BLAW 372 Exam 3
Ex of statement of fact vs statement of opinion
"Lane is a jerk" --> opinion "Lane cheats on his taxes" --> fact and therefore can lead to liability for defamation if FALSE
The modified Ultramares rule is referred to as what?
"Near Privity" rule - established in the Credit Alliance Case in 1985 * A minority of courts apply this rule *
What are exceptions to the burden of proving special damages for slander cases?
"Slander per se" - if a false statement constitutes "slander per se" it is actionable with NO proof of special damages required - Following 4 types of declarations are considered to be "slander per Se": 1. A statement that another has a "loathsome" disease (such a sex transmitted one) 2. A statement that another has committed improprieties (bad language or behavior) while engaging in a profession or trade 3. A statement that another has committed or has been imprisoned for a serious crime 4. A statement that a person is unchaste or has engaged in serious sexual misconduct (usually applies to unmarried ppl and also women)
2) Government in the Sunshine Act
"open meeting law" requires that "every portion of every meeting of an agency" be open to "public observation" also requires that the public be provided w/ advance notice of scheduled meetings & agendas like the FOIA --> sunshine act contains certain exceptions
Concept Summary 47.2
*review this concept summary*
Market-Share Liability
- Normally --> plaintiff must prove that the defective product that cause the injury was the product of a SPECIFIC defendant (aka one person) BUT when you can't prove who did it... - under the theory of market-share liability the liability is shared among ALL firms that manufactured & distributed a particular product during a certain period of time - court can hold each manufacturer responsible for a % of the plaintiff's damages that is equal to the % of it's market share
Mobile Sources - Reducing Emissions
- Obama admin set long-term goal of reducing emissions, including those from cars & sport utility cars by 80% by 2050 - admin also ordered EPA to develop national standards regulating fuel economy and emissions for medium -heavy duty trucks starting w/ 2014 models
Debtor in Possession
- On entry of order for relief, debtor who is left in place to operate the business during the reorganization proceeding is called the debtor in possession (DIP) - the court, however, may appoint a trustee ("receiver") to operate the debtor's business - court will choose this action if gross mismanagement of the business is shown or appointing a trustee is in the best interests of the estate
Best Interests of the Creditors
- Once a petition for Chapter 11 bankruptcy has been filed, a bankruptcy court, after notice & hearing, can dismiss/suspend all proceedings at any time if dismissal would better serve the interests of the creditors - Code also allows a court, after notice & a hearing, to dismiss a case under reorganization "for cause" when there is no reasonable likelihood of rehabilitation - a debtor who is dismissed can file a ch 11 petition in the future
Acceptance of the Plan
- Once the plan has been developed, it is submitted to each class of creditors for acceptance - For the plan to be adopted, each class must accept it. - A class has accepted the plan when a majority of the creditors, representing 2/3 of the amount of the total claim, vote to approve it.
The Duty of Professionals
- Professionals owe a higher duty of care based on special education, skill or intelligence (engineers, dentists, lawyers, accountants) - Breach of duty of care is called professional malpractice - held to a the reasonable accountant standard for accountants vs just the normal reasonable person standard
What creates a potential conflict with attorney/client confidentiality?
- SEC has implemented rules requiring attorneys who become aware that a client has violated securities laws to report the violation to the SEC - reporting a client's misconduct could be a breach of the privilege so these rules create potential conflict for attorneys Note: once an attorney-client relationship arises all communications between the parties are privileged
PCAOB
- SOX increased government oversight of public accounting practices by creating the PCAOB, which reports to SEC - the goal of PCAOB is to protect public investors and to ensure that public accounting firms comply with the provisions of SOX - smaller companies those with less than 75M in publicly held shares no longer need to file an auditor's report on management's assessment of internal controls under section 404(b)
Drinking Water
- Safe Drinking Water Act requires the EPA to set max levels for pollutants in public water systems - the operators of public water systems must come as close as possible to meeting the EPA's standards by using the best available technology - act requires each supplier of drinking water to send annual statement describing source of its water to every household it supplies --> statement must include levels of contamination & health concerns associated w/ contamination
Secured vs. Unsecured Creditor
- Secured --> has collateral - Unsecured --> no collateral aka secured ppl can sell your property if you can't pay them because your property is essentially collateral
The Bankruptcy Trustee
- a person appointed by the court to manage the debtor's funds - basic duty: to collect the debtor's available estate and reduce it to cash for distribution preserving the interests of both the debtor and the unsecured creditors
Invasion of Privacy
- a person has a right to solitude and freedom from prying public eyes (aka a right to privacy) - courts have held that certain amendments to the U.S. Constitution imply a right to privacy - Some states constitutions explicitly provide for privacy rights
1. Compensatory Damages
- a plaintiff is awarded compensatory damages to compensate or reimburse the plaintiff for ACTUAL losses - the goal is to make the plaintiff whole - often broken down into "special" and "general" damages
Actual Fraud
- a professional may be held liable for actual fraud when: 1) he intentionally misstates a material fact to mislead a client 2) the client is injured as a result of justifiably relying on the misstated fact
Constructive Fraud
- a professional may sometimes be held liable for constructive fraud whether or not he acted w/fraudulent intent A party misrepresents innocently, with no evil intention, but that misrepresentation could have been avoided with reasonable care.
Examples of situations/decisions/projects that need an EIS:
- development of a ski resort by a private developer on federal land - operation of a nuclear plant requiring a federal permit - creation of a dam as part of a federal project *anything involving fed project, permit, land, that is going to affect the environment --> needs an EIS*
1916 Landmark decision
- established the exception to the privity requirement mentioned previously - A guy got injured riding a Buick car that collapsed due to defective materials in the wheels - the question was whether or not Buick was liable even though they bought it from a manufacturer so they didn't even make it --> court ruled for the first time that even tho there was no privity contract, Buick was liable
6. Knowledgable User
- if a particular danger (such as electrical shock) is or should be commonly known by particular users of the product (such as electricians) the manufacturer need not warn these users of danger * similar to commonly known dangers *
What is gross negligence?
- intentional failure to perform a manifest duty in reckless disregard of the consequences of such a failure for the life or property of another
What is privity of contract?
- only original parties to a contract have rights and liabilities under the contract - a professional's duty is only to his client - aka no third parties involved
Superfund
- regulates the clean-up of disposal sites in which hazardous waste is leaking into the environment - Fund created by Congress in 1980 to clean up hazardous waste sites. Money for the fund comes from taxing chemical products.
State Regulations
- state laws may restrict a business's discharge of chemicals in the air/water or regulate its disposal of toxic wastes - states may also regulate the disposal or recycling of other wastes including glass, metal, plastic containers, & paper - additionally, states may restrict emissions from motor vehicles
Product Liability by Misrepresentation
- when a user/consumer is injured as result of manufacturer's or sellers fraudulent misrepresentation, the basis of liability may be the tort of fraud - misrepresentation must have been made knowingly or with reckless disregard for the facts - ex: mislabeling of packaged cosmetics *misrep must be about a material fact & buyer must've relied on it*
Attorney's Duty of Care - Liability for Malpractice
- when an attorney fails to exercise reasonable care and professional judgement, he breaches the duty of care and can be held liable for malpractice (professional negligence) - in malpractice cases, the plaintiff MUST prove that the attorney's breach of the duty of care actually caused injury
Ch 43 - Admin Agencies
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Other Applications of Strict Liability
1. Virtually all courts extend strict liability to injured bystanders. 2. Strict liability also applies to suppliers of component parts
Public Figures
3rd defense to defamation - politicians, entertainers, professional athletes, and others in the public eye are considered PUBLIC FIGURES - Public figures are regarded as "fair game" - false and defamatory statements about public figures that are published in media will NOT constitute defamation unless the statements are made with ACTUAL MALICE
Enforcement
Although rulemaking is the most prominent agency activity, rule enforcement is also critical - Often an agency enforces its own rules - after a final rule is issued, agencies conduct investigations to monitor compliance with the rule or the terms of enabling statute
The Role of the Admin Law Judge (ALJ)
An ALJ presides over the hearing and has the power to administer oaths, take testimony, rule on questions of evidence, and make determinations of fact Technically the ALJ who works for the agency prosecuting the case, is not an independent judge - nevertheless, an ALJ MUST be unbiased
What is another situation in which strict liability is applied?
Bailment - exists when goods are transferred temporarily into care of another
What is one of the more important aspects of consumer protection legislation?
Credit Protection *nearly 80% of U.S. consumers have credit cards, and most carry a balance on these cards - a total of about 2.5 trillion of debt nationwide*
FASB --> ? AICPA --> ?
FASB --> GAAP AICPA --> GAAS
What is the most important federal legislation regulating food and drugs?
FDCA Federal Food, Drug, and Cosmetic Act
Recap: FTC Orders and Remedies
FTC can issue: 1. Cease-and-desist order (stop the bad ad) 2. Counter-advertising (inform public about bad ad) 3. Multiple Product Order (stop false ad on EVERY product not just the one that was the issue)
Online Deceptive Advertising
FTC monitors websites for deceptive claims involving everything from medical treatments, to exercise equipment
Air Pollution
Fed involvement with air pollution goes back to the 50's/ 60's when Congress authorized funds for air-pollution research & enacted the Clean Air Act - Clean Air Act provides the basis for issuing regulations to control multi-state air pollution - it covers mobile sources of pollution (such as cars & other vehicles) - & covers stationary sources of pollution (such as utilities & industrial plants)
What is the most important federal consumer protection law?
Federal Trade Commission Act (FTC) created to prevent unfair and deceptive trade practices including deceptive advertising
Ex of unexpired leases benefit by filing ch 11
Five years ago, APT corp leased an office building for a 20 year term APT can no longer pay the rent due under the lease and has filed for ch 11 reorg. In this situation, the debtor in possession (DIP) can cancel the lease and APT will not be required to continue paying the substantial rent due for 15 more years
What does GAAS stand for?
Generally Accepted Auditing Standards
Is audit intended to uncover fraud or other misconduct?
NO - the purpose is to provide the auditor w/ evidence to support an opinion on the reliability of the businesses financial statements - but an auditor can still be liable for failing to detect fraud especially if they examined the records and didn't find it
Can a party be directly prosecuted for violating an interpretive rule or guidance document?
No. BUT informal action is important because it warns ppl that the agency MAY create a formal rule (Not an interpretive or guidance document) in the future
Is the sale/loan between two consumers protected under the TILA (truth in lending act)
No. only businesses who lend funds, sell on credit, arrange for extension of credit, etc.
How did Congress respond to growing concerns about hazardous waste on the environment?
Resource Conservation & Recovery Act (RCRA) - act also requires all producers of hazardous waste to label & package properly any hazardous waste to be transported - civil penalties up to 25k for each violation, criminal is up to 50k a day and 2 years in prison (can be doubled if you repeat your actions)
Function #1
Rule-making: -formulation of new regulations, or rules - regulations are said to be legislative because like statutes they have a binding effect (thus violators of agency rules may be punished) *since agency rules have significant legal force, the APA established procedures for agencies to follow in creating rules*
Ex of automatic stay
Stefanie filed for bankruptcy. When she requested a transcript from the university at which she had obtained her master's degree, the university refused because she owed more than 6k in tuition. The court ruled that the university violated the AUTOMATIC STAY by refusing to provide a transcript because it was attempting to collect an unpaid tuition debt
Chapter 7
Strict Liability and Product Liability - strict liability = liability without fault a) a person who engages in certain activities can be held responsible for any harm that results to others even if the person used the utmost care - Product Liability = when product defects cause injury or property damage to consumers, users, or bystanders
Credit-Card Rules
TILA also contains provisions regarding credit cards One provision: Limits consumer liability for credit card debt in cases of stolen cards to $50 (for unauthorized charges made before the creditor is notified that the card has been lost)
Application of TILA
TILA requirements apply only to those who in the ordinary course of business, lend funds, sell on credit, or arrange for the extension of credit THEREFORE --> sales/ loans made between 2 consumers do not come under the protection of the act
Who is held accountable for administering the debtor's estate?
TRUSTEE - to allow the trustee to accomplish this duty, the Code gives trustee certain powers & these powers must be exercised w/in 2 years of the order for relief
Which agency oversees the credit practices of banks, mortgage lenders, and credit card companies?
The Consumer Financial Protection Bureau (CFPB)
Typically, the fed government relies on state and local governments to enforce federal environmental statutes and regulations such as those regulating air quality (T/F)
True.
The Repayment Plan - Allowable expenses
a debtor must apply the means test to identify the amount of disposable income that will be available to repay creditors debtor is allowed to deduct certain expenses from monthly income to arrive at this amount but only if they are appropriate Length of the plan: 3-5 years depending on family income BUT MAY NOT EXCEED 5 YEARS
What is a consumer-debtor?
a debtor whose debts result primarily from the purchase of goods for personal, family or household use
Federal, State, and Local Regulations
all levels of government in the U.S regulate some aspect of the environment
1. Notice of the Proposed Rulemaking
first step in notice and comment rule-making when a fed agency decides to create a new rule, the agency publishes a notice of the proposed rule-making proceedings in the federal register. fed register = daily publication of exec branch that prints government orders, rules and regulations *This notice states where and when the proceedings will be held, the agency's legal authority for making the rule (usually enabling legislation), and the terms or subject matter of the rule*
Credit Card Rules - another provision
if a consumer receives an unsolicited (Not asked for) credit card in the mail that is later stolen, the company that issued the card CAN'T charge the consumer for any unauthorized charges
What is strict liability?
liability that does not depend on actual negligence or intent to harm. it stems from the hazardous activities therefore it doesn't matter if the company was negligent or not --> they are strictly liable
The Purpose of Tort Law
to provide remedies for the violation of various protected interests - examples of protected interests: personal physical safety & protection of property thus, tort law provides remedies for these "protected interests"
Individual's Repayment Plans - Ch 13
"Adjustment of Debts of an Individual w/ Regular Income" - Individuals w/ regular income who owe fixed (liquidated) unsecured debts of less than $383,175 or fixed secured debts of less than $1,149,525 may take advantage of bankruptcy repayment plans - partnerships & corporations are excluded (duh cuz individuals only) - salaried employees & sole proprietors & individuals who live on welfare, SS, fixed pensions, or investment income are eligible - many small business debtors have a choice of filing under either ch 11 or ch 13
What is a bona fide error?
"In good faith" unintentional mistake
What is the most important defense against Superfund?
*Innocent Land Owner Defense* - this defense may protect a landowner who acquired the property AFTER it was used for hazardous waste disposal
False Advertising Claims under the Lanham Act
*The Lanham Act covers false advertising claims* To state a successful claim for false advertising under this act, a business must establish each of the following elements: 1. An injury to a commercial interest in reputation or sales 2. Direct causation of the injury by false or deceptive advertising 3. A loss of business from buyers who were deceived by the advertising
Family Farmers and Fishermen - Ch 12
*created to help relieve economic pressure on small farmers* - family farmer = gross income is at least 50% farm dependent and whose debts are at least 50% farm related ^total debt must not exceed $4,031,575 ^ partnerships & corporations can qualify - family fisherman = gross income is at least 50% dependent on commercial fishing operations & whose debts are at least 80% related to commercial fishing ^ total debt must not exceed $1,868,200
Violations of the Clean Water Act
*discharging pollution in water w/out a permit or in violation of the permit (exceeds pollution limits) violates CWA & results in penalties* Civil penalties range from $10,000 to $25,000 per day, but not more than $25,000 per violation. Criminal penalties range from 2500 per day/1 year prison up to 1M fine and 15 years prison (criminal = intentional violation) Injunctive relief and damages can also be imposed (polluting party can be required to clean up the pollution or pay for the cost of doing so)
Substantial Abuse-Means Test Basic Formula
- A debtor wishing to file for bankruptcy MUST complete the means test to determine whether she qualifies for ch 7 - debtor's average monthly income in recent months is compared with the median income in the geographic area in which the person lives (if debtor is below --> they can are allowed to file for ch 7 bankruptcy) aka there is no presumption of bankruptcy abuse
Creditors' Meeting
- A meeting of ALL the creditors listed in the Chapter 7 schedules for liquidation (TRUSTEE CALLS THIS MEETING)
What is a potentially responsible party (PRP)?
- A person who falls into one of the categories listed previously is a PRP - If PRP does not clean up the site, EPA can clean up the site and recover the clean up costs from the PRP's
Liability for Harm
- A trespasser is GENERALLY liable for damage caused to the property and generally CANNOT hold the owner liable for injuries sustained on the premises - this common law rule is being changed a lot in favor of a "reasonably duty of care rule" - For instance, a landowner may have a duty to post a notice that guard dogs patrol the property - also if young children are attracted to the property (swimming pool) and are injured, the owner may be liable (this is called the attractive nuisance doctrine)
Ch 13 - Discharge
- After debtor has completed all payments, the court grants a discharge of all debts provided for by the repayment plan - Generally, all debts are dischargeable EXCEPT the following: 1. Allowed claims not provided for by the plan 2. Certain long-term debts provided for by the plan 3. Certain tax claims and payments on retirement accounts 4. Claims for domestic-support obligations 5. Debts related to injury or property damage caused while driving under the influence of alcohol or drugs *An order granting discharge IS FINAL*
Due diligence is one defense to liability for accountants, what are four other defenses?
- An accountant may raise the following defenses to Section 11 liability: 1. There were no misstatements or omissions 2. The misstatements/ omissions were not material facts 3. Misstatements/omissions had no causal connection to the plaintiff's loss 4. The plaintiff-purchaser invested in the securities knowing of the misstatements/omissions
Involuntary Bankruptcy
- Bankruptcy that occurs when CREDITORS file a petition with the court against a debtor (aka force) - Involuntary case CANNOT be filed against a charitable institution or a farmer - involuntary petition should NOT be used as an everyday debt-collection device & the Code provides penalties for filing of frivolous petitions against debtors - if court dismisses an involuntary petition, petitioning creditors may be required to pay costs & attorney's fees incurred by the debtor in defending against the petition - if the petition was filed in bad faith, damages can be awarded for injury to debtor's reputation
Potential Liability of Accountants under Securities Law
- Both civil AND criminal law may be imposed on accountants under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995
Development of the Strict Product Liability Doctrine
- California was the FIRST state to impose strict product liability in tort on manufacturers - Greenman v Yuba Power Products Inc (power tool threw a piece of wood and struck Greenman in the head)
Violations of the Clean Air Act
- Civil penalties up to $25,000/day - Additional fines up to 5k/day for other violations such as failure to maintain the required records - Intentional violations may involve criminal penalties (1M fine and prison up to 2 years) - whistleblowers may get up to 10k for providing info about violators
Stationary Sources - Hazardous Air Pollutants
- Clean Air Act requires EPA to list all hazardous air pollutants (HAPS) on a prioritized schedule - 200 substances have been classified as hazardous ^ - These are emitted from stationary sources by a variety of business activities: smelting, dry cleaning, house painting, and commercial baking
Distribution to Secured Creditors
- Code requires that consumer-debtors file a statement of intention w/ respect to secured collateral - they can choose to: 1) Pay off the debt & redeem the collateral OR 2) Claim it as exempt OR 3) Reaffirm the debt & continue making pmts OR 4) Surrender the property to the secured party
The Resource Conservation & Recovery Act (RCRA)
- Congress's response to growing concerns about the effects of hazardous waste materials on the environment - RCRA required EPA to determine which forms of solid waste should be considered hazardous and to establish regulations to monitor/ control hazardous waste disposal
Water Pollution
- Contamination of streams, rivers, lakes, oceans, or groundwater with substances produced through human activities **Water pollution stems mostly from industrial, municipal, and agricultural sources**
What is DIP's role?
