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90 Cards in this Set
- Front
- Back
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Gorton v. Doty (game day crash) |
An agency relationship is created once a party agrees to act on behalf of a second party subject to the second party’s control. (R2A §1) |
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Gay Jensen Farms Co. v. Cargill (More than financier) |
A fiduciary agency relationship merely requires a “manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act,” regardless of whether a contract was formed or the intent of the parties was to be bound by the legal obligations of that relationship. |
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Actual Express Authority (AEA) |
Principal tells agent what to do |
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Actual Implied Authority (AIA) |
Principal not always accountable for everything, but agent acts with implied understanding. Acts implicit in the task |
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Apparent Authority (AA) |
Authority to act in a manner reasonable for a person in agent’s position (looking at it from third party’s perspective)Apparent to third party that agent has the ability to enter into K |
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Ratification |
Principal decides after the fact to adopt/agree to terms. If there is than an issue, cannot renege |
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Inherent Agency Power (IAP) |
Only in certain jurisdictions |
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Mill Street Church of Christ v. Hogan (AA to hire bro) |
Implied authority is actual authority that is proven circumstantially to indicate that the principal intended to delegate powers to the agent that are necessary for carrying out the agent’s duties. One major circumstantial factor is prior work performed by agent for principal. |
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Three-Seventy Leasing Corporation v. Ampex Corporation (seller reneges on deal after verbal and written confirmation) |
An agent has the AA to act in a manner that is reasonable for a person in the agent’s position, and a third party can rely on those actions when a principal indicates through its actions that an agent had the appropriate authority. |
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Watteau v. Fenwick (Don’t buy any cigars…too late) |
An undisclosed principal can be held liable for the actions of an agent who is acting with an authority that is reasonable for a person in the agent’s position, regardless of whether the agent has the actual authority to do so. |
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Estoppel |
Occurs when a party reasonably relies on the promise of another party, and because of the reliance, is injured or damagedStandard for estoppel: 1) Principal has allowed for appearance of authority 2) 3rd party acted in good faith/reasonably 3) 3rd party changes position and acts in reliance |
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Hoddeson v. Koos Bros. (chick got played buying furniture) |
Absent proof of an agency relationship, a party may still have a duty of care for the other party to ensure that the other party is not disadvantaged in dealing with the party |
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Humble Oil and Refining Co. v. Martin (no e-brake on car, not good) |
A master-servant relationship exists when master exerts a considerable amount of control over the responsibilities of the servant |
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Hoover v. Sun Oil Company (fire at Sunoco) |
A master-servant relationship does not exist when an independent contractor controls the day-to-day operations of the entity that is responsible for damages suffered by a plaintiff |
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Murphy v. Holiday Inns, Inc. (slip and fall at the hotel, motel, Holiday Inn) |
When establishing an agency relationship through a contract, the nature and extent of the control agreed upon will determine whether the agency exists. |
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Miller v. McDonald’s Corp. (iced out Big Mac) |
Right to control test says that agency relationship exists regardless of level of control of agent, so long as principal has the right to exercise such control. R2A §267: If third party reasonable relies on apparent agency, principal is liable |
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Ira S. Bushey & Sons v. United States (drunken seaman) |
An employer will be held liable under respondeat superior if the actions of the employee arise out of the course of his employment |
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Manning v. Grimsley (typical douchy Sox fans) |
An employer is liable for damages resulting from an assault by an employee when the assault was in response to a plaintiff’s interference of the employee’s duties. |
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Reading v. Regem (guy uses military uni to smuggle goods) |
An agent has a duty to act solely for the master, and any profit earned while violating this duty belongs to the master |
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Town and Country House and Home Service, Inc. v. Newbery (former employees took client lists and formed new co) |
Agency relationship carries on even if employment doesn’t. No “grabbing and leaving” |
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Fenwick v. Unemployment Compensation Commission (what is a partner) |
A partnership is an association of two or more persons to carry on as co-owners a business for profit (NJSA 42:1-6) |
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Martin v. Peyton (Creditors or partners?) |
It must be proven that investors in an enterprise have an intent to carry on as co-owners of the business (for profit) before they can be considered partners |
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Young v. Jones (Price Waterhouse locations not PBE) |
Partnership by estoppel creates a liability to third parties who rely upon representations that a partnership exists. |
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Meinhard v. Salmon (Duty of loyalty) |
Joint adventurers owe one another the highest level of fiduciary duty of loyalty while the enterprise is ongoing |
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Meehan v. Shaughnessy (bad form while leaving prior law firm) |
A partner breaches his fiduciary duty by using his position of trust and confidence to the disadvantage of the partnership |
