Abrams v. Allen

• Decision Date: 02 July 1947
• Citation: 74 N.E.2d 305,297 N.Y. 52
• Parties: ABRAMS et al. v. ALLEN et al.
• Court: New York Court of Appeals Court of Appeals

297 N.Y. 52

74 N.E.2d 305

ABRAMS et al.

v.ALLEN et al.

Court of Appeals of New York.

July 2, 1947.

Appeal from Supreme Court, Appellate Division; First Department.

Action by Bernard Abrams and others, on behalf of themselves and all other stockholders of Remington Rand, Inc., similarly situated, against Theodore F. Allen and others, defendants, and Loring R. Hoover and others, respondents, for injuries caused by directorate's labor policy. From a judgment in favor of defendants-respondents, entered November 15, 1946, upon an order of the Appellate Division of the Supreme Court, 271 App.Div. 326, 65 N.Y.S.2d 421, which reversed upon questions of law an order of the Supreme Court at Special Term, entered in New York County, denying a motion by defendants-respondents pursuant to rule 112 of the Rules of Civil Practice, for a dismissal of the first cause of action alleged in the complaint and for judgment in favor of the defendants upon the ground that alleged cause of action did not state facts sufficient to constitute a cause of action, the plaintiffs appeal.

Judgment of the Appellate Division reversed, and order of the Special Term affirmed.

LEWIS, THACHER, and DYE, JJ., dissenting. Emil K. Ellis, of New York City, and Abraham J. Heller, of Brooklyn, for appellants.

Inzer B. Wyatt, Roy H. Steyer, and Victor Futter, all of New York City, for respondents.

DESMOND, Judge.

The Appellate Division has dismissed this complaint on the ground that, ‘stripped of its conclusory statements' it ‘shows only a reasonable exercise of business judgment by the directors' and that ‘no facts are set forth which show that appellants (defendants) had interests adverse to the corporation or that they dealt with the corporation for their own benefit or that they were guilty of waste or fraud.’ 271 App.Div. 326, 328, 65 N.Y.S.2d 421, 422. If in any aspect upon the facts stated plaintiffs are entitled to a recovery, dismissal was, of course, improper. Dyer v. Broadway Central Bank, 252 N.Y. 430, 432, 169 N.E. 635;Condon v. Associated Hospital Service of New York, 287 N.Y. 411, 40 N.E.2d 230. We need examine only two paragraphs (8th and 19th) of this long complaint to find a sufficient statement of alleged facts which, if proven, may entitle plaintiffs to judgment.

Paragraph 8 of the complaint is as follows: ‘8. That in furtherance of the aforesaid objects, said defendants caused and brought about the dismantling and removal of corporate plants, equipment and machinery, as well as the intentional curtailment of production, and thereby caused defendant corporation to incur and suffer great loss thereby, not on legitimate, honest, prudent and reasonable business grounds, but solely for the purpose of discouraging, intimidating and punishing its employees by removing hopes of re-employment of the said employees by the defendant corporation.’ That quoted matter contains four plain and concise statements of material fact. Civil Practice Act, s 241. First, it is alleged that defendant directors caused the dismantling and removal of corporate plants and the intentional curtailment of production; second, that this caused great loss to the corporation on whose behalf this suit is brought; third, that these things were not done for any legitimate business reasons, but (fourth) were done solely to discourage, intimidate and punish the corporation's employees. Surely, the allegations that plants were dismantled and that damage was thereby caused, are typical allegations of fact. The same is true as to the recital of the motives with which these things were done. Richmondville Union Seminary v. McDonald, 34 N.Y. 379, 381;People v. Lewis, 275 N.Y. 33, 39, 9 N.E.2d 765, 768;Advance Music Corp. v. American Tobacco Co., 296 N.Y. 79, 85, 70 N.E.2d 401, 403; 1 Wigmore on Evidence, 3d Ed., s 119; 23 C.J.S., Criminal Law, s 1127; National Labor Relations Board v. Nevada Consol. Copper Corporation, 316 U.S. 105, 62 S.Ct. 960, 86 L.Ed. 1305;Matter of New York State Labor Relations Board v. Union Club of City of New York, 295 N.Y. 917, 68 N.E.2d 29.

Paragraph 19 of the complaint charges: ‘That notwithstanding the knowledge by the individual defendants of the matters set forth in paragraph ‘8’ hereof, defendants permitted the defendant Rand, Jr. to dominate the board of directors of the defendant corporation in respect of its labor policies and acts as aforesaid and permitted him to vent his personal bias, animus and hatred in evolving and executing the policy, plan and program described in paragraphs ‘7’ and ‘8’ hereof, with the knowledge that the defendant Rand, Jr. was not actuated by honest bona fide considerations affecting the welfare of the defendant corporation and its stockholders but by the malice, bias and personal prejudices hereinbefore described and that in so doing defendants abdicated their duties and responsibilities as directors of the defendant corporation and committed inexcusable and wanton breaches of their trust and violations of their duties as directors, to the injury of the defendant corporation.' Those allegations, like the ones quoted from paragraph 8, are plain, direct statements of fact.

If the averments of fact, above quoted, are proven on the...