Legal Final Exam

BAR/BRI was the largest bar review company in the country, with branches in 45 states. Barpassers was a much smaller company located only in Arizona and California. BAR/BRI distributed pamphlets on campuses that falsely suggested Barpassers was near bankruptcy. Enrollments in Barpassers' courses dropped, and the company was forced to postpone plans for expansion. Did Barpassers have an antitrust claim against BAR/BRI?

A jury found that BAR/BRI had violated §2 of the Sherman Act by attempting to create an illegal monopoly. The jury ordered BAR/BRI to pay Barpassers more than $3 million, plus attorney's fees

Carl took out a life insurance policy naming his wife Jenny as the beneficiary. Years later, Carl dies after his car is struck by a drunk driver who swerved into his lane. Jenny files a claim under the life insurance policy. The terms of the policy state that the insurance company will pay out $200,000 if Carl dies in an accident that was not Carl's fault but only $50,000 if it is an accident caused by Carl. The insurance company denies Jenny's claim for $200,000, stating that the accident was Carl's fault and Jenny is only entitled to $50,000. If Jenny sues the insurance company, how much may she recover?

$200,000 plus potential punitive damages for the insurance company's wrongful denial of a claim

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

$500,000

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

Derrick has violated copyright, but not Samantha

If you are a smart consumer, you will: I. insure against as many different kinds of risks as you can so that no matter what happens, you will be protected. II. select as low a deductible as possible so that no matter what happens, you will not have to pay large sums out of pocket. III. buy flight insurance when you take long airplane flights so that your family will be protected if your plane crashes.

Niether I, II, or III

In her extremely popular series of young adult novels, Heidi describes the characters playing a new sport called "Quark"that Heidi created as part of writing the books. Readers and fans of the series begin playing Quark in real life. Ross organizes a Quark league and creates a website where teams can register for games. If Heidi sues Ross for copyright infringement, will she win?

No, because Heidi holds only a copyright for the books, not for the game of Quark itself

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

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

When a salesperson came to Richard's door, Richard purchased a magazine subscription and gave the salesperson his debit card number. After receiving the magazine for several months, Richard decided he did not like it. Richard called the bank and told him to stop payment to the magazine company for all future months. The bank told Richard that they needed something in writing from the magazine company confirming the cancellation of the subscription or else they must continue to honor the transfers. Is the bank correct?

No, because a consumer may stop payment of a preauthorized transfer by oral notice to the bank

Reserve Supply Corp., a cooperative of 379 lumber dealers, charged that Owens-Corning Fiberglass Corp. violated the Robinson-Patman Act by selling at lower prices to Reserve's competitors. It presented proof that these prices had harmed competition. Owens-Corning admitted that it had granted lower prices to a number of Reserve's competitors to meet, but not beat, the prices of other insulation manufacturers. Is Owens-Corning in violation of the RPA?

No, because a manufacturer is not liable under the RPA if it charges lower prices to meet competition.

Apple, Inc. creates a new smart phone that is unlike any existing phone on the market. Not wanting this new product to be confused with its existing iPhone products, it names it "The Phone" and develops an extensive, and expensive, advertising campaign for it. Is this a valid trademark?

No, because it is simply the product's ordinary name

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

No, because numbers are not patentable subject matter

Super Scoops, a national gossip magazine, recently found out about a popular Boston-based ice cream shop with a growing number of locations throughout Massachusetts named Sam's Super Scoops. Super Scoops was created in 1980, and Sam's Super Scoops opened its first shop in 2002. Does Super Scoops have a valid claim against Sam's Super Scoops?

No, because the companies sell such different products that consumers will probably not be confused by the similar marks.

Jerry Falwell was a nationally known Baptist minister whose website was falwell.com. One of his most outspoken critics registered the website fallwell.com— note the misspelling—to criticize the minister's views on homosexuality. This site has a disclaimer indicating that it was not affiliated with Reverend Falwell. The minister sued fallwell.com, alleging a violation of trademark law and the anti cybersquatting statute. Was there a violation?

