Dodge v. Ford Motor Co.
Michigan Supreme Court
170 N.W. 668 (1919)
The Ford Motor Company (defendant) was incorporated in 1903, and began selling motor vehicles. Over the course of its first decade, despite the fact that Ford continually lowered the price of its cars, Ford became increasingly profitable. On top of annual dividends of $120,000, Ford paid $10 million or more in special dividends annually in 1913, 1914, and 1915. Then, in 1916, Ford’s president and majority shareholder, Henry Ford, announced that there would be no more special dividends, and that all future profits would be invested in lowering the price of the product and growing the company. The board quickly ratified his decision. Henry Ford had often made statements about how he wanted to make sure people were employed, and generally run the company for the benefits of the overall community. The Dodge brothers (plaintiffs), who owned their own motor company, were minority shareholders in Ford, and sued to reinstate the special dividends and stop the building of Ford’s proposed smelting plant. The lower court ordered the payment of a special dividend and enjoined Ford from building the smelting plant. Ford appealed.
Rule of Law
Holding and Reasoning (Ostrander, J.)
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