Term
| Agent Principal relationship creation of. What are the elements? Cases? |
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Definition
| 1. Manifestation of assent by principal to agent 2. subject to his control. Dotty v. Gordon (manifest & control) / Cargill (control, creditor debtor) |
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Term
| Cargil factors of control to create agency relationship. |
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Definition
| 1. Veto powers over decisions 2. Putting people in control 3. Providing assurance of payments. |
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Term
| Inherent Agency Case, Section, case? Policy |
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Definition
| Watteau v. Fenwick case Section 8A - in the absense of authority, when there is an undisclosed principal and the agent is acting in the normal course of buisness, there will be a binding relationship. Policy behind this is to protect 3 parties from being harmed by a "secret principal" who should be liable. You could defete this by providing notice of the principal or if agent acted outside the normal course of business. |
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Term
| Ratification case and rule. |
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Definition
| Botticello, if someone enters into something they had no authority to enter into, can later be affirmed by the principal so long as the principal has full knowledge of all the material facts and the principal agrees. |
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Term
| 4 ways to ratify the agents behavior |
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Definition
| 1. express affirmation by principal 2. imply afirmance through acceptance of benefits 3. silence of principal 4. bringing a lawsuit to enforce the contract. |
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Term
| Agency by Estoppell, Case, Rule |
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Definition
| Koos Bros. Case, fake agent salesmen. Rule: The appearance of authority maut be shown to have been created by the manifestation of alleged principal and not solely by the agent, a. principal intentionally or carelessly caused such belief or b. having notice of such belief, the person did not take steps to notify the 3rd party otherwise. |
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Term
| What are the eight cases that deal with independant contractors versus employees? |
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Definition
| Humble Oil, Sun Oil, Hollida Inns. / Ira S. Bushey n Sons, Manning, Conaco, Majestic Reality. |
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Term
| Humble Oil Facts and Rule |
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Definition
| Humble operated day to day control over gas station such that Humble was held responsible for torts of contractor. He Set hours, and controlled day to day operations of store. DAY TO DAY CONTROL. |
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Term
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Definition
| Franchisee was independant contractor of the franshichor because, 1. he made no day to day reports, independantly operated store hour, assumed the risk of profit and risk. |
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Term
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Definition
| Contract did not provide day to day contoll, even though it used the same pillows, beds and standards, not enough to exercise day to day control. |
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Term
| Employor Liability for employee's acts, Cases? |
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Definition
| Ira Bushey & Sons - US gov. was responsible for the acts of sailor for turning the valve. Manning – Picture threw ball at fan and injured him. It was forseeable so ball team liable. If particular human behavior is characteristic of the employees hired for such positions, it is foreseesble that certain risks are assumed on behalf of the employer and would be considered “in the line of the work.” See pg 63 notes. See RS 228… a servant’s conduct is not within the scope of employment if it is too little actuated by a purpose to serve the master… |
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Term
| What are factors that show that the employee is acting in the scope of employment such that employor will be liable? |
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Definition
Whether or not they were acting in the scope of employment –
1. Either motivated by some desire to serve the employer or
2. There is some nexis between the job description or the job requirements and the cause of action. |
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Term
| What is the policy that courts try to find when attaching liability to employers or franschisors for the acts of their employees. |
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Definition
| Compensate agreived parties and attach liability to the parties that could most likely bear. |
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Term
| Majestic Reality Associaties. |
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Definition
| Liability of principal for the acts of the agent (independant contractor). A general or principal will be liable for the acts of an independent contractor is the work is inherently dangerous or negligence per se (the contractor is underfunded when it comes to insurance). Or if there is day to day control over the independant contractor or |
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Term
| Duty of Loyalty between agent and principal cases? |
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Definition
| Reading v. Reagan, General Automotive Manufactures. |
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Term
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Definition
| If an agent makes money while in the scope of his employment, he holds the money in a constructive trust for his employer. |
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Term
| General Automotvie Manufacure v. Singer |
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Definition
| If an agent draws business away from the principal who the agent owes a fiduciary duty and matter of loyalty too, he must give the profits to the principal. (machine shop manager gave jobs to others). |
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Term
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Definition
| Proxy statements gathered using corporate funds is ok if it the sums are not excessive and it is fully disclosed to shareholders. |
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Term
| Ronsenfeld v. Fairchild Engine |