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Putnam v. Shoaf (Partner sells out, then wants a piece of action later…nope) |
A co-partner owns no personal specific interest in any specific property or asset of the partnership, and may only convey an undivided interest in the value or deficit of the partnership |
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National Biscuit Company v. Stroud (Partner stuck with order he didn’t want) |
Partnerships are based upon a “majority rules” principal. If two partners, one is bound by a decision/act involving a third party, even if disagree. If three partners, majority rules |
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Summers v. Dooley (trashy partnership) |
UPA states: “Any difference arising as to ordinary matters connected with the partnership business may be decided by a majority of the partners” |
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Day v. Sidley & Austin (More law firm drama) |
Agreements made under the partnership are subject to majority-rules, and unless there is a true fiduciary breach (such as one partner being unjustly/illegally enriched) the agreements are binding |
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Owen v. Cohen (The bowling alley debacle) |
Court may order dissolution when there are disagreements of such a nature and extent that all confidence and cooperation between the parties has been destroyed, or where one of the parties, by his misbehavior, materially hinders a proper conduct of the partnership business |
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Collins v. Lewis (Cafeteria partnership) |
A partner who has not fully performed the obligations required by the partnership agreement may not obtain an order dissolving the partnership |
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Page v. Page (One bro wants out, not the other) |
A partnership may be dissolved by the express will of any partner when no definite term or particular undertaking is specified |
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Prentiss v. Sheffel (Majority partners force dissolution, buy back without the minority slacker) |
Majority partners of a partnership-at-will may purchase the partnership assets at a judicially supervised dissolution sale where a minority shareholder has been frozen out of the partnership and the parties’ relationship has deteriorated to the partnerships’ detriment |
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Kovacik v. Reed (Kitchen remodeling partnership) |
While generally the rule is that, absent an agreement to the contrary, the parties split profits/losses irrespective of the amount each contributed, here one party provided financing and the other labor, making the deal fair, and any damages to either party would not be fair |
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Southern-Gulf Marine Co. v. Camcraft, Inc. (Place of incorp did not affect K) |
Where a party has K’d with a corp and is sued upon the K, neither is permitted to deny the existence, or the legal validity of the corp |
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Enterprise Liability Doctrine (Piercing the corp veil) |
Theory that individual entities or persons can be held jointly liable for some action on the basis of being part of a shared enterprise |
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Alter Ego Theory |
Legal doctrine whereby the court finds a corporation lacks a separate identity from an individual or corporate shareholder, resulting in injustice to the corporation’s debtors. Finding alter ego gives the court cause to pierce the corporate veil and hold individual shareholders personally liable for debts of the corporation. |
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Reasons for piercing the corp veil: |
Comingling of funds Undercapitalization Shareholder is using corp for own benefit, not best interest of corp Fraud/injustice |
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Agency |
If respect the corp form, agency relationship wont allow for liability to flow through (one of benefits of incorporating) |
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Walkovszky v. Carlton (Trying to pierce cab company’s corp veil) |
Whenever anyone uses control of a corp to further his own – rather than the corp’s business – he will be liable for the corp’s acts. But where a corp is a fragment of a larger corp combine, which actually conducts the business, the court will not pierce the corp veil to hold individual shareholders liable (just the higher corp) |
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Sea-Land Services, Inc. v. Pepper Source (Comingling made this one easier to pierce) |
The corp veil will be pierced where there is a unity of interest and ownership between a corp and an individual, and where adherence to the fiction of a separate corp existence would sanction a fraud or promote injustice |
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Direct suit |
One that is brought against corp based upon personal injury Damages go to the injured individual Derivative suits can be brought in both public corps and closely held corps (private) |
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Derivative suit |
One that is brought on behalf of corp bc corp is misusing funds, making bad decisions, or injury the corp in some way (generally, they enforce fiduciary duties of D&O’s) Damages from derivative litigation run to the corp |
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Demand |
Shareholder first required to make a demand upon the board to fix the issues before filing a derivative suit This gives an opportunity to avoid litigation and resolve problem internally (cuts back on frivolous suits and judicial efficiency)Also functions to give the corp warning as to coming litigation (also can backfire, giving them time to prepare evasive response) |
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Excusal |
Waiver of the requirement that demand requirement upon shareholder if shareholder can show that demand would be futile |
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Wrongful refusal |
If demand is refused, burden on shareholder to show that lack of good faith in so doing (Basically have to show that D&O violated Business Judgment Rule) |
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Business Judgment Rule |
Level of deference given to D&O’s of a corp Presumes that D&O’s carry out their functions in good faith, after sufficient investigation, and for acceptable reasons |
