BL 300 final

misappropriation theory

misappropriation insider trading operates as a fraud on the market on the source of the trader's information (secretly misappropriating info for their own use- requires deception) misappropriation insider trading occurs when: 1. a trader, who is NOT an insider of the company whose stock is being traded, gets material nonpublic information 2. from someone to whom the trader owes a duty not to trade... 3. and trades anyway

choice of law: goods v. services

services (real estate, stocks, bonds, and intangibles) or mixture of g&s where service element is predominant --> common law. goods (tangible personal property) or mixture of g&s where goods element is predominant --> statutory law (UCC)

activist investor

shareholder who wants to increase their power, get on BoD, change corp. policies, etc.

roles within a corporation

shareholders election BoD. BoD holds lots of power: they handle dividends, major decisions, select and compensate officers. CEO & other officers: run the corporation

smith v van gorkom

shareholders getting more money than the value of the sock. no analysis of the intrinsic value was done. shareholders sue directors for breach of duty and care. directors want to defend w/ business judgement rule. did not hold in court because directors could not prove that they were sufficiently informed. BoD didn't ask questions, hire an IB, or look into the fairness. they relied blindly on officer reports. many directors were not even aware of the merger (given no notice or report). CEO didn't even read the agreement before signing it and presenting it to the board. only spent 2 hours meeting which is way too short. all of the above indicates a major lack of investigation. they were held liable for their breach in duty of care

overview of illegal reasons to fire someone that go against employment at will rules

unlawful discrimination, contract violation, miscellaneous federal and state law. the result --> arguments over the reason for termination. management says fired under employment at will or just cause, employee says fired for an illegal reason. jury decides!

when a Board adopts a poison pill in the face of a hostile takeover, they need to pass the ____ test

unocal test

california restrictive covenants (non-competes)

void and unenforceable. other states (IL, WA) are moving to protect low-wage workers

global corporations FCPA- inherent risk issues

when a large corp. decides to enter a foreign market, it is faced with major concerns. corporations must usually secure licenses, permits, registrations, or other govt. approvals. foreign govts. may require the apt. of a sposor which is required to be paid on an annual basis. business may be impossible or illegal unless the corp. is authorized to do business

Revlon mode

when sale or breakup of a company is inevitable, it is necessary for the board to take the offer of the bidder with the highest price obligation to seek out other bidders and if none come forward, have to go with the higher offer that brings in the most value for shareholders.

necessary elements of a RICO claim

1. conduct: party is associated with and carried out the directions of the enterprise. individual carrying out the direction of the enterprise. 2. racketeering type activities: mail + wire fraud, bribery, fraud 3. pattern of racketeering activity: need atleast 2 acts of it, unrelated incidents don't count 4. enterprise: includes "any individual, corporation, association, or other legal entity or group of individuals". can be an individual too if its not a defined entity. linked with part 1: the group that the individual is acting on helaf of. 1st and 4th elements are linked.

to determine validity of a contract, need:

1) price 2) subject matter 3) duration, AND 4) manner of payment if any of these are unclear, the offer is invalid under contract law.

most jurisdictions will enforce a non-compete if:

1. it protects an employer's legitimate business interest AND 2. the restrictions it imposes are reasonable with respect to duration, geography, and activity being restricted. ex. an unreasonable restriction would be Jimmy johns saying that sandwich makers have to agree to not work at any place that makes sandwiches within 1 mile of a JJ. the court said this was unreasonable --> unlawful purpose --> unenforceable

what must a plaintiff prove to win a 10b-5 case?

1. misstatement or omission (M/O) of fact. 2. M/O must be material. 3. M/O needs to be made in connection with the purchase or sale of a security (not just holding). 4. scienter (M/O was made intentionally or recklessly) 5. reliance (direct or fraud on the market) 6. loss causation (also economic loss and interstate commerce but not covered in this class).

invasion of privacy

1. the intrusion has to be objectionable (offensive; in employment, this will be determined by considering the extent of the business' interest in intruding) AND 2. the person who alleges an invasion of privacy must have had a reasonable expectation of privacy.

