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71 Cards in this Set

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Lind v. Schenley Industries, Inc. - man claims he had promotion that included large commission
Kaufmann had inherent agency to Lind, b/c he was his direct supervisor.

Kaufman also had apparent agency :
- manifestations
- good faith reliance
- change of position to detriment

Dissent thought Lind should have known not right b/c 4x his salary
Holzman v. De Escamilla - is limited partner liable when takes control?
Yes, by controlling crops, taking over mgmt., giving GP no power to withdraw without LP approval...they become GP
Gordon v. Doty - loan car to coach
Agency existed:

1. Consent - to use the car
2. Action for P - ? Does coach act on behalf of Doty?
3. Control - She told him he had to drive.
MJ v. Zadikoff - sets up side restaurant
2. PROOF of CONTROL– who makes the ultimate decision here? If Zadikoff knuckles under about an issue under the GP, he is an agent. If he can make the ultimate decisions, then he is not controlled and he is not an agent.

Court says it is possible he is their agent.
A. Gay Jenson Farms Co. v. Cargill, Inc - farmers against Warren and Cargill when Warren defaulted on grain K
Court said you could hold Cargill liable, because they went beyond creditor status.

1. Action - warren acted on behalf of cargill producing grain

2. Control - Cargill interfered with Warren's internal affairs - de facto control (recs, 1st right of refusal, had to approve financial decisions for warren, right to entry, correspondence and criticism of finances fo warren, paternal guidance, financing, etc.)

3. Consent - By directing warrent to act according to recommendation

Creditor who assumes control of his debtor's business may become liable as principal.
Mill Street Church of Christ v. Hogan - Sam hurt (who Bill hired) to help paint
Bill had IMPLIED authority to hire Sam.

1. In past Bill was allowed to have Sam help
2. Not possible to do job alone
3. Sam belived Bill could hire him.
Karl Rove & Co. v. Thornburgh - politician aid case K for direct mail services
Rule of unicorporated Non-Profit - An individual is not liable for the debts of the association merely b/c of his status as a member or officer of the association. (just being a member doesn’t make you a principal)


A member is personally responsible for a K entered into by a nonprofit assoc. only if – viewing him as though he were a principal and the association were his agent – that member AUTHORIZED, ASSENTED TO, or RATIFIED the K in question.

Dickman was agent of Thornburg - T kept control, although gave D large scope of authority. D has actual or apparent right to bestow T blessings on the committee actions.
370 Leasing Corp. v. Ampex Corp. - computer sales where person (Joyce) would only deal with Kay (friend)
K between Joyce and Ampex valid, b/c Kays had apparent authority.

- Kays submitted K to Joyce with a space for signature
- Joyce said he would only work with Kays...and so when they agreed rightfully assumed Kays had authority
Watteau v. Fenwick - people bought store from Humble and limited his powers to purchase, but didn't disclose their existence
When undisclosed Principal - both the principals and the agent are liable to 3rd party.

Undisclosed Principal liable even is agent does forbidden acts.
Nogales Service Center v. Atlantic Richfield Company - ARCO lent money to P and they did the gas station but didnt do the motel and planted crops that failed instead
Restatement §161—unauthorized acts of general agents

a. A general agent for a disclosed or partially disclosed principal subjects his principal to liability for acts done on his account which usually accompany or are incidental to transactions which the agent is authorized to conduct if, although they are forbidden by the principal, the other party reasonably believes the agent is authorized to do them and has no notice that he is not so authorized.

P is liable b/c within general scope of business and need to protect 3rd party.
Botticello v. Stefanovicz - husband who only owned 1/2 of property Ked to lease it
Walter was not allowed to lease mary's part..only his.

Mary did not ratifiy this transaction -
1. Marriage doesn’t automatically assume that she agreed or held Walter as her agent.

2. Real or Professed agency element - There doesn’t seem to be a real or professed agency, b/c Walter is doing all the negotiations and Mary does nothing. This is also proved in the document in that Mary didn’t even have a signature block on the paper.

3. Knowledge – looks like probably no knowledge

4. Affirmance – doesn’t look like there is any affirmance here either.

a. There is a lease and an option to buy. It is severable in this regard. Perhaps getting the rent payments was not an affirmance on the sale.
b. They have been accepting payments. Does this mean they have accepted it?
Ercanbrack v. Crandall – Walker Motor Company, Inc. - car VBO never produced car he ordered
Ratification Analysis:

1. Real of professed agency – real here salesman

2. Affirmance –
a. Dissent - When the man told him that he had not heard about the truck coming in yet. This seems like affirmance.
b. Majority - Or is the sales manager just blowing π off. Maybe he doesn’t know that there is no valid purchase order for this customer.

