MGMT 520 FINAL
EXAM Week 8

1.
(TCOs G and I)In
the 1930s, after immigrating to the U.S. from a region in central Europe
threatened by the onset of World War II, Luigi and Maria Spongee opened a
bakery in Chicago. They specialized in snack cakes. Spongee Cup Cakes became so
popular in the area that the family stopped being actual bakers and became
manufacturers/ food processors of the snack cakes on a regional basis. After
returning from the war, their son Steve completed college and began working in
television advertising in the early 1950s. Steve approached his parents and his
older brother Tom, who was now running the business, about the possibilities of
advertising and going national. The family liked the idea and began
advertising and expanding. In addition, to fuel the expansion, they offered
retailers price discounts and other incentives if they prominently positioned
thedisplays
set-up by Spongee rack jobbers. By the 1960s, they were a national brand,
controlling over 80 percent of the snack food industry.

In the 1970s, with the advent of the
hippie counter-culture and the back-to-Earth movement, a new competitor made an
impact on the Spongee business. The company, Herbal Snacks, began advertising
that their products only used natural ingredients. They even began running a
commercial in which a mother and child compared their Herbal Snacks with a
lampooned product named Cup Cake Spungies, stating that it tasted like poison
and dog food! Very-Large-Tom, a counter-culture pop star with a late night UHF
and cable show, joined in on the controversy created by the commercial and
stated that he did not understand how people, could buy such poisonous dog
food and serve it to their children as snacks! Market studies showed that
Spongee Cup Cakes sales suffered. As a result, Spongee began a more aggressive
shelf space and display marketing campaign to combat Herbal Snackss television
advertising. Spongees marketing efforts were successful. By also offering
volume discount incentives, they had prevailed upon retailers in their
traditional East Coast and Midwest markets to prominently display their
products. To counter this strategy, Herbal Snacks offered a deep discount to
TargetMart, a Southwest and West Coast discount chain, in exchange for an agreement
to exclusively sell only their snack foods.

