David Sokol worked at Berkshire Hathaway for legendary investor Warren Buffett, who is renowned not only for his investment skills but also his ethics. Bankers suggested to both Sokol and the CEO of Lubrizol that the company might be a good buy for Berkshire. Sokol then found out that the CEO of Lubrizol planned to approach Berkshire about a possible acquisition. Sokol purchased $10 million worth of Lubrizol stock before recommending Lubrizol to Buffett. Sokol mentioned to Buffett “in passing” that he owned shares of Lubrizol. Buffett did not ask any questions about the timing or amount of Sokol’s purchases. Sokol made a $3 million profit when Berkshire acquired Lubrizol. Did Sokol violate insider trading laws? Did he behave ethically? What are Buffett’s ethical obligations?
> Suzy Tomlinson, 74, met a tragic end – she drowned, fully-clothed, in her bathtub after a night out partying with 36 year old J.B. Carlson. He had taken her home at 1 a.m. and was the last person to see her alive. The two were not only party buddies, Suz
> If your grandparents were to die leaving a large estate and all of their children were also dead, would you prefer a per stirpes or per capita distribution?
> Linda and Eddie had two children before they were divorced. Under the terms of their divorce, Eddie became the owner of their house. When he died suddenly, their children inherited the property. Linda moved into the house with the children and began payi
> When William Cook died, his will left all of his property to his brother Eugene. There were two other pieces of paper in the safe with the will. One said that that his stamp collection should go to his housekeeper, Bertha. This document was signed by two
> When Gregg died, his will left his money equally to his two children, Max and Alison, whom he explicitly named. Max had died a few years earlier, leaving behind a widow and four children. Who will get Gregg’s money?
> Clyde received a letter from his automobile insurance company notifying him that it would not renew his policy that was set to expire on February 28. Clyde did not obtain another policy, and, in a burst of astonishing bad luck, on March 1, at 2:30 a.m.,
> Shawn was caught stealing letters from mailboxes. After pleading guilty, he was sentenced to two months’ in prison and three years’ supervised release. One of the supervised release conditions required him to stand outside a post office for eight hours w
> Dannie Harvey sued her employer, O. R. Whitaker, for sexual harassment, discrimination, and defamation. Whitaker counter-claimed for libel and slander, requesting $1 million in punitive damages. Both Whitaker and Harvey were insured by Allstate, under id
> Dan checks into a nice beachfront hotel. He does not want to expose his $10,000 Patek Philipe wristwatch to saltwater, and so he leaves it in the dresser in the room. When he returns from the beach, the watch is gone. He is shocked to learn that the h
> Ronald Armstead worked for First American Bank as a courier. His duties included making deliveries between the bank’s branches in Washington, DC Armstead parked the bank’s station wagon near the entrance of one branch in violation of a sign saying: “No P
> During her second year at the Juilliard School of Music in New York City, Ann Rylands had a chance to borrow for one month a rare Guadagnini violin, made in 1768. She returned the violin to the owner in Philadelphia, but telephoned her father to ask if h
> Eileen Murphy often cared for her elderly neighbor, Thomas Kenney. He paid her $25 per day for her help and once gave her a bank certificate of deposit worth $25,000. She spent the money. Murphy alleged that shortly before his death, Kenney gave her a
> Marjan International Corp. sells handmade oriental rugs. V. K. Putman, Inc., is a Montana trucking company. Marjan delivered valuable rugs to Putman for shipment from New York City to Tacoma, Washington. Unfortunately, there were several delays in transi
> During the Great Depression of the 1930s, the federal government’s Works Progress Administration hired artists to create public works of art. The goal was to provide employment and beautify the nation. The artist James Daugherty painted six murals on the
> In 1944, W. E. Collins conveyed land to the Church of God of Prophecy. The deed said: “This deed is made with the full understanding that should the property fail to be used for the Church of God, it is to be null and void and property to revert to W. E.
