BULE Exam #4

Discrimination Based on Gender

- b/c of sex includes: pregnancy, childbirth, sexual orientation, sexual identity, and sexual harrassment - Pregnancy Discrimination Act (1978) - employer violates Title VII when it intentionally fires an individual based in part of sex

Defenses to equal pay act

- seniority - merit /productivity

types of dissociation

- voluntary - vote - forced

corporate dissolution

-voluntary dissolution (BOD and shareholders agree to dissolve) - administrative dissolution (Secretary of state can create and dissolve) - judicial dissolution (court ordered corporation to be dissolved --usually involving illegal activity)

Three essential elements of a partnership

1. A sharing of profits and losses 2. A joint ownership of the business 3. An equal right in the management of the business

Incorporation Procedures

1. Select a state of incorporation 2. Secure the corporate name 3. Prepare the articles of incorporation 4. File the articles of incorporation with the secretary of state

stock certificate

A certificate issued by a corporation evidencing the ownership of a specified number of shares in the corporation.

franchise

Any arrangement in which the owner of a trademark, trade name, or copyright licenses another to use that trademark, trade name, or copyright in the selling of goods or services. - agreement: regulated by FTC and state law - termination: needs to have notice given and opportunity to fix problem

example 18.14 Accomdations for ADA

Bryan Lockhart, who uses a wheelchair, works for a cell phone company that provides parking for its employees. Lockhart informs the company supervisors that the parking spaces are so narrow that he is unable to extend the ramp on his van that allows him to get in and out of the vehicle. Lockhart therefore requests that the company reasonably accommodate his needs by paying a monthly fee for him to use a larger parking space in an adjacent lot. In this situation, a court would likely find that it would not be an undue hardship for the employer to pay for additional parking for Lockhart.

example 14.13

Chadwick and Barrel are members in an LLC. Chadwick manages the accounts, and Barrel, who has many connections in the community and is a skilled investor, brings in the business. If Barrel wrongfully dissociates from the LLC, the LLC's business will suffer, and Chadwick can hold Barrel liable for the loss of business resulting from her withdrawal

example 14.1 Ownership of property and sharing of profits is not enough to create a partnership

Chiang and Burke jointly own a piece of rural property. They lease the land to a farmer, with the understanding that—in lieu of set rental payments—they will receive a share of the profits from the farming operation conducted by the farmer. This arrangement normally would not make Chiang, Burke, and the farmer partners.

Case Brief Roberts v. Mike's Trucking, Ltd.

Facts - Roberts worked for Mike's trucking and Mike Culbertson the company owner was her supervisor - Culbertson called her his "sexretary" and constantly talked about his sex life - Culbertson asked her to sit on "big daddy's lap", rubbed against her, trapped her at the door, asked for hugs and kisses and if she needed help in the restroom - Roberts asked him to stop but he didn't and she became less productive at work suffering anxiety attacks and high blood pressure - Roberts filed a suit alleging hostile work environment through sexual harassment in violation of Title VII ; jury ruled in her favor and Culbertson appealled Issue: - Was Culbertsons actions toward Roberts enough to constitute hostile-environment harrassment Rule: - Title VII Application: - evidence established that the conduct occurred frequently - Culbertson's conduct unreasonably interferred with her work performance - reasonable person would find Culbertson's conduct created a hostile environment and Roberts found the conduct to be sufficently severe or pervasive to affect her employment Conclusion: - state intermediate appellate court affirmed the lower court's judgment in RObert;s favor - evidence sufficiently established that Culbertson's conduct was severe or pervasive enough to create a hostile work environment for roberts

venture capital

Financing provided by professional, outside investors (venture capitalists) to new business ventures.

private equity capital

Funds invested by a private equity firm in an existing corporation, usually to purchase and reorganize it.

operating agreement

In a limited liability company, an agreement in which the members set forth the details of how the business will be managed and operated.

example 14.5 Fiduiciary Duties

Jayne Trell, a partner at Jacoby & Meyers, owns a shopping mall. Trell may vote against a partnership proposal to open a competing mall, provided that she has fully disclosed her interest in the existing shopping mall to the other partners at the firm.

franchisee

One receiving a license to use another's (the franchisor's) trademark, trade name, or copyright in the sale of goods and services.

example 18.18 After Acquired Evidence

Pratt Legal Services fires Lucy, who sues Pratt for employer discrimination. During the pretrial investigation, Pratt discovers that Lucy made material misrepresentations on her job application. Had Pratt known of these misrepresentations, it would have had grounds to fire Lucy.

watered stock

Shares of stock issued by a corporation for which the corporation receives, as payment, less than the stated value of the shares.

buyout price

The amount payable to a partner on his or her dissociation from a partnership, based on the amount distributable to that partner if the firm were wound up on that date, and offset by any damages for wrongful dissociation.

Henry and Ryan each invest $10,000 in a limited partnership as limited partners, so that each has a 50% interest. Tracey sues the limited partnership and obtains a $100,000 judgment. Henry's liability is a. $10,000. b. $50,000. c. $100,000. d. Unlimited.

$10,000

When Kirk and Elisa formed their general partnership, Kirk contributed 90 percent of the capital, and Elisa contributed 10 percent. In the partnership agreement, they did not specify the percentage of the profits each partner would receive. In the first year of their partnership, they earned $35,000 in profits. Elisa's share of the profits is a. $3,500. b. $10,000. c. $17,500. d. $35,000.

$17,500

Requirements for disparate-treatment discrimination

(1) You are a member of a protected class. (2) you applied and were qualified for the job in question. (3) You were rejected by the employer. (4) The employer continued to seek applicants for the position or filled the position with a person not in a protected class.

joint liability

- 3rd party must sue all of the partners as a grup but each partner can be held liable for the full amount

Corporate Personnel

- Board of Directors (manages corporate structure, hires officers, and fires them) (elected by shareholders) - officers - shareholders (limited liability unless voluntarily assumes personal liability or courts pierce the corporate veil)

Employment Discriminatin Federal Laws

- Equal Pay Act 1963: current pay gap 82% - Title VII of Civil Rights Act of 1964: prohibits employment discrimination (hiring, firing, promotion, benefits) against employees, apellants, and union members based on race, color, relgion, national origin, or gemder

S corporation requirements

- The corporation must be a domestic corporation . - The corporation must not be a member of a affiliated group of corporations - The shareholders must be individuals (and some trusts or estates).(partnerships cannot be shareholders) - no more than 100 shareholders. - only one class of stock. - No shareholder may not be a non-resident alien.

Types of termination/dissolution

- agreement - court ordered - One person can decide to leave

Director's Management Responsibilities:

- authorize major corporate policy decisions - select and remove officers and other managerial employees and determine their pay - make financial decisions (dividends

Limited Liability Company

- creation: 2 or more memebers - legal position: separate legal entity - disadvantages: states aren't uniform in LLC laws, some states LLC's dissolve after 30 years, subject to employment tax - liability: not liable unless they are wrong-doer - duration: - transferability: - mgmt: if agreement is silent in an LLC then partnership rules apply - taxation: taxed as a partnership or corporation

corporation info

- creation: articles of incorporation with state - legal position: - liability: limited liability - duration: - transferability: - mgmt: shareholders are owners; they elect BOD; BOD elects officers - taxation: double taxation

General partnership

- creation: express or implied agreement between two or more people to create a biz for profit - legal position: separate legal entity (can sue and be sued; enter into contracts, own and sell property) - liability: unlimited personal liability - duration: fixed or no term ; if one partner leaves then the partnership dissolves - transferability: - mgmt: - taxation: pass through entity (personal income tax) - goverened by UPA in absence of express agreement

Sole Proprietorship info

- creation: no paperwork required to create - legal position: not a separate legal entity; owner is the biz - advantages: 100% of profits, control of decisions - liability: unlimited personal liability (100% of risk) - duration: when owner dies biz dies - transferability: easy to sell - disadvantages: raising capital - taxation: personal income tax

Limited Liability Partnership (LLP)

- creation: personal service form; only for doctors, lawyers, and accountants - legal position: - liability: limited liability (have liability insurance) - duration: - transferability: - mgmt: - taxation:

Limited Partnership

- creation: requires paperwork w/secretary of state - legal position: - liability: GP: personal liability; LP: limited liability up to investment- - duration: gen partner dissolution usually = dissolving of partnerhsip - transferability: - mgmt: at least one general partner (mgmt and personal liability) and one limited partner (no mgmt control and limited liability up to investment) - taxation:

Discrimination Based On Religion

- dual burden: non-discrimination plus reasonable accomodation - defense to reasonable accomodation: (1) undue hardships and (2) not a sincerely held belief

Things for entrepreneurs to consider when starting a business

- ease/cost of organizing - control of decision making - liability - tax considerations - need for capital

Corporate Powers

- express (in articles of incorporation or bylaws) - implied - ultra vires: ("beyond the power" ; corporation engaged in act beyond their power and can be sued) - articles of incorporation and bylaws are legally binding

corporate governance

- goverance and corporate law -Sarbanes-Oxley Act requires companies to: (1) set up confidential reporting systems for unethical or illegal behavior and (2) hold chief executives responsible for completeness and accuracy of all financial statements

When does sexual harrasment rise to Title VII gender discrimination

- harrassment so severe and pervasive as to alter the conditions of employment and create an abusive work environment (meritor test) - reasonable person standard based on severity, frequency, whether threatening or humiliating, whether unreasonably interferred with one's work

what can corporations legally do?

