SAME FACT PATTERN QUESTIONS $31-33$

Redbull, inc. is a closely held corporation $($S Corporation$)$ that manufactures and sells energy drinks. Redbull mixes and bottles its drinks out of three primary manufacturing facilities, which it owns. Redbull's Michigan facility manufactures Nuka Cola, the company's best$-$selling drink. Unfortunately, Redbull has learned that its most recent batch of Nuka Cola may have been contaminated.

Redbull's board of directors organizes a committee of its most trusted and knowledgeable employees to investigate the issue and provide the board with a report $($the Employee Report$).$ The Employee Report indicates that the batch may indeed have been contaminated, but there is anly a one$-$percent chance that those who consume the beverage will suffer any health ramifications. The board meets shortly after the report is issued. However, other matters take precedence at the meeting, so the board fails to take any action on the contamination problem.

A few months later, having moved production of Nuka Gola to Redbuil's gregen facility: Redbuli decides to seli the Michigan facility: To that end, Redbuills beard appeints a committee of officers and directors to selicit bids. The cemmithee retums with bily bne Bie for $$10$ million.

Unimpressed with the bid, the board asks Mr$.$ Zoolander, Redbull's outside legal counsel, whether the bid represents fair market value for the facility. Mr$.$ Zoolander replies, "Yes. Based on the $15$ acquisition deals I closed in Michigan last year, I believe that $$10$ million represents fair market value for this type of facility." The board thus votes to accept the bid, and the sale closes the following month.

Two months later, Redbull receives a litany of bad news. The worst is this: approximately $25$ percent of Redbull's customers fell ill upon consuming Irrational Energy Elixir. As a result, the contamination issue that the board did not address gets widely publicized, and Redbull's sales declined. Further, the board learns that three Michigan manufacturing facilities recently sold for roughly $$30$ million each; all three were virtually identical to the one Redbull sold for $$10$ million.

Which fiduciary duty is most likely implicated by the decisions Redbull's directors have made?

Duty to account

Duty of Loyalty

Duty of Care

Duty of diligence

Question $32$

$3$ pts

As to the contamination issue, what would be the board's best defense to the alleged breach raised in the last question?

Business Judgment Rule

Duty of Loyalty

Right against self$-$incrimination under the $5$th & $14$th Amendments

Duty of Care

Question $33$

$3$ pts

In addition, it has come to light Redbull, inc. that $3$ owners are not US citizens and $2$ are foreign corporations. Which of the following is true:

A closely held company cannot have non$-$US citizen owners

A closely held company cannot have foreign corporations as owners

Neither statement is true

Both statements are true