See auction date, current bid, equipment specs, and seller information for each lot. Plaintiffs contend that such alleged price fixing caused not only direct loss and damage to purchasers of products of Allis-Chalmers but also indirectly injured the stockholders of Allis-Chalmers by reason of corrective government action taken under the terms of the anti-trust laws of the United States for the purpose of rectifying the wrongs complained of. Plaintiffs are thus forced to rely solely upon the legal proposition advanced by them that directors of a corporation, as a matter of law, are liable for losses suffered by their corporations by reason of their gross inattention to the common law duty of actively supervising and managing the corporate affairs. v. ALLIS-CHALMERS MFG. Take heed - the law has far-reaching effects for managers as well as directors in exercising coporate government. Except for three directors who were unable to be in Court, the members of the board took the stand and were examined thoroughly on what, if anything, they knew about the price-fixing activities of certain subordinate employees of the company charged in the grand jury indictments. The directors of Allis-Chalmers appeared in the cause voluntarily. It employs in excess of 31,000 people, has a total of 24 plants, 145 sales offices, 5000 dealers and distributors, and its sales volume is in excess of $500,000,000 annually. Richard F. Corroon, of Berl, Potter & Anderson, Wilmington, for corporate defendant. Mr. Stevenson, the president, as well as Mr. Scholl and Mr. Singleton, who alone among the directors called to testify learned of the 1937 decrees prior to the disclosures made by the 1959-1960 Philadelphia grand jury, satisfied themselves at the time that the charges therein made were actually not supportable primarily because of the fact that Allis-Chalmers manufactured condensers and generators differing in design from those of its competitors. You can explore additional available newsletters here. You're all set! 640, an accident report made by defendants' agents as a result of interviews with defendant's employees was held to be privileged if taken for the purpose of the guidance of an attorney in pending litigation. When there could be no doubt but that certain Allis-Chalmers employees had violated the anti-trust laws, such persons were directed to cooperate with the grand jury and to tell the whole truth. He pointed to Graham v. Allis-Chalmers Mfg. Stevenson, officer and director defendant, first learned of the decrees in 1951 in a conversation with Singleton about their respective areas of the company's operations. ALLIS-CHALMERS 6070 Online Auctions at EquipmentFacts.com. Allis-Chalmers is a manufacturer of a variety of electrical equipment. In summary, the essence of what I can draw from the cases dealing with the degree of care required of corporate directors in the selection and supervision of employees is that each case of alleged negligence must be considered on its own facts, giving regard to the nature of the business, its size, the extent, method and reasonableness of delegation of executive authority, and the existence or non-existence of zeal and honesty of purpose in the directors' performance of their duties. Co., . Category: Documents. 141(f) as well, which in terms fully protects a director who relies on such in the performance of his duties. Co. about thirty years earlier. The damages claimed are sought to be derivatively recovered for the corporation from the corporate directors on the grounds that: "The Directors of the Company knew or, in the exercise of reasonable diligence, should have known of the specified course of conduct and the damage of great magnitude which that course of conduct was causing the Company and its shareholders, but the Directors failed to exercise proper supervision over the officers, agents and employees of the Company who were carrying out that course of conduct, condoned, acquiesced in and participated in the specified course of conduct and were guilty of either negligence or bad faith in their conduct of the business affairs of the Company." LinkedIn. This, we think, is a complete answer to plaintiffs' argument and supports the ruling of the Vice Chancellor. I expect they did (or at least knew about it), but I'm not sure. The order denying the motion to produce the documents described in paragraph 3 is affirmed. Were the directors liable as a matter of law? Chancellor Allen in Caremark followed Allis-Chalmers and endorsed director liability for conscious failure to respond to red flags once presented. Export. Nor does the decision in Lutz v. Boas, 39 Del. Download; Facebook. Sort by manufacturer, model, year, price, location, sale date, and more. Allis-Chalmers was a U.S. manufacturer of machinery for various industries.Its business lines included agricultural equipment, construction equipment, power generation and power transmission equipment, and machinery for use in industrial settings such as factories, flour mills, sawmills, textile mills, steel mills, refineries, mines, and ore mills.. Supplied to the Directors at the meetings are financial and operating data relating to all phases of the company's activities. After Stone v. Ritter, the duty at issue in board monitoring would be the duty of good faith, now subsumed within the duty of loyal-ty. Finally, while an annual budget for the Power Equipment Division, in which profit goals were fixed, was prepared by Mr. McMullen and his assistants for periodic submission to the board of directors, the board did not, allegedly because of the complexity and diversity of the corporation's products and the burden of more general and theoretical responsibilities, concern itself with the pricing of specific items although it did give consideration to the general subject of price levels. And no doubt the director Singleton, senior vice president and head of the Industries Group, to whom was delegated the responsibility of supervising such group, in implementing such policy made it clear to his staff as well as representatives of Allis-Chalmers' business competitors that it was the firm policy of his company that ruthless price cutting should be avoided. See Caremark, 698 A.2d at 969-70. The complaint alleges actual knowledge on the part of the director defendants of the anti-trust conduct upon which the indictments were based or, in the alternative, knowledge of facts which should have put them on notice of such conduct. In other words, management need not create a "corporate system of espionage.". The Power Equipment Division, presided over by McMullen, non-director defendant, contains ten departments, each of which is presided over by a manager or general manager. Hemmings Motor News has been serving the classic car hobby since 1954. We are concerned, therefore, solely with the denial of an order to produce those documents specified in paragraph 3. The pricing of more complex devices, often made to exacting specifications, however, was often taken further up the chain of command, at times being a matter to be finally fixed by Mr. McMullen, the divisional general manager. Further investigation by the company's Legal Division gave reason to suspect the illegal activity and all of the subpoenaed employees were instructed to tell the whole truth. It employs in excess of 31,000 people, has a total of 24 plants, 145 sales offices, 5000 dealers and distributors, and its sales volume is in excess of $500,000,000 annually. Derivative Litigation. Graham v. Allis-Chalmers Mfg. It seems clear from the evidence that while lesser officials were generally responsible for getting up such price lists, prices were fixed with the purpose in mind of having them more or less conform with those current in the trade inasmuch as it was established company policy that any flaunting of price leadership in the field in question would lead to chaos and possible violations of laws designed to militate against price cutting. Significantly, 141(f) of the Delaware Corporation Law, no doubt in recognition of the size and diversity of purpose of many corporations, has for almost twenty years provided that a director who relies in good faith on "* * * books of account or reports made to the corporation by any of its officials * * *", as well as "* * * upon other records of the corporation", should be "fully protected." The 1960 indictments on the other hand charged Allis-Chalmers and others with parcelling out or allotting "successful" bids among themselves. The argument made under this phase of the appeal breaks down into three categories, viz., first, the refusal to order the production of certain documents; second, the refusal to order the production of statements taken by the company's Legal Division in connection with its investigations of the anti-trust violations and in preparation for the company's defense to the indictments, and, third, the refusal to order the four non-appearing defendants whose depositions were being taken in Wisconsin to answer certain questions, or, in the alternative, to impose sanctions on the appearing defendants. The 1960 indictments on the other hand charged Allis-Chalmers and others with parcelling out or allotting "successful" bids among themselves. They argue, however, that they were prevented from doing so by unreasonable restrictions put upon their pre-trial discovery by the Vice Chancellor. Case law has established that the fiduciary duty of care requires directors to act with a degree of care that ordinary careful and prudent men would use in similar circumstances (Graham v Allis-Chalmers Mfg Co 188 A 2d 125, 130 (Del 1963)). They were at the time under indictment for violation of the anti-trust laws. No testimony was taken, however, on the quantum of such alleged damages, the scope of the trial having been confined in its initial phase to a receiving of evidence on the issue of alleged director liability for the damages claimed. 662 (a case in which national bank directors in a five to four decision were actually absolved of liability for frauds perpetrated by the bank president), directors may not safely hold office as mere figure heads and may not after gross inattention to duty plead ignorance as a defense. And while several non-director officials are named in the complaint, plaintiffs' claims for relief were tried and argued as a matter of director liability. While the law clearly does not now require that directors in every instance establish an espionage system in order to protect themselves generally from the possibility of becoming liable for the misconduct of corporate employees, the degree of care taken in any specific case must, as noted above, depend upon the surrounding facts and circumstances. Finally, plaintiffs argue that error was committed by the failure of the Vice Chancellor to even consider whether or not an inference unfavorable to the Directors should be drawn from their failure to produce as witnesses at the trial the Allis-Chalmers employees named as defendants in the indictments. During the year 1961 some seven thousand persons were employed in the entire Power Equipment Division, the vast majority of whose products were marketed during the period complained of at published prices. That they did this is clear from the record. Graham was a derivative action brought against the directors of Allis-Chalmers for *368 failure to prevent violations of federal anti-trust laws by Allis-Chalmers employees. When I started to write this, I did not know if Nike's board of directors saw this ad before it went out (more on that below). The written memoranda made as the result of such interviews have remained in the exclusive possession of the company's attorneys. 451, which held that the attorney-client privilege does not apply to information and statements which a lawyer secures from a witness while acting for his client in preparation for litigation. Over the course of the several hours normally devoted to meetings, directors are encouraged to participate actively in an evaluation of the current business situation and in the formulation of policy decisions on the present and future course of their corporation. Plaintiffs say these steps should have been taken long before, even in the absence of suspicion, but we think not, for we know of no rule of law which requires a corporate director to assume, with no justification whatsoever, that all corporate employees are incipient law violators who, but *131 for a tight checkrein, will give free vent to their unlawful propensities. 2 . 78, 85, 188 A.2d 125, 130 (1963). Had there been evidence of actual knowledge of anti-trust law violations on the part of all or any of the corporate directors, obviously such would have been presented to the grand jury. 40 HP to 99 HP Tractors. Richard F. Corroon, of Berl, Potter & Anderson, Wilmington, for Allis-Chalmers Manufacturing Co. SOUTHERLAND, C. J., and WOLCOTT and TERRY, JJ., sitting. 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