Cases

Question 1

At&T Mobility vs Conception

Answer 1

Facts
• Conception’s held $30 claim vs att for false advertising, phones were not really free
• Contract required consumer to arbitrate complaints individually
• In California a previous case rules these class action clauses unenforceable because of no bargaining power
• Removed the power of class actions
• Federal arbitrations act contains a saving clause that prevent arbitration clause enforcement upon such grounds as exists at law or in equity for revocation of any contract

Issue
• Does FAA preempt the CA ruling? Must the clause be enforced?

Holding
• Yes
• Agreements requiring individual arbitration must be in forced
• Strong federal policy in favor of arbitration
• Allowing Class action undermines the advantages of arbitration

Question 2

Epic Systems v Lewis

Answer 2

Facts
• EY gave their employees a take it or leave it arbitration agreement to be individually arbitrated
• After leaving EY lewis filed class action in violation of Fair Labor Standards Act
Issue
• Does Sec. 7 of NLRA give workers a substantive right to collective litigation, such that
employer/employee arbitration agreements that waive such right are unenforceable notwithstanding FAA?
Holding
• No. Contracts in which employees give up right to collective litigation against employer are ok.
Reasoning
• Congress expressed a “liberal federal policy favoring arbitration agreements” in the
FAA. By contrast, the NLRA mentions “concerted action” but is silent on workers’ rights to collective litigation. Court must reconcile the two, and therefore NLRA should be interpreted not to interfere with enforceability of arbitration agreements under FAA.

Question 3

Zappos

Answer 3

Facts
• Zappos was hacked, people who were hacked sought damages, terms of use on zappos had individual arbitration but you did not have to agree
Issue
• Is an A clause enforceable if a party does not agree to it?
Holding
• No it is not ruled against zappos
Reasoning
• No accepatance=no meeting of the minds
• Requirement to arbitrate unacceptable because terms of use constitutes an illusory contract

Question 4

Blackmon v Iverson

Answer 4

Facts
• When Iverson was young his surrogate father suggested he use the nickname the answer for logo and merchandize if he got into the NBA
• Iverson promised to give Blackmon 25% for suggesting the name
• Blackmon was not compensated when Iverson entered into deals

Issue
• Did Blackmons complaint state a claim on which relief can be granted?

Holding
• No

Reasoning
• Breach on contract fails for lack of consideration. Iverson was already given it before promised 25% so its past consideration the 25% was a gift not break of contract
• Idea of misappropriation fails because Blackon did not allege was harmed competitively of financially
• The nickname was neither novel nor concrete to no unjust enrichment

Question 5

Lucht Concrete Pumping

Answer 5

Facts
• concrete company expanded into summit county
• hired employee at will
• was asked to sign agreement non compete for 12 months and did sign
• quit and worked for another company
• company sued Horner for breach of contract and breach of fiduciary duty

Issue
• Does continuing employment of existing at-will employee provide adequate consideration to support a non-compete agreement?

Holding
• Yes, an employer that forbears from terminating an at-will employee is forgoing a legal right (to fire EE at any time for any reason) and thus it constitutes adequate consideration for the employee’s noncompete.
es. The judgment of the appellate court is reversed and remanded. Lucht’s agreeing not to terminate Horner in exchange for Horney agreeing not to compete is adequate consideration to support a contract.

Question 6

Kurashige v Indian Dunes

Answer 6

Facts
• Release agreement for use of Indian Dunes Park for riding motorcycle dirt bike, conspicuous and in large print.

Issue
• Is exculpatory language enforceable against claim of unconscionability?
• Exculpatory- is language which “has the general effect of freeing or appearing to free an individual or an entity from malpractice, negligence, blame, fault, or guilt”
• Unconscionability- A defense against the enforcement of a contract or portion of a contract. If a contract is unfair or oppressive to one party in a way that suggests abuses during its formation, a court may find it unconscionable and refuse to enforce it.

