Law School Resources

Dodge v. Ford Motor Co., (1919)

1. Dodge v. Ford Motor Co., (1919); pg. 262, briefed 2/19/97

2. Facts: Ford Motor Co. had a surplus of almost $112 million.  It declared a dividend of $1.2 million.  The Dodge Bros. were major shareholders, and wished to get some money to open a competing business.  Ford's Board of Directors refused to issue a larger dividend, claiming that the surplus was needed for expansion and operating cushion.

3. Procedural Posture: Dodge sued to compel Ford's board to declare a special dividend equal to one-half of its surplus.  The lower court awarded the dividend.

4. Issue: Whether the refusal of the Ford board of directors to issue such a dividend in this case amounted to a willful abuse of discretion.

5. Holding: Yes.

6. Reasoning: It is well recognized that the power to declare a dividend, and the amount of the dividend, is exclusively within the discretion of the board of directors.  However, a board may be compelled to pay a dividend if the failure to do so would be a willful abuse of their discretionary powers, or fraud, or breach of the fiduciary duty.  Here, the surplus is so large, that even if Ford were to immediately spend all of the money it planned for expansion, there would still be an obscene surplus.