Business Law Exam 2 Content

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.

Depending on state law, if a lender violates the usury laws, the borrower could possibly be allowed to keep:

(ALL OF THESE) I. the interest that exceeds the usury limit. II. all the interest. III. all of the loan and the interest.

To have an illegal monopoly, a company must:

(I) control the market, and (II) maintain its control improperly

The duty of care: (a) Is not a requirement of the business judgment rule (b) Protects directors who make an uninformed decision if it was entirely fair to the company (c) Protects a decision that has a rational business purpose, even if the activity was illegal (d) Will not protect directors who make a decision that harms the company

(b) Protects directors who make an uninformed decision if it was entirely fair to the company

If a manager engages in self-dealing, which of the following answers will NOT protect him from a finding that he violated the business judgment rule: (a) The disinterested members of the board approved the transaction (b) The transaction was of minor importance to the company (c) The disinterested shareholders approved the transaction (d) The transaction was entirely fair to the corporation

(b) The transaction was of minor importance to the company

CPA QUESTION: Assuming all other requirements are met, a corporation may elect to be treated as an S corporation under the Internal Revenue Code if it has:

100 or fewer stockholders.

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

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

Which of the following items cannot be trademarked?

A surname

Clean Earth, Inc. is a Delaware benefit corporation that produces cleaning products using 100 percent recycled, organic, and sustainably produced materials. Several years ago, it became a socially conscious organization and has fulfilled all of the reporting requirements since then. Clean Earth executives have decided to purchase its paper product supplies (such as napkins and toilet paper) from a new supplier, who plants two trees for every tree it uses. Since this supplier charges five times more than Clean Earth's previous supplier, profits from Clean Earth's paper products are expected to be cut in half. If a Clean Earth shareholder challenges the decision as being unfair to shareholders, how will a court likely rule?

Against the shareholders, if it finds that Clean Earth has acted in a "responsible and sustainable manner."

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 (Angela, Samantha, and Ed)

Bob and Marsha co-own a house. In which of the following situations are they tenants in common? a. They inherited the house from their Aunt Laurel, who left the house in her will "to Bob and Marsha." b. Bob and Marsha bought the house as a married couple and are now divorced. c. Marsha bought the house with Jon as joint tenants, and Jon sold his interests in the house to Bob.

All of these answers are correct.

A corporate stockholder is entitled to which of the following rights?

Approve dissolution

An existing collective bargaining agreement (CBA) has expired, and the union and company are unable to reach an agreement on economic issues during negotiations for a new CBA. The expired CBA has a no-strike clause and states that the terms of the old CBA will continue in force as long as the parties are negotiating a new CBA. The union goes on strike, and the company refuses to continue negotiations until the union at least agrees that continuing to bargain would not waive the company's claim that the union had illegally struck. Eventually, the two sides return to bargaining after the company hires replacement workers. The striking workers offer to return to work, but the company refuses to rehire many of them. In court, the union claims that the company committed an unfair labor practice (ULP) by (1) insisting the strike was illegal and (2) refusing to bargain until the union acknowledged the company's position. Why it is very important to the union to establish the company committed a ULP?

Because if the union's strike was a ULP strike, the company is required to rehire the workers.

The CBA at Red Corp. has expired, as has the CBA at Blue Corp. At Red, union and management have bargained a new CBA to impasse. Suddenly, Red locks out all union workers. The next day, during a bargaining session at Blue, management announces that it will not discuss pay increases.

Blue has committed a ULP, but Red has not.

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.

While working part-time at a Supercorp restaurant, Jenna spills a bucket of hot french fries on a customer. Who is liable to the customer?

Both Jenna and Supercorp.

Foster is a reporter for the Daily Journal where he writes a column on Wall Street gossip. His columns often affect the stock prices of the companies he writes about. He tells his friend, Ken, who is a stock broker, about some of his columns before they run. Ken trades on this information. Which of the following statements are true?

Both of these are true (both Foster and Ken are guilty of misappropriation)

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

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

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.

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

Copyright

Russell and Rachel have designed a new type of cell phone that they believe will revolutionize the market. They would like to start a company to produce, market, and sell the phone, and they know that they will need a considerable amount of up-front capital investment to develop a prototype and later to create inventory to sell. What is the best form of business for Russell and Rachel?

Corporation

Which of the following activities is legal under Title VII?

Craig refuses to hire Ben, who is blind, to work as a playground supervisor because it is essential to the job that the supervisor be able to see what the children are doing.

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.

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

Camille has been working at a new architecture firm for eight months when she learns that her co-worker Ryan earns $10,000 more than she does each year. Camille is shocked because she and Ryan perform identical services for the firm and have the same rank. What should Camille do?

File a claim with the EEOC regarding a violation of the Equal Pay Act.

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.

George and Susan open a dry-cleaning business together, but do not execute any documents or perform any formalities other than obtaining a "d/b/a" certificate for their business name: "G & S Clean." One day, when George is out for lunch, Susan burns a large hole in a customer's fur coat while cleaning it. Who is liable for the cost of the coat?

G & S Clean is liable, and both Susan and George are personally liable.

Alan and Ivan opened a kosher delicatessen, Main Court, which failed after barely a year in business. One supplier sued for overdue bills. Alan and Ivan will be liable to the supplier if Main Court was which of the following types of organizations?

General Partnership

George is president of Plumbers, Inc. He signs a contract with Susan, which calls for Susan to perform some services and receive $10,000. Susan performs, but Plumbers does not pay. Which of the following, if true, will grant Susan the right to recover from George personally?

George commingled personal assets with corporate assets.

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.

When Brook went to work at an advertising agency, his employment contract stated that he was "at-will and could be terminated at any time." After 28 months with the company, he was fired without explanation. Which of the following statements is true?

He could be fired for any reason except a bad reason.

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

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

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

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 (disability & health)

Which of the following statements is true?

In about half the states, employees have the right to bring guns into their workplace parking lot.

AB has three partners, Ramon, Janna, and Jackie, and $20,000 in assets when it begins its winding-up process. FAB owes $20,000 to a supplier, $25,000 on a bank note, and $5,000 to Jackie for a loan she gave to the partnership. FAB does not have a partnership agreement. What financial rights and obligations does Jackie have?

Jackie must pay a net amount of $5,000.

A random drug test of Fire Department yielded surprising results: Lily, a firefighter, tested positive for a prescription sleep aid; Maria, the fire house secretary, tested positive for amphetamines, which are prescription drugs for stimulation. Lily and Maria both have prescriptions for these drugs, but the drugs are not permitted under the Fire Department rules. The Fire Department fires Lily and Maria. Has the Fire Department violated the law?

Lily's termination is legal; Maria's is illegal.

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

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

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

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

Which of the following employers has violated Title VII?

Max hired a male corporate lawyer because his clients had more confidence in male lawyers.

Which of the following activities would not be considered sexual harassment?

Nancy yells "Crap!" at the top of her lungs every time her Rotisserie Baseball team loses

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 e-mail 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, nor III

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.

Neither I, II, nor III

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.

An elementary school custodian hit a child who wrote graffiti on the wall. Is the school district liable for this intentional tort by its employee?

No if he was an independent contractor, unless the school was negligent in hiring him.

Hannah is a restaurant manager where Ben works as a server. Hanna often flirts with Ben, telling him he gets the most tips because he is "so hot" and asking him to wear a smaller size uniform so she can see his muscles. One day, Hannah is showing a group of the servers pictures from her recent vacation and she said, "The only thing that would have made it better is if Ben was there, so I could see him on a beach without his shirt on." Ben is not actually bothered by any of Hannah's comments, but some of the other servers find them inappropriate. Does Ben have a claim for sexual harassment?

No, because Ben is not actually bothered by Hannah's conduct.

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

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

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

No, because Dr. Kaminsky was constructively evicted.

George is a gay mechanic who works for a national chain of car repair shops. George's boss, who did not know George is gay, often made comments about his opposition to gay marriage and his belief that a gay man could never be a good mechanic. One day, George's boyfriend drops George off for work and as George's boss is pulling into the parking lot, George kisses his boyfriend goodbye. The next day, George is fired. Does George have a claim for discrimination under Title VII?

No, because George is not a member of a protected category.

Malcolm is a newscaster for a national television network with hundreds of employees. He is steadily promoted to roles with more on-air time and asked to cover major news stories until he turns 35. At that point, Malcolm starts noticing that he is passed over for promotions for younger coworkers with less experience. When he asks why, the network tells Malcolm that his coworkers are more energetic, and that his age makes him out-of-touch with the young viewers. Does Malcolm have a claim under the Age Discrimination in Employment Act ("ADEA")?

No, because Malcolm is not old enough to be protected by ADEA.

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

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

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

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

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.

Zack, Gavin and Breana were college friends who decided to go into business together as a party equipment rental service. The three budding entrepreneurs formed as equal owners a Limited Liability Company (LLC) named "Parties R Us." The written operating agreement gave only Zack the authority to manage the business, hire and fire employees, and purchase equipment. Zach contributed to the LLC his knowledge in the party business (his family had owned a similar company), and Gavin and Breana each contributed $100,000 capital. Over the next year, Zack ran the business, but he did not consult with Gavin and Breana, and no meetings were held. When Gavin and Breana asked what was going on with the company, Zach said he was too busy to talk about it. At the end of the first year, despite Zach's best efforts, the LLC's cash was depleted and its liabilities significantly exceeded its assets. To make matters worse, a defective Parties R Us tent had collapsed onto a wedding group, causing serious injuries. One of the wedding guests, Margaret, sued the LLC and received a $500,000 judgement against them. Because the LLC cannot pay Margaret, is it likely that Zack, Gavin, and Breana will be held personally liable for the judgment?

No, because the LLC was an entity independent from its owners.

Frank, the CFO of Springer, Inc., concealed temporary financial losses the company suffered early in the fiscal year in Springer's annual report submitted to the Securities and Exchange Commission (SEC). It is illegal to submit fraudulent SEC filings, but Springer's financial situation had already improved greatly by the time the annual report was filed and Frank did not want to unnecessarily alarm shareholders. When news that Springer submitted fraudulent financials to the SEC broke, the company's stock price dropped by 15 percent and shareholders sued Frank under applicable securities laws. Frank defended on the basis that his actions were protected by the business judgment rule because he was acting in the company's best interests. Was Frank correct?

No, because the business judgment rule does not protect illegal activities.

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

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

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.

A law firm requires that applicants for paralegal positions take a technology skills test and will hire only individuals who can type a certain number of words per minute, create sophisticated spreadsheets, and compile a slideshow presentation in under a certain amount of time. All of these are tasks the firm routinely asks paralegals to perform. Many more black applicants fail the test than white applicants. Does the test violate Title VII?

No, because the requirement is job-related and there are not less discriminatory ways to achieve the same result.

The Fellowship is a not-for-profit corporation whose primary purpose is promoting goodwill among churches and synagogues. Its annual meeting featured various vendors with display booths. Keener, a church representative, approached the booth of Chris's Cars and Trucks (CCT) about buying a bus for his church. While Keener was test-driving one of CCT's buses, the brakes malfunctioned, and Keener was killed in the resulting crash. If CCT is liable for the accident, could The Fellowship also be liable as CCT's principal?

No, because there was no control or consent between CCT and The Fellowship.

Air USA, a private airline, requires all of its pilots to take annual eye exams to ensure that they are able to properly read all of the airplane's equipment, which often includes reading data in very small print while flying the plane. Has Air USA committed a violation?

No, because this medical exam is related to a job requirement.

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.

The unionized employees of the Premier Music Center, which owns and operates a large concert hall, have gone on strike and are picketing in front of the venue for alleged unfair labor practices. Premier and its employees have worked closely for years with the non-unionized security guards employed by Safe Event, Inc., who also work in the hall and the nearby parking lot. May the Premier employees picket in front of the Safe Event's office as well?

No, the union can only picket in front of the concert hall.

