Graham v. Allis Chalmers Manf. Co.

188 A.2d 125 (Del. Ch. 1963)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

Four subordinate employees of Allis-Chalmers violated federal antitrust laws and subjected the corporation to treble damages. A group of shareholders (Ps) brought suit against the directors of Allis-Chalmers for failure to properly supervise those subordinate employees. Ps claim that the directors knew of the activities of the subordinate employees and knew of the antitrust violations that were occurring. Ps allege that by not doing anything to stop the violations of the subordinate employees, the directors breached their fiduciary duty of care to the corporation. However, Ps bring forth no evidence that the directors knew of the violations. D had a dispersed, decentralized system of management whereby duties would be farmed out to the lowest level possible. D's were not pursued personally by federal authorities in the antitrust matter, and no evidence was found that could lead to them. In addition, shareholders allege a lack of adequate supervision and breach of the duty of care.