3. Knowledge – Usually - would have to vest in an agent of the company who would have authority to do the act you are trying to get ratified.
a. Majority – higher ups in the company didn’t know the sales person broke his authority. B/c they get so many orders at the same time, they didn’t know this was improperly executed.
b. Dissent – You should have been in control of your system and your agent so you should be responsible for the knowledge
Hoddeson v. Koos Bros.- montebanc case
Here store liable...no agency...but need to help P over D

Agency by Estoppel – party to be charged has done something to create a reasonable belief in something and the other party has done something to change his position in reliance on the belief that is to his detriment.

1. Duty to keep aisles free – from montebancs
a. ∆s could possibly produce evidence that they did everything they can from montebancs being in the store – maybe security personnel

2. Reasonable belief – she should have asked for a receipt, was she in that store before in that she would know that a certain course of procedure is done in making a purchase. Did this instance seem very unusual.

3. Detrimental reliance –
a. Detriment to ð, b/c she turned over her $.
Trustees of the American Federation of Musicians and Employers’ Pension Fund v. Steven Scott Enterprises, Inc. -
Constructive Authority – does not exist in the face of the 3rd party having knowledge of the express prohibition. If we find constructive, then we don’t have to go into ratification.

Find apparant for one and ratification for the other two
Atlantic Salmon A/S v. Curran - man didnt disclose he was a corporation and then stiffed creditors
How is an agent with no principal liable for the money or damage done?

a. In situations with non-disclosed agency, the agent is a co-maker of the obligation. The principal is liable. (Watteau case) If Fenwick couldn’t have found the owners liable, he could have found Humble liable.

b. Partially disclosed agency/principal – the agent says he is an agent, but won’t tell for whom. The agent shall be liable to the 3rd party in this case.

i. How do you protect yourself from liability? You need to have a bond or indemnification with the principal as part of your fee.

c. Fictional Agency – the principles that apply to make the agent liable to the 3rd party in the above cases would apply as in the case where the principal is made up.
i. Curran is liable personally. You can’t hide behind a fake principal.
ii. Can’t use marketing designs, inc., b/c he did not disclose this one.

Other ways:
* Undisclosed agency
*fraud or deceit
*Co-maker
*personal guarantee
*breach of implied warranty of authority
Humble Oil & Refining v. Martin - car rolled out of gas station and hurt neighbors

Schneider - franchise owner
Mannis - employee at the scene
Humble Vicariously Liable
a. Humble controls Schneider.

i. Court looks to the franchise agreement. The language is pretty broad that supports Humble’s control.
ii. Control is exerted under a strict system of financial control.
iii. The agreement required Schneider to do anything that Humble told him to do. This is the control required to find Humble liable.
b. If Humble Oil has to pay the entire claim of the Martins, then Humble Oil would have a right of contribution against Mrs. Love for 1/3. The other 2/3 would be through a right of indemnification with Manis.
c. If the document says that the company has a lot of control over the party, but in reality not much is exerted. The right alone will suffice to establish the agency. NEED MORE HERE.
i. Then entitled to find defacto control
Humble Oil & Refining v. Martin - car rolled out of gas station and hurt neighbors

Schneider - franchise owner
Mannis - employee at the scene
Humble Vicariously Liable
a. Humble controls Schneider.

i. Court looks to the franchise agreement. The language is pretty broad that supports Humble’s control.
ii. Control is exerted under a strict system of financial control.
iii. The agreement required Schneider to do anything that Humble told him to do. This is the control required to find Humble liable.
b. If Humble Oil has to pay the entire claim of the Martins, then Humble Oil would have a right of contribution against Mrs. Love for 1/3. The other 2/3 would be through a right of indemnification with Manis.
c. If the document says that the company has a lot of control over the party, but in reality not much is exerted. The right alone will suffice to establish the agency. NEED MORE HERE.
i. Then entitled to find defacto control
Humble Oil & Refining v. Martin - car rolled out of gas station and hurt neighbors

Schneider - franchise owner
Mannis - employee at the scene
Humble Vicariously Liable
a. Humble controls Schneider.

i. Court looks to the franchise agreement. The language is pretty broad that supports Humble’s control.
ii. Control is exerted under a strict system of financial control.
iii. The agreement required Schneider to do anything that Humble told him to do. This is the control required to find Humble liable.
b. If Humble Oil has to pay the entire claim of the Martins, then Humble Oil would have a right of contribution against Mrs. Love for 1/3. The other 2/3 would be through a right of indemnification with Manis.
c. If the document says that the company has a lot of control over the party, but in reality not much is exerted. The right alone will suffice to establish the agency. NEED MORE HERE.
i. Then entitled to find defacto control
Humble Oil & Refining v. Martin - car rolled out of gas station and hurt neighbors

Schneider - franchise owner
Mannis - employee at the scene
Humble Vicariously Liable
a. Humble controls Schneider.