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.

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

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

Wanda, Derek, and Mitchell formed B. Flowers, LLP three years ago. A year ago, Derek and Mitchell decided that the company was ready to open a new location and had B. Flowers take out a loan from a bank for the extra capital needed to expand. The new location has not performed well, and B. Flowers is unable to pay the remaining $50,000 owed to the bank. Is Wanda liable to the bank for the debt?

No, unless the partners have not complied with the LLP statutory filing requirements.

Marcus owns common stock in XO, an oil and energy company that is about to be liquidated. Is Marcus guaranteed to be paid in the process of dissolution?

No, unless there are assets remaining after all creditors and preferred stockholders are paid.

The German-American Vocational League was formed in New York during World War II to serve as a propaganda agency for Nazi Germany. Under U.S. law, all foreign agents were required to register, but neither the Vocational League nor its officers did so. When they were charged with violating U.S. law, they argued that they were not agents of the German government because they had no formal agency agreement. Is this a strong argument?

No. A formal contract is not necessary to establish an agency relationship.

Malik asks Petra, an expert in sports collectibles, to help him find a buyer for his collection of autographed baseballs. Petra finds a buyer who is willing to pay $5,000 for the collection, but Malik scoffs at the offer and insists it is worth at least double that amount. He says he would not even consider selling for less than $7,500. The next week, someone offers to pay $1,000 for the collection. Must Petra tell Malik about the offer?

No. If Petra has no reason to believe that Malik would be interested, she does not have to pass the offer on to him.

Sandy has no employment contract with her current employer and found a new job that would pay much more than her current job and, in accordance with company policy, gave her employer two weeks' notice that she would be leaving. Upset she was quitting, her employer terminated Sandy's employment immediately. Sandy cannot start her new job for two weeks. Sandy believes her employer has breached her employment agreement, and she should be paid for the two weeks she is unemployed. Is she right?

No. Sandy is an at-will employee.

Shapely Wear, a store that sells women's lingerie, undergarments, and sleepwear, posts the following on its website: "Now Hiring a New Sales Associate! 3 - 5 years of retail experience. Excellent people skills required. Ask for an application at the store. Women only - no boys allowed!" Has Shapely Wear violated Title VII?

No. The requirement that all applicants be female is a bona fide occupational qualification (BFOQ) in this case.

Wanda, a realtor, owns stock in Mackey Land, a publicly traded real estate development company. To market her own realty business, Wanda demands that Mackey Land provide her the list of Mackey Land shareholders. Is Wanda entitled to this information?

No. This is not a proper purpose to access company information.

Madeline interviews with Orson for a position at Perfunctory magazine. During their discussion of the position's responsibilities, Orson says that Madeline will have at least three bylines per issue. Orson offers her the job, and Madeline accepts. Madeline does not have a single byline in the next two editions of the magazine. The CEO of the Perfunctory tells Madeline that because Orson's byline promise is not in her contract, the magazine does not have to honor it. Is this true?

No. Verbal promises made during the hiring process are generally enforceable, even if not approved by the company's top executives.

Oil Co. was a controlling shareholder of Pogo, a company that drilled for oil and gas in the Gulf of Mexico. When some additional leases became available, Oil Co. purchased all of them for itself. Which of the following statements is true?

Oil Co. could avoid liability by proving that Pogo could not afford to pay for the additional leases

Pro Threads, Inc., an international designer clothing manufacturer, is acquiring by merger D-Satisfaction, a small manufacturer that specializes in fitted dresses. Dresses of this type account for one half of one percent of Pro Threads' sales. Do Pro Threads and D-Satisfaction shareholders need to approve the merger?

Only D-Satisfaction shareholders need to approve the merger.

Surgeons Dr. Martin and Dr. Kellogg are partners who decided to form a professional corporation together. After the business was established, the doctors went out to celebrate the new enterprise with some colleagues. Unbeknownst to Dr. Martin, Dr. Kellogg, who was on call that day, had to leave the party to perform emergency surgery on an accident victim. Unfortunately, Dr. Kellogg had too much alcohol at the dinner and was drunk during the procedure. As a result of his intoxication, Dr. Kellogg accidently cut a major artery in the patient's abdomen, and the individual bled to death on the operating table. A jury in the malpractice suit that followed awarded a $5 million judgment against Dr. Kellogg and the corporation. Insurance covered $1 million of the damages. Who would be responsible for the remaining $4 million?

Only Dr. Kellogg would be liable for the $4 million.

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

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

The board of directors of Athletic Stride, a successful sneaker company, votes to have the company purchase a professional basketball team for $500 million dollars. The directors are all knowledgeable about the professional sports industry, and none of them have a conflict of interest in the deal. When the shareholders oppose the purchase as being unrelated to the company's business, the board argues that, as the team's owner, Athletic Stride will have invaluable marketing and sponsorship opportunities. Would a court likely uphold the board's decision to purchase the basketball team?

Probably yes, because courts generally will support a board decision if there is even a remotely rational business purpose and no other breaches of the managerial fiduciary duties.

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

Kurt asked his car mechanic, Quinn, for help in buying a used car. Quinn recommends a Ford Focus that she has been taking care of its whole life. Quinn was working for the seller. Which of the following statements is true?

Quinn must pay Kurt the amount of money she received from the Ford's prior owner.

Generally, a corporation's articles of incorporation must include all of the following except:

Quorum requirements

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, Chip, Chip???

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

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

Kurt owns 55 percent of the New England Lumber Company (NELC) stock and is also the CEO. Kurt also owns two percent of the Boston Homes stock. Boston Homes is a construction company that builds houses throughout New England. Kurt wants NELC to provide Boston Homes with all of the lumber Boston Homes needs and to give Boston Homes a ten percent discount on all of its large orders. Four NELC board members who have no interest in Boston Homes form a special committee and approve the deal. If a NELC shareholder challenges the deal between NELC and Boston Homes in court, how should the court rule?

Strike down the deal unless it is entirely fair to NELC.

Lionel is the personal assistant to the head coach of a professional football team. At the end of the football season, a football player's wife gives Lionel front row tickets to the opera. What must Lionel do?

Tell his boss about the tickets. His boss may choose to keep the tickets for himself.

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.

Liam tells Emily that he wants to buy her friend Tamara's car, but does not think Tamara will sell it to him for personal reasons. Emily tells Tamara that she knows someone who would like to buy her car, and the two draw up a contract stating that Tamara will sell the car to "an undisclosed buyer" for $10,000. After Tamara has signed the contract and given Emily the keys, Emily has Liam sign the contract, agreeing to pay the $10,000 purchase price. Liam takes the car but disappears without paying. What, if anything, will Tamara be able to recover from Emily?

The contract price of the car because Liam is an unidentified principal.

Parker had just graduated from Howard University in Washington, DC at the top of his class with a B.S. in Computer Engineering. At just 19 years old, Parker was the youngest engineer to join a prestigious engineering firm in the nation's capital. Parker's colleagues, all with graduate degrees and in their 30s and 40s, are a somewhat jealous of his youth and abilities. They start to tease him about only having a Bachelor's degree, and about his young age. His manager nicknames him "rugrat" and someone leaves a brochure about Ph.D. programs at MIT on his desk chair. The last straw is another engineer programs Parker's computer to pop up images of dirty diapers whenever he tries to work on his system. If Parker files a claim for illegal harassment against the engineering firm, what result?

The firm wins because these actions are not illegal.

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.

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

The mark is arbitrary.

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.

Which of the following steps is not required in a disparate treatment case?

The plaintiff must submit to arbitration.

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

The seller can cancel orally or in writing.

The president of R. Hoe & Co., Inc., refused to call a special meeting of the shareholders although 55 percent of them requested it. One purpose of the meeting was to demand that the former president be reinstated. Do shareholders have the right to make these two requests?

The shareholders have the right to call a meeting but not to reinstate the president.

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

Tom, because Brady did not follow the proper eviction procedures.

CPA QUESTION - A principal will not be liable to a third party for a tort committed by an agent:

Unless the tort was committed within the scope of the agency relationship

Wilma is one of five equal members of Polar, LLC. This year, Polar generates $5 million in profits. The company reinvests $4 million into the company, leaving $1 million to be divided equally among the members. How are federal income taxes paid on Polar's profits?

Wilma (and each of the members) pays taxes on their $1 million share ($5 million divided by 5) of profits.

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

Yes (horizontal); No (vertical)

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

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

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 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.

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

Yes, and the court will order an abatement.

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.

Lynn had worked as a medical sales representative for Bravo Medical for nine years, and consistently met or exceeded her sales goals for the company. Bravo was so pleased with Lynn that they promoted her to regional manager, and asked her to work on increasing sales of a new pharmaceutical drug called "Superlatin." Superlatin was developed as an allergy medication, and it had moderate success on the market for this use. The drug, however, was even more effective at resolving male impotency, so much so that its nickname was "Romeo." Bravo Medical asked Lynn to market Romeo to medical prescribers as a drug to treat impotency, even though it had not been approved by the Food and Drug Administration (FDA). Bravo's Medical Research Director insisted that Romeo was safe for use in men to resolve this issue. Lynn refuses to market the drug for anything other than the allergy application and is fired by Bravo. Does Lynn have a case for wrongful termination?

Yes, because Bravo asked Lynn to violate the law.

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.

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

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

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

Yes, because Mark negligently performed a repair.

Figgins is the dean of a college. He appointed Sue acting dean while he was out of the country and posted a message on the college web site announcing that she was authorized to act in his place. He also told Sue privately that she did not have the right to make admissions decisions. While Figgins was gone, Sue overruled the admissions committee to admit the child of a wealthy alumnus. Does the child have the right to attend this college?

Yes, because Sue had apparent authority.

Gordon, an executive at EIR, Inc. and his secretary, Susannah, entered into a sexual relationship. During the course of their six-month affair, Gordon used his influence at the company to ensure that Susannah was promoted from receptionist to secretary to executive administrative assistant. When Susannah broke off their relationship, she was demoted to being a clerk in the mail room. Susannah filed a sexual harassment suit against Gordon and EIR. Assuming that Gordon's conduct constitutes sexual harassment, will EIR be liable?

Yes, because Susannah suffered a tangible employment action.

Tejasi brings suit against her employer under Title VII for disparate treatment on the basis of Tejasi's national origin. At trial, Tejasi proves that she is an Indian immigrant and that she was demoted at work after her boss stated to several coworkers: "Outsourcing is sending all of the good American jobs to India. I cannot believe that companies are giving good jobs to Indians in our own country, too." Tejasi's employer argues that her demotion was based on her poor performance and offers a poor review Tejasi received one week after the boss made his comment and one day before the demotion. Will Tejasi win her suit?

Yes, because Tejasi can likely prove that the poor review was merely pretext.

Michi Corp.'s board of directors has determined that the insolvent company will not be able recover financially and it is best to terminate the corporation. The board unanimously votes to dissolve and makes a recommendation to dissolve to the shareholders, but only 40 percent of the shareholders vote to approve dissolution. The shareholders insist that Michi is simply mismanaged and can be saved if the board appoints a new CEO. May the Michi board request a court to order dissolution of the company?

Yes, because a court may dissolve a corporation if it is insolvent or if its directors and shareholders cannot resolve a conflict over corporate management.

An amusement park in Florida is developed with an international theme section with restaurants, shops and attractions, each based on a different country. Each specific country section plans to hire "culturally authentic" employees that are natives of each nation. Before opening the park, the company's market researchers surveyed customer preferences related to the various nations that would be represented there. For the Germany section, market survey respondents believed that all Germans have blond hair and blue eyes. When hiring begins for the park, Sebastian, a German national overseeing the staffing of the Germany segment, employs many individuals of German origin that have the blond hair-blue eyes combination. Max, an Afro-German gentleman from Berlin, applies for a position in the park's "Germany." Sebastian decides not to hire Max, even though he qualifies for the job, because his race does not fit the customer preference and expectation for the Germany segment. Has the park discriminated against Max?

Yes, because a customer preference will not support a bona fide occupational qualification exception.

Barbara had a dream of opening her own bakery she planned to name "Sinful Sweets." While she saved money to start her business, she worked for a big commercial baker known as "The Bread Factory." The Bread Factory made many different types of bread, but none of the sweet baked items Barbara hoped to offer in her own shop. So, while Barbara made French baguettes and sourdough loafs, she thought about cupcake icing and baking the perfect chocolate chip cookie. Soon, the daydreaming led to snips of time searching the internet on her mobile phone for recipes; then she progressed to starting a file on her supervisor's computer desktop filled with ideas and saved searches. Barbara started testing her recipes using the bakery's materials, and she found that all her efforts were making her a better and more efficient baker. Once she had tested all her recipes at the bakery, Barbara's next step was to take two accumulated sick days to search for a storefront for Sinful Sweets. She found the perfect spot and provided two weeks' notice to The Bread Factory, including one week of vacation she had saved. Has Barbara through her actions breached a duty of loyalty to her soon-to-be former employer?

Yes, because she used The Bread Factory's resources and time to prepare for her own business.

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

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

Employees of Triec, Inc., a small electrical contractor, contacted the International Brotherhood of Electrical Workers and began an organizing a unionization drive. Six of the 11 employees in the bargaining unit signed authorization cards. Triec declined to recognize the union, which petitioned the NLRB to schedule an election. Triec then granted several new benefits for all workers, including higher wages, paid vacations, and other measures. When the election was held, only two of the 11 bargaining unit members voted for the union. Did Triec violate the National Labor Relations Act (NLRA)?

Yes, because the company interfered with the union organization.

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

Yes, because the fireplace is a fixture.

Jamal worked for a delivery company, and he was driving sometimes up to 10 hours a day. One afternoon, on the way back from making a delivery in his neighborhood, Jamal stopped at the uniform shop to pick up some shirts he needed for work. Usually he would run his errands in his personal vehicle after the day ended, but the uniform shop was on the way to his next delivery anyway. As he turned into the shopping center, Jamal was not paying attention and hit a bicyclist crossing the road, seriously injuring him. Is Jamal's delivery company liable for the bicyclist's injuries?

Yes, because the stop was a minor detour from his work.

Hank, a science professor, attends a cultural sharing and team-building event for university faculty, during which he reveals that he is a practicing Muslim. Shortly after, the head of the science department begins asking Hank many questions about his ability to separate his beliefs from his teaching material. The department head requests that the university revoke Hank's access to the chemical research labs because "Hank's extreme beliefs create a liability for the school if he has access to these dangerous substances." Hank files a Title VII suit claiming a hostile work environment on the basis of his religion. The next semester, the university cuts the funding for Hank's ongoing research project and informs him that he will be co-teaching one course, rather than his normal three courses. Has the university committed a violation beyond the potential hostile work environment?

Yes, because the university's actions towards Hank would deter a reasonable university employee from complaining about discrimination.

An appraiser valued a subsidiary of Signal Co. at between $230 million and $260 million. One month later, Burmah Oil offered to buy the subsidiary at $480 million, giving Signal only three days to respond. The board of directors accepted the offer without obtaining an updated valuation of the subsidiary or determining if other companies would offer a higher price. Members of the board were sophisticated, with a great deal of experience in the oil industry. A Signal Co. shareholder sued to prevent the sale. Is the Signal board protected by the business judgment rule?

Yes, because they acted in good faith.

Beatrix is a diamond dealer who also works as a jewelry designer at Bunny Mayhew Designs (BMD). Beatrix arranges to have one of her own company's salesmen meet with a BMD representative to try to sell some of Beatrix's available stock. May Beatrix do this?

Yes, but Beatrix must tell BMD that the salesman works for her.

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.

Fitness World is a corporation with 75 shareholders that are individuals who all hold common stock. At an annual meeting, the shareholders unanimously voted that Fitness World should register as an S corporation with the IRS so that the shareholders may enjoy the flow-through tax benefits. Is Fitness World eligible to register as an S corp?

Yes, if all of the shareholders are U.S. citizens or residents.

Mack is the local owner of a restaurant franchise. Though the national chain is known for its hotdogs, Mack wants to sell vegetarian burritos. Must Mack get permission from the franchisor?

Yes, if the franchise disclosure document demands it.

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.

Denise was a promoter for a proposed corporation, EVR-Young Corp. As promoter, she signed a three-year lease to rent office space from Landlord. She signed her name and indicated below her signature she is signing as "promoter for EVR-Young Corp., a company yet to be incorporated." EVR-Young never files incorporation documents with the state. Is Denise personally liable for the lease?

Yes, she remains liable as the promoter on a contract for which there has been no novation.

Sammy's, Inc. is a publicly traded company. Sammy's board of directors appointed Jeb as CEO. Jeb has made a number of blunders, which drove Sammy's deeply into debt. In its first meeting in six years, the board of directors votes for Sammy's to file for bankruptcy. Has the board committed any violations?

Yes, the board has breached its duty of care.

In order to obtain limited liability, Tom and Doris properly formed a limited liability company (LLC) to operate their catering business. They sometimes deposited the proceeds from catering jobs into their personal checking accounts, and if they needed to pay personal bills and were short of funds, they used the business account. If creditors of the business cannot get payment for their invoices, will a court order Tom and Doris to pay the creditors using their personal assets?

Yes, the court can pierce the veil of an LLC because Tom and Doris commingled assets.

After Classic Corp. went public at $12 a share, it began suffering many years of losses. Isaac Fogel, who owned 64 percent of the stock, decided to take the company private again by buying shareholders' stock at a price of 20 cents a share. Classic hired two financial advisers who opined that the buyout price was fair. The board of directors voted in favor of the sale and then scheduled a special shareholder meeting to vote on the buyout. Do the minority shareholders have any rights?

Yes, they have legal protection and are owed a fiduciary duty from the majority shareholders.

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.

Olivetti Office U.S.A., Inc., has unionized workers. The company's president reported to the union that Olivetti was losing money. He insisted that unless the union renegotiated certain wage increases in the current CBA, Olivetti would subcontract work to cheaper parts of the country to save money. The union requested to bargain over the proposed subcontracting, and Olivetti agreed. But when the parties met, the company would not permit the union to see the financial data that supported its arguments. After several meetings, the company declared an impasse, implemented its subcontracting proposal, and laid off workers in Connecticut. The union claimed this was an unfair labor practice (ULP). Was it?

Yes, this was a ULP because the union has the right to see the financial statements.

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

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

Fiona, an employee at-will of Prestige Exterminators, is promoted to the manager of the accounting department. She notices that the some of the accounting procedures are not in line with the Foreign Corrupt Practices Act of 1977; so she implements some policies to bring Prestige into compliance with the anti-bribery statute. A week later, Fiona is fired for "interfering with the company's operations." Does she have a claim for wrongful termination?

Yes. Employees cannot be fired for refusing to break the law.

Under the FMLA:

both men and women are entitled to take a leave of absence from their jobs for childbirth, adoption, or a serious health condition of their own or in their immediate family

A limited liability company:

can have an oral operating agreement.

Taylor Swift wanted to trademark her song lyrics: "And I'll write your name." She_____________

can trademark it because it is a short phrase associated with her entertainment services.

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. (???)

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

credit cards.

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

it has not ever been used anyplace in the world.

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.

A limited liability partnership:

protects the partners from liability for the debts of the partnership.

A sole proprietorship:

requires no formal steps for its creation.

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

tells potential customers that their returns on a whole life policy are certain to be higher than an equivalent amount invested in the stock market. (??)

Under Regulation Crowdfunding:

the issuer may sell only through one online platform.

An employer can legally require all employees to have a high school diploma if:

the nature of the job requires those skills

An unemployed CPA generally would receive unemployment compensation benefits if the CPA

was fired as a result of the employer's business reversals.

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.

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

you must return it, but the company must reimburse you for postage