Business Law Final Flashcards
Explain how the Commerce Clause affects state regulation of interstate business activities. Provide examples.
The Commerce Clause both empowers federal regulation and limits state interference with interstate commerce. States cannot:
Discriminate against out-of-state businesses
Impose excessive burdens on interstate commerce relative to local benefits
Regulate exclusively federal domains
Example: A state cannot impose higher taxes on out-of-state goods to protect local businesses
Analyze the three-tier framework for reviewing state regulations under the Commerce Clause
Courts examine:
1. Whether law discriminates against interstate commerce on its face
2. If discriminatory, strict scrutiny applies - law invalid unless no other means to achieve legitimate local purpose
3. If non-discriminatory, Pike balancing test weighs:
- Burden on interstate commerce
- Nature of local benefits
- Availability of less burdensome alternatives
Explain how commercial speech doctrine balances business and government interests
Courts apply Central Hudson 4-part test:
1. Speech must concern lawful activity and not be misleading
2. Government interest must be substantial
3. Regulation must directly advance that interest
4. Regulation must not be more extensive than necessary
Key principle: Commercial speech gets intermediate protection, allowing reasonable regulation while preventing overreach
Analyze the conditions under which courts will pierce the corporate veil
Courts consider multiple factors:
1. Unity of ownership and interest
2. Undercapitalization
3. Failure to observe corporate formalities
4. Misuse of corporate form for personal benefit
5. Public policy considerations
Must show both domination/control AND fraudulent/inequitable conduct
Compare fiduciary duties of directors in close corporations versus public corporations
Close Corporation Directors:
- Enhanced duty to minority shareholders
- Stricter scrutiny of self-dealing
- Greater emphasis on shareholders’ reasonable expectations
Public Corporation Directors:
- Focus on shareholder wealth maximization
- More deference under business judgment rule
- Heightened disclosure obligations
- Committee structures for independent oversight
Explain the relationship between corporate opportunity doctrine and duty of loyalty
Corporate opportunity doctrine requires:
1. Analysis of whether opportunity belongs to corporation:
- Line of business test
- Interest/expectancy test
- Fairness test
2. Full disclosure and corporate rejection before personal pursuit
3. Consideration of:
- How opportunity arose
- Corporation’s financial ability
- Fiduciary’s role in corporation
- Use of corporate resources
Analyze the strategic considerations in choosing between trade secret and patent protection
Factors include:
1. Duration of competitive advantage:
- Patents: 20 years but public disclosure
- Trade secrets: Potentially indefinite if secrecy maintained
2. Risk of independent discovery/reverse engineering
3. Enforcement costs and challenges
4. Industry norms and competitive landscape
5. Innovation lifecycle
6. Global protection needs
Evaluate trademark distinctiveness spectrum and its impact on business branding strategy
Spectrum from weakest to strongest:
1. Generic (no protection):
- Common name for product itself
- Example: “Computer” for computers
2. Descriptive (requires secondary meaning):
- Describes product characteristics
- Example: “Cold & Creamy” for ice cream
3. Suggestive:
- Suggests qualities through imagination
- Example: “Coppertone” for suntan lotion
4. Arbitrary or Fanciful:
- No relation to product
- Example: “Apple” for computers
Strategic implications for:
- Brand development
- Marketing investment
- Enforcement capability
- Geographic expansion
Analyze intersection of employment-at-will doctrine with public policy exceptions
Public policy exceptions include:
1. Statutory rights (whistleblower protection)
2. Constitutional rights
3. Professional ethical obligations
4. Common law duties
Key considerations:
- Clear public policy requirement
- Causation between protected activity and termination
- Preemption issues
- State variation in recognition of exceptions
Evaluate the burden-shifting framework in employment discrimination cases
McDonnell Douglas framework:
1. Prima facie case (plaintiff):
- Protected class membership
- Qualification for position
- Adverse employment action
- Circumstances suggesting discrimination
2. Legitimate non-discriminatory reason (employer)
3. Pretext analysis (plaintiff):
- Direct evidence
- Comparative evidence
- Statistical evidence
- Inconsistencies in employer’s explanation
What is the Commerce Clause?
Constitutional provision giving Congress power to regulate interstate commerce and preventing states from unduly burdening interstate commerce
What is the Supremacy Clause?
Constitutional provision establishing that federal law is supreme over state law when conflicts exist
What are the three levels of scrutiny for Equal Protection cases?
1) Strict scrutiny (fundamental rights/suspect classes)
2) Intermediate scrutiny (gender/legitimacy)
3) Rational basis (economic/social welfare)
What is commercial speech?
Communications by businesses primarily involving advertising and marketing that receive some First Amendment protection but can be regulated to prevent deception
What is a sole proprietorship?
Simplest business form where owner is the business, has complete control but unlimited personal liability
What are the three essential elements of a partnership?
1) Sharing of profits/losses
2) Joint ownership
3) Equal right to manage the business
What is an LLC?
A hybrid business entity offering limited liability protection of a corporation with tax advantages of a partnership
What is piercing the corporate veil?
Legal doctrine allowing courts to hold shareholders personally liable for corporate debts when corporate form is abused
What is required for trademark protection?
A distinctive mark used in commerce that identifies the source of goods/services
What are the requirements for patent protection?
Invention must be novel, useful, and non-obvious; cannot be law of nature or abstract idea
What is copyrightable?
Original creative works fixed in tangible form; ideas themselves cannot be copyrighted
What constitutes a trade secret?
Confidential business information that provides competitive advantage and is reasonably protected from disclosure
What is employment at will?
Legal doctrine allowing either employer or employee to terminate employment relationship at any time for any legal reason
What are the protected classes under Title VII?
Race, color, religion, sex, national origin
What is the EEOC?
Equal Employment Opportunity Commission - federal agency that enforces workplace discrimination laws
What size employers are covered by Title VII?
Employers with 15 or more employees
What is a limited partner?
Partner who contributes capital but cannot manage business and has limited liability
What is an S Corporation?
Corporation that meets IRS requirements for pass-through taxation while maintaining limited liability
What is a franchise?
Business arrangement where franchisee operates under franchisor’s trademark and business system
What are corporate bylaws?
Internal rules adopted by corporation governing its operation and management
What is the business judgment rule?
Legal principle protecting directors from liability for good faith business decisions
What is the duty of loyalty?
Fiduciary duty requiring directors/officers to put corporate interests ahead of personal interests
What are preemptive rights?
Shareholders’ right to maintain proportional ownership by buying new stock issues first
What is a shareholder derivative suit?
Lawsuit brought by shareholders on behalf of corporation against third parties
What is an operating agreement?
Document establishing LLC’s internal rules and member relationships
What are articles of incorporation?
Legal document filed with state to create corporation containing basic corporate information
What is a covenant not to compete?
Agreement restricting employee from competing with employer after employment ends
What is a franchise disclosure document?
Required legal document providing prospective franchisees with information about franchise opportunity
Compare and contrast LLC charging orders versus partnership creditor remedies
LLC Charging Orders:
- Limited to economic rights
- Cannot force dissolution
- Protected from direct asset seizure
- State variations in exclusivity
Partnership Creditor Rights:
- Can force asset sale
- May trigger dissolution
- Direct claim on partner assets
- Different rules for GP vs LP interests
Analyze tax implications of partnership “check-the-box” regulations
Key considerations:
1. Default classifications
- Single member LLC = disregarded entity
- Multi-member LLC = partnership
2. Election options:
- Corporation status available
- S-corp limitations apply
3. Impact on:
- Self-employment tax
- Basis calculations
- Distribution rules
- International operations
Explain safe harbor provisions for private placements under Regulation D
Rule 506(b):
- Unlimited offering amount
- Unlimited accredited investors
- Up to 35 sophisticated non-accredited
- No general solicitation
Rule 506(c):
- All accredited investors
- General solicitation permitted
- Enhanced verification required
Common requirements:
- Disclosure obligations
- Integration rules
- Bad actor disqualification
Compare shareholder rights in publicly traded versus closely held corporations
Public Corporation Shareholders:
- Liquid market for shares
- SEC disclosure protections
- Proxy voting systems
- Derivative suit rights
Close Corporation Shareholders:
- Buy-sell agreements
- Heightened fiduciary duties
- Oppression remedies
- Personal guarantees often required
Analyze enforceability of restrictive covenants in various business contexts
Considerations by context:
1. Employment:
- Geographic scope
- Duration
- Legitimate business interest
2. Sale of Business:
- Broader enforcement
- Goodwill protection
3. Franchise:
- System protection
- Territory restrictions
4. Professional Practice:
- Client protection
- Specialty considerations
Evaluate legal implications of electronic contracts and digital signatures
Key issues:
1. Authentication:
- Technical requirements
- Attribution
- Security measures
2. Formation elements:
- Offer and acceptance
- Click-wrap vs. browse-wrap
- Notice requirements
3. Uniform Electronic Transactions Act:
- State variations
- Federal preemption
- International recognition
Analyze compliance requirements under Foreign Corrupt Practices Act
Key elements:
1. Anti-bribery provisions:
- Foreign officials
- Business purpose
- Corrupt intent
2. Books and records:
- Internal controls
- Accurate recording
3. Jurisdictional reach:
- US companies
- Foreign subsidiaries
- Individual liability
4. Compliance program requirements:
- Risk assessment
- Due diligence
- Training
- Monitoring
Explain interaction between federal and state antitrust enforcement
Framework includes:
1. Federal enforcement:
- Sherman Act
- Clayton Act
- FTC Act
2. State enforcement:
- Baby Sherman Acts
- Parens patriae authority
- Multi-state coordination
3. Private rights of action:
- Federal treble damages
- State remedies
- Class actions
Analyze the intersection of Caremark duties and ESG oversight responsibilities for modern boards
Multi-level analysis required:
1. Traditional Caremark framework:
- Good faith oversight duty
- Red flag response obligation
- Information systems requirement
2. ESG integration:
- Stakeholder interests
- Climate risk monitoring
- Supply chain due diligence
- Social impact metrics
3. Board committee structures:
- Risk oversight allocation
- Information flow design
- Expert consultation requirements
4. Documentation requirements:
- Board minutes specificity
- Risk assessment protocols
- Monitoring system design
5. Liability considerations:
- Business judgment rule application
- Scienter requirements
- Causation standards
- Remedial measures
Evaluate jurisdictional nuances in multi-national corporate group liability structures
Analysis framework:
1. Enterprise liability theory:
- Veil piercing across borders
- Agency relationships
- Control tests by jurisdiction
2. Parent-subsidiary relationships:
- Limited liability preservation
- Management integration risks
- Asset segregation requirements
3. Choice of law considerations:
- Forum selection impacts
- Recognition of judgments
- Regulatory compliance
4. Risk mitigation strategies:
- Corporate structure design
- Contractual protections
- Insurance coverage
- Capital adequacy maintenance
Analyze patent portfolio management strategy in light of Alice/Mayo framework
Strategic considerations:
1. Subject matter eligibility:
- Abstract idea analysis
- Natural phenomenon exceptions
- Transformation test application
2. Claim drafting strategy:
- Technical solution emphasis
- Physical implementation details
- Integration specifications
3. Portfolio diversification:
- Method claims
- System claims
- Computer-readable medium claims
4. International considerations:
- Jurisdiction-specific eligibility
- Filing strategy optimization
- Enforcement pathway planning
5. Risk mitigation:
- Fallback positions
- Multiple independent claims
- Continuation strategy
Evaluate successor liability risks in asset purchase transactions
Comprehensive framework:
1. Traditional exceptions:
- Express/implied assumption
- De facto merger
- Mere continuation
- Fraudulent transfer
2. Modern expansions:
- Product line continuation
- Continuity of enterprise
- Environmental liability
3. Industry-specific considerations:
- Healthcare provider liability
- Environmental obligations
- Employment commitments
4. Risk mitigation strategies:
- Due diligence depth
- Purchase price adjustments
- Escrow arrangements
- Insurance solutions
5. Documentation requirements:
- Representations and warranties
- Indemnification provisions
- Third-party consents
- Regulatory approvals
Analyze extraterritorial application of U.S. securities laws post-Morrison
Complex analysis required:
1. Transactional test elements:
- Domestic securities
- Domestic transactions
- Listed securities treatment
2. Jurisdictional considerations:
- Personal jurisdiction
- Subject matter jurisdiction
- International comity
3. Enforcement mechanisms:
- Public enforcement
- Private rights of action
- Cross-border cooperation
4. Compliance implications:
- Due diligence requirements
- Disclosure obligations
- Risk factor analysis
5. Documentation strategy:
- Choice of law provisions
- Forum selection clauses
- ADR mechanisms
What constitutes trademark infringement?
The unauthorized use of a trademark or service mark on or in connection with goods and/or services in a way that is likely to cause confusion, deception, or mistake about the source of the goods and/or services.
What is the first sale doctrine in copyright law?
Once a copyrighted work is legally sold, the buyer can resell, lend, or give away the copy without permission from the copyright holder. This allows for legal secondary markets of copyrighted works.
What are the key requirements for copyright protection?
A work must be original and fixed in a tangible medium of expression. It does not need to be registered to receive protection, though registration provides additional benefits.
What is the implied covenant of good faith and fair dealing?
A contract law principle that requires parties to deal with each other honestly, fairly, and in good faith, not to take advantage of each other, and to fulfill their obligations in the spirit of the contract.
What constitutes a prima facie case of employment discrimination under Title VII?
The plaintiff must show they: 1) belong to a protected class, 2) were qualified for the position, 3) suffered an adverse employment action, and 4) circumstances suggest discrimination was the reason.
What is the key difference between an LLC and a corporation?
An LLC combines the limited liability protection of a corporation with the tax advantages and flexibility of a partnership, allowing pass-through taxation while protecting members’ personal assets.
What is the employment-at-will doctrine?
A legal principle stating that employment relationships may be terminated by either party at any time, with or without cause, unless modified by contract or law.
What is the Fair Labor Standards Act’s basic requirement regarding minors?
The FLSA prohibits minors from working in hazardous occupations and sets restrictions on working hours and conditions for those under 18, with special provisions for different age groups.
Under what circumstances can trade secrets be protected?
Trade secrets are protected when: 1) the information derives independent economic value from not being generally known, and 2) reasonable efforts are made to maintain its secrecy.
What is the Supremacy Clause’s effect on state laws?
When federal and state laws conflict, federal law takes precedence and preempts state law, making the state law invalid to the extent of the conflict.
What are the key considerations in commercial speech regulation?
Commercial speech regulations must: 1) directly advance a substantial government interest, 2) go no further than necessary to achieve the government’s purpose, and 3) regulate only lawful and non-misleading speech.
What triggers requirements under Title VII of the Civil Rights Act?
Title VII applies to employers and labor unions with at least fifteen employees or members.
Under federal law, what notice must be given for large-scale layoffs?
When laying off a large number of employees (like 400 out of 1,800), employers must give workers sixty days’ notice before the layoff.
How long does trademark registration last?
After the first renewal, trademark registration is renewable every ten years.
What is the difference between a trade name and a service mark?
A service mark identifies services (like “The Spicy Chocolatier Café”), while a trade name is the name under which a business operates.
How does a foreign LLC’s legal treatment work?
When dealing with a foreign LLC, a state will apply the law of the state where the LLC was formed.
What are the exceptions to the employment-at-will doctrine?
Exceptions include: contract theory modifications, public policy violations, and statutory requirements.
What constitutes patent infringement?
Making, using, or selling a patented invention without permission from the patent holder constitutes infringement.
What is the duty of loyalty in employment?
Employees must act in their employer’s best interest and not secretly profit from their position, such as through self-dealing or competing with the employer.
What authority does the Equal Employment Opportunity Commission (EEOC) have?
The EEOC monitors compliance with Title VII of the Civil Rights Act and investigates discrimination claims.
What’s the key distinction between partners and employees in a business?
Partners have ownership interests and management rights, while employees work for wages without ownership stakes. Receiving wages or tips does not create a partnership relationship.
What makes a state law restricting advertising unconstitutional?
Advertising restrictions that are vague (like banning ads in “bad taste”) or overly broad are typically unconstitutional under the First Amendment.
What protection does an LLP provide its partners?
An LLP limits the personal liability of partners while maintaining the partnership’s pass-through tax status.
How does the commerce clause affect state regulations?
States cannot impose substantial burdens on interstate commerce through their regulations.
What constitutes a theft of trade secrets?
Unauthorized access and copying of confidential business information, such as tapping into a competitor’s computer network to download confidential data.
What is the scope of fair use in copyright?
Fair use allows limited use of copyrighted material without permission for purposes such as criticism, comment, news reporting, teaching, scholarship, or research.
What is substantive due process?
It focuses on the content of laws and regulations rather than procedures, protecting fundamental rights from government interference. This differs from procedural due process, which focuses on the steps taken to protect rights.
How does the establishment clause affect business regulations?
It prohibits laws that promote or require support of specific religions, such as requiring businesses to donate to religious organizations or showing preference to particular religious institutions.
What are the essential elements of a corporation’s officer rights?
Officer rights are defined through: 1) employment contracts, 2) state statutes, 3) corporate bylaws, and 4) any additional rights granted through shareholder votes
What is the scope of worker’s compensation coverage?
Independent contractors generally cannot recover workers’ compensation if injured on the job - this benefit is limited to employees classified as such under state law.
How does the full faith and credit clause affect business contracts?
It requires states to honor and enforce valid judicial decisions from other states regarding contract rights, though there are some limitations and exceptions.
What constitutes protected commercial expression?
Commercial speech that is truthful and not misleading receives constitutional protection, though it can be regulated more than political speech. Obscene speech receives no protection.
What are the permissible restrictions on street vendor licensing?
Local governments can restrict street vendors through ordinances if they serve legitimate public interests (like reducing traffic), but these restrictions must meet equal protection standards.
What is the time limit for challenging a patent?
Unlike trademarks which have specific renewal periods, there is no specific time limit for challenging a patent’s validity if infringement is suspected.
How does limited liability protection work in an LLC context?
Members are protected from personal liability for business debts and obligations, but can still be held personally liable if they personally engage in wrongful conduct.
What are the key requirements of franchise agreements?
Even if not explicitly stated, franchise agreements include implied covenants of good faith and fair dealing, which can restrict the franchisor from actions that undermine the franchisee’s business.
What constitutes a violation of trade secrets?
Unauthorized access, disclosure, or use of confidential business information that derives economic value from not being generally known to competitors.
How does federal preemption affect state business regulations?
When federal law (such as a federal license or permit) conflicts with state law, the federal law prevails under the supremacy clause, invalidating conflicting state regulations.
What makes advertising restrictions constitutionally valid?
Restrictions must: 1) serve a substantial government interest, 2) directly advance that interest, 3) be no more extensive than necessary, and 4) not be vague or overly broad.
How does agency law apply to employees?
Employees who interact with third parties on behalf of their employer are both employees and agents, while those who only handle internal matters are employees only.
What are the key differences between LLPs and LLCs?
Both offer liability protection, but LLPs are typically used by professional service firms while LLCs offer more flexibility in management structure and are more commonly used for general business purposes.
What are the key elements needed for a trade secret to receive legal protection?
A trade secret must: 1) Have economic value from not being generally known, 2) Be actively protected by reasonable measures to maintain secrecy, and 3) Be information that provides economic advantage to its holder.
What constitutes fair use of copyrighted material?
Fair use is determined by examining: 1) The purpose of the use, 2) The nature of the copyrighted work, 3) The amount used, and 4) The effect on the market value of the original work. Common examples include commentary, criticism, news reporting, teaching and research.
What are the differences between bilateral and unilateral contracts?
A bilateral contract involves promises from both parties (e.g., a service agreement where one party promises to provide a service and the other promises to pay). A unilateral contract involves a promise from only one party, with acceptance through performance (e.g., a reward offer).