Antibribery Provision of FCPA

3 element claim. the act prohibits bribes on anything of value being paid to foreign govt. officials to aid in obtaining or retaining business. it applies to behavior anywhere in the world of US citizens, US companies, and payments by non US companies that "touch on" the US. (includes shareholders, employees, officers, joint venture partners) foreign govt. officials can be employees of any govt. org regardless of level.

elements of a valid common law (and UCC?) contract --> is this a promise that the court will enforce?

4 requirements are always necessary: 1. agreement between parties (meeting of the minds) 2. consideration provided by each party, 3. capacity of each party, AND 4. legal purpose of the agreement. sometimes it's necessary to satisfy a 5th requirement: 5. statute of frauds

legal purpose

4th element for a valid contract. contracts that are contrary to a statute or to public policy are illegal and generally considered void. unenforceable if it's an agreement to break the law or a violation of public policy (ex. wrongful discharge or an unreasonable non-compete)

statute of frauds

A statute under which a contract must be in writing to be enforceable. for common law, contracts that cannot be performed within one year has to satisfy the statute of frauds to be enforceable. also need it for any real estate contracts, when someone promises to pay the debt of another person, and prenups. for UCC, if the goods are over $500 then you need it atleast partly in writing to be enforceable- need to be signed and have a quantity. to satisfy: need to be evidenced by writing and has to be signed.

trade dress

A type of trademark protection that refers to the overall appearance and image of a product --> look and feel. (ex tiffany box packaging)

defense to disparate treatment

BFOQ

BFOQ

Bona Fide Occupational Qualification. a defense to disparate treatment claim. employer must establish that membership in a desired class is necessary to successfully do the job (the employer can discriminate on the basis of a protected class as long as that protected class is necessary to complete the job). race and color are never necessary for this.

unlawful discrimination

US protected groups: race, color, religion, gender, national origin, age 40 & over, disabled, pregnant, military status, genetic information, and other protected at the state or local level (Title VII)

non-compete

a clause under which one party agrees not to enter into or start a similar profession or trade in competition against another party needs to be reasonable to have a lawful legal purpose

business necessity

a defense to disparate impact claim. employer must establish that 1. the policy is related to safe and efficient job performance. 2. it's necessary to succeed in the job (consistent with business necessity) AND 3. no less discriminatory alternative exists

misstatements

a misrepresentation of fact (aka a lie)

patents

a patent is a government-granted right to exclude others from making, using, selling, offering for sale, or importing into the US an invention (based on article 1 section 8 of the constitution). three types of patents: utility, design, plant (not tested in this class) certain products can have more than 1 patent type in this class, only taking about direct infringement you cannot protect something as a patent AND a trade secret don't last forever

merchant

a person who deals in goods of the kind or otherwise by his occupation. has knowledge/skill peculiar to the practices/goods involved in the transaction. more flexibility for merchants compared to nonmerchants under UCC

tipping theory (tipping insider trading)

a tipper- who is either 1. an insider of the company whose stock is being traded or 2. someone who owes a duty under the misappropriation analysis- gives material nonpublic information... in breach of the tippers duty AND for the direct or indirect personal benefit of the tipper... to a tippee, who then trades on the information while knowing (or should have known) that the information is material nonpublic information obtained through a breach of duty important: need to prove that the tipper intended on benefitting. if they didn't intend on it, then its not tipping and just misappropriation

trade secret

a trade secret is business or proprietary information that is subject to reasonable security measures, has economic value, AND is not generally known and is not easily ascertainable. need all three elements. can potentially be very broad: ex. formulas, processes, computer programs, customer and supplier lists, strategic business data, financial projections, mkt. strategies, negative know-how. can arguably last forever (unlike a patent that can expire). do not need to file anything for trade secret protection --> cheap but need to be careful with employees

rule 10b5-2 (nontraditional duties under misappropriation theory)