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Eisenberg v. Flying Tiger Line, Inc. (Derivative or direct suit) |
A cause of action that is determined to be personal, rather than derivative, cannot be dismissed bc the P. fails to post security for the corp’s costs |
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Grimes v. Donald (Derivative suit for CEO’s big comp fails) |
When a stockholder demands that the board take action on a claim allegedly belonging to the corp and demand is refused, the stockholder may not, thereafter, assert that demand is excused with respect to other legal theories in support of the same claim, although the stockholder may have a remedy for wrongful refusal or may submit further demands which are not repetitious |
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Marx v. Akers (Derivative suit for CEO’s big comp fails) |
A director will always be an interested party, for the purpose of the excusal of a demand, when the director is voting on director compensation, but a plaintiff has to demonstrate with particularity that the compensation is excessive |
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A.P. Smith Mfg. Co. v. Barlow (Princeton donation challenged) |
Corporations are meant to support the growing nation, thus donating to surrounding schools and universities (and overall benevolence) is one of their primary functions |
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Dodge v. Ford Motor Co. (Ford messes up when says philanthropy first) |
“Well recognized law that directors of a corp have the power to declare a dividend and determine its amount.” Courts of equity will not interfere with management to refuse a dividend unless clearly to detriment of business (here, was found to be to detriment) |
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Shlensky v. Wrigley (Night games = more revenue?) |
The general rule is that, unless there is evidence of fraud or illegality on behalf of the organization, it is not the place of the court to interfere with the decisions of the board/management |
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Water, Waste & Land, Inc. d/b/a Westec v. Lanham (Dudes try to hide behind LLC) |
Under agency doctrine, if existence and identity of principal disclosed to third party, agent is not liable. If principal is partially disclosed (existence known, but identity not), the agent is a party to the K |
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Elf Antochem North America, Inc. v. Jaffari (Freedom to K means bound to arbitration) |
The LLC Act mimics the LP Act in granting the parties freedom to K, but thereby bounding the parties to the agreement as it is written, unless there is some inconsistency |
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Fisk Ventures, LLC v. Segal (#Stalemate) |
Where an LLC agreement vests power in more than one equity class, and requires the classes to cooperate to effect LLC action, one class does not breach either: (1) the LLC agreement or (2) the implied covenant of good faith and fair dealing by failing to acquiesce to the wishes of the other classes simply bc the other class believes their approach is superior |
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McConnell v. Hunt Sports Enterprises (Chaos in Columbus) |
Members of an LLC can agree to limit the scope of the fiduciary duty they owe to the LLC |
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Racing Investment Fund 2000, LLC v. Clary Ward Agency, Inc. (Capital calls not for debt-collection) |
A provision for capital calls by the manager of an LLC may not be used by outside parties as a debt-collection mechanism |
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New Horizons Supply Cooperative v. Haack (#bitchidontbelieveyouno) |
Proper dissolution of an LLC involves informing creditors in a timely manner |
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Kamin v. American Express Company (BJR is back) |
Unless P.’s can prove show claim of fraud, self-dealing, or bad faith on part of the Board, it is not the place of the court to interfere with business judgment decisions |
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Smith v. Van Gorkom (Transunion board grossly negligent) |
The BJR requires that D&O’s make an “informed business decision” in good faith that the decision is in best interest of the company |
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Cinerama, Inc. v. Technicolor, Inc. (CEO did his due diligence) |
Went up to DE Supreme Court, which held that – unlike Van Gorkam – CEO did due diligence and got max value for shares. Held for D. |
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Bayer v. Beran (Investing in wife’s singing career”) |
Court said that takes, though it looks shady, one director is not enough to bind the board. This was a group decision to invest. Dismissed. |
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Benihana of Tokyo v. Benihana (BJR again) |
BJR again |
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In re eBay Inc. Shareholders Litigation (Corporate Opportunity Doctrine) |
The Corporate Opportunity Doctrine is the legal principle providing that D&O’s and shareholders must not take for themselves any business opportunity that could benefit the corporation (one application of Duty of Loyalty) |
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In re The Walt Disney Co. Derivative Suit (Big payout to failed president) |
BJR again – D&O’s must use that amount of care which ordinarily careful and prudent men would use in similar circumstances and consider all material information reasonably available in making business decisions |
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Robinson v. Glynn (What is a security) |
The level of control dictates whether or not the investment may be categorized as a security (see requirements for the five elements of common stock above) |
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Doran v. Petroleum Management Corp. (Private placement) |
Four factors are relevant to determining if an offering is an exempt private placement: 1) Number of offerees and their relationship to each other and offeror 2) Number of units offered 3) Size of the offering 4) Manner of the offering |
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Escott v. BarChris Construction Corp. (Rule 10b-5 and Securities Act §11) |
Defendant corporate officers will be held liable for false or misleading statements when they materially affect the purpose of the registration statement. |
