Latest Posted Questions

Q:

Defendant Practice approached the Hospital about its desire to employ Dr. Rasheed and asked the Hospital to help facilitate his recruitment. The three entered into an agreement that Dr. Rasheed would relocate his practice and practice medicine in Jackson on a full-time basis for 36 months. Under the agreement, “[a]ny material breach of this Agreement by Physician and/or Practice, or a failure by Physician and/or Practice to fulfill any material provisions of this Agreement shall entitle Hospital, at its option, to terminate this Agreement immediately.” The Practice agreed to be jointly and severally liable for any amounts owed to the Hospital in the event of any breach by the Practice or Dr. Rasheed. The agreement guaranteed Dr. Rasheed a monthly cash collection of $23,350.00 for the first year. The Hospital advanced $180,187.43, to the Practice and Dr. Rasheed as cash collections guarantee payments during the 12-month guarantee period, an amount that the Practice and Dr. Rasheed were jointly and severally liable to repay at the end of the guarantee period. The agreement provided that the debt would be completely or partially forgiven if Dr. Rasheed continued to practice full-time in Jackson for two years at the end of the guarantee period, but if he failed to continue practicing for that time period, he or the practice would immediately reimburse the hospital the amount advanced. Less than one year into the agreement period, Dr. Rasheed stopped his full-time medical practice in Jackson, so the hospital requested reimbursements of the advanced payments pursuant to the terms of the agreement. The Practice did not respond to the Hospital’s demand for payment. The hospital then sued the Practice for breach of contract, seeking to recover the amount owed under the agreement. The Practice answered that the doctor’s actions were the cause of the breach, and therefore he alone was liable, not the Practice. Following discovery, the Hospital filed a motion for summary. In its response, the Practice stated that Dr. Rasheed left the area after being named as the subject of sexual misconduct allegations involving the staff and child patients, for which he was being pursued civilly and criminally. Therefore, it was impossible for Dr. Rasheed to practice and impossible for the Practice to allow him to continue practicing. Because there was an issue as to whether Dr. Rasheed had the ability to perform under the agreement, the Practice argued that summary judgment was inappropriate. The court granted the Practice’s motion and the hospital appealed. How do think the appellate court decided the case and why?

Q:

Plaintiff, a tenant in common in a piece of real property, had agreed to sell his interest therein to defendant, the other tenant in common. The contract of sale provided that defendant was to pay plaintiff $25,000 upon the execution of a bargain and sale deed transferring title to the defendant as the sole owner of the real property. The contract of sale further provided that plaintiff could continue to store his equipment at the property “for a maximum of 60 days from the date” of the contract of sale, and that “[i]mmediately upon the permanent removal of all of the equipment from the premises, Evelyn A. Cuggino shall pay the sum of ten thousand ($10,000.00) dollars . . . to Peter J. Magnani, which shall occur no later than 60 days from the date of this agreement.” At a nonjury trial, the evidence established that plaintiff had not removed his equipment within the 60-day period, yet defendant paid plaintiff the sum of $2,000 prior to plaintiff’s removal of the equipment, but not the remaining $8,000. Plaintiff sued to recover $8,000 for breach of a contract for the sale of real property. The trial court dismissed plaintiff’s action. The court found that plaintiff was not entitled to recover the remaining $8,000 due under the agreement, since the removal of the equipment within the 60-day period was a condition precedent to plaintiff’s entitlement to be paid the sum of $10,000 by defendant. Plaintiff appealed this dismissal, claiming the contract of sale did not provide for a forfeiture of plaintiff’s right to recover the $10,000 if he failed to remove the equipment within the 60-day period, and therefore it was not a condition precedent. How do you think the case was resolved on appeal? Why?

Q:

Plaintiff, a tree trimmer, purchased a pair of Brahma brand men’s work boots from Walmart on October 19, 2003. The boots’ packaging described the boots as “iron tough,” “rugged leather . . . men’s work boots.” Plaintiff wore the boots eight to twelve hours per day, six days a week, for about nine months. He claims that as the sole of “the boots wear down[,] the yellow rubber piece tends to unglue itself and roll up as you are walking, making it very dangerous when working.” Plaintiff states that this unglued piece of the sole of the boots caused him to trip, fall over, and injure his back. On July 28, 2004, Plaintiff was wearing the boots while at work cutting down dead tree limbs and removing the logs. When he began to move a log weighing about 150 pounds, the unglued sole of his boot got caught on debris, causing him to fall backward and drop the log on top of himself. He immediately felt a sharp pain in his back. The next morning, he was unable to get out of bed due to his back pain and was driven to the emergency room. He had x-rays and an MRI, which showed that he had two ruptured or bulging discs. Following five or six months of physical therapy, Plaintiff eventually underwent back surgery. Plaintiff filed his complaint against Defendants alleging breach of warranties on September 20, 2007, about three years and two months after the accident. Wal-Mart claims that since the lawsuit for consequential medical damages and not just for breach of the warranties of the boots, the three years tort statute of limitations apply rather than the four-year statute under the UCC. Who prevails on this issue?

Q:

Solve all PART-A IV Tick the appropriate answer] Q1. Which of the following is true about the extrusion process? a) Structure is homogeneous b) No time is lost in changing the shape c) Service life of extrusion tool is too high d) Its leading end is in good shape as compared to rolling Q2. In direct extrusion process at higher temperature which of the following is used to avoid friction? a) Oil b) Lubricants c) Molten glasses d) Wax Q3. In which of the following process frictional loss is eliminated at the billet container interface? a) Direct b) Indirect c) Impact d) Hydrostatic Q4. The centre of the extruded product can develop cracks called as? a) Centre cracking b) Centre burst c) Arrow headed fracture d) All of the mentioned Q5. Which of the following methods of manufacturing is used for the production of appliances like fridge and vacuum cleaner? a) Forging b) Deep drawing c) Sheet metal forming and cutting d) Rolling Q6. Combination die is a die which combines cutting and non-cutting actions in the blanking process. a) True b) False Q7. Which of the following types of force is predominant in the sheet metal forming processes? a) Shearing force b) Compressive force c) Tensile force d) Indirect compressive force Q8. Which of the following forming processes is suitable for making utensils and cup shaped objects? a) Forging b) Rolling c) Deep drawing d) Wire drawing Q9. Which of the following process is not grouped under metal removal process? a) boring b) milling c) tumbling d) rolling Q10. In which type of metal removal process, grinding is included? a) conventional machining b) abrasive process d) none of the mentioned Q11. In which metal removal process, material is removed a) conventional machining d) none of the mentioned c) nontraditional machining by particles? b) abrasive process c) nontraditional machining Q12. Which type of surface is produced by turning operation in lathe machine? a) flat c) taper d) none of the mentioned b) cylindrical Q13. Which type of feed is needed in facing operation? a) longitudinal b) cross c) both cross and longitudinal 2 d) none of the mentions

Q:

T. Christian Cooper was a partner to Sanders and Richard Campbell d/b/a The Mullen Company. In 2001, Cooper helped bring about a management agreement between The Mullen Co. and Newnan Crossing Partnership. Newnan was a partnership of several families in Mexico and was represented by Roberto Segovia. Under the agreement, the Mullen Co. was responsible for developing and managing ten real estate locations. In 2006, Cooper learned that a third-party company was interested in making investments in the real estate properties related to the agreement between Newnan and the Mullen Co. Cooper took it upon himself in his individual capacity to negotiate a $600,000 loan from Segovia and become a partner in the third-party venture. Cooper agreed to apply all distributions from the partnership to the note. While he did receive distributions totaling over $1.4 million, he did not apply any of it to the note. In 2010, Segovia died and the new management at Newnan refused to pay the Mullen Co. $1.8 million in management fees that the Mullen Co. believed it was owed pursuant to the management agreement. The Mullen Co. sued Newnan and eventually reached a settlement in 2012. The settlement stipulated that the Mullen Co. would dismiss its lawsuit in exchange for $300,000 and an assignment of any causes of actions Newnan had against Cooper or the Mullen Co. As required in the agreement, Newnan assigned the $600,000 note to the Mullen Co. The Mullen Co. subsequently asserted a claim on the $600,000 promissory note against Cooper. Cooper responded by asserting that Mullen Co. had breached its fiduciary duty to Cooper as a partner and for breach of contract. The jury found in favor of both the Mullen Co. and Cooper on several counts and the final judgment awarded $1,431,000 in damages to the Mullen Co. and $519,300 to Cooper. Both parties appealed. In the appeal, Cooper argued, inter alia, that he could not be held personally liable according to the terms of the promissory note because the promissory note was also a non-recourse note. The nonrecourse provision is as follows: “Nothing in the Note or the Loan Documents to the contrary withstanding, Payee shall look solely to the Partnership Distributions (reduced by tax obligations of [Cooper], as provided above) and the Partnership Interest for payment on this Note. No deficiency judgment for amounts unsatisfied after application of such distributions and proceeds from sale of the Partnership Interest shall ever be instituted, sought, taken or obtained against any party for any amounts which become due and owing.” Did the nonrecourse provision shield Cooper from having to pay beyond the agreed-upon collateral? How do you think a non-recourse provision coexists with the unconditional promise to pay required by negotiable instruments?

Q:

In February 2011, Paula Stenlund traveled to Panama City with her husband. While in Panama City, the Stenlunds were guests at the Panama City Marriott Hotel. Before and during the trip to Panama City, the Stenlunds received Marriott Marketing material that promoted the Royal Casino as being connected to the hotel. On February 13th, Paula Stenlund visited the Royal Casino. Stenlund followed an employee to locate a place where she could cash her winnings. Stenlund had to descend a set of stairs to reach the redemption area. However, she tripped over an electrical cable draped across the stairway and struck her face, head, and knees. The Royal Casino employee made effort to provide medical help. While the hotel manager sent a doctor to Paula’s room, the doctor did not provide substantive care. The Stenlunds returned to the United States on February 15th and Paula commenced an action against Marriott International in May. Paula alleged that Marriott International breached various duties it owed to her while staying at the Panama City Marriott Hotel and visiting the Royal Casino. The Panama City Marriott Hotel is owned by Hotel Properties of Panama and the Marriott branding was attached under an agreement between Marriott International and Hotel Properties. In addition, all management at the hotel was done by Marriott International Services, Limited, a company based in Bermuda and separate from Marriott International, in an agreement solely between Marriott Limited and Hotel Properties. In its opposition to Paula’s motion for summary judgment, Marriott International claimed Paula had sued the wrong party. In response, Paula argued that because Marriott International “tightly control[led] virtually every aspect of the [H]otel and [C]asino where Plaintiff was injured,” the level of control demonstrated that an agency relationship existed between Marriott International and Marriott Services. In essence, Paula argued that there was either actual agency or apparent agency between the two Marriott companies. In this case, the court determined that it did not matter whether Panama law or Maryland law applied because the result would be the same. What did the court decide and why? Describe the court’s reasoning for both the actual agency count and the apparent agency count.

Q:

In April 2008, The First Pentecostal Church of Beaumont settled an insurance claim for property damage from Hurricane Rita. The church received $1,094,611.02. During this time, the church was embroiled in a sexual harassment lawsuit. Concerned that the settlement money could be targeted in the lawsuit, Lonnie Treadway, the pastor of the church, decided to let its defending law firm, Lamb Law Firm, P.C. hold the settlement money. The money was deposited into an account in Lamb’s name. However, over the course of a year, the funds were transferred by Kip Lamb, the owner of Lamb Law, to a separate account held by Lamb Law. The funds totaling $1.2 million were spent for Kip Lamb’s personal expenses and Lamb Law’s operating expenses. In 2011, Leigh Parker, an attorney contracted by Lamb Law to work on the church’s case, informed the church’s board of trustees. Parker had known that Lamb had spent the funds since the summer of 2010 but had not informed the church until the church had requested the transfer of the settlement funds. In 2012, the church sued Lamb and Parker. Lamb also faced criminal charges and was eventually sentenced to fifteen years in prison. In its case against Parker, the church asserted that Parker was jointly and severally liable to it because he was part of a joint venture with Lamb, among other things. Specifically, the church argued that Parker and Lamb were part of a joint venture to misappropriate the church’s money and then hide the fact. What are the four elements of a joint venture as listed by the Texas Supreme Court in this case? The court ruled against the church for this argument. What was its reasoning?

Q:

Yumilicious, a company that franchises frozen yogurt restaurants in Texas, entered a franchising agreement with Why Not, LLC. The agreement was also personally guaranteed by the principals of Why Not, Matthew Barrie, and Kelly and Brian Glynn. The agreement franchises two Yumilicious frozen yogurt stores in South Carolina. Why Not faced difficulties turning a profit, partly because a supply agreement negotiated by Yumilicious fell through which meant Why Not could not economically purchase supplies in South Carolina. As a result of its difficulties, Why Not closed one of its stores without permission from Yumilicious and failed to make payment for royalties and products. Yumilicious subsequently sued. Why Not countersued Yumilicious, alleging that it had violated the Texas Deceptive Trade Practices Act, specifically the provision that made it illegal for a franchisor to “represent[] that goods or services have . . . characteristics [or] benefits . . . which they do not have” or to “fail[] to disclose information concerning goods or services which was known at the time of the transaction if such failure to disclose such information was intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed.” As proof of the violations, Why Not alleged that Yumilicious had failed to provide an updated Franchise Disclosure Document. Furthermore, the Franchise Disclosure Document that was provided underestimated start-up costs and failed to mention the out-of-state supply agreement that would supply Why Not could fall through. Which category of franchise does the franchise in this case fall under? How did the court rule on Why Not’s counterclaims and what was its reasoning?

Q:

Jose Vargas and Luis Felipe Villalobos were a two-man team independently contracted to Eves Express, Inc., to drive tractor-trailers. FMI, Inc. is a federally licensed motor carrier that conducts shipping business. FMI’s shipping distribution center is located in San Pedro, California. In 2010, FMI hired Eves Express as a contractor to deliver cargo from California to New Jersey. Vargas and Villalobos were the drivers assigned for the job. On January 10, 2010, during the trip, Vargas was resting in the sleeper berth while Villalobos was driving when Villalobos drifted to sleep at the wheel and rolled the tractor-trailer over, injuring Vargas. In April 2011, Vargas sued FMI, Eves Express, and Villalobos for negligence. Vargas contended that both FMI and Eves Express were under a nondelegable duty to members of the public, including himself because they are were operating a vehicle under a public franchise; the defendants were therefore liable for the negligence of Villalobos in injuring Vargas. Furthermore, Vargas argued that since the FMI and Eves Express were engaged in interstate commerce, they were each vicariously liable for Villalobos’s negligence. Finally, Vargas argued that Eves Express had failed to properly train, monitor, and supervise Villalobos which led to the accident. FMI and Eves Express filed a motion for summary judgment, contending that under California law, all workplace safety responsibilities and tort liabilities are implicitly delegated to an independent contractor; because Vargas was an independent contractor, they did not own Vargas a duty to provide a safe workplace. The court entered summary judgment for FMI and Eves Express and Vargas timely appealed. Consider the California law which implicitly delegates workplace safety responsibilities and tort liabilities from the contracting party to the independent contractor in terms of the WPH framework. Who are the stakeholders of the law and how are they affected by the law? Think beyond the obvious stakeholders such as the independent contractor and think of individuals such as prospective employees. Do you agree with the trial court’s decision? Why or why not? How did the appeals court rule? What was the appeals court’s reasoning?

Q:

The Chomiak family opened a seasonal summer resort on the shores of Lake George in 1957. To run the resort, the Chomiaks formed a closely held corporation called Twin Bay Village, Inc. One hundred shares were issued which were split between Stephan and Eleonora Chomiak and their two sons, Vladimir and Leon. Decades later in 2004, the shares passed hands and Vladimir’s son and daughter were the beneficial owners of a total of 48 shares in Twin Bay Village. Leo and his two daughters owned the remaining 52 shares. Ownership of shares were not the only thing that changed in Twin Bay Village. By this point, Vladimir no longer helped manage the corporation, and only Leo and his two daughters were still involved. In 2009, the majority shareholders, Leo and his two daughters attempted to force the minority shareholders to sell their shares back to the corporation. Met with refusal, the majority shareholders filed a suit to force dissolution of the corporation. The minority shareholders subsequently countersued, alleging the majority shareholders had breached their fiduciary duty to them by engaging in oppressive behavior and looting corporate assets. The trial court ruled in favor of Vladimir and his two daughters, the minority shareholders, for all claims alleged by them. While Leo appealed the decision, the appellate court affirmed the trial court. Could the minority shareholders apply Section 14.30 of the RMBCA to initiate a dissolution based on the claims it won? In other words, is Section 14.30 applicable to the claims of this case? Why or why not? What kind of evidence did the appellate court look at to determine that corporate looting took place?

Q:

Carnival Corporation & PLC is a dual-listed corporation, i.e., a corporate structure that joins separate corporations in a common economic enterprise. The dual-listed corporation (DLC) was formed by Carnival Corporation, a corporation headquartered in Florida, and Carnival PLC, a British company headquartered in Southampton, England. Zolt Sabo, Ilija Janev, and Stefan Vidojkovic (The Seafarers) were workers aboard a cruise ship, working for Cunard Celtic Hotel Services, Ltd., a company that operated under the corporate umbrella of Carnival Corporation & PLC. The Seafarers sustained back injuries while working aboard the cruise ship and collected benefits in accordance with their employment contract. However, the Seafarers became unsatisfied with their compensation and believed that their contracts unfairly limited it. In July 2012, Sabo, Janev, and Vidojkovic filed a class action lawsuit against Carnival Corporation and Carnival PLC, alleging failure to provide maintenance and cure in accordance with general US maritime law and the Jones Act, a federal statute that provides legal remedies not guaranteed under general maritime law. The defendants filed a motion to dismiss, asserting that the Seafarer’s claims should be dismissed because the court lacked jurisdiction over Carnival PLC, and Carnival Corporation was shielded from liability due to its corporate form. In the Seafarer’s final response, the plaintiffs made clear that they were only suing Carnival Corporation & PLC, the dual-listed corporation, and further asserted that the DLC was a suable entity because it was in reality a corporation, the Carnival Corporation & PLC was subject to corporation by estoppel, among other claims. For the first claim, the Seafarers argued that Carnival Corporation & PLC resembled a corporation in many ways and claimed that “Carnival Corporation & PLC operate[s] as a single enterprise sufficient to establish personal jurisdiction over both entities as a single operation.” Is this enough to qualify Carnival Corporation & PLC as a corporation? What would the DLC need to have done to be considered as a corporation and thus usable by the plaintiffs? What are the requirements for corporation by estoppel? Does corporation by estoppel apply in this case?

Q:

Stacey Greenfield sued the Canadian entities under Section 16(b) of the Securities Act of 1934. The Canadian entities which were a number of investment funds and partnerships. Canadian Fund LP and Cadian Master Fund were two investment funds which shared a general partner, Cadian GP, LLC, which Eric Bannasch was the sole managing member. Canadian Capital Management, LP, also owned by Bannasch, served as the investment manager of the investment funds. In addition, all financial decisions for all Cadian entities pertinent to this case were made by Bannasch. Recall that Section 16(b) requires all statutory insiders to return short-swing profits. Statutory insiders also include “beneficial owners” of more than 10 percent of any equity security of a company. In this case, Greenfield sued the Canadian entities as a group for buying and selling Infoblox common stock shares while collectively owners of at least 10 percent of Infoblox. In filing this complaint, Greenfield also asserted that the Canadian entities are “inexorably intertwined” and could therefore be held liable under Section 16(b). The Canadian entities moved for summary judgment for failure to state a claim. Do you think groups of individuals or other entities such as companies and investment funds should be collectively classifiable as beneficial owners and therefore liable under Section 16(b)? What are the implications if they are? What are the implications if they are not? How do you think the court decided this question?

Q:

Moto Inc. operates gasoline convenience stores throughout the American Midwest. It does business as MotoMart. In June 2011, the collective owners of at least 20 percent of Moto, Virgil Kirchoff, Kirchoff LP, and the Virgil Kirchoff Revocable Trust, launched a suit against Moto seeking corporate dissolution based on minority shareholder oppression. The plaintiffs asserted that by arbitrarily valuing its stock and failing to inform minority shareholders of Casey’s General Stores, Inc.’s interest in acquiring Moto. The trial court granted Moto summary judgment and the plaintiffs appealed. According to the appellate court, to fulfill a shareholder oppression claim, a claimant must show “(1) burdensome, harsh, and wrongful conduct; (2) a lack of probity and fair dealing in the affairs of the company to the prejudice of some of its members; or (3) a visible departure from the standards of fair dealing and a violation of fair play on which every shareholder is entitled to rely when entrusting her money to a company.” In its appeal, the plaintiffs-now-appellants argued the trial court should not have granted Moto summary judgment because Moto had a fiduciary duty to use reasonable care in evaluating its stocks and there was enough prima facie evidence showing Moto failed to exercise reasonable care. Suppose the appellate court accepted the appeallants’ argument that there was a genuine dispute of material fact about Moto’s actions. Would Moto’s lack of reasonable care fulfill the three requirements of a shareholder oppression claim quoted above? Why or why not? List examples of evidence appellants could show to meet the criterion.

Q:

In October 2005, Blatt was diagnosed with “Gender Dysphoria, also known as Gender Identity Disorder,” which she argues substantially limits one or more of her major life activities, including, but not limited to, interacting with others, reproducing, and social and occupational functioning. Blatt alleges that shortly after she was hired by Cabela’s in September 2006, Cabela’s began to discriminate against her on the basis of her sex and her disability, in violation of Title VII of the Civil Rights Act and the ADA, and that Cabela’s retaliated against her for opposing this discrimination, also in violation of these statutes. Blatt further alleges that in February 2007, Cabela’s terminated her employment based on her sex and disability. The stated purpose of the ADA is to “provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities." Congress opted to define the scope of the statute’s coverage by means of a flexible and broad definition of “disability,” namely, “a physical or mental impairment that substantially limits one or more major life activities of [an] individual.” Standing in contrast to this broad definition of disability, there are a few exceptions to the ADA’s coverage. The provision at issue in this case excludes from ADA coverage approximately one dozen conditions, including gender identity disorders. Cabela contends that the statute’s reference to gender identity disorders applies to Blatt’s condition and that the provision, therefore, excludes her condition from the ADA’s scope and that the court should grant defendant’s motion to dismiss the claims. Should the court grant the defendant’s motion to dismiss? Should gender identity disorder be considered a disability under the ADA?

Q:

Marykate Ellingsworth lives with her husband in Allentown, Pennsylvania. In 2012, she was hired by The Hartford (an insurance company) as a customer service representative. After completing her initial training, she was placed on a work team supervised by Angela Ferrier. Ms. Ferrier allegedly harassed Ms. Ellingsworth in various ways over the span of approximately one year. Ferrier would tell Ellingsworth that she “dresses like a dyke.” Ferrier would also make fun of Ellingsworth’s clothing, call her “stupid,” and tell her that she “sucks.” In addition to ridiculing Ms. Ellingsworth directly, Ms. Ferrier would also tell her coworkers that Ellingsworth “dresses like a dyke” and has a “lesbian tattoo.” Ferrier went so far as to tell Ellingsworth’s coworkers that Ellingsworth was a lesbian. These remarks were made in private to Ms. Ellingsworth and also, at other times, in front of coworkers. Because of this persistent harassment, Ellingsworth’s coworkers began to adopt the belief that Ellingsworth was gay, even though she is not. Eventually, it became “generally accepted” in the workplace that Ellingsworth was gay. Ellingsworth felt compelled to explain to her coworkers that she was not a lesbian. This situation began to exacerbate Ellingsworth’s pre-existing depression and anxiety. Due to her anxiety and depression, she took a leave of absence beginning January 6, 2014. On March 24, 2014, The Hartford wrote her a letter stating that she could either return to work or be terminated. Believing that nothing would be done to resolve the harassment, Ms. Ellingsworth was unable to return to work. She claims she was constructively discharged. Two months later, on May 23, 2014, Ms. Ellingsworth filed an administrative complaint with the Pennsylvania Human Relations Committee (“PHRC”). This complaint was cross-filed with the EEOC on or after that date. Ms. Ellingsworth filed a complaint against her former employer, alleging sexual harassment, gender discrimination, and retaliation. Defendant filed a motion to dismiss, alleging Title VII does not permit a claim based on sexual orientation. How should the court rule? Why?

Q:

Compagnie Générale des Eaux was a centuries-old French utility conglomerate led by Jean MarieMessier. In 1998, Compagnie Générale des Eaux changed its name to Vivendi, S.A., and developed a plan to reinvent as an entertainment media company. Vivendi shed its utilities and environment divisions and acquired various media businesses. A significant point in Vivendi’s plan occurred in 2000 when Vivendi merged with Canal Plus, S.A., a French film and television production company, and Seagram Company Ltd., a Canadian entertainment company. The three-way merger resulted in one of the world’s largest media companies, rivaling AOL-Time Warner. Vivendi, S.A., now simply Vivendi, continued to acquire companies, spending cash and increasing its debts. Vivendi’s debts blossomed from 3 billion euros to 21 billion euros between 2000 and 2002. Throughout Vivendi’s buying frenzy, it continuously conveyed to the public it was in sound financial health. Despite Vivendi’s assurances, Moody’s and the S&P downgraded Vivendi’s debt rating in 2002, rating it at just above junk level. Vivendi’s stock subsequently fell 26 percent. As it turned out, Vivendi’s financial officers had known it was facing a cash crunch long before the negative ratings were publicized. Chief Financial Officer Hannezo had informed Messier of the impending problems, who continued to acquire companies. A class action lawsuit was filed against Vivendi, Messier, and Hannezo in 2002 under Rule 10(b). The case moved to trial in 2009 after years of discovery, and, in 2011, a jury found under Rule (10b) violations of fifty-seven statements, Vivendi liable, but not Messier or Hanzo. Vivendi appealed the jury verdict on grounds that it could not be held liable for certain statements because they were forward-looking statements under the PSLRA. Under what conditions is a defendant not liable under 15 U.S.C. § 78u-5(c), the provision concerning forward-looking statements? One of the alleged misstatements identified by Vivendi was the following given on February 14, 2001: “Vivendi Universal enters its first full year of operations with strong growth prospects and a very strong balance sheet. This new company is off to a fast start and we are very confident that we will meet the very aggressive growth targets we have set for ourselves both at the revenues and EBITDA levels.” Do you think the statement qualifies as a forward-looking statement? Why or why not? What did the court think of this statement?

Q:

Fresh, Inc., is a cosmetics and skin care manufacturer. One of its product lines is Sugar Lip Treatment (Sugar), a lip balm. Sugar is a lip balm treatment that comes in various shades of color and comes in an oversized dispenser tube. Each tube of Sugar retails at stores and online at $22.50 to $25.00. Angela Ebener, a California resident that purchased tubes of Sugar over the four years preceding the trial, sued Fresh for deceptive advertising. Ebener asserted that she was led to believe there was more product than the packaging indicated because only 75 percent of the product was reasonably accessible. The remaining 25 percent was blocked by the tube’s screw mechanism. Furthermore, although the Sugar tube label stated there was 4.3 grams of product, a metallic weight at the base of the tube combined with packaging box itself made the whole package weigh approximately 29 grams. Ebener argued that the extra weight misled her to think there was more product than there actually was. The district court ruled against Ebener, citing that California’s Safe Harbor doctrine and federal preemption under the FDCA were fatal to her claims. Ebener appealed and the Ninth Circuit Court took the case and affirmed the district court decision. What is the Safe Harbor Doctrine and federal preemption under the FDCA according to the appellate court and how did they interact with California’s deceptive advertising laws to lead to the case’s conclusion? Do you think it is ethical for Fresh to label Sugar as having 4.3 grams of lip balm when only three-fourths of it is accessible?

Q:

Verisign, Inc. is a long-established tech company that sells Internet domain names. Verisign also runs .com and.net top-level domains. In 2014, XYZ.COM, LLC entered the domain business and launched a new top-level domain ending in “.xyz.” Verisign subsequently sued XYZ and its founder, Daniel Negari. At the heart of this case is not XYZ’s upstart desire to compete with Verisign, but in the alleged false advertisement that XYZ engaged into market itself. Some of the allegations of improper marketing included blog posts where Negari touted .xyz’s high registration numbers and popularity. Another supposedly misleading marketing statement was when XYZ paraphrased an interview between NPR and Negari, stating that an NPR reporter described “.xyz— the Next .com.” In addition to the accusations of exaggerated claims, Verisign also contended that XYZ had falsely disparaged the .com domain, against Verisign’s interests. For example, Negari said of .com domains in the NPR interview that “[a]ll of the good real estate is taken.” The district court granted summary judgment to XYZ, proclaiming that Verisign had failed to establish a violation of the Lanham Act on a number of grounds. The district court reasoned that statements like “all of the good real estate is taken” and “it’s impossible to find the domain name that you want,” were not false or misleading and amounted to puffery. Additionally, the district court stated that even if the statements were false or misleading, it did not violate the Lanham Act unless it deceived consumers. Do you think the quoted statements should be considered to be puffery? Why do you think false statements are not actionable unless it deceives consumers? How would a plaintiff alleging false advertising prove to the court that consumers have been deceived?

Q:

Company A are a company who operate a construction business based in Wales. The company are currently having an external audit and you are at the planning stage of the audit. This is the first year that your firm have audited company A. Company A are a family run business which has grown to become a successful business with a turnover of over £12,000,000. The management of the business are mostly family members and as such have total control over the internal control systems including full access to all the financial systems. Recently there has been a large turnover of staff in the accounting department of Company A which has caused some difficulties in completing work accurately. Company A have struggled to find appropriately trained staff resulting in existing staff being forced to work overtime. Staff are naturally unhappy about this situation especially as they have also become aware of incentives being paid to certain members of management for successful completion of work to deadlines, for example the payroll and VAT submissions to HMRC. Due to lack of storage Company A have recently made arrangements to store a large amount of inventory at a third-party location. Company A use a well-known accounting package for all financial areas except for the payroll department, which is processed using a different, more complex system. To date, the payroll system has been run by one person, Wesley, who is very experienced and has complete charge over the payroll since the company started trading. The managing director of Company A told you “We are very lucky to have Wesley running our payroll. This is an important area not only because of the regulatory requirements but also because of the large sums of money involved. As a company we are very proud to have someone we can trust 100%”. The finance director of Company A has indicated that one of their major customers may be going into administration. Sales to this customer account for 30% of the company’s overall turnover. Required: a) Using the scenario above, Identify and discuss FOUR audit risks that should be taken into consideration when planning the audit of Company A. Provide an audit response for each risk identified. (8 marks)

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