In reality, Spongee Cup Cakes used only
FDA approved ingredients and preservatives and were made in American plants
that always passed inspections. In contrast, although Herbal Snackss pilot
plant was in Montana, it had subcontracted the bulk of its production to a
plant in Canada. As a result, to maintain a level of quality, Herbal Snacks
used the maximum amount of preservatives allowed under Canadian law for the
imported product. The level was so high, reactions to the food were often
reported. The levels were higher than those allowed by FDA regulations, but
allowed per an agricultural import/export treaty between the United States and
Canada. Several people who ate these Herbal Snacks required emergency room
visits. A child in Idaho, with food allergy problems, even died. Her parents
served her the snack, relying on the advertising, not knowing that some of the
natural ingredients used in the Canadian-made product were dangerous to her.
The Spongee family seeks your advice and opinion regarding:
(1) Herbal Snackss advertising campaign.
(2) The marketing and distribution campaigns both companies have engaged in.
(3) The liability issues Herbal Snacks faces regarding their use of food
manufactured outside of the United States. (Points : 30)
2.
(TCOs A, E, F) John
and Janet Fonda, siblings and actors, decide to retire after years on the road.
They remember a town in New Jersey they were familiar with from their travels.
From the internet, they learn of a farm a few miles outside of town that seems
ideal. There is a great house and lots of land. The Fondas wish to convert the
farm to a restaurant-hotel with a dinner theater. They contact the realtor by
phone, and make arrangements to buy the parcel. The Fondas plan on travelling
to New Jersey prior to the closing to look things over, but are unable to do so
due to their touring schedule. The realtor, whose commission is technically
paid by the proceeds to the seller, and who has a listing contract with the
seller, advises the Fondas that she will handle everything. New Jersey custom,
law, and practice does not require a purchaser of land to have an attorney. The
realtor does only the bare minimum needed for title to transfer to the Fondas.
On their behalf, she only has a minimal title search and minimal inspections
done, and she obtains a minimal coverage title insurance policy. As the area
near the farm was once occupied by a large chemical plant, when the realtor
represents local purchasers, as a precaution, she advises the buyers to get the
maximum possible title search and title insurance, and to get all possible
inspections done. It is her regular practice to caution local purchasers who
she represents about the former chemical plant.
After closing on the property, the Fondas learn of the old chemical plant. They
seek your advice as to their liability and the liability of any other parties.
(Points : 30)
3.
(TCOs A, E, F)John, Lionel, and Evelyn Harrymore,
siblings and actors, decide to retire after years on the road. They remember a
town in Illinois they were familiar with from their travels. From the internet,
they learn of a farm a few miles outside of town that seems ideal. There is a
great house and lots of land. The Harrymores wish to convert the farm to a
restaurant-hotel with a dinner theater. They contact the realtor by phone, and
make arrangements to buy the parcel. The Harrymores plan on travelling to
Illinois prior to the closing to look things over, but are unable to do so due
to their touring schedule. The realtor, whose commission is technically paid by
the proceeds to the seller, and who has a listing contract with the seller,
advises the Harrymores that she will handle everything. Illinois custom, law,
and practice does not require a purchaser of land to have an attorney. The
realtor does only the bare minimum needed for title to transfer to the
Harrymores. On their behalf, she only has a minimal title search and minimal
inspections done, and she obtains a minimal coverage title insurance policy. As
the area near the farm was once occupied by a large chemical plant, when the
realtor represents local purchasers, as a precaution, she advises the buyers to
get the maximum possible title search and title insurance, and to get all
possible inspections done. It is her regular practice to caution local purchasers
who she represents about the former chemical plant.
After closing on the property, the
Harrymores learn of the old chemical plant. They seek your advice as to their
liability and the liability of any other parties. (Points: 30)
1. (TCO C) Three professors from Kellers New
Jersey campus, Robinson, Romney, and Obama, decide to visit ABC Go-kart
facility together in Pennsylvania. This decision is made after a lengthy
faculty brunch, at which unlimited alcoholic mimosas were served. ABC Go-kart
advertises at the colleges 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;
ABC 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 PENNSYLVANIA.
Professor
Robinson, who lives in New York City, 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!”
Obama
and Romney, who dislike each other for unknown reasons, are the only ones on
the track. They use go-carts manufactured by Kartmatic. As they begin the race
they drive very aggressively. Unbeknownst to either party, Fred, ABCs
mechanic, fed up with low pay, did not do the usual morning inspection of the
brakes and tires on either vehicle that morning. ABC had been contemplating
firing Fred due to his erratic work habits. ABC instructed Fred to inspect the
Kartmatics daily as they never trusted their brake mechanism. Kartmatics are
regularly marketed to amusement parks. Their instruction manual states that
they are not to be used for racing.
After
two laps, Obamas brakes fail as he tries to aggressively pass Romney. He
crashes into Romneys 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 Robinson
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 Robinsons wrist. At the hospital, Robinson 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 Robinson
had been rendered brain dead by accident at the ABC Go-kart facility.
(a)
What
claims may Professor Robinsons widow bring against the various parties?
(b)
What
defenses might each party bring against the possible claims asserted by
Professor Robinsons widow?
(c)
In what
state should the case be brought? (Points: 30)
(TCOs
A, B, F, H)
1.
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 colleges 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 schools 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 universitys 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 SECs 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 doesLinkTime, 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)
2. (TCOs
A, D, E)Marvin worked at the local country club pool as a lifeguard, not a
swim teacher, for the summer of 2013. Marvin was a public school physical
education teacher. The country club did not do a background check or confirm
any references when they hired him. They relied on the say-so of Marvins
brother, a member of the country club board of directors. The country club only
did a cursory internet search of the states Department of Education website to
verify that he had a valid teaching certificate. When one of the swim
instructors unexpectedly quit one day, he took over the class. Initially, the
class went well. Eventually, Marvin also took over coaching the clubs
competitive swim team. When he became the swimming coach, Marvin effectively
stopped teaching the swim classes. Instead, he had all the swimmers in the
classes do races and train for competitive meets during the 30 minute lessons.
Marvin had done this many times during the summer. His boss, the country club
director, knew this and, as the swim team was winning, ignored complaints from
parents and students. Marvin raced with the swimmers and pushed the winners out
of the way when they tried to touch the side of the pool so that Marvins team
would win each time. This was not the first time that Marvin had injured
swimmers. Last year, he was arrested for physically abusing a child he coached
at his school. Although the criminal charges were dropped, Marvin is on
administrative leave from his 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 his administrative suspension is
listed on the states database.
Several of the children, ages 6-8,
reported to their parents that they had been physically assaulted by Marvin
while in swim class for not working hard enough! The children had bruises on
their shoulders. Marvin began “kidding” an 18-year-old college
student who worked as a lifeguard and assisted Marvin with the coaching. Over
time, Marvin’s “jokes” that were directed at the young man became
very aggressive. Marvin continued, even though the young man asked him to stop.
In fact, after the young man told Marvin to stop, as he felt harassed, Marvin
hired another lifeguard to assist him 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 work out
among themselves.
Several parents brought suit against the
local country club, Marvin, and the country club director. The young lifeguard
has also brought suit. The local country club pool alleges that they are not
liable. Discuss the ethical, liability, and agency issues presented by this
matter, and all defenses available to the local country club pool. (Points: 30)

4. (TCOs A, E, F) John and Edwin
Booth, brothers and actors, decide to retire after years on the road. They
remember a town in Louisiana they were familiar with from their travels. From
the internet, they learn of a farm a few miles outside of town that seems
ideal. There is a great house and lots of land. The brothers wish to convert
the farm to a restaurant-hotel with a dinner theater. They contact the realtor
by phone, and make arrangements to buy the parcel. The Booth brothers plan on
traveling to Louisiana prior to the closing to look things over, but are unable
to do so due to their touring schedule. The realtor, whose commission is
technically paid by the proceeds to the seller, and who has a listing contract
with the seller, advises the Booths that she will handle everything. Louisiana
custom, law, and practice does not require a purchaser of land to have an
attorney. The realtor does only the bare minimum needed for title to transfer
to the Booths. On their behalf, she only has a minimal title search and minimal
inspections are done, and she obtains a minimal coverage title insurance
policy. As the area near the farm was once occupied by a large chemical plant,
when the realtor represents local purchasers, as a precaution, she advises the
buyers to get the maximum possible title search and title insurance, and to get
all possible inspections done. It is her regular practice to caution local
purchasers who she represents about the former chemical plant.

After
closing on the property, the Booths learn of the old chemical plant. They seek
your advice as to their liability and the liability of any other parties.
(Points: 30)

(TCOs B, C, G, I) KWRF, a small market radio station, learns from reading in
the industry trade magazine that the Federal Communications Commission (FCC)
has proposed a regulation change. The regulation will require radio stations to
do an additional 20 minutes of public service announcements each week. As KWRF
serves a small niche market, and has minimal advertising revenue, the loss of
20 minutes of air time could bankrupt them. What should KWRF do regarding the
proposed change?