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Definition
| As long as the new management’s expenses were not excessive, were used to gain votes and as a policy matter for the best interest of the corporation, AND the share holders vote to reimburse, it is ok to use corporate funds to reimburse the new board for expenses incurred in gathering proxies. SEC rules 14a-(7) full disclosure of costs. |
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Term
| Lovenheim v. Iroquois Brands, LTD |
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Definition
| SEC rule 14a-8i5 exemption to include proxy for Co. to investigate turkey torture. A shareholder proposal can be significantly related to the business of a securities issuer for noneconomic reasons including social and ethical issues and therefore may not be omitted from the issuers proxy statement even if it relates to operations which account for less than 5% of the issuesr’s total assests. |
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Term
| AFSCME v. AIG, Inc. pg 551 |
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Definition
| Rule 14a-8i8 exception to add info to proxy because it relates to election information. The Co. could not exclude the proposal by AIG major shareholder to amend the bylaws to allow shareholder nominated peeps to be on a ballot. Even though the SEC had interpreted rule 14a8i8 exclusion to include this in 1990, they gave no reasonable basis for changing their interpretation of what seemed to be an ambiguous statute and was in contradiction of the 1976 interpretation given by the SEC. As a result of this case the SEC amended the rules to include excluding any “procedure for such nomination or election” from a proxy statement to be voted on. |
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Term
| Ringling Bros. –Barnum & Bailey |
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Definition
| A group of shareholders may lawfully contract to vote in any manner they determine. Delaware General Corporation Law section 213 pg 142, agreement that allowed arbitrartor to determine vote was lawful. |
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Term
| What is a close corporation? |
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Definition
| Very few share holders, no public market, if under 30, can elect by majority to be a close corporation. |
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Term
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Definition
| Shareholders in a closely held corporation are free to contract regarding the management of the corporation absent the presence of an objecting minority, and threat of public injury. (contract with wife after her husband died was valid and enforcable because it was a close held corporation with no minorty injured shareholders). The things that would violate the business corp. act were 1. no public injury 2. absence of minority complaner 3. no prejudice to creditors. |
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Term
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Definition
| Close held corporations - Voting agreements binding individual shareholders to vote in concurrence with the majority constitute valid contracts in close held corporations, even though It was not inc. as such, the company had the characteristics of such. TV broadcast agreement for all to vote together according to majority of share holders or shares would be subjected to sale if K violated. |
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Term
| Wilkes v. Springside Nursing Home |
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Definition
| There is a strict obligation on the part of the majority stockholders in a close corporation to deal with the minority with the utmost good faith and loyalty. 1. Ask whether there was a legitimate business purpose in the majority for taking the action? The majority shareholders did not show a legitimate business purose for severing Wilkes from the payroll of the corporation or refusing to re-elct him as a salaried officer and director. |
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Term
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Definition
| The Malden Co. 2 shareholders had “froze out” minority wife of dead by 1. Excluding her from corporate decisions, 2. Denying her access to company decisions, 3. Hindering her ability to sell her shares on the open market. Issue: Could court order buyout of minority shareholder? NO – must only put her back in the position she would have been. An asset of a minority share of a close corporation has little or no market value, must pay money damages or order dividend payment. |
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Term
| Smith v. Atlantic Properties Inc. |
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Definition
| Minority share holder with controlling vote has same duty of loyalty to co. not to excersise the veto power in abuse of that duty of loyalty. |
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Term
| FENWICK v. Unemployment comp |
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Definition
| Even though the agreement stated that she was a partner, she was held to not be a partner, she didn’t exercise any control over the company. The courts ultimately look to the intent of the parties. |
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Term
| What are the things a court will look at to determine if there is a partnership relationship? |
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Definition
| 1. intent of the parties, 2. sharing in profits, 3. sharing in losses, 4. Contol of the company. Courts will look a what we do and not what we say. |
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Term
| What happens in the absense of a partnership agreement? |
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Definition
| The UPA controls 1914 and 1997? |
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Term
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Definition
| They had veto power, letters of resignation in hand (all these were protective measures) and the company never exercised actual control and used any of these measures. The courts stretched the rules a bit because the statkes were SOOO high and if a partnership would have been found for personal liability it would have been drastic. |
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Term
| What are the cases that talk about creditors exercising measures of control with out crossing the line of control? |
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Definition
| Cargill - had veto power, passed the line of control, was agency. Martin v. Peyton - has veto powers and protective measures in place but never exercised them. Big differnce between the two cases. |
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Term
