an artist Tennyson received less than any other paid artist on the program She received no special build up All BOD, except 2 that were not present, renewed the contract and this is ratification of the prior acts...