## Facts

- Giant Food Inc. was controlled by two family groups that held equal voting power through two common stock classes: Class AC (Cohen family) and Class AL (Lehrman family), each electing two of four directors via cumulative voting.
- After a family dispute over ownership of Class AL stock, a settlement allowed Jacob Lehrman to acquire all outstanding Class AL stock, restoring parity with the Cohen family’s voting power.
- To prevent board deadlock caused by equal voting blocs, the stockholders unanimously amended the charter to create a single share of Class AD common stock.
- The Class AD share had the right to elect one of five directors but had no meaningful economic rights: no dividends and no participation in corporate assets beyond repayment of par value.
- The board issued the single Class AD share to Joseph B. Danzansky, who used it to elect himself as the fifth director.
- When a resolution was proposed to provide Danzansky an executive employment arrangement and salary, the AC and AD votes supported it and the AL vote opposed it; the directors then elected Danzansky as president over AL-director opposition.
- Danzansansky resigned as director to serve as president, and the resulting board vacancy was filled.
- Jacob Lehrman sued, claiming the creation/issuance/voting of the AD share was an unlawful voting trust or voting-trust equivalent, violated public policy by creating voting-only stock, unlawfully delegated board authority, and supported related contract and fiduciary-duty claims.
- The Court of Chancery granted summary judgment to defendants; Lehrman appealed.

## Issues

1. Whether the Class AD share arrangement constituted a voting trust subject to Delaware’s voting trust statute (8 Del. C. § 218).
2. Whether the arrangement, even if not a formal voting trust, was sufficiently similar in substance and purpose to be subjected to § 218’s restrictions.
3. Whether creating stock with voting rights but virtually no economic rights is invalid as against Delaware public policy.
4. Whether the arrangement was illegal because it permitted an improper delegation of directors’ duties to the director elected by the AD share.

## Decision

- The Delaware Supreme Court affirmed summary judgment for defendants.
- The AD share structure was not a voting trust under § 218 because the AC and AL holders did not transfer or separate their voting rights from other incidents of ownership.
- The arrangement was not treated as a voting-trust equivalent because its purpose was a legitimate deadlock-avoidance mechanism rather than centralized control through trustees.
- A charter-authorized “voting-only” share with minimal economic rights was not illegal or void as against public policy.
- The AD director’s election did not constitute an unlawful delegation of board power; once elected, the AD director served as a regular director with the same duties as the others.

## Legal Principles

- A voting trust generally requires separation of voting rights from other ownership attributes through transfer of legal title to voting trustees for a defined period, typically to create a controlling voting bloc.
- An arrangement is not a voting trust where existing shareholders retain their voting and economic rights and voting power arises from a newly created class of stock rather than transferred votes.
- Delaware corporate law permits substantial charter flexibility in allocating voting and economic rights among classes of stock absent a statutory prohibition or clear public-policy conflict.
- Allocating director-election rights among stock classes is a governance structure choice, not an impermissible delegation of the board’s managerial authority; directors elected through such mechanisms owe the same fiduciary duties as other directors.

## Conclusion

The court upheld a charter-created, single-share voting class designed to break shareholder deadlock, holding it was neither a voting trust nor subject to voting-trust statutory limits, and that voting rights may be separated from substantial economic participation through properly authorized stock classification without violating Delaware law or public policy.


Lehrman v. Cohen, 222 A.2d 800 (Del. 1966)