- DIP's role is similar to that of a trustee in a liquidation bankruptcy - DIP is entitled to avoid preferential pmts made to creditors & fraudulent transfer of assets - DIP can also exercise a trustee's strong-arm powers - DIP has power to decide whether to cancel or assume pre-petition executory contracts (contracts that are not yet performed) or unexpired leases - cancellation of executory contracts or unexpired leases can be of substantial benefit to a ch 11 debtor
Pesticides/Herbicides - EPA Actions
- EPA can cancel or suspend registration of substances that it has identified as harmful & can inspect the factories where the chemicals are made
3. Judicial Controls
- Exercises control over agency powers through the court's review of agency actions - Agency actions are not automatically subject to judicial review though - Party seeking court review must FIRST exhaust all admin remedies under what is called the exhaustion doctrine
Bankruptcy Courts
- Fed court of limited jurisdiction that handles ONLY bankruptcy proceedings, which are governed by federal bankruptcy law - can have a jury trial if authorized and parties consent to it - bankruptcy court judges are appointed for 14 years
The Fair Credit Reporting Act
- Fed law established procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant and properly used. - Act protects privacy of background information and ensures that info by lenders supplied is accurate - consumer credit reporting agencies may issue credit reports to users only for specific purposes (extension of credit, issuance of insurance policies, etc.)
Pesticides/Herbicides
- Federal Insecticide Fungicide and Rodenticide Act (FIFRA) regulates the use of pesticides and herbicides - these substances must be: 1) Registered before they can be sold 2) Certified and used only for approved applications 3) Use in limited quantities when applied to food crops
Nutritional Content of Food Products
- Food products must bear labels detailing the nutritional value including the # of calories and amts of nutrients the food contains - The Nutrition Labeling and Education Act requires food labels to provide standard nutrition facts, terms such as 'low fat' and 'fresh' are regulated by FDA and USDA
Liability for Fraud
- Fraud (misrepresentation) involves the following elements: 1. Misrepresentation of material facts 2. An intent to deceive 3. Justifiable reliance by the innocent party on the misrepresentation - in addition --> to obtain damages, the innocent party must have been injured - Both actual & constructive fraud are potential sources of legal liability for an accountant or other professional
What are the reasons SEC decided to replace GAAP with IFRS?
- GAAP are rule based, where IFRS focus more on general principles - as a result --> GAAP is very detailed & fills nearly 25k pages - IFRS is simpler & more straightforward, & shorter only filling 2.5k pages (making it less difficult for companies to comply with IFRS) - another benefit, is for the investors --> it is easier to make cross-country comparisons between the financial statements
Accountant's Duty of Care
- Generally, an accountant is expected to possess the skills that an ordinarily prudent (showing care) accountant would have and to exercise the degree of care that an ordinarily prudent accountant would exercise
Stationary Sources - Maximum Achievable Control Technology
- Instead of establishing specific emissions standards for each hazardous air pollutant, Clean Air Act requires major NEW sources to use pollution control equipment that represents the maximum achievable control technology, or MACT, to reduce emissions
Criminal Violations of Tax Laws
- Internal Revenue Code makes it a felony to aid or assist in preparation of a false tax return - Violations are punishable by a fine of 100k (500k for corp return) and imprisonment for up to 3 years *** provision applies to ANYONE who prepares tax returns for other for compensation NOT just to accountants
What is the Lanham Act?
- Laws that help companies protect their trademarks against infringement - provides broad protection against false statements intended to hurt another business
Liability of Attorneys to Third Parties
- Like accountants, attorneys may be held liable under the common law to 3rd parties who rely on legal opinions to their detriment - Generally, an attorney is NOT liable to a non-client unless the attorney has committed fraud - The liability principles stated in the Restatement Rule however may apply to attorneys as well as to accountants
Chapter 11 Bankruptcy (Reorganization)
- MOST COMMONLY USED BY CORPORATE DEBTORS - A type of bankruptcy that allows businesses to reorganize their financial affairs and still remain in business - creditors & the debtors formulate a plan where debtor pays a portion of debts & is discharged remainder (i.e why they stay in business) *Same principles that govern the filing of a liquidation (ch 7) petition apply to reorganization ch 11 proceedings* *the case may be brought involuntarily or voluntarily* *automatic stay & adequate protection doctrine apply too*
Punitive Damages
- Monetary damages that may be awarded to a plaintiff to punish the defendant and deter similar conduct in the future - appropriate ONLY when the defendant's conduct was particularly egregious or reprehensible (blameworthy) - usually, this means punitive damages are available in intentional tort actions and only rarely in negligence lawsuits - they may be awarded in suits involving GROSS NEGLIGENCE though
Ex of proportionate liability
- Nina Chavez (accountant) helped the Prez of Midstate Trucking Company draft financial statements that misrepresented Midstate's financial condition. If Nina was not actually aware of the fraud, she can still be held liable but the amount of her liability could be less than the entire loss
Toxic Substances Control Act
- Regulates toxic chemicals/ chemical compounds such as asbestos & polychlorinated biphenyls (PCBs) - controls the introduction of new chemical compounds by requiring investigation of any possible harmful effects from these substances -EPA requires that manufacturers, processors first determine their effects on human health & the environment - EPA can require special labeling, limit the use of a substance, set production quotas, or prohibit the use of substance altogether.
The Duty to Warn Business Invitees of Risks
- Retailers & other firms that explicitly or implicitly invite persons to come onto their premises are usually charged with a duty to exercise reasonable care to protect these business invitees - must warn business invitees of FORESEEABLE RISKS such as construction zones or wet floors about which the owners knew or should have known (customer enters restaurant and slips on floor --> if there were no sign or anything posted, then owner is liable)
Liability under section 10b and SEC rule 10b-5 - Prohibited Conduct
- Section 10(b) makes it unlawful for any person, including an accountant, to use in connection with the purchase/sale of any security, any manipulative or deceptive plan that is against SEC rules & regulations - Rule 10b-5 further makes it unlawful for any person, by use of any means or instrumentality of interstate commerce, to do the following: 1) Employ any device, scheme, or strategy to defraud 2) Make any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances, not misleading 3) Engage in any act, practice, or course of business that operates/would operate as a fraud/deceit on any person, in connection w/ purchase/ sale of any security
What is actual malice as a defense to the public figure is "fair game"?
- Statements must be made with either knowledge of falsity or reckless disregard for the truth - Statements made about public figures, especially when they are communicated via a public medium, usually relate to matters of general interest (aka they are made about people who substantially affect all of us) - Public figures generally have some access to public mediums to answer to these "falsehoods" about themselves
Federal Exemptions (9 exemptions for property)
- The Code exempts the following property: 1. A portion of the equity in debtor's home (*homestead exemption*) 2. Motor vehicles up to a certain value (just one usually) 3. Reasonably necessary clothing, household goods & furnishings, & household appliances 4. Jewelry, up to a certain value 5. Tools of the debtor's trade or profession 6. A portion of unpaid but earned wages 7. Pensions 8. Public benefits including public assistance (welfare), SS, & unemployment compensation 9. Damages awarded for personal injury
Ch 13 - Good faith requirement
- The Code imposes the requirement of good faith on debtor at both the time of filing of PETITION and time of filing of the PLAN - if circumstances on the whole indicate bad faith, a court can dismiss a debtor's ch 13 petition - technically the Code hasn't defined "good faith" though
Limitations on the Homestead Exemption
- The Code limits the amount of equity claimed under home exemption (#1 above) - In general, if debtor acquired homestead w/in 3 and 1/2 yrs preceding date of filing--> MAX equity exempted = $155,675 *EVEN IF* state law would permit a higher amount - also, state homestead exemption is available *ONLY IF* debtor has lived in state for 2 yrs before filing bankruptcy petition - if felony --> not permitted to claim homestead
Automatic Stay
- The moment a petition is properly filed, an automatic stay is granted protecting debtor from all creditors - automatic stay suspends all actions by creditors against the debtor/ debtor's property - the "stay" continues until the bankruptcy proceeding is closed or dismissed - if a creditor knowingly violates the automatic stay (willful violation), any injured party, including the debtor, is entitled to recover ACTUAL damages, costs, & attorney fees
Ch. 7 Schedules
- Voluntary petition must contain following schedules: 1. List of both secured & unsecured creditors, their addresses & the amount of debt owed to each 2. A statement of the financial affairs of the debtor 3. A list of all property owned by the debtor including property that the debtor claims is exempt 4. List of current income and expenses 5. Certificate of credit counseling (mentioned above) 6. Proof of pmt received from employers w/in 60 days prior to the filing of the petition 7. Statement of amt of monthly income, itemized to show how amt is calculated 8. Copy of the debtor's federal income tax return for the most recent year ending immediately before the filing of the petition
1) Voidable Rights
- a TRUSTEE steps into the shoes of the debtor - thus, any reason that a debtor can use to obtain the return of her property can be used by the trustee as well (includes: fraud, duress, incapacity, mutual mistake) ex: Ben sells his boat to Tara. Tara gives Ben a check, knowing she has insufficient $ (aka fraud). Ben has the RIGHT TO AVOID that transfer & recover the boat from Tara. If Ben files for bankruptcy relief under ch 7, the TRUSTEE can exercise the same right to recover the boat from Tara, and the boat becomes a part of the debtor's estate
Voluntary Bankruptcy - Tax returns during bankruptcy
- a debtor may be required to file a tax return at the end of each tax year while case is pending & provide a copy to the court - this may be done at the request of the court or the U.S. trustee - a government official who performs admin tasks that a bankruptcy judge would otherwise have to perform - any party in interest (a party, such as a creditor, who has valid interest in the outcome of the proceedings) may make this request as well
4. Comparative Negligence (Fault)
- a defendant may be able to limit some of it's liability if it can show that the plaintiff's misuse of the product contributed to his or her injuries - when proved, comparative negligence differs from other defenses in that it does not completely absolve the defendant of liability (aka basically comparing who is negligent and how much) - it can, however, REDUCE the total amount of damages that will be awarded to the plaintiff
1. Preemption
- a defense to product liability - government regulations PREEMPT claims for product liability - an injured party may not be able to sue the manufact. of defective products that are subject to comprehensive federal regulatory schemes - ex: medical devices --> since the federal government regulates these and looks these over hard before they hit the market, this preempts liability on the ppl who sell them
Proportionate Liability
- a party is liable only for the proportion of damages for which he or she is responsible - in other words, the parties are subject to proportionate liability rather than joint and several liability - an accountant who participates in, but is unaware of, illegal conduct may not be liable for the entire amount of the loss caused by the illegality
Requests for Relief from Automatic Stay
- a secured creditor can petition the bankruptcy court for relief from the automatic stay - if a creditor does this, the stay will AUTOMATICALLY terminate 60 days after the request (unless the courts grant an extension)
Potential Liability to Third Parties - The "Reasonably Foreseeable Users" Rule
- a small minority of courts hold accountants liable to any users whose reliance on an accountant's statements or reports was reasonably foreseeable - this standard has been criticized as extending liability too far and exposing accountants to massive liability
Liability under the Securities Exchange Act of 1934
- accountant may be found liable for fraud - plaintiff has a heavier burden to prove under the 1934 act then the 33 act because an accountant does NOT have to prove due diligence to escape liability in the 34 act - instead they just have to prove they acted in "good faith"
Liability under Section 10(b) and SEC Rule 10b-5
- accountants additionally face potential legal liability under the antifraud provisions contained in the SEC act of 1934 under Rule 10b-5 - the scope of these antifraud provisions is very broad and allows private parties to bring civil actions against violators
Liability for Negligence
- accountants and other professionals may also be held liable under common law for negligence in the performance of their services - recall --> to establish negligence, the plaintiff must prove 4 elements: duty, breach, causation, and damages
Extent of Liability
- accountants may be held liable only to sellers or purchasers of securities under Section 10 (b) and Rule 10b-5 - Privity is NOT necessary for a recovery - accountant may be liable not only for fraudulent misstatements of material facts in written material filed w/ the SEC, BUT ALSO for any fraudulent ORAL statements or omissions made in connection with the purchase or sale of any security
Criminal Violations of Securities Laws
- accountants may be subject to criminal penalties for WILLFUL violations of the 1933 Securities Act and the 1934 Securities Exchange Act - if convicted --> imprisonment for 5 years and fine of 10k under 1933, and imprisonment for 10 years and 100k fine under 1934 act - Under SOX --> fine up to 5M imprisonment for up to 20 years (if accountant's misleading audit statement is used in securities filing)
3. Contributory Negligence
- all individuals are expected to exercise a reasonable degree of care in looking out for themselves - in the past, under the common law doctrine of contributory negligence, a plaintiff who was negligent could NOT recover anything from the defendant. Under this rule, no matter how insignificant the plaintiff's negligence was relative to the defendant's negligence, the plaintiff would be prevented from recovering any damages in other words, if i sue you for being negligent but i'm also negligent, i'm screwed and get shit today tho barely anyone follows that ^^
The Clean Water Act
- amendment to FWPCA - CWA established the following goals: 1. Make waters safe for swimming 2. Protect fish and wildlife 3. Eliminate discharge of pollutants into the water - CWA also set specific schedules which were later extended by the Water Quality Act --> these schedules limit the discharge of pollutants based on the technology available for controlling them
Accountants Duty of Care - Discovering Impropieties
- an accountant is not required to discover every impropriety (misconduct), defalcation (embezzlement), or fraud in a client's books ^but if fraud goes undiscovered due to negligence or failure to perform a duty, THEN the accountant will be liable for any losses suffered by the client
Potential Criminal Liability of Accountants
- an accountant may be found criminally liable for violations of securities laws and tax laws - in addition, most states make it a crime to: 1) knowingly certify false reports 2) Falsify, alter, or destroy books of account 3) obtain property or credit through the use of false financial statements
Intentional Torts Against Persons - Assault
- an assault is any intentional and unexcused threat of immediate harmful or offensive contact - words or acts that create a reasonably believable threat - an assault can occur even if there is NO ACTUAL contact with the plaintiff, provided that the defendant's conduct creates a reasonable apprehension (anxiety or fear that something bad will happen) of imminent harm in the plaintiff - ex: threats or intimidation
Does an intentional tort against a person require an evil or harmful motive?
- an evil or harmful motive is not required - in fact the person committing the action may even have a beneficial motive for doing what turns out to be a tortious act
Common Law Theory - Negligence and Strict Liability
- an injured party may sue a business polluter in tort under negligence and strict liability theories - negligence action --> business's alleged failure to use reasonable care toward a party whose injury was foreseeable and was caused by the lack of reasonable care - Ex of negligence: employees might sue an employer whose failure to use pollution controls has contaminated the air, causing employees to suffer respiratory illnesses
2. Superseding Cause
- an unforeseeable intervening event may break the causal connection between a wrongful act and an injury to another - if so, the intervening event acts as a superseding cause - that is, it relieves the defendant of liability for injuries caused by the intervening event ex: while riding his bike, Derrick negligently runs into Julie, who is walking on the side-walk. As a result of the impact, Julie falls and fractures her hip. While she was waiting for help to arrive, a small aircraft crashes nearby and explodes, and some of the fiery debris hits her, causing her to sustain sever burns. Derrick will be liable for the damages related to Julie's fractured hip, because the risk of injuring her with his bike was foreseeable. Normally, though, Derrick will not be liable for the burns caused by the plane crash, because he could not have foreseen the risk that a plane would crash nearby and injury Julie.
Examples of liquidation proceedings
- any "person" (individual, corporation, partnership) may be a debtor in a liquidation proceeding - Husband & wife can file jointly for bankruptcy under a single petition BUT - Railroads, insurance companies, banks, savings and loan associations investment companies licensed by small business admins and credit unions CANNOT BE DEBTORS in liquidation bankruptcy tho (other chapters of the code apply to them)
3. Conversion
- any act that deprives an owner of personal property or of the use of that property without the owner's permission and without just cause can constitute conversion - even the taking of electronic records and data may form the basis of a conversion claim - Often when conversion occurs, a trespass to personal property occurs *the original taking of the personal property from the owner was a trespass. wrongfully retaining the property is conversion*
Who is eligible for ch 11 bankruptcy (reorganization)?
- any debtor (except stockbroker/commodities broker) who is eligible for ch 7 relief is eligible for relief under ch 11 - INCLUDES railroads (Ch 7 didn't) * but more common in corporations *
Automatic Stay - secured property
- automatic stay on secured property TERMINATES 45 days after the creditor's meeting UNLESS the debtor redeems/ reaffirms certain debts - in other words, the debtor CANNOT keep the secured property (such as a financed car) even if she continues to make payments on it w/out reinstating the rights of the secured party to collect on the debt aka if you say I don't owe you I'm filing for bankruptcy but then you start paying the creditor while on automatic stay you must REINITIATE the debt before you will be able to actually keep the property
Ch 31 Bankruptcy Law
- bankruptcy: the last resort in resolving debtor creditor problems
Defamation - Publication Requirement
- basis of defamation is the "publication" of a false statement that holds an individual up to hatred or ridicule in the community - publication requires communication (accidentally or intentionally) to a 3rd party - if a 3rd party merely overhears defamatory statements by chance, the courts usually hold that this also constitutes publication & therefore defamation *note: any individual who repeats or republishes defamatory statements normally is liable even if that person reveals the source the statements*
Why do the majority of courts conclude that the Restatement's approach is more reasonable than the "Reasonably Foreseeable Users" Rule?
- because it allows accountants to control their exposure to liability - liability is "fixed by the accountant's particular knowledge at the moment the audit is published" not by the foreseeability of the harm that might occur to a 3rd party AFTER the report is released * Majority of courts use the Restatements rule*
2) Wrongful Interference with a Business Relationship
- business ppl devise countless schemes to attract customers - They are prohibited tho from unreasonably interfering with another's business in their attempts to gain a greater share of the market - there is a difference between competitive practices and predatory behavior (actions undertaken with the intention of unlawfully driving competitors completely out of the market *attracting customers in general is a legit business practice, whereas, targeting customers of a competitor is more likely to be predatory *
How can a straight (liquidation) bankruptcy be commenced?