i. Court looks to the franchise agreement. The language is pretty broad that supports Humble’s control.
ii. Control is exerted under a strict system of financial control.
iii. The agreement required Schneider to do anything that Humble told him to do. This is the control required to find Humble liable.
b. If Humble Oil has to pay the entire claim of the Martins, then Humble Oil would have a right of contribution against Mrs. Love for 1/3. The other 2/3 would be through a right of indemnification with Manis.
c. If the document says that the company has a lot of control over the party, but in reality not much is exerted. The right alone will suffice to establish the agency. NEED MORE HERE.
i. Then entitled to find defacto control
Humble Oil & Refining v. Martin - car rolled out of gas station and hurt neighbors

Schneider - franchise owner
Mannis - employee at the scene
Humble Vicariously Liable
a. Humble controls Schneider.

i. Court looks to the franchise agreement. The language is pretty broad that supports Humble’s control.
ii. Control is exerted under a strict system of financial control.
iii. The agreement required Schneider to do anything that Humble told him to do. This is the control required to find Humble liable.
b. If Humble Oil has to pay the entire claim of the Martins, then Humble Oil would have a right of contribution against Mrs. Love for 1/3. The other 2/3 would be through a right of indemnification with Manis.
c. If the document says that the company has a lot of control over the party, but in reality not much is exerted. The right alone will suffice to establish the agency. NEED MORE HERE.
i. Then entitled to find defacto control
Hoover v. Sun Oil Company - gas station employee smoked and caused fire - franchise case - what kind of agency?
Apparent Agency – in franchise situations, you often have an estoppel elements known as “HOLDING OUT.”

Franchise agent is telling the public that this franchisee is one of us. If there is reasonable detrimental reliance on this, and all elements in alignment, then perhaps the agency is established.
**Holding out – telegraphs to the public that this is one of ours, you can rely on us, we are controlling our people.

**You can counter manifestations from a source is through counter-manifestations. This would be like the 3rd party had express knowledge of the limitation on the agent’s authority.


To get Sunoco on the hook:
1. Holding Out – you may have problems with this element, b/c Barone’s name was over the door. May not look like a Humble Oil.
2. Reasonable Reliance – Hoover goes to Sunoco to get the product they most frequently dispense. I go to them b/c I trust their name.
3. Detriment – burns





2. Who is Smylik’s employer? Barone or Sunoco? (3 steps)
a. Look at the agreement. None found.
i. Not enough in this agreement to show control.
ii. Sun offered advice, but didn’t have to take it.
iii. Barone had standards, but not a ton of direction.
iv. Barone could also sell competing products.
v. Barone made no written reports to Sun.
vi. Barone independently determined hours of operation and pay scale, etc.
b. Look at reality of control.
i. Find defacto control.
Murphy v. Holiday Inns, Inc - customer slipped and fell on water leak from AC
Who is the employer here? Besty-Len Corporation. If they have done this corporation correctly, then Betsy and Len would not be held personally liable.
a. Go through the documents –
i. Holiday Inn has no control over details in doing the work
ii. Regulatory provisions did not give Holiday Inn control over the day to day operations of the premises.
iii. Even though the documents don’t say it…you can still go to court over defacto control.

b. Betsy-Len is vicariously liable. Unnamed employee is directly. Holiday Inn is not liable.

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5. Apparent Agency – show an actual or apparent agency.
a. I thought this was a Holiday Inn so I stayed here b/c of it.
b. Elements of estoppel
i. Holding Out
ii. Reasonable Reliance
iii. To Detriment of the Party causing change of position
c. Application
i. I relied on the fact that this was a Holiday Inn. (must be relying on the quality of the place).
1. If there was a sign over the desk that said Betsy-Len Motor Hotel Corp…then she would probably lose on this, b/c there seems to be independence here.
ii. My reliance was reasonable.
iii. The detriment was negligence that caused injury
Parker v. Domino’s Pizza - pizza man hits people's car...Parkers go to help the injured and are hurt in process
Who is the employer? J&B Enterprises? Domino’s Pizza?

Defacto Control – (captain of ship)
1. Ignore the actual contract if the facts override it
2. Look at the facts instead of the k
4. Actual control or right to control is good to establish agency - captain of the ship stresses the right to control
ii. You would want to establish through witnesses (different franchisees) that although we have all these standards, they are implemented in different ways at different franchises.
iii. If it is shown that Domino’s has given discretion to let the franchises do things the way they feel are best.


Here, Dominos - has control b/c they have complete operating manual, requirements and rules...nothing left to chance
Billops v. Magness Construction Co. - Hilton Banquet director commits the tort. Harasses the guests and π b/c he asked for money, although it had already been paid in advance.
No ruling - but think this is possible:

Apparent Agency – show an actual or apparent agency.
a. Estoppel Elements
i. Letters from Hilton that said they were happy the affair was going to be there
1. They knew they were going to have a grand affair
2. Put a lot of faith in Hilton, b/c it is a major hotel


--------------------
As ∆ attorney, you would want to point to elements that would show that the person picked the hotel for reasons other than the name:
i. Location
ii. May be the only place in town that can handle the event
iii. Coupon or discount
iv. Special chef
Brill v. Davajon - injuries from checker cab that was helping another car by pushing it
Strictly forbidden...but if within scope employer can still be liable.

1. pushing car not shown to be something in furtherance of the business
2. out of scope and cab co not liable

could maybe show that cab co has policy for helping people or good will to name...then maybe
Ira S. Bushey & Sons, Inc. v. United States - Sailor comes back to a ship that is in a floating dry dock. He lets the supports go by turning these wheels 20 times and it starts to sink and ruins a lot of stuff.
Is US LIABLE?
Minority view here -
Enterprise Liability test (Zone of Employment)

1. employer will be found liable for anything that is characteristic of the business, such that it would be foreseeable that the given harm could occur.
****Foreseeability is the key!!!
Manning v. Grimsley - Pitcher is trying to warm up and people heckle him. The pitcher throws the ball into the crowd at those people.
Scope of Employment
a. If Grimsley’s purpose was to further something for the ball club, then it is a service to his employer. Ball Club is liable.

i. He was worried about his future performance on the field.

b. If it is only b/c of his own personal rage…then he is only liable.
i. If we find out that these people were to far away to actually heckle him when he actually pitched.
ii. If you find out that Manning was with Grinsley’s wife last night and this is why he did it…then this would let Ball Club off the hook.

Court found heckling intereference with job...so possibly within scope
Arguello v. Conoco, Inc. - employee Smith harasses customers at gas station
Conoco Branded Stores - To get around the written info that says the branded stores are not agents:
a. Defacto Agency – was there control exerted despite the writing?
b. Apparent Agency – showing that there are no counter manifestations…as long as it doesn’t say this is a Conoco independent owned company, could argue this apparent agency as estoppel

Conoco Owned Store – clear agency admitted here
a. Cindy Smith Incident – she is employee of Conoco
i. Remand to determine if acting within scope of employment
Majestic Realty Associates, Inc. v. Toti Contracting Co. - Is it possible that if an employee of Toti makes a tort like letting a wall fall on a roof will the independent contractee be liable?
Inherently Dangerous - Where the activity contracted for constitutes a nuisance per se

1. Def: a condition involving a peculiar risk of harm to others unless special precautions are taken; an activity which can be carried on safely only by the exercise of special care and skill, and which involves grave risk of danger to persons or property if negligently done.

a. Examples: demolition (as in Toti), hydrological pressures, heights like in electric lines


2. ULTRA-HAZARDOUS ACTIVITES – this is where we impose absolute liability. Different from inherently dangerous.

a. Contractee is involved in the super-hazardous activity…you are liable no matter what happened.

b. Examples: use of explosives, transporting hazardous waste, radioactive materials, biological matter – take every precaution possible to prevent danger…still liable if something happens
Anderson v. Marathon Petroleum Co. -Main thrust of the case is distinguishing b/w injury cause to contractor’s own employee vs. a third party (case where man gets lung disease)
Worker’s compensation – covers this case

a. Exclusive remedy that covers negligent torts against employees.

b. Generally, this would kill all the theories that would apply to the contractee. Doesn’t matter how dangerous this activity is.
Kleeman v. Rheingold - lawyer has a courier go to file service of process…and the person doesn’t get it there in time to meet SOL.
Non-delegable duty

a. Duty deemed nondelegable when “the responsibility is so important to the community that the employer shouldn’t be permitted to transfer it to another.”

b. Instant case – service is deemed a non-delegable duty
i. Lawyer cannot hire independent contractors to limit responsibility for malpractice

ii. Lawyers also cannot neglect the legal matters entrusted in them

iii. Expert witness who messes up, appraisals, fact finding etc. – probably not responsible for this as a lawyer if you did your best in finding this person.

c. Source – the Code of Professional Responsibility here, often times it is a regulation of a statute
Reading v. Regem - solider moved goods through Cairo in military uniform
Remedy – Constructive trust - the ill gotten gain that serves as the measure of remedy (not really measure of damages)

i. Trust needs three parties, grantor, trustee, and beneficiary
ii. Grantor would be the smuggler, the trustee is P, and the beneficiary is the Crown
iii. Not a real trust, this really wouldn’t happen, but law says that’s how it is
iv. Better than actual damages, get more
v. In some sense like punitive damages, very powerful remedy
vi. Avoids the complication of having to compute actual damages

Standard – did the person use his position or assets of the employer in such a way that the profit generated from the assets could only be obtained through their use?

Rest §404 – an agent who, in violation of duty to his principal, uses for his own purposes or those of a 3rd person assets of his principal’s business is subject to liability to the principal for the value of its use.
General Automotive Manufacturing Co. v. Singer - ∆ is a manager – he created a side business to make a profit for himself while employed.

