Legal Environment Final Exam

Walter writes a song celebrating President Obama. Walter then applies for and receives a copyright to the song. If Stephen uses the song at concerts, on his TV show, and puts Walter's song on a CD, has Stephen violated Walter's copyright?

Yes, unless Stephen changed the words enough that it has become a parody

Victor purchased $1 million of insurance on his barn even though the barn was worth only $500,000. Victor's barn was struck by lightning and burned down. Under the insurance policy, how much will Victor be able to recover?

$500,000.

Paul's Pen Co. manufacturers and sells an inexpensive ball-point pen. Stacy's Stationery purchases the pens for $.25 each in quantities of 1,000. Stacey's discovered that a national chain, a competitor of Stacey's, buys the pen at $.20 for 1,000. If Stacy's Stationery sues Paul's Pen Co. for price discrimination:

Stacy's Stationery will win unless Paul's Pen Co. can justify the price differential.

As Bill was walking through the mall to Tonne's Department Store, his wallet fell out of his pants. While trying on a new suit at Tonne's, Bill left his leather jacket in the fitting room. Sue found Bill's wallet. Annie, a sales associate, found his jacket. What rights do Sue and Annie have in the found property?

Sue's rights to the wallet are superior to all except Bill. Annie generally has no rights to the jacket.

In the documentary movie Expelled: No Intelligence Allowed, there was a 15-second clip of "Imagine," a song by John Lennon. The purpose of the scene was to criticize the song's message. John Lennon's wife and sons, who held the copyright to the song, sued the movie makers to prevent its use. Who won?

The movie makers under the fair use doctrine

The Brass Corp. broadcast a television program alleging that Terry Vena, a former professional soccer coach, had fraudulently obtained a $1 million loan by misrepresenting the value of his company. Vena had been a sportscaster for Brass but had switched to a competing network. The source of the Brass story was "confidential working papers" from Vena's accountant. According to the accountant, the papers had been stolen. Who owns these working papers?

Vena's accountant

Cameron and Mitchell own a commercial office building as joint tenants. Mitchell transfers his interest in the building to his sister Claire. A year later, Claire dies. Who receives Claire's 50 percent interest in the office building?

Claire's heirs receive Claire's interest

Bobby applied for and received a credit card with a $5,000 limit when he graduated from college and started his new job. Bobby's roommate and Bobby agree to split the purchase of a $5,500 large flat-screen 3-D television and sound system for their apartment. Bobby purchases the items using his credit card, and the charge goes through without a problem. When Bobby's roommate does not pay him back, however, Bobby has trouble making the credit card payments. It is not until Bobby receives a loan from a family member several months later that he can pay off the credit card balance. In that time, the credit card company charged Bobby a $50 overlimit fee and $100 in late fees for the two months that Bobby did not pay on time. Must Bobby pay these charges?

Bobby must pay only $60 of the late fees.

In 2012, Donny wanted to get a loan to buy a house but was told that his credit scores were bad. Which of the following, if distributed via his credit report, is NOT in violation of the FCRA?

A note claiming that five businesses sought Donny's credit score in 2010

Louise lives in a small town that was ravaged by tornadoes. When staying in a shelter set up by the American Red Cross, Louise is so grateful for the help of the volunteers that she writes on a napkin "I, Louise Hermione Smith, leave all of my assets to the American Red Cross upon my death," signs the napkin, and puts it back in her purse. When another severe storm comes through Louise's town, she is badly injured by a falling tree. When arriving at the hospital, Louise tells a doctor and a nurse "I know I'm not going to live. I want all my money to go to the love of my life - David Potter." Louise dies in surgery later that day, and a nurse finds the napkin in Louise's purse when looking for contact information for Louise's family. Who will receive Louise's estate?

David, as Louise's statement to the doctor and nurse is a valid nuncupative will

Baker George took orders for his famous Christmas Fruitcake. His ad demanded that orders must be placed two months prior to delivery. However, this year, George received three times his usual number of orders. In mid-October, George knew that he could not make on-time deliveries. Which of the following is true?

George has to notify customers and ask if they still want their fruitcake

Sarah owns Fine Cuts hair salon. Hairdressers each rent a chair in the salon where they can style customers' hair, and Sarah provides receptionist services, maintains the space, and sells some hair care products at the front of the salon. The hairdressers must pay 35 percent of their profits to Sarah in return for the chair space and earn a commission for each hair product that they sell. Is Sarah selling the hairdressers a security in Fine Cuts?

No, the hairdressers are not expecting to earn money predominately from Sarah's efforts

Andy hires a moving company to ship his furniture from Seattle to Houston. Through no fault of the moving company, the furniture is damaged when rats decide to make a home in the inside of the moving van. The rats chew holes in the furniture, and it is ruined. Is the moving company liable to Andy for the damage to his furniture?

Yes, because common carriers are strictly liable.

Aaron and his twin brother Erin lived together in an apartment near the college they were both attending. Aaron was working full-time in addition to going to school, while Erin was spending his time sleeping and playing video games between classes. One morning just before 9AM, Aaron's mobile phone rang and he answered, although he didn't recognize the incoming phone number. "Hello, is this Erin?" the caller asked. "Yeeess" Aaron replied tentatively. The caller launched immediately into disclosures about collecting a debt, told Aaron that he owed $4,500 on credit card accounts, and asked how he would like to set up payments. Aaron realized that the collection agent was really calling for his brother, so he hung up the phone. When the debt collector's number appeared again on Aaron's line, he blocked the caller. Has the debt collector violated the Fair Debt Collection Practices Act (FDCPA)?

Yes, because the collector did not verify Aaron's identity

When walking out of the office, Martin finds an expensive Rolex watch on the sidewalk, next to a recycling bin, and picks it up. The next day Martin is wearing the Rolex, and Fred, a co-worker, sees it and says that it is, in fact, his watch. Fred shows Martin where his name is carved on the back of the watch. Martin refuses to give Fred the watch, insisting that Fred threw it away and it is now his. If Fred sues Martin for the watch, will Martin have to prove that Fred intentionally discarded the watch in order to be able to keep it?

Yes, because the law will not presume that a true owner abandoned property.

Lauren has owned her frozen yogurt shop "FroYo2GoGo" for about three years. While running her business, she developed a machine and process that can freeze yogurt and maintain its high quality for up to 12 months. Current methods only maintain the frozen products for 2-3 months with the same quality shown by what Lauren has developed. Her brother Troy is an engineer, so she talks to him about both the machine and her freezing process. Troy thinks a skilled mechanic could "reverse engineer" Lauren's machine and figure out how it operates, but he is stumped regarding her freezing process, which involves a considerable number of steps and precise timing. How should Lauren protect her machine and her yogurt freezing process?

By applying for a utility patent for the machine, and protecting the freezing process as a trade secret

David Delta rents an apartment on the second story of a building. The landlord leases space on the first floor below David's apartment to a cleaning company that mixes its cleaning chemicals in the leased space. The fumes from the company's chemical mixing drift up into David's apartment, even when the windows are closed. They cause David to suffer severe nausea and headaches, and he cannot sleep in the apartment. David's girlfriend and friends also refuse to come over due to the strong odors. If David brings a claim for nuisance, is he likely to win?

Yes, and the court will order an abatement

Pop-Cola is a small, not very successful, company that produces soft drinks and sells them in a small number of stores in Virginia. Heads of Pop-Cola hire a chemist from a successful national soft drink company, Refresco, whose products are known for its "one of a kind" taste. The chemist tells Pop-Cola that the key ingredient to Refresco's secret recipe is a special leaf that grows in the mountains. May Pop-Cola use the secret ingredient in its own soft-drinks?

No, because the recipe is a trade secret

East End Shipping files a negligence suit against its accountant, Malia. She files a motion to admit into evidence confidential information she received from East End during its last audit. East End moves to prohibit the evidence based on accountant-client privilege. Is East End correct?

No. The information is not protected by the Internal Revenue Service Restructuring and Reform Act and can be admitted because this is a civil case not involving the U.S. government.

Jasmine signs a lease for a residential apartment for 2 years. Jasmine does not renew the lease, but when the lease expires she does not want to move out. Instead, Jasmine remains in the apartment and sends the landlord that month's rent. The landlord returns the rent to Jasmine and tells her to sign a new lease or leave. What kind of tenancy does Jasmine currently have?

Tenancy at sufferance.

Donna rents a carpet cleaner from Vac-Rent, a company that leases equipment to the public. Vac-Rent had inspected the vacuum cleaner the week before and had not noticed anything wrong with it. After Donna uses the vacuum cleaner without experiencing any problems, she notices that her carpet begins to grow a horrible mold. Assuming the Vac-Rent machine caused the mold, is Vac-Rent liable for any damage caused by Donna's use of the vacuum cleaner?

Yes, because the bailment from Vac-Rent is subject to implied warranties

Mrs. Rosenberry enters into an agreement for the sale of her mansion to Mr. Green. The house has a very large decorative gas fireplace, which Mrs. Rosenberry had specially designed. The fireplace is connected to the gas line in the house; it can be removed and replaced by a professional in a matter of hours, but that may result in damage to the wall and floor surrounding the fireplace. The agreement does not specify whether the fireplace is included in the sale of the mansion. Does Mr. Green's purchase of the mansion include the fireplace?

Yes, because the fireplace is a fixture

Suzy Tomlinson, died unexpectedly at age 50. Suzy was on the board of directors of a company her long-time friend J.B. Carlson had started. Her family was stunned to find out that she had a $15 million life insurance policy, with the proceeds payable to a company J.B. controlled. J.B. said it was a key man policy and that he wanted to protect the company if she died because she had frequently introduced him to potential investors. Is the life insurance policy valid?

Yes, if J.B can show a true business relationship existed with Suzy and the company.

Bob and Marsha co-own a house. In which of the following situations are they tenants in common?

a. They inherited the house from their Aunt Laurel, who left the house in her will "to Bob and Marsha." b. Bob and Marsha bought the house as a married couple and are now divorced. c. Marsha bought the house with Jon as joint tenants, and Jon sold his interests in the house to Bob. d. All of these answers are correct.

In the movie The Hangover Part 2, Stu, the character played by actor Ed Helms, wakes up with a facial tattoo identical to that boxer Mike Tyson, who also appears in the film. Before the movie was released, the artist who designed and tattooed Mr. Tyson sued Warner Brothers in federal court for infringement. The suit delayed release of the film for several months and prevented the studio from showing the tattooed actor in trailers or clips of the film. The suit was later settled for an undisclosed amount, and the movie was then released intact. What would be the best form of protection for the intellectual property in a tattoo?

Copyright

Li owns two pieces of property along two different rivers. On one he has a small farm, which he irrigates with water from the river. On the other property, Li owns and operates a dock that he rents to private boat owners. The two rivers have the same quality of water, but only the river with the boating facility is out of compliance with EPA water quality standards under the Clean Water Act (CWA). May Li successfully challenge the validity of the EPA standards for the river with the boat facility?

No, because the EPA may vary water quality standards based upon the water's use.

Pauline wants to develop a line of flatware and pottery. She is experimenting with various names and symbols to develop a trademark. Pauline's three-year-old daughter tells a neighbor that "mommy makes Fatware and Potty." Pauline laughs so hard that she decides to design a trademark of a large, obese, pink pig sitting on a toilet, with the letters FP (initials for the term Fat-Potty) written underneath the pig. What is the best argument that Pauline's trademark is valid?

The mark is arbitrary.

Through her job as a paralegal at the Attorney General's office, Charlotte learns that MegaCorp has been defrauding its customers. Although the information is highly confidential, Charlotte shares it with her mother and asks her not to tell anyone. Charlotte's mother does not disclose the secret, but she does sell her stock in MegaCorp. Has Charlotte's mother committed a violation of securities law?

Yes, Charlotte's mother has committed insider trading by misappropriation

Bobby works as a janitor for a large office building. One night when emptying the recycling bins in the offices of Big Co., Bobby sees a memo marked "Confidential - Eyes Only" on the top. Curious, Bobby reads the memo and learns that Big Co. is closing half of its juice manufacturing plants in the U.S. and laying off 2,000 employees. At the end of his shift, Bobby tells this to his supervisor and good friend who promptly sells her stock in Big Co. the next day. Is Bobby liable for insider trading?

Yes, as a tipper.

Advertisements for Clean Mouth mouthwash claimed that it was as effective as flossing in preventing tooth plaque and gum disease. This statement was true, but only if the flossing was done incorrectly. In fact, many consumers do floss incorrectly. Is this advertisement deceptive?

Yes, because Clean Mouth omitted important information from its claim.

Mindy receives a $10,000 bonus and places it in a trust for her children, to pay for their college education. Mindy appoints her good friend and a prominent financial advisor Michael as trustee. Michael believes in a high-risk, high-reward investment strategy. Because Mindy's children are teenagers and only a few years away from entering college, he wants to increase the value of the trust as quickly as possible, so he invests all of the trust's funds in a single risky investment, which Michael believes would double the trust's value in one year. Instead, one year later the trust had lost 95% of its value. Is Michael liable to Mindy's children for the loss of the trust's money?

Yes, because Michael did not act as a reasonable person would act in managing the trust's assets

Vanessa has a valid will giving all her estate to her niece, Gabriela. One day, Gabriela is misbehaving and Vanessa tells Gabriela, in the presence of four adults, "Gabriela, I do not like your behavior. I am going to change my will and leave everything to the Ronald Reagan Library." Vanessa goes outside and is hit by lightning and dies immediately. Will Gabriela inherit Vanessa's estate?

Yes, because Vanessa's statement did not effectively revoke or amend her existing will

DMI, Inc. is building a new high-rise condo tower on property near the waterfront. To make the condos more attractive to buyers, DMI is including an underground parking garage. During construction, DMI encounters problems with water accumulation in the lower levels of the parking garage. To solve the problem, DMI purchases the neighboring property between the building and the nearby open water and fills the land in with fill to absorb more water. Has DMI violated the Clean Water Act (CWA)?

Yes, if the neighboring property is wetland, and DMI did not obtain an EPA permit.

Samantha buys a DVD and after watching it decides she does not like the movie. Samantha sells the DVD on the internet to Derrick, who burns a copy for his cousin. Have Samantha and Derrick violated the movie's copyright?

Derrick has violated copyright, but not Samantha

In 2009, Melissa developed a hydrogen powered engine for a car while working in her garage in her spare time. Melissa installed the engine in a small car that she has been driving around town. In 2012, engineers working for Ford Motor Co. independently developed an identical hydrogen powered engine. After completing tests on the engine for two years, Ford filed a patent for the engine on March 1, 2014. On March 2, 2014, Melissa also filed for a patent for her engine. Assuming the engine satisfies all of the requirements for a patent, who is entitled to the patent?

Ford, because Ford was the first to file for the patent

Darcie visited her insurance provider in 2015 and secured a $100,000 insurance policy on her life, naming her daughter LaMya as beneficiary. Then in 2016, after watching the film Terms of Endearment with two close friends, Darcie wrote out a will and asked the friends to witness her signature. The will stated: "I Darcie, hereby make my last will and testament. I leave the proceeds of my life insurance to my cousin Meredith; the contents of my safe deposit box to LaMya; and my remaining assets to my husband Jasper." Both friends signed the will. About a month later, Darcie's husband passed away, and a few days later, Darcie died. Darcie's assets at her death include the $100,000 insurance proceeds, some jewelry in her safe deposit box, and the contents of her home. Survivors include her daughter LaMya and cousin Meredith. Assuming that Darcie's will is valid, who will be the beneficiary of the life insurance policy?

LaMya, because she is the named beneficiary

In the registration statement filed with the SEC, DrugsUSA stated that it had three different medicines approved by the Food and Drug Administration (FDA). In reality, DrugsUSA had filed applications for approval with the FDA that were still pending. The SEC approved the sale of DrugsUSA stock, and Marilyn purchased $100,000 worth of stock. Two months later, all three of DrugsUSA's applications were denied by the FDA. The stock price plummeted, reducing the value of Marilyn's shares to a total of $2,000. What, if anything, can Marilyn recover?

Marilyn can recover $98,000 from DrugsUSA and the signatories of the registration statement.

Marissa accidentally left her wallet on an airplane. She did not discover the mistake until she unpacked her bags the next day. Marissa called the credit card companies of the two credit cards she owns, a MasterCard and an American Express Card, and reported the loss. Marissa did not think to call her bank and report her debit card stolen for two weeks. By the time Marissa called MasterCard, $200 in charges for purchases Marissa had not made had been placed on the card. After Marissa had notified American Express, the card was used to make a $500 purchase. Marissa's debit card was used the same day she lost it to make a $25 purchase, and then again the following week to make a $1,000 purchase. What charges, if any, is Marissa liable for?

Marissa is liable for $50 worth of charges on the MasterCard, and the first $500 of charges on the debit card (a total of $550)

Dannie Harvey, an architect, worked for O. R. Whitaker & Sons, an architecture firm. After she was fired, Harvey sued Whitaker for employment discrimination and Whitaker sued Harvey for slander. Discrimination and slander are intentional torts. Both Harvey and Whitaker carry professional liability insurance. Will either of them be covered by their professional liability insurance policies if they are found liable at trial?

Neither Harvey nor Whitaker will be covered

James is the trustee of a trust that was established by his parents to pay his children's college tuition. One of his children is going to Princeton, where the tuition is more than $50,000. Another child is attending a state university, where the tuition is one-tenth of Princeton's. Each of James' children voluntarily and independently selected their schools without regard for the tuition. James is paying both of these tuition bills from the trust. Has James violated his fiduciary duty?

No, James has not violated a fiduciary duty as long as he discloses to both how much he is paying for tuition.

Dr. Kaminsky was a gynecologist who practiced elective abortions in the state of Texas. In May 1983, the doctor signed a two-year lease for clinic office space from the building's owner, Fidelity Mutual Life Insurance Company. A clause in the lease stated "Lessee, on paying the said Rent, and any Additional Rental, shall and may peaceably and quietly have, hold and enjoy the Leased Premises for the said term." After moving into the building and beginning his practice, abortion protestors discovered the clinic location, and started organizing demonstrations in and around the building. On the days Dr. Kaminsky performed abortion procedures (usually Saturdays), singing and chanting demonstrators picketed in the building's parking lot, inner lobby, atrium area, stairwells, and even the office area waiting room. Protestors approached patients to speak to them, distributed literature, and attempted to block them from entering the building. Despite the doctor's repeated attempts to solicit help from Fidelity Mutual in controlling the demonstrators, there was little or no response. In December 1984, Dr. Kaminsky abandoned the premises, and Fidelity Mutual filed a claim against him for the unpaid rent. Will Fidelity Mutual prevail in their claim?

No, because Dr. Kaminsky was constructively evicted.

It is Sahara's lucky day. Her older brother, Micah, has decided to give her his '68 Ford Mustang as a graduation gift. Micah paid for the car with money he earned while he was in college, and now that he's a real estate broker, decides he needs a vehicle more appropriate for transporting clients. Sahara is, of course, thrilled when Micah hands her a small box on her graduation day with a key ring bearing the Ford Mustang emblem. Micah keeps the car keys, but tells Sahara he will transfer the title to the car next week. In the meantime, for insurance purposes, he keeps the Mustang garaged at his house. Over the next week, Micah drives the Mustang occasionally, and takes the title in and out of his vehicle registration file, planning on transferring the car to Sahara. He looks at full sized sedans, and just is not happy with the choices. Sahara is calling his cell phone daily, asking about the car. Finally, Micah decides that he wants to keep the car, but tells Sahara he will help her to buy something else. Can Sarah keep the gift of the Mustang?

No, because Micah maintained control over the car

Mitchell notices that his neighbor has allowed a large tree to grow close to his house, and that the tree appears to be rotted. Although the tree does not present a danger to Mitchell's house, he suspects that it could break and fall on his neighbor's house during a storm. Looking to make some easy money, Mitchell takes out an insurance policy on his neighbor's house. The following winter, Mitchell's instincts are proven correct when the tree crashes through the neighbor's roof, causing significant damage. May Mitchell recover under the insurance policy?

No, because Mitchell does not have an insurable interest in his neighbor's house

On March 1, Randy files an application with American Insurance Co. for home insurance on a house he is purchasing on March 15. On March 2, American sends Randy a binder that acknowledges receipt of the application and premium for the insurance policy. A hurricane causes substantial damage to the house on March 10, and on March 11 American denies Randy's application. Can Randy recover any money from American?

No, because Randy does not have an insurable interest in the house.

Rosemary has gone sailing with her nephew Steve on her boat every summer since he was a small boy. On their latest sailing trip, Rosemary told Steve, "I'm getting too old to take care of this big boat. Next summer, I will give it to you to keep." Steve replied that he would be delighted to accept the boat. When Steve goes to pick up the boat from Rosemary the following summer, she tells him that she sold it to her neighbor for $25,000. Steve claims that the boat belonged to him and that he is entitled to the $25,000. Is he correct?

No, because Rosemary did not intend to transfer ownership of the boat immediately.

New scientific research proves that moderate exposure to ZLM, a previously unknown particle in coal burning emissions, causes some humans to develop asthma over time. The EPA adopts new, strict limits on the amount of ZLM allowed in emissions. The only available method for large coal factories to comply with the ZLM limits is to implement a complex air filtering process with average costs of $75 million. A coalition of coal factory owners challenges the ZLM regulations as exceeding the EPA's authority under the Clean Air Act. Will they win?

No, because the CAA authorizes the EPA to regulate air contaminants that pose a threat to safety without regard to cost

Agnes spent almost ten years working in the human resources field before returning to school and completing a second major in accounting. After earning her CPA certification, she began working for a boutique accounting firm in downtown Los Angeles, California. One of Agnes' first assignments was to conduct a compliance audit for a major public healthcare insurer. The firm sent a team of five auditors, including Agnes, to conduct the week-long evaluation on access and internal controls, as well as compliance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA). On the third day of the audit, Agnes stayed behind to finish reviewing some paperwork while her colleagues left for lunch. The company's human resources manager Stacy happened to strike up a conversation with Agnes when she sees her alone in the workroom. Stacy is surprised to know that Agnes is so knowledgeable in HR matters, and asks if she can come back in the evenings to help advise her on some issues she's having with the company's employees. Agnes is excited to be able to use some of her background to benefit the firm, so she readily agrees. Is Agnes permitted to help Stacy?

No, because the healthcare insurer is a public company.

Wanda has a terminal illness and fears she is near death. She intends to give all of her money—$50,000—to a local church. Wanda's daughter, Tabitha, tells her that she can get treated by a healer in the Amazon, and Wanda decides to give it a try. Wanda instructs Tabitha to give the $50,000 to the church if she dies. If Wanda dies in a plane crash en route to the Amazon, is the church entitled to the $50,000?

No, because the money was never accepted by the church

Gary brings his guitar to a music shop for maintenance. The shop owner tells Gary that the job will take one week. Gary agrees to come back in one week and leaves the guitar with the shop owner. Rachel comes into the shop an hour later, sees Gary's guitar, and offers the shop owner $1,000 for it. Does the shop owner have the right to sell the guitar to Rachel?

No, because the shop owner is the bailee of the guitar

Noelle invests in her best friend's new software company. A few years later, Noelle is able to sell her stock in the successful company for $5,000,000. She places all of these earnings in a domestic asset protection trust (DAPT). After Noelle loses her job, she accumulates a large amount of credit card debt. When she tries to purchase an extravagant $2,000,000 apartment, she cannot get a loan because of her poor credit. The trustee of the DAPT denies Noelle's request to withdraw money from the trust to be able to purchase the apartment, saying that Noelle is trying to live beyond her means. Can Noelle force the trustee to release the $2,000,000 to purchase the apartment?

No, the donor of a DAPT can spend the trust assets only with the approval of the trustee

Dan checks into a nice beachfront hotel. He does not want to expose his $10,000 Patek Phillipe wristwatch to salt water, so he leaves it in the dresser in the room. When he returns from the beach, the watch is gone. The state where Dan is vacationing has the following statute: If the proprietor of any hotel shall provide a safe or other secure storage unit in the hotel's office or in another convenient place, for the safekeeping of any valuables belonging to guests of the hotel, and shall place, in a noticeable position in the room or rooms occupied by each guest, a notice stating the fact that a safe is provided in which valuables may be deposited, and any guest shall neglect to deliver valuables to the person in charge of the safe, the proprietor shall not be liable in any sum for the loss of valuables sustained by that guest, by theft or otherwise... "Valuables" includes money, bank notes, bonds, precious stones, jewelry, ornaments [etc.] and any other articles of similar value. Is the hotel liable?

No, unless Dan had not been notified that he should use the hotel's safe.

After acquiring the RazRSleek brand name and electric shaver assets, Flyy controlled 55 percent of the electric shaver industry in the United States. Chaser, a competitor, claimed that the acquisition of such a large market share was a violation of the law because the increased competition from Flyy would decrease Chaser's profits. Does Chaser have a valid claim?

No, unless Flyy excluded competitors and controlled prices.

Four months ago, Abacus Accounting Partners (AAC) completed an audit of Equilibrium, Inc. Colby managed the audit for AAC and then left AAC to be Equilibrium's CFO. AAC plans to do Equilibrium's next audit in six months. Are Colby and AAC's actions allowed?

No. AAC cannot audit Equilibrium in six months because Colby worked for AAC and managed its recent audit of Equilibrium

Zoe rents a loft space for two years to use as her art studio. One day, Zoe accidentally clogs the sink by washing too much paint down the drain, causing the water to back up and flood into the loft. When the landlord comes to repair the water damage, she notices that there is a leak in the 20-year old windows, and that Zoe has installed extra light fixtures on the walls to better illuminate her work. Zoe assures the landlord that she can easily remove the light fixtures before the end of the lease without damaging the walls. The landlord tells Zoe that she will have to pay for the cost to repair the water damage caused by the flooding and damage to the sink and replacing the windows, and demands that Zoe remove the extra lights immediately. Which of the landlord's demands would a court uphold?

Only the demand to pay for the cost to repair the water damage and plumbing.

Charlie writes a will leaving all of his belongings to his wife. After Charlie's wife dies, his daughter, Marie, invites Charlie to come live with her. Charlie has his lawyer draw up a new will leaving everything to Marie, except for $1 which he left to his son Stephen "who never visits me." Shortly after, Marie goes with Charlie to his lawyer's office, where Marie and Charlie's lawyer witness Charlie sign the will. Charlie's daughter never read the new will and is shocked when she learns of her inheritance after her father's death. Stephen, however, is outraged. What is Stephen's best argument against the new will?

The will was not validly executed because Marie served as a witness

Carla collects unique pens. In class, she notices that her friend Andrew is using a rare fountain pen that she wants to add to her collection. At the end of class, Carla pretends that her pen has run out of ink and asks Andrew if she can have the fountain pen to write her name on her paper before passing it in to the professor. Andrew hands Carla the pen, and she turns and runs out of the room, saying "Thanks for the gift!" If Andrew seeks to recover the pen, what is his best argument?

There was no gift, because Andrew intended to allow Carla to use the pen, not to transfer ownership to her

James, the CEO of a major restaurant chain, learns that he is about to be fired by the Board of Directors. Furious, he writes a press release calling all of the company's executives "greedy scoundrels," and stating that "whoever has to fill my shoes will have to answer to the shareholders for the financial mess that they have created." James had no actual knowledge of any financial mismanagement by the company. The company's stock drops substantially in the few hours of trading that occur before the markets close after James releases his statement. The next day, James issues an apology, saying (truthfully) that his press release had no factual basis, and the stock recovers over the course of the week. Is James liable for a securities law violation?

Yes, James is liable for making an untrue statement of material fact

In mid-January, Nirmal was traveling for business from his office in Boston to Dubai. He was especially looking forward to staying in Dubai's underwater hotel and taking a city tour with his business associates. Because he had to catch a very early morning flight, Nirmal booked a room in a hotel near Logan International Airport. While unloading his suitbag from his car, the zipper broke open, and his $2500 Armani suit slipped out onto muddy, icy slush in the parking lot. Panicking, Nirmal asked the hotel desk clerk, Robert, if there was a 24-hour dry cleaner nearby. Robert said yes, and also that the hotel would have the suit cleaned and returned to Nirmal by morning. After a relieved Nirmal retires to his room for the evening, Robert, being very careful with the mud-caked suit, places it in a plastic bag. The clerk, who has only been on the job for two days, mistakenly gives the suit to the trash collector, who throws it in the back of his garbage truck. Needless-to-say, Nirmal was not as excited the next day about his flight to Dubai. Was a bailment created between Nirmal and the Boston hotel for the care of his suit?

Yes, a bailment for the mutual benefit of the bailor and bailee.

Company A completes its initial public offering (IPO) and complies with all of the 1933 Act requirements. Must Company A register with the SEC as a reporting company under the 1934 Act?

Yes, because Company A has completed a public offering under the 1933 Act.

Mega Company produces a wide variety of products, including a paint product that is comprised of a variety of chemicals registered with the EPA. Mega Company discovers that one of the chemicals used in this paint product is effective at removing stains from clothing. Mega Company begins producing the chemical as a new product and markets it under the name "Stain Buster." Has Mega Company violated the Toxic Substances Control Act (TSCA)?

Yes, because Mega Company did not register the new use of the chemical with the EPA.

Color-Dyne's financial statements showed that Color- Dyne owned $2 million in inventory, but failed to reveal that various banks held secured interests in this inventory. Zahra Accounting advised Color-Dyne that it needed to disclose the security interests but ultimately issued an unqualified audit opinion to Color-Dyne. After reviewing Color-Dyne's audited financial statements, Cestus, Inc. allowed the company to purchase supplies on credit. Zahra did not know that Color-Dyne intended to give the financial statements to Cestus or any other creditors. Color-Dyne went bankrupt and Cestus never received any payment for the equipment. Is Zahra liable to Cestus?

Yes, because Zahra committed fraud

Othman lived in a $6 million dollar luxury home near Port Everglades, Florida. His property had several docks that extended out into the Atlantic Ocean, allowing Othman to moor his motoryacht and sailboat close to home. Nearly every weekend, he would go scuba diving with friends just a short distance from his beach area, and enjoy the spectacular coral reefs nearby. One year in July, Othman's uncle decided to visit in his own yacht which was motoring in from the Bahamas. The uncle's boat had a deeper keel, however, and therefore, the area around Othman's dock was dredged to accommodate the increased vertical height. The dredging caused silt to settle on a coral reef, damaging it severely. The reef is home to two species on the federal government's list as "threatened." The Endangered species Act states that you cannot "take"—meaning "harm, harass, pursue, hunt, shoot, wound, kill, trap, capture, or collect"—a species covered under the Act. Has Othman violated the Endangered Species Act?

Yes, because he altered the coral's habitat and harmed them

Senno Accounting audits First Rate Koi. The parents of a toddler who drowned at Koi's facility are suing the company and, because of this potential liability, Senno issues a qualified opinion. Senno's report states that other than the lawsuit, Koi's financial statements are generally accurate. Two months later, a major GAAP error is discovered in Koi's books, and it costs investors several million dollars. Is Senno liable?

Yes, because its qualified opinion was not made for the right reason

Jeremy is a doctor who would like to be able to provide low cost medical care to underprivileged families. Jeremy and two nurses form Medicine for All and file a registration statement and prospectus with the SEC. The prospectus states that Medicine for All is looking for funding for the salaries of Jeremy and the nurses and medical supplies and that the organization will earn little profits. Will the SEC allow Medicine for All to sell its securities?

Yes, provided all of the required disclosures are made clearly

Gerald wants to buy a new digital camera, and he sees an ad for a PicturePerfect Model A digital camera at a 25 percent discount at Bull's Eye—a large department store. Gerald goes to Bull's Eye the following day, but the store clerk tells him that they are out of that particular camera. The clerk suggests that Gerald purchase the PicturePerfect Model B camera instead. Even though the Model B is not on sale, the clerk insists it is worth it because the camera takes much better pictures and "will not break in a year, like the flimsy Model A cameras." Has Bull's Eye committed an FTC violation?

Yes, this is a bait-and-switch scheme.

Juan purchased an abandoned lot. When he started to develop the land, he discovered several underground storage tanks containing hazardous waste buried on the site. He claims the seller, Richards, is liable to him for the cost of removing the tanks. Richards claims he owned the lot for 20 years and never knew about the underground tanks. Richards argues he purchased the land from Thomas and that Thomas (or his heirs) is liable for the cost of removing the underground tanks. Does Thomas (or his heirs) have any liability to Juan or Richards?

Thomas is liable if he is still alive. Thomas' heirs are liable only if they have ever owned the land

Joe Kraft writes a series of short stories and one of the stories is published in a magazine. Later, Kraft learns that Robert Rill has copied the story, removed Kraft's name, and is selling it on the internet as his own. Kraft registers the story with the Copyright Office and sues Rill for copyright infringement. Will Kraft win?

Yes, because Kraft's story was copyrighted automatically when he wrote it, and Rill is selling the copyrighted material without Kraft's permission

Hugo, an auditor, makes a material misstatement in a financial statement he prepares for a registration statement for PerthCap. The next day, he makes a misleading statement in a required filing he prepares for Raging Buffalo Partners. Will he be able to avoid liability for these errors?

Yes. He is not liable to PerthCap if he shows he performed due diligence. He is not liable to Buffalo if he shows he acted in good faith and did not know the information was misleading.

The EPA issued new Clean Air Act (CAA) regulations applying stricter limits on the emissions from stationary deep drills, which are essential to "fracking" (the process of drilling into shale below the surface of the ground to release and capture natural gas). Two years later, the EPA issues an implementation plan for Pennsylvania, which has a booming fracking industry important to the state's economy. At the time the implementation plan is issued, Fred's Fracking is not in compliance. Must Fred's Fracking take steps to comply with the Pennsylvania implementation plan issued by the EPA?

Yes, if Pennsylvania had not yet developed its own state implementation plan.

Alice goes to her local Town Savings Bank and takes out a mortgage loan for $200,000 to purchase a new home. Town Savings Bank discloses the total payments, finance charge, and APR in the loan documents. If, after signing the loan agreement, Alice has an objection to the finance charge, could her claim be protected by the Truth in Lending Act (TILA)?

Yes, if the information was not disclosed clearly

Jane's Boutique would like to buy some of Holistic Health Co.'s popular nail polish for resale. Holistic Health tells Jane that if she buys less than 100 units, she must also buy a small order of their new vitamin product. Jane has no interest in selling vitamins in her boutique. If Jane wanted to challenge Holistic Health's requirement as an illegal tying arrangement, what additional facts would she have to prove?

Holistic Health has significant power in the nail polish market and is shutting out a significant portion of the vitamin market through the tying arraignment

Brother invites Sister to use his second home after Sister's apartment burns down and tells her to stay as long as she would like. If Sister lives in the home continuously for ten years, using it as a true owner would, and no one else uses the property in this time, can she claim adverse possession?

No, because Brother invited Sister to stay at the house and never revoked the invitation.

Garden Saver is a liquid solution made by ChemCo to kill garden weeds. After Garden Saver is on the market for a year, a study reveals that one in 100 people will suffer an allergic reaction to Garden Saver, which will cause a temporary but irritating skin rash. May the EPA regulate Garden Saver?

No, because Garden Saver does not pose an unreasonable risk to the public

Joel creates a trust for his son with instructions for the trustee to provide a monthly allowance to his son starting on his 18th birthday. When Joel's son is 17 and a senior in high school, he declares that he will not go to college. Joel contacts the trustee and convinces him to transfer all of the trust's assets to a new trust, which requires that Joel's son graduate college before payments can be made. When Joel's son turns 18, he claims that he is entitled to his first monthly payment. Is Joel's son correct?

No, if the trust was created in a state that allows decanting.

Tom is renting an apartment from Brady. After Tom fails to pay rent for three months, Brady sends Tom a notice that he is in breach of the lease for nonpayment of rent. The next month, Tom again fails to pay any rent. Brady places Tom's belongings in storage, changes the locks to the apartment, and leases the apartment to a new tenant. If Tom sues Brady for a wrongful eviction, who will win?

Tom, because Brady did not follow the proper eviction procedures

Smalltown has two family-owned hardware stores that have been in business for years. Major Hardware opens one of its superstores in Smalltown, advertising extremely low prices, which are at below cost. Because Major owns stores nationally, it is able to keep prices extremely low until it forces both of the family-owned stores out of business. Once Major is the only hardware store in town, it raises its prices enough to make up for its former losses and to make some additional profit. Has Major violated any antitrust laws?

Yes, Major has engaged in predatory pricing

Jonah lends Marcy his toaster until she can buy one for herself but forgets to mention that if the toaster is on for more than 30 seconds at a time it starts to smoke and can cause a fire. The next morning, Marcy sets the toaster to toast for 45 seconds and then goes to the bathroom. While Marcy is in the bathroom, the toaster catches fire and burns down the kitchen. Is Jonah liable to Marcy for the damage caused by the fire?

Yes, because Jonah failed to notify Marcy of a known defect

In 1985, Susannah Jones purchased a farm and several acres of land. An old wooden fence stood 200 yards south of the actual southern boundary of the plot of land that Jones purchased, but Jones thought that the fence ran along the southern boundary of her land. Jones installed a new, electrified fence, cleared the land on "her" side of the new fence, and began to graze cattle there. In 2000, Sam Kerry purchased the land that bordered the other side of the fence. In 2007, Kerry had the property surveyed and discovered that the true property boundary lay 200 yards north of the fence. The statutory period for adverse possession is 20 years. If Jones files suit the same year seeking a declaration that she now owns the 200 yards between the legal boundary and the fence, will Jones win?

Yes, because Jones has adversely possessed the land.

Lincoln and Mona Stafford owned a small family farm near the Ohio River, where they grew soybeans and corn. Lincoln enjoyed metal-working as a hobby, and he would make sculptures and place them at various sites on their 200 acres. Mona enjoyed adding to the sculptures by experimenting with various paints and etching chemicals, intended to add color and texture to the art. As word spread about the quality of Stafford metal work, Lincoln and Mona began to receive requests for sculptures. Soon they were selling the art, and the hobby-turned-business was quite profitable. The Staffords built a welding center on the farm that included a painting booth and a natural gas boiler for smelting metal. They were so busy that debris from their operations, including paint cans and chemical containers, were tossed behind the center's building. The painting booth was hosed down daily, and the run-off entered a floor drain that emptied to the river. Have the Staffords violated any federal laws in the operation of their metal art business?

Yes, both the federal Clean Air Act and Clean Water Act.

Molly ordered a custom-made plaque online from Master Woodwork, Inc., for her niece's college graduation. Master Woodwork promised that the plaque would ship on or before April 15, which meant it would arrive in plenty of time for the graduation on May 1. On April 1, Master Woodwork notified Molly that the shipment would be delayed until April 22. Molly did not respond because she was sure the plaque would still in arrive in time for the graduation. Master Woodwork sent Molly an e-mail on April 20 stating that the plaque would be shipped on April 30. Frustrated, Molly deleted Master Woodwork's email without responding and bought her niece a gift certificate. When the plaque arrived on May 4, Molly refused to accept it and told Master Woodwork she would not pay. Can Master Woodwork make Molly pay for the plaque?

No, because the order was cancelled when Master Woodwork missed the April 22 shipment date.

Jack and Jill are engaged and decide to buy a house together. Jack cannot attend the closing of the purchase of the house because he is away on business, so he signs a power of attorney to Jill so that she can sign the necessary papers at the closing for both of them. Jack is in a car accident on his way to the airport that causes him to go into an irreversible coma. Jill knows that Jack would not want any extraordinary measures taken to unnaturally prolong his life, but Jack's parents disagree. Does Jill have the authority to make Jack's medical decisions?

No, unless Jack also appointed Jill as his health proxy

Mark leases a house to Julia. When Julia mentions that the bedroom door is difficult to close, Mark comes to the house and fixes the door. Unfortunately, Mark leaves a sharp edge on the door that Julia catches her foot on, making a deep cut requiring multiple stitches. Julia sends Mark her medical bills associated with the injury. Under the common law rules, must Mark pay?

Yes, because Mark negligently performed a repair.

Molly leaves her car with Happy's Garage to replace her tires. Sally, who owns the same model car as Molly, mistakenly takes Molly's car from Happy's Garage. One mile away from Happy's Garage, Sally crashes the car. Molly sues Happy's Garage. Can Happy's Garage recover from Sally?

Yes, because Sally interfered with Happy's Garage's right to possess the car

Big Drug Company produces a medicine that greatly reduces the risk of a mother transmitting HIV to her child. Big Drug filed for a patent for the medicine in 1990 and was issued a patent in 1992. Big Drug sells the medicine at an extraordinarily high price. In 2011, Zachary begins purchasing the medicine from Big Drug and distributing it in developing countries for free to pregnant women who cannot afford the drug at Big Drug's price. If Big Drug sues Zachary for patent infringement, will Big Drug win?

No, because the patent term has expired.

Victoria's Secret, a well-known lingerie company, found out that a man named Victor Mosley is running a small store in Kentucky named "Victor's Little Secret." Mosley's shop sells guns and a variety of other weapons. Does Victoria's Secret have a valid claim?

No, unless Victoria's Secret's reputation was tarnished by association with unwholesome goods sold by Victor.

Carol is a 30-year-old surgeon with a husband and two young children. Carol receives a generous pension from her employer and diligently puts a portion of every paycheck into a trust fund for her children's education. Carol's husband works part-time as a graphic designer and spends more time taking care of the children to allow Carol to work the long hours her job requires. What type of life insurance should Carol get?

Term insurance

Stephanie purchases an automobile insurance policy that includes collision, comprehensive, and liability coverage. Stephanie lends her car to her brother Daniel. Sally, who is uninsured, crashes into Stephanie's car while Daniel is driving. The car requires $5,000 in repairs, and Daniel pays $3,000 in medical bills to treat his injuries from the accident. How much will Stephanie's insurance cover?

The $5,000 for car repairs, but not the $3,000 in Daniel's medical bills

The National Park Service would like to lease out some space along park rivers, that have previously not been open to the public, to a private recreation company that will rent kayaks and offer tours and lessons featuring educational lessons about the rivers. The agency believes this will raise awareness about the need for water conservation in the country. Does the National Environmental Policy Act (NEPA) require the National Park Service to prepare an environmental impact statement (EIS)?

Yes, because this is an action that significantly affects the quality of the human environment

Lanigan Manufacturing generates a huge amount of hazardous waste each month. Which statement is true concerning the EPA requirements Lanigan faces in relation to this waste?

a. All companies that deal with a certain quantity of hazardous waste must apply for an EPA permit. b. All hazardous wastes must be tracked from the time they are created to their final disposal. c. Lanigan must dispose of the hazardous waste at a certified facility. d. All of the statements are true concerning the EPA requirements Lanigan faces

Fred is engaged to Angela, and has a daughter, Samantha, from a previous marriage. Fred borrows the cost of his upcoming wedding from his friend Ed, and signs a loan agreement with a payback schedule. The week before the wedding, Fred dies in a tragic skiing accident. Who may recover from a life insurance policy on Fred, assuming the policy was taken out prior to his death?

a. Angela b. Samantha c. Ed d. All of these

Roxy applies for a life insurance policy with Young Insurance Company, naming her brother Paul as the beneficiary. When completing the application form about past surgeries, Roxy forgets to disclose that twelve years ago she had corrective laser eye surgery. One year after issuing the policy, Roxy died suddenly in a car accident. Young denies payment under the policy based on misrepresentation. If Roxy's brother, Paul, sues Young, he will

win, because Roxy's misrepresentation was not a material fact and did not increase Young's risk in insuring Roxy's life

Roger Schlafly applied for a patent for two prime numbers. (A prime number cannot be evenly divided by any number other than itself and 1—2, 3, 5, 7, 11, 13, for example.) Schlafly's numbers are a bit longer - one is 150 digits, the other is 300. Should the Patent and Trademark Office (PTO) issue this patent?

No, because numbers are not patentable subject matter

Singleton married Sharon, his second wife, on his 80th birthday. The next day, he made a will leaving everything to his son, Joey. Two years later, Singleton died suddenly. If Singleton and Sharon lived in a non-community property state, can Sharon recover any of Singleton's estate?

Yes, Sharon can receive a forced share equal to a certain percentage of Singleton's estate