Business Law Final Exam

What are the 2 goals of bankruptcy law?

Bankruptcy goals: protect debtor by allowing them to receive a fresh start and ensure equitable treatment of creditors who are competing for debtor's assets

Copyrights - rights granted to creator of original work.

Copyrights are protective rights granted to the author or originator of a literary or artistic work. "Original works." Say you bring original form of expression. Is it copyright-able? Must be in a durable medium, so original work. Author should own it unless on employee, in which case it belongs to the employer. c mark is no longer required, don't even need to register it - automatic copyright protection - but why not file? Cheap fee, world is put on notice of the copyright interest in your work, provision to recover attourney's fees. Lecture is copyrighted because recorded in a durable medium.

Tort of Negligence - 4 Prong Test

1) A duty of care to the client exists - must have skills that an ordinarily prudent person would have, must exercise degree of care that an ordinarily prudent person would exercise under similar circumstances unless you have held yourself out as an expert. 2) that duty is breached 3) client has been harmed 4) Causation between breach and harm

Three duties of an insured.

1) Do what is required of you - pay the premiums or the policy will be cancelled. 2) Give timely notice to insurer to event which may give rise to a claim. If you don't give notice, insurance company can take position that you needed to report it, cancel coverage. Insurance rates may go up if you notify them, but otherwise policy will be cancelled. 3)Cooperate with insurer during litigation or investigation, even if this person investigated is a friend.

Elements for tortious interference with contract

1) Exists a valid and enforceable contract 2) 3rd party knows about contract 3) 3rd party causes contract to be breached

2 prong test of a trade secret:

1) Info that drives economic value - would it be of value to a competitor if they knew 2) Have you taken reasonable steps to keep it secret (use NDAs). Internal and External protection - external people come to visit facilities should require them to sign an NDA "promise to hold in confidence and not use whatever they learn from us." Also force people to consent to VA courts and recover attourney's fees for breach of NDA, should have an escort, limit access to different parts of facility. Internal - no one should be exempt including top executives. Confidentiality rule as a condition of employement - hold in confidence everything we tell you is proprietary. Should also have restricted access and need-to-know. Must monitor people people. Make it clear that everything is owned by the company, company has right to access it at any time.

Three types of ADR and the differences between them.

1) Negotiation - settlement between two parties. Can occur before, during, or after litigation. No third party fees - but also no third party judgement to bring in unbiased help. Settlements should be in writing 2) Mediation - skilled third party helps bring about resolution of claims. Usually conducted by retired judge. Process is designed by parties, can be quick, and is private. Generally sign agreement stating that discussion cannot be used as evidence in lawsuit. Fees paid to mediator. No discovery, just discussion. Is non-binding process, unless settlement signed, and cannot force parties to come to conclusion. 3) Arbitration - more formal process, one arbitrator makes final and binding decision - no real ability to overturn this decision. Some discovery, faster than litigation, private (no jury), can be expensive. Formal hearing includes receiving documents and testimony.

Patents - 3 prong test

1) Novel 2) Useful 3) Must not be obvious in light of current technologies

How do you perfect a security interest in a debtor's property (other than by possession of that collateral or as the result of the purchase money financing in consumer goods?

1) Perfection by filing - The most common means of perfection is by filing a financing statement with the office of the appropriate government official. A financing statement gives public notice to third parties of the secured party's security interest. The security agreement itself can also be filed to perfect the security interest. The financing statement must provide the names of the debtor and the secured party, and it must indicate the collateral covered by the financing statement.

What are the 5 duties of an agent?

1) Performance - you are hired to do job; do what a reasonably prudent person would do 2) Notification - pass on meaningful information to the principle, keep up-to-date 3) Duty of Loyalty - act in the interest of the principle 4) Obedience - required to obey lawful direction of principle 5) Accounting - account to principle for any property. No commingling.

What are the 5 protected classes under Title VII of the Civil Rights Act of 1964?

1) Race 2) color 3) religion 4) natural origin 5) sex

Why ADR over traditional litigation?

1) Speed 2)cost 3) privacy 4) certainty (predictability) 5) flexible process

What are 2 additional protected classes?

1) disability 2) age

What are the factors to consider in determining whether an agent is acting within the scope of their employment?

1. Whether the employee's act was authorized by the employer. 2. The time, place, and purpose of the act. 3. Whether the act was one commonly performed by employees on behalf of their employers. 4. The extent to which the employer's interest was advanced by the act. (This was most commonly spoken of by Stauffer) 5. The extent to which the private interests of the employee were involved. 6. Whether the employer furnished the means or instrumentality (for example, a truck or a machine) by which an injury was inflicted. 7. Whether the employer had reason to know that the employee would perform the act in question and whether the employee had done it before. 8. Whether the act involved the commission of a serious crime.

Defend Trade Secrets Act

Allows you to use Federal Court system. Allows for seizure of trade secrets to keep from leaving the US. Main difference to Federal law.

What are the requirements for a buyer to purchase/take goods free from any security interest (even if that security interest was perfected)?

Buyers in the Ordinary Course of Business Under the UCC, a person who buys "in the ordinary course of business" takes the goods free from any security interest created by the seller even if the security interest is perfected and the buyer knows of its exis- tence [UCC 9-320(a)]. In other words, a buyer in the ordinary course will have priority even if a previously perfected security interest exists as to the goods. The rationale for this rule is obvious: if buyers could not obtain the goods free and clear of any security interest the merchant had created, for example, in inventory, the free flow of goods in the marketplace would be hindered. As mentioned in Chapter 17, a buyer in the ordinary course of business is a person who in good faith, and without knowledge that the sale violates the rights of another in the goods, buys in the ordinary course from a person in the business of selling goods of that kind [UCC 1-201(9)]. Note that the buyer can know about the existence of a perfected security interest, so long as he or she does not know that buying the goods violates the rights of any third party.

How should a company benefitting from a non-compete or non-solicitation protect itself?

Company should send the breaching party the noncompete agreement, to ensure that they are on notice. Should also notify breaching employee.

What fiduciary duties automatically arise in a fiduciary relationship?

DUTY OF CARE AND LOYALTY.

From the perspective of the IRS, what is the critical factor in determining whether an agent is an employee or an independent contractor?

Degree of control - manner and means by which the person controls the work process, no matter what the label says. The Internal Revenue Service (IRS) has established its own criteria for determining whether a worker is an independent contractor or an employee. The most important factor is the degree of control the business exercises over the worker. The IRS tends to closely scrutinize a firm's classification of its workers because, as mentioned, employers can avoid certain tax liabilities by hiring independent contractors instead of employees. Even when a firm has classified a worker as an independent contractor, the IRS may decide that the worker is actually an employee. If the IRS decides that an employee is misclassified, the employer will be responsible for paying any applicable Social Security, withholding, and unemployment taxes.

What is the difference between disparate treatment and disparate impact?

Disparate treatment is intentional, disparate impact is not intentional. If you pick all women to fire, disparate treatement, but if you fire half of the room and half happen to be woment, disparate impact.

Risk of republication of defamatory statement.

Each republisher of a defamatory statement bears liability for the damage cause by their sharing it. DON"T POST SOMETHING TO FACEBOOK - you are liable for defamation just as the original person.

How do you create a security interest in a debtor's collateral (other than by possession of that collateral)?

Either through 1) possession or 2) a security agreement. To become a secured party, the creditor must obtain a security interest in the collateral of the debtor. Three requirements must be met for a creditor to have an enforceable security interest: 1. Unless the creditor has possession of the collateral, there must be a written or authenticated security agreement that clearly describes the collateral subject to the security interest and is signed or authenticated by the debtor. 2. The secured party must give the debtor something of value. 3. The debtor must have rights in the collateral Once these requirements have been met, the creditor's rights are said to attach to the collateral. attachment gives the creditor an enforceable security interest in the collateral [UCC 9-203].1

What is "at will" employment from the standpoint of an employer and also from the standpoint of an employee?

Employment relationships have traditionally been governed by the common law doctrine of employment at will. Under this doctrine, either party may terminate the employment relationship at any time and for any reason, unless doing so violates an employee's statutory or contractual rights. Employer's standpoint - can terminate any time with or without cause. From an employee's standpoint, can quit any time with or without cause. Sometimes, company material that leads an employee to believing they are employed for life creates an exception to an at-will employment contract.

Why weren't the former store managers in Mims v. Starbucks entitled to overtime pay?

Former managers were routinely putting in 60-80 hours a week and they were not doing management tasks. Issue is - what is your primary value to the employer? Your role as manager. They have decision making abilities, could hire/fire people. So Starbucks won. If "management", not entitled to overtime pay. Executive, administrative, professional are not paid overtime.

From an employee's perspective, what are the benefits of an agent being deemed to be an "employee?"

From an agent's side, would want to be an "employee" because principle is always liable for the acts done within the scope of employment, paid workers comp and unemployment, protected by Title 7 employment laws.

From an employer's perspective, what are the benefits of an agent being deemed to be an "independent contractor?"

From an employer's standpoint, benefits of being an independent contractor: 1) not liable [for acts of the employee], 2) no benefits [health, etc.], 3) no workers compensation, 4) no unemployment payments, 5) do not provide office supplies/equipment, 6) discrimination laws do not apply to independent contractors.

How would you design a company privacy policy to deal with an employee's "reasonable expectation of privacy?"

Have it written in the employee handbook - "we will monitor you, be aware that this is happening." "This equipment is ours, we have a right to look at it." No expectation of privacy, get them to sign off on it. Tell employees - own all equipment, will and are going to monitor it, no expectation of privacy.

Is a principal liable for the acts of its independent contractor and why?

If agent is independent contractor should principal be liable? NO. Because the principle doesn't control the manner and means by which the work is performed.

If an agent is not authorized, is a principal liable on a contract signed by the agent on the principal's behalf and why?

If an agent has no authority but nevertheless contracts with a third party, the principal cannot be held liable on the contract. It does not matter whether the principal was disclosed, partially disclosed, or undisclosed. The agent is liable, however. Principle is not liable for criminal acts.

Assuming an agent has been granted authority and has been acting within the scope of that authority, what is the agent's liability on a contract where the principal is (i) disclosed, (ii) partially disclosed, and (iii) undisclosed?

If principal is disclosed, no liability. Partially disclosed - probably on the hook. Didn't disclose - agent on the hook, [if authorized can seek compensation]

Are you entitled to unemployment benefits if you are fired for misconduct or voluntarily quit (and why)?

If you voluntarily quit you are not entitled to unemployment benefits. Only [entitled] when you are fired without cause. Employer layoff situations only. Must be willing and able to do work to be entitled.

In the Alberty-Velez case, why was she denied the protection of employment discrimination laws and the factors deemed important by the court in making that determination?

Independent contractor - factors, paid on show by show, no taxes withheld, did her own shows, made her own scripts, was permitted to be employed by anyone else at any time. Alberty-Valez was found to be an independent contractor, not entitled to employee protection laws. [factors - fixed length contract, controlled the the program]

How should a hiring company protect itself from potential claims of intentional interference with contract?

Inquire about prospective employee's existing noncompete agreements. Must do due diligence in finding this out. If a noncompete exists, a company can offer to buy out the noncompete, but with a clause in the employment agreement for a burn off period to cover themselves if the employee leaves quickly after employment.

Difference between libel and slander.

Libel - in permanent medium (writing, video, etc). Do not need to prove damages if libel. Slander - spoken

Lessons from the Feddeman case.

Recruiting colleagues to move to another employer is a breach of fiduciary duties (loyalty) if you are still employed by the employer while recruiting.

Innocent Landowner defense (and environmental compliance investigation)

No knowledge of pollution - so do a Phase I assessment, go into the historical records to see who owned it and how it was used. Phase I will protect you if you did due diligence. Example - Before Phase I, Bank makes loan for a piece of property, look at history and see it was a hunting ground, littered with lead. Bank says they don't want to foreclose on the property, so didn't. Owner and current owner are jointly and severally liable to clean up hazardous waste. So when buying a property, do an environmental survey. If company A buys Company B, and Company B has polluted property, company A is now liable. If you are about to buy a piece of property - don't put your head in the sand, do a Phase I assessment. If comes up clean, then won't be held liable for property that you buy.

One potential disadvantage of arbitration.

No potential to overturn an erroneous decision. Also -fees, no right to conduct a full discovery, may be unpredictable.

Desirability of required mediation.

Nothing discussed in mediation can be used in evidence in a lawsuit, process can be done quickly and in private

Opinion vs. fact.

Only applies to statements of fact (objectively verifiable), not opinion. Puffery is not a fact. Statements of fact prefaced with "this is opinion" does not convert to opinion. First ammendment protects opinion. "X is a windbag" - not objectively ascertainable. Can't be the basis of defamation. "This is my opinion - X filed fraudulent tax return." This is ascertainable, statement of fact, liable for defamation if false.

Potentially Responsible Parties.

Potentially responsible parties - if a potentially responsible party doesn't clean up, the EPA will clean it up and then charge the parties. Who is a PRP? Potentially responsible parties - if a potentially responsible party doesn't clean up, the EPA will clean it up and then charge the parties. Who is a PRP? 1) Person who generated the waste 2) Carrier that transported the waste 3) Person who owned the site at the time of disposal 4) Current owner or operator of the site where dumped Strict liability without fault or negligence.

Remedies available for trademark violations.

Remedy for infringement - if sustained damages, you should ask for every profit when trade off mark. Issue an injunction when sure to win case and monetary damages may not be sufficient. Law permits the destruction of the offending goods. Injunctions, damages, destruction.

What is "respondeat superior" and the effect of that principle on a principal's liability for an agent's acts?

Respondeat Superior - let the master respond. Master was responsible for what the servants did. Principal is liable for acts done within the scope of employment. Anger Case and Giant Food.

Breach of contract (and scope of work).

Specify what you are and aren't going to do. If client says "time is of the essence" could be breach of contract. Accountants and other professionals face liability under the common law for any breach of contract. A professional owes a duty to her or his client to honor the terms of their contract and to perform the contract within the stated time period. If the pro- fessional fails to perform as agreed in the contract, then she or he has breached the contract, and the client has the right to recover damages from the professional. Damages include expenses incurred by the client to hire another professional to provide the contracted- for services and any other reasonable and foreseeable losses that arise from the professional's breach. For instance, if the client had to pay liquidated damages or penalties for failing to meet deadlines, the court may order the professional to pay an equivalent amount in damages to the client.

Significance of attachment of application to policy.

The filled-in application form for insurance is usually attached to the policy and made a part of the insurance contract. Thus, an insurance applicant is bound by any false statements that appear in the application (subject to certain exceptions). Because the insurance company evaluates the risk based on the information included in the insurance application, misstatements or misrepresentations can void a policy, especially if the insurance company can show that it would not have extended insurance if it had known the facts.

What is the benefit of filing a financing statement?

The most common means of perfection is by filing a financing statement with the office of the appropriate government official. A financing statement gives public notice to third parties of the secured party's security interest. The security agreement itself can also be filed to perfect the security interest. The financing statement must provide the names of the debtor and the secured party, and it must indicate the collateral covered by the financing statement. [From Sarah's notes]: gives public notice of a secured party's interest. Also allows a court to determine which secured parties get paid first, based on date of filing.

Issues to consider in determining whether to use trade secret protection or apply for patent protection.

Three things: No cost for trade secrets, no disclosure of info for trade secrets, no time limits for trade secrets.

Trademarks - source identifier (avoid confusion in the marketplace). Dumb Starbuck's.

Trademarks - source identifier (avoid confusion in the marketplace). Dumb Starbuck's. [from Ben's notes, 4/13] Trademark is a word, symbol, or phrase attached to goods to serve as a source identifier. Trademarks associate manufacturer to product. If you have a confusingly similar logo but not same manufacturer, it is an infringement. Until 1946 it was common law, no statutes protecting trademark rights. Idea of trademark law is for businesses to avoid losing to other businesses. [from Ben's notes, 4/13] Trademarks must be distinctive - generic marks give no protection. Trade dress - an image on the product. Distinctive characteristics of trademark that draw association without replicating entire trademark. Dumb Starbucks - opens on Monday. Play off Starbucks mark. Looks just like a Starbucks store. So Starbucks trademark issue. Starbucks files an injunction to cease and desist. "Consuming public will be confused with what you are doing." Injunction to seek equitable relief, money damages won't be adequate. 3 days later the store stopped operating - no Dept. of Health license to sell goods. Who tipped them off? Probably Starbucks. Did due dilligence to avoid PR nightmare, Starbucks comes out looking good. If a parody, must be satirical. The closer it comes to a commercial enterprise, the less likely you get parody protection.

Potential liability to third persons.

Ultramares doctrine. Duty of care is for those for whose primary benefit the statements were prepared. If prepare for company XYZ, they don't say that they will be using them to apply for a loan, assume just for XYZ. Duty to forseen or known users of reports. If know it will be used for credit, duty of care is to the bank. If didn't perform services well and bank suffers damages, you are on the hook.

The 40 hour requirement for overtime pay under the Fair Labor Standards Act and how it works.

Under the FLSA, any employee who works more than forty hours per week must be paid no less than 1.5 times her or his regular pay for all hours over forty. The FLSA overtime provisions apply only after an employee has worked more than forty hours per week, so employees who work ten hours a day, four days per week, are not entitled to overtime pay. Certain employees—usually administrative, executive, and professional employees, as well as outside salespersons and computer programmers—are exempt from the FLSA's overtime provisions. 4-27, For non-exempt employees, entitled for 1.5 times pay. Exemptions for management - professional, administrative, executive.

State Uniform Trade Secrets Act

Until 2016 used to be Federal courts, now state courts. Courts can award attorneys fees in case if trade secrets if they were stolen in bad faith.

What is the effect of the automatic stay on a creditor's ability to collect from a debtor who has filed from bankruptcy protection and why?

When bankruptcy petition filed, creditor has automatic stay starting on the day petition filed. This prohibits a creditor from trying to collect debt. If secured creditor, automatic stay terminates 45 days after "creditors meeting", unless creditor reaffirms debt. Allows creditors to have a fair playing field for division of debt so that one does not receive payments in advance and a distribution from the bankruptcy court. After 45 day limit unsecured creditors must still wait(?)

Insurable interest (life and property) - what is it and when is it determined?

With life insurance, insurable interest is determined at policy issuance and is not influenced by subsequent events. In property insurance, insurable interest is determined at time of loss. Insurable interest exists when an insured person derives a financial or other kind of benefit from the continuous existence, without impairment or damage, of the insured object (or in the case of a person, their continued survival). A person has an insurable interest in something when loss of or damage to that thing would cause the person to suffer a financial or other kind of loss. Typically, insurable interest is established by ownership, possession, or direct relationship. For example, people have insurable interests in their own homes and vehicles, but not in their neighbors' homes and vehicles, and certainly not those of strangers.

What is a preferential payment and the circumstances under which a trustee in bankruptcy can recover that payment?

Within 90 days of filing for bankrupsy, the creditor gets more than they would have gotten through a bankruptcy distribution. Payment made for anticedent debt within 90 days, get more than they would have gotten under bankruptcy distribution plan. Transfers That Do Not Constitute Preferences. Not all transfers are preferences. To be a preference, the transfer must be made for something other than current consideration. Most courts generally assume that payment for services rendered within fifteen days before the payment is not a preference. If a creditor receives payment in the ordinary course of business from an individual or business debtor, such as payment of last month's cell phone bill, the bankruptcy trustee cannot recover the payment. To have made a recoverable preferential payment, an insolvent debtor must have transferred property, for a preexisting debt, within ninety days before the filing of the bankruptcy petition. The transfer must have given the creditor more than the creditor would have received as a result of the bankruptcy proceedings. The Code presumes that a debtor is insolvent during the ninety-day period before filing a petition. If a preferred creditor (one who has received a preferential transfer from the debtor) has sold the property to an innocent third party, the trustee cannot recover the property from the innocent party. The preferred creditor, however, generally can be held accountable for the value of the property. To be recoverable, a preference must be a transfer for an antecedent (preexisting) debt, such as a year- old landscaping bill. In addition, the Code permits a consumer-debtor to transfer any property to a creditor up to a total value of $6,225 without the transfer's constituting a preference. Payment of domestic- support debts does not constitute a preference.

What is the order of distribution of sales proceeds from the public or private sale of secured collateral?

[from 4/27] Any costs of sale are taken care of first, then secured in order of those who filed first, then second... if anything left, no other secured creditors, then it goes to the debtor who owned the property. Unsecured creditors get nothing in the collection of collateral. Secured creditors avoid all of these problems. Unsecured creditors generally get nothing. If you don't file a proof of claim, get nothing because you failed to file proof of claim.

What is the result of more than 1 secured party claiming a security interest in the same collateral and pursuing that collateral?

[from Ben's notes 3/28] This frequently happens in bankruptcy. 1st security interest in time has collateral. The second stakeholder only gets money after the 1st loan is paid off. If still any proceeds after the 2nd stakeholder, remainder goes to the owner. [from 4/27] Assume that the secured creditors all have security agreements - then look at who filed first, first in time. If disposing of collateral - first costs of sale and advertising, then first in time secured creditor gets paid off, then to other secured creditor; if all other secured creditors are paid off, remainder goes to debtor. General debtors have no right to proceeds of the sale of collateral.

What is the effect of failing to describe accurately, in the financing statement, the collateral?

[from page 402] Both the security agreement and the financing statement must describe the collateral in which the secured party has a security interest. The security agreement must describe the collateral because no security interest in goods can exist unless the parties agree on which goods are subject to the security interest. The financing statement must also describe the collateral to provide public notice of the fact that certain goods of the debtor are subject to a security interest. Other parties who might later wish to lend funds to the debtor or buy the collateral can thus learn security interest by checking with the office in which a financing statement would be filed. For land-related security interests, a legal description of the realty is also required [UCC 9-502(b)]. [from page 403] Any improper filing renders the secured party's interest unperfected and reduces the secured party's claim in bankruptcy to that of an unsecured creditor. For instance, if the debtor's name is incorrect or if the collateral is not sufficiently described on the financing statement, the filing may not be effective.

Definition of defamation.

false statement of fact harming someone's reputation that is published (told) to a third person. If a public figure is subject of defamation, they must prove actual malice (prove that defamer knew it was false when published).