Holding-Yes

Rationale
• not oppressive, since consumer had choice to bike elsewhere; not surprised b/c terms were conspicuous & clear (bold large font, etc
•  No substantive unconscionability – though one-sided, the risk reallocation was not unexpected and was reasonable, b/c Kurashige had notice of danger and largely had control over possible injury
• Did not involve the interest of the public

Question 7

A/R Retail v Hugo Boss

Answer 7

Facts
• HB opened reatils stores in NYC under 13 year lease
• Covid hit and lockdowns were enforced
• A/r sued HG for not paying rent
• HB claimed common law defenses of “frustration of purpose” & “impossibility of performance” to rescind/reform lease; that under the lease terms, the pandemic was (1) a “casualty” rendering premises untenantable, (2) that pandemic was a “hazard” entitling HB to rent abatement and recovery of “overpaid” rent. Written lease said:

Issue
• Do the adverse financial impact of Covid and gov’t orders restricting consumer access to store relieve tenant of obligations to pay rent?

Holding-NO HB claims dismissed

(1) Tenant not entitled to invoke lease provision for termination in event of “casualty” because pandemic is not a casualty as term denotes physical damage to premises. HB also never exercised option to terminate. 
(2) Tenant not entitled to rent abatement/reduction due to existence of “hazard” that rendered premises unusable, because HB provided no evidence that the property was “completely or partially destroyed” or “damaged” as required under lease terms. Tenant merely argued their use suffered.

Question 8

MacNeil v. Cannon

Answer 8

Facts
• MAcneil conracts C to make floor parts for cars
• C says will “manufacture a quality mat” with carpets that will adhere to mat and will be exceptional quality
• When carpets did no adhere M sued C for breach of Warranty
• Cannon says it made no express warranties

Issue-may C be liable for breack of express warranty based on statements it made to M

Holding
• Yes, Cannon may be liable for breach of warranty based on its alleged representation regarding carpetmat adhesion, but not its statements regarding “quality mats” that would “meet expectations of quality” and “would be suitable.”
Reasoning
• To be actionable express warranty statement must be
o Regarding a fact not an opion that can be proven false
o Of which buyer is ignorat
o That become basis of bargin
• Specific factual warranties can be express warranties
• Vague statements that do not assert specific facts are not warranties
• The adhesion was factual and specific the others were not

Question 9

Holmes v Lerner

Answer 9

Facts
• L and H verbally agree to form a company to produce nail polish, called urban decay
• H’s idea L’ money
• H role was not defined and was eventually squeezed out
• H sued on basis or oral partnership agreement

Issue- is there an oral contract making H and L partners

Holding-Yes
To form partnership, there’s no requirement for an agreement specifically on division of profits; just a manifestation of intent to form a partnership and carry on as co-owners a business for profit. Profit sharing agreement just provides further evidence. Nothing unusual about an agreement where one party provides idea and the other financing.

Question 10

Walkovszky v Carlton

Answer 10

Facts
• W as injured by taxi company owned by C who owned many corporations
• W sued and asserted that all cab corps were operated by C as a single entity and were operated to defraud the public who might be injured but unable to obtain a full compensation

Issue-under these cirucumsatnce may corporate veil be pierced to hold C as controlling shareholder and personally liable?

Holding-No
Law allows for incorporation of a business precisely to allow proprietors to escape personal liability, although there are limits, enforced by allowing veil piercing actions against shareholder. Limits exist where (1) SH operates the corporation as a ”dummy” that is really just alter ego of shareholder, or (2) corps were intentionally undercapitalized. 
Here, Carlton followed corporate form, treating the entities as their own persons and not comingling assets. Moreover, he took out the required minimum insurance.

Question 11

Smith v VanGorkum

Answer 11

Facts
• VG is CEO with a potential LBO on the way
• CFO says a price is feasible per share even though trading under that
• CEO goes to BoD and gives them price they approve based on the CEO oral argument and had not read any details

Issue- Were Directors protected from liability by Business Judgment Rule? (BJR-protects BoD by assuming they are acting in good faith with fiduciary standard of loyal tie duty of care and duty of loyalty)

Holding- BOD not Protected by BJR. BoD was “grossly negligent.” BoD members could be liable personally for intrinsic value per share minus the $55/share price.

Reasoning- BOD can’t blindly rely upon reports like statements of officers. To satisfy duty of care, should’ve engaged I-banking firm to prepare written and reasoned valuation study and fairness report. BoD should have taken its time, asked questions and not locked itself in. BoD failure was not not cured by SH vote b/c all material facts not disclosed to SH

Question 12

In re Caremark Derivative Suit

Answer 12

Facts
• Caremark employees violated state and federal anti-kickback laws, leading to company being charged criminally & paying fines of $250M. Shareholder derivative action filed by SH on behalf of Company against its directors.

Issue
• Since fairness of settlement turns on strength of case against directors, what does a director’s duty of care require in terms of corporate supervision and is it likely that BOD violated that duty?

Holding
• Board has duty to monitor corporate legal compliance, but Caremark’s BOD likely didn’t violate it. Settlement is fair & reasonable.
• Here, there’s a low probability that BOD violated its duty of care by failing to adequately monitor and supervise legal compliance because record shows “active consideration” of Corporate structures/programs policies related to kickbacks and “does not tend to show knowing or intentional violation of the law.”

Question 13

Duty of Good Faith in Abbot Labs Derivative Suit

Answer 13

Facts
• Over 6 years, FDA sent multiple warning letters to Abbott and its BoD re: adulterated products, but Abbott failed to implement a voluntary compliance plan and ultimately paid $100M fine and was forced to recall/dispose of products. SH brought derivative suit on behalf of company against BoD for Br/FD, but made no demand upon the Board to initiate suit against themselves. A

Issue
• Does the failure of the Board to follow-up on noncompliance letters constitute Br/FD of Good Faith such that directors likely would not be entitled to BJR protection and thus were exposed to personal liability,

Holding-YES
• Systematic and intentional failure of the board to exercise oversight despite knowledge of illegality shows reasonable doubt that Directors acted in good faith, an essential element of BJR protection
• While Corporate charter provision exculpated the directors from liability for breach of duty of care, it did not excuse them for breach of loyalty or lack of good faith. Thus, directors were exposed to liability and demand was not necessary.

Question 14

Dodge v Ford Motor Co

Answer 14

Facts
• FMC owned by Henry Ford (58%, President and Director) and Dodge Bros (10%, no Bd seats). FMC (Henry) wants to mass produce cars w/ vertical integration (using own parts), lower price & expand consumer base so it stops paying its usual special dividends of $10+M/yr and wants to reinvest profits in new plant (which would hurt Dodge Bros), double worker salaries, and cut price of cars. Dodge Bros (who had their own auto parts company supplying to Ford) sue to require FMC to distribute 75% of cash surplus, distribute all earnings except that which is reasonably required for emergencies, and stop new plant construction

Issue- Are shareholders entitled to force management to distribute profits?

Holding- Not usually, because Business Judgment Rule insulates the Board and Courts won’t second guess the means chosen for growing the business or making it more efficient. New plant not enjoined. But here, some dividends must be paid. Can’t treat shareholders as merely incidental players in the corporation

Question 15

AP Smith MFg v Barlow

Answer 15

Facts
• Bod resolved to donate money to charity
• Sharheolders challenged this as beyond the power of the corporation
• President argued was sound investment in community goodwill and an educated future work force

Issue- May a corporation lawfully donate a reasonable amount of money to universities and community charities?

Holding-YES
• Public policy favors corporate charitable contributions
• Here, there was “no suggestion the donation was made indiscriminately or to a pet charity of the corporate directors in furtherance of personal rather than corporate ends.”

Question 16

Shlensky v Wrigley

Answer 16

Facts
• Shareholders sue Cubs for negligence and mismanagement for not having lights
Issue- Have Plaintiffs stated a cause of action? Is Wrigley protected by the BJR?

Holding- Have Plaintiffs stated a cause of action? Is Wrigley protected by the BJR?

Reasoning
• It is a reasonable business interest to try to avoid further deterioration of the neighborhood (property value), and to avoid incurring additional costs that may not be recouped. Courts should defer to such business j

Question 17

Dynamex v Cal Superior Court

Answer 17

Facts
•	Changed drivers from IE’s to EE’s drivers sued caliming new classification violated applicable wage orders
Issue-in Ca what is the standard for classifying workers in wage order contect? Can class be certified?

Holding-Class certified
• . Ca. Sup. Court issued new standard (in CA), replacing flexible common law “right to control” test for determining whether workers should be classified as IE or EE, for purposes of wage orders. New standard presumes that all workers are EE’s, and places burden of proof upon employers under “ABC” test.
• ABC test
o (A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
o (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and
o (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed
Reasoning - Misclassification is unfair and harmful to workers, competitors and the public. Courts need to look at statutory purpose to see which classification best effectuates underlying legislative intent, such as remedying unfairness to workers
.
Implications- Huge potential consequences for Gig Economy companies that classify workers as IE’s (e.g., Uber/Lyft/Grubhub) – esp. since “B” of ABC Test requires CA employers to show worker performs work outside the usual course (core) of hiring entity’s business. Dynamex has also been held to apply retroactively, but unclear yet how far this extends & whether it covers wage claims outside of wage order, e.g., reimbursement for biz expenses like gas

Question 18

EEOc v Abercrombia and Fitch

Answer 18

Facts
• Muslim women applies for job at AF is qualified and is interviewd. Religious accommodations are not discussed with E or used at AF and AF does not hire because scarf violates AF look policy
• E files complaint with EEOC (equal opportunity employment commission)
• AF wins because cannot viole title VII of civil rights act without first hiring

Issue- Does an employer need to have actual knowledge of the applicant/employee’s need for a religious accommodation in order to be held liable for failing to accommodate a religious practice in violation of Title VII?

Holding- No. Applicant need not show employer had knowledge of need for an accommodation. Applicant must only show that applicant’s need for accommodation was a “motivating factor in employer’s decision”

Reasoning
• Statute contains no knowledge requirement, unlike ADA. It’s all about motives. Even if employer knows of need for accommodation, it’s still legal to refuse to hire that applicant if your motives were different. Likewise, it’s illegal to refuse to hire because of religion, even if you only suspected the need for an accommodation, but declined to hire because of religion.

Question 19

Harris Group v Robinon

Answer 19

Facts
• Former employees of the consulting arm of a CO engineering firm (“the Company”) who were subject to Confidentiality Agreement and an employee’s common law fiduciary duty of loyalty spun off to form new business (“NewCo”). Prior to departure, the employees took inventory of the Company’s clients/projects, copied/sent themselves the Company’s files and then deleted them, leased office space, obtained liability insurance, developed a NewCo website, and drafted a departure announcement. Employees then resigned with one day’s notice, making job offers to remaining at-will employees who accepted them. Next month, they contacted The Company’s clients, successfully soliciting many of them to terminate their business with The Company and transfer projects to NewCo.
Issue
• Did the fmr. employees & NewCo use “wrongful means” such that they can be properly held liable for tortious interference, even though business competition is often privileged?
Holding
• Yes. While jury instructions were a bit circular and included examples of “wrongful means” (like violence and baseless threats of litigation) that were not at issue, these errors were harmless b/c fmr. employees and NewCo. nevertheless engaged in other “wrongful means” of inducement to breach:
o Conversion (theft) of company documents
o Breach of fiduciary duty of loyalt
o Breach of NDA/confidentiality agreement

Question 20

ABC test

Answer 20

ABC test
o (A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
o (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and
o (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed