Gries

GRIES SPORTS ENTERPRISES v. CLEVELAND BROWNS

Supreme Court of Ohio

26 Ohio St. 3d 15; 496 N.E.2d 959 (1986)

FACTS

GSE and Gries own forty-three percent of the outstanding stock of the Browns, a Delaware corporation which has its principal place of business in Cleveland, Ohio. Gries is also a director and officer of the Browns. Modell owns fifty-three percent of the stock of the Browns and is president, chief executive officer and director of the Browns. In addition to Modell and Gries, on March 16, 1982, the board of directors of the Browns was comprised of Modell's wife, Patricia Modell; Bailey, who was general counsel for and a full-time employee of the Browns; Berick, outside legal counsel for the Browns; Cole; and Wallack, another full-time employee of the Browns who died in January 1984.

Other than Modell and Gries, the only director who then owned any shares in the Browns was Berick, whose stock represented only about one percent of the total outstanding shares.

In 1973, Modell, along with others not involved in this action, formed Cleveland Stadium Corporation. CSC leased the Cleveland Municipal Stadium from the city of Cleveland for a period of twenty-five years and entered into sublease agreements with the Browns and with the Cleveland Indians baseball team. As of 1981, Modell owned eighty percent of the stock of CSC, with the remaining twenty percent owned by various individuals including Berick, Bailey, Cole, Wallack and Gries (and GSE). Modell was president of CSC, and Bailey was secretary and general counsel for CSC.

In December 1975, Modell sold to CSC approximately one hundred ninety acres of vacant land located in Strongsville, Ohio ("the Strongsville land") for $4,000,000. The Strongsville land had originally been acquired in parcels by Modell in 1972 and 1973 for approximately $800,000. Of the $4,000,000 purchase price, $3,000,000 was paid to Modell in cash in late 1975 and 1976. Modell was given...