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Law School Case Brief

Ringling Bros.--Barnum & Bailey Combined Shows, Inc. v. Ringling - 53 A.2d 441 (Del. 1947)

Rule:

Generally speaking, under Delaware law, a shareholder may exercise wide liberality of judgment in the matter of voting, and it is not objectionable that his motives may be for personal profit, or determined by whims or caprice, so long as he violates no duty owed his fellow shareholders. The ownership of voting stock imposes no legal duty to vote at all. A group of shareholders may, without impropriety, vote their respective shares so as to obtain advantages of concerted action. They may lawfully contract with each other to vote in the future in such way as they, or a majority of their group, from time to time determine. 

Facts:

Two shareholders, widows of two branches of the Ringling brothers who were circus performers, entered into a shareholders' agreement regarding their voting rights and duties with regard to shares in corporate appellant, Ringling Brothers and Barnum & Bailey Circus. After a dispute at a corporate meeting over an election of directors, one of the shareholders, appellee sued the corporation, the other shareholder who had entered into the voting rights agreement with her, and another individual shareholder (who was not a party to the voting rights agreement), arguing the agreement had required individual appellant shareholder to either vote for an adjournment of the meeting or for a particular slate of directors. Individual appellant shareholder contended the agreement was invalid. The court first held that an arbitration provision within the agreement gave the appointed arbitrator no substantive powers to enforce his decision. The court then modified and followed the rule that a shareholder could enter into a binding agreement with respect to the voting rights of corporate shares. 

Issue:

Can a shareholder enter into a binding agreement with respect to his voting rights for his or her corporate shares?

Answer:

Yes

Conclusion:

The court held that the agreement was binding, and a shareholder could enter an agreement regarding his voting rights. However, the court refused to declare the election invalid in order to respect the voting rights of appellant shareholder who was not a party to the agreement, instead vacating one director's position who had not received a majority vote.

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