(TCOs
G and I) In the 1930s, after immigrating to the
U.S. from a region in central Europe threatened by the onset of World War II,
Bruno and Helga Kreamie opened a bakery in Brooklyn. They specialized in snack
cakes. Kreamie Cup Cakes became so popular in the area that the family stopped
being actual bakers and became manufacturers/ food processors of the snack
cakes on a regional basis. After returning from the war, their son Steve
completed college and began working in television advertising in the early
1950s. Steve approached his parents and his older brother Tom, who was now
running the business, about the possibilities of advertising and going
national. The family liked the idea and began advertising and expanding. In
addition, to fuel the expansion, they offered retailers price discounts and
other incentives if they prominently positioned the store displays set-up by
Kreamie rack jobbers. By the 1960s, they were a national brand, controlling
over 80 percent of the snack food industry.
In the 1970s, with the advent of the
hippie counter-culture and the back-to-Earth movement, a new competitor made an
impact on the Kreamie business. The company, Granola Snacks, began advertising
that their products only used natural ingredients. They even began running a
commercial in which a mother and child compared their Granola Snacks with a
lampooned product named Cup Cake Creamies, stating that it tasted like poison
and dog food! Not-So-Tiny-Tim, a counter-culture pop star with a late night UHF
and cable show, joined in on the controversy created by the commercial and
stated that he did not understand how people, could buy such poisonous dog
food and serve it to their children as snacks! Market studies showed that
Kreamie Cup Cakes sales suffered. As a result, Kreamie began a more aggressive
shelf space and display marketing campaign to combat Granola Snackss
television advertising. Kreamies marketing efforts were successful. By also
offering volume discount incentives, they had prevailed upon retailers in their
traditional East Coast and Midwest markets to prominently display their
products. To counter this strategy, Granola Snacks offered a deep discount to
WackoMart, a Southwest and West Coast discount chain, in exchange for an
agreement to exclusively sell only their snack foods.
In reality, Kreamie Cup Cakes used only
FDA approved ingredients and preservatives and were made in American plants
that always passed inspections. In contrast, although Granola Snackss pilot
plant was in Arizona, it had subcontracted the bulk of its production to a plant
in Mexico. As a result, to maintain a level of quality, Granola Snacks used the
maximum amount of preservatives allowed under Mexican law for the imported
product. The level was so high, reactions to the food were often reported. The
levels were higher than those allowed by FDA regulations, but allowed per an
agricultural import/export treaty between the United States and Mexico. Several
people who ate these Granola Snacks required emergency room visits. A child in
Oregon, with food allergy problems, even died. Her parents served her the
snack, relying on the advertising, not knowing that some of the natural
ingredients used in the Mexican-made product were dangerous to her.
The Kreamie family seeks your advice and
opinion regarding:
(1) Granola
Snackss advertising campaign.
(2) The
marketing and distribution campaigns both companies have engaged in.
(3) The
liability issues Granola Snacks faces regarding their use of food manufactured
outside of the United States. (Points : 30)
(TCOs
D, E, F) Frank Jones is a college student who had
a plow attached to his jeep so he could earn extra money plowing during the
winter. Jones was under contract to plow the driveways of Mr. Washington and
Ms. Adams, two neighbors down the street. John Smith lives between Washington
and Adams. Jones took it upon himself to plow Smiths lot the seven times this
past winter when there were storms and when he plowed the other two lots. Jones
had never spoken to Smith about it, and Smith never objected. In the spring,
Jones personally appeared at Smiths house and presented him with a bill. Smith
refused to pay Jones, stating that, he never agreed to any contract. That
statement was made after Jones presented him with a bill of $600, which he
calculated as the reasonable value of his services. After Smiths obnoxious
response, Jones yelled: I will see you in court!
What legal arguments could Jones make to enforce his $600 bill? What legal
arguments could Smith make to avoid liability? (Points : 15)
(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 Truckings 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)
(TCO C)
Three professors from Kellers 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 colleges 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, XYZs
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, Clintons brakes fail as he tries to aggressively pass Bush. He
crashes into Bushs 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 Favres 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
Favres widow bring against the various parties?
(b) What defenses might each
party bring against the possible claims asserted by Professor Favres widow?
(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. Collinsworths 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 Collinsworths 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 Collinsworths second album and
her recent unsuccessful concert tour, NastiCondiMedia did not do the final
production work on Collinsworths 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?

(c) What types of relief might either party
seek? (Points : 30)

(TCOs A,
B, F, H)
PART A
Paul and Thomas Franklin, 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 FaceLinked. Paul
attended and resided at the colleges 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 schools student directory online, and offering blog,
chat, and message board features. FaceLinked was such a hit that within a year,
the school advised the brothers that they had to remove FaceLinked from the
universitys server as it was utilizing too many resources. This was not a
problem as the Franklins found advertisers, so they were able to move
FaceLinked to a private server without charging user fees. In fact, FaceLinked
was earning so much revenue that the Franklin brothers were able to pay
themselves and the six friends who helped them start and operate it salaries.
The Franklin 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 FaceLinked 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 FaceLinked 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
FaceLinked 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 Franklin 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 Franklin had his conviction expunged. In addition, FaceLinked
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 FaceLinked 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
SECs regulation when it was proposed. After the public offering was completed,
FaceLinked 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 FaceLinked in favor of a new,
upstart rival service offered by TronCom. Fearful that the new advertisers
would back out of their contracts, the Franklin brothers sold a great deal of
their stock.
What issues does FaceLinked, its officers, and stockholders face under (a)
state securities law, (b) the Securities Act of 1933, and (c) the Securities
and Exchange Act of 1934? (Points : 60)

(TCOs A, D, E) Woody worked at the local country club pool as a lifeguard, not
a swim teacher, for the summer of 2013. Woody was a public school physical
education teacher. The country club did not do a background check or confirm
any references when they hired him. They relied on the say-so of Woodys
brother, a member of the country club board of directors. The country club only
did a cursory internet search of the states Department of Education website to
verify that he had a valid teaching certificate. When one of the swim
instructors unexpectedly quit one day, he took over the class. Initially, the
class went well. Eventually, Woody also took over coaching the clubs
competitive swim team. When he became the swimming coach, Woody effectively
stopped teaching the swim classes. Instead, he had all the swimmers in the
classes do races and train for competitive meets during the 30 minute lessons.
Woody had done this many times during the summer. His boss, the country club
director, knew this and, as the swim team was winning, ignored complaints from
parents and students. Woody raced with the swimmers and pushed the winners out
of the way when they tried to touch the side of the pool so that Woodys team
would win each time. This was not the first time that Woody had injured
swimmers. Last year, he was arrested for physically abusing a child he coached
at his school. Although the criminal charges were dropped, Woody is on
administrative leave from his 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 his administrative suspension is
listed on the states database.

Several
of the children, ages 6-8, reported to their parents that they had been
physically assaulted by Woody while in swim class for not working hard
enough! The children had bruises on their shoulders. In addition, Woody began
kidding an 18 year old black college student who worked as a lifeguard and
assisted Woody with the coaching. Over time, Woodys jokes toward the young
man became very aggressive. Woody continued even though the young man asked him
to stop. In fact, after the young man told Woody to stop as he felt harassed,
Woody hired another lifeguard to assist him 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 parents brought suit against the local country club, Woody, and the
country club director. The young lifeguard has also brought suit. The local
country club pool alleges that they are not liable. Discuss the ethical,
liability, and agency issues presented by this matter, and all defenses available
to the local country club pool. (Points : 30)

(TCOs G and I) In the 1930s, after
immigrating to the U.S. from Ireland at the onset of World War II, Shamus and
Mary McCream opened a bakery in Boston. They specialized in snack cakes.
McCream Cup Cakes became so popular in the area that the family stopped being
actual bakers and became manufacturers/ food processors of the snack cakes on a
regional basis. After returning from the war, their son Steve completed college
and began working in television advertising in the early 1950s. Steve
approached his parents and his older brother Tom, who was now running the
business, about the possibilities of advertising and going national. The
family liked the idea and began advertising and expanding. In addition, to fuel
the expansion, they offered retailers price discounts and other incentives if
they prominently positioned the store displays set-up by McCream rack jobbers.
By the 1960s, they were a national brand, controlling over 80 percent of the
snack food industry.
In the 1970s, with the advent of the hippie counter-culture and the
back-to-Earth movement, a new competitor made an impact on the McCream
business. The company, Healthy Snacks, began advertising that their products
only used natural ingredients. They even began running a commercial in which a
mother and child compared their Healthy Snacks with a lampooned product named
Cup Cake McCrumbs, stating that it tasted like poison and dog food! Tiny-Big-
Brian, a counter-culture pop star with a late night UHF and cable show, joined
in on the controversy created by the commercial and stated that he did not
understand how people, could buy such poisonous dog food and serve it to their
children as snacks! Market studies showed that McCream Cup Cakes sales suffered.
As a result, McCream began a more aggressive shelf space and display marketing
campaign to combat Healthy Snackss television advertising. McCreams marketing
efforts were successful. By also offering volume discount incentives, they had
prevailed upon retailers in their traditional East Coast and Midwest markets to
prominently display their products. To counter this strategy, Healthy Snacks
offered a deep discount to WaySafeMart, a Southwest and West Coast discount
chain, in exchange for an agreement to exclusively sell only their snack foods.
In reality, McCream Cup Cakes used only FDA approved ingredients and
preservatives and were made in American plants that always passed inspections.
In contrast, although Healthy Snackss pilot plant was in Florida, it had
subcontracted the bulk of its production to a plant in the Dominican Republic.
As a result, to maintain a level of quality, Healthy Snacks used the maximum
amount of preservatives allowed under the law of the Dominican Republic for the
imported product. The level was so high, reactions to the food were often
reported. The levels were higher than those allowed by FDA regulations, but
allowed per an agricultural import/export treaty between the United States and
the Dominican Republic. Several people who ate these Healthy Snacks required
emergency room visits. A child in Georgia, with food allergy problems, even
died. Her parents served her the snack, relying on the advertising, not knowing
that some of the natural ingredients used in the Dominican Republic-made
product were dangerous to her.

