Cases Flashcards
General Automotive v. Singer
Rule: Employees owe a fiduciary duty to their employers.
Facts: Singer was sued for breach of K and was found liable for breach of fiduciary duty because he did not disclose his decision and had to return the profits he made.
Meinhard v. Salmon
Rule: Managing partners have a higher fiduciary duty than regular partners.
Facts: Meinhard was in a joint venture in a hotel. Salmon was approached about renewing the lease. Court found joint venturers who owe one another fiduciary duties when the new opportunity is an extension and expansion of the first opportunity.
Dissent: Fiduciary duty ends when the venture expires.
Feinwick v. Unemployment
Rule: A partnership exists when two or more persons act as co-owner of a business.
Facts: Beauty saloon owner in “partnership” with secretary.
Courts looks specifically at:
- intent of the parties
- share of profits
- sharing of losses
- ownership and control
- community of power in administration
- language of agreement
- conduct toward third parties (hold self out as partners)
- Rights upon dissolution
Martin v. Peyton
Rule: In order for a creditor to be a partner in a firm, the creditor must be closely enough associated with the firm so as to make it a co-owner carrying on the business for profit.
Facts: Peyton gave KNK a laon and in return received 40% of profits, veto rights, collateral securities, dividends, equiy option, and full access to inspect books, and veto power.
Court rules that they are not partners because these were ordinary precautions taken by a lender to protect their investment and was nto sufficent to establish Peyton as a co-owner.
Young v. Jones
Rule: A person who represents, or permits another to represent, that he or she is a partner in an existing partnership or with other persons who are not partners, is liable to 3rd parties who rely on that representation.
Facts: Young loaned $500K to bank and PwC Bahamas issues an unqualified opinion. Young lost his investment. Young sued PwC claiming they are partners with PW Global (according to brochure). The investor didn’t present any evidence to suggest that he relied on information that PW-Bahamas was in a partnership with PW-US.
National Bisquit Company (Nabisco)
Rule: In a general parternship with two partners, each party has the power to bind the partnership in matters pertaining to the partnership’s business.
Facts: Stroud and Freedman were partners in grocery store but were dissolving the partnership. Stroud ordered bread and it was delivered but, Freeman refused to pay. The ct found that since there can be majority under UPA §9 between 2 partners, and both have equal rights to manage, each has agency to order bread in the ordinary course of business.
Could have been avoided if Freeman sent an official letter to Nabisco explaing the Stroud was dissolving.
Owne v. COhen
Rule: A court may order the dissolution of a partnership when the parties’ quarreling makes it impossible for them to cooperate, or when one partner’s acts materially hinder the partnership’s business.
Facts: Owen provided funds and Cohen managed a bowling alley. Owen sues to have the court dissolve the corp b/c Cohen mismanaged funds, humilated him, and conducted illegal business (gambling room). The ct held the standard to dissolve a parternship: uncooperatie disagreement needs to be enough to hinder management of the partnership.
Cantor v. Sunshine
Rule: The act of executing the certificae of incorporation, the bona fide effort to file it and the dealings with plaintiffs in the name of that corporation fully satisfy the requiste proof of the existence of a de facto corporation.
Facts: Brunetti leased from Cantor (someone who has extensive experience leasing to corporations) on behalf of Sunshine. Filed with SOS but wasn’t incoporated b/c of delay at SOS. Sunshine defaulted on lease and Cantor sued Brunetti. Ct found B was not personally liable because corporation was a de facto corp.
Elements:
- Good faith effort to incorporate
- Had a legal right to form business
- Acted as if the corp was formed
- signed on behalf of corp.
- business cards
- appointed officers
Duray v. Perrin
Rule: Where a body assumes to be a corporation and acts under a particular name, dealing with under such assumed name is estopped to deny its corporate existence.
Facts: Duray signed K with Perrin. Signed a new K with Outlaw, LLC. Outlaw defaulted on K and Duray sued. The court determined Duray was King with Outlaw, not Perrin. Does De facto and estoppel analysis.
