Graham v. Allis-Chalmers Manufacturing Co.
Supreme Court of Delaware
188 A.2d 125 (Del. 1963)
Allis-Chalmers (defendant), a large equipment manufacturer that delegated management responsibility to the lowest practical level, had employees in one product division engage in a price-fixing scheme beginning in 1956, leading to guilty pleas by the company and several employees; shareholders (plaintiffs) sued the directors derivatively, arguing they should have discovered and prevented the scheme, pointing to two 1937 FTC consent decrees addressing earlier antitrust concerns that some directors were aware of but believed had been resolved. The directors had no actual knowledge of the current scheme and acted promptly once informed, and the Vice Chancellor refused to impose liability; the plaintiffs appealed.
Whether corporate directors and officers must be held liable for losses resulting from their failure to actively supervise and manage corporate affairs.