Oceanic Exploration Co. v. Grynberg

In February 1976, Oceanic Exploration Company (Oceanic) (defendant) formed a voting-trust agreement with its stockholders, who owned 76 percent of Oceanic’s stock. The agreement provided that 51 percent of the company’s stock would be placed in a trust for four years, subject to the control of three outside directors. The agreement’s purpose was to give the directors the majority of voting rights because Oceanic was struggling financially. In June 1976, Oceanic and the stockholders entered into an agreement to amend the voting-trust agreement and to (1) create a purchase-option agreement for Oceanic to buy the stock, (2) force a director resignation, and (3) institute a noncompete agreement. The amendment provided that all 76 percent of the stock would be placed into the trust for five years. In October 1976, Jack J. Grynberg and other shareholders (plaintiffs) challenged the voting-trust agreement on multiple grounds. One such ground was that the amended voting-trust agreement was invalid under 8 Del. C. § 218, which was the state’s voting-trust statute. The shareholders claimed that under Section 218(b), an extension to a voting-trust agreement was permitted only within the final two years of the voting trust. In the chancery court, the vice chancellor relied on the fact that the February and June agreements were both filed with the state as required by Section 218 and found that the Section 218(b) two-year restriction applied. Therefore, the vice chancellor held that the June agreement was invalid. Oceanic filed an interlocutory appeal, arguing that the June amendment did not constitute a voting-trust agreement under law and therefore was not subject to Section 218.