- by filing either a voluntary or an involuntary petition in bankruptcy - Petition in bankruptcy: the document that is filed w/ a bankruptcy court to initiate bankruptcy proceedings - If the DEBTOR files the petition, the bankruptcy is VOLUNTARY - if the CREDITOR files a petition (aka forcing the debtor into bankruptcy) the bankruptcy is then INVOLUNTARY
Ch 13 - Filing the Petition
- can only be initiated by the debtor's filing of a VOLUNTARY petition OR by court conversion of a ch 7 petition *recall: a court may convert a ch 7 petition because of a finding of substantial abuse under the means test* - also, certain liquidation and reorg cases may be converted to repayment plan cases w/ the consent of the debtor - a trustee MUST BE APPOINTED (because they are the one making payments under the plan) - on the filing of a repayment plan petition, the automatic stay previously discussed takes effect
2. Assumption of Risk
- can sometimes be used as a defense in a product liability action - Defendant must show the following: 1. The plaintiff knew & appreciated the risk created by the product defect 2. The plaintiff voluntarily assumed the risk by express agreement or by words or conduct even thought it was unreasonable to do so ex: tanning bed NOTE: some states do not allow the defense of assumption of risk in strict product liability claims (b/c it messes with public policy which isn't ok)
Estate in Bankruptcy
- certain after-acquired property to which the debtor becomes entitled w/in 180 days after filing may also become part of the estate - such after-acquired property includes gifts, inheritances, property settlements (from divorce) & life insurance death proceeds
Confirmation of the Plan
- confirmation is conditioned on the debtor's certifying that all postpetition domestic-support obligations have been paid in full - in addition, even when all classes of creditors accept the plan, the court may refuse to confirm it if it isn't in the " best interest of the creditors" - for small-business debtors, if the plan meets the listed requirements, the court must confirm the plan w/in 45 days
Conversion - Intention
- conversion can occur even when a person mistakenly believed that he was entitled to the goods - in other words, good intentions are NOT a defense against conversion - someone who buys stolen goods, for instance, can be sued for conversion even if he didn't know the goods were stolen ^ if the true owner of the goods sues the buyer, the buyer MUST either return the property to the owner or pay the full value of it * conversion can also occur from an employee's unauthorized use of a credit card *
Conversion - failure to return goods
- conversion is the civil side of crimes related to theft, but it is not limited to theft - even when the rightful owner consented to the initial taking of the property (aka no theft or trespass occurred), a failure to return the property may still be conversion ex: Chen borrows Mark's iPad for traveling. When he returns, Mark asks for iPad back. Chen says he gave it to his lil brother for xmas. Mark can sue Chen for conversion
Additional Grounds for Dismissal
- court can dismiss debtor's voluntary petition for ch 7 relief for substantial abuse or failure to provide necessary documents w/in specified time (previously mentioned) However there are TWO other situations where a court might dismiss a petition for ch 7 1. if debtor has been convicted of violate crime or trafficking offense 2. if debtor fails to pay post-petition domestic support obligations (child & spouse support)
3. Unreasonably Dangerous Products
- court could consider a product so defective as to be an unreasonably dangerous product in either of the following situations: 1. The product was dangerous beyond the expectation of the ordinary consumer 2. A less dangerous alternative was economically feasible for the manufacturer but manufact. failed to produce it
Inadequate warnings - content of warnings
- courts apply a reasonableness test to determine if the warnings adequately alert consumers to the product's risks - for instance, children will likely respond readily to bright, bold, simple warning labels, whereas educated adults might need more detailed info *Note: if the person doesn't read the instructions they most likely can't sue for inadequate warnings but may be able to sue for design defect*
5. Commonly Known Dangers
- dangers associated w/ certain products (matches and sharp knives) are so commonly known that manufact. need not warn users of those dangers - if defendant succeeds in convincing the court that a plaintiff's injury resulted from a commonly known danger, the defendant will not be liable
2) Preferences
- debtor isn't allowed to transfer property or make pmt that favors or gives PREFERENCE to 1 creditor > others - trustee is allowed to recover payments made both voluntarily & involuntarily to 1 creditor in preference > another - to have made recoverable preferential pmt an INSOLVENT debtor must have transferred property for PREEXISTING debt w/in 90 DAYS before the filing of bankruptcy petition - transfer must have given the creditor MORE than what would be received as a result of bankruptcy - Code presumes a debtor is INSOLVENT during the 90 day period before filing a petition
3A Comparative Negligence
- doctrine of contributory negligence (aka both contributed to the negligence) has now been replaced by COMPARATIVE NEGLIGENCE - both the plaintiff's and the defendant's negligence are computed, and the liability for damages is distributed accordingly - some jurisdictions have adopted a "pure" form of comparative negligence that allows the plaintiff to recover, even if the extent of his fault is greater than that of the defendant - Under pure comparative negligence, if the plaintiff was 80% at fault, and the defendant was 20% at fault, the plaintiff can recover 20% of his damages - many states comparative negligence statutes, however, contain 50% rule that prevents the plaintiff from recovering any damages if he was more than 50% at fault aka if you are 65% at fault you can't recover shit but if you were 35% at fault you could recover 65% damages
Estate in Bankruptcy (also known as estate in property)
- estate consists of ALL the debtor's interests in the property currently held, wherever located The estate in bankruptcy includes all of the following: 1. Community property (property jointly owned by married persons in certain states) 2. Property transferred in a transaction voidable by trustee 3. Proceeds & profits from the property of the estate
Design Defects: factors to be considered, risk utility analysis, and consumer-expectation test
- factors that courts consider are the probability of foreseeable risks, advantages & disadvantages of the product as it was designed and as it "could" have been designed - most courts engage in a risk-utility analysis to determine whether the risk of harm from product outweighs its utility to the user and to the public - some courts engage in a consumer-expectation test saying that the design was defective because it fails to perform in the manner that a reasonable consumer would expect it to perform
What else might a tax preparer be subject to penalties for besides just preparing a false tax return?
- failing to furnish the taxpayer with a copy of the return - failing to sign the return - failing to furnish the appropriate tax identification numbers
Intentional Torts Against Persons - False Imprisonment
- false imprisonment is the intentional confinement or restraint of another person's activities without justification - false imprisonment interferes w/ freedom to move w/out restraint - confinement can be accomplished through the use of physical barriers, physical restraint, or threats of physical force
Ch 12 & Ch 13 bankruptcy relief
- family-farmer and family-fisherman debt adjustments (ch 12) - individual repayment plans (ch 13) - the procedures for filing ch 12 & ch 13 are very similar but CHAPTER 13 IS MORE COMMON
Discharge
- from the debtor's point of view, the PRIMARY PURPOSE of liquidation is to obtain a fresh start through a discharge of debts - a discharge voids any judgement on a discharged debt & prevents any action to collect it - certain debts, though, are NOT dischargeable in bankruptcy & certain debtors may NOT qualify to have all debts discharged in bankruptcy
Minimizing Liability - When will the EPA waive all fines to a company for environmental impact?
- if a small company corrects the violation within 180 days after being notified of the violation * DOESN'T waive criminal fines though*
Order for Relief
- if a voluntary petition for bankruptcy is found to be proper, the filing of the petition will itself constitute an ORDER FOR RELIEF (court's grant of assistance to a petitioner) - once a consumer debtor's voluntary petition has been filed, the trustee & creditors must be given notice of the order for relief by mail NOT more than 20 days after entry of the order
Accountants Duty of Care - Defenses to Negligence
- if an accountant is found guilty of negligence, the client can collect damages for losses that arose from this negligence - BUT an accountant facing this claim has several possible defenses including the following: 1. The accountant was not negligent 2. If the accountant was negligent, this negligence was not the proximate cause of the client's losses 3. The client was also negligent (depending on whether the state applies contributory negligence or comparative negligence)
Involuntary Bankruptcy - Order for Relief
- if debtor challenges involuntary petition, a hearing will be held, & bankruptcy court will enter an order for relief if it finds either of the following: 1. The debtor is not paying debts as they come due 2. General receiver, assignee, or custodian took possession of, or was appointed to take charge, substantially ALL of debtor's property w/in 120 days b4 filing of petition *if court grants an order of relief, the debtor will be required to supply the same info in the bankruptcy schedules as in a voluntary bankruptcy*
Substantial Abuse - Applying the Means Test to Future Disposable Income
- if debtor's income is above median income, then further calculations must be made - the calculations are meant to determine whether the person will have sufficient disposable income in the future to repay at least some of his unsecured debts - it is assumed the debtor's recent monthly income will continue for the next 60 months therefore disposable income is then calculated by subtracting living expenses and secured debt payments such as mortgage payments from monthly income *Note living expenses do NOT include cell phone and cable services --> only food, etc.*
Defenses to Wrongful Interference
- if it can be proven that the interference is justified or permissible - Bonafide competitive behavior (such as marketing and advertising) is a permissible interference EVEN IF it results in the breaking of a contract. *aka if you lose a customer because another competitor advertised so well you can't recover damages *
When will a court approve a reaffirmation?
- if it finds the agreement will not result in undue hardship to the debtor AND - reaffirmation is consistent w/ the debtor's best interests
Intentional Torts Against Persons - Battery
- if the act that created the apprehension is completed and results in harm to the plaintiff, it is a battery - an unexcused & harmful/offensive physical contact, intentionally performed
Automatic Stay - Bad Faith
- if the debtor had 2 or more bankruptcy petitions dismissed during the prior year, the Code presumes BAD FAITH - In this situation, the automatic stay does NOT go into effect until the court determines that the petition was filed in good faith
The Sarbanes- Oxley Act
- imposes a number of strict requirements on both domestic and foreign public accounting firms - these requirements apply to firms that provide auditing services to companies ("issuers") whose securities are sold to public investors - the act defines "issuers" as: 1) company that has securities registered under section 12 of the Securities Exchange Act of 1934 2) company that is required to file reports under Section 15(d) of the 1934 act 3) Company that has filed a registration statement that has not yet become effective under the Securities Act of 1933
Liability under Section 12(2)
- imposes civil liability for fraud in relation to offerings or sales of securities - liability arises when the offeror or seller makes an oral statement to an investor or provides a written prospectus that includes an untrue statement or omits a material fact - accountants may be liable under Section 12(2) if they participated in preparing materials in which the false misrepresentation or omission was made
Liability under Section 18
- imposes civil liability on accountant who makes or causes to be made a report/document/statement that at the time was materially false or misleading
Product Liability based on Negligence - "Cause in Fact" & Proximate Cause
- in a product liability suit based on negligence, plaintiff must show defendant's conduct was the "cause in fact" of an injury - cause in fact requires showing that "but for" the defendant's action, the injury would not have occurred - must also show the defendant's act was the PROXIMATE cause of the injury *for proximate cause to become relevant, a plaintiff must FIRST ESTABLISH CAUSE IN FACT*
Voluntary Bankruptcy - Substantial abuse - means test
- in the past, bankruptcy court would dismiss ch 7 petition if the use of ch 7 would constitute a "substantial abuse" of bankruptcy law - today, the law provides a MEANS TEST to determine a debtor's eligibility for ch 7 - PURPOSE = keep upper-income people from abusing the bankruptcy process by filing for ch 7 as was thought to have happened in the past - this test forces more ppl to file for ch 13 rather than have their debts discharged under ch 7
1. Executive Agency
- include cabinet departments of the executive branch, which assist the president in carrying out executive functions and the subagencies with the cabinet departments - has a single administrator, director, or secretary who is appointed by the Prez to oversee the agency and can be removed by the Prez at any time
State Exemptions
- individual states have the power to pass legislation precluding debtors from using the federal exemptions w/in the state - a majority of states have done this so in these states, debtors may use ONLY state not federal exemptions -whereas in the other states, debtors may choose either exemptions of state law OR fed exemptions
Fraudulent Misrepresentation
- intentional deceit for personal gain (the tort includes several elements): 1. A misrep of material facts or conditions with knowledge that they are false or with reckless disregard for the truth 2. An intent to induce another party to rely on the misrepresentation 3. A justifiable reliance on the misrepresentation by the deceived party 4. Damages suffered as a result of that reliance 5. A causal connection between the misrep and the injury suffered
What does section 18 liability apply to?
- it is narrow in that it applies ONLY to applications, reports, documents, and registration statements filed with the SEC - in addition, it applies only to sellers and purchasers
what is the 1995 private securities litigation reform act?
- it made some changes to the potential liability of accountants and other professionals in securities fraud cases - among other things, the act imposed a statutory obligation on accountants - an auditor must use adequate procedures in an audit to detect any illegal acts of the company being audited ^ if something illegal is found, auditor must disclose it to company's BOD, audit committee, or SEC depending on circumstances ^
Innocent Land owner defense
- landowner claiming this defense MUST not have had a contractual/employment relationship w/ the person who owned the land when contamination occurred - Since land is often transferred by contract --> this defense would seem to be not usually available HOWEVER - a landowner who can prove that he had no knowledge of the hazardous waste disposal at the time of purchase can still assert the defense
Voluntary Bankruptcy
- law requires that BEFORE debtor can file a petition, they must receive credit counseling from an approved nonprofit agency w/in 180 day period preceding date of filing - debtors filing a ch 7 petition must include certificate proving they received individual or group counseling ^ - consumer-debtor who is filing for liquidation bankruptcy must confirm the accuracy of the petition's contents - attorney's must file an AFFIDAVIT (written statement proving something) stating that they have informed the debtors of the relief available under each chapter of the Code & they must attempt to verify the accuracy of the consumer-debtor's petitions and schedules
Attorney's Duty of Care - Misconduct
- lawyers shouldn't engage in conduct involving "dishonesty, fraud, deceit, or misrepresentation" ** Note: states do NOT usually discipline attorneys if their misconduct does not reflect on their honesty and trustworthiness
Application of Strict Liability to Product Liability
- liability of manufacturers and sellers for harmful or defective products - liability is a matter of social policy & is based on 2 factors: 1. Manufact. can better bear the cost of injury because it can spread cost throughout society by increasing the price of its goods 2. Manufact. is making a profit from its activities & therefore, should bear cost of injury as op. expenses
Joint and Several Liability of PRPs
- liability under Superfund is USUALLY joint & several - in other words, a PRP who generated only a fraction of the hazardous waste disposed of at a site may nevertheless be liable for ALL of the clean-up costs - Superfund authorizes a party who has incurred clean-up costs to bring a "contribution action" against any other person who is liable or potentially liable for a % of the costs
Local Regulations
- local zoning laws may be designed to prevent/ regulate growth of cities & suburbs - laws may prohibit certain land uses - even when zoning laws allow a business's development plan to build, the plan may be altered to lessen the environmental impact - in addition, cities and counties may impose rules regulating methods of waste removal, appearance of buildings, maximum noise level
Strict Liability
- modern concept of strict liability traces its origins to an English case decided in 1868 - "Person who for his own purposes brings on his land and collects and keeps there anything likely to do mischief if it escapes... is prima facie answerable for all the damage which is the natural consequence of its escape" - Prima facie = "at first sight" * today, the doctrine of strict liability is the norm rather than the exception*
Ch 7 - Liquidation Proceedings
- most familiar type of bankruptcy proceeding --> often referred to as ordinary or straight bankruptcy - a debtor in a liquidation bankruptcy turns all assets over to bankruptcy trustee (person appointed by court to manage debtor's funds) - trustee sells the nonexempt assets & distributes the proceeds to creditors - with certain exceptions, the remaining debts are then discharged (extinguished) and the debtor is RELIEVED of the obligation to pay the debts
Recap: what are the two requirements for defamation?
- must be a statement of fact or - must be published to a 3rd party (aka harming that persons reputation)
What does an agency do if it decides that an EIS is unnecessary? (aka they say this doesn't affect the environment so were good)
- must issue a statement supporting the conclusion *** people who believe that a federal agency's activities threaten the environment often use EIS's as a means to challenge those activities ***
Are proof of claims necessary?
- necessary if there is *ANY* dispute concerning the claim but not necessary in no-asset cases
Does moral pressure constitute false imprisonment?
- no - also it is essential that the person being restrained does NOT wish to be restrained (otherwise nothing is wrong) - Ex: shoplifters --> businesses often face suits for false imprisonment after they attempt to confine a suspected shoplifter for questioning ^ under the "privilege to detain" a merchant can use reasonable force to detain/delay persons suspected of shoplifting and hold them for the police (varies state by state)
Statement of Fact vs. Statement of Opinion
- normally, the tort of fraud occurs only when there is reliance on statement of fact - sometimes tho, reliance on statement of opinion may involve the tort of fraud if the individual making the statement of opinion has superior knowledge of the subject matter ex: lawyer makes a statement of opinion about the law in a state in which he is licensed to practice, a court might treat it as a statement of fact
1. Trespass to Land
- occurs when a person w/out permission does any of the following: 1. Enter onto, above, or below the surface of land that is owned by another 2. Causes anything to enter onto land owned by another 3. Remains on land owned by another or permits anything to remain on it Note: actual harm to the land is NOT an essential element of this tort because the tort is designed to protect the right of an owner to exclusive possession
3. Product Misuse
- occurs when a product is used for a purpose for which it was not intended - courts have severely limited this defense though and it is now recognized as defense ONLY WHEN THE PARTICULAR USE WAS NOT FORESEEABLE - if the misuse is reasonably foreseeable, the seller must take measures to guard against it Ex: eating popcorn every day --> this is foreseeable that when you sell popcorn someone might eat it every day and thus, develop a sickness from it therefore misuse of product is NOT a defense and you must warn them of the sickness caused from eating it every day
4. Disparagement of Property
- occurs when economically injurious falsehoods are made about another's product or property rather than about another's reputation (as in the tort of defamation) - it is a general term for torts that can be more specifically referred to as "slander of quality" or "slander of title"
Defamation: Statement of Fact Requirement
- often at issue in defamation lawsuits is whether the defendant made a statement of fact or a statement of opinion - statements of opinion are normally not actionable because they are protected under the 1st amendment - in other words, making a negative statement about another person is NOT defamation unless the statement is false and represents something as a fact rather than a personal opinion
Damages for Libel
- once a defendant's liability for libel is established, general damages are presumed as a matter of law - general damages are designed to compensate the plaintiff for nonspecific harms such as disgrace or dishonor in the eyes of the community, humiliation, injured reputation and emotional distress ( i.e. harms that are difficult to measure) *In other words, to recover damages, the plaintiff need not prove that he or she was ACTUALLY harmed in any specific way as a result of the libelous statement*
Substantial Abuse-Means Test - Can the debtor afford to pay unsecured debts?
- once future disposable income has been estimated, that amount is used to determine whether the debtor will have income that could be applied to unsecured debts - courts may also consider the debtor's bad faith or other circumstances indicating abuse ex: if you are paying retirement funds but not paying your debt you can technically afford to pay your debt then --> aka abuse of bankruptcy (trying to avoid your debt)
Defenses to Product Liability
- one defense is to show that there is no basis for the plaintiff's claim - another is to show that the goods were altered AFTER being sold Others are: 1.Preemption 2.Assumption of the risk 3. Product misuse 4. Comparative negligence 5. Commonly known dangers 6. Knowledgable User 7. Statutes of Limitations and Repose
Minimizing Liability
- one way for a business to minimize its potential liability under Superfund is to conduct environmental compliance audits of its own operations regularly - aka the business can investigate its own operations and property to determine whether any environmental hazards exist - EPA encourages companies to conduct self-audits and promptly detect, disclose, and correct wrongdoing - Companies that do so are subject to LIGHTER penalties for violations (fines may be reduced by 75%)
The Reorg Plan - Filing the Plan
- only the debtor may file a plan w/in the first 120 days after the date of the order for relief - This period may be extended but not beyond 18 months from the date of the order for relief - if the debtor does not meet 120 day deadline, or obtain an extension, any party may propose a plan - if a small-business debtor chooses to avoid a creditor's committee, the time for the debtor's filing is 180 days
1. Assumption of Risk
- plaintiff who voluntarily enters into a risky situation, knowing the risk involved, will not be allowed to recover - this is the defense of assumption of risk, which requires 2 elements: 1. Knowledge of the risk 2. Voluntary assumption of the risk - defense of assumption of risk is frequently asserted when the plaintiff was injured during a recreation activity (skydiving) aka by going skiing or skydiving, you are ASSUMING THE RISK and therefore you can't accuse someone of being negligent in their service to you *can also apply to bystanders at a baseball game*
ch 11 - Discharge
- plan is binding on confirmation - nevertheless, the law provides that confirmation of a plan DOES NOT discharge an individual debtor **** for individual debtors, the plan MUST be completed before discharge will be granted **** - for ALL OTHER DEBTORS --> the court may order discharge at any time after the plan is confirmed - on discharge, the debtor is given a reorganization discharge from all claims not protected under the plan Note: discharge does not apply to any claims that would be denied discharge under liquidation
What other powers does the trustee have?
- powers of avoidance (enabling the trustee to set aside a sale or transfer of debtor's property and take the property back for the debtor's estate) ^^ these powers apply to (1) Voidable rights (2) Preferences (3) Fraudulent Transfers ^^ - Trustee can also avoid certain statutory liens (creditor's claims against the debtor's property) NOTE: - debtor shares MOST of trustee's avoidance powers - thus, if trustee doesn't take action to enforce the rights just mentioned, debtor in liquidation bankruptcy can enforce that right
Confidentiality and Privilege
- professionals are restrained by the ethical tenets of their professions to keep all communications w/ their clients confidential 1) Attorney-Client Relationships - confidentiality of attorney/client communications is protected by law, which confers a privilege on such communications - this privilege exists because of the client's need to fully disclose the facts of his case to the attorney - client holds the privilege and can only waive this privilege by disclosing privileged info to someone outside the privilege
Automatic Say - The Adequate Protection Doctrine
- protects secured creditors from losing their security as a result of automatic stay - bankruptcy court can provide adequate protection by requiring debtor to make periodic cash pmts or a 1 time cash pmt - court can also require debtor to provide additional collateral to extent that the stay may actually cause the value of property to decrease
1. Slander of Quality
- publication of false info about another's product, alleging that it is not what its seller claims, constitutes the tort of slander of quality or "trade libel" - to establish trade libel, Plaintiff must prove the improper publication caused a 3rd person to refrain from dealing w/ plaintiff & the plaintiff sustained economic damages (lost profits) as a result - an improper publication may be both a slander of quality and a defamation of character. For instance, a statement that disparages the quality of a product may also disparage character of a person who would sell such a product *aka saying that product is shit (quality is shit) and therefore, by saying the product is shit, you are basically hinting at the fact that the seller is shit too aka defamation*
Accountant's Duty of Care - Qualified Opinions and Disclaimers
- qualifying opinion = auditor approves the financial statements overall but identifies one or two issues that are still in question - Disclaimer = auditor basically states that she/he does not have sufficient info to issue an opinion
Causation - Foreseeability
- questions of proximate cause are linked to the concept of foreseeability because it would be unfair to impose liability on a defendant unless the defendant's actions created a foreseeable risk of injury - generally, if the victim or the consequences of a harm done were unforeseeable, there is no proximate cause
The Clean Water Act - Standards for Equipment
- regulations generally specify that the BEST AVAILABLE CONTROL TECHNOLOGY (BACT) be installed - essentially, the guidelines on this require the most effective pollution control equipment available - New sources must install BACT equipment before beginning operations - Existing sources are subject to timetables for the installation of BACT equipment and must immediately install equipment that utilizes the best practical control technology (BPCT)
1. Mobile Sources of Pollution
- regulations governing air pollution from cars & other mobile sources specify pollution standards & establish time schedules for meeting standards - EPA periodically updates pollution standards in light of new developments & data, usually reducing amount of emissions allowed
The Reorganization Plan
- reorganization plan to rehabilitate the debtor is a plan to conserve & administer the debtor's assets in the hope of an eventual return to successful operation & solvency - Plan must be FAIR & EQUITABLE & do the following: 1. Designate classes of claims & interests 2. Specify the treatment to be afforded to the classes of creditors (The plan must provide the same treatment for all claims in a particular class) 3. Provide an adequate means for the plan's execution (individual debtors are required to utilize postpetition assets as necessary to execute the plan) 4. Provide for pmt of tax claims over a 5 year period *The plan need not provide for full repayment to unsecured creditors. Instead, creditors receive a % of each dollar owed to them by the debtor*
Attorney's Duty of Care
- required to be familiar with well-settled principles of law and to find relevant law through research - normally --> attorney's performance is expected to be that of a reasonably competent general practitioner of ordinary skill, experience and capacity - BUT --> if you have expertise in a particular area of law (intellectual property) then you are held to a higher standard of care
Liability Under the Securities Act of 1933
- requires registration statements to be filed with the SEC PRIOR to an offering of securities - accountants frequently prepare and certify the issuer's financial statements that are included in the registration statement
Section 11 - The Due Diligence Standard
- section 11 imposes a duty on accountants to use due diligence in preparing financial statements included in the filed registration statement - once a purchaser has proved a loss on a security, the accountant has the burden of showing that he or she exercised due diligence
Liability under Section 11
- section 11 of the Securities Act imposes civil liability on accountants for misstatements and omissions of material facts in registration statements - an accountant may be liable to anyone who acquires a security covered by the registration statement ^ proof of reliance on the materially false statement is not required --> a purchaser only needs to demonstrate that she or he has suffered a loss on the security ^ there is no requirement of privity either ^
Who has priority over the proceeds from disposition of collateral? (secured or unsecured)
- secured - therefore if the collateral is insufficient to cover the secured debt owed, the secured creditor becomes an unsecured creditor for the difference (deficiency) ???
Potential Liability to Third Parties - The Restatement Rule
- since the Ultramares rule has been severely criticized (because auditors work is intended for use by ppl who are not parties to the contract) courts adopted the position take by the Restatement (Third) of Torts - This rule states that accountants are subject to liability for negligence not only to their clients but also to foreseen or known users of their reports or financial statements (aka 3rd parties)
Negligent Misrepresentation
- sometimes a tort can arise from misreps that are made NEGLIGENTLY rather than INTENTIONALLY - the KEY difference between intentional and negligent misrep is whether the person making the misrep had actual knowledge of its falsity - negligent misrep requires only that the person making the statement or omission did NOT have a reasonable basis for believing its truthfulness
Preference to Insiders
- sometimes, creditor receiving preference is an "insider" - aka an individual, partner, partnership, corporation, or officer or director of a corp who has a close relationship w/ the debtor - in this situation, the avoidance power of the trustee extends to transfers made w/in ONE YEAR before filing - trustee must however prove that debtor was INSOLVENT when transfer occurred & it was made to/for benefit of an insider
privileged communications as a defense continued
- statements made by judges in court during trial are absolutely privileged as are statements made by government officials during legislative debate - In other situations, a person will NOT be liable for defamatory statements because he has a qualified/conditional privilege - an employer's statements in written evaluations of employees, for instance, are protected by a qualified privilege - generally, if the statements are made in good faith & the publication is limited to those who have a legitimate interest in the communication, the statements fall w/in the area of qualified privilege *think of it as you "qualify" for immunity and can defend yourself against the negative comment you said*
Appropriation Statutes
- states differ as to the degree of likeness that is required to impose liability for the appropriation of identity - Some courts have held that even when an animated character in a video or video game is made to look like an actual person, there are not enough similarities to constitute appropriation
Strict Liability of PRP's
- superfund imposes strict liability on PRP's, and that liability can't be avoided through transfer of ownership - Thus, selling a site where hazardous wastes were disposed of does NOT relieve the seller of liability & the buyer also becomes liable for clean up - Liability also extends to businesses that merge w/ or buy corporations that have violated superfund - A parent corp is NOT automatically liable for violations of it's sub but it can be held liable if the Parent corp participated in or controlled the facility that the sub used
Distribution of Property
- the Code provides specific rules for the distribution of the debtor's property to SECURED and UNSECURED creditors - if any amt remains AFTER priority classes (secured v. unsecured) of creditors have been satisfied it's given to debtor
Aiding and Abetting
- the act also made it a crime to aid and abet a violation of the 1934 Securities Exchange Act - aiding and abetting might include knowingly participating or assisting in some improper activity or keeping quiet about it * if an accountant knowingly aids and abets a primary violator, the SEC can seek an injunction or monetary damages *
Who does not attend the creditors meeting?
- the bankruptcy judge does NOT attend this meeting *BUT* obvi the debtor is required to attend & to submit to examination under oath by creditors & the trustee *at meeting --> trustee ensures that debtor is aware of potential consequences of bankruptcy & of possibility of filing under a different ch. of Code*
Battery continued
- the contact can be harmful or it can be offensive (an unwanted kiss) - physical injury need not occur - contact can involve any part of the body or anything attached it to (for instance, a hat, a purse, or a jacket) - whether the contact is offensive is determined by the REASONABLE PERSON STANDARD
Recap:
- the defense of innocent land owner defense protects ONLY property owners who took precautions and investigated the possibility of environmental hazards before buying the property ^ after doing so, still had NO knowledge of hazardous waste disposal at the time of purchase and therefore is INNOCENT
Intentional Torts Against Persons - Intentional Infliction of Emotional Distress (IIED)
- the tort of IIED involves an intentional act that amounts to extreme and outrageous conduct resulting in severe emotional distress to another - To be actionable (capable of a lawsuit) the act must be extreme and outrageous to the point that it exceeds the bounds of decency accepted by society
Defenses
- there are few defenses to a liability under Superfund - aka there is a small number of arguments you could make against Superfund as to why your dumping of waste is ok
Reorganizations - Workouts
- to avoid bankruptcy proceedings, creditors may prefer PRIVATE, negotiated adjustments of creditor-debtor relations ("workouts") - often these out-of-court workouts are much more flexible & more conductive to a SPEEDY settlement - speed is critical because delay is one of the MOST costly elements in any bankruptcy proceeding * another advantage of workouts: avoid the various admin costs of bankruptcy proceedings*
Reaffirmation of Debt - Procedures
- to be enforceable, reaffirmation agreements must be made BEFORE the debtor is granted a discharge - agreement must be SIGNED & filed w/ the court - court approval is generally required (exception: if you have an attorney)
Reaffirmation of Debt - Required Disclosures
- to discourage creditors from engaging in bad reaffirmation practices, certain disclosures must be given to debtors entering into reaffirmation agreements - disclosures explain debtor is NOT required to reaffirm any debt - also inform debtor that liens on secured property such as cars, will remain in effect even if debt isn't reaffirmed *Reaffirmation agreement disclosures: amount of debt, rate of interest, date pmts begin, & the right to rescind*
Toxic Chemicals & Hazardous Waste
- today, control of toxic chemicals & hazardous waste has become increasingly important - if not properly disposed of, these substances may seriously endanger human health & environment for instance by contaminating public drinking water
Unintentional Torts - Negligence
- tort of negligence occurs when someone suffers injury because of another's failure to live up to a required DUTY OF CARE - In contrast to intentional torts, negligence torts neither wish to bring about the consequences of the act nor believes that they will occur - the person's conduct merely creates a risk of such consequences. If no risk is created, there is NO negligence - The risk must be FORESEEABLE. In other words, it must be such that a reasonable person engaging in the same activity would anticipate the risk & guard against it
Intentional Torts Against Persons
- tortfeasor (the one committing the tort) must intend to commit an act which interferes with another's interests in a way not permitted by law • Intended the consequences of the act, or knew w/ substantial certainty that certain consequences would result. • The intent can be transferred if the tortfeasor intended to harm one person and harmed another instead
Wrongful Interference
- torts known as business torts generally involve wrongful interference with another's business rights - Business torts involving wrongful interference generally fall into two categories: interference w/ a contractual relationship and interference w/ a business relationship
Potential Liability to 3rd Parties - The Ultramares Rule
- traditional rule - also known as "New York Rule" - basically saying auditors are NOT liable to 3rd parties for negligence since under the privity requirement, the auditor is in a contract w/ the company that it is auditing NOT the 3rd parties * A minority of courts apply this rule*
Potential Liability to Third Parties
- traditionally, a professional owed a duty ONLY to those w/ whom she had a direct contractual relationship (aka those w/ whom she is in privity of contract) - today this situation has changed --> most notably w/ auditors
The Bankruptcy Trustee - Trustee's Powers
- trustee has power to require ppl holding debtor's property at the time petition is filed to deliver property to the trustee - to enable the trustee to implement this power, the Code says the trustee has rights EQUIVALENT to a creditor who has judicial lien for example - this power of a trustee (which is equivalent to that of a lien creditor) is known as STRONG ARM POWER
3) Fraudulent Transfers
- trustee may avoid fraudulent transfers or obligations if they: 1) were made w/in two years prior to the filing of the petition OR 2) were made w/ actual intent to hinder, delay or defraud a creditor Ex: Amy is planning to petition for bankruptcy so she sells her gold jewelry worth 10k to a friend for 500. The friend agrees that in the future he will "sell" the jewelry back to Amy for the same amount. This is a fraudulent transfer that the trustee can UNDO.
What is generally the case with estate bankruptcy though?
- usually a pretty divided line - property acquired BEFORE filing is property of the estate and property acquired AFTER filing remains the debtor's
7. Statutes of Limitations & Repose
- usually injured party must bring product liability claim w/in 2-4 years - often the running of the prescribed period is tolled (suspended) until the party suffering an injury has discovered it or should have discovered it - to ensure sellers will not be left vulnerable to lawsuits indefinitely, many states have passed statutes of repose, which place OUTER time limits on product liability actions
Pesticides/Herbicides - Violations & Penalties
- violation of FIFRA to sell a pesticide/herbicide that is either UNREGISTERED or has had its registration CANCELLED - also a violation to sell a P/H with a false or misleading label - also a violation to destroy any labeling required under the act *Note: a state can also regulate the sale and use of federally registered pesticides* (as long as it doesn't contradict the fed rule of FIFRA)
Common types of trespass to land:
- walking or driving on another's land - shooting a gun over another's land - throwing rocks at a building that belongs to someone else - constructing a building so that part of it extends onto an adjoining landowners property
2. Slander of Title
- when a publication falsely denies or casts doubt on another's legal ownership of property, resulting in financial loss to the property's owner the tort of "slander of title" occurs - usually this is an intentional tort in which someone knowingly publishes an untrue statement about another's ownership of certain property w/ the intent of discouraging a 3rd person from dealing w/ the person for instance, it would be difficult for a car dealer to attract customers after competitors published a notice that the dealer's stock consisted of stolen cars
Superfund - Potentially Responsible Parties
- when a release/ potential release of hazardous chemicals from a site occurs, the following ppl may be held responsible for cleaning up the site: 1. Person who generated the waste disposed of at site 2. Person who transported waste to site 3. Person who owned/operated site at time of disposal 4. Current owner or operator of site
Ex of (10) student loans
- when filing for ch 7 bankruptcy student loans are usually exempt from this aka you HAVE TO PAY them off regardless *BUT* and exception to this is undue hardship if the payment of the student loans imposes an undue hardship on the debtor and the debtor's dependents (ex: you don't have a job and can't keep a job and have 131k in student loans to pay)
When does liability for negligent misrepresentation usually arise?
- when the defendant who made the misrepresentation owed a duty of care to the plaintiff to supply correct info - statements or omissions made by attorneys and accountants to their clients for example can lead to liability for negligent misrepresentation
IIED - Limited by the 1st amend
- when the outrageous conduct consists of speech about a public figure, the 1st amend's guarantee of freedom of speech also limits emotional distress claims
2. Trespass to personal property
- whenever any individual wrongfully takes or harms the personal property of another or otherwise interferes with the lawful owner's possession and enjoyment of personal property - also called "trespass to chattels" or "trespass to personalty" - Harm means not only destruction of the property, but also anything that diminishes its value, condition, or quality - Also, involves intentional meddling with a possessory interest, including preventing an owner's access to personal property
SOX - requirements for working papers
- work paper = documents used and developed during the audit - must keep working papers related to an audit for SEVEN years after
Recall --> Strict Liability
- you are liable regardless of if you tried to harm someone or if it was just a mistake - don't matter --> you are strictly liable regardless
Common Law Actions
-Common law remedies against environmental pollution originated centuries ago in England - those responsible for operations that created dirt, smoke, toxics, etc. were sometimes held liable under common law theories of: 1. Nuisance 2. Negligence and Strict Liability
Agency Creation and Powers
-Congress passes enabling legislation: specifying the name, purposes, functions, and powers of the agency being created. -An enabling statute defines the agency's legal authority (agencies can exercise only those powers that Congress has delegated to them)
IIED - Outrageous Conduct
-repeated annoyances (being stalked) coupled with threats, are generally enough to constitute outrageous conduct *acts that cause indignity or annoyance alone usually are not sufficient*
Defenses to Torts
1 consent, 2 comparative negligence, and 3 statutes of limitations (aka if you don't sue after two years then you screwed my dude)
The Fair and Accurate Credit Transactions Act (FACT)
1) Passed in effort to combat identify theft - act established a national fraud alert system - consumers who suspect they have been victimized by identity theft can place an alert on their credit files - when consumer establishes that identity theft has occurred, the credit reporting agency must stop reporting allegedly fraudulent account info 2) Act also requires major credit reporting agencies to provide consumers with free copies of their own credit reports every year (every 12 mo)
FTC issued guidelines to help online businesses comply with existing laws:
1. All ads (online and offline) must be truthful & not misleading 2. Claims made in an ad must be substantiated (aka must have evidence to back up claim) 3. Ads cannot be unfair 4. Ads must disclose relevant limitations and qualifying info concerning the claims advertisers are making 5. Required disclosures must be "clear and conspicuous" (aka disclosure should be as close as possible to the claim on the page)
Recap - 7 Intentional Torts against Persons
1. Assault and Battery 2. False Imprisonment 3. Intentional Infliction of Emotional Distress ( IIED) 4. Defamation (Libel or Slander) 5. Invasion of Privacy 6. Fraud 7. Abusive or Frivolous Litigation
Exceptions to Discharge
1. Claims for bank taxes accruing w/in 2 years prior to bankruptcy 2. Claims for amounts borrowed by the debtor to pay federal taxes for any nondischargeable taxes 3. Claims against property or funds obtained by the debtor under false pretenses or by false representations 4. Claims by creditors who were not notified of the bankruptcy (these claims didn't appear on the schedules the debtor was required to file) 5. Claims based on fraud/ misuse of funds by the debtor while acting in a fiduciary capacity or embezzlement 6. Domestic support obligations & divorce 7. Claims for amts due on a retirement account loan 8. Claims based on willful or malicious conduct by the debtor towards another or the property of another 9. Certain government fines & penalties 10. Student loans 11. Consumer debts of more than $650 for luxury goods 12. Cash advances totaling more than $925 13. Judgments against a debtor as a result of the debtor's operation of a motor vehicle while intoxicated 14. Fees or assessments arising from the property in a homeowners association as long as the debtor retained an interest in the property
Exceptions to Automatic Stay
1. Collection efforts for domestic support obligations, including child support & debts to former spouses etc 2. Proceedings against the debtor related to divorce, child custody, and domestic violence are not stayed 3. Investigations by a securities regulatory agency can continue 4. Certain statutory liens for property taxes are not stayed
To prove due diligence, the accountant must show that he/she:
1. Conducted a reasonable investigation 2. Had reasonable grounds to believe & did believe, at the time the registration statement became effective, the statements were true & there was no omission of material facts that would be misleading
Establishing defamation involves proving the following elements:
1. Defendant made a false statement of fact 2. Statement was understood as being about the plaintiff and tended to harm the plaintiff's reputation 3. Statement was published to at LEAST one person other than the plaintiff 4. If the plaintiff is a public figure, she or he must also prove actual malice, discussed later
The Court's decision in the Chevron case created a new standard for courts to use when reviewing agency interpretation of law: (hint: 2 questions)
1. Did Congress directly address the issue in dispute in the statute? If so, the stat language prevails. 2. If the statute is silent/ambiguous, is the agency's interpretation "reasonable"? If it is, a court should uphold the agency's interpretation even if the court would have interpreted the law differently
To succeed in a negligence action, the plaintiff must prove each of the following:
1. Duty (defendant owed a duty of care) 2. Breach (defendant breached that duty) 3. Causation (defendant's breach caused injury) 4. Damages (plaintiff suffered legally recognizable injury)
What are the requirements for involuntary bankruptcy petition?
1. If the debtor has 12 or more creditors, 3 or more of these creditors having unsecured claims totaling at lease $15,325 must join in the petition 2. If a debtor has fewer than 12 creditors, one or more creditors having a claim totaling $15,325 or more may file
The court will confirm a plan w/ respect to each claim of a secured creditor under any of the following circumstances:
1. If the secured creditors have accepted the plan 2. If the plan provides that secured creditors retain their liens until there is payment in full or until the debtor receives a discharge 3. If the debtor surrenders the property securing the claims to the creditor
Courts ask two questions in deciding whether the requirement of causation is met:
1. Is there causation in fact? - Did the injury occur because of the defendant's act, or would it have occurred anyway? If the injury would not have occurred without the defendant's act, then there is causation in fact - Causation in fact usually can be determined by the use of the "but for" test: "but for" the wrongful act, the injury would not have occurred - this test seeks to determine whether there was a cause-and-effect relationship between the act and the injury suffered - in theory causation in fact is limitless, one could claim for example, that "but for" the creation of the world a particular injury would not have occurred. Thus, as a practical matter, the law has to establish limits and it does so through the concept of proximate cause
What are the four primary elements of Superfund?
1. It established an info gathering & analysis system that enables the government to identify chemical dump sites and determine the appropriate action 2. It authorized EPA to respond to emergencies & to arrange for the clean-up of a leaking site directly if the persons responsible fail to clean up the site 3. It created a Hazardous Substance Response Trust Fund (also called Superfund) to pay for the clean-up of hazardous sites using funds obtained through taxes on certain businesses 4. It allowed the government to recover the cost of clean-up from persons who were (even remotely) responsible for hazardous substance releases
Recap: two types of torts related to abusive litigation:
1. Malicious prosecution 2. Abuse of process * key different between abuse of process and malicious prosecution is LEVEL OF PROOF * ^ Unlike malicious prosecution, abuse of process is not limited to prior litigation and DOES NOT require the plaintiff to prove malice. It can be based on wrongful subpoenas, court orders to seize property, or other types of the legal process ^
In practice, the NPDES system under the CWA includes the following elements:
1. National effluent (pollution) standards set by the EPA for each industry 2. Water-quality standards set by the states under EPA supervision 3. A discharge permit program that sets water-quality standards to limit pollution 4. Special provisions for toxic chemicals and for oil spills 5. Construction grants and loans from the federal government for publicly owned treatment works, primarily sewage treatment plans
Under the Restatement of Torts, an accountant's liability extends to:
1. Persons for whose benefit and guidance the accountant intends to supply the info or knows that the recipient intends to supply it 2. Persons whom the accountant intends the info to influence or knows that the recipient so intends
Under FTC guidelines, bait-and-switch advertising occurs if the seller does any of the following:
1. Refuses to show advertised item 2. Fails to have a reasonable quantity of time in stock 3. Fails to promise to deliver advertised time w/i a reasonable time 4. Discourages employees from selling advertised item
The Consumer Product Safety Act authorizes the CPSC to do the following:
1. Set safety standards for consumer products 2. Ban the manufacture & sale of any product that the commission believes poses an "unreasonable risk" to consumers (fireworks, cribs, toys) 3. Remove from market any products it believes to be imminently hazardous (voluntary recalls of defective products from stores) 4. Require manufacturers to report on any products already sold or intended for sale if the product have proved to be hazardous (after the fact) 5. Administer other product-safety legislation, including the Child Protection and Toy Safety Act & the Federal Hazardous Substances Act
Under section 18, a seller or purchaser must prove one of the following:
1. The false or misleading statement affected the price of the security 2. The purchaser/ seller relied on the false/misleading statement in making the purchase/sale & was not aware of the inaccuracy of the statement *sellers/purchasers must bring a cause of action "within one year after discovery of facts constituting the cause of action and within 3 years after such cause of action accrued" **
An Environmental Impact Statement must analyze the following:
1. The impact the action will have on the environment 2. Any adverse effects on the environment and alternative actions that might be taken 3. Any irreversible effects the action might generate ---------- an action qualifies as "major" if it involves a substantial commitment of resources (money) an action is "federal" if a federal agency has the power to control it
The 6 Requirements for Strict Product Liability
1. The product must be in a defective condition when the defendant sells it. 2. The defendant must normally be engaged in the business of selling (or otherwise distributing) that product. 3. The product must be unreasonably dangerous to the user or consumer because of its defective condition (in most states). 4. The plaintiff must incur physical harm to self or property by use or consumption of the product. 5. The defective condition must be the proximate cause of the injury or damage. 6. The goods must not have been substantially changed from the time the product was sold to the time the injury was sustained.
What are the 4 factors courts use?
1. The purpose of the investigation - must have a legitimate purpose (harassment is improper purpose) 2. The relevance of the info being sought 3. The specificity of the demand for testimony or documents - the subpoena must describe the material being sought 4. The burden of the demand on the party from whom the information is sought
exceptions to Government in the Sunshine Act
1. The subject of meeting concerns accusing any person of a crime 2. Open meetings would frustrate the implementation of future agency actions 3. The subject of the meeting involves matters relating to future litigation or rulemaking
2 Main Goals of Bankruptcy Law
1. To protect a debtor by giving him or her a fresh start without creditors' claims 2. To ensure equitable treatment of creditors who are competing for a debtor's assets. *Thus, the law attempts to balance the rights of the debtor and of the creditors*
Defenses against trespass to Land
1. Trespass was warranted by a license 2. Trespasser can enter to assist someone in danger (aka the trespass was WARRANTED w/out a license) *Licensee is one who is invited or allowed to enter onto the property of another for the licensee's benefit* EX: going to a movie, your ticket is your license and you are the licensee who is allowed to enter the movie theatre
Defenses to Section 18 of the SEA of 1934
1. acted in good faith (aka had no knowledge of misstatement and no intent to deceive) 2. accountant proves plaintiff knew the statements in question were false
The Injury Requirement and Damages
1. must have legally recognizable injury (suffer some loss, harm, wrong, or invasion of a protected interest) 2. no injury, no recovery (because the purpose of tort law is to compensate for legally recognized harms and injuries resulting from wrongful acts) - compensatory damages are the norm in negligence cases
What are the two reasons settlement is appealing to firms?
1. to avoid appearing uncooperative and 2. to avoid the expense involved in formal adjudication proceedings and in possible later appeals
Intentional Torts Against Property
1. trespass to land 2. trespass to personal property 3. conversion 4. disparagement of property *these torts are wrongful actions that interfere w/ individuals' legally recognized rights w/ regard to their land or personal property*
Federal regulations governing water pollution can be traced back to what?
1899 Rivers and Harbors Appropriations Act ^ Regulations prohibited ships & manufacturers from discharging waste in waterways w/out a permit in 1948 congress passed Federal Water Pollution Control Act (FWPCA) but its regulatory system and enforcement powers proved to be inadequate
2nd question the courts ask
2. Was the act the proximate, or legal, cause of the injury? - proximate cause (legal cause) exists when the connection between the act and an injury is strong enough to justify imposing liability - proximate cause asks whether the injuries sustained were foreseeable or were too remotely connected to the incident to trigger liability - judges use proximate cause to limit the scope of the defendant's liability to a subset of the total number of potential plaintiffs that might have been harmed by the defendant's actions
2. Comment Period
2nd step in notice and comment rulemaking Following publication of notice, agency must allow ample time for people to comment in writing on the proposed rule - comments can be written or oral, purpose is to give interested parties the opportunity to express their views on the proposed rule to influence the agency policy
Defenses to Defamation
3 Defenses to Defamation 1. truth - if a defendant in a defamation case (person who said the mean thing) can prove that the statements of fact were true, normally no tort has been committed 2. privilege 3. Whether or not it concerns a public figure
Defenses to Negligence
3 basic affirmative defenses in negligence cases (defenses that a defendant can use to avoid liability even if the facts are as the plaintiff states) 1. Assumption of Risk 2. Contributory Negligence/ Comparative Negligence 3. Superseding cause
1) Wrongful Interference w/ a Contractual Relationship
3 elements are necessary for wrongful interference with a contractual relationship to occur: 1. A valid, enforceable contract must exist between two parties 2. A third party must know that this contract exists 3. This third party must intentionally induce a party to the contract to breach the contract
Adjudication
3rd basic function of agency powers
3. Causation
3rd element necessary for a negligence action - if a person breaches a duty of care and someones suffers injury, the person's act must have CAUSED the harm for it to constitute the tort of negligence
The Private Securities Litigation Reform Act of 1995
3rd security law that can impose both civil and criminal liability on accountants (Securities Act of 1933 and Securities Exchange Act of 1934 were the first two)
3. Final Rule
3rd step in notice and comment rulemaking -After the agency reviews the comments, it drafts the final rule and publishes it in the Federal Register - Final rule must contain "concise general statement of basis and purpose" - Final rule can include modifications based on the public comments (unless substantial changes then --> new proposal for rule) - final rule is complied in code of federal regulations
Invasion of Privacy under the Common Law
4 acts that qualify as an invasion of privacy: 1. intrusion into an individual's affairs or seclusion - extends to eavesdropping by wiretap, unauthorized scanning of a bank account, compulsory blood testing & window peeping 2. false light - publication of info that places a person in a false light - ex: writing a story that attributes to a person ideas and opinions not held by that person is an invasion of privacy 3. public disclosure of private facts - when a person publicly discloses private facts about an individual that an ordinary person would find objectionable or embarrassing (such as a newspaper account of a citizen's sex life because even if it is true, it shouldn't be a matter of public concern) 4. appropriation of identity - using a person's name, picture, likeness, or other characteristics for commercial purposes w/out permission is also an invasion of privacy ^ an individual's right to privacy normally includes the right to the exclusive use of his or her identity
Ex of Notification
A company that sells blenders receives 23 letters from customers complaining that during operation the blender exploded sending glass everywhere. The company must IMMEDIATELY notify the CPSC because the alleged defect creates a substantial risk to the public
Chapter 45 Environmental Protection
A constant tension exists between the desire to increase profits and the need to protect the environment for businesses.
Remedies for Violations of FCRA
A credit reporting agency that fails to comply with the act is liable for actual damages plus additional damages (not to exceed 1k) & attorney's fees creditors & companies that use info from credit reporting agencies MAY also be liable for violations of the FCRA
The Delegation Doctrine
A doctrine based on the U.S. Constitution, which has been construed to allow Congress to delegate some of its power to administrative agencies to make rules and implement laws.
Special Damages
A form of compensatory damages that awards a sum of money for specific, identifiable expenses associated with the injured person's loss, such as medical expenses or lost wages. - "quantifiable monetary losses" - might also be awarded to compensate for extra costs, the loss of irreplaceable items, and the costs of repairing or replacing damaged property
Ex of controversial delay in medications made to the public
A group of citizens petitioned the FDA to allow everyone access to "Plan B" WITHOUT a prescription FDA was basically saying you can't have it until you get a prescription (which obviously takes time) therefore, this "delay" in drugs being available is controversial because women could get pregnant in that delay
The Fair Debt Collection Practices Act
A law that protects consumers from abusive practices by creditors and collection agencies
Equal Credit Opportunity Act
A law that protects consumers from discrimination in the granting or denying of credit - it is an amendment to the TILA
Ex of IIED limited by 1st amendment freedom of speech
A magazine printed a false ad showing a picture of Rev. Falwell & described him as losing his virginity to his mother in an outhouse while he was drunk. Falwell sued the magazine for intentional infliction of emotional distress (IIED) and won BUT the Supreme Court overturned the decision. The Court held that parodies of public figures are protected under the 1st amendment from IIED.
Example of Public Figures - actual malice
A magazine published a story about a former girl who claimed to have slept with a soccer player David Beckham more than once. Beckham sued Magazine for libel, seeking 25M in damages. He said that he had never met the woman, had not cheated on his wife with her, and had no paid her for sex. After months of litigation, a federal district court dismissed the cases because Beckham could not show that the magazine had acted with actual malice. Whether or not the statements in the magazine were true, there was no evidence that the defendants had made the statements with knowledge of their falsity or reckless disregard for the truth
General Damages
A monetary award to compensate a victim for non monetary losses, such as pain & suffering, that do not involve specific measurable expenses. - compensates individuals NOT companies - physical or emotional pain and suffering, loss of companionship, loss of consortium (losing the emotional and physical benefits of a spousal relationship), disfigurement, loss of reputation, or loss or impairment of mental capacity
Sales
A number of statutes protect consumers by requiring the disclosure of certain terms in sales transactions and providing rules governing unsolicited (unwanted) merchandise the FTC has regulatory authority in this area as do some other fed agencies
What is a toxic tort?
A personal injury cause by exposure to a toxic substance, such as asbestos or hazardous waste. Victims can sue for medical expenses, lost wages, and pain and suffering.
The Repayment Plan
A plan indicating how and when debts of the business will be paid. The plan MUST provide the following: 1. The turning over to the trustee of such future earnings or income of the debtor as is necessary for execution of the plan 2. Full payment through deferred cash payments of all claims entitled to priority such as taxes 3. Identical treatment of all claims w/in a particular class (The Code permits the debtor to list co-debtors such as guarantors as a separate class)
Environmental Impact Statements (EIS)
A report required by federal law that assesses the possible effect of a project/decision on the environment if the project is subsidized in whole or part by federal funds.
What is a violation of GAAP and GAAS considered?
A violation of GAAP/GAAS is considered: prima facie ("at first site") evidence of negligence on the part of the accountant compliance w/ GAAP & GAAS does not necessarily relieve an accountant from potential legal liability tho because they may be held to a higher standard of conduct established by state statutes or by judicial decisions
IIED - Defamation
A- freedom of speech is not absolute --> courts are required to balance free speech w/ other pervasive & strong social interests including society's interest in preventing & redressing attacks on reputation - Defamation of character involves wrongfully hurting a person's good reputation - the law imposes a general duty on all persons to refrain from making FALSE, defamatory statements of fact about others
Many rules created by admin agencies must be adopted using what?
APA's notice-and-comment rulemaking which involves 3 steps: 1. Notice of the proposed rulemaking. 2. A comment period. 3. The final rule
Ex of causation
Ackerman carelessly leaves a campfire burning. The fire not only burns down the forest but also sets off an explosion in a nearby chemical plant that spills chemicals into a river, killing all the fish for 20 miles downstream. Should Ackerman be liable to the resort owners? To the tourists whose vacations were ruined? These are questions of proximate cause that a court must decide both of these causation questions must be answered in the affirmative for liability in tort to arise *** if there is causation in fact but a court decides that the defendant's action is not the proximate cause of the plaintiff's injury, the causation requirement has not been met therefore the defendant normally will not be liable to the plaintiff ***
Federal Food, Drug, and Cosmetic Act (FDCA)
Act protects consumers against contaminated and misbranded foods and drugs (monitored by the FDA) -FDCA establishes food standards, specifies safe levels of potentially hazardous food additives, and provides classifications of foods and food advertising
What is actual malice?
Actual malice is the legal standard for LIBEL cases to determine when public officials/figures may recover damages in lawsuits against the news media
Agencies provide a comprehensive regulatory scheme
Administrative agencies in government work together and share the responsibility of creating and enforcing particular regulations *These regulations have numerous benefits as well as COSTS*
What is adjudication?
After conducting an investigation (enforcement) of a suspected rule violation, an agency may initiate an admin action against an individual or organization - most admin actions are resolved thru negotiated settlements at their initial stages SOMETIMES tho --> an actions ends in formal adjudication - the resolution of the dispute through a hearing conducted by the agency
CH 13 - Confirmation of the Plan
After the plan is filed, court holds a confirmation hearing at which interested parties (such as creditors) may object to the plan - hearing must be held at least 20 days but no more than 45 days after the meeting of the creditors - debtor must have filed all pre-petition tax returns & paid all postpetition domestic-support obligations before a court will confirm any plan
The Hearing
Agency adjudication may involve a trial-like arbitration procedure before an admin law judge (ALJ)
ex of transferred intent
Alex swings a bat intending to hit Blake but misses and hits Carson instead. Carson can sue Alex for the tort of battery (discussed shortly) because Alex's intent to harm Blake can be transferred to Carson
What is disposable income? (for fisherman)
All income received minus amounts needed to support the farmer or fisherman and his family and to continue the farming or commercial fishing operation completion of payments under the plan discharges all debts provided for by the plan
Reaffirmation of Debt
An agreement to pay a debt dischargeable in bankruptcy sometimes a debtor wishes to repay a debt even though the debt can be discharged (such as debt owed to a family member, physician, bank) *Note: a debtor cannot retain secured property wile continuing to pay w/out entering into a reaffirmation agreement*
Ex of wrongful interference with a contractual relationship
An opera signer, Joanna Wagner, who was in contract to sing for Lumley for a specified period of years. A man named Gye, who knew of this contract, nonetheless "enticed" Wagner to refuse to carry out the agreement, and Wagner began to sing for Gye. Gye's action constitutes a tort because it INTERFERED WITH THE CONTRACTUAL RELATIONSHIP between Wagner and Lumley.
Ex of (8) Claims based on willful or malicious conduct by the debtor towards another or the property of another
Anthony owned a pizza restaurant that employed John. One night, Anthony accused John of stealing & shoved him causing him to fall & injure his back. Anthony filed for bankruptcy. John argued that these debts were non dischargeable and the court agreed. The exception from discharge includes any debts for willful injury & Anthony's actions were deliberate aka Anthony still owes the money even though he filed for bankruptcy since he purposefully injured John
Creditors' Committees
As soon as practicable after the entry of the order for relief, a creditors' committee of unsecured creditors is appointed. This committee is often composed of the biggest suppliers of the business. The committee may consult with the trustee or the DIP concerning the administration of the case or the formulation of the plan. Additional creditors' committees may be appointed to represent special interest creditors. Generally, no orders affecting the estate will be entered w/out the consent of the committee or after a hearing in which the judge is informed of the committee's position
What are some examples of property that is NOT exempt under federal law?
Bank accounts Cash Family heirlooms Collection of stamps & coins Second cars & Vacation Homes
Who is subject to strict liability?
Businesses that engage in ultra hazardous activities such as transportation of radioactive materials are STRICTLY LIABLE for any injuries the activities cause in a strict liability actions, party does NOT have to prove the business failed to exercise reasonable care
The Clean Water Act - Permit System for Point-Source Emissions
CWA established a permit system for regulating discharges from "point sources" of pollution, which include industrial, municipal (sewage pipes) and agricultural facilities - under this system, called the National Pollutant Discharge Elimination System (NPDES), any point source emitting pollutants into water MUST have a permit
How can an ALJ be unbiased but work for the agency?
Certain safeguards prevent bias on the part of the ALJ and promote fairness in the proceedings -Ex: 1. APA requires ALJ to be separate from an agency's investigative and prosecutorial staff 2. APA also prohibits ex parte (private) communications between the ALJ and any party to an agency proceeding including the agency and the company involved 3. finally, provisions of the APA protect ALJ from agency disciplinary actions unless the agency can show good cause for such action
Recap:
Clean Air Act --> major sources of pollution must use pollution control equipment that represents maximum achievable control technology (MACT) to reduce emissions Clean Water Act --> New sources of pollution must install the best available control technology (BACT) before beginning operations Existing sources must immediately install equipment that utilizes the best practical control technology (BPCT) and meet a timetable for installing BACT equipment
2. Stationary Sources
Clean Air Act also authorizes the EPA to establish air-quality standards for stationary sources (such as manufacturing plants) - but the act recognizes that PRIMARY responsibility for implementing these standards rests w/ state & local governments - Standards are aimed at controlling hazardous air pollutants (those likely to cause death or cancer)
The formal Administrative Agency Adjudication Process
Complaint --> Answer --> Hearing before Admin Law Judge --> Order of Admin Law Judge (for example, a cease-and-desist order) --> Appeal to Governing Board of Agency --> Final Agency Order --> Appropriate Court for Review of Agency Decision (usually an appellate court, but it depends on the specific agency) --> Court Order
3) Regulatory Flexibility Act
Concern over the effects of regulation on the efficiency of businesses, particularly smaller ones, led Congress to pass the reg flex act in 1980: - whenever a new regulation will have a "significant impact upon a substantial number of small entities" the agency must conduct a regulatory flexibility analysis
Example of Enabling Legislation
Congress created the FTC in the Federal Trade Commission Act. - The act prohibits unfair methods of competition and deceptive trade practices. It also describes the procedures that the FTC must follow to charge person with violations of the act. *FTC=agency who Congress delegated powers, FTC Act = Congress legislation*
2. Legislative Controls
Congress exercises authority over agency powers through legislation - congress can give AND take away power (even abolishing an agency altogether is allowed) - Give power = enabling legislation - Take away = subsequent legislation
What is the "fast-track" chapter 11 procedure?
Congress has established a "fast-track" ch 11 procedure for small business debtors whose liabilities do not exceed 2.49M & who do not own/manage real estate - Fast track enables a debtor to avoid the appointment of a creditors' committee & also shortens filing periods because the process is shorter & simpler it is less costly
Ch 44
Consumer Law
Many states and the FTC have "cooling off" laws. What are these?
Cooling off laws allow the buyers of goods sold door to door to cancel their contract w/in 3 business days *FTC rule also requires that consumers be notified in Spanish of this right if the oral negotiations of the sale were in that language*
Example of a defense to negligence
Cooper (accountant) advises BSM to report a transaction as a gain. SEC says nah you can't do that you must correct that before you make a public offering of your stock. Because of this delay, the public offering doesn't happen on the time (where the price per share was 16). Instead it happens later when the price is $12. * Since the accountant's negligence was NOT the proximate cause of the decline in stock price, Cooper is not liable for damages based on the price decline *
Judicial Deference to Agency Decisions
Courts defer to agency's judgment regarding facts within agency's scope in other words, the courts tended to accept the agency's judgement, often citing the agency's great expertise in the subject area of regulation
What case modified the Ultramares rule?
Credit Alliance Corp v. Arthur Andersen & Co in this case, the court held that if a 3rd party has a sufficiently close relationship or nexus (connection) w/ an accountant, then the Ultramares privity requirement may be satisfied w/out establishment of an accountant-client relationship - this rule is often referred to as "near privity"
Ex of lawyer misconduct
Dan, an attorney, was the driver in a one-vehicle drunk driving accident in which his brother was killed. He plead guilty for drunk driving. Dan served 120 days in jail and was released on 5 years probation. The court terminated his probation early because of his good behavior and he went back to practicing law. *Since Dan only had one tragic event in his life and no other professional misconduct, the crime of drunk driving did not reflect badly on his honesty and trustworthiness to be a lawyer as it had nothing to do with the services he provides. I think he would've had to perform misconduct in his services for him to be untrustworthy
What do you sue for when you are suing for invasion of privacy?
Defamation
Creditor's Claims
Each creditor files a "proof of claim" w/ bankruptcy court clerk w/in 90 days of creditors' meetings Proof of claim lists the creditors' name & address as well as the amt that the creditor asserts is owed by debtor When the debtor has NO ASSETS (called a "no-asset case") creditors are notified of the debtor's petition for bankruptcy but are instructed not to file a claim in "no-asset" cases the creditors will receive NO PAYMENT & MOST DEBTS ARE DISCHARGED
Admin Agencies Exist at All Levels of Government
Federal level Examples: SEC, Equal Employment Opp Commission, Environmental protection agency, State/Local Level Examples: state pollution- control agency (mirrors federal agency of environmental protection agency) *we will focus on federal admin law mostly*
What Act did Congress pass in response to tainted food?
Food Safety Modernization Act (FSMA) FSMA requires anyone who manufactures, processes, packs, distributes, receives, holds, or imports food products to pay a fee and register with the U.S. Department of Health and Human Services
Types of Bankruptcy Relief
Four chapters of the Code set forth the most important types of relief that debtors can seek: 1. Chapter 7 - liquidation (the selling of all nonexempt assets and the distribution of the proceeds to the debtor's creditors) 2. Chapter 11 - reorganizations 3. Chapter 12 - adjustment of debts of family farmers and fishermen with regular incomes 4. Chapter 13 - adjustment of debts of individuals with regular incomes
The level of skill expected of accountants and the degree of care that they should exercise in performing their services are reflected in what standards?
GAAP & GAAS - when performing their services, accountants must comply with GAAP & GAAS
Ex of Nuisance
Hewitt's factory causes neighbors to suffer from smoke, and vibrations but if the factory is the core of the local economy, a court may leave it in operation and award monetary damages to the injured parties rather than injunction (shutting down the factory)
Ex of ECOA
Hughes Inc & Summit Pointe obtained financing from Bank to construct 2 real estate developments. The bank also required the builder (Hughes) AND his wife to sign personal guaranty agreements for the loans. When the borrowers failed to make loan payments the bank sued the 2 companies and Hughes and his wife personally. The wife claimed that personal guaranty contracts that she signed were obtained in violation of the ECOA. Court held that because the applicant Hughes was creditworthy the personal guaranty's of his wife were in violation of ECOA & unenforceable
Special Requirements for Consumer-Debtors
If Debtor, has debts resulting primarily from purchase of goods for personal, family, or household use (aka they are a consumer-debtor), then the Clerk of bankruptcy court must give special notice regarding their options (benefits/costs of each chapter)
Product Liability based on Negligence
If a manufacturer fails to exercise "due care" to make a product safe, a person who is injured by the product may sue the manufacturer for negligence *Manufacturers must use due care in all of the following areas: 1. Designing the product 2. Selecting the materials 3. Using the appropriate production process 4. Assembling and testing the product 5. Placing adequate warnings on the label to inform the user of dangers of which an ordinary person might not be aware 6. Inspecting and testing any purchased components used in the product
Consumer Notification and Inaccurate Information
If denied credit based on his/her credit report, consumer has right to be notified of the fact and the right to the source of information (name and address of credit-reporting agency that issued the report) - same notice must be sent to consumers who are charged more than others ordinarily would be for credit or insurance because of their credit reports
Liability for Breach of Contract
If professional breaches (express or implied) the terms of a contract, then client has right to recover damages from the professional. - Damages can include: expenses incurred by the client to hire another professional to provide the contracted-for-services and any other reasonable and foreseeable losses - ex: if client had to pay a penalty for failing to meet deadlines, the court may order the professional to pay an equivalent amount in damages to the client
FTC Actions- FTC Orders and Remedies
If the FTC succeeds in proving that an advertisement is unfair or deceptive it usually issues a cease-and-desist order
Marketing
In addition to regulating ad practices, Congress has passed several laws to protect consumers against other marketing practices
Objections to Discharge
In addition to the exceptions to discharge previously mentioned, a bankruptcy court may also deny discharge based on the debtor's CONDUCT: 1. The debtor's concealment or destruction of property with the intent to hinder, delay, or defraud a creditor. 2. The debtor's fraudulent concealment or destruction of financial records. 3. The grant of a discharge to the debtor w/in 8 yrs before petition was filed. 4. The debtor's failure to complete the required consumer education course. 5. Proceedings in which the debtor could be found guilty of a felony (basically, a court may not discharge any debt until the completion of felony proceedings against the debtor).
1. Duty of Care and Its 2. Breach
In determining whether the duty of care has been breached, courts consider: 1. The nature of the act (whether it is outrageous or commonplace) 2. The manner in which the act was performed (cautiously versus heedlessly) 3. The nature of the injury (whether it is serious or slight) *failure to live up to a standard of duty of care may be an ACT (accidentally setting fire to a building) or an OMISSION (neglecting to put out a campfire)*
4) Small Business Regulatory Enforcement Fairness Act
Includes provisions intended to ease the regulatory burden on small businesses: 1. Fed agencies must prepare guides that explain how small businesses can comply w/ fed regulations 2. Congress may review new fed regulations for at least 60 days before they take effect, giving opponents of the rules time to present their arguments 3. Courts may enforce the Regulatory Flexibility Act (above) - provision helps to ensure fed agencies will consider ways to reduce economic impact of new regulations on small businesses 4. The office of the National Ombudsman at the Small Business Administration was set up to receive comments from small businesses about their dealings with federal agencies. Based on these comments, ratings of agencies are now published.
Since regulations are costly, what do businesses have a strong incentive to do?
Influence the regulatory environment through LOBBYING
For a plaintiff to succeed in recovering damages under these antifraud provisions he or she must prove what?
Intent ( scienter) to commit the fraudulent or deceptive act * Ordinary negligence is NOT enough *
The holding of the chevron case: (Judicial Deference to Agency Decisions)
Issue: whether or not agency judgement extends to questions of interpretation rather than just fact *Supreme Court ruled that the courts should defer (accept) an agency's interpretation of LAW as well as FACT *
Ex of battery
Ivan threatens Jean w/ a gun and then shoots her. The pointing of the gun at Jean is an assault. The firing of the gun (if the bullet hits Jean) is a battery.
Is liability under Superfund usually strict liability or joint and several liability?
Joint & Several - because regardless of % of damage you personally caused --> you are responsible for all
Example of qualified privilege
Jorge has worked at Google for 5 years and is being considered for a management position His supervisor, Lydia, writes a memo about Jorge's performance to those evaluating him for the position The memo contains certain negative statements, which Lydia honestly believes are true if Lydia limits the disclosure of the memo to company reps her statements will likely be protected by QUALIFIED PRIVILEGE
ex of tort of negligence aka unintentional tort
Juan walks up to Maya and intentionally shoves her. Maya falls and breaks her arm as a result. In this situation, Juan is liable for the intentional tort of battery. But if Juan carelessly bumps into Maya, and she breaks her arm, Juan's actions equal negligence. Either way, Juan has committed a tort *important: if the element of intent is missing --> negligence. if he intended to do it --> intentional tort (7 of them for persons and 4 for property) *
ex of trespass to personal property
Kelly takes Ryan's BLAW book as a joke and hides it so Ryan is unable to find it for several days before the final. Here, Kelly has engaged in a trespass to personal property (also called conversion). If it can be shown that trespass to personal property was warranted, then a complete defense exists --> most car shops when repairing a car can hold the car (called artisan's lien) if the owner refuses to pay for the repairs already fixed --> this is not trespass to personal property then
Labeling and Packaging Laws
Labeling must be accurate and must use words that are easily understood by the ordinary consumer - in some instances, labels must specify the raw materials used in the product, such as the percentage of cotton, nylon, or other fiber used in garment - in other instances --> product must carry a warning such as those required on cigarette packages
2. Legislative Controls continued
Legislative authority is required to fund an agency, and enabling legislation usually sets certain time and monetary limits ^ congress can ALWAYS revise these limits^ Also: Congress has the authority to investigate the implementation of its laws and the agencies that it has created - congress can also "freeze" the enforcement of most federal regulations before the regulations take effect
3 branches of government
Legislative, Executive, Judicial
Product Defects
Manufacturing defects, design defects, and inadequate warnings.
Example of Truth as a defense to defamation
Mr. McKee, a doctor, examined a patient who had been transferred from ICU to a private room. In the room the patient's son was there. The son later wrote on "rate your doctor" that "Dr. McKee seemed upset that my father had been moved into a private room. Never having met my father or his family, Dr. McKee said 'when you weren't in ICU, I had to spend time finding out if you transferred or died'. When we gaped at him, he said "Well 44% of hemorrhagic strokes die within 30 days. I guess this is the better option" *McKee filed a suit for defamation but lost. The court found that all the statements made by the son were essentially true, and truth is A COMPLETE (ABSOLUTE) DEFENSE TO DEFAMATION ACTION* In other words, true statements are not actionable no matter how bad --> even if there are minor inaccuracies in the truth
Product Liability based on Negligence - is privity of a contract required?
NO - recall: privity of a contract refers to the relationship that exists between the parties to a contract, aka it is the reason that normally only the parties to a contract can enforce the contract - aka a person who is injured from the product can still bring a negligence suit even if they weren't the one who bought it (aka the one who bought it is technically in a privity contract)
Transfers that do not constitute preferences
NOT ALL TRANSFERS ARE PREFERENCES! pmts for services w/in 15 days before payment is NOT a preference if creditor receives payment made in ordinary course of business (such as a pmt for last month's phone bill) bankruptcy trustee CANNOT recover the pmt ^ to be recoverable, preference must be a transfer of preexisting debt - ALSO the Code permits transfer of property up to a total value of $6,225 w/out it constituting preference
How does a point source get a permit to emit pollutants into the water?
NPDES (the system) permits can be issued by the EPA and authorized state agencies and Indian Tribes - the permits may be issued ONLY if the discharge will NOT violate water quality standards & they must be reissued every 5 years
Major difference between 1933 act and 1934 act:
Negligence in preparing financial statements does NOT lead to liability under the 1934 act BUT an accountant is liable for ALL negligent acts under the 1933 act
Can the TCPA impose fines?
No --> Federal Communications Commission (FCC) enforces the TCPA, therefore, the FCC imposes the fines (up to 11k a day) on companies that violate the junk fax provision act BUT TCPA gives consumers the right to sue for either $500 for each violation of the act OR for the actual monetary losses resulting from a violation, whichever is greater if a court finds that a defendant willfully or knowingly violated the act, the court can triple the damages
Who does the Fair Debt Collection Practices Act apply to?
ONLY applies to specialized debt-collection agencies and attorneys who regularly attempt to collect debts on behalf of someone else usually for a % of the amount owed creditors attempting to collect debts are NOT covered by the act
Inadequate Warnings: Obvious risks, State laws & Constitutionality
Obvious Risks: There is no duty to warn about risks that are obvious or commonly known (ex: doing flips on a trampoline) BUT --> risks that seem obvious might not be obvious to ALL users such as children so in court you'd have to prove that you made it easy for the child to see the warning label State Law & Constitutionality: an action alleging that a product is defective due to an inadequate label can be based on state law but that law must not violate the U.S. Constitution
Manufacturing defects
Occurs when a product "departs from its intended design even though all possible care was exercised in the preparation and marketing of the product." ex: a glass bottle too thin, explodes in a customer's face
Most cited case on the concept of foreseeability and proximate cause is what case?
Palsgraf case (established foreseeability as the test for proximate cause) Helen Palsgraf was waiting for a train. A man carrying a package was rushing to catch a train that was moving away from a platform across the tracks from Palsgraf. As the man attempted to jump aboard the moving train, he seemed unsteady. A railroad guard on the car reached forward to gram him & another guard pushed him from behind to help him board the train. In the process, the man's package, which (unknown to the rail guards) contained fireworks, fell on the railroad tracks & exploded. There was nothing about the package to indicate its contents. The repercussions of the explosion caused weighing scales at the other end of the train platform to fall on Palsgraf, causing injuries for which she sued the railroad company. Jury found railroad guards to be negligent in their conduct. After appeal, NY's highest state court held railroad company was NOT LIABLE to Palsgraf. The railroad had not been negligent toward her, because injury to her was NOT FORESEEABLE.
Environmental Regulatory Agencies
Primary federal agency is the EPA (Environmental Protection Agency). - most fed environmental laws provide that citizens can sue to enforce environmental regulations IF governing agencies fail to do so - All federal agencies must take the environmental impact into account when making significant decisions (EIS)
2nd defense to defamation
Privileged communications - in some circumstances, a person will not be liable for defamatory statements because she enjoys a privilege or immunity - Privileged communications are of 2 types: absolute & qualified ***only in judicial proceedings and certain government proceedings is an absolute privilege granted ***
Chapter 47
Professional Liability & Accountability
Strict Product Liability and Public Policy
Public policy rests on a threefold assumption: 1. consumers should be protected from unsafe products; 2. manufacturers & distributors should be liable to any user of the product regardless of if they have privity of contract 3. manufacturers, sellers & distributors can bear the costs of injuries better because they can basically charge higher prices to offset the legal costs *Public policy may be expressed in a statute or in the common law, but can also be revealed in a court's interpretation of a statute*
Manufacturing defects - quality control & expert testimony
Quality control: - usually manufacturing defects occur when a manufacturer fails to assemble, test, or check the quality of a product therefore liability is imposed regardless of whether the quality control efforts were reasonable (this is done to increase in investment in safety checks) Expert Testimony: - cases are often decided based on expert testimony - ex: ladder collapses, an expert says the holes didn't align up right therefore, manufacturer is liable
What is the difference between real property and personal property?
Real Property --> land and things permanently attached to the land, such as a house Personal Property --> consists of ALL other items, including cash & securities (such as stocks & bonds)
Accountants Duty of Care - Global Accounting Rules
SEC now requires U.S. companies to use global accounting rules for all financial reports filed w/ SEC these rules are known as IFRS
Ex of aid and abet
Smith & Jones, an accounting firm, performs an audit for Belco Sales Company that is so inadequate as to constitute gross negligence. Belco uses the financial statements provided by Smith & Jones as part of a scheme to defraud investors. When the scheme is uncovered, the SEC can bring an action against Smith & Jones for aiding and abetting. The firm knew or should have known that its audited statements contained material misrepresentations on which investors relied
APA - Fair Notice
The APA also includes many requirements concerning the notice that regulatory agencies must give to those affected by its regulations -before changing a certain regulatory principle, the agency MUST give fair notice of what conduct will be expected in the future
The Hearing Continued -
The APA requires that before the hearing takes place, the agency must issue a notice that includes: 1.the facts and law on which the complaint is based 2.the legal authority for the hearing 3. its time and place
Mobile Sources - Authority to Regulate Greenhouse Gases
The Clean Air Act does NOT specifically mention CO2 emissions (greenhouse gas) therefore EPA didn't regulate CO2 emissions from motor vehicles until 2009 after Supreme court ruled that it had authority to do so - Court said that broad definition in Clean Air act of "air pollutant" gives EPA authority to regulate CO2
Notification Requirements
The Consumer Product Safety Act requires the distributors of consumer products to notify the CPSC immediately if they receive info that a product "contains a defect which... creates a substantial risk to the public" or an "unreasonable risk of serious injury or death"
What is the amendment to the TSR?
The Do Not Call Registry - Telemarketers must refrain from calling consumers who are on that list also: TSR applies to any offer made to consumers in the U.S EVEN IF offer comes from a foreign firm (aka TSR helps protect consumers from illegal cross-border telemarketing operations)
Automobile Fuel Economy Labels
The Energy Policy and Conservation Act (ECPA) requires car makers to attach an info label to every new car -label must include the Environmental Protection Agency's fuel economy estimate for the vehicle
Ex of formal complaint
The Environmental Protection Agency (EPA) finds that Acme Manufacturing is polluting groundwater in violation of federal pollution laws. The EPA issues a complaint against Acme in an effort to bring the plan into compliance with federal regulations. This complaint is a public document, & a press release may accompany it. Acme will reason by filing an answer to the EPA's allegations. If Acme and the EPA can't agree on a settlement, the case will be adjudicated.
Drugs and Medical Devices
The FDA is also responsible under the FDCA for ensuring that drugs are safe and effective before they are marketed to the public - because FDA must ensure safety of new medications there is always a delay before drugs are available to the public --> which can lead to controversy
Example of Exhaustion doctrine
The FTC claims that Sysco Industries used deceptive advertising and orders it to run new ads. Sysco says the ads are not deceptive. - under the exhaustion doctrine, Sysco must go through the entire FTC process before it can bring a suit against the FTC in court to challenge it
Food Labeling
The Fair Packaging and Labeling Act require that food product labels identify: 1) the product 2) quantity of contents (size of serving & # of servings too) 3) manufacturer 4) packager or distributor
Enforcement of the Act - FDCPA
The Federal Trade Commission is primarily responsible for enforcing the FDCPA - a debt collector who fails to comply with the act is liable for actual damages, plus additional damages not to exceed 1k and attorney's fees - debt collectors who violate the act are EXEMPT from liability if they can show that the violation was not intentional and resulted from a bona fide error
Example of APA's notice-and-comment rulemaking:
The Occupational Safety and Health Act authorized an agency to develop and issue rules governing safety in the workplace. When the agency wants to make new rules regarding safety in the steel industry, it has to follow the specific procedures (Notice-and-comment) outlined by the APA
TILA - Disclosure Requirements
The TILA's disclosure requirements are contained in Regulation Z, issued by the Federal Reserve Board of Governors - if contracting parties are subject to the TILA the requirements of regulation Z apply to any transaction involving an installment sales contract that calls for payment to be made in more than 4 installments
Marketing - Fraudulent Telemarketing
The Telemarketing and Consumer Fraud and Abuse Prevention Act directed the FTC to establish rules governing telemarketing and to bring actions against fraudulent telemarketers
Marketing - Telephone Solicitation
The Telephone Consumer Protection Act (TCPA) prohibits telephone solicitation using an automatic telephone dialing system or prerecorded voice *TCPA also makes it illegal to transmit ads via fax w/out first obtaining the recipient's permission*
Does the federal law (EPCA) preempt a state advertising law on deceptive advertising?
The example in the book says the federal statute (EPCA) DID NOT preempt a claim for deceptive advertising made under state law
Abusive or Frivolous Litigation
The filing of a lawsuit without legitimate grounds and WITH malice. Alternatively, the use of a legal process in an improper manner. - if a party initiates a lawsuit out of malice and without a legitimate legal reason, and ends up losing, that party can be sued for MALICIOUS PROSECUTION. - ABUSE OF PROCESS --> can apply to any person using a legal process against another in an improper manner or to accomplish a purpose for which the process was not designed
Caloric Content of Restaurant Foods
The health-care reforms enacted in 2010 included provisions aimed at combating the problem of obesity in the U.S. (i.e Obamacare) all restaurants w/ 20 or > locations are now required to post the caloric content of the foods on their menus so that customers will know how many calories the foods contain - foods offered through vending machines must also be labeled so that their calories is visible to would-be purchasers *fed law on menu labeling takes the place of all previous state and local laws in the area*
Damages for Slander
The plaintiff must prove special damages (actual economic loss). * different than damages for libel as you don't need to prove you were harmed to get damages in libel*
The Administrative Process
The procedure used by administrative agencies in fulfilling their three basic functions: rulemaking, enforcement, and adjudication.
Why do you have to prove special damages in slander cases but not libel?
The requirement is imposed in slander cases because oral statements have a temporary quality - In contrast, a libelous (written) statement has the quality of permanence and can be circulated widely, especially through tweets and blogs - also, libel usually results from some degree of deliberation by the author
What does aid and abet mean?
To aid and abet means to assist another person in the commission of a crime by words or conduct actively, knowingly, and intentionally.
How does one obtain relief from pollution under the nuisance doctrine then?
To obtain relief, a property owner may have to identify distinct harm SEPARATE from that affecting the general public this harm is referred to as a "private" nuisance
Chapter 6
Tort Law - any time that one party's allegedly wrongful conduct causes injury to another, an action may arise under the law of torts (tort literally means "wrong")
What types of contracts fall under the cancellation rules (cooling off laws)?
Trade show sales contracts, contracts for home equity loans, Internet purchase contracts, and home (door-to-door) sales contracts In addition, certain states have passed laws allowing consumers to cancel contracts for dating services, gym memberships, and weight loss programs
Numerous 3rd parties (such as investors, shareholders, creditors, corporate managers and directors, and regulatory agencies) rely on auditors when making decisions (T/F)
True - therefore, the privity requirement in regard to accountant's liability to 3rd parties is not a thing anymore - aka auditors can be held liable to 3rd parties for negligence
If a preferred creditor (one who has received a preferential transfer) has sold the property to an innocent 3rd party, the trustee CANNOT recover the property from the innocent party (T/F)
True BUT --> preferred creditor generally can be held liable for the value of the property
Under market-share liability, burden of identification shifts to defendants if the plaintiff establishes a prima facie case on every element of the claim except identification of the specific defendant (t/f)
True a prima facie case is one in which the plaintiff has presented sufficient evidence for the claim to go forward in other words, if the plaintiff proves the manufacturer's screwed up, the manufacturer's (defendants) now have to identify who contributed what to the defective product *Some jurisdictions don't like the idea of market-share liability because it "deviates from traditional legal principles"
When a discharge is denied under any of the circumstances listed previously, the debtor's assets are still distributed to the creditors (T/F)
True but after the bankruptcy proceedings, the debtor remains *liable* for the unpaid portion of ALL claims - in addition, a discharge may be revoked (taken back) w/in 1 year if it is discovered that the debtor acted dishonestly during the bankruptcy proceeding ^ if that occurs, a creditor whose claim was not satisfied in the distribution of the debtor's property can proceeds w/ his or her claim against the debtor
For fraud to occur, more than mere "puffer", or "sellers talk" must be involved. (T/F)
True fraud exists only when a person represents as a fact something he or she knows is untrue for instance --> it is fraud to claim that the roof of a building does not leak when one knows that it does facts are objectively ascertainable, whereas "sellers talk" (such as I'm the best accountant in town) is not because the use of the word "best" is subjective
Under the ECOA, a creditor may not require a cosigner on a credit instrument if the applicant qualifies under the creditor's standards of creditworthiness for the amount of the terms of the credit request (T/F)
True. *see next example*
Under the provisions of TILA, ALL of the terms of a credit instrument must be clearly disclosed (T/F)
True. A lender must disclose: - APR - finance charged - amount financed - total payments
EPA sets primary & secondary levels of ambient standards - that is max permissible levels of certain pollutants - & states formulate plans to achieve those standards. (T/F)
True. different standards apply depending on whether the sources of pollution are located in clean areas or polluted areas & whether they are existing sources or major new sources
FTC Actions - When the FTC receives numerous & widespread complaints about a problem, it will investigate (T/F)
True. If FTC concludes that an ad is unfair/deceptive, it drafts a formal complaint which is sent to the alleged offender. The company may agree to settle the complaint without further proceedings - if not, the FTC can conduct a hearing in which the company can present its defense
The FDCPA also requires a collection agency to include a validation notice when it initially contacts a debtor for payment of a debt OR w/in 5 days of that initial contact. (T/F)
True. The notice must state that the debtor has 30 days in which to dispute the debt and to request a written verification of the debt from the collection agency
Communications between professionals and their clients (other than those between an attorney and their clients) ARE NOT privileged under federal law (T/F)
True. in cases involving federal law, state-provided rights to confidentiality of accountant-client communications are NOT recognized aka in fed cases, if a court orders it, an accountant MUST provide the info sought
U.S Constitution authorizes only the legislative branch to create laws (T/F)
True. BUT: Constitution does not specifically refer to admin agencies --> admin agencies can make legislative rules ("substantive rules") that are as LEGALLY BINDING as laws that Congress passes
Supreme Court has held that an insurance company's failure to notify new customers that they were paying higher insurance rates as a result of their credit scores was a willful violation of the FCRA (T/F)
True. because they used the info from credit reporting agencies they can also be liable for violations of the FCRA - aka i think they just have to notify the customer why they are doing what they are doing (because of the shitty credit report they received on them)
The Bankruptcy Trustee - Duties for Means Testing
Trustee is required to promptly review all materials filed by the debtor to determine if there is substantial abuse Must file statement w/in 10 days after 1st meeting w/ creditors indicating whether the case is presumed to be abuse under the means test
The Basis of Tort Law
Two notions serve as the basis of all torts: wrongs and compensation - Tort law recognizes that some acts are wrong because they cause injuries to others. - A tort action is a civil action in which one person brings a personal suit against another, usually for compensation/damages.
Requirements of the Fair Debt Collection Practices Act
Under the FDCPA, a collection agency may NOT do any of the following: 1. Contact the debtor at the debtor's place of employment if the debtor's employer objects 2. Contact the debtor at inconvenient or unusual times (such as 3 am) 3. Contact 3rd parties other than the debtor's parents, spouse, or financial adviser about payment of a debt unless the court authorizes to do so 4. Harass or intimidate the debtor (abusive language/threatening violence) or make false statements (such as posing as a police officer) 5. Communicate w/ debtor at any time after receiving notice that the debtor is refusing to pay the debt, unless advising the debtor about further action to be taken by the collection agency
Potential Liability to Clients
Under the common law, professionals may be liable to clients for: Breach of Contract. Negligence. Fraud.
Search Warrants
United States supreme court requires that even admin agencies get a search warrant before searching and seizing evidence ** exceptions to getting a search warrant tho**
Hearing Procedures
Vary from agency to agency, but often resembles a trial. * can be informal adjudication proceedings such as meeting in a conference room with an ALJ to resolve a dispute *
Example of Restitution
Verity International billed phone-line subscribers who accessed certain porn sites at the rate for international calls to Madagascar. When consumers complained about the charges, Verity told them that the charges were valid and had to be paid. A fed appellate court held that this representation of "incontestability" was deceptive and a violation of the FTC act. The Court ordered Verity to pay 18M in restitution to its consumers.
FTC Actions - Restitution Possible
When a company's deceptive ad leads to wrongful payments by consumers, the FTC may seek other remedies, including restitution recall: restitution = returning the goods/value of the goods to the person
The Practical Significance of Admin Law
Whereas stat law is created by legislatures, admin law is created by admin agencies
What is the question that a court faces when confronted with an agency's interpretation of a statute that it administers?
Whether the agency has acted within its statutory authority
Can the common law rules (Ultramares, Restatement, and Reasonably Foreseeable User rules) apply to other professionals besides accountants?
Yes - accountants, attorneys and other professionals may be held liable to any of those rules ignore this flashcard
Do public figures have a greater burden of proof in defamation cases?
Yes. Public figures have a greater burden of proof in defamation cases to show actual malice than do private individuals *aka they have to prove actual malice or else the defamatory statement is fine and no damages are pursued *
Dram Shop Acts
a bar's owner or bartender may be held liable for injuries caused by a person who became intoxicated while drinking at the bar also for continuing to serve a person who was already intoxicated some states statutes also impose liability on SOCIAL HOSTS (person's hosting parties) for injuries caused by guests who became intoxicated at the host's homes *under these statutes, it is UNNECESSARY to prove that the bar owner, bar tender, or social host was negligent *
In particular, the due diligence standard places a burden on accountants to verify information furnished by who?
a corporation's officers and directors - for example accountants may be held liable for failing to detect danger signals in documents furnished by corporate officers that required further investigation
What is a material fact?
a fact that a reasonable person would consider important when determining his or her course of action
Ex of outrageous conduct
a father attacks a man who has had consensual sex w/ the father's daughter. The father handcuffs the man to a steel pole and threatens to kill him unless he leaves town immediately. The father's conduct may be sufficiently extreme and outrageous to be actionable as an intentional infliction of emotional distress
How does a hearing procedure for admin law resemble a trial?
a formal adjudicatory hearing resembles a trial in many respects: - parties are permitted to undertake discovery - the burden of proof is placed on the agency - during the hearing, parties may give testimony, present other evidence, and cross examine witnesses
Credit Protection - The truth-in-lending Act
a key statute regulating the credit and credit card industries is the Truth-in-Lending Act (TILA) -TILA is basically a DISCLOSURE LAW because it requires sellers and lenders to DISCLOSE credit terms and loan terms so that individuals can shop around for the best financing arrangements
Wetlands
a lowland area, such as a marsh or swamp, that is saturated with moisture, especially when regarded as the natural habitat of wildlife. CWA prohibits the filling or dredging of wetlands unless a permit is obtained from the Army Corps of Engineers
The Reasonable Person Standard
a measurement of the way members of society expect an individual to act in a given situation - It is not necessarily how a particular person WOULD act - It is society's judgment of how an ordinarily prudent person SHOULD act *tort law measures duty of care by the reasonable person standard --> changes by profession and by case*
Second confidentiality relationship (attorney was the first)
accountant- client relationships - in a few states, accountant-client communications are privileged by state statute - in these states, accountant client communications may not be revealed EVEN in court w/out client's permission - The MAJORITY of states, however, abide by the common law which provides that if a court orders an accountant must disclose info about his client to the court - physicians & other professionals may similarly be compelled to disclose in court info given to them in confidence by patients or clients
Deceptive Advertising - Claims that appear to be based on factual evidence
advertising that appears to be based on factual evidence but, in fact, is not reasonably supported by evidence --> this = deceptive Ex: a weight loss ad (if the facts literally show you have to exercise/eat good to physically lose that much weight, then the pill being advertised is bullshit)
What is one reason settlement is appealing to agency's?
agencies can conserve their resources and avoid formal actions by just giving advice and negotiation solutions rather than going to court
Fair and Accurate Credit Transactions Act (FACT Act)
also requires account numbers on credit card receipts to be shortened therefore merchants can no longer obtain the customer's names and full credit card numbers
Protection of Health and Safety
although labeling & packaging laws promote consumer health and safety, there is a significant distinction between regulating the info dispensed about a product and regulating the actual content of the product Ex: tobacco products --> producers of tobacco must use labels that warn consumers about the health hazards but the sale of tobacco is not restricted
What is one of the more important tasks that an accountant may perform for a business?
an AUDIT (systematic inspection by tests of financial records)
Credit Card rules - another provision
another provision requires credit card companies to disclose the balance computation method that is used to determine the outstanding balance and to state when finance charges begin to accrue
Oil Pollution Act
any oil facility, oil shipper, vessel owner, or vessel operator that discharges oil into water may be liable for clean up costs and damages polluter can also be ordered to pay for damages to natural resources, private property, & the local economy
Exemptions
as just described, the trustee takes control of the debtor's PROPERTY in a Ch 7 bankruptcy, BUT an individual debtor is entitled to exempt (exclude) certain property from the bankruptcy
Agency powers include functions:
associated with the legislature (rulemaking), executive branch (enforcement), and the courts (adjudication)
What is the most widely used defense in negligence actions?
comparative negligence (degree to which the plaintiff's own negligence contributed to cause the injury)
Damages Available in Tort Actions
compensatory and punitive *Note: difference between DAMAGE and DAMAGES* - Damage = injury, damages = monetary compensation for such harm or injury
The Consumer Product Safety Act
established the CPSC (Consumer Product Safety Commission) CPSC: commission conducts research on the safety of individual consumer products and maintains a clearinghouse on the risks associated with various products
Two Types of Agencies
executive agencies and independent regulatory agencies
When is a substance deemed harmful?
if human exposure to substance, including exposure through eating food, results in a risk of 1 in a million or higher of developing cancer
What about pollution that is not from "point sources"? (such as runoff from small farms)
if it not from a point source, it is not subject to much regulation
Mobile Source - Controlling Climate Change
in 2016, a fed district court in Oregon allowed an unprecedented lawsuit to go forward against the U.S. government for doing TOO little to control climate change *argument was that the government has known for years that CO2 pollution causes climate change & therefore by failing to address the causes of pollution, the government has violated their constitutional rights* (Unsolved case to this day)
Controlling Costs of Health Insurance
in an attempt to control the rising costs of health insurance, certain restrictions were placed on insurance companies insurance companies must spend at least 85% of all premium dollars collected from large employers on benefits and quality improvement if insurance companies do not meet these goals, they must provide rebates to consumers
Classification of Torts
intentional and unintentional - intentional torts result from the intentional violation of person or property (fault plus intent) - unintentional torts (torts involving negligence) which results from a breach of a duty to act reasonably (fault WITHOUT intent)
The Duty of Landowners
landowners are expected to exercise reasonable care to protect individuals coming onto their property from harm ex: apartments --> landowners are expected to make sure their guests are not harmed in stairways, entryways, laundry rooms, etc.