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Definition
| Price water house had their name on the brochure (holding out), the people who put their bank in the bahama’s branch could not show that they RELIED to their detriment on that holding out. |
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Term
| Why was there no apparent authority found in the young v. jones (price waterhouse case) sufficient to find agency relaitonship? |
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Definition
| Why was there no apparent agency relationship here? Even though Price Water houses name was on the brochures, there was no communication between the principal and injured 3rd party so no apparent agency existed. |
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Term
| In the price water house case, why was there no inherent agency relationship? |
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Definition
| Inherent agency requires that there be an "agreement" entered into. There was never an agreement between price waterhouse and the bahama's branch. |
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Term
| What are the elements of partnership by estoppell? |
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Definition
| 1. Holding out by one to a third partner that there is a partnership 2. A reliance by the injured party on that representation, which reliance causes the harm. |
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Term
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Definition
| after 20 yr relationship in business, the dude has a chance to make building into another buisness, he was required to give the opportunity to his partner first before taking it for his own. Fiduciary relationship exists between partners, the punctilo of honor is the duty of loyalty owed. |
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Term
| What is the duty of loyalty owed to another partner when you get a buisness opp.? |
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Definition
| An unrelenting supreme punctilio of honor. |
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Term
| Limited partners are primarily what type of investors? |
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Definition
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Term
| T / F The duty of loyalty between general partners and limited partners are the same? |
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Definition
| Yes, they both owe an unrelenting punctilio of honor. |
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Term
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Definition
| UPA 103b(3) A partnership agreement may not eliminate the duty of loyalty under section 404(b) or 603(b)b(3), but the agreement may identify types of activities that do not violate the duty of loyalty, if not manifestly unreasonably. (Here, certain types of voting were held to violate the duty of loyalty.) |
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Term
| Duty of loyalty cases under partnerships? |
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Definition
| Prometheus - partnership agreement can discharge duty if not manifestly unreasonable. Meinhard v. Salmon - 404 b(1) A parner holds as trust for the partnership, any property, profit or benefit derived by the partner. Meehan v. Shaughnessy 404(b)2,3 to refrain from competing with the partnership before the dissolution of it. |
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Term
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Definition
| Violated duty of loyalty in two ways 1. Section 20 of UPA 1914 "shall render on demand (must be on demand) true and full information of all things" here they lied about going to new law firm and Section 404 b3 - Removed cases to their new law firm, duty of loyalty to refrain from competing with the partnership under the UPA 1997. |
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Term
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Definition
| At will termination in contract Guitine method to dispel partner by vote. UPA 31(1)(a) - Dissolution is caused without violation of the agreement between the partners by the termination of the definite term or particular underaking specified in the agreement. The firm had the right to vote Lawlis (who had alcholic problems and lied) out of the partnership, was lawful under section 31. |
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Term
| What are the two cases that talk about the rigts and duties of partners in making decisions? |
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Definition
| National Biscuit Co. and Summers. |
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Term
| National Biscuist Co. and Summers cases define the statutes, facts and policies. |
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Definition
| National Biscuit Co. - bought bread for partnership w/ out permission. 9(1) partners are agents for partnership with power to bind 18(e) All parnters have equal rights 18(h) Any difference arising as to ordinary matters conducted may be decided by majority. When no majority, all partners must agree. Summers - hired trash guy with out permission from other partner, not ok to bind partnership, relied on 18(h) all must agree. Policy - these two cases are contrasted by: in National buscuit - 3 party suing, in Summers, partners suing other partner. Court more likely to find majority and binding agent action when a 3rd party has been injured. |
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Term
| What is the policy behind finding actions by one partner binding on the partnership when the other partner hasn't agreed, no majority? |
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Definition
| section 9 of UPA, all partners are agents for the partnership. section 18(e) all have equal rights in the partnership. |
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Term
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Definition
| Pavesaver case - because it was a wrongful dissolution, the non breaching party has the choice of continuting the buisness operations, here he could not do so with out the patent. |
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Term
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Definition
| The UPA exception to sharing losses. If one partner contributed labor and did not recieve a salary, it would be unfair for him to have to share in the losses of the business upon dissolution. (Case law not used much in any states). |
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Term
| Taxi cab case what rule does it teach us? |
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Definition
| Enterprise liability / piercing corporate viel. Name of case is Walkovszky v. Carlton. |