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Basic Inc. v. Levinson (Fraud on the market) |
Misleading statements during merger discussions will be material under Rule 10b-5 if the misstatements would have changed the view of the total information by a reasonable investor. Said another way, an investor’s reliance on material, public misrepresentations may be presumed under a fraud-on-the-market theory for purposes of a Rule 10b-5 action |
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Nondisclosure |
When D.’s fail in a duty to speak, court dispense with the proof of reliance requirement if the undisclosed facts were material |
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Omitted information |
Courts are split on this issue. Cases of half-truths may or may not still need reliance showing |
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Fraud on the Market |
The theory that those who trade on public trading markets rely on the integrity of the stock’s market price. If material misrepresentation artificially distorts the market price, courts infer that investors have relied on the misinformation. In other words, if the truth had been revealed, investors would not have traded at the prevailing nondisclosure price. |
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Goodwin v. Agassiz (Insider info about Copper in ground?) |
D&O’s of corp are bound to exercise the strictest good faith in respect to its property and business |
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SEC v. Texas Gulf Sulphur Co. (Insider info) |
Insiders cannot act on material information (information that a reasonable man would deem important to the value of the stock) until the information is reasonably, publicly disseminated. |
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US v. O’Hagan (Outsider with inside info) |
An outsider (one who does not work for the company itself) who misappropriates confidential information to personally benefit violates §10(b) because there is deception in connection with the purchase or sale of a security. |
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Waltuch v. Conticommodity Services, Inc. (Good faith req’t can’t be overruled by a K) |
A corporation cannot agree to indemnify an officer in a manner that is inconsistent with the state statute, but the officer is entitled to indemnification if the charges against him have been dismissed |
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Citadel Holding Corp. v. Roven (Indemnify me son) |
An agreement between a corporation and its officer to advance an officer money to cover legal expenses that arise from his position with the company is independent of whether the company is required to indemnify the officer and is consistent with other statutory provisions. |
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Levin v. MGM, Inc. (Corp can use company funds to defend) |
The decision as to the continuance of the present management rests entirely with the stockholders. A court may not override or dictate on the matter, so long as no breach of duties/illegalities |
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Rosenfeld v. Fairchild Engine & Airplane Corp. (Again corp funds ok if for the benefit of corp and not personal) |
In a contest over corp policy, D&O’s have the right to make reasonable expenditures, subject to the scrutiny of the court when duly challenged, from the corp treasury for the purpose of persuading stockholders of the correctness of their position and for soliciting their support for policies which the directors believe in good faith are in the best interests of the corp |
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J.I. Case Co. v. Borak (Private §14(a) action allowed?) |
Under §27 of Exchange Act, private party may bring §14a cause of action |
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Mills v. Electric Auto-Lite Co. (Damages under §14(a)) |
A material misstatement or omission in a proxy statement is all that is required to maintain an action under §14(a) |
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Lovenheim v. Iroquois Brands, Ltd. (“Significantly-related” to biz) |
Under Rule 14a-8(c)(5), a shareholder proposed resolution for a proxy statement can only be turned down when the proposal both concerns less than 5% of total earnings or assets, and when it is not significantly-related to the business. Here it was considered significantly-related to biz. |
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Ringling Bros-Barnum & Bailey Combined Shows v. Ringling (Yup, it’s a circus) |
Shareholders can agree to pool their votes and have a third party intercede when there is any disagreement as to how to vote. |
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McQuade v. Stoneham (“Best efforts” K can’t usurp minority voting power) |
Shareholders cannot form an agreement to control the decisions traditionally vested in the judgment of the directors of a company |
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Clark v. Dodge (No one else injured by breach since only two shareholders) |
An agreement between shareholders, wherein the shareholders entering the agreement are the only shareholders of the company, is valid even if the agreement contemplates controlling management decisions (no public policy concerns) |
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Wilkes v. Springside Nursing Home, Inc. (No legit biz interest for freeze out…just cut the dude off) |
Shareholders in a close corporation owe each other a duty of acting in good faith, and they are in breach of their duty when they terminate another shareholder’s salaried position - when the shareholder was competent in that position - in an attempt to gain leverage against that shareholder |
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Ingle v. Glamore Motor Sales, Inc. (No legit biz interest for freeze out…just cut the dude off) |
Absent an employment contract, an employee is an at-will employee when his shareholder agreement provides a buyback provision of his shares if they are terminated for any reason. |
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Alaska Plastics, Inc. v. Coppock (#Exprobz) |
Majority shareholders in a closely held corporation owe a fiduciary duty of utmost good faith and loyalty to minority shareholders. |
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Pedro v Pedro (Vote for Pedro) |
Majority shareholders who buy back shares from another shareholder are obligated to pay FMV if they have breached a fiduciary duty owed to the shareholder. |