- hold or transfer title to land/property - sue or be sued - enter into and enforce contracts - be found civily and criminally liable for violations of law - exercise some constitutional rights ( 1st and 4th amendments)

Types of Employment Discrimination under Title VII

- intentional discrimination (desparate treatment) - unintentional discrimination (disparate impact) - reverse discrimination (Ricci v DeStefano : employer can intentionally discriminate if their is strong belief that the unintentional unfiled lawsuit will win) - discrimination based on religion - discrimination based on gender

Corporate Liabilities

- liable for torts commited by its agents or officers within the course or scope of their employment - civilaly liable for contracts - liable for criminal acts but only fined and not jailed - piercing the corporate veil: courts hold wrong-doer personally liable for corporate debts (more likely in close corporations )

Advantages of Corporate Structure

- limited liability - easier access to raise capital (issue shares of stock) - ease of transfer of ownership (not possible in LLC or partnership) - unlimited life

Directors

- make corporate policy and hire officers - rights: participation, inspection, indemnification - duties: loyalty, care, not commit waste - liabiilty: no personal liability unless (1) you're a wrongdoer and (2) piercing of the corporate veil - NO SINGLE AGENT; cannot bind the corporation into contracts; the board as a WHOLE can bind the corporation - fiduiciary

officers

- manage day-to-day operations - duties: loyalty, care - liability: can be fired by BOD; no personal liability for debts for corporation unless (1) they are a wrongdoer and (2) court has pierced the corporate veil - fidicuiary and agent of the corporation

Americans with Disabilities Act (ADA)

- must file with EEOC - Dual burden: non-discrimination plus reasonable accomodation - plantiff's burden: protected under ADA, qualified, rejected, discrimination was "sole" reason

shareholders

- owners - rights: elect directors, dividends if board declares them, rights upon dissolution, derivative lawsuits (lawsuit brought by a shareholder to force a corporation to take some action) - liability: limited liability except for piercing the corporate veil

3 situations in which courts will ignore the corporate structure and pierce the corporate veil

- owners uses corporation to perpetuate fraud - corporation used to circumvent the law - corporation used to accomplish an illegitimate objective

factors that lead courts to pierce corporate veil

- party is tricked into dealing with the corporation rather than the individual - corporation is set up to never make a profit or thinly capitalized at the start - formed to evade an existing obligation - corporate formalities sa meetings are not followed - personal and corporate interests are comingled

nature of corporations

- primarily state law - seperate legal entity - owners: shareholders - owners can be any legal entity (natural persons, partnerships, corporations)

Remedies under Title VII

- reinstatement, - benefits - back pay, - lost promotions - compensatory damages (in intentional cases) (caps based on size of employer)

three most important rights of directors

- right to participation - right of inspection - right of indemnification

requirments to be in a partnership

- share in management - share in profits and losses - must be in a business - agents and agents of each other

duty of loyalty

- usurping ( taking away business oportunities) - duty no to compete - conflict of interest -

example 14.3 partnership by estoppel

Jackson Paper Manufacturing Company makes paper that is used by Stonewall Packaging, LLC. Jackson and Stonewall have officers and directors in common, and they share employees, property, and equipment. In reliance on Jackson's business reputation, Best Cartage, Inc., agreed to provide transportation services for Stonewall and bought thirty-seven tractor-trailers to use in fulfilling the contract. Best provided the services until Stonewall terminated the agreement. Best filed a suit for breach of contract against Stonewall and Jackson, seeking $500,678 in unpaid invoices and consequential damages of $1,315,336 for the tractor-trailers it had purchased. Best argued that Stonewall and Jackson had a partnership by estoppel. The court agreed, finding that "defendants combined labor, skills, and property to advance their alleged business partnership." Jackson had negotiated the agreement on Stonewall's behalf, and a news release stated that Jackson had sought tax incentives for Stonewall. Jackson also had bought real estate, equipment, and general supplies for Stonewall with no expectation of payment from Stonewall to Jackson. This was sufficient to prove a partnership by estoppel

example 18.7 religious discrimination

Jason Sewell claimed that his employer, a car dealership, fired him for not attending the weekly prayer meetings of dealership employees. If the dealership did require its employees to attend prayer gatherings and fired Sewell for not attending, he has a valid claim of religious discrimination.

example 14.12

Jen Fong, a citizen of New York, wishes to bring a suit against Skycel, an LLC formed under the laws of Connecticut. One of Skycel's members also lives in New York. Fong will not be able to bring a suit against Skycel in federal court on the basis of diversity jurisdiction because the defendant LLC is also a citizen of New York. The same would be true if Fong was bringing a suit against multiple defendants and one of the defendants lived in New York.

example 14.7 Wrongful Dissociation

Jenson & Burke's partnership agreement states that it is a breach of the agreement for any partner to assign partnership property to a creditor without the consent of the others. If a partner, Janis, makes such an assignment, she has not only breached the agreement but has also wrongfully dissociated from the partnership.

example 18.4 discrimination based on national origin

Jiann Min Chang was an instructor at Alabama Agricultural and Mechanical University (AAMU). When AAMU terminated his employment, Chang filed a lawsuit claiming discrimination based on national origin. Chang established a prima facie case because he (1)was a member of a protected class, (2) was qualified for the job, (3) suffered an adverse employment action (4)was replaced by someone outside his protected class (a non-Asian instructor). AAMU, however, showed that Chang had argued with a university vice president and refused to comply with her instructions. The court ruled that the university had not renewed Chang's contract for a legitimate reason—insubordination—and therefore was not liable for unlawful discrimination.

example 15.3 Misappropriation of Close Corporation Funds

John Murray, Stephen Hopkins, and Paul Ryan were officers, directors, employees, and majority shareholders of Olympic Adhesives, Inc. Merek Rubin was a minority shareholder. Murray, Hopkins, and Ryan were paid salaries. Twice a year, Murray, Hopkins, and Ryan paid themselves additional compensation—between 75 and 98 percent of Olympic's net profits. Rubin filed a suit against the majority shareholders, alleging that their compensation deprived him of his share of Olympic's profits. The court explained that a salary should reasonably relate to a corporate officer's ability and the quantity and quality of his or her services. Profits resulting from an officer's performance may also affect the amount of compensation. In this case, the court found that a reasonable amount of compensation would have been 10 percent of Olympic's average annual net sales. This was comparable to the average compensation for officers in similar firms

example 18.13 Age Discrimination (Prima Facie and Pretext)

Josephine Mora, a fund-raiser for Jackson Memorial Foundation, Inc., was sixty-two years old when the foundation's chief executive officer (CEO) fired her, citing errors and issues with professionalism. Mora filed a suit against the foundation, alleging age discrimination. She asserted that when she was fired, the CEO told her, "I need someone younger I can pay less." She had a witness who heard that statement and also heard the CEO say that Mora was "too old to be working here anyway." The CEO denied making these statements, and the foundation claimed that Mora was terminated for poor job performance. A district court granted a summary judgment in the foundation's favor, and Mora appealed. A federal appellate court reversed, concluding that the lower court's analysis of causation was incorrect. The court held that a reasonable juror could have accepted that the CEO had made discriminatory remarks, and could have found these remarks were sufficient evidence of a discriminatory motive. If so, that would show that Mora was fired because of her age. The court therefore remanded the case back to the lower court for a trial.

example 18.10 Constructive Discharge

Khalil's employer humiliates him in front of his co-workers by informing him that he is being demoted to an inferior position. Khalil's co-workers then continually insult and harass him about his national origin (he is from Iran). The employer is aware of this discriminatory treatment but does nothing to remedy the situation, despite repeated complaints from Khalil. After several months, Khalil quits his job and files a Title VII claim. In this situation, Khalil would likely have sufficient evidence to maintain an action for constructive discharge in violation of Title VII.

example 18.19 States can prohibit affirmative action

Michigan voters passed an initiative to amend the state's constitution and prohibit publically funded colleges from granting preferential treatment to any group on the basis of race, sex, color, ethnicity, or national origin. The law also prohibited Michigan from considering race and gender in public hiring and contracting decisions. A group that supports affirmative action programs in education sued the state's attorney general and others, claiming that the initiative deprived minorities of equal protection of the laws in violation of the U.S. Constitution. A federal appellate court found that the law violated the equal protection clause, but the United States Supreme Court reversed. The Supreme Court held that the courts do not have the power to set aside the amendment to the Michigan Constitution prohibiting affirmation action in public education, employment, and contracting. The Court explained that it was not deciding the constitutionality of a particular affirmative action program, but was only ruling that a state has the inherent power to ban affirmative action within that state

example 18.8 Undue Hardships from religious accomodations

Miguel Sánchez-Rodríguez sold cell phones in shopping malls for AT&T in Puerto Rico. After six years, Sánchez informed his supervisors that he had become a Seventh Day Adventist and could no longer work on Saturdays for religious reasons. AT&T responded that his inability to work on Saturdays would cause it hardship. As a reasonable accommodation, the company suggested that Sánchez swap schedules with others and offered him two other positions that did not require work on Saturdays. Sánchez could not find workers to swap shifts with him, however, and he declined the other jobs because they would result in less income. He began missing work on Saturdays. After a time, AT&T indicated that it would discipline him for any additional Saturdays that he missed. Eventually, he was placed on active disciplinary status. Sánchez resigned and filed a religious discrimination lawsuit against AT&T. The court found in favor of AT&T, and a federal appellate court affirmed. The company had made adequate efforts at accommodation by allowing Sánchez to swap shifts and offering him other positions that did not require work on Saturdays.Miguel Sánchez-Rodríguez sold cell phones in shopping malls for AT&T in Puerto Rico. After six years, Sánchez informed his supervisors that he had become a Seventh Day Adventist and could no longer work on Saturdays for religious reasons. AT&T responded that his inability to work on Saturdays would cause it hardship. As a reasonable accommodation, the company suggested that Sánchez swap schedules with others and offered him two other positions that did not require work on Saturdays. Sánchez could not find workers to swap shifts with him, however, and he declined the other jobs because they would result in less income. He began missing work on Saturdays. After a time, AT&T indicated that it would discipline him for any additional Saturdays that he missed. Eventually, he was placed on active disciplinary status. Sánchez resigned and filed a religious discrimination lawsuit against AT&T. The court found in favor of AT&T, and a federal appellate court affirmed. The company had made adequate efforts at accommodation by allowing Sánchez to swap shifts and offering him other positions that did not require work on Saturdays.

example 14.6 Indemifying (reinbursing) the partnership

Nicole Moren was a partner in Jax Restaurant. After work one day, Moren was called back to the restaurant to help in the kitchen. She brought her two-year-old-son, Remington, and placed him on the kitchen counter. While she was making pizzas, Remington reached into the dough press. His hand was crushed, causing permanent injuries. Through his father, Remington filed a suit against the partnership for negligence. The partnership filed a complaint against Moren, arguing that it was entitled to indemnity (compensation or reimbursement) from Moren for her negligence. The court held in favor of Moren and ordered the partnership to pay damages to Remington. Moren was not required to indemnify the partnership because her negligence occurred in the ordinary course of the partnership's business

example 15.9 Shareholder Voting

Novo Pictures, Inc., has 10,000 outstanding shares of voting stock. Its articles of incorporation set the quorum at 50 percent of outstanding shares and provide that a majority vote of the shares present is necessary to pass resolutions concerning ordinary matters. Therefore, for this firm, a quorum of shareholders representing 5,000 outstanding shares must be present at a shareholders' meeting to conduct business. If exactly 5,000 shares are represented at the meeting, a vote of at least 2,501 of those shares is needed to pass a resolution. If 6,000 shares are represented, a vote of 3,001 is required.

example 18.3 four-fifths rule

One hundred white applicants take an employment test, and fifty pass the test and are hired. One hundred minority applicants take the test, and twenty pass the test and are hired. Because twenty is less than four-fifths (80 percent) of fifty, the test would be considered discriminatory under the EEOC guidelines.

franchisor

One licensing another (the franchisee) to use the owner's trademark, trade name, or copyright in the selling of goods or services.

preemptive right

Rights that entitle shareholders to purchase newly issued shares of a corporation's stock, equal in percentage to shares already held, before the stock is offered to outside buyers.

example 18.2 procedures for resolving disparate treatment discrimination

Samantha applies for employment with a construction firm and is rejected. If she sues on the basis of disparate-treatment discrimination in hiring, she must show that: (1) She is a member of a protected class. (2)She applied and was qualified for the job in question. (3)She was rejected by the employer. (4)The employer continued to seek applicants for the position or filled the position with a person not in a protected class. If Samantha can meet these relatively easy requirements, she has made out a prima facie case of illegal discrimination. This means that she has met her initial burden of proof and will win unless the employer can present a legally acceptable defense. The burden then shifts to the employer- who must articulate a legal reason for not hiring the plaintiff. To prevail, the plaintiff must then show that the employer's reason is a pretext (not the true reason) and that discriminatory intent actually motivated the employer's decision.

example 15.8 Conflicts of Interest and Duty of Loyalty

Southwood Corporation needs office space. Lambert Alden, one of its five directors, owns the building adjoining the corporation's main office building. He negotiates a lease with Southwood for the space, making a full disclosure to Southwood and the other four board directors. The lease arrangement is fair and reasonable, and it is unanimously approved by the other four directors. In this situation, Alden has not breached his duty of loyalty to the corporation, and thus the contract is valid. If it were otherwise, directors would be prevented from ever transacting business with the corporations they serve.

example 14.2 Sharing of Profits and Losses proves the existence of partnership

Syd and Drake start a business that sells fruit smoothies near a college campus. They open a joint bank account from which they pay for supplies and expenses, and they share the proceeds (and losses) that the smoothie stand generates. If a conflict arises as to their business relationship, a court will assume that a partnership exists unless the parties prove otherwise.

true or false every model is a separate legal entity except sole propritorship?

TRUE

certificate of limited partnership

The basic document filed with a designated state official by which a limited partnership is formed.

example 15.7 business judgement rule

The board of directors of the Chugach Alaska Corporation (CAC) voted to remove Sheri Buretta as the chair and install Robert Henrichs. During his term, Henrichs acted without board approval, made decisions with only his supporters present, retaliated against directors who challenged his decisions, and ignored board rules for conducting meetings. Henrichs refused to comply with bylaws that required a special shareholders' meeting in response to a shareholder petition and personally mistreated directors, shareholders, and employees. After six months, the board voted to reinstall Buretta. CAC filed a suit in an Alaska state court against Henrichs, alleging a breach of fiduciary duty. A jury found Henrichs liable, and the court barred him from serving on CAC's board for five years. The appellate court affirmed. Given the nature and seriousness of Henrichs's misconduct, the business judgment rule did not protect him.

Melanie and Beau both work at comparable jobs at Technology Impact, Inc. Melanie is paid 15 percent less than Beau. Which of the following is not a legitimate defense to this pay inequality? a. The company has a merit system in place, and Beau has performed better at his job than Melanie has at hers. b. The company has a seniority system, and Beau has been with the company longer than Melanie. c. The company pays Melanie less because she has a husband who is a highly successful businessperson. d. The company pays according to production, and Beau produces more.

The company pays Melanie less because she has a husband who is a highly successful businessperson. TV

Elliot is suing Acme, Inc. for a breach of contract, but because it has very little in assets, he asking the court to pierce the corporate veil and hold the officers personally liable. In which of the following situations would the court likely approve Elliot's request? a. The corporation was under-capitalized from the beginning, and never had sufficient assets to operate as a viable business. b. The officers make their decisions based on information presented to them, but unknown to them is the fact the information is incorrect. c. The officers loaned money to the corporation in an attempt to delay any adverse actions d. The corporation has struggled to make a profit from the beginning.

The corporation was under-capitalized from the beginning, and never had sufficient assets to operate as a viable business.

sexual harassment

The demanding of sexual favors in return for job promotions or other benefits (quid pro quo), or language or conduct that is so sexually offensive that it creates a hostile working environment.

articles of incorporation

The document containing basic information about the corporation that is filed with the secretary of state, when a business is incorporated.

example 18.6 intentional discrimination to remedy an unintentional disparate impact

The fire department in New Haven, Connecticut, administered a test to identify firefighters eligible for promotions. No African Americans and only two Hispanic firefighters passed the test. Fearing that it would be sued for discrimination if it based promotions on the test results, the city refused to use the results. The white firefighters (and one Hispanic) who had passed the test then sued the city, claiming reverse discrimination. The United States Supreme Court held that an employer can engage in intentional discrimination to remedy an unintentional disparate impact only if the employer has "a strong basis in evidence" to believe that it will be successfully sued for disparate-impact discrimination "if it fails to take the race-conscious, discriminatory action." Mere fear of litigation was not sufficient reason for the city to discard its test results. Subsequently, the city certified the test results and promoted the firefighters.

dissolution

The formal disbanding of a partnership or a corporation.

bylaws

The internal rules of management adopted by a corporation at its first organizational meeting.

example 14.4 Proportion of Profits and Losses in a Partnership

The partnership agreement for Rico and Brent provides for capital contributions of $60,000 from Rico and $40,000 from Brent, but it is silent as to how Rico and Brent will share profits or losses. In this situation, Rico and Brent will share both profits and losses equally. If their partnership agreement provided for profits to be shared in the same ratio as capital contributions, however, 60 percent of the profits would go to Rico, and 40 percent of the profits would go to Brent. If their partnership agreement was silent as to losses, losses would be shared in the same ratio as profits (60 percent and 40 percent, respectively).

winding up

The second of two stages in the termination of a partnership or corporation, in which the firm's assets are collected, liquidated, and distributed, and liabilities are discharged.

dissociation

The severance of the relationship between a partner and a partnership when the partner ceases to be associated with the carrying on of the partnership business.

Sole Proprietorship

The simplest form of business, in which the owner is the business. The owner reports business income on his or her personal income tax return and is legally responsible for all debts and obligations incurred by the business.

example 15.2 Transfer of Shares in Close Corporations

Three brothers, Terry, Damon, and Henry Johnson, are the only shareholders of Johnson's Car Wash, Inc. Terry and Damon do not want Henry to sell his shares to an unknown third person. To avoid this situation, the corporation could restrict the transferability of shares to outside persons. Shareholders could be required to offer their shares to the corporation or the other shareholders before selling them to an outside purchaser.

example 14.14 LLC dissolution when its no longer feasible to carry on the business

Three men—Walter Perkins, Gary Fordham, and David Thompson—formed Venture Sales, LLC, to develop a subdivision in Petal, Mississippi. Each of them contributed land and funds resulting in 466 acres of land and about $158,000 in cash. Perkins was an assistant coach for the Cleveland Browns, so he trusted Fordham and Thompson to develop the property. More than ten years later, however, Fordham and Thompson still had not done anything with the property, although they had formed two other LLCs and developed two other subdivisions in the area. Fordham and Thompson claimed that they did not know when they could develop Venture's property and suggested selling it at a discounted price, but Perkins disagreed. Perkins then sought a judicial dissolution of Venture Sales. The court ordered a dissolution. Because Venture Sales was not meeting the economic purpose for which it was established (developing a subdivision), continuing the business was impracticable.

example 15.11 Preemptive rights of shareholders

Tran Corporation authorizes and issues 1,000 shares of stock. Lebow purchases 100 shares, making her the owner of 10 percent of the company's stock. Subsequently, Tran, by vote of its shareholders, authorizes the issuance of another 1,000 shares (by amending the articles of incorporation). This increases its capital stock to a total of 2,000 shares. If preemptive rights have been provided, Lebow can purchase one additional share of the new stock being issued for each share she already owns—or 100 additional shares. Thus, she can own 200 of the 2,000 shares outstanding, and she will maintain her relative position as a shareholder. If preemptive rights are not allowed, her proportionate control and voting power may be diluted from that of a 10 percent shareholder to that of a 5 percent shareholder because of the issuance of the additional 1,000 shares

Employment Discrimination

Treating employees or job applicants unequally on the basis of race, color, national origin, religion, gender, age, or disability;

example 18.9 Gender must be a determining factor

Wanda Collier worked for Turner Industries Group, LLC, in the maintenance department. She complained to her supervisor that Jack Daniell, the head of the department, treated her unfairly. Her supervisor told her that Daniell had a problem with her gender and was harder on women. The supervisor talked to Daniell but did not take any disciplinary action. A month later, Daniell confronted Collier, pushing her up against a wall and berating her. After this incident, Collier filed a formal complaint and kept a male co-worker with her at all times. A month later, she was fired. She subsequently filed a lawsuit alleging gender discrimination. The court concluded that there was enough evidence that gender was a determining factor in Daniell's conduct to allow Collier's claims to go to a jury

example 18.15 Job Applications involving ADA

When filling the position of delivery truck driver, a company cannot automatically screen out all applicants who are unable to meet the U.S. Department of Transportation's hearing standard. The company would first have to prove that drivers who are deaf are not qualified to perform the essential job function of driving safely and pose a higher risk of accidents than drivers who are not deaf.

example 18.12 Online Harassment

While working at TriCom, Shonda Dean receives racially harassing e-mailed jokes from another employee. Shortly afterward, the company issues a warning to the offending employee about the proper use of the e-mail system and holds two meetings to discuss company policy on the use of the system. If Dean sues TriCom for racial discrimination, a court may find that because the employer took prompt remedial action, TriCom should not be held liable for its employee's racially harassing e-mails.

Don, Keith, Jack and Diane are shareholders in a close corporation. Don and Keith, as majority shareholders owe which of the following duty to Jack and Diane as minority shareholders: a. a fiduciary duty to minority shareholders. b. a good faith and fair dealing duty to minority shareholders. c. a goodwill duty to minority shareholders. d. no duty to minority shareholders.

a fiduciary duty to minority shareholders.

Sally incorporates her business, Sally's Rhinestones, in her home state of Maryland. She wants to expand and sell some of her jewelry in Virginia. In Virginia, her company will be considered a. an alien corporation because her business has been chartered in another state. b. a public corporation, so she will probably not have to obtain a license to do business there. c. an open corporation, so she can do business in any state that allows open corporations to operate. d. a foreign corporation, and she will probably have to obtain a certificate of authority to do business there.

a foreign corporation, and she will probably have to obtain a certificate of authority to do business there.

Acme Co. has just completed the incorporation process and received its articles of incorporation from the state. At the first organizational meeting of the new company, the officers' most important task is to a. amend the articles of incorporation. b. adopt bylaws. c. determine the details of the stock sale. d. create a hiring policy.

adobt bylaws

Katrina and Shannon form a general partnership to operate a gourmet kitchen business. In most states, if they do not specify their respective management rights a. one partner has superior management rights b. both partners have equal management rights c. one partner manages the business and the other provides the capital d. the partner who invested more capital has a greater voice in management

both partners have equal management rights

As a director and officer of Harold Transport, Inc., Harold would most likely be considered to have breached his duty of loyalty if he a. suggests to the other members of the board that the company should purchase a new line of trucks. b. becomes a director of Cineplex, a chain of multiplex theaters. c. buys stock in Arnold's Transport, Inc., a competing trucking firm. d. personally takes advantage of a business opportunity that the officers and directors of Harold Transport voted against.

buys stock in Arnold's Transport, Inc., a competing trucking firm.

Chance, Justina, and Rich have been operating a chain of self-service laundries as a general partnership for three years. At the beginning of the fourth year, Justina declares bankruptcy. Under the version of the Uniform Partnership Act (UPA) that is in effect in most states, Justina's bankruptcy will a. do nothing to the partnership; it will continue as before. b. dissolve the partnership automatically. c. cause Justina's dissociation from the partnership. d. cause the partnership to declare bankruptcy.

cause Justina's dissociation from the partnership.

Min applies for a job as a receptionist at an accounting firm. If she is denied a job because she is of Asian origin, she may be a victim of a. direct-treatment discrimination. b. disparate-treatment discrimination. c. primary-treatment discrimination. d. disparate-impact discrimination.

disparate-treatment discrimination

Roy, Andy and Tim are partners in a general partnership, and have all been sued individually based on a breach of contract relating to the partnership. The judge dismisses the lawsuit on the basis that the plaintiff should have filed a lawsuit only against the partnership under the UPA as an a. entity. b. aggregate. c. anomaly. d. adjustment.

entity

The University Smyth has an admissions policy that requires a certain number of points to be automatically awarded to minority applicants. This type of policy may violate the a. equal protection clause. b. establishment clause. c. advancement clause. d. access to education clause.

equal protection clause

The directors and officers of Sports Color, Inc., vote to refuse to declare a dividend. The shareholders can a. overrule the directors and vote themselves to declare a dividend. b. file an action to require the directors to declare a dividend. c. demand that a court declare a dividend. d. return treasury shares in exchange for a dividend.

file an action to require the directors to declare a dividend.

Betty has engaged in a number of acts that constitute a conflict of interest between her and Global Mfg., Inc. The corporation wants to remove her, and can do so a. for cause. b. in good faith. c. when her term expires. d. when the shareholders vote at the next annual meeting.

for cause

When will employer be held liable for harrassment?

harrassment by supervisors: - employer liable even if unaware of behavior and even if employee suffers no adverse job action UNLESS employer took reasonable care to prevent/correct and plantiff unreasonable failed to take advantage of that prevention/correction policy harrassment by co-workers: - employer is liable if they knew/should've known about harrassment and failed to take immediate corrective action

Acme, Inc., a publicly traded company with a market value of $50 million, a. is exempt from filing an auditor's report on management's assessment of internal controls. b. is exempt from filing stock transaction reports with the SEC. c. is exempt from the requirement that its CFO certify the accuracy of the corporate financial statements. d. is exempt from the requirement to improve the directors' monitoring of officer's activities.

is exempt from filing an auditor's report on management's assessment of internal controls.

Defenses to Employment Discrimination claim(Title VII)

legitimate, non-discriminatory motive: - plantiff denied job benefit for a reason that's not prohibited under Title VII - if defendant proves innocent motive, burden shift back to plantiff to show discrimination was "determing or motivating factor" (doesn't have to be sole motive) Bona Fide Occupational Qualification (BFOQ): - discrimination other than race or color is reasonably necessary for the normal operation of the business - if defendant proves BFOQ then they win

Tina designed a new type of handbag that has proven to be very popular. She begins manufacturing these handbags on a large scale and considers her options for setting up a business to market the bags nationwide. She opts for a distributorship franchise under which she will a. pay for one half of the franchisee's start-up costs. b. grant a trade name in her handbags to dealers. c. license distributors to sell her handbags. d. avoid certain taxes and fees.

license distributors to sell her handbags.

Floors R Us, a franchisor, cancels its franchise agreement with Bernardo, the franchisee without any notice. Floor's action is a. likely a wrongful termination. b. an act in the ordinary course of business. c. will allow Bernardo a right to reimbursement of his franchise fee. d. is a violation of federal law.

likely a wrongful termination.

Eastminster Presbyterian Church has an opening for a new head pastor. Mohammed, who is a Muslim, applies for the job. The church declines to hire him and continues to look for other applicants. If Mohammed files a claim of illegal discrimination against the church, the church a. may assert a bona fide occupational qualification (BFOQ) defense. b. can claim that Mohammed did not make out a prima facie case of illegal discrimination. c. can assert that its hiring practices are not intentionally discriminatory. d. can contend that the EEOC's "80 percent rule" is irrelevant when there is only one available job.

may assert a bona fide occupational qualification (BFOQ) defense.

Anson is a citizen of Connecticut. He suffers severe injuries in a car accident. He hires a Michigan attorney to bring a multimillion-dollar claim against the car manufacturer. The attorney belongs to an LLC whose members are from several states, including Connecticut. After losing the product liability claim, Anson brings a malpractice lawsuit against the attorney. He a. may file in a state court in Connecticut or Michigan, or in federal court. b. must file in federal court. c. may file only in a Connecticut state court. d. may file in a state court in Connecticut or Michigan.

may file in a state court in Connecticut or Michigan.

Julio lives in an area with a high percentage of Hispanic workers. Many of these workers are legal immigrants who have relatively little college training. If, when Julio applies for his job, he is given an examination designed for a college graduate, and if he and most Hispanic applicants fail to pass the test, the employer a. might be engaged in disparate-harm discrimination. b. might have violated the Americans with Disabilities Act (ADA). c. might be engaged in disparate-impact discrimination. d. has almost certainly done nothing wrong.

might be engaged in disparate-impact discrimination.

Hurwitz and Padden formed a two-person law firm as a partnership without a written agreement. They shared all proceeds on a fifty-fifty basis and reported all income as partnership income. A year later, Hurwitz filed articles of organization with the state of Minnesota to establish the firm as an LLC. When they formed the LLC, they did not create an operating agreement. Three years after they formed the LLC, Padden told Hurwitz that he wanted to dissolve their professional relationship. They resolved all issues between them except for a division of fees from several of the firm's cases. Hurwitz sued seeking distribution of the profits on the basis of partnership law which would result in a fifty-fifty split. Padden argued that he was entitled to a greater share of the profits because they had formed an LLC in which he was allowed to receive a greater share of the profits than 50 percent. The court most likely held that Padden was a. not entitled to more than 50 percent of the profits, because the parties historically had divided the profits fifty-fifty. b. not entitled to more than 50 percent of the profits, because it was appropriate to apply partnership principles to an LLC when there was no operating agreement. c. entitled to more than 50 percent of the profits, because Hurwitz would be unjustly enriched if he received 50 percent of the profits. d. entitled to more than 50 percent of the profits, because it was the parties' intent to compensate Padden to a greater extent than Hurwitz.

not entitled to more than 50 percent of the profits, because it was appropriate to apply partnership principles to an LLC when there was no operating agreement.

Melissa works as a computer data-entry operator at VeraSign. Melissa informs VeraSign that she suffers from carpal tunnel syndrome, causing pain in her wrists rendering her unable to use a keyboard. Melissa requests as an accommodation that VeraSign hire a data-entry employee to enter the information on her behalf. VeraSign refuses to do so. VeraSign has a. violated the ADA because it discriminated against an employee with a disability. b. violated the ADA because it failed to provide a reasonable accommodation. c. not violated the ADA because the requested accommodation is an undue hardship on the employer. d. not violated the ADA because modifying computer technology is not a covered protection.

not violated the ADA because the requested accommodation is an undue hardship on the employer.

Ziad is a dentist who is a partner in a limited liability partnership (LLP). He negligently harms Dania while attempting to perform a root canal operation. With regard to the liability of the other partners in Ziad's LLP, a court would most likely find that a. if Ziad was negligent, they are also liable. b. none of them can be held liable for Ziad's acts. c. they are liable only if Ziad intended to harm Dania. d. only a partner who was Ziad's supervisor can be held liable.

only a partner who was Ziad's supervisor can be held liable.

Wendy is a member of the board of directors and the chief financial officer of The Shoe Fits, Inc. Under the duty of due care that she owes the corporation, Wendy does NOT need to a. attend board meetings and oversee the corporation's employees and other officers. b. attend presentations and make a careful study of business choices before making decisions. c. oversee every aspect of the business, including such things as ordering merchandise and arranging for janitorial services. d. subordinate her personal interests to the welfare of the corporation.

oversee every aspect of the business, including such things as ordering merchandise and arranging for janitorial services.

Age Discrimination in Employment Act (ADEA)

plantiffs burden: - protected under ADEA (40 or older) - qualified - rejected - discrimination was "sole" reason

Lysco gives to all 15,000 of its shareholders the right to purchase newly issued shares of Lysco stock in proportion to the percentage of shares they currently own and before anyone else is offered the shares. This right is known as a. a preemptive right. b. a proxy right. c. a warrant agreement. d. an attachment right.

preemptive right

A group of lawyers in Plainsville decide to start a law firm together. They use the name of the three lawyers who first decided to create the firm. The law firm of Adams, Bell, and Clyde has the letters P.C. at the end of its name. The letters stand for a. public corporation. All of its members are professionals, and they pay taxes at a lower rate than most corporations. b. public company. None of its members are professionals, and they pay taxes at a higher rate than most corporations. c. professional corporation. All of its members are professionals and are subject to less liability than most corporate officers. d. professional corporation. All of its members are professionals and are subject to greater liability than most corporate officers.

professional corporation. All of its members are professionals and are subject to greater liability than most corporate officers.

Tara signs a written agreement with Harry, giving Harry the right to cast Tara's votes for a certain group of people nominated for the Syllibar Corporation board of directors. This agreement between Tara and Harry is known as a a. derivative agreement. b. proxy. c. subpoena. d. cumulative voting agreement.

proxy

Preston wants to be his own boss and is considering starting a business. He has to decide which form of business organization to adopt and will most likely consider all of the following except a. the cost of legal formalities. b. publicity and public relations. c. the various types of liability to which owners are subject. d. tax issues

publicity and public relations.

Carl tells Jenny that he will give her a raise if she agrees to have a romantic relationship with him. In legal terms, this is known as a. hostile-environment harassment. b. quid pro quo harassment. c. settled harassment. d. invidious harassment.

quid pro quo harassment

Marsha is a sole proprietor of a small quilting shop. She has considered changing her business structure, but she cannot find an alternative structure that would give her the main advantage she enjoys as a sole owner. The major advantage is that she a. receives dividends. b. receives all the profits. c. assumes very limited risk. d. is taxed as a corporation.

receives all the profits

Jazmine is an officer of New Stage, a theater production company. Without telling any other officers or the board of directors, she decides that New Stage should try to sell gardening tools over the Internet. She makes contracts with suppliers and a Web-based remote order-fulfillment company. The only action that may NOT be taken is a. the corporation can file a lawsuit against her. b. she can file a lawsuit against the corporation if it refuses to reimburse the expenses she incurred to make the contracts. c. the shareholders can file a lawsuit on behalf of the corporation. d. the state attorney general may seek an injunction against the transactions or seek a dissolution order from a court.

she can file a lawsuit against the corporation if it refuses to reimburse the expenses she incurred to make the contracts.

Wally is blind and would like to work for Dairy Times writing articles on the dairy industry. Wally uses voice-recognition software that allows him to dictate articles to his computer. His computer is specially designed for visually impaired individuals. Dairy Times interviews Wally but offers the job to a sighted person instead. Dairy Times may have violated a. the ADEA. b. 42 U.S.C. Section 1981. c. the ADA. d. the NRA.

the ADA

Matt and Chad form an LLC, and Matt later decides to withdraw as a member. They do not have a provision in their operating agreement regarding withdrawal of a member, but they do live in a state that has adopted the ULLCA, which means that a. the LLC must purchase Chad's interest at fair value within 120 days. b. Matt will lose all of his interest in the LLC. c. the LLC must dissolve within 120 days. d. Matt must find a new member to purchase Chad's interest at a fair value.

the LLC must purchase Chad's interest at fair value within 120 days.

Kurt is 52 years old and has worked for a company covered by the Age Discrimination in Employment Act (ADEA) of 1967. He wants to bring a claim of age discrimination against his employer because he was replaced by a younger, lower-paid worker. To make out a prima facie case of age discrimination, Kurt does not have to establish that he a. was qualified for the job he lost. b. was replaced by someone who was below the age of 40. c. was discharged in a way that creates an inference of discrimination. d. is a member of the protected age group.

was replaced by someone who was below the age of 40.

Rheingold Supply has a seniority system by which employees who have worked the longest are first in line for promotions and last to be laid off. As a result, most of the senior managers at Rheingold Supply are men. If Jane files a claim of illegal discrimination, Rheingold Supply a. will have a legitimate defense because gender is a bona fide occupational qualification for senior management. b. will have a legitimate defense because Rheingold Supply has a seniority system in place. c. will have a legitimate defense because retaining men in top management positions is a business necessity. d. will be in violation of Title VII of the Civil Rights Act.

will have a legitimate defense because Rheingold Supply has a seniority system in place.

articles of organization

The document filed with a designated state official by which a limited liability company is formed.

Rubina convinced Mariah to start a business with her in a partnership rather than a sole proprietorship. The disadvantage of a sole proprietorship that Rubina wants to avoid is a. being taxed as a limited liability corporation. b. receiving all the profits. c. undertaking limited liabilities. d. bearing the burden of all losses and liabilities.

bearing the burden of all losses and liabilities.

inside director vs outside director

inside director: - member of the board of directors who is also an officer of the corporation outside director: - member of the board of directors who does not hold a management position

what are the protected classes

race, color, religion, sex, national origin

quorum

the number of members of a decision-making body that must be pre-sent before business may be transacted

Eddie and Eric enter into a partnership agreement to sell gourmet dog biscuits. If they do not specify how long the general partnership will last, the partnership will end a. in 12 months. b. whenever either partner wants to end it. c. in one year plus one day. d. whenever both partners agree to end it.

whenever either partner wants to end it.

order of priority when conflicts arise among documents involving corporations:

1. The U.S. Constitution. 2. State constitutions. 3. State statutes. 4. The articles of incorporation. 5. Bylaws. 6. Resolutions of the board of directors.

The ADA Defines a Disability as Including Any of the Following:

1. a physical or mental imparitment that substantially limits one or more of the major life activities of the affected individuals 2. a record of having such impairment 3. being regarded as having such an imparirment

To Prevail on a Claim under the ADA, the Plaintiff Must Show That:

1. they have a disability 2. they are otherwise qualified for the employment in question 3. they were excluded from the employment solely because of the disability

example 14.11 preorganization of contracts

607 South Park, LLC, entered into a written agreement to sell a hotel to 607 Park View Associates, Ltd., whose general partner then assigned the rights to the hotel purchase to another company, 02 Development, LLC. At the time, 02 Development did not yet exist—it was legally created several months later. 607 South Park subsequently refused to sell the hotel to 02 Development, and 02 Development sued for breach of the purchase agreement. A California appellate court ruled that LLCs should be treated the same as corporations with respect to preorganization contracts. Although 02 Development did not exist when the agreement was executed, once it came into existence, it could enforce any preorganization contract made on its behalf

ultra vires

A Latin term meaning "beyond the powers"; in corporate law, acts of a corporation that are beyond its express and implied powers to undertake.

pass-through entity

A business entity that has no tax liability. The entity's income is passed through to the owners, and they pay taxes on the income.

prima facie case

A case in which the plaintiff has produced sufficient evidence of his or her claim that the case will be decided for the plaintiff unless the defendant produces evidence to rebut it.

stock warrant

A certificate that grants the owner the option to buy a given number of shares of stock, usually within a set time period.

S corporation

A close business corporation that has most corporate attributes, including limited liability, but qualifies under the Internal Revenue Code to be taxed as a partnership.

example 15.10 cumulative voting

A corporation has 10,000 shares issued and outstanding. The minority shareholders hold 3,000 shares, and the majority shareholders hold the other 7,000 shares. Three members of the board are to be elected. The majority shareholders' nominees are Acevedo, Barkley, and Craycik. The minority shareholders' nominee is Drake. Can Drake be elected by the minority shareholders? If cumulative voting is allowed, the answer is yes. Together, the minority shareholders have 9,000 votes (the number of directors to be elected times the number of shares held by the minority shareholders equals 3 times 3,000, which equals 9,000 votes). All of these votes can be cast to elect Drake. The majority shareholders have 21,000 votes (3 times 7,000 equals 21,000 votes), but these votes have to be distributed among their three nominees. The principle of cumulative voting is that no matter how the majority shareholders cast their 21,000 votes, they will not be able to elect all three directors if the minority shareholders cast all of their 9,000 votes for Drake,

close corporation

A corporation whose shareholders are limited to a small group of persons, often family members.

Business Necessity

A defense to allegations of employment discrimination in which the employer demonstrates that an employment practice that discriminates against members of a protected class is related to job performance.

benefit corporation

A for-profit corporation that seeks to have a material positive impact on society and the environment.

disparate-treatment discrimination

A form of employment discrimination that results when an employer intentionally discriminates against employees who are members of protected classes.

example 18.1 supreme court limits discrimination claims against employers as a group

A group of female employees sued Wal-Mart. The employees alleged that store managers who had discretion over pay and promotions were biased against women and disproportionately favored men. The United States Supreme Court ruled in favor of Wal-Mart, effectively blocking the class action (a lawsuit in which a small number of plaintiffs sue on behalf of a larger group). The Court held that the women could not maintain a class action because they had failed to prove a company-wide policy of discrimination that had a common effect on all women included in the class. Therefore, they could not maintain a class action.

Limited Liability Company (LLC)

A hybrid form of business enterprise that offers the limited liability of the corporation but the tax advantages of a partnership.

limited liability partnership (LLP)

A hybrid form of business organization that is used mainly by professionals who normally do business in a partnership. An LLP is a pass-through entity for tax purposes, but a partner's personal liability for the malpractice of other partners is limited.

corporation

A legal entity formed in compliance with statutory requirements that is distinct from its shareholder-owners.

Limited Partnership (LP)

A partnership consisting of one or more general partners and one or more limited partners. - the loss of the general partner usually = dissolution

member

A person who has an ownership interest in a limited liability company.

business judgment rule

A rule that immunizes corporate management from liability for actions that result in corporate losses or damages if the decision makers took reasonable steps to become informed, had a rational basis for their decisions, and did not have a contract of interest with the corporation

tangible employment action

A significant change in employment status or benefits, such as occurs when an employee is fired, refused a promotion, or reassigned to a lesser position.

shareholder's derivative suit

A suit brought by a shareholder to enforce a corporate cause of action against a third person.

seniority system

A system in which those who have worked longest for an employer are first in line for promotions, salary increases, and other benefits, and are last to be laid off if the workforce must be reduced.

information return

A tax return submitted by a partnership that only reports the income and losses earned by the business. The partnership as an entity does not pay taxes

Constructive Discharge

A termination of employment brought about by making the employee's working conditions so intolerable that the employee reasonably feels compelled to leave.

example 18.17 Bona fide occupational qualification (BFOQ)

A women's clothing store might legitimately hire only female sales attendants if part of an attendant's job involves assisting clients in the store's dressing rooms. Similarly, the Federal Aviation Administration can legitimately impose age limits for airline pilots—but an airline cannot impose weight limits only on female flight attendants.

articles of partnership

A written agreement that sets forth each partner's rights and obligations with respect to the partnership.

example 14.8 Duty of Care after Dissociation

Amy Pearson, a partner who leaves an accounting firm, Bubb & Pearson, can immediately compete with the firm for new clients. She must exercise care in completing ongoing client transactions, however, and must account to the firm for any fees received from the old clients based on those transactions.

Case Example 18.5 reverse discrimination

An African American woman fired four white men from their management positions at a school district. The men filed a lawsuit for racial discrimination, alleging that the woman was trying to eliminate white males from the department. The woman claimed that the terminations were part of a reorganization plan to cut costs. The jury sided with the men and awarded them nearly $3 million in damages. The verdict was upheld on appeal (though the damages award was reduced slightly)

Partnership

An agreement by two or more persons to carry on, as co-owners, a business for profit.

example 14.9 Wrongful Dissolution

Attorneys Randall Jordan and Mary Helen Moses formed a two-member partnership in 2003. Although the partnership was for an indefinite term, Jordan ended the partnership in 2006 and asked the court for declarations concerning the partners' financial obligations. Moses, who had objected to ending the partnership, filed a claim against Jordan for wrongful dissolution and for appropriating $180,000 in fees that should have gone to the partnership. Ultimately, the court held in favor of Moses. A claim for wrongful dissolution of a partnership may be based on damages arising from the excluded partner's loss of "an existing, or continuing, business opportunity" or of income and material assets. Because Jordan had attempted to appropriate partnership assets through dissolution, Moses could sue for wrongful dissolution

example 14.15 Distributorship

Black Rain Beer Company distributes its brands of beer through a network of authorized wholesale distributors, each with an assigned territory. Marik signs a distributorship contract for the area from Gainesville to Ocala, Florida. If the contract states that Marik is the exclusive distributor in that area, then no other franchisee may distribute Black Rain beer in that region.

example 15.1 Criminal acts and tort liability of corporations

Brian Gauthier drove a dump truck for Angelo Todesca Corporation. The truck was missing its back-up alarm, but Angelo allowed Gauthier to continue driving it. At a worksite, Gauthier backed up to dump a load and struck and killed a police officer who was directing traffic. The state charged Angelo and Gauthier with the crime of vehicular homicide. Angelo argued that a corporation could not be guilty of vehicular homicide because it cannot operate a vehicle. The court ruled that if an employee commits a crime "while engaged in corporate business that the employee has been authorized to conduct," the corporation can be held liable for the crime. Hence, the court held that Angelo Todesca Corporation was liable for Gauthier's negligent operation of its truck, which resulted in a person's death

example 15.13 Duties of Majority Shareholders

Brodie, Jordan, and Barbuto formed a close corporation to operate a machine shop. Each owned one-third of the shares in the company, and all three were directors. Brodie served as the corporate president for twelve years but thereafter met with the other shareholders only a few times a year. After disagreements arose, Brodie asked the company to purchase his shares, but his requests were refused. A few years later, Brodie died, and his wife inherited his shares in the company. Jordan and Barbuto refused to perform a valuation of the company, denied her access to the corporate information she requested, did not declare any dividends, and refused to elect her as a director. In this situation, a court found that the majority shareholders had violated their fiduciary duty to Brodie's wife

example 14.16 Good Faith and Fair dealing in termination

Buddy House was in the construction business and had collaborated on projects with Holiday Inns Franchising, Inc., for decades. Many projects were undertaken without written contracts. Holiday Inn asked House to inspect a hotel in Texas to estimate the cost of renovating it to be a Holiday Inn. The parties agreed that House would buy and renovate the hotel and Holiday Inn would grant him a franchise for ten years. Holiday Inn assured House that his franchise license would be extended at the end of ten years provided that the hotel was run appropriately. House bought the hotel, renovated it, and operated it as Hotel Associates, Inc. (HAI), generating substantial profits. Before the ten years had passed, Greg Aden, a Holiday Inn executive, developed a plan to license a different local hotel as a Holiday Inn instead of renewing House's franchise license. Aden stood to earn a commission from licensing the other hotel. House was not informed of Aden's plan. When HAI applied for an extension of its franchise, Holiday Inn asked for major renovations. HAI spent $3 million to comply with this request. Holiday Inn did not renew HAI's license, however, but instead granted a franchise to the other hotel. HAI sold its hotel for $5 million and filed a suit against Holiday Inn. The court found that Holiday Inn's conduct constituted bad faith and fraud. Holiday Inn had assured House that he would be relicensed at the end of ten years, and House was justified in believing that there were no obstacles to his relicensure. The court awarded HAI compensatory and punitive damages

example 14.10 Dissolution due to partnership death

Clyde Webster, James Theis, and Larry Thomas formed T&T Agri-Partners Company to own and farm 180 acres in Illinois. Under the partnership agreement, the firm was to continue until January 31, 2010, unless it was dissolved. The death of any partner would dissolve the partnership. Webster died in 2002, but Theis and Thomas did not liquidate T&T and distribute its assets. Webster's estate filed a lawsuit against Theis, Thomas, and the partnership in state court, seeking to dissolve the partnership. The court ordered the defendants to dissolve the partnership and liquidate its assets. Because Theis and Thomas violated the clear provisions of the partnership agreement, it was unlawful for the partnership to continue after Webster's death

example 15.6 Duty to exercise reasonable supervision

Dale, a corporate bank director, fails to attend any board of directors' meetings for five years. In addition, Dale never inspects any of the corporate books or records and generally fails to supervise the efforts of the bank president and the loan committee. Meanwhile, Brennan, the bank president, who is a corporate officer, makes various improper loans and permits large overdrafts. In this situation, Dale (the corporate director) can be held liable to the corporation for losses resulting from the unsupervised actions of the bank president and the loan committee.

disparate-impact discrimination

Discrimination that results from certain employer practices or procedures that, although not discriminatory on their face, have a discriminatory effect.

Types of franchises

Distributorship - manufacturing licenses a dealer to sell its product (auto dealer or beer distributor) Chain Style - franchise operates under a franchisors trade name (mcdonalds) Manufacturing or Processing Plant - franchisor trasnmits to the franchisee the essential ingredients or formula to make a particular product (coca-cola)

Classifications of Corporations

Domestic: does biz in the state its incorported in Foreign: does biz in state other than state its incorporated in (needs certificate of authority unless biz is by mail or online) alien: biz incorporated outside the country doing biz in a U.S. state publicly held: shared traded in a securities market (many owners) closely held: shareholders operate the biz/mgmt

example 15.12 watered stock

During the formation of a corporation, Gomez, one of the incorporators, transfers his property, Sunset Beach, to the corporation for 10,000 shares of stock. The stock has a specific face value (par value) of $100 per share, and thus the total price of the 10,000 shares is $1 million. After the property is transferred and the shares are issued, Sunset Beach is carried on the corporate books at a value of $1 million. On appraisal, it is discovered that the market value of the property at the time of transfer was only $500,000. The shares issued to Gomez are therefore watered stock, and he is liable to the corporation for the difference between the value of the shares and the value of the property.

Case Brief Dees v. United Rentals North America, Inc.

Facts - Dees an African American applied to United Rentals and was offered a position in St Rose Louisisana - First 2 years of employment went smoothly, but then his performance began to deteroriate and his managers gave him written warnings - after a final warning Dees was fired; he was 62 - Dese filed a charge with EEOC alleging employment based discrimination on his race and age in violation of Title VII and ADEA - Dees received a "right to sue: notice and filed a suit against United Rentals; judggment in United's favor; Dees Appealled Issue: - Does Dees have enough evidence and meet all of the qualifications to file a discrimination suit based on age and race? Rule" - Prima Facie Case - Title VII - ADEA Application: - United Rentals provided extensive evidence of legitmate nondiscriminatory reasons for dee's termination --namely unsatisfactory job performance - Dees had only made conclusory allegations that he was discriminated against - Dees presented nothing to tie Rentals final termination decison to a discriminatory motive - No evidence demonstrates the Rentals decison to discharge Dees was motivated by his race or age Conclusion: - federal appellate court affirmed the lower courts judgment in favor of rentals - Dees failed to submit any evidence of discrimination and that this is fatal to his claims under title VII and ADEA - Dees subjective belief that rentals discriminated against him is clearly insufficient to demonstrate pretext

Case brief Mekonen v Zewdu

Facts - Green cab has an operating agreement that requires the members to pay weekly fees and those who don't must return their taxi licenses to the company - members cannot withdraw from the company w/o consent of all the other members - Mekonen withdrew from comapny w/o consent and continued to to drive under green cab name - Mekonen filed suit in Washington state against members who hadn't withdrawn to seek right to operate as green cab - Court held they couldn't rep themselves as green cab and ordered them to return their licenses to the company; plantiff appealed order to return their licenses Issue: - Does Mekonen and the other plantiffs have a right to use the green cab licenses Rule - operating agreements - LLC's Application: - operating agreement states " the company shall hold all rights to any taxi and other license and permits necessary to operate its vehicles - Plantiffs have no right to use taxicab licenses unless they are memebers of green cab LLC and in good standing - PLantiffs withdrew their memberships and have paid no weekly fees - operating agreement required a member not to withdraw without consent of all the members Conclusion: - state intermediate appellate court upheld lower courts order to plantiff to return their taxi license to green cab - under company's operating agreement, as defaulting members, the plantiffs had no right to retain and use the licenses

Belmont v. MB Investment Partners

Facts: - Bloom formed North Hills, LP, as a stock investment fund. - Investments in North Hills were administered by Bloom and other MB personnel, using MB's offices, computers, filing facilities, and office equipment. MB officers and directors were aware that Bloom was operating North Hills while he was also working at MB. - two investors in North Hills requested a full redemption of their investments. By that time, however, most of the money that had been invested in North Hills was gone. Bloom was arrested, and MB terminated him. - SUit was filed against MB alleging fraud Conclusion and Remedy: - MB officers and directors failed to make basic inquiries about Bloom's operation of North Hills, and did not collect any information on North Hills or monitor sales of investments in North Hills to MB's own customers. - The fraud of an officer of a corporation is imputed to the corporation when the officer's fraudulent contact was (1)in the course of his employment, and (2)for the benefit of the corporation. - This is true even if the officer's conduct was unauthorized, effected for his own benefit but clothed with apparent authority of the corporation, or contrary to instructions. The underlying reason is that a corporation can speak and act only through its agents and so must be accountable for any acts committed by one of its agents within his actual or apparent scope of authority and while transacting corporate business. - judge remanded the case for a trial with respect to the investors' claims against MB. -Liability can be imputed (attributed) to a corporation for the acts of its agent committed within the scope of his or her authority.

Case Brief Morales-Cruz v. University of Puerto Rico

Facts: - Cruz bgean a tenure-track teaching position a University of Puerto Rico school of law in 2003 - One of her co-teachers had an affair with a student that resulted in a pregnancy - Cruz wanted a one year extension of her tenure review and the law school dean criticized her for not reporting her co-teachers affair - comments were made about cruz having poor judgment and being immature for not reporting - cruz learned about these comments and complained to the university's chancellor - As a result, the dean recommended denying her extension and the committee denied it - When she was fired she sued the universityb under Title VII asserting that the dean had retaliated against her for complaining to the chancellor - district court found cruz had not stated a proper retaliation claim under title VII Issue: - Did cruz suffer an adverse employment action as a result of her reporting the dean to the chancellor RUle - Title VII - Ellerth/Faragher Affirmative defense - tangible employment action Application - cruz's allegations do not support reasonable inderence that she was engaging in protected conduct when she opposed the remarks made - the facts alleged provide no reasonable basis for inferring that the comments cited reflected gender based discrimination - the comments were unarguably gender neutral and do not afford an objectively reasonable foundation for a retaliation action Conclusion - US court of appeals of first circuit held that cruz could not bring a retaliation claim under TITLE VLL - affirmed district courts judgment for University of Puerto RIco

Guft v. Loft, Inc.

Facts: - Guth was Loft Inc's president who sold candies, syrups, beverages and food - Guth pwned grace company which made syrups for soft drinks - Without the knowledge of Loft's board, Guth used Loft's capital, credit, facilities, and employees to further the Pepsi enterprise. At Guth's direction, Loft made the concentrate for the syrup, which was sent to Grace to add sugar and water. - Loft charged Grace for the concentrate but allowed forty months' credit. Grace charged Pepsi for the syrup but also granted substantial credit. Grace sold the syrup to Pepsi's customers, including Loft, - Finally, losing profits at its stores as a result of switching from Coca-Cola, Loft filed a suit in a Delaware state court against Guth, Grace, and Pepsi, - court ruled in plantiffs favor Remedy and Conclusion: - a rule that demands of a corporate officer or director to protect the interests of the corporation committed to his charge, but also to refrain from doing anything that would work injury to the corporation - there is presented to a corporate officer or director a business opportunity which the corporation is financially able to undertake nd, by embracing the opportunity, the self-interest of the officer or director will be brought into conflict with that of his corporation, the law will not permit him to seize the opportunity for himself. - he created a conflict between self-interest and duty. He made himself the judge in his own cause. - a reasonable probability of injury to Loft resulted from the situation forced upon it. - The facts and circumstances demonstrate that Guth's appropriation of the Pepsi-Cola opportunity to himself placed him in a competitive position with Loft with respect to a commodity essential to it, thereby rendering his personal interests incompatible with the superior interests of his corporation; and this situation was accomplished, not openly and with his own resources, but secretly and with the money and facilities of the corporation which was committed to his protection. - The state supreme court was "convinced that the opportunity to acquire the Pepsi-Cola trademark and formula, goodwill and business belonged to [Loft], and that Guth, as its President, had no right to appropriate the opportunity to himself." - This early Delaware decision was one of the first to set forth a test for determining when a corporate officer or director has breached the duty of loyalty. The test has two basic parts—whether the opportunity was reasonably related to the corporation's line of business, and whether the corporation was financially able to undertake the opportunity.

example 15.5 Ultra Vires Doctrine (beyond the power)

Four men formed a nonprofit corporation to create the Armenian Genocide Museum & Memorial (AGM&M). The bylaws appointed them as trustees (similar to corporate directors) for life. One of the trustees, Gerard L. Cafesjian, became the chair and president of AGM&M. Eventually, the relationship among the trustees deteriorated, and Cafesjian resigned. The corporation then brought a suit claiming that Cafesjian had engaged in numerous ultra vires acts, self-dealing, and mismanagement. Although the bylaws required an 80 percent affirmative vote of the trustees to take action, Cafesjian had taken many actions without the board's approval. He had also entered into contracts for real estate transactions in which he had a personal interest. Because Cafesjian had taken actions that exceeded his authority and had failed to follow the rules set forth in the bylaws for board meetings, the court ruled that the corporation could go forward with its suit.

Buck is a director of Bromley Corp. Buck owns a printing company, and Bromley needs to have a book printed. If Buck contracts with Bromley to print the book, he must a. Do nothing special; the contract is valid. b. Fully disclose his interest to the other board members and abstain from voting on the matter. c. Never enter into a contract like this. d. Resign from the board if anyone questions the conflict of interest.

Fully disclose his interest to the other board members and abstain from voting on the matter.

example 18.11 Harrassment by nonemployees

Gordon, who owns and manages a Great Bites restaurant, knows that one of his regular customers, Dean, repeatedly harasses Sharon, a waitress. If Gordon does nothing and permits the harassment to continue, he may be liable under Title VII even though Dean is not an employee of the restaurant.

Bona Fide Occupational Qualification (BFOQ)

Identifiable characteristics reasonably necessary to the normal operation of a particular business. These characteristics can include gender, national origin, and religion, but not race.

example 15.4 Securing Corporate Name

If an existing corporation is named Digital Synergy, Inc., the state is unlikely to allow a new corporation to choose the name Digital Synergy Company. That name is deceptively similar to the first and could impliedly transfer part of the goodwill established by the first corporate user to the second corporation, thereby infringing on the first company's intellectual property rights. In addition, the new corporation could not use Digital Synergy Company as a domain name if the existing corporation used Digital Synergy, Inc., as its domain name.

exaxmple 18.16 Business Necessity

If requiring a high school diploma is shown to have a discriminatory effect, an employer might argue that a high school education is necessary for workers to perform the job at a required level of competence. If the employer can demonstrate a definite connection between a high school education and job performance, the employer normally will succeed in this business necessity defense.

general partner

In a limited partnership, a partner who assumes responsibility for the management of the partnership and liability for all partnership debts.

limited partner

In a limited partnership, a partner who contributes capital to the partnership but has no right to participate in the management and operation of the business. The limited partner assumes no liability for partnership debts beyond the capital contributed.

proxy

In corporate law, a written or electronically transmitted form in which a stockholder authorizes another party to vote the stockholder's shares in a certain manner.

joint and several liability

In partnership law, a doctrine under which a plaintiff may sue, and collect a judgment from, one or more of the partners separately (severally, or individually) or all of the partners together (jointly). This is true even if one of the partners sued did not participate in, ratify, or know about whatever gave rise to the cause of action.