The McCream
family seeks your advice and opinion regarding:
(1) Healthy Snackss advertising campaign.
(2) The marketing and distribution campaigns
both companies have engaged in.
(3) The liability issues Healthy
Snacks faces regarding their use of food manufactured outside of the United
States. (Points : 30)

(TCOs A, E, F) John and Edwin
Booth, brothers and actors, decide to retire after years on the road. They
remember a town in Louisiana they were familiar with from their travels. From
the internet, they learn of a farm a few miles outside of town that seems
ideal. There is a great house and lots of land. The brothers wish to convert
the farm to a restaurant-hotel with a dinner theater. They contact the realtor
by phone, and make arrangements to buy the parcel. The Booth brothers plan on
traveling to Louisiana prior to the closing to look things over, but are unable
to do so due to their touring schedule. The realtor, whose commission is
technically paid by the proceeds to the seller, and who has a listing contract
with the seller, advises the Booths that she will handle everything. Louisiana
custom, law, and practice does not require a purchaser of land to have an
attorney. The realtor does only the bare minimum needed for title to transfer
to the Booths. On their behalf, she only has a minimal title search and minimal
inspections are done, and she obtains a minimal coverage title insurance
policy. As the area near the farm was once occupied by a large chemical plant,
when the realtor represents local purchasers, as a precaution, she advises the
buyers to get the maximum possible title search and title insurance, and to get
all possible inspections done. It is her regular practice to caution local purchasers
who she represents about the former chemical plant.
After closing on the property, the Booths learn of the old chemical plant. They
seek your advice as to their liability and the liability of any other parties.
(Points : 30)MGMT 520 FINAL
EXAM Week 8 1.
(TCOs G and I)In
the 1930s, after immigrating to the U.S. from a region in central Europe
threatened by the onset of World War II, Luigi and Maria Spongee opened a
bakery in Chicago. They specialized in snack cakes. Spongee Cup Cakes became so
popular in the area that the family stopped being actual bakers and became
manufacturers/ food processors of the snack cakes on a regional basis. After
returning from the war, their son Steve completed college and began working in
television advertising in the early 1950s. Steve approached his parents and his
older brother Tom, who was now running the business, about the possibilities of
advertising and going national. The family liked the idea and began
advertising and expanding. In addition, to fuel the expansion, they offered
retailers price discounts and other incentives if they prominently positioned
thedisplays
set-up by Spongee rack jobbers. By the 1960s, they were a national brand,
controlling over 80 percent of the snack food industry.

In the 1970s, with the advent of the
hippie counter-culture and the back-to-Earth movement, a new competitor made an
impact on the Spongee business. The company, Herbal Snacks, began advertising
that their products only used natural ingredients. They even began running a
commercial in which a mother and child compared their Herbal Snacks with a
lampooned product named Cup Cake Spungies, stating that it tasted like poison
and dog food! Very-Large-Tom, a counter-culture pop star with a late night UHF
and cable show, joined in on the controversy created by the commercial and
stated that he did not understand how people, could buy such poisonous dog
food and serve it to their children as snacks! Market studies showed that
Spongee Cup Cakes sales suffered. As a result, Spongee began a more aggressive
shelf space and display marketing campaign to combat Herbal Snackss television
advertising. Spongees marketing efforts were successful. By also offering
volume discount incentives, they had prevailed upon retailers in their
traditional East Coast and Midwest markets to prominently display their
products. To counter this strategy, Herbal Snacks offered a deep discount to
TargetMart, a Southwest and West Coast discount chain, in exchange for an agreement
to exclusively sell only their snack foods.

