Gottfried v. Gottfried

Family-owned Gottfried Baking Corporation paid no dividends on its common stock from 1931 to 1945 while regularly paying dividends on preferred stock, then in 1945 paid $31,532 on common stock (about 45% of the prior year's earnings combined with other distributions) and separately retired outstanding preferred stock for $165,000, a move two of the minority shareholders themselves had supported at the 1944 shareholders' meeting; minority shareholders (plaintiffs) sued the corporation and its directors (defendants), alleging the dividend policy was motivated by a desire to freeze them out, pointing to their discontinuation from company payrolls, loans to controlling officers, and a disputed statement allegedly made by one director about the majority intending to "freeze out" the minority.