Guth v. Loft

Charles Guth was the president of Loft, Incorporated, a major candy company in the 1930s. Loft manufactured most of its own syrup except the cola syrup that it would purchase from Coca-Cola.

In 1931, Guth realized that Coca-Cola was charging smaller wholesaler less than his candy company, Loft. Consequently, he as the Loft president decided to switch the cola syrups to Pepsi.

In 1931, Pepsi was going bankrupt; so, Guth purchased the Pepsi formula and trademark while resuscitating Pepsi. Guth acquired his Pepsi interest in his own name instead of Loft. However, Guth used Loft's manufacturing facilities, credit, materials, & employees to further Pepsi business without knowledge of Loft's board of directors.

Loft corporate directors sued Guth and Pepsi. Loft alleged that Guth breached his duty of loyalty by usurping a corporate opportunity.

Loft won in the chancery court. Guth was ordered to transfer his Pepsi stock to Loft as an equitable remedy.

Do corporate directors or officers breach their duty of loyalty if they usurp corporate opportunities?

Yes. If a corporate director or officer usurps a corporate opportunity, then s/he breaches the duty of loyalty.

A corporation's directors & officers owe the corporation a duty of loyalty & are required to act with utmost good faith toward the corporation's interest.

The rule of corporate opportunity has 5 elements

1. financially capable
2. practical advantage
3. conflict of interest
4. in the line of business
5. interest in the opportunity

• Business_Associations#Usurpation_of_Corporate_Opportunities
• Walter Mack (1895 – 1990) takes over Pepsi as the new Pepsi President.