In reality, Spongee Cup Cakes used only
FDA approved ingredients and preservatives and were made in American plants
that always passed inspections. In contrast, although Herbal Snackss pilot
plant was in Montana, it had subcontracted the bulk of its production to a
plant in Canada. As a result, to maintain a level of quality, Herbal Snacks
used the maximum amount of preservatives allowed under Canadian law for the
imported product. The level was so high, reactions to the food were often
reported. The levels were higher than those allowed by FDA regulations, but
allowed per an agricultural import/export treaty between the United States and
Canada. Several people who ate these Herbal Snacks required emergency room
visits. A child in Idaho, with food allergy problems, even died. Her parents
served her the snack, relying on the advertising, not knowing that some of the
natural ingredients used in the Canadian-made product were dangerous to her.
The Spongee family seeks your advice and opinion regarding:
(1) Herbal Snackss advertising campaign.
(2) The marketing and distribution campaigns both companies have engaged in.
(3) The liability issues Herbal Snacks faces regarding their use of food
manufactured outside of the United States. (Points : 30)2.
(TCOs A, E, F) John
and Janet Fonda, siblings and actors, decide to retire after years on the road.
They remember a town in New Jersey they were familiar with from their travels.
From the internet, they learn of a farm a few miles outside of town that seems
ideal. There is a great house and lots of land. The Fondas wish to convert the
farm to a restaurant-hotel with a dinner theater. They contact the realtor by
phone, and make arrangements to buy the parcel. The Fondas plan on travelling
to New Jersey prior to the closing to look things over, but are unable to do so
due to their touring schedule. The realtor, whose commission is technically
paid by the proceeds to the seller, and who has a listing contract with the
seller, advises the Fondas that she will handle everything. New Jersey custom,
law, and practice does not require a purchaser of land to have an attorney. The
realtor does only the bare minimum needed for title to transfer to the Fondas.
On their behalf, she only has a minimal title search and minimal inspections
done, and she obtains a minimal coverage title insurance policy. As the area
near the farm was once occupied by a large chemical plant, when the realtor
represents local purchasers, as a precaution, she advises the buyers to get the
maximum possible title search and title insurance, and to get all possible
inspections done. It is her regular practice to caution local purchasers who
she represents about the former chemical plant.
After closing on the property, the Fondas learn of the old chemical plant. They
seek your advice as to their liability and the liability of any other parties.
(Points : 30)3.
(TCOs A, E, F)John, Lionel, and Evelyn Harrymore,
siblings and actors, decide to retire after years on the road. They remember a
town in Illinois they were familiar with from their travels. From the internet,
they learn of a farm a few miles outside of town that seems ideal. There is a
great house and lots of land. The Harrymores wish to convert the farm to a
restaurant-hotel with a dinner theater. They contact the realtor by phone, and
make arrangements to buy the parcel. The Harrymores plan on travelling to
Illinois prior to the closing to look things over, but are unable to do so due
to their touring schedule. The realtor, whose commission is technically paid by
the proceeds to the seller, and who has a listing contract with the seller,
advises the Harrymores that she will handle everything. Illinois custom, law,
and practice does not require a purchaser of land to have an attorney. The
realtor does only the bare minimum needed for title to transfer to the
Harrymores. On their behalf, she only has a minimal title search and minimal
inspections done, and she obtains a minimal coverage title insurance policy. As
the area near the farm was once occupied by a large chemical plant, when the
realtor represents local purchasers, as a precaution, she advises the buyers to
get the maximum possible title search and title insurance, and to get all
possible inspections done. It is her regular practice to caution local purchasers
who she represents about the former chemical plant.After closing on the property, the
Harrymores learn of the old chemical plant. They seek your advice as to their
liability and the liability of any other parties. (Points: 30)1. (TCO C) Three professors from Kellers New
Jersey campus, Robinson, Romney, and Obama, decide to visit ABC Go-kart
facility together in Pennsylvania. This decision is made after a lengthy
faculty brunch, at which unlimited alcoholic mimosas were served. ABC Go-kart
advertises at the colleges 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;
ABC 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 PENNSYLVANIA.Professor
Robinson, who lives in New York City, 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!”Obama
and Romney, who dislike each other for unknown reasons, are the only ones on
the track. They use go-carts manufactured by Kartmatic. As they begin the race
they drive very aggressively. Unbeknownst to either party, Fred, ABCs
mechanic, fed up with low pay, did not do the usual morning inspection of the
brakes and tires on either vehicle that morning. ABC had been contemplating
firing Fred due to his erratic work habits. ABC instructed Fred to inspect the
Kartmatics daily as they never trusted their brake mechanism. Kartmatics are
regularly marketed to amusement parks. Their instruction manual states that
they are not to be used for racing.After
two laps, Obamas brakes fail as he tries to aggressively pass Romney. He
crashes into Romneys 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 Robinson
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 Robinsons wrist. At the hospital, Robinson 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 Robinson
had been rendered brain dead by accident at the ABC Go-kart facility.(a)
What
claims may Professor Robinsons widow bring against the various parties?(b)
What
defenses might each party bring against the possible claims asserted by
Professor Robinsons widow?(c)
In what
state should the case be brought? (Points: 30)(TCOs
A, B, F, H)1.
PART APaul 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 colleges 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 schools 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 universitys 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
BLinkTime 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 SECs 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 doesLinkTime, 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)2. (TCOs
A, D, E)Marvin worked at the local country club pool as a lifeguard, not a
swim teacher, for the summer of 2013. Marvin was a public school physical
education teacher. The country club did not do a background check or confirm
any references when they hired him. They relied on the say-so of Marvins
brother, a member of the country club board of directors. The country club only
did a cursory internet search of the states Department of Education website to
verify that he had a valid teaching certificate. When one of the swim
instructors unexpectedly quit one day, he took over the class. Initially, the
class went well. Eventually, Marvin also took over coaching the clubs
competitive swim team. When he became the swimming coach, Marvin effectively
stopped teaching the swim classes. Instead, he had all the swimmers in the
classes do races and train for competitive meets during the 30 minute lessons.
Marvin had done this many times during the summer. His boss, the country club
director, knew this and, as the swim team was winning, ignored complaints from
parents and students. Marvin raced with the swimmers and pushed the winners out
of the way when they tried to touch the side of the pool so that Marvins team
would win each time. This was not the first time that Marvin had injured
swimmers. Last year, he was arrested for physically abusing a child he coached
at his school. Although the criminal charges were dropped, Marvin is on
administrative leave from his 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 his administrative suspension is
listed on the states database.Several of the children, ages 6-8,
reported to their parents that they had been physically assaulted by Marvin
while in swim class for not working hard enough! The children had bruises on
their shoulders. Marvin began “kidding” an 18-year-old college
student who worked as a lifeguard and assisted Marvin with the coaching. Over
time, Marvin’s “jokes” that were directed at the young man became
very aggressive. Marvin continued, even though the young man asked him to stop.
In fact, after the young man told Marvin to stop, as he felt harassed, Marvin
hired another lifeguard to assist him 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 work out
among themselves.Several parents brought suit against the
local country club, Marvin, and the country club director. The young lifeguard
has also brought suit. The local country club pool alleges that they are not
liable. Discuss the ethical, liability, and agency issues presented by this
matter, and all defenses available to the local country club pool. (Points: 30)
4. (TCOs A, E, F) John and Edwin
Booth, brothers and actors, decide to retire after years on the road. They
remember a town in Louisiana they were familiar with from their travels. From
the internet, they learn of a farm a few miles outside of town that seems
ideal. There is a great house and lots of land. The brothers wish to convert
the farm to a restaurant-hotel with a dinner theater. They contact the realtor
by phone, and make arrangements to buy the parcel. The Booth brothers plan on
traveling to Louisiana prior to the closing to look things over, but are unable
to do so due to their touring schedule. The realtor, whose commission is
technically paid by the proceeds to the seller, and who has a listing contract
with the seller, advises the Booths that she will handle everything. Louisiana
custom, law, and practice does not require a purchaser of land to have an
attorney. The realtor does only the bare minimum needed for title to transfer
to the Booths. On their behalf, she only has a minimal title search and minimal
inspections are done, and she obtains a minimal coverage title insurance
policy. As the area near the farm was once occupied by a large chemical plant,
when the realtor represents local purchasers, as a precaution, she advises the
buyers to get the maximum possible title search and title insurance, and to get
all possible inspections done. It is her regular practice to caution local
purchasers who she represents about the former chemical plant.

After
closing on the property, the Booths learn of the old chemical plant. They seek
your advice as to their liability and the liability of any other parties.
(Points: 30)(TCOs B, C, G, I) KWRF, a small market radio station, learns from reading in
the industry trade magazine that the Federal Communications Commission (FCC)
has proposed a regulation change. The regulation will require radio stations to
do an additional 20 minutes of public service announcements each week. As KWRF
serves a small niche market, and has minimal advertising revenue, the loss of
20 minutes of air time could bankrupt them. What should KWRF do regarding the
proposed change?(TCOs
G and I) In the 1930s, after immigrating to the
U.S. from a region in central Europe threatened by the onset of World War II,
Bruno and Helga Kreamie opened a bakery in Brooklyn. They specialized in snack
cakes. Kreamie Cup Cakes became so popular in the area that the family stopped
being actual bakers and became manufacturers/ food processors of the snack
cakes on a regional basis. After returning from the war, their son Steve
completed college and began working in television advertising in the early
1950s. Steve approached his parents and his older brother Tom, who was now
running the business, about the possibilities of advertising and going
national. The family liked the idea and began advertising and expanding. In
addition, to fuel the expansion, they offered retailers price discounts and
other incentives if they prominently positioned the store displays set-up by
Kreamie rack jobbers. By the 1960s, they were a national brand, controlling
over 80 percent of the snack food industry.In the 1970s, with the advent of the
hippie counter-culture and the back-to-Earth movement, a new competitor made an
impact on the Kreamie business. The company, Granola Snacks, began advertising
that their products only used natural ingredients. They even began running a
commercial in which a mother and child compared their Granola Snacks with a
lampooned product named Cup Cake Creamies, stating that it tasted like poison
and dog food! Not-So-Tiny-Tim, a counter-culture pop star with a late night UHF
and cable show, joined in on the controversy created by the commercial and
stated that he did not understand how people, could buy such poisonous dog
food and serve it to their children as snacks! Market studies showed that
Kreamie Cup Cakes sales suffered. As a result, Kreamie began a more aggressive
shelf space and display marketing campaign to combat Granola Snackss
television advertising. Kreamies marketing efforts were successful. By also
offering volume discount incentives, they had prevailed upon retailers in their
traditional East Coast and Midwest markets to prominently display their
products. To counter this strategy, Granola Snacks offered a deep discount to
WackoMart, a Southwest and West Coast discount chain, in exchange for an
agreement to exclusively sell only their snack foods.In reality, Kreamie Cup Cakes used only
FDA approved ingredients and preservatives and were made in American plants
that always passed inspections. In contrast, although Granola Snackss pilot
plant was in Arizona, it had subcontracted the bulk of its production to a plant
in Mexico. As a result, to maintain a level of quality, Granola Snacks used the
maximum amount of preservatives allowed under Mexican law for the imported
product. The level was so high, reactions to the food were often reported. The
levels were higher than those allowed by FDA regulations, but allowed per an
agricultural import/export treaty between the United States and Mexico. Several
people who ate these Granola Snacks required emergency room visits. A child in
Oregon, with food allergy problems, even died. Her parents served her the
snack, relying on the advertising, not knowing that some of the natural
ingredients used in the Mexican-made product were dangerous to her.The Kreamie family seeks your advice and
opinion regarding:(1) Granola
Snackss advertising campaign.(2) The
marketing and distribution campaigns both companies have engaged in.(3) The
liability issues Granola Snacks faces regarding their use of food manufactured
outside of the United States. (Points : 30)(TCOs
D, E, F) Frank Jones is a college student who had
a plow attached to his jeep so he could earn extra money plowing during the
winter. Jones was under contract to plow the driveways of Mr. Washington and
Ms. Adams, two neighbors down the street. John Smith lives between Washington
and Adams. Jones took it upon himself to plow Smiths lot the seven times this
past winter when there were storms and when he plowed the other two lots. Jones
had never spoken to Smith about it, and Smith never objected. In the spring,
Jones personally appeared at Smiths house and presented him with a bill. Smith
refused to pay Jones, stating that, he never agreed to any contract. That
statement was made after Jones presented him with a bill of $600, which he
calculated as the reasonable value of his services. After Smiths obnoxious
response, Jones yelled: I will see you in court!
What legal arguments could Jones make to enforce his $600 bill? What legal
arguments could Smith make to avoid liability? (Points : 15)(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 Truckings 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)(TCO C)
Three professors from Kellers 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 colleges 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, XYZs
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, Clintons brakes fail as he tries to aggressively pass Bush. He
crashes into Bushs 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 Favres 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.(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. Collinsworths 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 Collinsworths 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 Collinsworths second album and
her recent unsuccessful concert tour, NastiCondiMedia did not do the final
production work on Collinsworths 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?(c) What types of relief might either party
seek? (Points : 30)PART B
FaceLinked 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 Franklin 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 Franklin had his conviction expunged. In addition, FaceLinked
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 FaceLinked 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
SECs regulation when it was proposed. After the public offering was completed,
FaceLinked 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 FaceLinked in favor of a new,
upstart rival service offered by TronCom. Fearful that the new advertisers
would back out of their contracts, the Franklin brothers sold a great deal of
their stock.
What issues does FaceLinked, its officers, and stockholders face under (a)
state securities law, (b) the Securities Act of 1933, and (c) the Securities
and Exchange Act of 1934? (Points : 60)
(TCOs A, D, E) Woody worked at the local country club pool as a lifeguard, not
a swim teacher, for the summer of 2013. Woody was a public school physical
education teacher. The country club did not do a background check or confirm
any references when they hired him. They relied on the say-so of Woodys
brother, a member of the country club board of directors. The country club only
did a cursory internet search of the states Department of Education website to
verify that he had a valid teaching certificate. When one of the swim
instructors unexpectedly quit one day, he took over the class. Initially, the
class went well. Eventually, Woody also took over coaching the clubs
competitive swim team. When he became the swimming coach, Woody effectively
stopped teaching the swim classes. Instead, he had all the swimmers in the
classes do races and train for competitive meets during the 30 minute lessons.
Woody had done this many times during the summer. His boss, the country club
director, knew this and, as the swim team was winning, ignored complaints from
parents and students. Woody raced with the swimmers and pushed the winners out
of the way when they tried to touch the side of the pool so that Woodys team
would win each time. This was not the first time that Woody had injured
swimmers. Last year, he was arrested for physically abusing a child he coached
at his school. Although the criminal charges were dropped, Woody is on
administrative leave from his 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 his administrative suspension is
listed on the states database.

