Final Review Flashcards
Who do fiduciary duties apply to
Directors and officers, shareholders, employees
What are the potential sources for fiduciary duties
common law, statute, contractual
What fiduciary duties do directors and officers owe?
Duty of Loyalty and duty of care
Duty of Loyalty
must act in **good faith **in a manner they reasonably belief to be the best interest of the corporation.
RB is both subjective and objective, best interest is discretionary
Actions prohibited by duty of loyalty
- competing with corporation
- taking business opportunities from corporations
- voting in transactions with a C/I
- Insider trading
- profitting improperly
Duty of Care
Must behave in a manner that a person in a similar position would behave in similar circumstances. Must take steps to inform themselves. Can rely on those who they have a reason to trust.
Negligence standard is objective.
What are the two types of Employment Relationships
At Will and Contract
At will employment
mutually volitional agreement of both parties. Either party can terminate at any point and for any reason*
*protected classes cannot be THE reason of termination
Contractual Employment
durational term, outlines duties and responsibilities, stipulates compensaion, sets terms and conditions for cause of termination, consequences* for termination
employer* : severance package
employee* : Restrictive covenants
FD of Employees During Employment
common law duty of loyalty. Can prepare to compette but cannot:
* appropriate TS
* solicit employer’s customers while still working there
* solicit employees to leave while still working there
* carry away CI
Post Employment FD of employees
maintain CI, and absent a valid NC may seek and obtain employment with competitor
Prima Facie Case of TS under UTSA
- establish the existence of a TS
- ∆ acquired knowlede of TS as a result of Confidental relationship
- ∆ made unauthorized use or disclosure
Elements of a TS
- information
- independent economic value
- not generally known/readily ascertainable by improper means
- Subject of Reasonable efforts to protect
*tangible is helpful, not required.
*agreement defining it is helpful, not dispositive
What constitutes “information” when proving a TS
can be a compilation, generally not customer lists: must be something in addition to just names, can be affirmative (recipe or formula) or negative (what not to do)
Evaluation of “not generally known”
done on a case by case basis based on the value, size, and sophistication of parties
Evaluation of reasonable efforts
evaluated under the circumstances, taken into account relationship and sophistication of parties
What constitutes “misappropriation” of a TS
acquisition, disclosure, use
what constitutes acquisition of TS
MUST BE BY IMPROPER MEANS
- includes a breach or inducement of breach of FD
What constitutes disclosure or use of a TS
- disclosure or use
- without express or implied consent,
- by a person who:
- used improper means OR
- knew or had reason to know it was:
- from someone who had improper means OR
- acquired from or through someone who had a duty of secrecy
- derived from or through a person who owed duty
reverse engineering alone is not enough
Special Defenses under UTSA
basically disprove any PF + consent, disclosure
* generally known
* no reasonable efforts
* independently developed
* reverse engineered
* π disclosed it
* π implied consent
* no independent economic value
Generic/Equitable Defenses under UTSA
- laches
- estoppel
- unclean hands
- “memorization defense” (weak; someone who intenitonally memorizes a TS is likely still liable)
Remedies under UTSA
injunctive relief
- mandatory or prohibatory
- TRO
- Prelim
- permanent
damages
UTSA vs DTSA
- DTSA is more elaborate, broader but less specific.
- DTSA grants FQJ without preempting state claims
- DTSA prohibits injunctions that prohibit a person from obtaining employment
- both allow for injunctive relief and damages
Requirements for TRO
- immediate irreparable loss
- PF case of each claim
- narrowly tailored
- needs insurance policy
Attributes of TRO
- only lasts for 14 days, can be renewed with sufficient reasoning
- used when there is a real emergency needing immediate relief
- can be given without notice in extreme situations, but need to explain why notice should not be given
Requirements of a Preliminary Injunction
- inadequate remedy at law causing irreparable harm
- reasonable likelihood of success at trial by establishing PF case
- balancing of harms to parties
- public interst disservice (imp. when large part of society or critical tech)
- decided by individual judge
What is the CFAA?
provides criminal and civil recourse for hacking. Used to use to go after employees who used computers to gather infor prior to departure
What are the two theories of the CFAA
- broad: breach of FD could give rise to CFAA claim
- narrow: no violation without accessing areas of a computer without authorization
Van Buren Gate theory of CFAA
- to violate CFAA a person needs to avoid a “gate that is down”. They need to enter particular areas of the computer that are off limits. Key inquiry is whether the person was authorized at the time. Wrongful/malicious intent is irrelevant
Policy of Non-Compete Agreements
- they are restraines of trade and thereofre contracry to economic prinicples, so courts construe them against the beneficiary
- promoters argue theat they promote honesty and fair dealing and allow employers to develop without concern that they will not be able to enforce their rights
Requirements of a Non-Compete
- protectable interst (good will, confidential information, trade secrets)
- Reasonable restrictions (must have a relationship to protected interest):
- time
- space/area (nexxus to activity)
- activity (determined by work with previous employer
Formation Issues/Defenses of Non-Competes
- Validity of K
- no meeting of the minds or fraud in the inducement
- consideration adequacy and timing
employment = consideration if signed in conjunction with emloyment
Defenses Against Enforcement of Non-Compete
- overbreadth
- ambiguity of restrictions
- lack of protectable interest
Effect of Type of Termination on Enforceability on NC
involuntary termination may affect enforceabilty of Non-Compete
NY Rule: involunatry termination = per se invalid
Majority rule: involuntary termination is considered when determining validity
Minority rule: involuntary termiation is irrelevant when considerig validity
Assignability and Enforceability of Non-Competes
an assignee cannot enforce a K against an anssignor
Common Law: K for services cannot be asisgned without permission of assigned without an assignment clause
Standards of Judicial Scrutiny on Non-Competes
- dependent on the level of bargaing power
- highest level of scrutiny to employment agreements
- mid level to stock redepmption
- low level to business, franchise, or partnership
3 Prong Analysis detmining enforeability of NC ancillary to sale
- covenant must be no broader in activity, time, and geography than necessary to protect interests
- must not unduly burden promisor
- must not necessairly compromise public interest in free competition
Red Pencil
if restirctive covenant is overbroad, then unenforceable
Blue Pencil
court can strike overbroad provisions, and leave enforeable, but cannot rewrite anything
Rule of Reason
Courts have discretion to modify RC to reflect intent of the parties, including inseting language and restrictions
Passive vs Active Non-Solicitation Agreement
passive vs active is relevant when considering whether something is a “solicitaion”
NDA Duration Rule
you can have an indefinite NDA if you include the right language
3 Common Law Business Torts
- Interference with Contract
- Interfence with Business Relations
- Interference with Potential Business Advantage
PF for Tortious Interference with Contract
- existence of a valid K
- ∆ must have had knowledge of K
- ∆ must have shown purposeful intent to interfere w/ K
- Interference proximately causes damage
PF for Tortious Interference with Business Relations
- existence fo a valid business relationship
- ∆ had knowledge of relationship
- ∆ must show purposeful intent to interfere w/ relationship
- interference PC damage
- pecuniary damages shown with reasonable certainty
PF for Tortious Interference with Potential Business Advantage
- existence of a protespctive advantage sufficiently definite and speciic enough to be capable of acceptance or performance
- ∆ must have knowledge
- ∆ must have shown purposeful intent to interfere
- interference proximately causes damage
- pecuniary damages
Defense for business torts
fair competition
Inevitable Disclosure Doctrine
an individual is so intertwined w something CI that disclosure is ienvitable
factors that weigh in favor of inevitablity
- highly competitive industry
- employee had intimate knowledge
- substantial overlap of duties
- lack of candor
- targeting
2 theories for liability under inevitable disclosure doctrine
minority: independent cause of action
majority: theory under UTSA
PF Common Law Defamation
- publication to a 3d party
- false or derogatory Statement
- understood to be about π
- proximate cause
- special/specific damages to reputatition
Standard of Conduct for Defamation Claims
- dependent on type of π
- private: negligence
- all purpose public figure: actual
- limited purpose public figure: actual malice
- in regard to the specific public controversy
Defenses to Defamation
- truth/substantial truth
- opinion
- privilieges (judicial, legislative, qualified)
Remedies to defamation
Special Damages
First Amendment and Defamation
we want to encourage open discourse and maintain freedom of speech. Public figures are inherently going to be the subject of the press, so we don’t want to elimate the possibility of speaking of them, but we don’t want to totally abandon their rights either
PF of False Advertising
- false or misleading statement about product or services
- such statement EITHER
- actually deceived OR
- had the capacity to deceive a substantial portion of potential customers - deception is material
- product or service is in interstate commerce
- π has been or is likely to be injured bc of the statement
Remedies for False Advertising
injunctive relief or damages
Defenses for false advertising
Opinion, and Puffery
2 part test for standing for False Advertising under the Lanham Act
- can the party show economic or rep injury
- does injury occur when deception of customers causes them to withold trade from π
How to prove deception/misleading under false advertising claim
- if statement is actually false, then deception is presumed
- if statement is alleged to be misleading then need to show evidence of actual deception
PF for Right of Publicity
- Π must show that “challenged use”:
1. Expressly or implicitly identified the π
2. Done w/o consent of π
3. For advertising or other commercial uses of trade
Defenses to Right of Publicity
- Incidental use
o Applicable to news in which they use NIL to promote itself - Newsworthiness
o Exception on reporting on matters of public interest - Biography
o RoP does not extend to literary work after death - parody
4 part test for Puffery
- analyze the common usage or menaing of the allegedly defamatory words themselves
- consdier the dergee to which the statements are verificable
- examine the context in which the statement occurrs
- examin the broader socia context to which the statement fits
