Fact Pattern 15-1
Gretta is the CEO of a paper company built near a river used in interstate commerce
although the state in which the company is located is land locked and not near the coast.
Gretta determines that a significant amount of money needs to be spent to comply with
the federal Clean Water Act. She is already in trouble with stockholders because of low
profits and does not wish to spend extra money on pollution control. Therefore, she
instructs employees to simply dump waste into the river. She was aware that she would
be fired if the company received a heavy fine, but she decided to take the risk because
she was in danger of being fired if profits did not come up anyway. Also, while Gretta
believed that the Clean Air Act applied; Linda, a majority stockholder, told her that the
Clean Water Act would not apply based upon the location of the plant.
Refer to Fact Pattern 15-1. Does Gretta have any greater danger in this situation than
being fired?
a. Yes, she can be held individually liable for the pollution since she knowingly violated
the Clean Water Act; and she could face a fine as well as jail time.
b. Yes, she can be held individually liable for the pollution since she knowingly violated
the Clean Water Act; but she could only be fined, not sent to jail.
c. So long as the majority shareholder approves of her actions, she cannot be fined or
sent to jail for any environmental violation.
d. No.
Answer:
__________ is the simplest and most prevalent form of business enterprise in the U.S.
a. S corporation
b. Partnership
c. Sole proprietorship
d. Joint venture
Answer:
The Supreme Court considers market divisions between competing firms to be so
inherently anti-competitive as to constitute per se violations of the Sherman Act.
a. True
b. False
Answer:
__________ is a process used mainly in the area of public international law whereby a
third party, often a disinterested government, brings the parties together by establishing
communication and providing a site where the parties can meet, often in secret.
a. Public involvement
b. Good offices
c. International involvement
d. Best transactions
Answer:
__________ can include boycotts of goods, refusal to maintain commercial
relationships, and quotas.
a. Economic sanctions
b. Embargoes
c. Tariffs
d. Dumping
Answer:
Priscilla bought a new CD with her favorite Christmas music on it. She promptly
proceeded to copy it for 15 of her best friends, including Brenda, and provided it free of
charge. Unknown to Priscilla, Brenda’s brother, Chris, was a member of the band. When
he found out how Brenda got the disk, he angrily called Priscilla and accused her of
copyright infringement. Is he correct that Priscilla is guilty of copyright infringement?
a. It is unlikely that Priscilla is guilty of copyright infringement because of the fair use
doctrine.
b. It is unlikely that Priscilla is guilty of copyright infringement because of the merger
doctrine.
c. It is unlikely that Priscilla is guilty of copyright infringement because she did not
charge her friends for the copies and did not mass produce the CD.
d. It is likely that Priscilla would be found guilty of copyright infringement.
Answer:
A title insurance policy does not insure against:
a. defects in title.
b. undisclosed liens.
c. defects in warranties.
d. errors in the abstraction of the title.
Answer:
Canada withdrew from the Kyoto Protocol.
a. True
b. False
Answer:
In CASE 23.2Executive Benefits Insurance Agency v. Arkinson(2014) the
U.S.SupremeCourt ruled that some claims Congress labeled as “core” (so-called Stern
claims) cannot be adjudicated by a bankruptcy court even if all the parties consent to
the bankruptcy court’s jurisdiction in advance.
a. True
b. False
Answer:
Statutes and agency rules often provide that courts performing judicial review of
agency action may NOT rule on which of the following issues?
a. Issues raised with the agency and won
b. Issues raised with the agency and lost
c. Issues raised with the lower courts and lost
d. Issues not raised with the agency
Answer:
The most common form of agency relationship is employer-employee.
a. True
b. False
Answer:
In theStern v. Marshall case discussed in the text, the U.S. Supreme Court addressed
whether a counterclaim for tortuous interference with an expected gift, filed in response
to a bankruptcy claim for defamation, was a core matter subject to the jurisdiction of
the bankruptcy court. And if it was a core matter subject, did the authority conferred
upon the bankruptcy court violate Article III of the U.S. Constitution? How did the
Court rule?