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Term
| What is the 2 part vandoren test and the elements of each? |
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Definition
1. Must show a unity of interest
2. Must show fraud or injustice.
Unity of iterest includes a. whether the promotor disrespected corporate formalitites (bylaws minutes, meetings), b. comingling of assests c. undercapitalization d. if they treated the assest as their own. [Fraud or injustice elements can be] a. unjust enrichment, or manipulating the bank accounts to serve their misapropriation. |
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Term
| What element of Vandoran test will not show fraud or injustice alone? |
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Definition
| The fact that a person didn't get paid and wants to collect their money. |
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Term
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Definition
| shipped goods then didn't get paid, subsidary paying (shipper) went under, All four elements of unity of interest were present, court found fraud or injustice. |
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Term
| Contributions to charitys rule |
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Definition
| 1. must have a nexis between the corporation purpose and the donation 2. Must not be excessive 3. Can not donate to a pet charity. (Case is AP Smith donation to princeton Univ.) |
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Term
| What does Ford Motor Co. case stand for? |
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Definition
| A company must maximize profits (if that is the reason for its formation) also, courts do not get involved in the decisions of what the corporations decide to do Business Judgment rule. |
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Term
| What is necessary to overcome the business judgment rule? |
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Definition
What is necessary to overcome the business judgment rule?
1. Fraud
2. Illegality
3. Conflicts of interest
4. Breach of good faith |
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Term
| What does the Wrigley Case stand for? |
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Definition
Courts uphold the business judgment rule. Here owner didn't want to put lights up at the field which might have brought in more money. This was ok, must show one of these to invalidate the business judgment rule.
1. Fraud
2. Illegality
3. Conflicts of interest
4. Breach of good faith |
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Term
| T / F a direct lawsuit does not require demand. |
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Definition
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Term
| How can you tell the difference between a direct lawsuit and a derivative lawsuit? |
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Definition
| Direct is no money damages wanted (alledged de-vaulation of stock). Derivitive is seeking money damages. |
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Term
| In the Grimes case, he alledged that the board abdicated their reponsibility, court said no they didn't however an abdigation claim would be a direct claim. |
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Definition
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Term
| What happens when you make demand on the board? |
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Definition
1. You surrender the claim to the corporation 2. Board has torespond within 90 days
Board responds and says we considered it sorry no deal.
Then you go to court and say board did not exercise proper judgment (high bar). |
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Term
| What is the difference between excusal in New York versus Deleware Law? |
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Definition
| In New York, they have to plead with particularity using the "tools at hand." and the third element is whether the board failed to inform themselves rather than in Deleware, the third standard is Whether the underlying transaction was not the product of a valid business judgment rule. |
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Term
| WHat must you show in court to prove that demand on the board was excused (Delaware Law) |
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Definition
What can you do to be legally excused from demand? You must prove -
1. The board has a material or financial interest / conflict of interest.
2. They are incapable of making an independent decision.
3. Underlying transaction was not the product of a valid business judgment. |
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Term
| What must you prove to show that demand is excused under the New York Law? |
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Definition
a. Must plead with particularity
1. Here’s why they are self interested
2. Here’s why they are self dealing
3. Here’s why they failed to inform them selves |
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Term
| What are the "tools at hand" used to plead with particularity under the new york law in the case where demand is excused? |
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Definition
1. Board member minutes
2. Public information |
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Term
| Wrigley Case / what is necessary to overcome the business judgment rule? |
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Definition
1. Fraud
2. Illegality
3. Conflicts of interest
4. Breach of good faith |
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Term
|
Definition
| A special litigation committee shall have all the powers and authority of the board to the extent provided in the resolution of the board. |
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Term
| Zapata - Deleware law and rule? |
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Definition
When demand has been excused, a special litigation committee is formed to determine if the corp should go forward, says no and requests to dismiss the case, the court asks the following to see if it should be dismissed.
1. Was the committee independent
2. Did the committee conduct its report in good faith
3. In the courts own judgment is it in the best interest of the business?
141(c) special litigation committee |
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Term
| Oracle decision stands for what? |
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Definition
| Whether or not the special litigation committee was independant in the context of a decision that was made to dismiss the action on behalf of the corporation after demand had been excused. No, here personal relationship prevented the independance of the board. |
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Term
| Famous line from the "informed decision" factors in the francis case. |
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Definition
| “They spawned their fraud in the backwater of her neglect” |
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Term
| What are the two cases dealing with failure of board to "inform them selves" (violation of duty of care). |
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Definition
| Van Gorkom case and Francis. |
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Term
| What is a duty of care violation? |
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Definition
| Failure of the board to inform themselves fully. |
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Term
| What is a duty of loyalty violation? |
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Definition
| A conflict of interest on the board. |
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Term
|
Definition
| Failure to inform them selves, duty of care violation. 20 minute presention, no private valuation, 2 hour meetin.. Van Gorkam picked an arbitrary number. Dissent says 155 years of time experience between all board members should have been enough. |
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Term
|
Definition
– wife who let 2 sons bleed corporation to death.
There was no business judgment made however they define what it takes to “inform” themselves.
1. Rudimentary understanding of the business
2. Keep informed about the business (monitoring of corporate affairs)
3. Maintain an understanding of the financial going ons.
“They spawned their fraud in the backwater of her neglect” |
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Term
| The corporate opportunity doctrine? |
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Definition
Factor a court considered in determining whether or not an interested director must give the corporation the opportunity.
1. Whether the corporation has the financial ability to undertake the job 2. Whether the deal is within the line of business (EBAY case)3. Whether you would expect the corp. to be interested (Broz case) (Expectancy) 4.Self interest leads to conflict |
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Term
|
Definition
co director had other business that could buy up the cellphone area, gave opp to current board, didn’t have to give opp to other company who might have merged with that co. however.
1. Whether the corporation has the financial ability to undertake the job 2. Whether the deal is within the line of business (EBAY case)3. Expectancy (whether you would expect the corp to be interested.) , 4.Self interest in the executives taking the opportunity leads to conflict
Did they owe them a duty of loyalty when the merger might not go through?
Here, there was no expectancy – Lower court focused on no formal presentation to the board, higher court said formal didn’t matter, no duty owed to other company. |
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Term
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Definition
| Corporate Doctrine question. Ebays directors got shares from goldman sachs. It was a violaion of duty of loyalty because it was "In the line of business of something EBAY would have done." ?Expectancy, financially capable, would self interest lead to conflict. |
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Term
| What are the two factors to look at and what are the cases dealing with scope of employment? |
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Definition
| scope of employment, under employers control. Bushy n Sons, Manning, Conaco. Test is foreseeabiltiy. 228 |
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Term
| What are the cases dealing with equal rights in a partnership? |
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Definition
| National buscuit, summers v. dooley, Day v. Sidley Autstin |
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Term
| What cases deal with the power of voting in a partnership? If dissolution is caused by voting? |
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Definition
| Lawlis, Day v. Sidley &Austin |
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Term
| What are the cases for Unity of interest or fruad or injustice? |
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Definition
| Taxi Cab case, Sealand services, Sheffield v. Roman Catholic Church, Bristol Myers Squib. |
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Term
| Unity of interest show what? |
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Definition
|
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Term
| Cargil factors that were not contol but allowed for a creditor. |
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Definition
| ICC - Inspections, counseling, recomending consultants. |
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Term
| What Cargil factors showed control? |
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Definition
| Veto, Control of peepps, payment assurance. |
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Term
| What can be done to ratify an agents acts by the principal and what case? |
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Definition
| Boticello, LASE - lawsuit, accept benefits, silence, Express affirmation. |
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Term
| What types of things were found in Holiday Inn such that no liability as franchisor? |
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Definition
| HERP - Hire fire, expenses no control over, fixing rates,sharing profits (none of these) |
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Term
| What does a court look at to find a partnership? What are the cases? |
