Following are the exam instructions for the Business Associations II final exam tomorrow. Please note, you will have these for the exam, but I wanted to provide them early in case you want to read them first. You do not need to do anything with these. They are here just in case you'd like to take a look before the exam gets started.
INSTRUCTIONS FOR FINAL EXAMINATION
1. This is an open-book examination. You may use any non-electronic materials you wish to bring, and you may take the exam on a laptop if you have complied with the UND School of Law’s requirements. Thus, you must print and bring to the exam hard copy (paper) versions of anything you wish to access during the exam.
2. You will have three hours (180 minutes) to complete the entire examination, which consists of 20 multiple-choice questions to be answered on the provided Scantron form, and 3 essay questions, which are to be answered in a blue book or typed on a laptop using the approved software. The estimated time for each section is noted clearly in the exam. The time allocations correspond directly to the point allocations. Thus, although you may spend as much or as little time on each question as you wish, you should recognize that a 20-minute question is the functional equivalent of a 20-point question.
3. For the multiple-choice questions, please indicate your response clearly on the Scantron form. Specifying more than one option is automatically incorrect. If you have questions or concerns, pick the best answer, then explain briefly on your exam answer (in ExamSoft or your blue book and not on the Scantron) why you think there is more than one correct answer (or there are no correct answers) and move on. Please answer every question.
4. If you are using a laptop to answer the essay questions, you still must log in to the program at the beginning of the exam period. (If you are handwriting the exam, you should not have your laptop in the exam room.) Please turn in the entire exam, including your scratch paper (with your exam #). Remember that the multiple-choice responses must be put on the Scantron to receive credit. This exam is double-sided; both sides matter!
5. Please use only your exam number -- do not use your name, student ID number, or Social Security Number on any exam materials.
6. This final exam is to be your work, and your work alone. University and UND School of Law policies apply, including, but not limited to the School of Law’s Academic Dishonesty and Misconduct Policy. By turning in this exam, you certify that the exam was completed by you, without the aid of any materials not expressly authorized.
7. Remember, this exam covers the material we discussed in class. Relax (as best you can) and use the information from our class materials and discussions to guide you to the correct answers. You are better served answering every essay question with a little less information that you would prefer than you would be writing beyond the allotted time and missing an entire question. If you see any problems or inconsistencies with any of the questions, note them briefly, explain any assumptions (consistent with the given facts), and move on. You’ve worked hard. Try to stay focused on the exam, and share what you know.
Monday, May 4, 2009
Thursday, April 30, 2009
Question Re: Walkovszky v. Carlton
What are the roles of agency law and respondeat superior in the Walkovszky v. Carlton case on page 207 of the text?
This is a good question about a not very well-explained issue raised by the court's confusing discussion of agency. Here's my attempt to clarify:
Agency is not really a proper part of the discussion here, in my view. The rule established, it appears, is that if a shareholder controls the corporation to further his or her own personal business, and not the corporation’s business, he or she will be held liable for the corporation’s acts and debts on a principal-agent theory. This sounds a lot like the traditional veil-piercing/alter ego rule, resulting (it would seem) in liability for all of the shareholders (not just Carlton).
The idea behind the court's agency rationale seems to be that the corporation acted as an agent of Carlton. To prove that, the concept would require that Carlton was using the corporation to further his own interests, and not those of the corporation. But corporations are set up to benefit the shareholders economically, and if you can find that the company was acting solely as an alter ego for the principal, you should be able to find liability under a veil-piercing theory. Also, in directing the corporation, Carlton was acting as a director or officer, not as a shareholder, so it's hard to see why agency liability would be proper here where there is a proper director's role.
The main things to take from this are the issues related to enterprise liability and veil piercing. Respondeat superior here should be appropriate in the basic tort context, holding the principal (e.g., taxi company) liable for injuries cause by an agents (e.g., a taxi driver), but should not add much to the veil piercing analysis other than providing additional support for an alter-ego theory.
This is a good question about a not very well-explained issue raised by the court's confusing discussion of agency. Here's my attempt to clarify:
Agency is not really a proper part of the discussion here, in my view. The rule established, it appears, is that if a shareholder controls the corporation to further his or her own personal business, and not the corporation’s business, he or she will be held liable for the corporation’s acts and debts on a principal-agent theory. This sounds a lot like the traditional veil-piercing/alter ego rule, resulting (it would seem) in liability for all of the shareholders (not just Carlton).
The idea behind the court's agency rationale seems to be that the corporation acted as an agent of Carlton. To prove that, the concept would require that Carlton was using the corporation to further his own interests, and not those of the corporation. But corporations are set up to benefit the shareholders economically, and if you can find that the company was acting solely as an alter ego for the principal, you should be able to find liability under a veil-piercing theory. Also, in directing the corporation, Carlton was acting as a director or officer, not as a shareholder, so it's hard to see why agency liability would be proper here where there is a proper director's role.
The main things to take from this are the issues related to enterprise liability and veil piercing. Respondeat superior here should be appropriate in the basic tort context, holding the principal (e.g., taxi company) liable for injuries cause by an agents (e.g., a taxi driver), but should not add much to the veil piercing analysis other than providing additional support for an alter-ego theory.
Wednesday, April 15, 2009
Class Slides for April 8, 2009
I promised to make the class slides available for the April 8, 2009, class. Due to a variety of concerns, I will not post them here, but I will bring hard copies to class; if you are not in class today, I will make additional copies available from the faculty secretary, Karen Martin.
Tuesday, March 31, 2009
Revised Syllabus: Dealing with Missed Classes
Two classes were canceled because of weather-related issues, so I have revised to syllabus. Following is the updated sections of our remaining classes:
The full syllabus, revised to include the above information, is available here.
March 25, 2009: canceled, snow storm
March 30, 2009: canceled, flood
April 1, 2009: KRB pp. 482-510
April 6, 2009: KRB pp. 511-19
April 8, 2009: KRB pp. 599-618
April 13, 2009: Holiday, No Class
April 15, 2009: Finish materials from prior class; Intro to Mergers & Acquisitions
April 20, 2009: Clean-up, Recap and Review
April 22, 2009: Film: Barbarians at the Gate
Please note: We will discuss this more in class, but the movie on April 22 is 107 minutes, so it will run past the end of our last class. I hope that people can stay to watch the end of the movie, but I understand conflicts may not allow that. For anyone unable to stay, I will make the film available from the faculty secretary.
The full syllabus, revised to include the above information, is available here.
March 25, 2009: canceled, snow storm
March 30, 2009: canceled, flood
April 1, 2009: KRB pp. 482-510
April 6, 2009: KRB pp. 511-19
April 8, 2009: KRB pp. 599-618
April 13, 2009: Holiday, No Class
April 15, 2009: Finish materials from prior class; Intro to Mergers & Acquisitions
April 20, 2009: Clean-up, Recap and Review
April 22, 2009: Film: Barbarians at the Gate
Please note: We will discuss this more in class, but the movie on April 22 is 107 minutes, so it will run past the end of our last class. I hope that people can stay to watch the end of the movie, but I understand conflicts may not allow that. For anyone unable to stay, I will make the film available from the faculty secretary.
Monday, March 9, 2009
Wednesday, March 4, 2009
Post-Wheelabrator: Five Scenarios
To help break down Wheelabrator, as requested last class, consider the following scenarios, assuming that in each instance a majority of disinterested shareholders approved the transaction at issue after full disclosure. The following summarizes the possible effects we discussed:
1. Duty of Care violation: board failed to reach an informed business judgment (e.g., Van Gorkom). Claim is extinguished, so a plaintiff can only succeed by proving waste or gift. Note that waste or gift is only permitted with unanimous shareholder approval.
2. Lack of board authority (i.e., only shareholders could approve the item at issue). Claim extinguished. Later, proper approval by vote of shareholders ratifies (fixes) prior mistake.
3. Lack of adequate investigation and consideration by board (e.g., Van Gorkom). Subset of duty of care violation described in item 1 and claim cannot proceed.
4. Interested director. Again, where approved by disinterested shareholders, with approval, the burden shifts to the plaintiff who must overcome the business judgment rule, meaning that the plaintiff must prove waste, gift, or gross negligence). Thus, the loyalty exception to the BJR is eliminated. Ratification by disinterested shareholders makes it as though there were no conflict. This is the Wheelabrator in a nutshell.
5. Controlling shareholder. If the court determines that there is a controlling shareholder, which is definitely one with more than 50%, but possibly one with as little as 20%, then, even though the shareholders are disinterested (i.e., not officers or directors), the burden shifts to plaintiff and the standard is entire fairness. Compare Wheelabrator, where (on those facts) the court did not find that 22% ownership was a controlling shareholder.
1. Duty of Care violation: board failed to reach an informed business judgment (e.g., Van Gorkom). Claim is extinguished, so a plaintiff can only succeed by proving waste or gift. Note that waste or gift is only permitted with unanimous shareholder approval.
2. Lack of board authority (i.e., only shareholders could approve the item at issue). Claim extinguished. Later, proper approval by vote of shareholders ratifies (fixes) prior mistake.
3. Lack of adequate investigation and consideration by board (e.g., Van Gorkom). Subset of duty of care violation described in item 1 and claim cannot proceed.
4. Interested director. Again, where approved by disinterested shareholders, with approval, the burden shifts to the plaintiff who must overcome the business judgment rule, meaning that the plaintiff must prove waste, gift, or gross negligence). Thus, the loyalty exception to the BJR is eliminated. Ratification by disinterested shareholders makes it as though there were no conflict. This is the Wheelabrator in a nutshell.
5. Controlling shareholder. If the court determines that there is a controlling shareholder, which is definitely one with more than 50%, but possibly one with as little as 20%, then, even though the shareholders are disinterested (i.e., not officers or directors), the burden shifts to plaintiff and the standard is entire fairness. Compare Wheelabrator, where (on those facts) the court did not find that 22% ownership was a controlling shareholder.
Wednesday, February 25, 2009
Handouts in PDF
Please click here for a PDF file if the handouts for BA2 to this point. Please let me know if you have any questions.
Monday, February 16, 2009
Reminder: No Class on Wednesday, February 18, 2008
I just wanted to provide one more note that we will not meet until next Monday. I hope you have a great week, and I'll see you one week from today.
Monday, February 9, 2009
Cases for Upcoming Classes
Monday, February 2, 2009
Independent Board of Directors: NYSE
Today we discussed the rule requiring independent boards for companies listed on the New York Stock Exchange. The tests for independence, and some commentary, are available here.
Friday, January 16, 2009
Q & A Related to Class 1
Question: When you were talking about the liability for the promoter of a corporation for pre-incorporation activity, you presented a question that asked once the articles of incorporation are filed, is the promoter liable if the corporation breaches any pre-incorporation contracts? I took from that discussion that the promoter is liable for those pre-incorporation contracts, (under MBCA 2.04) but why? Is it because the promoter created an arms-length transaction with the person at the other end of the contract (since the corporation didn’t exist at the time) and thus is directly tied to the transaction?
Answer: Yes. The Model Business Corporation Act (MBCA) § 2.04, Liability for Preincorporation Transactions, provides:
Note that the promoter can disclose the corporation does not yet exist and that he or she has no intention of being bound. If made expressly part of the agreement, the promoter should be able to escape personal liability. Because the corporation did not exist, there is no other party to be bound; as such, knowing no corporation had been formed, the promoter remains bound unless released. The message – form the corporation first, then sign contracts!
Question: Under the fourth example, if the articles are not filed or are defectively filed, can the defectively formed entity enforce the contract? Is the answer to that question, it depends…as in the courts will only allow the enforcement of such a pre-incorporation contracts where equity demands (such as part-performance)?
Answer: We will discuss this more in some of the cases we’ll cover, but the short answer is, yes, sometimes a defectively created company can enforce a contract. In fact, that’s kind of what happens in the first case we’ll discuss. There are two concepts that can allow this to happen: (1) de facto corporation doctrine and (2) corporation by estoppel. A court will often find a de facto corporation where the promoters (a) tried in good faith to incorporate, (b) had a legal right to incorporate, and (c) acted as a corporation. For corporation by estoppel, courts will enforce the contract where (a) the party claiming it is not a corporation thought it was a corporation all along and (b) that party would earn a windfall if allowed to claim the corporation did not exist. There can, in some situations, be some overlap between these two concepts. Either one can suffice.
Answer: Yes. The Model Business Corporation Act (MBCA) § 2.04, Liability for Preincorporation Transactions, provides:
“All persons purporting to act as or on behalf of a corporation, knowing there was no incorporation under this Act, are jointly and severally liable for all liabilities created while so acting.”
Note that the promoter can disclose the corporation does not yet exist and that he or she has no intention of being bound. If made expressly part of the agreement, the promoter should be able to escape personal liability. Because the corporation did not exist, there is no other party to be bound; as such, knowing no corporation had been formed, the promoter remains bound unless released. The message – form the corporation first, then sign contracts!
Question: Under the fourth example, if the articles are not filed or are defectively filed, can the defectively formed entity enforce the contract? Is the answer to that question, it depends…as in the courts will only allow the enforcement of such a pre-incorporation contracts where equity demands (such as part-performance)?
Answer: We will discuss this more in some of the cases we’ll cover, but the short answer is, yes, sometimes a defectively created company can enforce a contract. In fact, that’s kind of what happens in the first case we’ll discuss. There are two concepts that can allow this to happen: (1) de facto corporation doctrine and (2) corporation by estoppel. A court will often find a de facto corporation where the promoters (a) tried in good faith to incorporate, (b) had a legal right to incorporate, and (c) acted as a corporation. For corporation by estoppel, courts will enforce the contract where (a) the party claiming it is not a corporation thought it was a corporation all along and (b) that party would earn a windfall if allowed to claim the corporation did not exist. There can, in some situations, be some overlap between these two concepts. Either one can suffice.
Tuesday, January 13, 2009
Next Class Topic: Law & Economics; Revised Syllabus Posted
I have updated and revised the syllabus because so many people do not yet have the text. The books should be available soon, so we'll pick up with the reading assignments starting next Wednesday, January 21, 2009. There is no reading assignment for class tomorrow (January 14, 2oo9). Please click here for the revised syllabus.
For tomorrow, we'll talk about law and economics, which will hopefully lead to some good discussion and provide a foundation for the law and cases we will consider this semester.
In preparation for class tomorrow, consider the following, posted by the good folks over at Truth on the Market:
For tomorrow, we'll talk about law and economics, which will hopefully lead to some good discussion and provide a foundation for the law and cases we will consider this semester.
In preparation for class tomorrow, consider the following, posted by the good folks over at Truth on the Market:
Monday, January 12, 2009
Bookstore Update
The bookstore claims that they will have as many as 45 books by late Wednesday. You should obtain your book from whomever you wish, but I wanted you to know this (hopefully) should be an option if you would prefer to deal with the bookstore here.
Revised Syllabus Pending; Book Information
As noted, I will provided a revised syllabus later today or tomorrow that will adjust for the fact that textbooks are not available for everyone. I have placed one copy of the book on reserve in the library, but obviously that will not serve everyone's needs.
I cannot guarantee the quality of any of the book sellers, but Amazon has a number of copies available, both new and used. click here for Amazon options.
I cannot guarantee the quality of any of the book sellers, but Amazon has a number of copies available, both new and used. click here for Amazon options.
Sunday, January 11, 2009
Course Syllabus -- Spring 2009
For the complete course syllabus, including course rules and reading assignments, please click here.
Monday, January 5, 2009
First Class Assignment
The assignment for the first class meeting on January 12, 2009, is pages 200-22 in the text, William A. Klein, J. Mark Ramseyer, & Stephen M. Bainbridge, Business Associations (6th ed. 2006).
Note that this is a different text than the one used for Business Associations I in Fall 2008, and is the same text I used last year for Business Associations II. However, the material covered in BA II this year will be different from that covered in last year's course.
The full syllabus and other readings for future classes will be posted on this blog. I look forward to our first meeting.
Note that this is a different text than the one used for Business Associations I in Fall 2008, and is the same text I used last year for Business Associations II. However, the material covered in BA II this year will be different from that covered in last year's course.
The full syllabus and other readings for future classes will be posted on this blog. I look forward to our first meeting.
Subscribe to:
Comments (Atom)
