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Gries Sport Enterprises V. Cleveland Browns

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Submitted By Marduklia78
Words 292
Pages 2
Question 2, p. 394 (answer in one paragraph)
2. Modell owned 80 percent of the Cleveland Stadium Corporation (Stadium) and 53 percent of the Cleveland Browns Football Company (Browns). Gries owned 43 percent of Browns. The Browns’ board consisted of Modell, the outside lawyer for both corporations, three individuals employed by both corporations, and Gries. Modell proposed that the Browns buy the Stadium for $6 million. Gries objected, saying that the Stadium appraised for only $2 million. The Browns’ board approved the purchase nonetheless (all directors other than Gries voting in favor). Gries commenced a shareholders derivative suit seeking to rescind the purchase. Who should win? See Gries Sports Enterprises v. Cleveland Browns Football Company, 496 N.E.2d 959 (Ohio S. Ct. 1986).

If Gries had strong evidence to proof the inclined act from Modell, then this should be adjudicated to Gries. In this case the Court utilizes the business judgment rule to analyze this claim. The rule is based on the presumption that directors, employers, etc., are better equipped than courts to make business judgments and that those making the decisions act without a personal interest and have exercised reasonable diligence and acted in good faith.

It is the settled law of this state that directors must manage the corporate business with a view solely to the common interest, and cannot directly or indirectly derive personal profit or advantage from their position which is not shared by all the stockholders. The maxim of the civil law applies without limitation or restriction to their relation to the corporate property and business. [Corporate directors] occupy a strictly fiduciary relation to the stockholders and are accountable to them on principles governing that relationship.

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