> Lisa Preece rented an apartment from Turman Realty, paying a $300 security deposit. Georgia law states: “Any landlord who fails to return any part of a security deposit which is required to be returned to a tenant pursuant to this article shall be liable
> Kenmart Realty sued to evict Mr. and Ms. Alghalabio for nonpayment of rent and sought the unpaid monies, totaling several thousand dollars. In defense, the Alghalabios claimed that their apartment was infested with rats. They testified that there were nu
> Karin made illegal firearm purchases at a gun show. At her trial, she alleged that she had committed this crime because her boyfriend had threatened to harm her and her two daughters if she did not. Her lawyer asked the judge to instruct the jury that th
> Frank Deluca and his son David owned the Sportsman’s Pub on Fountain Street in Providence, Rhode Island. The Delucas applied to the city for a license to employ topless dancers in the pub. Did the city have the power to deny the Delucas’ request? Argumen
> Nome 2000, a partnership, owned a large tract of wilderness land in Alaska. The Fagerstrom family had used the property for camping and holidays since about 1944. In 1966, Charles and Peggy Fagerstrom marked off an area for a cabin and brought material t
> In New Orleans, Mardi Gras “Indians” are carnival revelers who dress up for Mardi Gras in costumes influenced by Native American ceremonial attire. “Indians” often spend the entire year and thousands of dollars crafting their intricate designs with feath
> Fredrik Colting wrote a book entitled, 60 Years Later: Coming Through the Rye, a riff on J. D. Salinger’s famous Catcher in the Rye. Colting’s book imagined how Salinger’s protagonist, Holden Caulfield would view life as a 76-year old. Alice Randall wro
> While in college, David invented a new and useful machine to make macaroni and cheese (he called it the “Mac ‘n’ Cheeser”). It was like nothing on the market, but David did not apply for a patent. At that time, he offered to sell his invention to several
> Roger Schlafly applied for a patent for two prime numbers. (A prime number cannot be evenly divided by any number other than itself and 1. Examples of primes are 2, 3, 5, 7, 11, and 13.) Schlafly’s numbers are a bit longer—one is 150 digits, the other i
> Rebecca Reyher wrote (and copyrighted) a children’s book entitled My Mother Is the Most Beautiful Woman in the World. The story was based on a Russian folktale told to her by her own mother. Years later, the children’s TV show Sesame Street televised a s
> After Edward Miller left his job as a salesperson at the New England Insurance Agency, Inc., he took some of his New England customers to his new employer. At New England, the customer lists had been kept in file cabinets. Although the company did not re
> Frank B. McMahon wrote one of the first psychology textbooks to feature a light, easily readable style. He also included many colloquialisms and examples that appealed to a youthful student market. Charles G. Morris wrote a psychology textbook that copie
> Sequenom developed a noninvasive prenatal diagnostic test to assess the risk of Down syndrome or other chromosomal abnormalities in fetuses. The test analyzes DNA from the fetus that is found in the mother’s blood. Prior to this test, women had to underg
> Conley owned video poker machines. Although they are outlawed in Pennsylvania, he placed them in bars and clubs. He used profits from the machines to buy more machines. Is he guilty of money laundering?
> Victoria’s Secret, a well-known lingerie company, found out that a man named Victor Moseley was running a small store in Kentucky named “Victor’s Little Secret.” Moseley’s shop sold clocks, patches, temporary tattoos, stuffed animals, coffee mugs, leathe
> The Navy wanted to conduct training exercises off the coast of California for sonar submarines. Scientists were concerned that the sounds emitted by the sonar would harm marine mammals, such as whales, dolphins, and sea lions. Environmental groups filed
> The Lordship Point Gun Club operated a trap and skeet shooting club in Stratford, Connecticut, for 70 years. During this time, customers deposited millions of pounds of lead shot and clay target fragments on land around the club and in Long Island Sound.
> The marbled murrelet is a seabird on the list of endangered species. Pacific Lumber Co. received permission to harvest trees from land on which the murrelet nested, on the condition that it would cooperate with regulators to protect the murrelet. But be
> Tariq Ahmad decided to dispose of some of his laboratory’s hazardous chemicals by shipping them to his home in Pakistan. He sent the chemicals to Castelazo (a company in the United States) to prepare the materials for shipment. Ahmad did not tell the dri
> Before the Department of Agriculture issued regulations on genetically modified beets, what steps did it need to take under the environmental statutes?
> Shell Oil sold pesticides to B&B, which allowed these chemicals to leak into the ground. Shell neve owned or operated the site, and never transported wastes to the site. B&B ultimately went bankrupt. Is Shell liable for the costs of cleaning up this site
> Thomas worked at a Sherwin-Williams paint store that James managed. Thomas and James had a falling out when, according to Thomas, “a relationship began to bloom between Thomas and one of the young female employees, the one James was obsessed with.” After
> Josephine was a 60-year-old widow who suffered from high blood pressure and epilepsy. A bill collector from Collections Accounts Terminal, Inc., called her and demanded that she pay $56 she owed to Cabrini Hospital . She told him that Medicare was suppos
> After TNT Motor Express hired Joseph Bruce Drury as a truck driver, it ordered a background check from Robert Arden & Associates. TNT provided Drury’s Social Security number and date of birth, but not his middle name. Arden discovered that a Joseph Thoma
> While driving his SUV, George Xinos struck and killed a pedestrian. He then fled the scene of the crime. A year later, the police downloaded information from his car’s onboard computer which they were able to use to convict him of the crime. Should this
> Thomas Waldock purchased a used BMW 320i from Universal Motors, Inc. It was warranted “to be free of defects in materials or workmanship for a period of three years or 36,000 miles, whichever occurs first.” Within the warranty period, the car’s engine fa
> In October, Renie Guimond discovered that her credit report at TransUnion incorrectly stated that she was married, used the name “Ruth Guimond,” and had a credit card from Saks Fifth Avenue. After she reported the errors, TransUnion wrote her in November
> Processed cheese food slices must contain at least 51 percent natural cheese. Imitation cheese slices, by contrast, contain little or no natural cheese and consist primarily of water, vegetable oil, flavoring, and fortifying agents. Kraft, Inc., makes Kr
> Clarice, a young woman with a mental disability, brought a malpractice suit against a doctor at the Medical Center. As a result, the Medical Center refused to treat her on a nonemergency basis. Clarice then went to another local clinic, which was later a
> American Academic Suppliers (AAS) and Beckley-Cardy (B-C) both sold educational supplies to schools. When B-C’s sales began to plummet, it responded by reducing its catalog prices. It also offered an additional discount in states in which AAS was making
> After acquiring the Schick brand name and electric shaver assets, North American Phillips controlled 55 percent of the electric shaver industry in the United States. Remington, a competitor, claimed that the acquisition of such a large market share was a
> Samantha manufactures 60 percent of the titanium screws sold in the United States. Does she have a monopoly on this product? What would you need to know to answer this question?
> Suppose that Masi Bikes insists that retailers cannot sell its Soulville 10 model for less than $1,099. The company threatens to cut off any retailers who discount that price. But bicycle stores would like to use these bikes as a loss leader—selling them
> In New York City, 50 bakers formed an association. They developed a system of distribution under which stores were only allowed to buy from a single baker. A store that wanted to shift to another baker had to consult the association and pay cash to the f
> Which court(s) have jurisdiction as to each of these lawsuits—state or federal? Explain your reasoning with each. (a) Pat wants to sue his next-door neighbor, Dorothy, claiming that Dorothy promised to sell him the house next door. (b) Paula, who lives
> Fluor, an engineering and construction company, was awarded a $1 billion project to build a coal gasification plant in South Africa. Fluor signed an agreement with a South African client that prohibited them both from announcing the agreement until March
> Gary Griffiths was a vice president for a railroad. The CEO asked him to prepare an inventory of all the rolling stock the company owned and to arrange trips among its rail yards for a group of men in suits. Employees began asking Griffiths if the compan
> Do you love ice cream? Here is an opportunity for you! For only $800, you can buy a cow from Berkshire Ice Cream. The company gets milk from the cow and you get to share in the profits from the sale of ice cream. Just last month, Berkshire mailed $32,000
> On November 5, Hawes, Inc., a small subcontractor, opened an account with Basic Corp., a supplier of construction materials. Hawes promised to pay its bills within 30 days of purchase. Although Hawes purchased a substantial quantity of goods on credit fr
> Corporate executives are not the only people to earn fabulous salaries. Some athletes earn even more than CEOs. What is the difference between athletes and executives (besides a hook shot)?
> DeVry Inc. runs for-profit schools. Its shareholders submitted a proposal that would require the company to “annually report to shareholders on the expected ability of students at Company-owned institutions to repay their student loans.” Must DeVry inclu
> Pfizer Inc. paid $2.3 billion to settle civil and criminal charges alleging that it had illegally marketed 13 of its most important drugs. This settlement made history, but not in a good way. It was both the largest criminal fine and the largest settleme
> Two shareholders of Bruce Co., Harry and Yolan Gilbert, were fighting management for control of the company. They asked for permission to inspect Bruce’s stockholder list so that they could either solicit support for their slate of directors at the upcom
> Edgar Bronfman, Jr., dropped out of high school to go to Hollywood and write songs and produce movies. Eventually, he left Hollywood to work in the family business—the Bronfmans owned 36 percent of Seagram Co., a liquor and beverage conglomerate. Promote
> William H. Sullivan, Jr., purchased all the voting shares of the New England Patriots Football Club, Inc. (the Old Patriots). He organized a new corporation called the New Patriots Football Club, Inc. The boards of directors of the two companies agreed t
> You plan to open a store in Chicago, specializing in rugs imported from Turkey. You will work with a native Turk who will purchase and ship the rugs to your store. You are wise enough to insist on a contract establishing the rights and obligations of b
> Shareholders lost their gamble when they bought stock of Jackpot Enterprises, Inc. Fed up with management, a shareholder asked the company to include a proposal in the proxy statement that would require the board of directors to sell or merge the company
> Ronald O. Perelman, chairman of the board and CEO of Pantry Pride, met with his counterpart at Revlon, Michel C. Bergerac, to discuss a friendly acquisition of Revlon by Pantry Pride. Revlon rebuffed Pantry Pride’s overtures, perhaps in part because Berg
> Some companies adopt a staggered board of directors as an antitakeover defense. How does a staggered board affect cumulative voting?
> James owned Despatch Industries. When his son, Wade, and son-in-law, Alan, started working for the company, they both signed identical employment contracts, which provided for a severance payment if they left the company. After Wade and James had a falli
> Eve bought defective ball bearings from Saginaw Corp. Alfred was the sole shareholder of the company and also its landlord. After Alfred sold all of Saginaw’s assets, he withheld enough money to cover the rent that Saginaw owed him. As a result, Saginaw
> States compete for lucrative filing fees by passing corporate statutes that favor management. One proposed solution to this problem would be a federal system of corporate registration. Is this a good idea? What are the impediments to such as system?
> Waste Management, Inc., the country’s largest waste hauler, changed its name to WMX Technologies, Inc. Similarly, U.S. Steel changed its moniker to USX Corp. and American Airlines became AMR Corp. What legal steps would be necessary to protect the new co
> Michael incorporated Erin Homes, Inc., to manufacture mobile homes. He issued himself a stock certificate for 100 shares for which he made no payment. He and his wife served as officers and directors of the organization, but, during the eight years of it
> Dickens, Inc. is a bookstore incorporated in Nevada. From its warehouse in Montana, it ships books to all 50 states. The company’s owner lives in New York, its web designer lives in California. Where is Dickens a domestic corporation? Where must it quali
> The Resolution Trust Corp. (RTC) sued the directors of the Commonwealth Savings Association seeking to recover from them personally $200 million that the bank lost in bad real estate loans. The directors approved the loans after state and federal regulat
> Claus Scherer worked for Rockwell International and was paid more than $300,000 per year. Rockwell fired Scherer for alleged sexual harassment of several workers, including his secretary, Terry Pendy. Scherer sued in United States District Court, alleg
> Mike Love and Brian Wilson were members of the Beach Boys. In the 1960s, they wrote songs together. The copyrights for these songs were later sold to Rondor, which paid the two men royalties when the songs were played. In 2004, Wilson re-recorded some of
> Is there any good reason to be in a partnership? If so, for what sort of business would it make sense?
> Carrie and Laura started a business together to sell bridesmaids dresses online. Carrie spent months preparing the financials and meeting with potential investors while Laura designed dresses and found suppliers. Once Carrie was finished with the financ
> Lucan and Alison agreed to practice law together. Their stationery said, “The Lucan and Alison Partnership” and they told everyone they were partners. They signed a partnership agreement providing that Lucan would receive a “guaranteed annual draw of $1
> Dutch, Bill, and Heidi were equal partners in a lawn care business. Bill and Heidi wanted to borrow money from the bank to buy more trucks and expand the business. Dutch was dead set against the idea. When the matter came to a vote, Bill and Heidi voted
> Arthur, John, and George formed a partnership to drill and maintain cesspools for two years. After less than two months, John and George sent a letter to Arthur informing him that they were dissolving the partnership. Arthur sued the two other men, askin
> Brothers Sydney and Ashley were partners in a real estate partnership in Pennsylvania. They received identical salaries. Sydney moved to Florida to establish residency so that he could obtain a divorce there. His lawyer told him not to return to Pennsylv
> Seventy-Three Land, Inc., sued Maxlar Partners for the balance due on a note made by the partnership. Max, a partner, asked the court to dismiss the claim against him personally because the plaintiff had not first tried to collect against the partnership
> Hebert, an artist, entered into an agreement with Randy for the reproduction and distribution of his paintings. Herbert was to receive 50 percent of the gross sales revenues. Randy was responsible for all losses and for management of the business. Before
> Pedro and Juan have a business selling ties with fraternity insignia. Pedro finds out that an online shirt business is for sale. It sounds like a great idea -- customers send in their measurements and get back a custom-made shirt at a price no higher tha
> Trial practice also is dramatically different in Britain. The parties’ solicitors do not go into court. Courtroom work is done by different lawyers, called barristers. The barristers have very limited rights to interview witnesses before trial. They k
> A Saudi Arabian government-run hospital hired American Scott Nelson to be an engineer. The parties signed the employment agreement in the United States. On the job, Nelson reported that the hospital had significant safety defects. For this, he was arr
> Frank Brown, who is African-American, tried to buy lunch at a McDonald’s at the Dadeland Mall in Florida. The manager, Omar Zaveri, not only refused to serve Brown but verbally abused him, used racial slurs and told all the other employees that he would
> Leonard, an attorney, was negligent in his representation of Anthony. In settlement of Anthony’s claim against him, Leonard signed a promissory note for $10,400 on behalf of his law firm, an LLC. When the law firm did not pay, Anthony filed suit against
> Corporations developed to encourage investors to contribute the capital needed to create large-scale manufacturing enterprises. But LLCs are often start-ups or other small businesses. Why do their members deserve limited liability? And is it fair that LL
> As you will see in Chapter 33, Facebook began life as a corporation, not an LLC. Why did the founder, Mark Zuckerberg make that decision?
> What is the difference between close corporations and S corporations?
> If you were to look online for a description of a professional corporation, you might find websites stressing that, in a PC, shareholders are still responsible for their own wrongdoing. For example: “In some states, these professionals can form a corpora
> Kristine bought a Rocky Mountain Chocolate Factory franchise. Her franchise agreement required her to purchase a cash register that cost $3,000, with an annual maintenance fee of $773. The agreement also provided that Rocky Mountain could change to a mor
> Mrs. Meadows opened a biscuit shop called The Biscuit Bakery. The business was not incorporated. Whenever she ordered supplies, she was careful to sign the contract in the name of the business, not personally: The Biscuit Bakery by Daisy Meadows. Unfortu
> Alan Dershowitz, a law professor famous for his prominent clients, joined with other lawyers to open a kosher delicatessen, Maven’s Court. Dershowitz met with greater success at the bar than in the kitchen—the deli failed after barely a year in business.
> Pam Huber worked at Wal-Mart as a grocery order filler, earning $13 an hour. While on the job, she suffered a permanent injury to her right arm and hand. Both she and Wal-Mart agreed that she was disabled under the ADA. As a reasonable accommodation, she
> British discovery practice differs from that in the United States. Most discovery in Britain concerns documents. The lawyers for the two sides, called solicitors, must deliver to the opposing side a list of all relevant documents in their possession.
> Mary Ann Singleton was the librarian at a maximum security prison located in Tazewell County, Virginia. About four times a week, Gene Shinault, assistant warden for operations, insistently complimented Singleton; stared at her breasts when he spoke to he
> In disparate treatment cases, the plaintiff must show that the defendant intentionally discriminated, but not in disparate impact cases. Is it fair to hold employers liable when they have not engaged in intentional wrongdoing?
> Ronald Lockhart, who was deaf, worked for FedEx as a package handler. Although fluent in American Sign Language, he could not read lips. After 9/11, the company held meetings to talk about security issues. Lockhart complained to the EEOC that he could no
> Generally, the BFOQ defense does not apply to customer preference. But recently, some clients have been pressuring their law firms to staff their cases with female and minority lawyers. If a firm does so, would the BFOQ defense be valid? Should it be?
> The Lillie Rubin boutique in Phoenix would hire only women to work in sales because fittings and alterations took place in the dressing room or immediately outside. The customers were buying expensive clothes and demanded a male-free dressing area. Has t
