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Valparaiso Univ. Law School

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Wednesday, February 25, 2009

Business Associations Limerick of the Week: Ringling Bros.

Bros6

The Ringling Brothers are pictured at right. Together, they created a successful business enterprise. But when they passed the circus on their heirs, things got a bit messy. So messy, in fact, that I no longer teach this case, as the facts are too complicated and the situation too idiosyncratic to justify the time one has to spend on the case in order the earn the meager reward it offers in terms of useful law. Still, it is at least about the breach of a contract, in this case a shareholders agreement, and that makes it a legit case to discuss on this blog. And the facts of the case certainly render it Limerickworthy. 

Much of the background behind the case is nicely explored in J. Mark Ramseyer's article, which can be found on SSRN here. The short version is as follows. John Ringling, one of the original five brothers (he's the one with the mustache!), controlled the circus until his death in 1936. At that point, control passed to three Ringling factions: John's wife Edith, and her son Robert; Aubrey and James Haley; and Ida Ringling North (a sister to the original five) and her sons John Ringling North and Henry North. John Ringling North was the most industrious of the new generation and he actually knew how to run a business. He was the impressario who engaged Igor Stravinsky and George Balanchine to create a ballet for elephants. John North ran the circus ably until 1943 when the Haleys entered into a vote pooling agreement with Edith and Robert Ringling and thus were able to seize control of the board. They did so, Ramseyer tells us, in order to assure that the circus would continue during World War II. 

This was an unwise decision. John North had decided to shut down the circus for the remainder of the war because of the scarcity of fireproof materials for the tents under which the circus performed. But Robert Ringling and the Haleys were willing to take the risk. The result was the tragic Hartford Fire on July 6, 1944, in which 168 people were killed. Ramseyer reports that the fire was either caused by: a mentally handicapped arsonist employed by the circus; a "dirty son-of-a-b----" in the bleachers who threw a cigarette butt; or a monkey jumping around the upper poritions of the tent with a lit cigar. So much for the value of eyewitness testimony. In any case, the circus ended up paying nearly $4 million to settle civil suits, and James Haley was sentenced to a year in jail for involuntary manslaughter. 

Perhaps out of fellow feeling or perhaps out of business savvy, John North made friendly overtures towards his convicted business partner. Robert Ringling, on the other hand, who was himself lucky to have escaped a prison sentence, stayed away. As a result, when Haley got out of jail, he and Aubrey refused to cast their shareholder votes as previously agreed per their shareholder agreement with Edith and Robert Ringling. Aubrey and John North hatched a plan to return control of the circus to John North, while also allowing James Haley the opportunity to benefit from a position as an officer in the corporation.  

The issue before the court then was whether the Haleys had violated their shareholder agreement by refusing to abide by the ruling of the arbitrator appointed under the agreement, one Mr. Loos, and by refusing to cast their votes as Mr. Loos determined they should. The Delaware Supreme Court found that the Haleys were in breach of the agreement but that Mr. Loos had no power to enforce it. It therefore determined that the Haleys' improper votes simply would not count. The result was that the Haleys were simply left without representation on the newly-elected board, but that board was now evenly split between representatives of the North faction and representatives of the Ringling faction, a recipe for deadlock. 

This Limerick addresses the question of what role the Haleys were to have in the new administration of the circus. 

Ringling Bros. v. Ringling

After the Great Hartford Fire,
Aubrey and John did conspire.
The corporation is close;
Aubrey's misconduct, gross
Now the Haleys perform on high wire.

[Jeremy Telman]

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