a trader owes a duty to the source of information in business/personal relations if: -the trader agrees to maintain confidentiality -the trader and source have a practice of sharing known confidences (can be pretty broad) -the source of the information is the trader's spouse, parent, child, sibling (unless the circumstances indicate that confidentiality is not expected)

suspect categories of discrimination

all employment discrimination laws protect people based on their membership in specific categories identified in the law. everyone is a member of many categories, and thus, protected (e.g. men and women)

what is a good

all things including specially manufactured goods which are moveable at time of identification to the contract for sale

violation of public policy (most common)

an employer cannot discharge an at-will employee for a reason that violates public policy. has to be rooted in the law (not "fairness"). ex. when an employee refuses to commit an unlawful act also protects employees from getting discharged for reporting employers unlawful/wrongful conduct (protection from other whistleblowing that isn't already covered in statutory law ) title vii claims don't fall under this (That would fall under unlawful discrimination)

express warranty

an explicit guarantee by the seller that the good will have a certain quality. statement of fact, part of the basis for the bargain: the buyer relied on that fact when buying

two primary provisions of the FCPA

anti bribery and accounting

fraud

any deception intended to induce someone to part with money or property

duty of care in the context of BoDs

boards of directors have a duty to avoid making mistakes. shareholders can sue them for making a wrong decision. the directors' defense is the business judgement rule

defense to disparate impact

business necessity

UCC contract acceptance

can be accepted in any manner - DON'T need mirror image rule if at least one party is not a merchant, then added terms are a side offer that needs to be negotiated. if both parties are merchants, then added terms automatically are accepted unless 1. the buyer objects, 2. original offer precluded (made impossible), or 3. material alteration

civil vs. criminal

civil gives damages to the victim criminal punishes the defendant

duress/fraud

contracts are voidable is the party was under duress. not automatically void, but the party who agreed can void if they want to. duress - threat of illegal harm/unlawful conduct fraud - an untrue statement/lies involved in the contract. an untrue statement within the specific contract. also can be a lie w/ respect to the process

crimes

crimes are always prosecuted by the state or federal govt. by a govt. prosecutor. burden of proof needs to be "beyond a reasonable doubt". (in civil cases the burden of proof is less intense). need mens rea ("the guilty mind"). some actions can be both crimes and civil wrongs

raising capital under the 1933 act (class 6)

defining a security; selling securities to the public. registration requirements, misstatements and omissions in the registration statement

application of revlon rule when board agrees to an offer

depends on the terms of the deal. if there is going to be 1 controlling shareholder, then revlon analysis applies. if compensation to target's shareholders will be in cash or mostly cash, revlon applies. if in stock, then revlon does not apply. here, the board may consider factors other than just price (this is because shareholders will now have a long term interest in the new company and other factors rather than just price will also be important. in a cash scenario or controlling shareholder scenario, they're either not have the ability to sell shares again or have control again, so highest price matters)

patent litigation

direct infringement --> defenses --> remedies

compliance programs and the duty to exercise reasonable supervision

directors must ensure that appropriate compliance programs are in place and must be sure they remain informed about those programs. if they do that, and serious legal violations occur, the directors are not liable

business judgement rule

directors win any lawsuit brought by shareholders alleging that the board made a wrong decision so long as: 1) the directors were informed AND 2) no director had an unacceptable conflict of interest BoD has a duty when working with a third party to make reasonable inquiries and exercise reasonable oversight. can't succeed in business judgement if they don't do this. cannot rely on just a conclusory opinion. breach of duty of loyalty may affect ability for business judgement rule to hold

quid pro quo sexual harassment

employee suffers retaliation for refusing their supervisors sexual advances --> a threat carried out employer automatically liable

employer liability for harassment: quid-pro-quo

employer liable

contract violation (in context of illegal reasons to fire someone)

if by discharging the employee the employer violates union agreements, written agreements, or verbal agreements (they're often enforceable if they're under a year old)

employer rights under the NLRA

employers can make rules governing employee conduct, but they must ensure that the rules do not violate the employees' section 7 rights. example of rules that are generally lawful: civility rules - behavior that is rude, condescending, otherwise socially unacceptable toward other employees is prohibited. examples of rules that are generally unlawful: confidentiality rules related to wages, benefits or working conditions - employees shall not disclose "any information pertaining to the wages, commissions, performance, or identity of employees". some rules warrant more scrutiny (balance legitimate justifications for rule v. adverse impact on employee rights) for example: rules regarding disparagement or criticism of the employer.

leading sources of white collar prosecutions

environmental crimes, fraud, bribery and money laundering, food and pharmaceutical drugs, antitrust

civil rights act of 1866

established that all persons born in the United states, regardless of race, color, or previous condition of slavery or involuntary servitude, were entitled to basic rights of citizenship in the US. this includes employment

violation of implied contracts

even if there isn't an enforceable contract, there are time when an implied contract may exist. if the employer violates that implied contract it could be a wrongful discharge. how is one created? if an employees been told they've been doing a good job, received raises, been a long term employee, never been formally criticized, etc. --> full list in book. need ALL of these to create an implied contract

SEC v. texas gulf sulphur co

exploring for copper on property they don't own. they addressed the rumor but in a misleading way. shows that you don't have to address rumors, but if you choose to, it has to reflect the truth and not mislead anyone. you can also choose to make a "no comment" statement but in the law that is still considered to be a statement

warranties

guarantees made by a seller that an article, good or service will conform to a certain standard or will operate in a certain manner

implied warranty of fitness for a particular purpose

guarantees that the goods are fit for a particular purpose beyond the original purpose for which the seller recommended them. need 4 elements of an implied warranty

implied warranty of merchantability

guarantees the goods are reasonably fit for the general purpose for which they are sold and that they are properly packaged and labeled (Ex. bike helmet packaged properly) only applies if seller is a merchant

what constitutes "protected concerted activity" under the NLRA

have atleast 2 employees who complain about/ work to improve the terms and conditions of employment

violation of implied covenant of good faith and fair dealing

if an employer makes a promise and avoids filling it then it could be wrongful discharge. making a decision to avoid filling a duty to a promise you've made (firing someone before paying them compensation earned)

employer liability for harassment: hostile environment

if hostile environment created by co-worker, employer liable if it knew or should have known about the harassment but failed to stop it. if hostile work environment is created by supervisor: if defendant suffers a tangible job action, employer liable. if there is no tangible job action, employer liable unless it can prove 1. it took reasonable care to prevent and correct harassing behavior, and 2. the employee unreasonably failed to take advantage of preventative or corrective opportunities

employment at will

in the absence of an employment contract to the contrary, an employer generally has the right to dismiss an employee at any time for any reason, even a lousy reason, so long as the reason doesn't violate the law. the US is carving out more exceptions to employment at will.

nonpublic info

info that has not been absorbed into the market

materiality

information that a reasonable investor would find important when making an investment decision statements about finances, assets, accounting principles, etc. are always considered material

classical inside trading

insider trading operates as a fraud on the shareholders of the company whose stock was traded. classical insider trading occurs: 1. where an insider (fiduciary) of the company whose stock is being traded 2. trades while in possession of material, nonpublic information insider can be "temporary" and not a company employee (ex. IB, lawyer, accountant, etc.)

disparate impact

it is illegal discrimination if the employer's application of a neutral criteria has the effect of disadvantaging a significant proportion of people in a protected category need to identify: a facially neutral policy that negatively impacts a protected class. this is more about company policies and systematic discrimination.

disparate treatment

it is illegal to intentionally discriminate by denying a benefit/privilege of employment based on membership in a protected class. can be proven by direct or indirect evidence intentional discrimination need to prove 1. member of a protected class 2. denied a position or benefit that they sought for or was qualified and the position was available

rule 10b: statutory basis for insider trading

it shall be unlawful for any person to use or employ, in connection with the purchase or sale of any security any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the commission may prescribe. a person commits insider trading in violation of section10b when he/she: trades on material, nonpublic information AND breaches a duty under one of the theories of insider trading

shipx example

kai is going to benefit personally from this transaction --> she needs to disclose this conflict of interest to the board of directors. in the case she only disclosed it to the CEO. additionally, she needs to get approval from a majority of disinterested directors. if she can't get approval from a majority of disinterested directors, she needs approval from a majority of shareholders. after the fact, shipx can go through with the transaction legally in the eyes of the court if they: prove the transaction was fair and reasonable --> the transaction is voidable unless they can prove it was fair and reasonable

NLRA: protected concerted activity

most private sector employees (not ICs) who are not supervisors have the right to engage in "concerted activities or other acts of mutual aid or protection" (ie protected concerted activity). it's illegal to discipline an employee for engaging in protected concerted activity --> unfair labor practice doesn't just apply to union employees, any nonsupervisory employee is protected

consideration

necessary for a valid contract the consideration is a promise of value that each side has to give up, can be money/service/good/to refrain from doing something that you're legally allowed to do. needs to be provided by each party: legal benefit or legal detriment.

common law contract formation and agreement/disagreement

need four elements: 1. valid offer + acceptance, with intention to be bound, definiteness, awareness and mirror image rule 2. consideration, by both parties 3. capacity by both parties 4. legal purpose of the contract SOMETIMES 5. statute of frauds

capacity

needed for a valid contract. a person's ability to understand the nature and effect of an agreement. red flags: intoxication, minority (underage), mental incompetence. for intoxication and minority, any agreement entered into by one of these is voidable. if a guardian has been appointed for someone who lacks capacity, the contract is void. if there is no guardian, the contract is voidable is mental incompetency at the time of agreement is proved.

who has a duty not to trade under the misappropriation theory?

people who may owe traditional fiduciary duties or duty established by SEC Rule 10b-2 employer regular fiduciary duties or if trader agrees to maintain confidentiality, the trader and source have a practice of sharing known confidences, or the source of information is the trader's spouse, parent, child, sibling (unless the circumstances indicate that confidentiality is not expected)

section 10b of the 1934 act

prohibited conduct: use of a fraudulent, manipulative, or deceptive device in connection with purchase or sale of securities (all securities, not just publicly traded ones). legal standard: scienter--> need to prove some level of intent by the speaker covered parties: primary violators, controlling persons, aiders and abettors all securities covered. lawsuits can be brought by the DOJ (criminal penalties), the SEC (civil penalties), or by private parties (usually shareholders).

title VII of the civil rights act of 1964

prohibits discrimination based on race, color, religion, sex, and national origin in connection with compensation, terms, conditions, or privileges of employment

racketeering under the racketeer influenced and corrupt organization act ("RICO") prohibits...

prohibits... 1. investment in any enterprise of income derived from a pattern of racketeering activity... 2. acquisition of an interest in an enterprise through racketeering activity... 3. participation in an enterprise through a pattern of racketeering activity 4. conspiring to engage in any of these activities (4 types of RICO claims)

useful article doctrine

provides that copyright protection does not extend to the useful application of an idea

what does the UCC cover

regulates sales of goods by both merchants and nonmerchants.

accounting provision of the fcpa

requires that US public companies keep books and records that accurately reflect their business transactions

obligations of securities issuers under the 1934 act

rule 10b-5, widely applied securities fraud provision that applies to public and private securities. insider trading prohibited

corporate opportunity doctrine

specialized rule for situations where an officer or director considers taking a business opportunity. if a director has an opportunity that is in the same line of business as the company, they need to offer the opportunity to the company before they could possibly pursue it as a personal opportunity. if corp declines, they can move forward with personal.

puffing

statements a reasonable person would recognize as nonfactual or extravagant- NOT a warranty statement of opinion, not enforceable, tactic used by salespeople to boost marketing

wrongful discharge - umbrella term

termination of employment without good cause- violation of: good faith and fair dealing, implied contracts, public policy

false statements act

the FBI must establish that the defendant: 1. made a materially false statement in any matter, 2. within the jurisdiction of the federal govt. 3. to a govt. official

mail and wire fraud

the FBI must establish: 1. the existence of scheme intended to defraud or to obtain money or property by fraudulent means, AND 2. use of mails or of interstate phone lines or electronic communications in furtherance of the fraudulent scheme

FCPA - extra territorial application

the FCPA is a unique law --> very far reaching. law has extra-territorial application to US persons and companies who commit designated acts abroad. applies to non-US persons/companies where any part of the bribery touches the US. jointly enforced by SEC and DOJ can be any size gift, giver does not need to be affiliated with govt (only receiver), any govt. employee counts (not just high ranking ones, etc.) person still liable even if just "instructed by their employer" to carry out the act

fair use doctrine

the conditions under which you can use material that is copyrighted by someone else without paying royalties. for example, can use part of a copyrighted work for commentary/criticism. courts balance public benefit of the defendants use against any detrimental effect on the copyright owners interests. they consider: 1. the purpose + character of the use. was it for profit? 2. the economic effect of the use on the copyright owner 3. the nature of the work used, and 4. the amount of work used argument for fair use ex: the economist might argue that this is fair use of the copyrighted book because only a small amount of the original was used for the public as news, and doesn't reduce the value of the original work. they could also argue that it actually increases the value of the original work because it brings more attention to the original and doesn't give all the information from the original work.

duty of loyalty for BoD

the duty of loyalty formalizes the law's approach to conflicts of interest. need to prove a transaction made under a conflict of interest is acceptable if after full disclosure of the conflict: a majority of disinterested (not conflicted) directors approve the transaction OR a majority of shareholders approve the transaction. all agents owe their principal (their employer) a duty of loyalty and should treat opportunities in this same way. corporate opportunity doctrine

hostile work environment sexual harassment

the hostility has to create a severe or pervasive enough environment to alter the terms and conditions of the plaintiff's employment and create an abusive work environment (need to look at a bunch of different factors like frequency, severity, does it interfere with the employees work performance.)

copyright

the legal right to prevent others from copying an original expression of an idea in a fixed, tangible medium. like a work of art. protects the expression not the underlying ideas. plaintiff has to register their copyright with the federal govt. in order to litigate (but copyrights exist automatically upon creation?) fall within one of the following categories: literary works, musical works, dramatic works, pantomines/choreography, pictoral graphic/sculptural, motion pictures, sound recording, can copyright work made for hire if its within scope of employment and within 1 of the 9 categories. need to prove: work is substantially similar to original and defendant had access to the original work.

bribery

the offering, giving, soliciting, or receiving of any item of value as a means of influencing the actions of an individual holding a public or legal duty

mirror image rule

the terms of our acceptance have to be identical to the terms of the offer, otherwise there is no acceptance.

tools to prevent others from making or selling protected services or products

trade secret, patent, copyright. can help protect competitive advantage with these

tools to prevent others from providing false or misleading information to consumers or to protect famous marks

trademark (a way to build your brand --> a symbol of the band), rights against unfair competition

trademark

words or symbols that identifies the sources of goods or services. also designs, sounds, smells, color, the appearance of a store/restaurant chain --> the US is very generous with what can be a mark (so much more than other countries). legally protected for an indefinite period of time. you should register your trademark but you don't have to. registering gives you more legal rights in litigation. identifies the source of the goods, advertises, ensures quality fanciful or arbitrary marks, suggestive marks, descriptive marks no protection for generic terms

misc. federal and state law

wrongful discharge and statutory whistle blowing

does discrimination against an employee because of the employee's transgender status or sexual orientation violate the prohibition on employment discrimination because of sex in title VII of the civil rights act of 1964?

yes. court rules in 6-3 opinion written by justice gorsuch