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

Ringling Bros.-Barnum & Bailey Combined Shows (the corporation) (defendant) was a closely held corporation with 1,000 shares of outstanding stock. The corporation’s three stockholders were Edith Ringling (plaintiff), Aubrey Haley (defendant), and John North (defendant). Ringling owned 315 shares, Haley owned 315 shares, and North owned 370 shares. Ringling and Haley entered into an agreement to always vote their shares jointly and in the same way. The agreement provided that if Ringling and Haley could not agree on how to vote their shares, an arbitrator would settle the dispute. The corporation’s board of directors had seven positions. Independently, Ringling and Haley each had enough votes to elect two directors. By pooling their votes together, Ringling and Haley could jointly elect five of the seven directors, with North’s shares allowing him to elect the last two directors. In 1946, Ringling and Haley agreed that Ringling would vote for herself and her son for two of the director positions and that Haley would vote for herself and her husband for two positions. However, the women disagreed about who should be the fifth director. The dispute went to arbitration, and the arbitrator ruled that Ringling and Haley were to vote for William Dunn, a prior board member, for the fifth position. At the annual shareholder meeting, Haley’s husband voted for Haley by proxy and cast all Haley’s votes for Haley and himself, with no votes for Dunn. Ringling voted for herself, her son, and Dunn. North voted for himself, a Mr. Woods, and a Mr. Griffin. With these votes, the seven highest vote receivers were Haley, Haley’s husband, Ringling, Ringling’s son, North, Griffin, and Woods. The outgoing chairman of the corporation’s board relied on Ringling and Haley’s pooling agreement and the arbitrator’s ruling to declare that Dunn would receive a position instead of Griffin. At the next board meeting, both Dunn and Griffin claimed to be the seventh board member. Ringling filed a lawsuit in the Delaware Court of Chancery, seeking a declaration that the pooling agreement was enforceable and, therefore, Dunn was the seventh board member. The court ruled that the pooling agreement was valid and binding. Haley and the corporation appealed to the Delaware Supreme Court.