EmpireCollegeSchool of Law

Business Organizations

Professor Wargo

Issue Outline- Midterm Fall 2006

  1. Question One - Tow Mater
  2. Minor Issue - Shareholder’s Derivative Suit
  3. Necessity of demand (should be futile)

a)Board failed to inform themselves

b)Not product of valid business judgment

  1. Business Judgment Rule
  2. Not if breach of Duty of Care or Loyalty
  3. Doesn’t matter because of ratification
  4. Duty of Care – board members
  5. 300 page analysis
  6. 15 minute meeting
  7. One-sided agreement?
  8. Duty of Loyalty – Doc Hudson contact
  9. Only with Hudson, any others?
  10. Disclosure?
  11. Shareholder Ratification
  12. Proper disclosure?
  13. Ratified by majority

a)Outstanding shares vs. shares present at meeting

b)Shares of directors counted? Does it matter?

II.Question Two - Homer Simpson

  1. Choice of Entity
  2. Sole proprietorship

a)Negative - Dangerous business

b)Positive – Homer disorganized

c)Positive – pass through losses

  1. General partnership

a)Negative – Dangerous business

b)Positive – Homer disorganized

c)Positive – pass through losses

  1. Limited partnership

a)Negative – Homer disorganized

b)Negative – Who is the GP

c)Negative – Are there two partners?

d)Positive – could arrange for limited liability

e)Positive – pass through losses

  1. Limited liability company – probable choice

a)Negative – Homer disorganized (some state formalities)

b)Positive – Homer disorganized (less formal than corp)

c)Positive – pass through losses

d)Positive – limited liability

e)Positive – disregarded entity with Marge

  1. Corporation (S or C)

a)Negative – Homer disorganized

b)Positive – limited liability

c)Positive – pass through losses if S corp

d)Negative – no pass through losses if C corp

  1. Minor Issue - Promoter Liability for boat contract

  1. Question Three - David Eckstein
  2. Liability protection
  3. Properly formed
  4. No public designation of limited liability
  5. Piercing the LLC veil
  6. Failure to respect LLC entity

a)Failure to take minutes – not required for LLC

b)Failure to be insured – inadequate capitalization

  1. Sanction fraud or promote injustice

a)Taking money out was customary

b)Accident is a tort (unexpected creditor)

c)Did members know about David’s injury (12/30) when they took distribution (12/31)

  1. Minor Issue – Agency – driver, CardinalCo is liable as an entity
  2. Not an issue - (de facto, de jure, estoppel discussion of corporation)
  3. Not part of call of question

  1. Question Four - Bert Williams
  2. Does Agency Exist?
  3. Ziegfield
  4. Rogers
  5. Fields
  6. Brice
  7. Agency – Contract
  8. Scope of Authority - Ziegfield

a)Actual

b)Apparent

c)Inherent

  1. Ratification
  2. Estoppel
  3. Did Rogers, Brice, Fields have any knowledge of contract?
  1. Agency – Tort
  2. Independent Contractor – Rogers

a)Foreseeable conduct

b)Control by ZiggyCo.

  1. Independent Contractor - Brice
  2. Employee – Fields

a)Scope of employment

b)Is he really employee?

1