Brophy v. Cities Service Co.

Brophy v. Cities Service Co.

Opinion

  [*243]   [**7]  HARRINGTON, Chancellor.

The question is whether the amended complaint states a cause of action against Thomas F. Kennedy, one of the defendants. Four causes are alleged, but only one seeks any relief against him. It appears that with the exception of Kennedy, the individual defendants were directors of Cities Service Company throughout the period involved in the action and constituted the controlling majority of the board. The gravamen of the charge against Kennedy is that at all times material he was employed in an 'executive capacity' and as 'confidential secretary' to the defendant, W. Alton Jones, a director and officer of Cities Service Company; that in those capacities 'he had access to confidential information concerning Cities Service Company' and its operations and the [***2]  operations of its subsidiaries. The acts of Kennedy labelled fraudulent are briefly, that by reason of his employment he knew in advance from 1932 to the date of filing the amended complaint when Cities Service Company, or its controlled subsidiaries, intended to purchase shares of Cities Service Company's stock ¹ on the open market in quantities sufficient to cause a rise in its market price; that knowing in advance when such purchases were to be made Kennedy acquired for his personal account, or for the account of his nominees, Cities Service Company's shares prior to the purchase by the company, and thereafter sold them at a profit resulting from the rise in the market price incident to the purchase by Cities Service Company; that by reason of Kennedy's employment as an executive and as the confidential secretary to an officer and director of Cities  [*244]  Service Company he occupied a position of trust and confidence toward the corporation, with respect to the information so acquired, and the purchase of its stock for his own account was a breach of the duty he owed to Cities Service Company.

 [***3] 

Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.