a. The Court ruled that the tortuous interference counterclaim was a core proceeding but
that the bankruptcy court lacked the constitutional authority to enter a final judgment on
the claim.
b. The Court ruled that the tortuous interference counterclaim was a core proceeding
and that the bankruptcy court had the constitutional authority to enter a final judgment
on the claim.
c. The Court ruled that the tortuous interference counterclaim was not a core proceeding
and that the bankruptcy court lacked the constitutional authority to enter a final
judgment on the claim.
d. The Court ruled that the tortuous interference counterclaim was a core proceeding in
part and that the bankruptcy court had the constitutional authority to enter a final
judgment on portions of the claim.
Answer:
As part of any legislative proposal or other major governmental action that will
significantly affect the quality of the environment, the government must generally
include an environmental assessment (EA).
a. True
b. False
Answer:
As the court stated in the Suarez v. Pueblo International, Inc. (2000) case, the ADEA
guarantees workplaces “free from the ordinary ebb and flow of power relations and
interoffice politics.”
a. True
b. False
Answer:
Congress is given the power to enact bankruptcy laws by:
a. a delegation of authority by the President.
b. the U.S. Constitution.
c. rulings of the Supreme Court.
d. inherent powers under federalism.
Answer:
To prove __________ in a product liability case, the injured party must show that the
defendant did not use reasonable care in the design or manufacture of its product.
a. negligence
b. strict liability
c. breach of warranty
d. defect
Answer:
The Equal Protection Clause of the Fourteenth Amendment limits the power of the
federal government to regulate commerce.
a. True
b. False
Answer:
Abandoned or historically polluted sites are governed by the __________ whereas the
__________ covers current and future hazardous waste treatment facilities.
a. Comprehensive Environmental Response, Compensation, and Liability Act; National
Pollutant Discharge Elimination System
b. Resource Conservation and Recovery Act; National Pollutant Discharge Elimination
System
c. Resource Conservation and Recovery Act; Comprehensive Environmental Response,
Compensation, and Liability Act
d. Comprehensive Environmental Response, Compensation, and Liability Act;
Resource Conservation and Recovery Act
Answer:
A merger agreement is an agreement between two companies to combine into a single
entity.
a. True
b. False
Answer:
Which of the following makes a security interest created under Article 9 a floating lien?
a. The provision that, unless otherwise agreed, a security agreement gives the secured
party a security interest in the proceeds if the collateral is sold, exchanged, collected, or
otherwise disposed of.
b. The provision that, unless otherwise agreed, a security agreement fails to give the
secured party a security interest in the proceeds if the collateral is sold, exchanged,
collected, or otherwise disposed of.
c. The provision that, unless otherwise agreed, interest rates will vary depending on the
prime rate of interest.
d. The provision that, unless otherwise agreed, the parties will not sell, exchange,
collect, or otherwise dispose of property and that if such an action is taken, all sums
owed become immediately due.
Answer:
Which of the following is true regarding Section 16(c)’s restriction on selling stock
short?
a. Section 16(c) prohibits officers, but not directors, from selling any of their company’s
equity securities short.
b. Section 16(c) prohibits directors, but not officers, from selling any of their company’s
equity securities short.
c. Section 16(c) prohibits officers or directors from selling any of their company’s
equity securities short.
d. Section 16(c) allows both officers and directors to sell their company’s equity
securities short so long as the equities are obtained and delivered within twenty days
after the short sale.
Answer:
The Restatement (Third) requires that any claim of design defect be supported by a
showing of a reasonable alternative design.
a. True
b. False
Answer:
A revolving loan is based upon the continuous extension of credit of an unlimited
amount.
a. True
b. False
Answer:
What three-step procedure does an agency follow in order to promulgate rules or
regulations, and in what order is the procedure performed?
a. (1) Evaluation of comments (2) notice to the public (3) adoption.
b. (1) Notice to the public (2) evaluation of comments (3) adoption.
c. (1) Voting (2) evaluation of comments (3) adoption.
d. (1) Adoption (2) notice (3) evaluation of results.
Answer:
Which of the following is true regarding hostile takeovers in the European Union?
a. All member states must observe the neutrality rule and the breakthrough rule.
b. Member states may opt out of the neutrality rule and the breakthrough rule.
c. Member states may opt out of the neutrality rule, but all member states must observe
the breakthrough rule.
d. Member states may opt out of the breakthrough rule, but all member states must
observe the neutrality rule.
Answer:
CASE 2SEC v. Edwards (2004) involved sales of interests in pay telephones with a
question before the U.S. Supreme Court of whether a moneymaking scheme falls
outside the definition of an investment contract because the promised rate of return is
fixed, rather than variable. How did the Court rule?
a. The Court held that a promise of a fixed rate of return did not prevent the
arrangement from being an investment contract.
b. The Court held that a promise ofa fixed rate of return prevented the arrangement
from being an investment contract.
c. The Court held that a promise of a fixed rate of return did not prevent the
arrangement from being an investment contract, but only because the underlying
company went into bankruptcy.
d. The Court held that a promise of a fixed rate of return prevented the arrangement
from being an investment contract, but only because the underlying company went into
bankruptcy.
Answer:
The process of questioning the witnesses in a trial is called voir dire.
a. True
b. False
Answer:
Which of the following is considered in determining whether use of copyrighted
material constitutes fair use?
a. Only the amount of the work used.
b. (1) The amount of the work used, and (2) the economic effect of the use on the
copyright owner.
c. (1) The economic effect of the use on the copyright owner, (2) the nature of the work
used, and (3) the amount of the work used.
d. (1) The purpose and character of the use, (2) the economic effect of the use on the
copyright owner, (3) the nature of the work used, and (4) the amount of the work used.
Answer:
Generally, an administrative agency may only do what Congress or the state legislature
has authorized it to do.
a. True
b. False
Answer:
Interest is generally computed on a __________ basis.
a. yearly
b. monthly
c. weekly
d. daily
Answer:
Which of the following is not a factor used in determining the anticompetitive effects of
a horizontal merger under the Clayton Act?
a. The level of concentration in the market.
b. The market shares of the firms involved in the transaction.
c. Whether the market is structurally conducive to anticompetitive behavior.
d. The market price of the buyer’s stock.
Answer:
If an issuer makes successive sales within a limited period of time, the SEC may
__________ the successive sales, resulting in the loss of a private-offering exemption.
a. restrict
b. register
c. integrate
d. qualify
Answer:
In the case of a(n) __________, the U.S. Supreme Court has ruled that the reliance will
be presumed under Rule 10b-5 if the fact was material.
a. public statement
b. misstatement
c. omission
d. tip
Answer:
Fact Pattern 21-2
Alice and her general partner, Greg, own several businesses. Alice is very interested in
salt water aquariums and decides that a good venture for the partnership would be the
development of a business to raise tropical fish. She plans to issue stock to start the fish
business with the idea that she and Greg will purchase a majority of the stock. She has a
friend, Tony, a plastic surgeon with a good practice, who has expressed interest in the
venture because he believes that the presence of fish in waiting rooms reduces anxiety
and encourages patients to spend more money. Alice does not want to go to the expense
and trouble of a formal registration under the 1933 Act and seeks advice on how to
avoid that process should the partnership issue securities.
Refer to Fact Pattern 21-2. As far as Greg is concerned, which of the following is true?
a. Selling to Greg would not trigger registration requirements because his status as a
general partner results in him being considered an accredited investor.
b. Selling to Greg would not trigger registration requirements so long as he purchases at
least 10% of outstanding stock.
c. Selling stock to Greg would not trigger registration requirements because he is a
tombstone investor.
d. Selling stock to Greg would trigger registration requirements.
Answer: