1. (TCOs D, E, F) Benjamin is a long-time key salesman for Morton and Dunderfield, a business supply company in Eastern Pennsylvania. The company decides to change its formal employer/employee relationship with all of its sales people, including Benjamin. Instead of compensating them with salary and a bonus based on quarterly sales, they change the relationship to that of an independent contractor who earns a sizeable percentage commission each month. With the change in this relationship, Morton and Dunderfield require all of their sales people to sign employment contracts which contain a clause that states upon leaving Morton and Dunderfield’s employ, they will not contact any former customers for a period of two (2) years. Benjamin, fearing he will lose his job, signs the agreement. After the first month, he realizes he will earn much less that he formerly did.
He seeks your advice on his options. (Points : 15)
He seeks your advice on his options. (Points : 15)
2. (TCOs B, C, G, I) Lonestar Trucking, a large freight carrier servicing the Southwest, learns from reading in the industry trade magazine that the Federal Motor Carrier Safety Administration (FMCSA) has proposed a regulation change. The regulation, proposed pursuant to a statute that restricts drivers from operating/driving a truck for more than twelve (12) hours a day, will now require drug testing of any driver involved in an accident. The regulation was proposed due to political pressure from Mothers Against Impaired Driving (MAID), a group dedicated to eliminating deaths due to people driving while impaired. Lonestar Trucking is concerned, not just about the costs of implementing such a regulation, but how it will comply with its requirements since accidents often occur far from their base of operations. Lonestar Trucking’s employees and their union are also very upset with the proposal. They are concerned that the field drug tests used by police officers are notorious for giving “false positive” results, and that the proposed regulation will require that a test be given even when “the other diver” is clearly at fault.
What should Lonestar Trucking do regarding the proposed change? (Points : 15)
3. (TCO C) Three professors from Keller’s Illinois campus, Favre, Bush, and Clinton, decide to visit XYZ Go-kart facility together in Minnesota. This decision is made after a lengthy faculty brunch, at which unlimited alcoholic mimosas were served. XYZ Go-kart advertises at the college’s various campuses and, in fact, the professors use their faculty discount at the facility. At the facility signs are posted everywhere in bold: “BY PARTICIPATING IN Go-KART RACING, YOU VOLUNTARILY ASSUME THE RISK OF ANY DEATH OR INJURY THAT MAY RESULT. “ Additionally, the professors hurriedly sign a contract, which states: “YOU ARE GIVING UP ALL LEGAL RIGHTS”; “XYZ WILL NOT BE HELD LIABLE FOR ANY NEGLIGENCE RESULTING IN YOUR INJURY OR DEATH”; and “THE PARTIES AGREE THAT ANY POSSIBLE LEGAL ACTION WILL BE HEARD IN THE STATE OF MINNESOTA.”
Professor Favre, who lives in Wisconsin, is sick and sweating profusely after consuming a great deal of alcohol. He decides not to race. He suspects that he is having a minor reaction as he is diabetic and drank more than he intended. In the Waiting Area, which is located next to the track, he takes off his helmet. There is a sign posted that says “KEEP YOUR RACE HELMET ON WHILE IN THE WAITING AREA!"
Clinton and Bush, who dislike each other for unknown reasons, are the only ones on the track. They use go-carts manufactured by PrimoKarts. As they begin the race they drive very aggressively. Unbeknownst to either party, Ritchie, XYZ’s mechanic, fed up with low pay, did not do the usual morning inspection of the brakes and tires on either vehicle that morning. XYZ had been contemplating firing Ritchie due to his erratic work habits. XYZ instructed Ritchie to inspect the PrimoKarts daily as they never trusted their brake mechanism. PrimoKarts are regularly marketed to amusement parks. Their instruction manual states that they are not to be used for racing.
After two laps, Clinton’s brakes fail as he tries to aggressively pass Bush. He crashes into Bush’s kart near the waiting area. The brakes on both vehicles fail to hold. A tire dislodges at a high-rate of speed, and hits Professor Favre in the head, rendering him unconscious and bleeding from head injuries. His helmet is lying on the ground nearby. An ambulance is called. The medical technicians, seeing the head injuries, fail to notice the medical alert bracelet on Professor Favre’s wrist. At the hospital, Favre dies from insulin shock and other complications due to his diabetes while the emergency room doctor was doing a procedure to prevent blood clots and a possible stroke from the head injury. At autopsy, it was later learned that Professor Favre had been rendered brain dead by accident at the XYZ Go-kart facility.
(a) What claims may Professor Favre’s widow bring against the various parties?
(b) What defenses might each party bring against the possible claims asserted by Professor Favre’s widow?
(c) In what state should the case be brought?
Professor Favre, who lives in Wisconsin, is sick and sweating profusely after consuming a great deal of alcohol. He decides not to race. He suspects that he is having a minor reaction as he is diabetic and drank more than he intended. In the Waiting Area, which is located next to the track, he takes off his helmet. There is a sign posted that says “KEEP YOUR RACE HELMET ON WHILE IN THE WAITING AREA!"
Clinton and Bush, who dislike each other for unknown reasons, are the only ones on the track. They use go-carts manufactured by PrimoKarts. As they begin the race they drive very aggressively. Unbeknownst to either party, Ritchie, XYZ’s mechanic, fed up with low pay, did not do the usual morning inspection of the brakes and tires on either vehicle that morning. XYZ had been contemplating firing Ritchie due to his erratic work habits. XYZ instructed Ritchie to inspect the PrimoKarts daily as they never trusted their brake mechanism. PrimoKarts are regularly marketed to amusement parks. Their instruction manual states that they are not to be used for racing.
After two laps, Clinton’s brakes fail as he tries to aggressively pass Bush. He crashes into Bush’s kart near the waiting area. The brakes on both vehicles fail to hold. A tire dislodges at a high-rate of speed, and hits Professor Favre in the head, rendering him unconscious and bleeding from head injuries. His helmet is lying on the ground nearby. An ambulance is called. The medical technicians, seeing the head injuries, fail to notice the medical alert bracelet on Professor Favre’s wrist. At the hospital, Favre dies from insulin shock and other complications due to his diabetes while the emergency room doctor was doing a procedure to prevent blood clots and a possible stroke from the head injury. At autopsy, it was later learned that Professor Favre had been rendered brain dead by accident at the XYZ Go-kart facility.
(a) What claims may Professor Favre’s widow bring against the various parties?
(b) What defenses might each party bring against the possible claims asserted by Professor Favre’s widow?
(c) In what state should the case be brought?
(Points : 30)
. 4. (TCOs A, D, E) Judy Collinsworth, a then-unknown folk singer, signed a three album recording contract with Mercury Apollo Music, Inc. Mercury Apollo Music was a boutique label specializing in folk artists. Collinsworth’s first album for Mercury Apollo was moderately successful. The second album, unfortunately, was panned by the critics and did not sell. Mercury Apollo Music was acquired by NastiCondiMedia, Inc. NastiCondiMedia, in an effort to re-vitalize Collinsworth’s career, encouraged her to leave the folk style she was committed to and do more commercially viable pop material. Collinsworth rejected this request. Furious with NastiCondiMedia, Collinsworth wanted to end the contract. On her own, with what remaining personal funds she had left, she immediately went to an independent recording studio and did sessions toward a third album without approval or consent by NastiCondiMedia. Using her concert band, she recorded tracks for over 30 songs. Due to the financial failure of Collinsworth’s second album and her recent unsuccessful concert tour, NastiCondiMedia did not do the final production work on Collinsworth’s third album.
Collinsworth then entered into a contract with EasyListening Communications, Inc. She began recording a new folk album with EasyListening in conjunction with a concert tour that they financed and produced. At her concerts, Collinsworth would regularly introduce the new material that would be on her new album.
Shortly after the concert tour began, NastiCondiMedia brings suit against Judy Collinsworth and EasyListening Communications, Inc.
(a) What causes of action might NastiCondiMedia bring against Collinsworth and EasyListening?
(b) What causes of action might Collinsworth and EasyListening bring against NastiCondiMedia?
Collinsworth then entered into a contract with EasyListening Communications, Inc. She began recording a new folk album with EasyListening in conjunction with a concert tour that they financed and produced. At her concerts, Collinsworth would regularly introduce the new material that would be on her new album.
Shortly after the concert tour began, NastiCondiMedia brings suit against Judy Collinsworth and EasyListening Communications, Inc.
(a) What causes of action might NastiCondiMedia bring against Collinsworth and EasyListening?
(b) What causes of action might Collinsworth and EasyListening bring against NastiCondiMedia?
(c) What types of relief might either party seek? (Points : 30)
5. (TCOs A, B, F, H)
PART A
Paul and Thomas Hamilton, brothers, are college students and web designers. While at the University of Megalopolis, a private, for-profit college in the “Quad State” area, they started an online chat service called LinkTime. Paul attended and resided at the college’s campus in the State of Quadrahenria. Thomas, who was on probation during college for a low level felony drug conviction, could not be a resident student and took classes at the campus in the Commonwealth of New Guernsey campus. The chat service began by putting information from the school’s student directory online, and offering blog, chat and message board features. LinkTime was such a hit that within a year, the school advised the brothers that they had to remove LinkTime from the university’s server as it was utilizing too many resources. This was not a problem as the Hamilton found advertisers, so they were able to move LinkTime to a private server without charging user fees. In fact, LinkTime was earning so much revenue that the Hamilton brothers were able to pay themselves and the six friends who helped them operate it salaries. The Hamilton brothers are graduating from the University of Megalopolis and will be attending separate graduate programs. Paul will attend Quadrahenria State University, and Thomas the College of New Guernsey. As LinkTime is so successful, the brothers not only plan to expand it to the two new colleges that they are attending, but to as many other colleges within the four states comprising the “Quad State” area as possible. They even have hopes of “going national.” As part of their plan to expand to other campuses, they expect to recruit a student from each of the new schools “to get them in.” They wish to formalize LinkTime by organizing it as a proper business. The brothers would like to maintain a majority interest in the business, give about 20 percent to the six friends from their undergraduate days who helped them run the service, and use the remaining interest in the business to attract other investors and use employee incentives.
They seek your advice on (a) the form of business they should use, (b) who might have a claim on the business, and (c) how they might protect themselves from claims regarding a computerized internet platform?
PART B
LinkTime has been a phenomenal success for over ten years. They are now a worldwide social networking phenomenon. Over the years and the various incarnations of the business enterprise, they are now a corporation with just under 100 shareholders. In anticipation of a public offering, they have just completed a private stock offering and allowed several of the initial equity owners to exercise stock options. The Hamilton brothers each exercised options to purchase 10,000 shares for $5 a share. Also in anticipation of the public offering, pursuant to the early intervention drug plea he made while in college, Thomas Hamilton had his conviction expunged. In addition, LinkTime sold $10 million in two year advertising contracts, which would allow the clients to back out for a 90 percent refund. These unusual contracts increased their current revenue by 15%. As LinkTime is such a phenomenon, the hype regarding the public offering has been enormous. Even college students are attempting to buy the stock. Days before the public offering, the following occurred: (a) a broker at their underwriter, Silversmith &Baggs, showed a pension fund director a draft version of the prospectus; (b) Paul sold 1000 shares of the stock that he purchased through the stock option plan for $45 a share, telling the private investor that the issue price for the public offering would be at least $60 a share; and (c) several of the people who bought stock in the private offering sold it at a nice profit. The initial public stock offering had many problems. The NASDAQ computer system, which was implemented pursuant to a recent regulation change by the Securities And Exchange Commission (SEC), could not keep up with the demand. The system could not accurately report the price, and many day traders, including Big Profit Hedge Fund, lost money. Big Profit had formally filed its opposition to the SEC’s regulation when it was proposed. After the public offering was completed, LinkTime stock stabilized at $40 a share, well below the initial offering price of $70 a share. In light of the fiasco of the public offering and the bad press that it generated, users began to drop LinkTime in favor of a new, upstart rival service offered by TronCom. Fearful that the new advertisers would back out of their contracts, the Hamilton brothers sold a great deal of their stock.
PART A
Paul and Thomas Hamilton, brothers, are college students and web designers. While at the University of Megalopolis, a private, for-profit college in the “Quad State” area, they started an online chat service called LinkTime. Paul attended and resided at the college’s campus in the State of Quadrahenria. Thomas, who was on probation during college for a low level felony drug conviction, could not be a resident student and took classes at the campus in the Commonwealth of New Guernsey campus. The chat service began by putting information from the school’s student directory online, and offering blog, chat and message board features. LinkTime was such a hit that within a year, the school advised the brothers that they had to remove LinkTime from the university’s server as it was utilizing too many resources. This was not a problem as the Hamilton found advertisers, so they were able to move LinkTime to a private server without charging user fees. In fact, LinkTime was earning so much revenue that the Hamilton brothers were able to pay themselves and the six friends who helped them operate it salaries. The Hamilton brothers are graduating from the University of Megalopolis and will be attending separate graduate programs. Paul will attend Quadrahenria State University, and Thomas the College of New Guernsey. As LinkTime is so successful, the brothers not only plan to expand it to the two new colleges that they are attending, but to as many other colleges within the four states comprising the “Quad State” area as possible. They even have hopes of “going national.” As part of their plan to expand to other campuses, they expect to recruit a student from each of the new schools “to get them in.” They wish to formalize LinkTime by organizing it as a proper business. The brothers would like to maintain a majority interest in the business, give about 20 percent to the six friends from their undergraduate days who helped them run the service, and use the remaining interest in the business to attract other investors and use employee incentives.