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Definition
| Fenwick v. Unemployment Comp, Martin v. Peyton. Subjective Intent of the parties, right to share profits, right to share losses. |
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Term
| What are the three cases dealing with special litigation committee and what is the two part test? |
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Definition
Aurabach Case (to determine if demand should be excused). Zapata Case, Oralce Case (after demand has been excused to decide if they should go forward)
If the committe has acted independently and in good faith conducted its report. (Oracle) - In the courts judgment is it in the best interest of the corporation? |
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Term
| Cases of business judgment rule? |
|
Definition
|
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Term
| What is the business judgment rule and what is necessary to over come it? |
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Definition
| If the board acts in good faith and there is no apparent conflict then the business judgment rule protects. To overcome the business judgment rule you must prove fraud, illegality or gross negligence. |
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Term
| Breach of duty of care case is? |
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Definition
|
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Term
| Breach of fiduciary duty case and what are the factors for a corporations board fiduciary duty? |
|
Definition
| Francis case - RMF Rudimentary, Monitoring, Finances |
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Term
| When there is a breach of the duty of loyalty what can the directors prove? |
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Definition
| Entire fariness of the decision, or ratify the decision with a majoiryt of disinterested directors or shareholders. |
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Term
| Proving the entire fairness case |
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Definition
|
|
Term
| Ratifying the decision (corp violation of duty of loyalty) |
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Definition
|
|
Term
| Corporate Dotcrine Opportunity Cases and factors |
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Definition
| Broz, Ebay - FLEC Financial, line of business, Expectancy, if self interest leads to a conflict. |
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Term
| Proving intrinsic Fairness and the rule/factors |
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Definition
| Sinclair Oil Corp. V. Levien 1. Domination of the subsidary causes the sub to act in a way that the parent receives something to the detriment of the minority (BOP shifts to parent). |
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Term
| You can violoate the duty of loyalty by violating the caremark standards what cases and what is the rule? ` |
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Definition
| Disney, Jones v. Harris, Stone v. Ritter Rule: AVA 1. purpose other than advancing the best interest of the corporation 2. Intent to vioate applicable law 3. Fail to act when there is a known duty to act. |
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Term
| What is the test for whether something is a security? |
|
Definition
| DNCVV Dividends, Negotiability, Collateral, Voting rights, increase in value? |
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Term
| What is the test to see whether someone is a passive investor? |
|
Definition
| Howey test ICPC 1. An investment of money 2. in a common enterprise 3. led to expect profits 4. the effots made by those other than the investor are the ones that will determine if sucessful or not. |
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Term
| Is it a private placement test? |
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Definition
| # of offerrees (sophistication and access), # of units, size of offerning, manner of offering. |
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Term
| SEction 11 Securities Act of 1933, case and rules? Standard of reasonbleness? |
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Definition
| Fraud in connection with security, Escott v. BarChris, all who signed the statement can be liable, 11(b) is affirmative defense. Must prove reasonable investigation and no reason to believ any part was untrue. If made by expert or you were expert replace part two 1. made reasonable investigation and no reason to believe any ommission of facts or such didn't reflect his statement as expert. Reasonableness - one in which required by a prudent man in management of his own property. |
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Term
| Rule 11,5, 4, 2 securities act 1933? |
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Definition
| 11 - fruad in connection with registration of a security, 5- all securities must be registered, 4 - exemptions, 2 defines security. |
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Term
| What are the 4 elements of a 10b violation as set forth in basic? |
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Definition
| Scienter, materiallity, causation, Reliance. |
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Term
| What case deals with no fraud on the market because the information wasn't public? |
|
Definition
| West v. Prudential - here dude told 8 peeps only. |
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Term
| What case talked about what types of things were sufficient to show fraud? |
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Definition
| Sante Fe Industries Inc. - undervalued appraisal was not fraud, need intent, things that are fraud are washed sales, matched orders and rigged prices. |
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Term
| WHat are the cases for 10b violations of misleading info? |
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Definition
| Basic, West v. Prudential, Santa Fe Industries Inc. |
|
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Term
| What are the cases for insider information violations under 10b? |
|
Definition
| GTDHC. Goodwin v. Agassiz, Texas Gulf Sulpher, Dirks v. SEC, O'Hagan, Carpenter v. US. |
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Term
| WHat is the rule from Dirks? |
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Definition
| 1. tipor has a fiduciary duty that she breaches 2. Tipee must know or should know of the breach 3. The tipor must receive some material benefit directly to them selve. |
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Term
| What do we learn from O'Hagan? |
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Definition
| Laywer for Co. buys stock in Co. he knows they are going to merge with, not ok, ow a duty to the source of the information, you can escape this duty by disclosing to the source you are going to trade. |
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Term
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Definition
| split 4/4 over employee owed a duty to source of information. Question over precedent for future cases. |
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Term
| What are the beneficial owner cases? |
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Definition
| Reliance sale to 9% then second sale didn't count, and Foremost must be a benefical owner before the purchase. |
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Term
| What is the propalatic rule with 16b? |
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Definition
| You will not be deemed to have insider information until you are a beneficial owner. |
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Term
| What are the two cases under proxy fights? What is the rule we learned? |
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Definition
Leven v. MGM, Rosenfeld v. Fairchild.
1. Can use corporate funds to reimburse if they are reasonable (BOP on board to show) 2. must be fully disclosed 3. must be a legitimate corporate purpose. This is the Levin v. MGM test. |
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Term
| What case was it where the new board was reimbursed for expenses? |
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Definition
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Term
| WHat did we learn from Lovenheim |
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Definition
| You can propose something like forming an investigation committee and it won't be in the ordinary course of buisness exclusion, ask the SEC for exclusion, letter of no action, sue if you don't agree. Here they sued and won. |
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Term
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Definition
| 14a818 exclusion for something to do with election, wanted to have shareholder nominated peeps on proxy, it was ok because was procedural not substantive so court allowed it. |
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Term
| What are the cases for voting in closely held corporations? |
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Definition
| Ringling bros (cumulative voting), Ramos v. Estrada (Voting agreement). |
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Term
| What are the factors that show it is a closely held corp, case name, purpose? |
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Definition
| Galer v. Galer - The purpose of a closely held corporation is the same as a large however look at 1. small number of shareholders 2. expectations of employees 3. no market for the shares 4. shareholders are officers in co. |
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Term
| WHat are the freeze out in closely held corp cases and what does each one stand for? |
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Definition
| Wilks (standard), Brodie (Remdies), Wolfson (minority veto power) |
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Term
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Definition
| A freeze out occurs when the minority stock holders purpose for entering the corporation is frustrated, look at factors such as 1. removal from office, 2. no salary, payments or profit sharing. |
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Term
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Definition
| This case is all about remedies, you must pay back what the minority has a "reasonable expectation" of getting out of the agreement, a forced buyout of shares won't do it because there is no market for the shares. |
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Term
| What is the Wolfson test? |
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Definition
| Here a minority shareholder has Veto Power and must use it for a valid purpose and explain why he used it, can not be unreasonble. Maintaining land versus paying out dividends. |
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Term
| What standards do you use to show there has been a freeze out? |
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Definition
| The person freezing out has an opportunity to prove there was a reasonalbe and legitimate business purpose for the freeze out 2. the one being froze out can prove there is a less injurous way. |
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Term
| What are the issues with closely held corporations? FVPRMR. |
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Definition
| funny voting people really might rule. freeze outs, voting agreements, purpose of corp, remedies, min veto power, Rule |
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Term
| What are the cases dealing with proper planning in Close Corporations? |
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Definition
| Jordon v. Duff (The obstain or disclose and 10b applies when ever a shareholder can respond to material information). Pedro v. Pedro (If fraudelently expelled from co. then even where there is a buyout agreement, the court will award expectation. |
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Term
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Definition
| Ferris v. Glen Alder, here Glen Alder bought List shares small buys big and big no longer exists. This was not a sale of assets it was a merger and they should have given share holders appraisal rights. |
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Term
| Using the Merger for your own personal benefit, case and rule. |
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Definition
| Coggins v. New England Patriots Football Club. The burden is on the majority shareholder to prove there is a legitimate corporate purpose for the merger, can not be to effectuate ones personal needs. |
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Term
| What case and when can there be a short form merger? |
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Definition
| Sante Fe. when 90% owned by majority rule is, price must be fair and the minority can challenge the fairness of the price. |
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Term
| Where the directors are on both sides of the transaction, cases, rule: |
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Definition
| Wheelabrator - ratifying a duty of loyalty breach by disinterested shareholders voted to approve merger, burden shifts to plaintiff to show fraud illegality or gross negligence. Coggins v. New England Patriots - prove that merger was for valid business purpose and not for self entrenchment. |
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Term
| When does the Unical standard kick in? |
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Definition
| When the board adopts defensive measures. |
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Term
| What is the unical standard? |
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Definition
| The business judgment rule protects defensive measures adopted by the board if the board can show 1. its in the best interest of the Co (fid duty, fully informed) 2. not motivated by self entrenchment 3. The defensive measure has to be inline with the threat posed. |
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Term
| When does the Revlon standards kick in and what are they? |
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Definition
| 1. Sale of control 2. break up of company 3. open bidding contest then the board has a duty to get the best value for the company. |
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Term
| Why didn't time violate the Revlon standards? |
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Definition
| There was no break up of control, time was gong to have a majority share representation on a going forward basis. |
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Term
| What went wrong in Paramount v. QVC |
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Definition
| Here they hit the Revlon standard when they effectively put the co. up for bid, they violated the Revlon duties because the defensive measures kept them from getting the best deal possible. |
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Term
| What are the cases where the buyer of the shares or stock is someone in the management? What is the rule? |
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Definition
| Coggins v. New England Patriots, Goodwin v. Agassiz, Texas Gulf Sulpher, Sante fe. The concept of fairness is unflinching in its demand that where one stands on both sides of a transaction, he has the burden of establishing its entire fairness, sufficient to pass the test of careful scrutiny by the courts. |
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Term
| What is the difference between Del Law and NY law to show that demand is excused. |
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Definition
| New York Law plead with particularity. |
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Term
| Landreth says that if it says stock it's a security! |
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Definition
| says that if it says stock it's a security! Held that the sale of a business in the form of a stock deal will involve the sale of a security. |
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Term
| An asset deal will involve a sale of securities? |
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Definition
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Term
| An earn out will constitute and investment contract? |
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Definition
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Term
| Congress has adopted a substance over form analysis focusing on the economic reality of the instrument in question. |
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Definition
|
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Term
| what is the foreman test? |
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Definition
| When a purchaser is motivated by a desire to use or consume the item purchased, the securities law do not apply. |
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Term
| Reves v. Ernst & Young test |
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Definition
| Family resemblence test is used to determine whether a note is a security. |
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Term
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Definition
| certificate of deposit issued by a bank is not a security where CD was guaranteed by FDIC and had a fixed rate of return. |
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Term
| Why was the heightened pleading standard not necessary? |
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Definition
| Rule 9b civil procedure already required this for securites. 104th congress was the evil men. |
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Term
| How can a person avoid misrepresentation under the new PSLRA reforms? |
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Definition
| Crouch their false or misleading forward looking statements with meaningful cautionary statements. |
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Term
| Rule 11 sanctions, what does it do, how did PSLRA change it? |
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Definition
| Discourages attorney's from bringing fraudulent claims for securities laws (no need for PSLRA. Under 11, judges MUST bring sanctions rather than sanctions discretionary if a single allegation lacks adequate factual support. |
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Term
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Definition
| required that all national securities be effectively brought on the federal court level if over 50 plaintiffs and removed from state (preemption). |
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Term
| Each named defendant acted with intent to defraud |
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Definition
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