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Capital Group Companies, Inc. v. Armour

Delaware Court of Chancery
2005 WL 678564 (2005)


Capital Group Companies, Inc. (CGC) (plaintiff) was a privately-held Delaware corporation. Timothy Armour (defendant) was an executive vice president of a CGC subsidiary and purchased CGC stock as an employee. To purchase the shares, Armour was required to enter into a Stock Restriction Agreement (SRA). The SRA prohibited transferring either direct ownership or any interest in the CGC shares to nonemployees. For tax-planning purposes, Armour and his wife, Nina Ritter (defendant), created a revocable trust to purchase additional stock. The trust’s provisions required that CGC approve any distributions of the trust’s CGC shares. The trust also said that the shares could be repurchased by CGC if the shares were distributed to someone other than Armour upon the revocation of the trust. Finally, Armour and Ritter signed a joinder agreement, agreeing to be bound by the SRA. Subsequently, Armour filed for divorce. As part of the divorce, Ritter indicated that she was seeking: (1) an award of a direct or indirect interest in the trust, (2) one-half of any dividends received from the CGC shares and (3) one-half of any proceeds received from the sale of any CGC shares. After being made aware of Ritter’s requests, CGC sued Ritter and Armour seeking a declaration that the SRA prohibited any award of a beneficial or direct interest in the CGC shares to Ritter.

Rule of Law


Holding and Reasoning (Lamb, J.)

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