Estoppel is an equitable remedy and does not concern legal status–> Duray thought that Outlaw was a valid LLC and proceeded to perform (Received billing, liability insurance from Outlaw) under the K as if that were the case.
Elements:
- Incorporators have proceeded in good faith
- Under a valid statute.
- For an authorized purpose (legal business)
- Have executed and acknowledged articles of association pursuant to that purpose, a corporation de facto comes into being.
Estoppel Elements:
- Thought it was a corporation. Treated the entity as though it were a corporation
- would earn a windfall (obtain an unfair advantage or disadvantage) now allowed to argue that entity was not a corporation.
A.P. Smith
Rule: A corporation may take any action, including authorizing contributions/ donations, as long as it is consistent withs state law.
Facts: AP Smith donated $1500 to Princeton. Shareholder questioned this action. Court allowed the donation because it was given to benefit corporation, it was modest in amount and it wasn’t given to a pet charity.
Common law elements:
- There must be some corporate benefit (PR).
- Amount must be reasonable
- Donation cannot be to a pet charity (ulterior motive)
Dodge v. Ford
Rule: A company cannot take actions that harm its shareholders and are motivated solely by community/public interest concerns, rather than business concerns.
Facts: Ford began withholding shares to invest back into the community. Ford Motor was acting as a semi-charity instead of giving money back to shareholders. Ct determined withholding dividends is fine but it must be for the benefit of the corporation. Ct ordered Ford to pay dividends.
Shlenksky v. Wrigley
Rule: A court will only interfere with the honest business judgment of the directors of a corporation if there is a showing of fraud, illegality, or conflict of interest that causes damages to the corporation.
Facts: P wanted D to install night lights at the baseball field.
Ct found failing to install night lights did not cause significant damage to the corporation. P did not consider the costs of the upkeep of lights, which could increase or further decrease profits. Damages to stockholders is a mere conclusion not supported by facts.
In re Oracle:
Rule: A member of the board of directors cannot be independent if he or she cannot analyze a problem objectively, with only the best interests of the corporation in mind.
BCL §627 requires P to pay bond so if the Shareholder loses, the other shareholders will not be responsible for the attorney’s fees of corporation.
Facts: P brought a suit against Oracle for:
1) BOD and directors engaged in insider trading. They misrepresented infomation which caused the stock to plummet and used the information to trade before plummet.
2) Other members of the board did not trade but committed a caremark violation (sat idly by when they have a duty in good faith to look over actions of BOD…breach of fiduciary duty)
Issue: Whether SLC was independent enough so as to render an impartial decision regardig claims.
Can’t have substantial connections. Case by case analysis.
Automati Self-Cleansing Filter Syndicate
Rule: A corporation’s board of directors is not bound to carry out the resolution of a simple majority of the shareholders in violation of the articles of association. Has a duty to the corporation.
Facts: Company’s shareholders voted to sell assets (55%). BOD declined to sell. Shareholders sued. Ct concluded that BOD is to be an agent of the entire corp, not just the majority.
Jennings
Rule: Apparent authority cannot be established through the actions of the agent suggesting apparent authroity, but may be established through prior actions that are sufficiently similar and repetitive.
Facts: Mercantile was a publicly held company with 400 shareholders. Nine BOD and executive committee. Jennings solicited real estate bids for company. EC would determine whether company would accept any offers. J brought an offer and President accepted the offer. Ct determined Jennings could not recover because he WAS ON NOTICE. Public companies require BOD approval and they didn’t do a lot of deals like this.
Elements:
1) . Knowingly permits the agent to exercise; or
2) . holds im out as possessing authority
Analysis:
- Private or public company
- Is the transaction unique?
- Repetitve in nature?
Menhard
Rule: The president of a corporation has inherent agency power to bind the corporation to a contract if the contract was within the ordinary scope of his duties and the third party has no notice that he lacks authority.
Facts: Appellant corp offered to sell 30 acres of land. President of company accepted the offer in a written agreement. BOD refused the agreement. President of company has inherent authority. Actions were within normal business operations and appellant reasonably believed the president was authorized to contract.