He gives business to other companies that he thinks can handle the demand better.
**He keeps this all secret
Violations:

a. Usurpation of employers assets
i. 388 and 404
b. Competing with employer
i. 387 and 393
c. Duty to disclose
i. 381
d. Duty to Refrain from Disclosing Confidential Information

He was to get 3% commission on jobs...so would have to repay all minus 3%
Westec v. Lanham - manager didnt disclose the LLC - no notice to creditors it was LLC
4. HOLD - Court – if you see LLC you know you are dealing with agents and you must look to the articles.
a. If there is no indication of LLC, you are not responsible for checking into this.
Investcorp, L.P. v. Simpson Investment Co. - $10 million in land...cant agree how to invest
Member includes those leaving.

Drafting
1. When you have departing member and unanimous to continue – the departing member would want distribution mandatory in K
2. If using members or remaining members in agreement, you need to make clear what this all means.
3. HOLD - Court does common sense construction – concludes everyone should be paid at distribution time.
4. Operating Agreement is very important. Always contemplate what might go wrong when drafting.
Kidd v. Thoman Edison - P sues b/c she is not paid for all the “mini-concerts” she gave in promotion of the recording device that TAE was selling.

What Kind of Authority can you find?
Apparent authority can be applied here. But inherent as well....in inherent section of book.

Manifestation that Mary Carson Kidd would pick up from the other authority to feel like that agent had the power to K with her –

1. Fuller is a booking agent in the entertainment industry.
2. It is usual for tours that a person would book.
3. You would get paid at each of these locations. So, it would be logical that he would be allowed to make these events with her and she should get paid.

Even though agent disobeys principal...P is liable if the general scope of business entrusted to A is similar.
Walker v. Resource Development Co. - Can you expel a member?
a. Expulsion
i. Just like in partnership can only expel partners when the operating agreement provides for it
ii. Most people want an LLC because it keeps the investor from becoming liable, and protect selves from others mishaps
iii. Can’t unilaterally expel


--------------
4. Gotta do a dissolution (never force to stay together) never want to do wrongfully, always do windup minus a continuation clause
5. Remedy: constructive trust
a. Ï get his 18% interest minus what he owes in capital contributions
New Horizons Supply Cooperative v. Haack - sibling business fails, brother leaves, sisters winds up but pockets some profits
5. HOLD – there is no piercing. The business failed, but was being done as an LLC.
a. The thing that trips her up and incurs personal liability – she does not follow the distribution hierarchy followed from partnership law.
i. UPA §40(b) – what happens to the money of a dissolved partnership when wound up and liquidated.
1. First claim is outside creditors.
2. Second is inside
3. Third is partners
ii. Same in LLC.
b. Mistake - Allison takes these AR collections and pockets them.
i. She is not supposed to do this until she paid all outside creditors.
ii. Claim against Haack is not veil, but instead it is the messing up of priority of payments.
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ii. Theory of Distribution Mess Up – SHOULD BE ADDED TO THOSE WAYS IN WHICH A PERSON CAN BE STUCK WITH PERSONAL LIABLITY
Jerman v. O’Leary - 36 acres of park sold and 11 kept and some want to buy personally after undisclosed zoning change
5. HOLD – finds a breach. Remanded due to damages.
a. Fiduciary duty of a GP to LP
b. The court takes a stance that there is a residue of fiduciary responsibility. You cannot contract into it, but if you contract too short…you might not be able to get into it.
i. Hypo: say the operating agreement had said something about “this clause is to be construed as permitting the GP to purchase property for themselves at whatever they find reasonable including nominal consideration.” This would be more specific, and may show language was intended to permit this.
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THEY DID NOT ACT IN GOOD FAITH
Town and Country House & Home Service, Inc. v. Newberry - Home cleaning services (telemarketing) call places where they thought people would want house cleaning services.
Trade Secret: confidential information that the agent cannot divulge after termination
a. Customer lists can be trade secrets
i. He probably didn’t memorize all the customer names (as is excepted by 396)
ii. The information was too difficult to achieve and became an asset of the employer. Could amount to a constructive trust issue.
3. Duty – he breached his duty to withhold confidential information. §396
4. Damages – would have to compare those customers he would likely have gotten on his own with those he actually took.
Elf Atochem North America v. Jaffari - NOT SURE NEED INFO
i. Derivative lawsuit – if you don’t like what management is doing. They are harming the entity.
1. Derivative suit is devised to permit shareholders to seek relief on behalf of firm in cases where corp management no elected to pursue claim
Tom Thumb Food Markets, Inc v. TLH Properties, LLC - Told TT that he owned the property, but only had an option to purchase.
He intended to follow through and acquire the property.
Since TT also was at fault in the situation will not pierce veil Witholding statements and poor finances made them liable too.
McConnell v. Hunt Sports Enterprises - want to start hockey franchise. One member drives hard bargain. Upon refusal another member forms an entity and does it.
3. Is this a conflict of interest with the original LLC?
a. Yes, unless you have an operating agreement clause that permits competition.
i. They have this here – 347. Not perfect clause.
ii. “In any other business venture”
1. You cannot compete with the LLC in the purpose that is its only purpose…the Bluejackets franchise???
2. Or - But, Hunt saw to it that they had no business venture.
3. Clause is terse and broad. Probably put in there, b/c these men are all involved in many different things related.
b. Court feels that Mc is ok. Sees no problem in the taking of the franchise.
VGS, Inc. v. Castiel - when two members screw over another and make a merge which reduced the primary shareholders interest to peanuts
Follow partnership fiduciary duty - must give notice.

