Fact Pattern 17-2
Janie is a pharmacist in Small City. At the direction of several physicians in Small City,
she begins mixing up a treatment for indigestion that is prescribed by the physicians.
She advertises the mixture, and she and prescribing physicians see a large increase in
business. Other pharmacists who do not want to bother with mixing begin to complain.
Janie takes the position that it is a free country, and she can do as she pleases since there
is no evidence that the mixture is harmful; and it is particularly helpful for those
individuals who have had reactions to other indigestion medication.
Refer to Fact Pattern 17-2. Is it legal for her to advertise the product?
a. No.
b. Only if it has been approved by the Food and Drug Administration.
c. Only if it is sold for under $50.
d. Yes.
Answer:
A __________ reverses the jury verdict on the ground that the evidence of the
prevailing party was so weak that no reasonable jury could have resolved the dispute in
that party’s favor.
a. directed verdict
b. summary judgment
c. judgment n.o.v.
d. judgment on the pleadings
Answer:
Fact Pattern 22-1
Trudy was hired by Food Corporation to handle a products liability lawsuit brought
against it alleging that it distributed dangerous dog biscuits. Trudy’s investigation
brought to light facts establishing that the biscuits were not defective and that the
problem actually involved improper retention policies on the part of retailers. Trudy is
aware that this information will result in the stock of Food Corporation increasing
dramatically. Trudy immediately buys shares of Food Corporation and tells her fiancé,
Frank, about the expected increase as well. Trudy tells Frank because she wants to
borrow money from him for the trade and also because she believes that his investment
will enable them to take a nicer honeymoon. Frank initially resists because of his
training in business law and his concern that trading on the information would violate
federal law, but he ends up going along with Trudy because he too wants a nice
honeymoon. Trudy’s suspicions come true. The lawsuit is dismissed, the stock increases
dramatically, and she and Frank go on a great honeymoon. The day after they return, an
investigator from U.S. Attorney’s Office interviews her regarding her trades and those
of Frank.
Refer to Fact Pattern 22-1. Is there a basis upon which to hold Frank liable for a
securities violation based upon his receipt and use of the information?
a. No because he had no duty toward Food Corporation.
b. Yes, he could be held liable as a tipper.
c. Yes, he could be held liable as a tippee.
d. Yes, he could be held liable as a remote tippee.
Answer:
Which of the following is NOT a requirement for a Rule 10b-5 violation?
a. The defendant either used the mails, an instrumentality of interstate commerce, or a
facility of a national securities exchange.
b. The defendant made a statement that either misrepresented or omitted a fact of
material importance.
c. The misrepresentation or omission was made with scienter.
d. The statement was made in connection with a public offering.
Answer:
The U.S. government has adopted __________ to facilitate seeking consensus of the
most affected groups regarding the substance of new regulations, a process which arose
from the Japanese style of negotiation.
a. administrative review
b. federal mediation
c. regulatory negotiations
d. rule arbitration
Answer:
The __________ Act permits __________ companies to make a(n) __________ public
offering without meeting all the onerous SEC registration requirements.
a. JOBS, emerging growth, secondary
b. JOBS, farming, initial
c. Sarbanes-Oxley, multinational, secondary
d. JOBS, emerging growth, initial
Answer:
Under Section 16(b) pertaining to short-swing profits, a person will be considered a(n)
__________ of any securities held by his or her immediate family or any other relative
living in his or her household.
a. family owner
b. beneficial owner
c. actual owner
d. imputed owner
Answer:
Which of the following is a legal principle of international law under which nations
submit their decision-making authority to a common organization or institution?
a. Private international law
b. Supranational law
c. The international naturalized agreement
d. The foreign resolution principle
Answer:
Fact Pattern 3-1
Bruce lived in Tennessee and had an appliance store in Tennessee. Bruce’s residence
and the appliance store, however, were within twenty miles of the Virginia state line.
Bruce advertised heavily in both Tennessee and Virginia. Susan, one of his customers
from Virginia, had an unfortunate experience with a refrigerator purchased from Bruce
in that the refrigerator caught on fire and burned down Susan’s house which was worth
$200,000. Susan obtained proof that the refrigerator had actually been returned to Bruce
because it malfunctioned and that, rather than repair the refrigerator and sell it as used,
Bruce sold the refrigerator to her as new without repairs. Susan sued Bruce in federal
district court in Virginia on a number of theories. Bruce opposed the lawsuit on the
basis that it could only be filed in a state court and also on the basis that he was not
subject to jurisdiction in Virginia.
Refer to Fact Pattern 3-1. Which of the following is the most likely result in regard to
Bruce’s claim that the lawsuit could only be appropriately filed in a state court?
a. The court would likely rule that federal court jurisdiction failed to exist because the
parties were not all residents of the same state.
b. The court would likely rule that federal court jurisdiction failed to exist because the
amount in controversy was excessive..
c. The court would likely rule that federal court jurisdiction existed based on the
presence of a consumer complaint.
d. The court would likely rule that federal court jurisdiction existed based on diversity
of citizenship.
Answer:
Which of the following is a component of a market?
a. A product component
b. A geographic component
c. A defined component
d. Both a product component and a geographic component
Answer:
CASE 1, Meinhard v. Salmon(1928), involved the question of respondeat superior.
a. True
b. False
Answer:
Which of the following products has traditionally been viewed as “unavoidably unsafe”
by the courts?
a. Medical services
b. Outdoor consumer goods
c. Some vaccines
d. Automobiles
Answer:
Under a guaranty of collection, the guarantor becomes obliged to pay only after the
lender has attempted unsuccessfully to collect the amount due from the primary debtor.
a. True
b. False
Answer:
__________ which notifies the __________ of the filing of a lawsuit, has traditionally
been accomplished by mail or by personally handing a complaint to the receiving party.
a. Service of process, defendant
b. Service of process, plaintiff
c. In personam jurisdiction, plaintiff
d. Choice of forum, defendant
Answer:
A partnership requires a minimum amount of capital in order to be formed.
a. True
b. False
Answer:
A seller should enter into a contract of indemnity with a manufacturer giving the seller a
right to reimbursement if found liable for a defect caused by the manufacturer.
a. True
b. False
Answer:
UCC Section 2-319 expressly authorizes the buyer and seller to allocate the
__________ between them as they see fit.
a. damages
b. specific performance
c. modification
d. risk of loss
Answer:
The U.S. Supreme Court ruled that living organisms can be patented if they are
human-made.
a. True
b. False
Answer:
Sections 1 and 2 of the Sherman Act have extraterritorial reach.
a. True
b. False
Answer:
Criminal recklessness is when a person consciously intends to cause the harmful result.
a. True
b. False
Answer:
A contract entered into by a minor is:
a. void.
b. voidable.
c. binding.
d. illusory.
Answer:
Which of the following is NOT true regarding Section 2 of the Sherman Act?
a. Unilateral conduct may violate Section 2.
b. Section 2 allows the mere possession of monopoly power.
c. A firm violates Section 2 even if attains the monopoly power by superior
performance.
d. The offense of monopolization has two elements: monopoly power and proof that the
defendant willfully acquired or maintained that power through anticompetitive acts.
Answer:
InStoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc. referenced inthetext,
the U.S Supreme Court analyzed the question ofwhether customer / supplier companies
that agreed to arrangements allowing an issuer to mislead its auditor are liable in a
private action under section 10(b) of the 1934 Act. The Court ruled:
a. that based on ‘scheme liability,” the customer / supplier companies could be held
liable although no public statement was made.
b. that based on “transaction causation” the plaintiffs could establish reliance and that
the plaintiffs were, therefore, entitled to proceed.
c. that plaintiff investors had no private right of action because they did not rely upon
the statements or representations at issue.
d. that the plaintiff investors had no private right of action because the defendants were
not aiders and abettors and, instead, acted primarily on their own behalf outside the
realm of securities regulation.
Answer:
Once an agent is given __________ authority, he or she also has __________ authority
to do whatever is reasonable to complete the task he or she has been instructed to
undertake.
a. express, implied
b. express, absolute
c. express, limited
d. apparent, contractual
Answer:
Jackson owns a business in a foreign country that is considered “friendly” with the U.S.
but which has significant political unrest. Jackson is uneasy about the situation in the
country. He is concerned that his business could be the subject of a taking by the
foreign country or losses due to civil unrest. What advice would you give him?
a. He should seek insurance through the Foreign Insurance Services Company, a
privately run insurance company specializing in foreign risk.
b. He should do nothing at the present, but seek reimbursement through the U.S.
government should losses be incurred.
c. He should seek insurance through the Overseas Private Investment Corporation, a
U.S. government agency specializing in providing insurance for foreign risk.
d. He should sell the company and leave the country because insurance is not available
Answer:
In Morrison v. National Australia Bank Ltd. referenced in the text, the U.S Supreme
Court held that Section 10(b) of the 1934 Act and SEC Rule 10b-5 apply to any
company that trades on the NY Stock Exchange.
a. True
b. False
Answer:
The European Union Market Abuse Directive requires member states to enact national
legislation punishing primary, but not secondary insiders.
a. True
b. False
Answer:
The tort of false imprisonment requires that the plaintiff either knew he or she was
confined or suffered harm as a result of the confinement.
a. True
b. False
Answer:
Self-regulation within the advertising industry has been largely successful in reducing
the number of fast-food commercials directed at children.
a. True
b. False
Answer:
Under the Securities Fraud Enforcement Act, when may a brokerage house be fined?
a. If it knew or recklessly disregarded information that would indicate insider trading
activities on the part of its employees.
b. Whenever an employee is found guilty of insider trading.
c. If it was negligent in failing to discover insider trading.
d. A brokerage house may not be fined under the Act.
Answer:
A __________ cuts off the right to assert a cause of action after a specified period of
time from the delivery of the product or the completion of the work.
a. statute of limitations
b. statute of repose
c. revival statute
d. statute of resolution
Answer:
In a(n) __________, the potential buyer pays the seller for the right, but not the
obligation, to purchase the property during a given time period.
a. right of first refusal
b. real estate investment trust
c. option contract
d. preliminary agreement
Answer: