blw exam 3
Which of the following is a service mark?
The Geek Squad at Best Buy.
Walter filed for bankruptcy. Which of the following is true immediately after he files?
An automatic stay is granted and debtors may not collect any debts from Walter.
Which of the following is a debt that is dischargeable under the Bankruptcy Code if the debtor can prove undue hardship?
Bernice took out a $32,000 student loan to attend a master's program in accountancy.
Failsafe Securities Incorporated has filed bankruptcy. Among the investors in Failsafe, who will be paid first?
Bondholders
Porter and Dolly are in a business to sell Porter's locally famous chili. Dolly agrees to handle the sales and marketing and Porter agrees to oversee making the chili. They do not enter into a formal agreement, written or otherwise. Which of the following business types is this?
General partnership type known as an implied partnership.
Mike has written a novel. When, if ever, would Mike's novel be copyright protected?
The novel is copyrighted automatically after completion.
A unanimous consent resolution is a/an.
document signed by each principal to dispose of necessary tasks such as electing directors or issuing stock
Sean, Gertie and Manfred formed a limited liability corporation (LLC). All three had the power to bind the LLC. This form is known as a/an
member-managed LLC.
Murder is the killing of a human being with malice aforethought. Malice aforethought is the premeditation and planning of the crime. Malice aforethought shows that one considered the consequence of the action and knowingly committed the crime. The malice aforethought would be the __________________.
mens rea
Geoff and Matilda formed an LLC. Their LLC will be most likely be treated as a __________ for tax purposes
pass-through entity
The type of corporation that generally has the highest number of shareholders is the
publicly held corporation.
Each of the following is considered trade dress except
the white linen tablecloths at the Four Seasons Restaurant in New York City.
Baxter, Carney and Davidman are general partners in BCD Architects and have a written agreement that sets the expiration of their partnership at ten years. On his own initiative, Baxter decides to leave the partnership after eight years. As a result of the loss of Baxter's expertise, three months later, the partnership breaches a contract to design a building by a certain time and is sued for $1 million. Which of the following is true?
Baxter has wrongfully dissociated and will be liable for damages suffered by the partnership after he left
Brenda is the CEO of a large corporation. While presenting a proposal to a commercial bank for a corporate loan, she offered the bank's commercial loan manager a $10,000 "gift" for favorable treatment. Is Brenda guilty of bribery?
Brenda is not guilty of bribery.
Enrique owns Enrique's Investigation Agency (EIA). He has been getting behind on bills because some clients have failed to pay on time. If he wants to receive temporary protection for EIA from creditors so that he can continue operating his business while devising a plan to pay them, which type of bankruptcy protection should Enrique pursue?
Chapter 11
Tashawna wants to open a modeling agency, be the principal thereof, and have no personal liability for debts. Which of the following organizations would best suit her needs?
Corporation
Which of the following is not an example of a trademark lost, or in danger of losing protection, due to its becoming a generic term?
Ford
A preferential transfer is illustrated by which of the following examples?
Fraley paid off a debt of $25,000 to First Trust Bank, then filed a petition for bankruptcy two months later.
Which of the following does not require a duty of care or good faith to other principals?
Gary owns a shoe repair business as a sole proprietorship and serves dozens of regular customers.
In Metro-Goldwyn-Mayer Studios v. Grokster, Ltd., Grokster claimed a fair use exception to the copyright infringement claim because its process was such that it was impossible for Grokster to know if the users of its device were infringing or not. Which of the following was the outcome?
Grokster was denied the fair use exception because the majority of its business model was dedicated to appealing to former Napster customers and the model showed intent to infringe on copyrights.Correct
Which of the following is not generally a rationale for piercing the corporate veil?
Inadequate capitalization, failure to follow corporate formalities and fraud or wrongdoing by corporate directors are all considered rationales for piercing the corporate veil.
Baker stole $5,000 from Mindy, his ex-girlfriend. He was sued in court for the theft by Mindy. What is the classification of this case and what will be the standard of proof that will apply?
It is a civil case and the standard of proof is preponderance of the evidence.
Reginald, Dwight and Elton formed a limited liability corporation (LLC) with a maximum term of five years. At the end of the term and with the LLC highly successful, Reginald and Dwight wanted to continue the LLC for five more years, but Elton did not. If the vote stands at two to one, what result for the LLC
It will continue but have no fixed term.
Which of the following is an example of a suggestive trademark?
Netflix
The Department of Education proposed a new rule that was published in the Federal Register. What is the next step in the process?
Public comment
The Federal Agency of Automotive Repairs (FAAP) revised a rule that had been originally proposed but not yet published as final. Under these circumstances, what is the legal obligation that the FAAP has to provide in terms of additional comment periods?
The FAAP has no obligation to provide an additional comment period.
Teddy holds a bond issued by XYZ Corporation that has matured. What has happened to his bond?
The face value of the bond is due to be paid to him.
Which of the following is an attribute of privately held corporations?
They are not limited in terms of revenue.
In which of the following occasions would formal rulemaking be used by a federal agency?
When Congress has specifically indicated in the enabling statute that agency rules must be made on the record after a hearing.
Misty and Kate opened a coffee shop in their home state, Massachusetts. They incorporated their shop, Misty Kate's Coffee Adventure, Inc., in the state of Massachusetts. In Massachusetts, Misty Kate's would best be characterized as
a domestic corporation.
The three stripes on Adidas clothing represent
a trademark.
Janet was tried and convicted of reckless driving. The sentence will be imposed
based on the discretion of the judge, subject to sentencing guidelines.
The No Electronic Theft Act primarily addressed protection regarding
copyrights.
Theo and Vincent had a general partnership and wanted to form a limited liability partnership (LLP) for protection from personal liability. To form this, they must
file a statement of qualification with the appropriate public official.
Arnie experiences financial difficulties with his business, Arnie's Golf Emporium (AGE). He owes creditors $300,000 and has only $20,000 in assets. This includes his cousin Jack, whom he owed $15,000. Arnie pays off the entire $15,000 to Jack, leaving only $5,000 in assets and then one week later AGE files for Chapter 7 bankruptcy. The appointed trustee later determined that Jack would not have received anything under the distribution of assets under the Bankruptcy Code. This transfer is known as a
fraudulent transfer that can be voided and placed back into the bankruptcy estate.
The choice of establishing a member-managed or manager-managed limited liability corporation (LLC) is
generally made on a public filing and available for third parties to view.
Mitigating circumstances
if proved, may be applied to reduce a defendant's punishment.
Debtco no longer has enough assets to pay the usual business bills that arise. Debtco is considered
insolvent.
Under the Administrative Procedures Act, a federal district court judge has the power to void federal agency actions or aside actions inconsistent with the Constitution under the general power of whom?
judicial review.
Dissolution of a limited liability corporation (LLC) is a
liquidation process triggered by an event specified in the operating agreement.
The Computer Software Copyright Act defined computer software programs as
literary works.
Wally purchased a Gucci purse from Luxury Products-R-Us for his wife that cost $2,000 on April 1. He purchased this under a contract where he promised to pay off the $2,000 to Luxury Products-R-Us within 180 days. On May 30, Wally filed a petition for bankruptcy. Under the Bankruptcy Code, the debt is known as
nondischargeable.
Tom started a business selling footballs. Before filing articles of incorporation, he arranged for a bank loan and hired three people to run his store. Tom is known in corporate law as a/an
promoter.
The power of federal agencies as to when and whom to regulate is known as
prosecutorial discretion
Ignatio ordered his stockbroker to purchase 1,000 shares of National Motors stock on the New York Stock Exchange. The broker purchased the shares from a large institutional investor. This is a purchase on the __________ market.
secondary
Violet signed a contract agreeing to be primarily liable to pay off Jamilla's loan. Violet is known as a
surety.
Failco had several small debts but no realistic means of paying them off. Reggie, the owner of Failco, had not personally guaranteed any of the loans and owned no personal assets. He wants to simply shut down Failco and stop doing business and not pay off his creditors. This method is known as
the lights-out option.
All of the following are types of partnerships except
uniform liability partnerships.
Wilhelm has taken out a private loan from Community Home Bank (CHB). Credit was extended to him based on the fact that he had paid his loans off in the past, made a high income and was considered a good credit risk. CHB required no collateral. CHB is known as a/an
unsecured creditor.
A utility or business method patent will last for
20 years from the date of the filing of the application with the U.S. Patent and Trademark Office.
Mike has been hired by a publishing company to write a companion book for a particular text sold to college students. In 2010, Mike completes the companion book, and he signs over his copyright to the publisher. The publisher actually publishes the book in 2013. When will the publisher's copyright run out and expire?
2108
Mary Beth has written a novel. Copyright protection regarding her work will be for
70 years after her death.
Which of the following would not be a possible obstuction of justice charge?
A defendant takes the 5th Amendment when questioned by investigators.
Carlton was a director of Rich Financial, Incorporated. Which of the following are duties that Carlton owes to Rich Financial?
A duty of care and a duty of loyalty.
Which of the following would generally not be patentable?
A mathematical formula that allows one to calculate the gross national product.
Which of the following are exempt assets in a Chapter 7 bankruptcy?
Jessie declares personal bankruptcy and owns a diamond ring appraised at $1,500.
The Securities Exchange Commission is proposing new rules for the presentation of financial statements by publicly traded corporations. The agency expects to hear from several public accounting firms and corporations about the expected effects of the regulation. This is an example of what rulemaking phase?
Public comment.
Bunny is not allowed to file for Chapter 7 bankruptcy in her state. Which of the following would be a reason for this under bankruptcy law?
She makes too much money to pass the means test.
Katrina is upset that the Federal Agency of Secretive Things has refused to make information about their activities public. She wants the agency to hold some of their meetings in public. Which of the following would support her desire?
The Government in the Sunshine Act
Which of the following is true of general partnerships?
They involve two or more principals.
Which of the following is true of Subchapter S corporations?
They receive flow-through tax treatment.
What is the last step in the agency rulemaking process?
What is the last step in the agency rulemaking process?
Dixon is on trial for embezzlement, a crime. For her to be proven guilty, her guilt must be proved
beyond a reasonable doubt.
Meredith owns Meredith's Boutique and has fallen behind on her payments to creditors. She wants to turn around her business and settle past debts. This is known as a
workout.
Ashlyn, Devin and Mackenzie are engineers who set up ADM, LLP. They are equal partners for the purposes of running the firm and the distribution of profits. For tax purposes, the profits of ADM, LLP were $300,000 for the year. How much will Ashlyn, Devin and Mackenzie report for tax purposes for the year?
$0 in LLP income, $100,000 each in personal income.
Grady formed a sole proprietorship, Grady's Auto Paint Specialties (GAPS). He was hired by Redding to touch up the original paint on his rare collectible Ferrari. Grady negligently ruined the original paint job, reducing the value of the car by $100,000. Redding is suing Grady for the full amount. GAPS has only $60,000 in total assets. Assuming he wins his case and gets a judgment for the full $100,000, what amount can Redding collect?
$100,000, the total amount of the judgment.
LaTavian was a midlevel manager for Superco. He saw financial irregularities within Superco and reported them to the federal authorities. The SEC followed up on LaTavian's tip and discovered fraud at Superco which led to an SEC enforcement action and recovery from Superco. Under the Dodd-Frank law, what percentage of the recovery is LaTavian entitled to as a reward for being a whistle-blower?
10 to 30 percent
A design patent will last for
14 years from the date of the filing of the application with the U.S. Patent and Trademark Office.
McDonald has invented a machine that harvests corn in the field, automatically shucks the corn from the husk, and peels the kernels from the cob, separating everything for easy disposal or further use. Assuming that all requirements are met for a patent, the length of his patent protection will be
14 years from the filing of the application with the U.S. Patent and Trade Office.Correct
Aquilla worked as an engineer and artist for General Manufacturing, a large automobile manufacturer. She would come up with the unique look and styling of the company's line of performance cars. General Manufacturing has applied for patent protection for her styling on the cars. This patent will be valid for
14 years.
William is a director of National Cars, Incorporated. He understands that he should act in good faith and behave as a reasonably prudent person would under the circumstances in his dealings related to his position with National Cars. Which duty does this encompass?
Duty of due care
Garth is best friends with Wayne, the CEO of Great Pharma, Incorporated (GPI), a publicly traded corporation. GPI had just made an important discovery: the cure for cancer. The information has been kept secret by GPI. Before the news was made public in a press conference, Wayne told Garth about it on May 1 and that day Garth bought 10,000 shares of GPI stock. The press conference was on May 2 and after the announcement, GPI stock went up $50 a share. Garth immediately sold his stock and made $500,000. Garth is known in the law of insider trading as a/an
tippee.
Cellupro, a company that designed and manufactured cell phones, had a unique design to their products and a particular color for their phones and packaging. This design and color is known as
trade dress.
Isadora was the chief financial officer of Big Band Incorporated (BBI), a publicly traded corporation. She knew that BBI was about to announce record earnings for the year, a fact not yet made public, so she purchased 1,000 shares of BBI stock before the earnings were made public. One week later when the earnings were made public, BBI stock increased in value $10 per share and Isadora immediately sold her newly purchased shares and made $10,000. Isadora has committed
traditional insider trading.
Valentino patented a new and unique manufacturing process that his corporation used. This is known as a
utility patent.
Cynthia hates writing term papers and reports, so when she receives an assignment to write a paper for her law class, she calls her friend Stephanie and agrees to pay Stephanie to write the paper for her. Stephanie, instead of writing the paper, copies a paper from a small, remote law journal that publishes faculty-written papers from throughout the world online. When the plagiarism is discovered, an infringement claim is brought. Cynthia is guilty of
vicarious infringement.
Ginger declared bankruptcy and Jackie, her trustee, stopped a transfer to Thriftyco, a creditor, because she felt it gave an unfair advantage to Thriftyco over other creditors. This type of transfer that can be stopped by the trustee is known as a
voidable transfer.
Charlotte's Candies has decided to go out of business. Settling the affairs of the partnership and discharging partnership liabilities will occur during the ______________________ phase of the closing of a partnership.
winding-up
Which of the following is an application of the emergency escrow provisions created by the Sarbanes-Oxley Act?
The SEC required that a multi-million dollar payout to a fired corporate executive be held in escrow prior to formal allegations of wrongdoing.
A federal agency sought to inspect Hi-Tech Solutions, a business that was considered pervasively regulated. Under these circumstances, what must the federal agency obtain to conduct a regularly scheduled inspection of Hi-Tech Solutions?
The agency needs to obtain no warrant.
Zelda, the CEO of Fullerton Corporation, felt that a federal agency had enforced a rule in a manner that unfairly affected Fullerton and others in Fullerton's industry. Zelda challenged the final administrative rule in federal court on behalf of Fullerton. What standard will the court apply in reviewing the rule?
The arbitrary and capricious rule
Mike raped Kathy in the parking lot of Tom's Pub. The attorney general/district attorney's office prosecuted Mike on rape charges. Subsequently, Kathy filed a lawsuit against Mike for money damages. Classify each legal action.
The attorney general/district attorney's case was a criminal case; Jane's lawsuit was a civil case.
LeBaron was a corporate executive for ABC Solutions, Incorporated (ABC). He made a decision while managing ABC that turned out very badly and resulted in significant losses for ABC shareholders, even though it appeared reasonable at the time he made it. Which of the following would protect LeBaron from lawsuits against him filed by shareholders?
The business judgment rule
Kindley, Lipscomb and Manuel formed an LLP for their accounting firm, KLM, LLP. What duties do they have to report on taxes on behalf of the LLP to federal and state taxing authorities?
To file an information return informing the federal and state authorities of their profits and losses.
Luke declared a Chapter 11 bankruptcy for his business, Lukeco. There were ten creditors to whom he owed money and seven of them accepted the reorganization plan and three rejected it. Luke wants the court to force all creditors to accept the plan. This is known as the
cram-down provision.
The bespeaks caution doctrine focuses on the duty that a/an
issuer of stock has to include disclosures in the stock prospectus about cautions that an investor should take; it provides a defense to the issuer if the disclosures are specific and narrowly tailored.
Securities that are exempt from full registration requirements include all of the following except
large public offerings to unsophisticated investors.
Shirley, a policeman, was walking down a public sidewalk at night with her flashlight. She passed a parked car and shined her flashlight into it. In the back seat, she saw a bong and a baggie that obviously contained marijuana. From this, she obtained a search warrant to check the car more thoroughly and the owner was later arrested. Shirley's actions were
legal because it was a search of an area that was openly visible and authorities may use simple mechanical devices to aid searches without a warrant, and what she saw would support a subsequent warrant.
Josephine owned a fleet of school buses. The Department of School Bus Safety (DSBS) regulated school buses in the United States and Josephine's business was authorized by the DSBS to provide buses under the program. Due to numerous safety violations, the DSBS fined Josephine's business. This is an example of the DSBS's power over
licensing.
Weston and Noble wanted to form a music production business. They wanted to share profits and losses and have heightened protection from debts and liabilities. Which of the following business entities would be most appropriate for them?
limited liability partnership
The Department of Cute Ferrets, a U.S. federal government agency, has decided to make some revisions to a final agency rule. The proposed revisions are minor and within the original scope of the rule. These revisions will not automatically trigger the requirement for a second public comment period under the
logical-outgrowth test.
LaStarla was competing in a beauty pageant and was offended when Tracee, a fellow competitor, told her that she looked like a blimp in her evening gown. LaStarla flew into a rage and smashed her crown on top of Tracee's head, unfortunately killing her. The state of mind LaStarla had at the time of the killing is known as the
mens rea.
Irving is a creditor who has taken interest in real estate to collateralize a loan. Irving is known as a
mortgagee.
Acme Corporation attempted to register a trademark that was generic and not fanciful, arbitrary, suggestive or descriptive with a secondary meaning. Under these circumstances, Acme has
no case for registration of the trademark because a trademark must be fanciful, arbitrary or suggestive to be capable of being copyrighted.
Shelly was vice president of international sales for Techco, a private U.S. corporation. She was on a sales trip to Zimbabwe to land a contract to provide computers to the Zimbabwean government. While there, she gave a bribe of $50,000 to Anesu, a sales representative for Afritech, a private corporation, in exchange for Anesu withdrawing her bid on the contract so that Shelly could win. With respect to the Foreign Corrupt Practices Act (FCPA), under these circumstances, Shelly is
not in violation of the FCPA because the bribe was not to a government official.
Stan is an investment manager. He has received money from various investors and given them a promise of very high returns on their investments. The invested money is not supplying enough capital to pay the returns promised, so he has started using new investors' money to pay older investors. By advertising and by word of mouth, people are anxious to invest with Stan because of the money being paid, and with the influx of new investors, he is able to continue operating. Stan is
operating a Ponzi scheme.
Renate purchased common stock in XYZ Corporation, this gives her the right to
payments in dividends based on the current profitability of the company.
Wilder wants a loan for his small business. He approaches Ingalls, a banker, who agrees to give him the loan on condition that Wilder sign a personal guaranty. Under these circumstances, Wilder's
personal assets will be liable in the event he defaults on the loan.
Marcelino set up a business in which he was the primary shareholder, Boxing Stars, Incorporated (BSI), to market boxing gear and clothing. The company that leased Marcelino the retail space for BSI to do business demanded that Marcelino sign a document agreeing to pay them out of his personal assets if BSI defaults on the retail lease. The document that Marcelino signed is known as a
personal guarantee.
Limited liability partnerships (LLPs) are created by states in large part to deal with the
potential liability for acts of other general partners or the debts of the partnership itself.
Landers purchased stock in Monster Truck Corporation. His stock had quasi-debt features and gave him preference rights for receiving dividends from Monster. Landers likely has __________ stock.
preferred
With regard to the sale of securities, the Securities Litigation Uniform Standards Act of 1998 is intended to
prevent private parties from instituting lawsuits against corporations in federal or state court based on state laws that punish misrepresentations or omissions of material facts.
The management of Secure Securities, Incorporated decided to go public and issued stock on the New York Stock Exchange. This is known as the
primary market.
Talia, Shemp and Lola formed a corporation under the name Dependable Health Solutions, Inc., and advertise their services nationwide. All stock is owned by Talia, Shemp and Lola as principals, and none was offered to anyone outside the corporation. This would be classified as a
privately held corporation.
A pass-through entity is one in which
profits are taxed after they are distributed to individual partners.
Stan signed a contract in which he promised to pay back the party that loaned him money to purchase his house over the course of 15 years. This contract accompanied his mortgage. It is known as a
promissory note.
The Department of Homeland Security proposed new rules for the oversight of U.S. national borders. The rules were a substantial change from the original guidelines. After the members of the department studied and researched the issue and its effect on the department and how it achieved the goals set out by Congress in the enabling legislation, the next step in the process would be
publication of the proposed rule.
Maria is the CFO of a company being investigated by the SEC for various alleged violations. Each of the following would constitute an obstruction of justice except
refusing to answer questions and invoking the Fifth Amendment.
Cybersquatting describes the practice of
registering multiple domain names and then selling them back to companies at inflated prices.
With regard to the president's power over appointments in independent agencies that report directly to the president, the president has the power to
remove principal officers of agencies at any time with or without cause and without congressional approval.
Which of the following describes a literal patent infringement where the infringed device does more than is described in the patent application of the protected invention?
rule of addition
Charles set up a fraud scheme in which he promised investors huge returns that other investments could not match, but actually paid returns to investors from money paid by subsequent investors and pocketed the rest. Charles is
running a Ponzi scheme.
Philene was an investor in Safe Harbor Corporation (SHC) through an initial public offering. She believed she has been defrauded by false statements made by SHC's executives about the company's financial health and wants to file a lawsuit against SHC because she lost money by investing in them based on their alleged misrepresentations. Her attorney told her that to win her case, she needed to prove that the executives knew they were lying. This element is known as
scienter.
The adjudicative phase of the criminal justice process includes each of the following components except
setting bail.
Professor Patty is very distraught that three students in her class cannot afford to buy the 42-chapter book for the course. The book is used for two semesters, although not all students take the second semester. She finally tells the three students that she will make copies of the first 21 chapters for them, at no charge. Professor Patty makes the copies and gives each chapter to the students prior to her coverage of the relevant chapter in class. If Professor Patty is sued for copyright infringement
she loses because she is copying whole sections and a significant portion of the book.
Brittney is the CFO of Wealthy Manufacturing, Incorporated (WMI). She made $100,000 by buying 20,000 shares of WMI's stock at $30 a share in November of 2020 and selling them for $35 a share in February of 2021. These profits would be called
short-swing profits.
With regard to the relationship between courts and administrative agencies, the U.S. Supreme Court has consistently held that the courts
should defer to administrative agencies and not substitute their judgment for that of an agency.
Danielson opened a business in which she had unlimited liability and could avoid annual filing requirements. Danielson likely ran a business known as a
sole proprietorship.
Trade secret protections are provided through
state statutes and common law.
Asianna, Barry, Corrina and Dontelle are members of ABCD, LLC. After three years ABCD closed. The bank that extended them a loan sued for repayment of $100,000. The bank may
sue the LLC but may not sue Asianna, Barry, Corrina and Dontelle.
Fran was walking down the sidewalk when she was approached by Sherm, who held a gun to her head and threatened to shoot her if she did not break into a car and steal a computer he saw inside. Fran did so and was arrested when her fingerprints were later found on the car. Under these circumstances, Fran has
the defense of duress.
Each of the following is a part of the Howey test for determining whether something is defined as a security except
the expectation of a return must not be the primary reason for the investment.
Both Lloyd and Harry are claiming patent protection for the same invention that each independently created. The rights to protection will be awarded to
the first to file an application for the patent.
Rodriguez Distributing recently landed a huge account with Big Grocery Retailer. Rodriguez needs to hire 50 new warehouse employees. This decision to hire new employees would be made by
the officers.
Paul, John, George and Richard decided to form a limited liability corporation (LLC) for their music business. They want to clearly define the way partners leave the LLC and describe what will happen when they dissolve the LLC. This information would be included in
the operating agreement.
In order to pursue a copyright infringement claim against an Internet service provider (ISP), the copyright owner must first provide the ISP with all the following except:
A statement by the complaining party that economic loss as a result of the use of the material has occurred.
Susan, Penelope, LaTasha, Danielle and Francis formed a limited partnership to practice law. Susan and Penelope were general partners, the other three were limited partners. After five years, they decided to dissolve. What would be required?
A unanimous vote of Susan and Penelope and consent of any limited partner who owns a majority of the rights to receive a distribution as a limited partner.
Mylie has a clothing store as a sole proprietorship. Her shop has a net income at the end of the year of $200,000. She took a salary from this of $60,000. The remaining money is left in her bank account.
At tax time, Mylie pays taxes on $200,000.
Roger is the CFO of a corporation and had a business dinner with some of the company's largest shareholders. Roger knowingly and intentionally started drinking a variety of alcoholic drinks and even excused himself to secretly snort cocaine in the men's room. By the end of the evening, he obviously intoxicated. His dinner companions kept buying more rounds of drinks, and Roger needed no urging to continue drinking. By dessert, he was obviously extremely intoxicated. At that point, his companions asked him to sign a variety of documents, which he did not read due to his condition. The documents turned out to be falsified financial statements, which were then supplied to the accountants who were auditing the company. Is Roger guilty of criminal fraud?
Because Roger was so intoxicated, he likely could not have formed the required mens rea and would not be guilty of criminal fraud.
Chang, Monica and Haley went into business as a limited partnership running a restaurant. Chang and Monica managed the restaurant and ran the day-to-day operations. Haley had no role in running the restaurant. Chang and Monica each invested $500,000 and Haley contributed the building and land, which was appraised at $1 million. Brady, a customer, had a severe peanut allergy and ordered a peanut-free dish, but was negligently served a dish with peanuts and suffered severe long-term health effects. Brady sued the partnership and was awarded a judgment for $3 million. Brady managed to seize the assets of the partnership to satisfy his judgment, having the property and building sold, and seizing all other property, but $1.5 million remains unpaid. What result?
Chang and Monica each owe $1.5 million jointly and severally, so Brady may sue one or both of them; Haley has no additional liability.
Emily makes $55,000 a year. The median income for her state is $42,000. She owes over$80,000 in various debts. Which of the following is an option to address her personal debt issue?
Chapter 13 bankruptcy
Charles was setting up Charles Investments, Incorporated, but had not yet incorporated. Charles entered into an agreement with Superior Staffers to supply his office with 20 clerical employees. In June, he signed a contract to pay Superior Staffers $75,000 per month in consideration of providing the 20 employees for his main corporate office. In October, he informed Superior Staffers that he had decided to breach the contract. In November, he finally incorporated Charles Investments. Superior Staffers then sued Charles personally for breach of contract in December. What result?
Charles will be personally liable.
An example of the perfection of a security interest is
Community Credit Union (CCU) loaning money to Straightline Products and getting a collateral interest in their inventory which they file with the state.
Constantine and William are in business selling cell phones. Both have contributed $10,000 to the business. Constantine runs the day-to-day operations of the business partnership and makes the decisions on its direction. Constantine and William signed a partnership agreement stating that William would be liable for debts of the partnership only up to his $10,000 contribution. Which is true of this arrangement?
Constantine is a general partner, and William is a limited partner.
Della wanted to form her corporation by incorporating in Delaware. Which of the following is an advantage to Della of incorporating in Delaware?
Delaware has a well-established body of case law that allows more reliability in corporate planning.Correct
Casey is considering loaning money to Dorrine by a written and dated agreement. She wants to increase the likelihood that she will be high in priority for receiving money as repayment should Dorrine ever declare bankruptcy. Which of the following should Casey do?
Have Dorrine put up some property as collateral under the agreement and take possession of it.
Antonio has arranged for a business which he plans to name "Laser Tag Incorporated" (LTI) but it is not yet incorporated. Prior to incorporating, he got a line of credit from his bank for $500,000 to start up the business and leased a warehouse. The warehouse owner did not know that the business was not yet incorporated. LTI was incorporated three months after Antonio entered into the lease and after six months, LTI breached the lease contract. The warehouse owner claims a loss of $50,000 as a result of the breach. Under the Revised Model Business Corporation Act, what liability will Antonio have personally for the warehouse owner's losses?
He will be completely shielded from personal liability.
Jack was a general partner in Jack's Creations, a clothing design business. There were three other partners in the firm, Chris, Tina, and Luke, all of them limited partners. Jack withdrew from the partnership. What will happen to Jack's Creations?
It will dissolve.
Martin is an intern working for Tennessee Fried Chicken (TFC), an international company with over 1,000 franchised restaurants throughout the United States and in 21 other countries. TFC heavily advertises on television and in various print media that its chicken is superior due to its blend of "42 secret herbs and spices." Many have tried to duplicate the recipe unsuccessfully, and burglars have even been caught trying to steal it. One day Martin is called into the president's office for an assignment, and during their conversation, the president leaves the room, leaving Martin alone. Martin notices that the wall safe is open and looks inside, where he sees an envelope labeled "THE RECIPE." He opens it and finds that it is the list of the 42 secret herbs and spices, along with quantities and order of use. He quickly makes a copy of the recipe and returns the envelope to the safe. That afternoon, he calls Bluto's Fried Chicken, a TFC competitor, and informs Bluto's of the information he possesses, and they arrange a meeting. If Martin sells the recipe to Bluto's, who, if anyone, would be guilty of misappropriation?
If Martin sells the recipe to Bluto's, both Martin and Bluto's are guilty of misappropriation.
Jan, Marsha and Cindy incorporated and obtained a $500,000 loan in their corporate name, JMC Incorporated. The loan must be paid back at a rate of eight percent interest over eight years. After paying on the loan regularly for six years, JMC stopped making payments and Jan, Marsha and Cindy defaulted on the loan while still owing $200,000. JMC had no assets at the time of the default. What is the liability of Jan, Marsha and Cindy in this case?
Jan, Marsha and Cindy have no personal liability for the debt unless they pledged personal assets as collateral or signed a personal guarantee.
Which of the following unsecured creditors has first priority?
Janice, an attorney who handled the bankruptcy and has unpaid legal fees.
Dr. Spec has been working for ten years on a new contact lense that will repair a person's sight back to 20/20 over the course of 12 months. The doctor knows that this will be a game changer for his profession. He wants to see how the product is received so he creates a few to sell in his practice. He sold the first pair to John on December 1, 2018. In fact the contact lenses have worked better than expected with perfect vision within just a month. A Youtube video about the new contact lenses goes viral on January 4, 2019. On January 1, 2019, Dr. Spec files a provisional application for a patent that is approved 6 months later. Dr. Spec's patent will expire on
January 1, 2039.
Julio is a general partner and Farrah is a limited partner in a limited partnership. Julio and Farrah are the only partners and each invested $50,000 in the partnership. This $100,000 represents the total assets in the partnership. There is a substantial lawsuit against the partnership and the plaintiff is awarded a judgment for $200,000. The plaintiff collects the $100,000 of partnership assets and is attempting to collect the remaining $100,000. Which of the following is a correct statement of the additional liabilities that are still owed by Julio and Farrah?
Julio will have a liability of $100,000 and Farrah will have a liability of $0.
Kamalla is the CFO of Fraudco. Her boss, Driscoll, recently told her to shred all evidence of the financial statement fraud that Fraudco has been engaged in to hide the evidence from the SEC. The SEC had been conducting an investigation of Fraudco but had released no findings yet.
Kamalla could be imprisoned for up to 20 years if she shreds the documents.
Under Article 9 of the UCC, which of the following could be used as collateral?
Light fixtures attached to a commercial building
The Securities Act of 1934 would focus on
Luke, a purchaser of common stock on a public exchange from another investor.
In Miranda v. Arizona, Miranda's voluntary confession was suppressed because
Miranda was questioned in a police interrogation room and the Court deemed the setting too coercive, particularly since he did not know his rights, and even though he was not forced to talk by the police, his confession was therefore not truly voluntary.
Deputy Aldana stopped Lori, a college student, because he'd had experience with many college students in the past who had been in possession of drugs. After performing a pat down search of Lori, he found cocaine in her pocket. Deputy Aldana then used the drugs to justify obtaining a warrant to search Lori's dorm for more drugs, where he found a large quantity of marijuana with scales and other paraphernalia. Lori is now being tried for drug trafficking. What evidence, if any, would be admissible at trial?
Neither the marijuana nor the cocaine would be admissible at trial.
Officer Tom stops Kathy because she looks like a criminal to him, and after a pat down finds marijuana in her pocket. He then uses the drugs to justify obtaining a warrant to search her home for more drugs. The search uncovers 8 kilos of cocaine. What evidence, if any, would be admissible at trial?
Neither the marijuana nor the cocaine would be admissible at trial.
Which of the following is least likely to be considered a mitigating circumstance?
Sex.
Which of the following could be formed as a limited liability partnership (LLP) in states that follow the traditional view in which LLP protection is rooted?
Ronnie and Regina open a public accounting firm.
SharePeer (SP), an online music streaming service, is a platform for music sharing. SP had a policy against copyright infringement by members. SP also had the ability to locate and identify songs posted on its service that infringed upon copyrights. SP had a policy where they would terminate the membership of those users who violated copyrights. Thousands of songs were posted that did not violate copyrights. However, thousands of members of SP were violating the policies and infringing upon the copyrights of Big Music, a major recording label. SP had not taken actions to stop the infringement. If Big Music sues SP for infringement, what is the likely result?
SP can be successfully for indirect infringement.
Vicente owns Vicente's Machine & Welding (VMW), a machine shop, as a sole proprietorship. He has back troubles and wants to retire. What is the best way for Vicente to transfer the ownership of his business?
Sell the assets of VMW to another.
Three doctors, Brent, Tori and Shawnee, formed a limited liability partnership for their medical practice, with all being equal partners. Shawnee was negligent in her treatment of a patient and was sued for malpractice. Whom of the following will have personal liability for the judgment if the patient wins their lawsuit?
Shawnee will have personal liability for the judgment.
In U.S. v. DeCoster, the defendants' company suffered from an extremely serious salmonella contamination that affected up to 56,000 victums. Peter and Jack DeCoster, defended, saying they had adopted all of the recommendations and precautions but it failed to eradicate salmonella, therefore they were not culpable. Which of the following was the result?
The DeCosters were found guilty because they knew or should have known of the risk presented to the public.
Thomas is a private citizen who wants to review the records of the SEC, a federal agency. Which of the following federal laws might support his right to this access?
The Freedom of Information Act
Corrigan was the sole proprietor of Tastee Burgers, a restaurant. In 2018, Bergdahl allegedly suffered from food poisoning after eating lunch at Tastee Burgers. In 2019, Corrigan died and left everything, including Tastee Burgers, by will to his niece, Layla. Layla then reorganized Tastee Burgers as a limited liability corporation with her best friend Horowitz. In 2020, Bergdahl filed a lawsuit for $500,000 against Tastee Burgers for long term health effects from the food poisoning. Layla and Horowitz have denied responsibility for the injuries and seek a dismissal of the lawsuit. What should the court decide?
The court should grant a dismissal, as sole proprietorships terminate upon the death of the sole proprietor.
ABC Corporation substantially copied a patent of XYZ Corporation. ABC did not precisely copy XYZ's patent as there was one element of ABC's device that performed substantially the same function but was not exactly the same as XYZ's patent. If XYZ sued for infringement, what doctrine would support XYZ's theory?
The doctrine of equivalence
Which of the following statements is correct?
The obligations of a corporation are distinct from the obligations of its principals.
Michelle is driving at night when a policeman pulls her over for a blown taillight. When he approaches the car, he shines his flashlight into the car and sees a bag of white powder on the back seat. The officer orders Michelle out of the car and then reaches in to seize the bag. A quick examination leads him to believe that the bag contains cocaine. He arrests Michelle and takes her to the station. Was the officer's search legal?
The officer conducted a legal search of areas which were openly visible because he may look into the car and may use simple mechanical devices, such as a flashlight, to aid his search without a warrant.
Dirk and Benedict agreed to form a limited liability company (LLC). However, they did not execute an operating agreement. What will be the result?
The state LLC statute will set out the default rules.
Sheila filed a citizen's suit against the Department of Airplane Safety. Which of the following would Shiela's suit not be allowed to attack?
The substance of a regulation properly promulgated.
Which of the following does not have to be shown for copyright protection to be granted?
The work has a present or potential value.
Which of the following statements is true?
There are no federal common law crimes.
Jennifer and Angela are both broke. They have sold most of their possessions, and neither can find a job. One evening they decide to rob a bank. They agree that Jennifer will enter the bank pretending to have a bomb strapped to her chest and Angela will drive the getaway car. The next morning they drive to the bank, and while they are waiting for it to open, they see a church next door. Hoping for divine help while committing the robbery, they step into the church to pray. Suddenly realizing the error of their ways, they abandon their plans and sign up to become nuns.
They are guilty of conspiracy.
Kenny and Gene planned to steal Dave's custom car. The came up with a strategy to trick Dave into loaning them his keys while pretending to be valets at the restaurant Dave was planning to eat at. They put on fake valet uniforms and arrived at the restaurant, but just before carrying out their plans, Kenny and Gene change their minds and left Dave and his car alone. What crime, if any, have Kenny and Gene committed?
They are guilty of conspiracy.
Kameron, Candice and Leo were members of an LLC, Printing Unlimited, LLC (PU). They leased a digital printing press for their company. Press Sales, Incorporated (PSI), the company that manufactured and leased the printing press to them, required personal guarantees from each of them as a requisite leasing the press. What will be required of Kameron, Candice and Leo?
They must pledge personal assets to guarantee the payment obligations of PU.
Tamelin was a shareholder of Low Country Incorporated, a corporation. Which of the following is a right that Tamelin has?
To elect and remove directors if she has consent of the majority of shareholders.
Bambi wants to have an initial public offering (IPO). Under what circumstances would an IPO make sense for Bambi's organization?
When she wants to turn her privately held corporation into a publicly held corporation.
Gerald was the national sales manager of the Intergalactic Space Corporation (ISC), a publicly traded company. ISC was involved in financial report fraud, but Gerald was not involved in it and had no knowledge of it. Under Sarbanes Oxley (SOX), Gerald was forced to forfeit several years of executive bonuses that were tied to the financial reports that he had received from ISC. Under SOX, this is known as a/an
clawback provision
An ex post facto law is
a law that criminalizes an act that occurred before the law was enacted.
John owns Tech Gamers Enterprises (TGE), a sole proprietorship. A typical way for him to raise capital would be by
a private or commercial loan.
Pete has met with a group of professional investors to raise funds for his new legal research technology company, Techlaw Pros. The professional investors focus exclusively on funding technology companies in the legal field and are demanding substantial control over Techlaw Pros through sitting on the board of directors. Pete is seeking money from
a venture capital firm.
Murder is the killing of a human being with malice aforethought. Malice aforethought is the premeditation and planning of the crime. Malice aforethought shows that one considered the consequences of the action and knowingly committed the crime. The killing would be the
actus reus.
What function is Horatio, an administrative court judge in a federal agency, fulfilling when he decides whether a corporation violated a rule of his agency?
adjudication
An involuntary bankruptcy petition is filed
against a debtor by a group of three or more creditors with an unsecured aggregate claim of at least $15,775.
An operating agreement in a limited liability corporation (LLC) is a/an
agreement of the parties to the LLC that that cover the internal rules for the actual operation of the entity
Piercing the corporate veil is the process of
allowing parties to reach the personal assets of shareholders of a corporation.
A Difference between a C corporation and an S corporation is
an S corporation's earnings are taxed only when income is distributed to shareholders, a C corporation taxes at the corporate level and when income is distributed to shareholders.
Which of the following is eligible for immediate trademark protection?
arbitrary trademarks
Zachary was the CEO of Zachary's Fried Chicken (ZFC), a national chain of stores. He kept ZFC's process of seasoning and frying chicken secret from competitors, but he did not patent it. This process will be protected for
as long as ZFC desires.
Sonia runs Soniaco, a company in which investors have lost confidence. Soniaco now is unable to raise funds to continue operating. Sonia has entered into an agreement to assign Soniaco to a large creditor, with notice to be given to all of Soniaco's other creditors. After claims are made, the assets of Soniaco are distributed first to creditors with liens on Soniaco's assets, then to pay costs associated with administration, and third to all priority unsecured creditors This procedure is known as a/an
assignment for the benefit of creditors.
Washington was the CEO of Shadyco, a company that sold vegetables wholesale to restaurants. He was in charge of ensuring that the operations ran smoothly and that the products were kept in a safe condition. Washington paid little attention to the day-to-day operations of his company's five warehouses and as a result, the food became contaminated and several people got food-borne illnesses. However, Washington had no knowledge of the unsafe condition of the food and no intent to contaminate anyone. Under these circumstances, Washington may
be convicted of a crime based on the responsible corporate officer doctrine.
Destinee, Teronne, and Ahmed had a limited liability partnership (LLP) that called for additional contributions from them to fund the LLP when necessary. This provision is known as a/an
capital call.
Theophilus sued the Department of Train Punctuality (DTP) for alleged failure to enforce their own regulations, which resulted in thousands of dollars of losses to his business. Which of the following would this action be known as?
citizen suit
Huge Corporation sought to raise money by issuing bonds. This is an example of ______________ financing.
debt
The primary methods of capitalizing LLCs are
debt through private lenders or commercial lenders or through a sale of ownership equity.
Janis declared Chapter 11 bankruptcy for her business, the Holding Company, Incorporated (HCI). The bankruptcy court appointed Grace as a trustee to oversee the management of HCI and report back to the judge. This process is known as a
debtor in possession.
Ian was a shareholder of National Corporation (NC), a publicly traded corporation. He brought a lawsuit against Tenielle, the president of NC, in the name of NC itself. Ian is alleging that Tenielle breached her duty of loyalty to NC. This is known as a/an
derivative action.
Which of the following is not eligible for immediate trademark protection?
descriptive trademarks
Ben is the manager of a branch of a large bank. He has regularly taken money from customers' accounts for his own use and changed the bank records to cover his actions. Ben is guilty of
embezzlement.
The SEC's powers include all of the following except the power to
establish new federal agencies for the prosecution of securities law violations.
The Administrative Procedures Act does all of the following except
establishing the number of senators who must vote to approve the nomination of a senior member of a federal agency.
Jones and Hagen want to form a limited partnership. To do so, it is required that they
file a certificate of limited partnership with their state government.
Because it is not a taxable entity, an LLP
files an information tax return.
Trade secrets are protectable
for as long as the company desires.
A trademark can be any of the following except a
formula.
Stevie owns a business and wishes to distribute products to a broad market without having to hire additional employees or deal with the overhead costs of retail space. Stevie should set up a
franchise.
Ahmed wanted to get a loan, but since he was starting up a new business and considered a credit risk due to inexperience, the bank required that he get a cosigner on the loan. He convinced his friend Aaida, who had excellent credit, to cosign on the loan. Under the terms of the agreement, Aaida will only owe on the loan if Ahmed stops paying and defaults. Aaida is known as a
guarantor.
Arthur has attached a device to a local ATM machine that records customers' bank account numbers and PINs. He then sells these account numbers and PINs to nefarious individuals who use the information to steal money from the customers' accounts. Arthur is
guilty of a crime under the Computer Fraud and Abuse Act as amended by the Patriot Act.
Shamarlie was the head of Shandling Corporation. She treated her position as one primarily of public relations and big picture ideas but failed to attend meetings of corporate directors and paid no attention to Shandling's financial statements and she ignored the potential outcomes of decisions made by other corporate directors. Under these circumstances, Shamarlie has likely violated
her duty of care.
Adrienne, Rocky, Paulie and several other investors have a common expectation of profit in Mickey, Incorporated. Assuming all other requirements to classify this as a security are in evidence, the commonality of this transaction would be described as a
horizontal commonality.
Under the exclusionary rule
illegally obtained evidence may not be introduced at trial.
Haley and Gina were partners in a limited liability corporation (LLC). The LLC became insolvent, it was unable to pay off its debts. There was $100,000 left in the LLC in cash assets and Haley and Gina immediately transferred $50,000 each to their husbands. This is known as a/an
improper distribution.
A grand jury will issue a[n] ________ if its investigation indicates that a defendant should be held over for trial.
indictment
Juan is a corporate director for Thorough Manufacturing, Incorporated (TMI) and owns 12 percent of the stock of TMI. Juan is classified by federal law as a/an
insider
Secure Financial Advisors (SFA) was a firm that bought and sold securities on behalf of their clients. SFA is known as a/an
intermediary.
