(TCOs D, E, F) State Senator Leghornne, while filibustering the opposition party’s proposed statute on public education, accuses State Senator Gentile, the bill’s sponsor, of being an “unabashed child lover.” It is common knowledge that State Senator Gentile, who is gay, recently married an 18-year-old college intern who had worked in his legislative offices. The relationship and the marriage were covered in the local papers. Although many conservative people had “their opinions” on the matter, most dealt with the situation with decorum and respect. State Senator Leghornne had recently and vehemently opposed the state’s same sex marriage law. State Senator Gentile’s spouse was so distraught and upset by the comments made during the filibuster that he attempted suicide by overdosing on sleeping pills. Fortunately, State Senator Gentile returned home in time to call an ambulance, and all are now doing fine.
Senator Gentile’s spouse seeks your advice about possible legal actions that he could bring against State Senator Leghornne. He points out to you that he met State Senator Gentile when he was 18, an adult allowed to marry under state law, and that their marriage and relationship are perfectly proper pursuant to the state’s same sex marriage law. (Points : 15)
(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? (Points : 15)
(TCO C) Three professors from Keller’s 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 college’s 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, ABC’s 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, Obama’s brakes fail as he tries to aggressively pass Romney. He crashes into Romney’s 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 Robinson’s 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 Robinson’s widow bring against the various parties?
(b) What defenses might each party bring against the possible claims asserted by Professor Robinson’s widow?
(c) In what state should the case be brought? (Points : 30)
(TCOs A, D, E) Daphne Vega Rueben, a then-unknown salsa singer, signed a three album recording contract with Rainbow Music, Inc. Rainbow Music was a boutique label specializing in Latin artists. Vega Rueben’s first album for Rainbow was moderately successful. The second album, unfortunately, was panned by the critics and did not sell. Rainbow Music was acquired by BigMusicMedia, Inc. BigMusicMedia, in an effort to re-vitalize Vega Rueben’s career, encouraged her to leave the salsa style she was committed to and do more commercially viable pop material. Vega Rueben rejected this request. Furious with BigMusicMedia, Vega Rueben 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 BigMusicMedia. Using her concert band, she recorded tracks for over 30 songs. Due to the financial failure of Vega Rueben’s second album and her recent unsuccessful concert tour, BigMusicMedia did not do the final production work on Vega Rueben’s third album.
Vega Rueben, then entered into a contract with BonitaCancion Communications, Inc. She began recording a new salsa album with BonitaCancion in conjunction with a concert tour that they financed and produced. At her concerts, Vega Rueben would regularly introduce the new material that would be on her new album.
Shortly after the concert tour began, BigMusicMedia brings suit against Daphne Vega Rueben and BonitaCancion Communications, Inc.
(a) What causes of action might BigMusicMedia bring against Vega Rueben and BonitaCancion?
(b) What causes of action might Vega Rueben and BonitaCancion bring against BigMusicMedia?
(c) What types of relief might either party seek? (Points : 30)
(TCOs A, B, F, H)
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 college’s 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 school’s 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 university’s 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?
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 SEC’s 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 Woody’s brother, a member of the country club board of directors. The country club only did a cursory internet search of the state’s 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 club’s 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 Woody’s 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 state’s 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, Woody’s “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 Snacks’s television advertising. McCream’s 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 Snacks’s 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 Snacks’s 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)
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