The Beginning of a Lawsuit
Toward the end of 1930, at which point Frankart Inc. had become a very well known and financially successful company, Arthur Von Frankenberg had become disenchanted with a prior arrangement he had made with his partners Henry Underberg and George Murad. Although Von Frankenberg had always owned the majority of the shares in the corporation since its inception, he had (strangely) agreed to a stipulation that split all profits equally among the three partners and that each received only one vote, regardless of the number of shares owned.
The End of a Partnership
He wrote the following letter in December of 1930.
33 West 67th St.,
New York City
December 12, 1930
Mr. Henry Underberg,
c/o Frankart, Inc
225 Fifth Ave.,
New York City
Dear Mr. Underberg:
As you know, I have been dissatisfied with the arrangement between yourself, Mr. Murad and myself as embodied in the paper which we three signed dated August 31, 1925, and its subsequent modifications. Frankart, Inc. depends upon me for the designs of the articles for which it sells. I own three-fifths of the capital stock and yet am limited to one-third of the profits of the business which spring entirely from my creative work notwithstanding that under the laws of this state I am, as the principal stockholder, entitled to dividends upon my stockholding. I have been advised that there is some doubt as to the validity of the agreement. In any event, I wish to notify you that after the close of the fiscal year on December 31, 1930, I shall make other arrangements for the manufacture and sale of articles produced from my designs unless before that date the agreement in question shall be completely done away with and another providing for a distribution of the profits in harmony with the law of this state, be entered into. Although my ideas of the new arrangement are not finally formulated I am inclined to believe that Frankart, Inc., as a corporation, should enter into a proper contract with me for the production of designs, with a manufacturer for the manufacture of the articles in accordance with the designs, and with a manager and salesman for taking care of the business and distribution of the manufactured articles. All of the profits of the business properly belong to Frankart, Inc, and should be distributed among its stockholders in accordance with the law of this state, and the corporation itself should be governed by a board of directors elected by the stockholders in accordance with the provisions of this state.
I am sending an identical letter to Mr. Murad and will be glad to receive a prompt reply.
Yours very truly,
(signed) ARTHUR VON FRANKENBERG
Henry Underberg and George Murad joined forces in a legal case to prevent Von Frankenberg from potentially creating a new Board of Directors under his control. The case went to the New York State Supreme Court. Von Frankenberg ultimately lost in 1931.
More on this in my self-published book due out by the end of 2013.