Rosenfeld v. Fairchild Engine & Airplane Corp.
Court of Appeals of New York
128 N.E.2d 291 (N.Y. 1955)
In a proxy fight over Fairchild Engine & Airplane Corp.'s (defendant) board, sparked by a dispute over a former director's costly pension contract, the old board spent $106,000 of corporate funds defending its position, the winning new board later paid the old board $28,000 to cover its losing campaign costs, and the new board was reimbursed $127,000 for its own campaign expenses -- a reimbursement that shareholders separately ratified by majority vote. Shareholder Rosenfeld (plaintiff) sued to force the return of all three payments to the corporate treasury; the trial court dismissed his complaint, and he appealed.
Whether corporate directors may spend money from the corporate treasury to persuade shareholders and solicit proxy support in a policy-based proxy contest.