Inadequate Warnings (3rd type of product defect) 1st --> manufact. defect, 2nd --> design defect
liability based on foreseeability that proper instructions/labels would have made the product safe to use - seller must also warn consumer of the harm that can result from the FORESEEABLE misuse of it's product
Ocean Dumping Act
made it unlawful for any person to dump radiological, chemical, & radioactive waste into the ocean (pollutants) - act regulates the transportation of these materials over the ocean too - civil penalty up to 50k & criminal is 50k fine w/1 year in prison (court can also grant injunction)
Tainted Foods
many people in the U.S have contracted food poisoning from eating foods that were contaminated w/ salmonella or E. coli bacteria - in response to this --> congress enacted the Food Safety Modernization Act to provide greater government control over U.S food safety system - this act gives the FDA authority to directly recall any food products that it suspects are tainted, rather than relying on the producers to recall items
Federal Regulations
most of the fed statutes are designed to address pollution in the air, water, or land some specifically regulate toxic chemicals, including pesticides (insects), herbicides (plants), and hazardous wastes
What is a significant difference between trials and admin agency hearings?
normally much more information including hearsay (secondhand info) can be introduced as evidence during admin hearings whereas in trial, usually secondhand evidence is not as heavy
Advertising, Marketing, and Sales
numerous fed laws have been passed to define the duties of sellers and rights of consumers exhibit 44-1 example of laws passed in these areas: Advertising, Labeling and packaging, sales, food and drugs, product safety, credit protection
Design Defects
occur when a product is manufactured according to the manufacturer's standards, but the product injures a user due to its unsafe design - To successfully assert a design defect, a plaintiff has to show: 1. A reasonable alternative design was available 2. As a result of the defendant's failure to adopt the alt. design, the product was not reasonably safe *in other words --> manufacturer is liable ONLY when the harm was reasonably preventable*
deceptive advertising
occurs if a reasonable consumer would be misled by the advertising claim vague generalities and obvious exaggerations are allowed (these claims are known as puffery)
Distribution to Unsecured Creditors
paid in the order of their priority Claims for domestic-support obligations such as child support and alimony have the HIGHEST priority amount unsecured creditors so these claims must be paid FIRST *each class must be FULLY paid before the next class is entitled to any of the remaining proceeds*
Common Law Theory - Nuisance
persons may be held liable if they use their property in a manner that unreasonably interferes with other's rights to use or enjoy their own property - courts typically balance the harm caused by pollution against the costs of stopping it - courts have often denied injunctive relief (stopping of specific behavior) on the ground that hardships that would be imposed on the polluter are greater than the hardships suffered by the plaintiff
What is the FTC Mail or Telephone Order Merchandise Rule?
protects consumers who purchase goods via mail, internet, phone, or fax - Merchants are required to ship orders within the time promised in their ads and to notify consumers when orders cannot be shipped on time - if the seller doesn't give estimated shipping time, it must ship within 30 days
Regulation Z
provision extending truth-in-lending disclosures to consumers - Transactions subject to Reg Z are installment loans, retail & installment sales, car loans, improvement loans, certain real estate loans if the financing is less than 25k
Expanded Coverage for Children and Seniors
reforms enabled more children to obtain health insurance coverage & allowed young adults (< age 26) to remain on their parent's health insurance policies - legislation also ended lifetime limits and most annual limits on care and gave insured persons access to recommended preventive services (such as cancer screening and vaccinations) w/out a cost - people can no longer be denied insurance because of preexisting conditions - Medicare recipients now receive a 50% discount on name-brand dugs
Health-Care Reforms
reforms that gave Americans new rights and benefits with regard to health care also prohibited certain insurance company practices
Libel vs Slander
remember: the law imposes a duty on all ppl to refrain from making FALSE defamatory statements of fact about others - if you breach this duty in WRITING --> Libel - if you breach this duty ORALLY --> Slander * tort of defamation also arises when a false statement of fact is made about a person's product, business or legal ownership rights to property *
Why are ch 13 repayment plans beneficial?
repayment plans offer advantages because they are less expensive and less complicated than reorganization or liquidation
What is the FTC's Telemarketing Sales Rule (TSR)?
requires telemarketers to: 1. identify the seller's name 2. describe the product being sold 3. disclose all material facts related to the sale (such as total cost) - TSR makes it illegal for telemarketers to misrepresent info or facts about their goods - - Telemarketer must also remove a consumer's name from its list of contacts if the customer requests -
What is a cease-and-desist order?
requires the company to stop the challenged advertising in some circumstances it may also impose a sanction known as counter advertising
1) Freedom of Information Act
requires the fed government to disclose certain records to any person or entity on written request, even if no reason is given for the request - all fed government agencies must make records available electronically on the internet and in other electronic formats * obviously doesn't apply to personal/confidential info*
Filing the Petition & Confirmation of the Plan
similar to ch 13 filing (not later than 90 days after order for relief has been entered) similar to ch 13 (confirmation w/in 45 days of filing) for unsecured debtors, the plan must be confirmed in either of the following circumstances: 1) the value of the property to be distributed under the plan equals the amount of the claim 2) the plan provides that all of the debtor's disposable income to be received in a 3 year period will be applied to making pmts
Exception: A Duty to Warn
some risks are SO obvious that an owner need not warn of them for instance, a business owner does NOT need to warn customers to open a door before attempting to walk through it other risks, however, even though they seem obvious to a business owner, may not be so in the eyes of the customer (such as a child) ***NOTE: even if a risk is obvious, a business owner is not necessarily excused form the duty to protect customers from foreseeable harm from that risk***
Good Samaritan Statutes
someone who is aided voluntarily by another cannot turn around and sue the "Good Samaritan" for negligence - these laws were passed largely to protect physicians and medical personnel who volunteer their services in emergency situations to those in need, such as individuals hurt in car accidents ex: someone has a heart attack, ppl try to save him and in the process of CPR they crack that person's ribs
Accountants Duty of Care - Unaudited financials
sometimes, accountants are hired to prepare unaudited financial statements - lesser standards of care are required in this situation - nevertheless, accountants may still be liable for omissions from unaudited statements - Accountants may be subject to liability for failing, in accordance with standard accounting procedures, to designate a B/S as "unaudited" - also can be liable for failure to disclose fraud has occurred to client
What is Consumer Law?
statutes, agency rules, common law judicial decisions that serve to protect the interest of consumers are classified as consumer law
Who has the primary responsibility for enforcing the permit system subject to EPA monitoring?
the STATES
The three functions (rulemaking, enforcement, and adjudication) make up what is known as ...
the administrative process ^APA is an integral part of the admin process^
What is the cram-down provision?
the court may confirm the plan OVER the objections of a class of creditors - before the court can exercise the right of "cram-down confirmation" it must be demonstrated that the plan does not discriminate unfairly against any creditors and is fair & equitable
Product Liability
the legal obligation of sellers to pay damages to individuals who are injured by defective or unsafe products - product liability is based on 4 theories: 1. Negligence 2. Misrepresentation 3. Strict Liability 4. Warranties
1. Proving a defective condition
the plaintiff doesn't have to show why or in what manner the product became defective - plaintiff does however, have to prove that the product was defective at the time it left the hands of the seller - must also show that the product was "unreasonably dangerous" to the user
Confirmation of the Plan - continuted
the plan can be modified on the request of the debtor, the DIP, or the trustee - even if only one class of creditors has accepted the plan, the court may still confirm the plan under the Code's so called CRAM-DOWN PROVISION
What happens if there are insufficient proceeds to fully pay all the creditors in a class?
the proceeds are distributed PROPORTIONATELY to the creditors in that class classes in lower priority will receive nothing in almost ALL ch 7 bankruptcies the funds will be insufficient to pay ALL creditors
What happens if the consumer-debtor surrenders the collateral to the secured party? (aka the last option listed previously)
the secured creditor can enforce the security interest - secured party can either: 1) accept the property in full satisfaction of the debt 2) sell the collateral and use proceeds to pay off debt
Negligence cases against professionals often focus on what?
the standard of care exercised by the professionals - In performing their contracts, professionals must exercise the established standards of care, knowledge, and judgement generally accepted by members of their professional group
Amendments to Credit-Card Rules
these amend's added the following protections: 1. Company can't retroactively increase int rates on existing card balances unless the account is 60 days delinquent (behind on credit card payments) 2. Company must give 45 days' notice to consumers b4 changing its credit-terms 3. Monthly bills must be sent to cardholders 21 days b4 due date 4. Interest rate charged can't increase except in specific situations such as when promotional rate ends 5. Company can't charge over-limit fees except in specified situations 6. When the customer has balances at different int rates, pmts in excess of min amount due must be applied first to the balance with the highest rate 7. Company can't compute finance charges based on previous billing cycle (a practice known as double-cycle billing). This practice hurts consumers b/c they are charged interest for previous cycle even if they paid the bill in full.
Abnormally Dangerous Activities
those that involve a high risk of serious harm to persons or property that cannot be completely guarded against by the exercise of reasonable care - ex: blasting explosives, keeping wild animals - there is no fault, but there is still responsibility --> strict liability is imposed aka you are responsible regardless
The 3 branches of government exercise certain controls over agency powers and functions, but in many ways admin agencies function independently. (t/f)
true. - For this reason, admin agencies, which constitute the bureaucracy, are sometimes referred to a the FOURTH branch of the U.S. government
Why will courts hardly grant punitive damages?
violates the due process clause recall: due process clause says courts must respect all legal rights owed to a person Note: state laws may limit the amount of damages (both punitive & general) that can be awarded (caps range from 250k to 750k)
What is transferred intent?
when one intends to harm one individual but UNINTENTIONALLY harms a second person
Agency Powers and the Constitution
*Admin agencies occupy and unusual niche in the U.S. governmental structure because they exercise powers that are normally divided among 3 branches of government*
Examples of Administrative inspections and tests
- Safety inspections of underground coal mines - safety tests of commercial equipment and cars - Environmental monitoring of factory emissions - Agency may also ask a firm to submit certain documents or records to the agency for examination
What does the regulatory flexibility analysis measure?
- analysis measures cost that the rule would impose on small businesses and consider less burdensome alternatives - act also contains provisions to alert small businesses about forthcoming regulations - act relived small business of some record keeping burdens especially w/ regard to hazardous waste management
2 Independent regulatory agencies
- ex: FTC and SEC - president's power is less because officers serve for fixed terms and cannot be removed without just cause
1. Executive Controls
- exercises control over agencies both through the president's power to appoint federal officers and through the president's veto power the prez may veto enabling legislation passed by Congress
Public Accountability - 4 laws passed by Congress to hold admin accountable:
1. freedom of information act 2. government-in-the-sunshine-act 3. regulatory flexibility acts 4. small business regulatory enforcement fairness act
What is an Admin Agency?
An agency that implements what Congress adopts as a general statute - The agency creates detailed rules and regulations necessary to carry out the statute (because the agency has time, resources, and expertise to make detailed decisions)
Example of comment period
Brown Trucking learns that the U.S. Department of Transportation is considering a new regulation that will have a negative impact on its ability to do business. A notice of the rulemaking is published in the Federal Register. Later, a public hearing is held so that proponents/opponents can offer evidence and question witnesses. At this hearing, Brown's owner orally expresses his opinion about the pending rule (offering his comment)
Admin agencies also issue interpretive rules which are what?
Declare policy and do NOT affect legal rights or obligations
Negotiated Settlements
Depending on the agency, negotiations may involve a simple conversation or a series of informal conferences whatever form the negotiations take, their purpose is to rectify the problem to the agency's satisfaction and eliminate the need for additional proceedings
Example of interpretive rule
Equal Employment Opportunity Commission issues interpretive rules indicating how it plans to interpret the provisions of certain statutes, such as the Americans with Disabilities Act. *These informal rules provide enforcement guidelines for agency officials*
Agency Orders
Following a hearing, the ALJ renders an initial order, or decision on the case. If no party appeals the case, the ALJ's decision becomes the final order of the agency. initial order --> can appeal to board or commission --> can appeal to federal appellate court (otherwise final order)
Formal Complaints
If a settlement cannot be reached, the agency may issue a formal complaint against the suspected violator
Failure to Follow Rulemaking Procedures
If an agency fails to follow proper rulemaking procedures --> resulting rule may not be binding
Enforcement - Inspections and Tests
In conducting investigations, many agencies gather information through on-site inspections - sometimes, inspecting an office, a factory, or some other business facility is the only way to obtain the evidence needed to prove a regulatory violation - other times, an inspection or test is used in place of a formal hearing to show the need to correct or prevent an undesirable condition
When Courts Will Give Chevron Deference to Agency Interpretation
In order for agency interpretations to be assured Chevron deference (aka accepted), they must meet the formal legal standards for notice-and-comment rulemaking. *nevertheless, there are still gray areas and many agency interpretations are challenged in court*
Ex: of FOIA
Juanita, a reporter from a magazine, makes an FOIA request to the Centers for Disease Control and Prevention for a list of people who have contracted a highly contagious virus. The CDCP will not have to comply because this info is personal and confidential.
Does the agency have to respond to all comments?
No. but it must respond to significant comments that bear directly on the proposed rule agency responds by either modifying its final rule or explaining why it did not make any changes to the final rule. *sometimes (in informal procedures) an agency may accept comments after the comment period is closed*
Admin Procedure Act (APA) - The arbitrary and capricious Test
One of Congress's goals in enacting APA was to provide for more judicial control over admin agencies - therefore, APA says that courts should "hold unlawful and set aside" agency actions found to be "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" -under this standard, parties can challenge regulations as contrary to law or as so irrational that they are arbitrary and capricious
Bait-and-Switch Advertising (FTC issued rule that governs specific ad techniques)
Promoting a low-priced item ("bait) to attract customers to whom the business then tries to sell a higher-priced item ("switching the customer to a more expensive item")
Informal Agency Actions
Rather than take the time to conduct notice and comment rulemaking, agencies have increasingly been using more informal methods of policymaking such as issuing interpretive rules and guidance documents ^informal agency actions are EXEMPT for APA's requirements because they do not establish legal rights (they "guide" you) ^
Public Accountability
Since the public was worried about the growing power exercised by admin agencies, congress passed several laws to make agencies more accountable through public scrutiny
Claims Based on Half-Truths
Some ads contain "half-truths" meaning that the presented info is true but incomplete and may therefore lead consumers to a false conclusion Ex: Campbell soup said most soups are low in fat & cholesterol which is helpful in fighting heart disease. what the ad did NOT say was that many of the soups are high in sodium and that high sodium diets may increase the risk of heart disease. FTC ruled these claims as deceptive because they were half truths.
Judicial Controls - The Admin Procedure Act
Sometimes, Congress specifies certain procedural requirements in an agency's enabling legislation - in the absence of any directives from Congress concerning a particular agency procedure, the Admin Procedure Act (APA) applies - APA = judicial review of most agency decisions
Who relies on FOIA provisions to obtain info from government agencies?
The media, industry trade associations, public-interest groups, and even companies seeking info about competitors *an agency's failure to comply with an FOIA request can be challenged in a fed district court*
What is the exhaustion doctrine
The party seeking court review must first exhaust all administrative remedies aka the complaining party must have gone thru the administrative process before seeking court review
Subpoenas - Limits
There are limits on what an agency can demand courts use four factors to determine whether an agency is abusing its discretion in pursuing information as part of an investigation
What makes a rule arbitrary and capricious?
There is no precise definition but if the agency has done any of the following: (Could equal arbitrary/capricious then) 1. Failed to provide a rational explanation for its decision 2. Changed its prior policy w/out justification 3. Considered legally inappropriate factors 4. Entirely failed to consider a relevant factor 5. Rendered a decision plainly contrary to the evidence
What is counter advertising?
This requires the company to advertise in a new way to inform the public about the earlier misinformation The FTC sometimes institutes a multiple product order, which requires a firm to stop false advertising for all its products not just the product involved in the original action
Subpoenas
two basic types: 1. Ad testificandum ("to testify") - this one is the ordinary one - it is a writ, or order, compelling a witness to appear at an agency hearing 2. Duces Tecum ("bring it to you") - compels an individual to hand over books, papers, records, or documents to the agency
What are examples to warrantless searches by admin agencies?
warrants are not required to conduct searches in highly regulated industries firms that sell firearms or liquor for instance are automatically subject to inspections without warrants - also coal mines are hazardous so therefore don't need a warrant as well as emergency situations is normally considered reasonable to not have a warrant
FTC Actions - Damages When Consumers Are Injured
when a company's deceptive ad involves wrongful charges to consumers, the FTC may seek other remedies, including damages
When will an agency resort to a subpoena or a search warrant?
when a firm thinks an agency's request (for business records or inspections) is unreasonable and disruptive --> the firm may refuse to comply with the request & therefore the agency uses subpoenas or search warrants
What is another example of a deceptive practice?
when ads contain an endorsement by a celebrity and the celebrity does not actually use the product --> can be viewed as deceptive (half-truth)