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Dodge v. Ford Motor Co

Law Dictionary

Law Dictionary

Featuring Black's Law Dictionary 2nd Ed.
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Citation. Dodge v. Ford Motor Co., 204 Mich. 459, 170 N.W. 668, 1919 Mich. LEXIS 720, 3 A.L.R. 413 (Mich. 1919)

Brief Fact Summary. Plaintiff shareholders, Dodge et al., brought an action against Defendant corporation, Ford Motor Company, to force Defendant to pay a more substantial dividend, and to change questionable business decisions by Defendant.

Synopsis of Rule of Law. The purpose of a corporation is to make a profit for the shareholders, but a court will not interfere with decisions that come under the business judgment of directors.

Facts. Defendant corporation was the dominant manufacturer of cars when this case was initiated. At one point, the cars were sold for $900, but the price was slowly lowered to $440 – and finally, Defendant lowered the price to $360. The head of Defendant corporation, Henry Ford, admitted that the price negatively impacted short-term profits, but Ford defends his decision altruistically, saying that his ambition is to spread the benefits of the industrialized society with as many people as possible. Further, he contends that he has paid out substantial dividends to the shareholders ensuring that they have made a considerable profit, and should be happy with whatever return they get from this point forward. Instead of using the money to pay dividends, Ford decided to put the money into expanding the corporation.

Issue. The issue is whether Plaintiff shareholders can force Defendant to increase the cost of the product and limit the money invested into expansion in order to pay out a larger dividend.

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