Ringling v. Ringling Bros.-Barnum & Bailey Combined Shows, Inc.

Supreme Court of Delaware · 1947 · Corporations

53 A.2d 441 (Del. 1947)

Updated August 22, 2026

Corporationsshareholder voting agreementspooling agreementsvoting trustscumulative votingstock pooling agreementvoting agreementvoting trust distinction

Facts

At the 1946 annual meeting, Mrs. Ringling owned 315 shares, Mrs. Haley owned 315 shares, and North owned 370 shares; seven directors were to be elected by cumulative voting. Under a 1941 agreement, Mrs. Ringling and Mrs. Haley promised to consult, act jointly in exercising voting rights, and submit disagreements to Karl D. Loos as arbitrator, whose decision would be binding. When they could not agree on a fifth director, Loos directed that both women vote for adjournment and later directed a coordinated slate that would elect five directors, including Dunn. Mrs. Haley, acting through her proxy, refused to vote as directed and instead cast her votes only for herself and her husband, leading to a dispute over whether Dunn or Griffin had been elected.

Issue

Whether the 1941 agreement requiring the two shareholders to vote jointly and to follow an arbitrator's binding decision in the event of disagreement was valid under Delaware law, or instead illegal or revocable as an impermissible separation of voting power from stock ownership absent compliance with the voting trust statute. If valid, what effect Mrs. Haley's breach should have on the 1946 election.

Rule

Section 18 governing voting trusts does not invalidate shareholder agreements by which shareholders bind each other as to how they will vote their own shares. A stock pooling agreement is valid if it is merely a contract among shareholders to vote jointly, including reasonable provisions to break deadlock, and does not transfer voting rights to a trustee or otherwise create a voting trust. A binding arbitration provision in such an agreement obligates each party to exercise her own voting rights in accordance with the arbitrator's decision, but absent an express grant it does not authorize one party or the arbitrator to vote the other's shares. In an election review, the Court of Chancery may reject votes cast by a registered shareholder when those votes violate another person's rights.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lena Ortiz and Naomi Price each own 20% of a Delaware corporation based in Wilmington. They sign a written agreement providing that they will consult before every shareholder vote, vote jointly if they agree, and if they deadlock, a named accountant in Philadelphia will decide how each must vote; the agreement does not transfer shares, certificates, or record ownership to anyone.

If Naomi later argues the agreement is invalid because it affects voting rights without complying with Delaware's voting-trust statute, what is the best answer?

Explanation. The majority distinguished a stock pooling agreement from a voting trust. A voting trust involves depositing or transferring stock to a trustee to vest voting rights in that trustee. By contrast, an agreement in which shareholders bind each other as to how they will vote their own shares is valid, and a reasonable arbitration or deadlock-breaking provision does not make it a voting trust when no voting power is transferred. (Derived from Ringling v. Ringling Bros.-Barnum & Bailey Combined Shows, Inc. (1947).)