Here primary would have removed the one guy to prevent this. Unfair to primary.
Jewel v. Boxer - law firm splits...what about fees for continuing cases?
(1) Have to turn them over to old firm and then fees are split according to % of interest because no pnr is entitled to extra compensation from unfinished bus, unless there is an agreement to the contrary
Meehan v. Shaughnessy - took cases both originated AND working on
II) They violated the UPA.
1) They took cases they had been working on, not just originated.
2) Court said the rule should be extended to the cases that did not originate with you but were rightfully taken.
----------------
b. The court said as to those you wrongfully took but would have gone anyway – fair charge.
c. The court said as to those you wrongfully took but would have stayed with the big firm – use Jewel v. Boxer rule. The fee goes back to the old firm and it is split according to their percentage in the old firm.
Coroon & Black-Rutters & Roberts, Inc. v. Hosch - trade secret of insurance list - one party left original company and sent letters to his clients telling them they were switching to new company
Trade secret def – according to Torts restatement - Trade Secrets Factors:
i. Extent to which the information is known outside the business
ii. Extent to which the information is known by employees/others involved in the business
iii. Measures taken to guard the secrecy of the info
iv. Value of the information to the company and competitors
v. Amt of money and effort expended by co to develop information
vi. Ease or difficulty the info could be discovered by the public

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In this case...not enough to be trade secret in Wisconsin....dissent feels it is.
Fenwick v. Unemployment Compensation Commission - beauty shop cashier made partner?
3. Elements to consider if partnership exists
a. Intent of the parties
b. Right to share in profits of the business„_but sharing profits doesn¡¦t always mean there is a partnership
i. look to see if the other party had right to control the business„_see Fenwick
c. Obligation to share in the losses
d. Right to ownership and control of the partnership property and business
e. Community power in the management
f. Language of the agreement
i. But even if it says it is a partnership, doesn¡¦t mean it is, must have all the rights of a partner
g. Conduct of parties toward third persons
h. Rights of the parties upon dissolution, and apparent results after dissolution
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Here, Fenwick had all the control...the partnership was merely an agreement for increased salary...cashier not liable.
Frank v. R.A. Pickens & Son Company - manager of partnership terminated Frank...he claims wrongfully excluded. Frank wants judicial dissolution.
Power of partnership agreement
a. Makes a non-partner manager of business
b. Pickens has the power of expulsion. (This can only be granted via agreement.)
c. Continuation feature ¡V this is why this will not dissolve and liquidate. It will dissolve and reform with the remaining partners who have the right to conduct the same business as before Frank¡¦s leaving.
i. Dissolution w/ continuation by agreement„_technically when a partner leaves the partnership the partnership dissolves, but can have a continuation agreement
d. Deals with Frank's departure economically. Frank gets book value ¡V this starts with cost. They can do this only b/c Frank agreed to it.
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Book value ok to give Frank.
Martin v. Peyton - lenders accused of being creditors to other creditors
a. ∆ says they are creditors
i. They don’t have any power to transact
ii. Not agreed to share losses
iii. Etc.

b. Other creditors say ∆s are partners
i. They can be partners,
ii. Share of Profits
iii. Etc.

4. Court decides they are not partners. (If they would have been found partners they could have been personally liable to the other creditors.)
all factors point to lender relationship with security like mortgage. Bank had partners tender resignation and hld assets as collateral.
Kaufman-Brown Potato Co. v. Long - are these creditors partners?
b. KB –
i. used partnership label freely
ii. KB acted as distributors and could initiate transactions
iii. KB visits the farm and make recommendations…indicate participation in partnership (different from agency where recommendations are not indicative)
iv. Capital advanced they wanted first and then profit share second (reversal of loan)
v. KB were involved in distribution, sales, etc. and rendered substantial services to the enterprise.
Young v. Jones - partnership by estoppel - audit letter incorrect
Elements of partnership by estoppel
1. Represent by words or conduct or consent to another representing
2. Not actual partners
3. Liable for representation or consent to persons giving credit
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Brochure says they are related entities.

No reliance shown on any statement by PW-US. They didnt rely on this brochure or even see it when making the relation.
Meinhard v. Salmon - Gerry owned the Bristol Hotel and converts it to shops and offices but is passive investor. She wants Salmon to do the work. Salmon understands he will be able to make more money this way than the rental business.
- Passive lease – he needs $200,000 to make the conversion. Salmon only has half that amount.
- Meinhardt has money to help. Must give him a share.
a. Usury law – caps on the amount lenders can charge.
b. First 5 years, M gets 40, S gets 60. They share losses, as there would be those at the outset.
c. The profits come in. Becomes a very prosperous enterprise.

Gerry then offers another deal. Salmon now takes this on his own without Meinhardt. M gets mad. Sues.
HOLD – constructive trust of the lease in such a way that the shares are 51/49.
i. Meinhard didn’t even have a chance to compete in this venture.
ii. What if there was a renewal on the lease issue? Salmon would say terms over. Meinhard would say that this was in the deal.
iii. Messages:
1. If you are a partner, disclose things to other partners. (Otherwise the courts will impose constructive trust.)
2. Get your act together when you negotiate abinitio. (Use lawyers, work through an agreement more extensively.)
Singer v. Singer - two family members go out on own to do a vernture away from partnership this is conflicting
iii. A partner must not compete w/ the partnership w/in the scope of the business-
1. But-can put a clause in the partnership agreement allowing partners to compete directly w/ the partnership„_See Singer
Bane v. Ferguson - law firm case - pension - former partner claims
HOLD – court says too bad
i. You have no fiduciary duty to someone who is no longer a partner. The agency relationship ended when he left.

Post dissolution duties
i. There are fiduciary duties that carry on after dissolution, but not all duties continue after dissolution
1. A partner is not a fiduciary of his former partners
Meehan v. Shaughnessy - law firm cases - M, B & C all want to start their own firm - what client can you take?
What about taking clients?
Go to the rules of professional responsibility
i. The notice is mailed
ii. The notice is sent only to persons with whom lawyer has an active lawyer client relationship
iii. Notice related to open and pending matters
iv. Sent promptly after the change
v. Does not urge client to sever relationship
vi. Clearly states client has right to decide
vii. Notice is brief and doesn’t badmouth the old firm
Gibbs v. Breed, Abbott & Morgan - law firm cases - 2 partners from trust and estate dept leave and take clients (grabbing and leaving)
HOLD – they properly took the clients, so the huge judgment is taken back.
a. Also taking information from desk files.
i. If not a confidence, you can take it and use it. This here was not deemed confidential.
b. Recruitment of the non-partner personnel – the memo to Chadbourne with all the information on the personnel’s salaries and personal information.
5. Damages – maybe some would have left anyway…this may mitigate it. Now sort out only those who left b/c they were improperly recruited. Did they lose clients b/c of this person’s leaving?
Lawlis v. Kightlinger & Gray - drunk partner claims predatory expulsion
3. Predatory Expulsion – this is in an economic context
- In order to share in a higher share of profits.
- This is not true, b/c they worked with him so much to help with the alcoholism

Expulsion must be made in good faith - here they tried to help him a lot, but ended up having to let him go.
Bohatch v. Butler & Binion - whistle blowing case - She is expelled from the prominent firm.
Theories on whistleblowing:

1. Majority - have power to get rid and not have to pay, no def bona fide, not expanded despite policy clash b/n partnership and ethical duty to report, say ok to integ partnership, also be ethical

2. Concurrance - make sure you're right then go ahead. You can expel her only if she’s wrong (concur on the result, b/s she was wrong)

3. Dissent – can’t expel if she acted in GF, right or wrong.
a. You cannot put a chilling effect on reporting improper behavior
Putnam v. Shoaf - 1. Bookkeeper was embezzling from them. Woman got out when profits were low. She sells to Shoafs and now she wants the windfall b/c of the embezzlement.
HOLD – all the assets never were yours. They belonged to the partnership, and were transferred when your interest was transferred.
a. Shoafs get the benefit.
b. Mrs. P gets nothing. Her attys argument was based on a misapplication of partnership property rights.
National Biscuit Company v. Stroud - S doesnt want to buy N's bread and tell N that he will no longer be liable for purchases with N.
Questions of authority – if a 3rd party is aware of a limitation on authority, there can be no actual nor constructive authority.

§18 Rule Determining Rights and Duties of Partners – need consent of all parties. If there is a tie, need the MAJOIRTY of the partners.
i. This is problematic when there are only 2 (or even numbers of partners).
ii. There is no restriction on Freeman’s authority then, b/c there is no majority vote.
5. So the firm is responsible for the bread, b/c Freeman acted with authority granted to him in §9.
Summers v. Dooley - trash collector hires additional help against partner's will
Under circ of this case, manifestly unjust to permit recovery of an expense incurred individually for benefit of one partner not partnership
Day v. Sidley & Austin - former senior partner upset about a merger that made him loose authority
He is SOL.

