True/False
1. Anytime an employee diverts from his authorized delivery route he is outside the scope of his employment and, accordingly, his employer will not be vicariously liable for torts committed by that employee during the diversion.
2. Martha Stewart’s conviction for violating Rule 10b-5 (insider trading) was sustained even though she claimed to not even know the reason why her friend sold his substantial stock holding in the subject company.
3 Courts have generally held that even though a corporation may not legally be able to accept a potential business opportunity, a Director must nevertheless first offer that opportunity to the corporation to avoid claims that he breached his fiduciary duty of loyalty to the company.
4 A lawsuit brought by a shareholder against the corporation for failure to produce records for his inspection is one of the several grounds justifying a derivative lawsuit against the corporation.
5. In a closely-held corporation, officers that are also shareholders ought to respect corporate formalities if, for no other reason, to minimize the possibility of having the corporate veil pierced and personal liability attach.
6.Respondeat Superior imposes liability upon the employer (master) for the tortious acts of his employee (servant) when the employer manifested some act of negligence, such as careless hiring or training of the employee.
7. Large institutional investors partially address the concern that numerous shareholders with fractionalized interests in a corporation cannot effectively hold management accountable through their right to vote.
8 Although most agency issues concern the principal’s liability to a third party (derivative, or external relationships), some agency issues are internal, concerning a dispute between the principal and the agent.
9. Corporate governance issues mainly impact larger, publicly-traded companies, as compared with closely-held corporations in which the same individuals may be both shareholders and Directors.
10. Breach of fiduciary duty includes the exercise of business judgment that is careless and falls below expected standards of prudence.
11. A corporation’s liability for the misrepresentations of its president can exist even when the president’s misrepresentations to a potential contracting third party are intentional.
12. Flow-through taxation of the allocable share of a partnership’s net loss can be a great tax advantage for those individual partners that may have income from other sources which they could offset.
13. The federalization of corporate governance ethics was attacked by the previous president and his administration.
14. At common law, the most important, and often determinative, factor in evaluating whether a corporate veil will be pierced is whether or not corporate formalities have been respected.
Question # 1 – In which form of business do you recommend the brothers operate their enterprise? Give specific reasons supporting your recommendation.
Question # 2 – Let’s jump ahead a few years. After some initial success, the business is barely breaking even because of entry into the market of several competitors, all of whom have undercut the brothers’ prices. To make matters worse, one of the brothers’ independent drivers, Lenny Piecemeal, is careless and allows one of the dogs he is walking to run into the street and get run over by a Tesla. The owner of the dog sues Lenny, the business, and the brothers individually. Assuming you chose an entity with limited liability for one or both brothers, does the customer have a cause of action against the business for the careless driver’s acts? If so, will the customer be able to “pierce” through the entity and collect her judgment out of the personal assets of one or both of the brothers?Does she have any direct causes of action against the brothers individually?
