Globe Woolen Co. v. Utica Gas & Electric Co.
Court of Appeals of New York
121 N.E. 378 (1918)
John Maynard served as president and director of Globe Woolen Co. (plaintiff) while also sitting on the board of electric utility Utica Gas & Electric Co. (defendant), and negotiated two power-supply contracts between the companies guaranteeing Globe's electricity costs would run at least $300 less monthly than its prior steam costs; Maynard abstained from voting when Utica's board ratified the contracts, but never disclosed that Globe intended to substantially increase production and power usage, which ultimately caused Utica devastating losses (predicted up to $300,000) since it remained bound to guarantee savings based on Globe's earlier, lower production levels. When Utica tried to rescind, Globe sued for specific performance, arguing that Maynard's abstention from voting shielded the contracts from challenge; the trial and appellate courts both found the contracts unenforceable as unfair and made under the dominating influence of the common director.
Whether a corporate director's abstention from voting on a contract between his corporation and another company he also directs is sufficient, by itself, to shield the contract from challenge as unfair self-dealing.