Several
of the children, ages 6-8, reported to their parents that they had been
physically assaulted by Woody while in swim class for not working hard
enough! The children had bruises on their shoulders. In addition, Woody began
kidding an 18 year old black college student who worked as a lifeguard and
assisted Woody with the coaching. Over time, Woodys jokes toward the young
man became very aggressive. Woody continued even though the young man asked him
to stop. In fact, after the young man told Woody to stop as he felt harassed,
Woody hired another lifeguard to assist him 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 parents brought suit against the local country club, Woody, and the
country club director. The young lifeguard has also brought suit. The local
country club pool alleges that they are not liable. Discuss the ethical,
liability, and agency issues presented by this matter, and all defenses available
to the local country club pool. (Points : 30)(TCOs G and I) In the 1930s, after
immigrating to the U.S. from Ireland at the onset of World War II, Shamus and
Mary McCream opened a bakery in Boston. They specialized in snack cakes.
McCream Cup Cakes became so popular in the area that the family stopped being
actual bakers and became manufacturers/ food processors of the snack cakes on a
regional basis. After returning from the war, their son Steve completed college
and began working in television advertising in the early 1950s. Steve
approached his parents and his older brother Tom, who was now running the
business, about the possibilities of advertising and going national. The
family liked the idea and began advertising and expanding. In addition, to fuel
the expansion, they offered retailers price discounts and other incentives if
they prominently positioned the store displays set-up by McCream rack jobbers.
By the 1960s, they were a national brand, controlling over 80 percent of the
snack food industry.
In the 1970s, with the advent of the hippie counter-culture and the
back-to-Earth movement, a new competitor made an impact on the McCream
business. The company, Healthy Snacks, began advertising that their products
only used natural ingredients. They even began running a commercial in which a
mother and child compared their Healthy Snacks with a lampooned product named
Cup Cake McCrumbs, stating that it tasted like poison and dog food! Tiny-Big-
Brian, a counter-culture pop star with a late night UHF and cable show, joined
in on the controversy created by the commercial and stated that he did not
understand how people, could buy such poisonous dog food and serve it to their
children as snacks! Market studies showed that McCream Cup Cakes sales suffered.
As a result, McCream began a more aggressive shelf space and display marketing
campaign to combat Healthy Snackss television advertising. McCreams marketing
efforts were successful. By also offering volume discount incentives, they had
prevailed upon retailers in their traditional East Coast and Midwest markets to
prominently display their products. To counter this strategy, Healthy Snacks
offered a deep discount to WaySafeMart, a Southwest and West Coast discount
chain, in exchange for an agreement to exclusively sell only their snack foods.
In reality, McCream Cup Cakes used only FDA approved ingredients and
preservatives and were made in American plants that always passed inspections.
In contrast, although Healthy Snackss pilot plant was in Florida, it had
subcontracted the bulk of its production to a plant in the Dominican Republic.
As a result, to maintain a level of quality, Healthy Snacks used the maximum
amount of preservatives allowed under the law of the Dominican Republic for the
imported product. The level was so high, reactions to the food were often
reported. The levels were higher than those allowed by FDA regulations, but
allowed per an agricultural import/export treaty between the United States and
the Dominican Republic. Several people who ate these Healthy Snacks required
emergency room visits. A child in Georgia, with food allergy problems, even
died. Her parents served her the snack, relying on the advertising, not knowing
that some of the natural ingredients used in the Dominican Republic-made
product were dangerous to her.