No fraud cause he makes the same $.
Should have contrated around this 2nd time. Own fault.

No ouster b/c merger allowed in PA.

No duty to disclose internal changes in firm. Exec committee made decision.
Owen v. Cohen - bowling alley - Owen found out that Cohen was a terrible person. Cohen is not a worker. Belittles Owen. Wants to open a gambling place.
Cohen wrongfully dissolved -
UPA § 32 – Dissolution by Decree of Court
i. (1) on application by or for a partner the court shall decree a dissolution whenever:
1. (c) partner is prejudicial
2. (d) not reasonably practical
3. (f) other circumstances (bad marriage)

Modern Valuation??? Good will??
Collins v. Lewis - Cost of cafeteria is WAY higher than originally planned. $636,720. Collins doesn’t want to put anymore money into it. This is the time cafeteria is opening to the public. - Judicial dissolution???
a. Court does not grant it.
b. Parties did not have animosity.
c. You always have the power to dissolve, but you will give to Lewis the three things from §38, power to continue business, payout debited with damages and good will as may be found.
4. Collins has to stay in the partnership longer. Forcing Collins to put more money in the deal.
Page v. Page - linen supply - the big airforce deal - one brother tries to cut out other for cheap - dissolve
Wants to cause dissolition to wind up. Is this wrongful?

Fiduciary relationship with partner. This relationship extends into the dissolution process, therefore we will grant George an appraisal remedy. You cannot proceed with your plan as you originally set forth, b/c as a partner owning a fiduciary duty to your fellow partner and being in a position to take over, you are going to have to fairly account for the AIRFORCE base opportunity.
i. The court sees what HB is trying to do, and wants George to get a cut of the $.
ii. HB has to do what Collins did. He has to figure out how to treat George fairly enough so that George will think the bid out is fair.
1. Liquidation – first put up as going concern. Then try to sell piecemeal. If not, then distribute in kind.
2. Not partners anymore, but they would co-own the property…so HB has to offer something appealing to George.
Prentiss v. Sheffel - partnership owns strip mall - dissolves and sell at auction...one partner bids on and wins.
3. Willful dissolution b/c this was at-will.
a. Default rule says proceed to winding up and liquidation.
b. Put shopping center on auction block.
c. Prentiss’ bid on the property and won the building back.
i. They only need 15% to buy the property.
4. Sheffel argues that they should not be able to bid and win the property.
a. He says they are bidding paper dollars, b/c they froze him out and then he has no economic interest in this.

COURT SAYS - i. What are the damages for freezing out? There are none.
ii. Court feels ∆’s argument is stupid. ∆ gets more money since the ðs bid.
iii. Prentiss’ win b/c it was done properly.
Pav-Saver Corp. v. Vasso Corp. - a. PS Manufacturing
i. PS Corp – owned by Dale (inventor)
1. trademark and patent
ii. Vasso Corp – owned by Meersman (businessman)
1. money
d. Majority of courts would let the agreement govern both aspects – return and liquidated damages. Most courts would side with the DISSENT.
i. Very strange to make 2 detriments…one under contract and one outside.
????
Kovacik v. Reed - case about kitchen remodeling that lost money
2) Policy in support of UPA instead of Kovacik (case abv) is that it is tedious to calculate value of each individual service - so just charge both

Case - 4) Kovach disagrees - If you force partners to share losses of actual money, the partners spending the money will be more careful about spending it, since they will be liable too.
a) 266 Note 1 – partners share losses in proportion each partner’s share of the profits are continued


One loses labor...one loses money
G&S Investments v. Belham - misconduct and death of Nordale
3) Buyout Agreement
a) Pnrs in investment co. Nordale is on coke and is crazy, ends up dying. Estate wants more money by sell at FMV, instead of what estate would get by the agreement which states go by bk value, but court ends up doing dissolution b/c Nordale incapable of performing, not wrongful
b) Each person gets a vote if no decision (by majority) stays status quo
c) When make agreement make sure to include a dispute management provision
d) How value interest of pnr who w/draws?
(1) Dissolution pay out clause (like Pickens-farmer), provide continuation, payout


Cost basis - capital contribution + profits - losses
Frigidaire Sales Corporation v. Union Properties, Inc -
The general partner can only perform its functions via agency.

3. 3 Theories in which the limited would be liable??:
a. Undisclosed principals…make the agent personally liable on the K
b. Personal Guarantee or if they act personally in the proceedings
i. Different from this case - If the two people go through the corporate formalities and only act as they should with a fiduciary duty to do the best for it, then the law would say that eve though it is closely owned, we will recognize that they have only acted in their corporate capacity.
1. Here, they separate things.
c. Piercing the Corporate Veil
i. Doctrine says: as a result of abuses that M and B have in dealing with the entities, the corporation is taken away and we look at them as liable partner.
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They kept their own actions separate from the busniess ones.