1. How does this Meinhard v. Salmon come out under current law? Is the new lease a “benefit
derived by [Salmon] in the conduct of the partnership business?” Is the lease opportunity
“information concerning the partnership’s business?”
2. It is 2017. We are attorneys for Salmon when Gerry approaches. What is our advice to Salmon?
3. Salmon tells Meinhard. We represent Meinhard. What advice?
4. We are attorneys for Salmon before he enters into his next real estate deal. What is our advice
to Salmon?
5. POP QUIZ 1: Mandatory or default rule?
6. How should McConnell v. Hunt be decided under ULLCA with the Operating Agreement:
“Members may compete. Members shall not in any way be prohibited from or restricted in
engaging or owning an interest in any other business venture of any nature, including any
venture which might be competitive with the business of the Company.”?
7. POP QUIZ 2:
8. Sally has $100,000 in cash. Sally forms a corporation. Sally transfers the cash to the corporation
in return for 100 shares of stock in the corporation. How much is the stock worth in the
aggregate?
9. How much is that per share?
10. If the corporation had issued 10,000 shares instead of 100 shares, how much would Sally’s stock
be worth in the aggregate? How much per share?
11. What if the corporation had issued 10 shares instead of 100 shares?
12. Sally contributed $100,000 to Corporation in return for stock worth $100,000. If the corporation
spends $90,000 of the cash to buy a business worth $95,000, how much would Sally’s shares be
worth in the aggregate?
13. Assume that the corporation’s assets are worth $100,000 and then the corporation pays Sally a
dividend in the amount of $5,000. Now how much are Sally’s shares worth in the aggregate?
14. Assume that the corporation’s assets are worth $100,000 and that the corporation initially
issued 100 shares of stock, all to Sally. The corporation then does a two-for-one “stock split” –
exchanging two new shares for each old share surrendered. How much are Sally’s 200 shares
worth?
15. Assume that the corporation’s assets are worth $100,000 and that the corporation initially
issued 100 shares of stock, all to Sally. The corporation issues 10 additional shares to Sally as a
“stock dividend.” How much are Sally’s 110 shares worth? Why?
16. How much are the 10 extra shares worth?
17. Assume that the corporation’s assets are worth $100,000 and that the corporation initially
issued 100 shares of stock, all to Sally. Then the corporation issued 100 additional shares to Bob
in return for an investment of $100,000. How much are the corporation’s shares worth in the
aggregate?
18. Assuming that Sally and Bob get along well together, how much would Sally’s shares be worth?
19. One hundred investors form a corporation. Each invests $1,000 in cash and gets one share of
stock. The corporation has $100,000 in cash. What is the aggregate value of the 100 shares
outstanding? Each share worth?
20. Sally forms a corporation, invests $100,000 in cash, and receives 100 shares of stock. The
corporation immediately sells an additional, identical 100 shares of stock to Bob for $200,000.
After the sale to Bob, the corporation has $300,000 and 200 shares are outstanding. How much
is each share worth? Did Bob overpay?
21. POP QUIZ #3:
22. POP-QUIZ #4:
23. Exogen Hypo: You are outside counsel to E. D has been implicated as a potential carcinogen.
OSHA is considering a ban. Management hopes to move manufacturing to Indonesia and keep
using D and keep using in US until OSHA conducts hearings and rulemaking. What is your advice
to the board considering (a) legal concerns, (b) FCPA Compliance concerns, and (c) non legal
concerns?
24. Justin, Kathy and Lorenzo form a corporation Justin and Kathy each contribute $20,000 for 20
shares. Lorenzo contributes $60,000 for 60 shares. Profits for the first year are $10,000. How do
they share?
25. The Certificate of Incorporation names Justin, Kathy, and Lorenzo as directors until the first
shareholder meeting. Do they have the right to continue as directors?
26. If Justin, Kathy and Lorenzo had formed a partnership, Justin and Kathy had each contributed
$20,000, and Lorenzo had contributed $60,000, how would they share the $10,000?
27. If Justin, Kathy and Lorenzo as partners had different views about how to price the partnership’s
products, whose view would prevail?
28. If Justin, Kathy and Lorenzo had formed a manager-managed LLC, Justin and Kathy had each
contributed $20,000, and Lorenzo had contributed $60,000, how would they share the $10,000?
29. If the Articles of Organization listed Justin, Kathy, and Lorenzo as the initial managers would
each have the right to continue as a manager for as long as they wish?
30. Deal: Jyoti has control, Tom furnishes the capital, gets a 6% return on it, and both work full time
and share profits equally. Can this be a sole proprietorship? In what capacities will they
participate?
31. Same deal, can it be a partnership? Capacities?
32. Same deal, can it be a corporation? Capacities?
33. Same deal, can it be a limited partnership? Capacities?
34. Same deal, can it be an LLC? Capacities?
35. As attorney for Jyoti and Tom, what entity do you recommend and why?
36. Deal: Paula is the promoter, providing only services, and getting 20% ownership. Forty investors
are contributing $10 million and getting 80% ownership. Paula wants a five-member board of
directors elected by investors. What entity type do you recommend and why?
37. Deal: Meinhard heir will furnish the capital. Salmon heirs will manage and control. Meinhard
gets 50% of profits; Salmon heirs split 50%. As attorney for both, what entity do you recommend
and why?
38. If employees have the right to stop working at a time that would interfere with operations, is
that a right to control the business?
39. Gutters gets a bank loan on these terms: Interest at 8% plus 2% of Gutter’s gross revenues. Bank
has right to enter the premises or go to job sites to inspect. The loan is repayable “on demand”
which would end the business. Is the bank a partner under Ziegler and Stein?
40. Novell says it has 5,000 partners around the world. IBM is licensing companies to call
themselves “IBM Business Partner” even though the license says “neither of us is legally a
partner.” Why are they calling each other “partner” when they aren’t? Dishonest?
41. Is IBM liable under RUPA §308(a)?
42. Google says “through a new partnership, LG and Google will market LG-Google handsets.” If a
third party contracts with LG in reliance on this statement, is Google liable as a purported
partner?
43. Partnership Accounts: fill out for loss of $20,000
44. Partnership accounts: fill out for profits of $20,000 and loss of $12,000
45. Partnership accounts: fill out for dissolution where assets sold for $38,000:
46. Clark Resources v. Verizon: DeRogatis is “Area Sales Vice President for Government and
Education in Pennsylvania.” She meets with Clark Tells Clark “you have a deal.” Later Verizon
says there’s no deal, DeRogatis didn’t have authority. Clark sues. If Clark had asked DeRogatis if
she had authority to contract and DeRogatis said “yes,” would Verizon be bound?
47. If DeRogatis had signed a written agreement with Clark, would Verizon be bound?
48. If Clark had asked DeRogatis’ boss if she had authority and boss said “yes,” would Verizon be
bound?
49. What more can Clark do?
50. Is DeRogatis liable to Clark on the contract?
51. Knox is in the business of raising chickens. He is actually an agent for McCabe. Williams, who
doesn’t know about McCabe, sells feed to Knox. Is Williams entitled to collect from McCabe on
an agency theory?
52. Is that the right rule?
53. Supplier extends credit to Contractor on a 30 day account. Contractor incorporates; transfers
assets to the corporation. Supplier doesn’t know about the corporation and continues to sell on
the account. A year after incorporation, Contractor doesn’t pay. Supplier discovers the
corporation and sues for payment of the account. Who is liable on the account?
54. You interview for a job in the Department of Justice. The lawyer-interviewer offers you the job.
You accept. Is the DOJ bound?
55. Should franchisors be liable for torts of their franchisees?
56. ChemCo has liability for chemical leaks if ChemCo knows about them. Alvin, an ChemCo
environmental engineer, discovers a leak, but doesn’t tell ChemCo. Is ChemCo liable?
57. Would the result be different if Alvin were a clerk in the accounts payable department?
58. Beth works in ChemCo’s credit department, and learns of a restriction on TranCo’s right to
borrow money. Beth does not tell the loan department, which lends money to TranCo. Did
ChemCo lend with knowledge of the restriction?
59. ChemCo employs Charlie to purchase land on commission. Charlie discovers a defect in the land
that seller TrunCo doesn’t know about. To get the commission, Charlie doesn’t tell ChemCo.
ChemCo buys the land. Did ChemCo buy with knowledge of the defect?
60. On Monday, Facebook’s CFO sends notice of board meeting on Wednesday to approve sale of a
factory. Has a meeting been validly called? (Facebook Bylaws §3.7 Special meetings of the
Board for any purpose or purposes may be called at any time by the chairman of the Board, the
president, any vice president, the secretary or any two directors.)
61. Four of Facebook’s eight directors are present at a validly called meeting. All vote yes. Was
there a quorum? (Facebook Bylaws §3.8 At all meetings of the Board of Directors, a majority of
the total number of directors shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors, except as may be otherwise specifically provided by statute or by
the certificate of incorporation.)
62. Facebook’s CEO wants to sell you Facebook’s thirty-acres of land for $2 million. Does the CEO
have actual authority to bind Facebook? (Facebook Bylaws 5.6. Subject to such supervisory
powers, if any, as may be given by the Board of Directors to the chairman of the board, if any,
the chief executive officer of the corporation . . . shall, subject to the control of the Board of
Directors, have general supervision, direction, and control of the business and the officers of the
corporation.)
63. Fair value of Blue, Green, survivor shares is $100 each. But the terms of merger favor Green
shareholders by giving them 1.07 survivor shares per Green share while giving Blue shareholders
.93 shares per Blue share. Will appraisal right this wrong?
64. Blue and Green shares are listed and trading for $100 on a national securities exchange. After
the same merger is announced, Green trades for $107 and Blue trades for $93. How much
money do Blue shareholders get?
65. At a special meeting, Facebook shareholders adopt a bylaw limiting the number of directors to
seven. The board adopts a bylaw fixing the number of directors at ten. Shareholders sue. Result?
66. What can the shareholder do about the board’s resolution?
67. Stockholder derivative action against directors for negligence, mismanagement. All other major
league teams play their weekday games at night. The Cubs don’t play at night due to Wrigley’s
“personal views” that (1) baseball is a daytime sport and (2) night games would harm the
neighborhood. Were the directors negligent?
68. Is this level of deference to board decision making good public policy? Should there be a
“medical judgment rule” to protect doctors when there is no “fraud, illegality or conflict of
interest?” If board members were liable for negligence, how would judges decide whether
board decisions were negligent?
69. Is accounting an internal control? Is auditing?