They seek your advice on (a) the form of business they should use, (b) who might have a claim on the business, and (c) how they might protect themselves from claims regarding a computerized internet platform?
PART B
LinkTime has been a phenomenal success for over ten years. They are now a worldwide social networking phenomenon. Over the years and the various incarnations of the business enterprise, they are now a corporation with just under 100 shareholders. In anticipation of a public offering, they have just completed a private stock offering and allowed several of the initial equity owners to exercise stock options. The Hamilton brothers each exercised options to purchase 10,000 shares for $5 a share. Also in anticipation of the public offering, pursuant to the early intervention drug plea he made while in college, Thomas Hamilton had his conviction expunged. In addition, LinkTime sold $10 million in two year advertising contracts, which would allow the clients to back out for a 90 percent refund. These unusual contracts increased their current revenue by 15%. As LinkTime is such a phenomenon, the hype regarding the public offering has been enormous. Even college students are attempting to buy the stock. Days before the public offering, the following occurred: (a) a broker at their underwriter, Silversmith &Baggs, showed a pension fund director a draft version of the prospectus; (b) Paul sold 1000 shares of the stock that he purchased through the stock option plan for $45 a share, telling the private investor that the issue price for the public offering would be at least $60 a share; and (c) several of the people who bought stock in the private offering sold it at a nice profit. The initial public stock offering had many problems. The NASDAQ computer system, which was implemented pursuant to a recent regulation change by the Securities And Exchange Commission (SEC), could not keep up with the demand. The system could not accurately report the price, and many day traders, including Big Profit Hedge Fund, lost money. Big Profit had formally filed its opposition to the SEC’s regulation when it was proposed. After the public offering was completed, LinkTime stock stabilized at $40 a share, well below the initial offering price of $70 a share. In light of the fiasco of the public offering and the bad press that it generated, users began to drop LinkTime in favor of a new, upstart rival service offered by TronCom. Fearful that the new advertisers would back out of their contracts, the Hamilton brothers sold a great deal of their stock.
What issues does LinkTime, its officers, and stockholders face under (a) state securities law, (b) the Securities Act of 1933, and (b) the Securities and Exchange Act of 1934? (Points : 60)
6. (TCOs A, D, E) Jane worked at the local country club pool as a lifeguard, not a swim teacher, for the summer of 2013. Jane was a public school physical education teacher. The country club did not do a background check or confirm any references when they hired her. They relied on the “say-so” of Jane’s brother, a member of the country club board of directors. The country club only did a cursory Internet search of the state’s Department of Education website to verify that she had a valid teaching certificate. When one of the swim instructors unexpectedly quit one day, she took over the class. Initially, the class went well. Eventually, Jane also took over coaching the club’s competitive swim team. When she became the swimming coach, Jane effectively stopped “teaching” the swim classes. Instead, she had all the swimmers in the classes do races and train for competitive meets during the 30 minute lessons. Jane had done this many times during the summer. Her boss, the country club director, knew this and, as the swim team was winning, ignored complaints from parents and students. Jane raced with the swimmers and pushed the winners out of the way when they tried to touch the side of the pool so that Jane’s team would win each time. This was not the first time that Jane had injured swimmers. Last year, she was arrested for physically abusing a child she coached at her school. Although the criminal charges were dropped, Jane is on administrative leave from her public school job until an administrative hearing with the state Department of Education can be held in the fall. The incident was reported in several local papers, and her administrative suspension is listed on the state’s database.
Several of the children, ages 6–8, reported to their parents that they had been physically assaulted by Jane while in swim class for not “working hard enough!” The children had bruises on their shoulders. In addition, Jane began “approaching” an 18-year-old college student who worked as a lifeguard and assisted Jane with the coaching. Over time, Jane’s “advances” toward the young man became very aggressive. Jane continued even though the young man asked her to stop. In fact, after the young man told Jane to stop, as he felt harassed, Jane hired another lifeguard to assist her with the coaching. The country club director was aware of this situation, but as the swim team was winning, he took the position that it was an interpersonal issue that the two should workout among themselves.
Several of the children, ages 6–8, reported to their parents that they had been physically assaulted by Jane while in swim class for not “working hard enough!” The children had bruises on their shoulders. In addition, Jane began “approaching” an 18-year-old college student who worked as a lifeguard and assisted Jane with the coaching. Over time, Jane’s “advances” toward the young man became very aggressive. Jane continued even though the young man asked her to stop. In fact, after the young man told Jane to stop, as he felt harassed, Jane hired another lifeguard to assist her with the coaching. The country club director was aware of this situation, but as the swim team was winning, he took the position that it was an interpersonal issue that the two should workout among themselves.
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