The reverend lost on both counts. The court ruled that there was no confusion—fallwell.com had a clear disclaimer. Also, there was no indication of bad faith. The court was reluctant to censor political commentary

Zach sells Cutco Knives door to door. Which of the following statements is FALSE?

The seller can cancel orally or in writing

Mark leases a house to Julia. When Julia mentions that the bedroom door is difficult to close, Mark comes to the house and fixes the door. While at the house, Mark notices that two of the boards on the stairs leading to the front door are rotted through. A few weeks later, Julia cuts her hand badly from a sharp edge on the top of the door while trying to do chin ups using the door. While leaving the house to go to the hospital, Julia steps on one of the rotted steps, which collapses causing Julia to fall and break her ankle. Julia sends Mark her medical bills associated with the injuries. Under the modern trend of common law rules, must Mark pay?

Yes, but only for the bills related to the broken ankle

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

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

Mary took out $15,000 in loans to pay for her undergraduate tuition and an additional $100,000 in loans to pay for graduate school. Upon graduating, Mary got a job as a financial advisor at an annual salary of $150,000. Two years later, Mary was promoted to a position that paid $200,000 annually and was eligible for another raise after a year. Mary decided to purchase a $300,000 condo. If Mary has paid off her undergraduate loans and can afford to make a $30,000 down payment, may a lender give Mary the mortgage for the remainder of the condo purchase price?

Yes, if it has a good faith belief that Mary can afford to repay the loan

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

Yes, if the information was not disclosed clearly

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

Yes, provided all of the required disclosures are made clearly

Gary, Louise, and Brian, who each own competing gas stations in town, happen to see each other at a restaurant one morning and have breakfast together. While talking, they decide that they will all set their prices to the national average gas price. Have they committed an illegal act?

Yes, regardless of whether the price is fair to consumers

Spencer Winsor, III is a member of the High Society Club, an exclusive club that accepts only people who earn over $500,000 annually. At one of the Club's meetings, Spencer mentions that one of his expanding software companies would like to make a stock offering, but does not provide any information about the company. During the meeting, 80 Club members agree to purchase 60 shares at $1,000 per share, raising a total of $4.8 million for the company. Has Spencer and/or the company violated the Securities Act of 1933?

c. No, because the stock qualifies as a private offering under Rule 505.

Donald Trump wanted to copyright the phrase "You're Fired!" which he used on his reality show, The Apprentice. He:

can copyright it only if it is in a tangible form

An insurance company does not violate its covenant of good faith and fair dealing if it:

charges elderly customers higher premiums than it charges younger customers

A tenant renting an apartment under a three-year written lease that does not contain any specific restrictions may be evicted for:

counterfeiting money in the apartment

To receive a patent, an invention must meet all of the following tests, except:

it has not ever been used anyplace in the world

If you receive a product in the mail that you did not order:

it is a gift to you

Michael signs a lease for an apartment. The lease establishes a periodic tenancy for one year, starting September 1 and ending the following August 31. Rent is $800 per month. As August 31 approaches, Michael decides he would like to stay another year. He phones the landlord to tell him this, but the landlord is on vacation and Michael leaves a message. Michael sends in the September rent, but on September 15, the landlord tells him the rent is going up to $900 per month. He gives Michael the choice of paying the higher rent or leaving. Michael refuses to leave and continues to send checks for $800. The landlord sues. Landlord will:

lose

Under Regulation D, an issuer:

must make disclosure to unaccredited investors

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

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

Paul and Shelly Higgins had two wood stoves in their home. Each rested on, but was not attached to, a built-in brick platform. The downstairs wood stove was connected to the chimney flue and was used as part of the main heating system for the house. The upstairs stove, in the master bedroom, was purely decorative. It had no stovepipe connecting it to the chimney. The Higginses sold their house to Jack Everitt, and neither party said anything about the two stoves. Is Everitt entitled to either stove? Both stoves?

A buyer normally takes all fixtures. The downstairs stove was permanently attached to the house and used as part of the heating system. The owner who installed it intended that it remain, and it was a fixture; Everitt got it. The upstairs stove was not permanently attached and was not a fixture; the sellers could take it with them.

Clyde goes into a Tesla dealership to investigate buying an electric sports car. He does not look as if he can afford a six-figure purchase, so the sales staff orders a credit report on him. After all, no point in wasting their time. Do they have the right to order a report on Clyde?

A car dealership cannot obtain a consumer report on someone who simply asks general questions about prices and financing or who wants to test-drive a car; nor can the dealer order a report to use in negotiations. However, a dealer has the right to a report that is needed to arrange financing requested by the consumer or to verify a buyer's creditworthiness when he presents a personal check to pay for the vehicle

Donny wanted to get a loan to buy a house, but was told that his credit scores were bad. Which of the following, if distributed via his credit report, is not in violation of the Fair Credit Reporting Act?

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

Which of the following items cannot be trademarked?

A surname

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

All of these

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

Bobby must pay only $60 of the late fees

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

Claire's heirs receive Claire's interest

Which of the following statements about a public offering is FALSE?

Company officers may make public statements about the offering before the stock is sold

During a visit to a hospital emergency room for treatment of a gunshot wound to his chest, John Cummings tested positive for cocaine. Six months later, he applied for a life insurance policy, which was to benefit his mother. The application asked if he had, within the prior five years, used any controlled drugs without a prescription by a physician. Cummings answered, "No." A year after the policy was issued, Cummings died of a gunshot wound. Was the policy valid?

Cummings's mother argued that the policy was valid because her son had not died from taking drugs. The gunshot wound was unrelated to his cocaine use. However, an insurer has a right to void a policy if the insured makes any material misstatement. Here, the misstatement was material because the insurance company would not have issued the policy, or would have charged a much higher premium, if it had known about the cocaine. As a result, the company had the right to void the policy.

Leo rents an apartment from Donna for $900 per month, both parties signing a lease. After six months, Leo complains about defects, including bugs, inadequate heat, and window leaks. He asks Donna to fix the problems, but she responds that the heat is fine and that Leo caused the insects and leaks. Leo begins to send in only $700 for the monthly rent. Donna repeatedly phones Leo, asking for the remaining rent. When he refuses to pay, she waits until he leaves for the day, then has a moving company place his belongings in storage. She changes the locks, making it impossible for him to re-enter. Leo sues. What is the likely outcome?

Donna has ignored the legal procedures for evicting a tenant. Instead, she engaged in actual eviction, which is quick and, in the short term, effective. However, by breaking the law, Donna has ensured that Leo will win his lawsuit. He is entitled to possession of the apartment, as well as damages for rent he may have been forced to pay elsewhere, injury to his possessions, and the cost of retrieving them. He may receive punitive damages as well. Bad strategy, Donna.

On the first of every month, your monthly rent is automatically deducted from your bank account. You are moving out and want to make sure the payments stop. What should you do?

Either (a) or (b) You must call the bank at least three days before the first of the month. You must write the bank at least three days before the first of the

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

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

Julie, an MBA student, rents an apartment from Marshall for $1,500 a month. The written lease will last for two years, until Julie graduates. Julie moves in and enjoys the apartment. However, after 10 months, Marshall sells the building to Alexia, who notifies Julie that the new rent will be $1,750, effective immediately. If Julie objects, Alexia will give her one month to leave the apartment. Julie comes to you for advice. What are her options?

Generally, the sale of leased property does not affect the lease but merely substitutes one landlord, the purchaser, for another, the seller. Alexia has no right to raise the rent during Julie's tenancy. Julie is entitled to the apartment, for $1,500 per month, until the lease expires.

Geoff takes out renters' insurance with Fastball Insurance Co. On the application where it asks if he has any pets, he fills in "poodle." Although he does not know it, his "poodle" is really a Portuguese water dog. The two breeds look a lot alike. A month later, his apartment is robbed. Fastball investigates and discovers that Geoff does not have a poodle after all. It denies his claim. Geoff files suit. What result?

Geoff's misrepresentation was not material—the difference between these two breeds of dog would not have affected liability on the renter's policy. If he had said he had an attack dog such as a Doberman, perhaps the premium would have been lower because the dog would scare off intruders (or higher because the dog would also attack friends and neighbors), but poodles and Portuguese water dogs are equally friendly. Fastball would be liable for refusing to pay this legitimate claim

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

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

To have an illegal monopoly, a company must: I. Control the market. II. Maintain its control improperly. III. Have a market share greater than 50 percent.

I and II

After the death of Babe Ruth, one of the most famous baseball players of all time, his daughters registered the name "Babe Ruth" as a trademark. Which of the following uses would be legal without the daughters' permission? I. Publication of a baseball calendar with photos of Ruth II. Sales of a "Babe Ruth" bat III. Sales of Babe Ruth autographs

I and III

Depending on state law, if a lender violates the usury laws, the borrower could possibly be allowed to keep: I. the interest that exceeds the usury limit. II. all the interest. III. all of the loan and the interest.

I, II, and III

Lucas has bought the following insurance this week: I. A life insurance policy on his brother; II. A life insurance policy on the partner in his accounting practice; and III. A fire insurance policy on the fitness club he belongs to, so that if it burns down, he will receive a large enough payment to enable him to join a different club In which of these policies does he have an insurable interest?

II and III

To prove a violation of copyright law, the plaintiff does not need to prove that the infringer actually copied the work, but she does need to prove: I. the item has a © symbol on it. II. the infringer had access to the original. III. the two works are similar

II and III

Which of the following policies are you likely to need in your lifetime? I. Service plan on an appliance II. Whole life insurance III. Disability insurance IV. Health insurance

III and IV

When Mark applied for life insurance with Farmstead, he indicated on the application that he had not received any traffic tickets in the preceding five years. In fact, he had received several such citations for driving while intoxicated. Two years later, Mark was shot to death. When Farmstead discovered the traffic tickets, it denied coverage to his beneficiary. Was Farmstead in the right?

If Mark had told the truth, Farmstead still would have issued the policy, but the premium would have been higher. Therefore, it can deny coverage even though his lie was not about something that was a factor in his death

Companies must obtain permission from a consumer before charging for overdrafts on:

Neither

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

Neither Harvey nor Whitaker will be covered

Eric is a clever fellow who knows all about computers. He: I. removed the author's name from an article he found on the Internet and sent it via email to his lacrosse team, telling them he wrote it. II. figured out how to unscramble his roommate's cable signal so they could watch cable on a second TV. III. taught the rest of his lacrosse team how to unscramble cable signals. Which of these activities is legal under the Digital Millennium Copyright Act?

Neither I, II, or III

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

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

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

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

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

No, because the patent term has expired

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

No, because the recipe is a trade secret

Pamela Stone was in a car accident. Her policy did not cover any damages she suffered if she was more than 50 percent to blame. The insurance company investigated and determined that the accident was at least 60 percent her fault, so it refused to pay her claim. When Stone sued the company, the jury determined she was only 45 percent at fault. Did the insurance company violate its covenant of good faith and fair dealing?

No, it was not unreasonable. The two parties had a good faith disagreement about the validity of the claim. The insurance company had to pay the claim, but not any penalty for violating the covenant of good faith and fair dealing.

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

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

Tempify is one of two companies that sells controls that can be installed to any thermostat, light, or appliance that allows the devices to be controlled remotely over the internet or through an app. Tempify markets its controls as a product that can help consumers save money and reduce energy consumption. To that end, Tempify begins including plastic film coverings that can be placed on windows to help prevent heat from escaping in the winter in all of the packages of its controls. Is this legal?

No, this is an illegal tying arrangement

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

No, unless Flyy excluded competitors and controlled prices

Paul was an investment banker who sometimes bragged about deals he was working on. One night, he told a bartender, Ryanne, about an upcoming deal. Ryanne bought stock in the company Paul had mentioned. Both were prosecuted for insider trading. Ryanne was acquitted but Paul was convicted, even though Ryanne was the one who made money. How is that possible?

Paul is liable if he knew the information was confidential and he expected some personal gain. A gift counts as personal gain. (The courts have an expansive definition of gifts—practically anything counts. Here, the information could be interpreted as a tip to the bartender.) Ryanne would not be liable unless she knew the information was confidential and had come from an insider who was violating his fiduciary duty.

On July 1, 2015, Quick, Onyx, and Nash were deeded a piece of land as tenants in common. The deed provided that Quick owned one-half the property and Onyx and Nash owned one-quarter each. If Nash dies, the property will be owned as follows:

Quick ½, Onyx ¼, Nash's heirs ¼

If Chip helps out his daughter Sarah by buying a policy to insure her apartment, then _______ is the insured, _________ is the beneficiary, and ________ is the owner.

Sarah/Sarah/Chip

Which of the following forms of tenancy will be created if a tenant stays in possession of the leased premises without the landlord's consent, after the tenant's one-year written lease expires?

Tenancy at sufferance

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

Tenancy at sufferance.

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

Term insurance

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

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

Two medical supply companies in the San Francisco area provide oxygen to homes of patients. The companies are owned by the doctors who prescribe the oxygen. These doctors make up 60 percent of the lung specialists in the area. Does this arrangement create an antitrust problem?

The FTC charged the doctors with an illegal tying arrangement. Because the doctors effectively controlled such a high percentage of the patients needing the service, other oxygen companies could not enter the market.

The Smith family is renting a house from Barry Becker in Maine under a one year lease running from September to September. During the first week of February, the house's water heater breaks during a blizzard, leaving the family with no hot water. After the Smiths repeatedly call Becker, he arrives one week later to fix the water heater. While working at the house, he accidentally causes an electrical failure and cannot get the power to turn back on. Although the water heater is functioning when Becker leaves, it breaks the next day. An electrician comes to the house ten days later and turns the power back on. On the ninth day without power, the Smiths moved to a hotel and stayed there for one week until they could find a new house to rent. Becker sues the Smiths for nonpayment of rent and the Smiths countersue for their moving fees and hotel bill. Who wins?

The Smiths, because they were constructively evicted from the house

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

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

Tamra leases office space from Larry. During the term of the lease, Tamra assigns the lease to Amy. After three months, Amy stops paying rent. If Larry sues Tamra for the unpaid rent, will he win?

Yes, because Tamra remains liable under the lease even after the assignment occurred

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

Yes, because the fireplace is a fixture

Kathleen, a single woman, applied for an Exxon credit card. Exxon rejected her application without giving any specific reason and without providing the name of the credit bureau it had used. When Kathleen asked for a reason for the rejection, she was told that the credit bureau did not have enough information about her to establish creditworthiness. In fact, Exxon had denied her credit application because she did not have a major credit card or a savings account, she had been employed for only one year, and she had no dependents. Did Exxon violate the law?

The court held that Exxon violated both the Fair Credit Reporting Act (FCRA) and the Equal Credit Opportunity Act (ECOA). The FCRA requires Exxon to tell Kathleen the name of the credit bureau that it used. Under the ECOA, Exxon was required to tell Kathleen the real reasons for the credit denial.

Joel and his brother, Joshua, were toddlers when their father left them asleep in the rear seat of his automobile while visiting a friend. A cigarette lighter was on the dashboard of the car. When Joshua woke up, he began playing with the lighter and set fire to Joel's diaper. Do the parents have a claim against the manufacturer of the lighter under the Consumer Product Safety Act?

The court held that the plaintiff did not have a claim because there was no evidence that the manufacturer had knowingly violated a consumer product safety rule.

Marta places a large, prefabricated plastic greenhouse in her backyard, with the steel frame bolted into concrete that she poured specially for that purpose. She attaches gas heating ducts and builds a brick walkway around the greenhouse. Now, the town wants to raise her real property taxes, claiming that her property has been improved. Marta argues that the greenhouse is not part of the real property. Is it?

The greenhouse is a fixture and is part of the real property

Kenmart Realty sued to evict Mr. and Ms. Armondo from a residential apartment for nonpayment of rent and sought the unpaid monies, totaling several thousand dollars. In defense, the Armondos claimed that their apartment had toxic mold. They testified that there were large patches of dark mold in the walls and floor of the living room, bedroom, and kitchen, that there was a foul odor from the mold and that they had begun to suffer frequent headaches. They testified that the landlord had refused numerous requests to remove the mold. Please rule on the landlord's suit, assuming that they reside in a jurisdiction with the implied warranty of habitability.

The landlord will lose because the conditions violate the warranty of habitability

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

The movie makers under the fair use doctrine

Jonah bought 12 paintings from Theo's Art Gallery at a total cost of $1 million. Theo told Jonah that the paintings were a safe investment that could only go up in value. (If anyone ever tells you that, run!) The gallery permitted purchasers to trade in a painting in return for any other artwork the gallery owned. In the trade-in, the purchaser would get credit for the amount of the original painting and then pay the difference if the new painting was worth more. When Jonah's paintings did not increase in value, he sued Theo for a violation of the securities laws. Were these paintings securities?

The paintings were not securities because there was no "common enterprise." The investors did not pool funds or share profits with other investors.

Mantra Films sold Girls Gone Wild DVDs online. When customers ordered one DVD, the company would enroll them automatically in a "continuity program" and send them unordered DVDs each month on a "negative-option" basis, charging consumers' credit cards for each DVD until consumers took action to stop the shipments. Is Mantra's marketing plan legal?

This marketing plan was deceptive because customers were not told that they would be enrolled in the continuity program. Also, Mantra could not legally bill for the unordered DVDs. Under the unordered merchandise rule, consumers had the right to treat them as gifts

Thomas, aged 80, has spent a lifetime accumulating unspoiled land in Oregon. He owns 16,000 acres, which he plans to leave to his five children. He is not so crazy about his grandchildren. Thomas cringes at the problems the grandchildren would cause if some of them inherited an interest in the land and became part-owners along with Thomas's own children. Should Thomas leave his land to his children as tenants in common or joint tenants?

Thomas is better off leaving the land to his children as joint tenants. That way, when one of his children dies, that child's interest in the land will go to Thomas's surviving children, not to his grandchildren.

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

Tom, because Brady did not follow the proper eviction procedure

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

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

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

Yes, Major has engaged in predatory pricing

Are horizontal price-fixing and vertical price-fixing per se violations of the Sherman Act?

Yes, No

Tenant signs a two-year lease with Landlord. Upon expiration of the lease, Tenant moves to a new property. Two months later, Tenant writes to Landlord requesting the return of the $2,000 security deposit Tenant had paid at the start of the lease. Landlord responds that Landlord put the deposit towards professional cleaning and repair work that was needed in the leased property because Tenant had left it in such awful condition. If Tenant sues Landlord, can Tenant recover any money?

Yes, Tenant may be able to recover up to $6,000 in some states

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

Yes, as a tipper

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

Yes, because Clean Mouth omitted important information from its claim

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

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

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

Yes, because Jones has adversely possessed the land.

Donna and Carl Nichols each bought term life insurance from Prudential Insurance Company of America that contained a rider providing that if the insured became disabled, the premiums did not have to be paid and the policy would still stay in effect. This term is called a "waiver of premium." Carl became totally disabled, and his premiums were waived. Some years later, two Prudential sales managers convinced the Nicholses to convert their term life insurance policies into whole life insurance policies. They promised that, once Carl made the conversion, he would only have to pay premiums on the new policy for a six-month waiting period. They even wrote "waiver of premium benefit to be included in this policy" on the application form. Only after the new policy was issued did the Nicholses learn that Prudential would not waive the premium. The Nicholses had exchanged a policy on which they owed nothing further for a policy on which they now had to pay premiums that they could not afford. Do the Nicholses have a claim against Prudential?

Yes, the Nicholses can recover both compensatory and punitive damages from Prudential

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

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