In CASE 20.4In re Abbott Laboratories Derivative Shareholders Litigation(2003), the
shareholder-plaintiffs alleged the corporate directors breached their duty of good faith
through their failure to follow up on repeated notices of regulatory noncompliance.
How did the court rule?
a. The court ruled the directors were not liable and did not breach any duty of good faith
because they were unaware of the issues, and accepted corporate governance
procedures did not require the disclosure of the noncompliance notices to them.
b. The court ruledthe directors could not be held liable because the corporation’s
certificate of incorporation exempted directors from liability for breach of the duty of
care.
c. The court ruledthe business judgment rule applied and that the plaintiffs’ allegations
could not withstand the protection of that rule.
d. The court ruledthe plaintiffs sufficiently pleaded allegations that, if true, constituted a
breach of the duty of good faith leading to the directors’ actions falling outside the
protection of the business judgment rule.
Answer:
The federal trademark act is known as the __________ Act.
a. Trademark
b. Signal
c. Smith
d. Lanham
Answer:
Copyright protection does not extend to derivative works.
a. True
b. False
Answer:
State laws regulating genetically modified food are typically declared unconstitutional
on the basis that they are preempted by federal law.
a. True
b. False
Answer:
An environmental impact statement is not required from the government before actions
are taken that will affect the environment, but such a statement is required from private
developers.
a. True
b. False
Answer:
Administrative agencies have been referred to as the fourth branch of the U.S.
Government.
a. True
b. False
Answer:
Countries are prohibited by international law from regulating the percentage of foreign
ownership of businesses that are incorporated within their borders.
a. True
b. False
Answer:
Phising involves tricking victims into divulging personal information (especially credit
card information) over the Internet.
a. True
b. False
Answer:
Which of the following is true regarding the regulation propounded by the SEC titled
Regulation Analyst Certification, Regulation AC?
a. It prohibits analysts from issuing reports that they do not personally believe to be
true, and it also requires the disclosure of any analyst compensation arrangements
related to specific recommendations or views contained in research reports.
b. It prohibits analysts from issuing reports that they do not personally believe to be
true, but it does not require disclosure of any compensation reports.
c. It requires that analysts report compensation arrangements in relation to
recommendations or views contained in research reports but, because of problems
involving proof, it does not specifically prohibit analysts from issuing reports that they
do not personally believe to be true.
d. The regulation will be put into action in phases with the first phase, effective in 2012,
requiring disclosure of compensation arrangements in relation to recommendations or
views contained in research reports and the second phase, effective in 2014, prohibiting
entirely the issuance of recommendations or views in relation to stock for which an
initial public offering was made within the previous twelve months.
Answer:
A private-sector employee can avoid at-will status by negotiating a contract that
provides for a specific term of employment and defines how the contract can be
terminated.
a. True
b. False
Answer:
Which of the following is true regarding express authority?
a. It may be given by the principal’s actual words but not by action.
b. It may be given by written contract only.
c. It may be given by the principal’s actual words and also by an action that indicates
the principal’s consent.
d. It may be given by action but only after a contract of agency has been signed.
Answer:
Without a constitutional grant of power, the federal government cannot act.
a. True
b. False
Answer:
According to the __________ doctrine, a court may determine that the inclusion of
sufficient cautionary statements in a prospectus renders immaterial any
misrepresentations and omissions contained therein.
a. actual cause
b. bespeaks caution
c. common sense
d. trap door
Answer:
The Fifth Amendment grants the criminal defendant a right to a trial by jury.
a. True
b. False
Answer:
Fact Pattern 2-2
Wally and Janice are both managers in a small corporation set up to manufacture
sporting goods. They both receive bonuses for any ideas that benefit the company,
although Janice’s bonus is computed at a lower rate than Wally’s because she has been
at the company a shorter amount of time. Janice has a great marketing idea that would
result in her receiving a bonus of $1,000. She has it all worked out on her computer.
Unknown to her, one evening after business hours, Wally obtains the information from
her computer and submits it himself the next day. He is immediately awarded a bonus
of $2,000 for the information. Fortunately for Janice, Sally, a custodian, saw Wally in
Janice’s office and heard him calling his wife while he was there to brag about his
misdoings. Sally informed Blaire, the CEO, of Wally’s actions.
Refer to Fact Pattern 2-2. Which of the following types of justice is involved if Blaire
requires that Wally give Janice $1,000?
a. Compensatory
b. Retributive
c. Fair
d. Justifiable
Answer:
Federal legislation to amend Title VII to include sexual orientation has not been
enacted.
a. True
b. False
Answer:
Monica tells all her employees that she expects them to treat others as they would like
to be treated. Which of following is a descriptive term for Monica’s requirement?
a. The Required Rule
b. The Accepted Rule
c. The Golden Rule
d. The Advanced Rule
Answer:
The principal has the right to demand reimbursement from the agent for any damages
paid to a third party because of an agent’s negligence.
a. True
b. False
Answer:
Research shows that because of the severe penalties involved, insider trading in China
is very rare.
a. True
b. False
Answer:
The respondeat superior doctrine typically applies to the actions of independent
contractors.
a. True
b. False
Answer:
In 2014, the FDA proposed a rule that would extend its authority to e-cigarettes.
a. True
b. False
Answer:
Legally astute management teams practicing strategic compliance management:
a. view the cost of complying with government regulation is viewed as an investment,
not an expense.
b. view the cost of complying with government regulation is viewed as an expense
which should be avoided until legal action is threatened.
c. do only the minimum necessary to comply with any applicable law should be done.
d. view the cost of complying with government regulation as an expense which should
be avoided until legal action is threatened, while only engaging in the minimum efforts
necessary to comply with any applicable law.
Answer:
Which of the following does NOT involve liability for an intentional tort?
a. A defendant is found liable for battery
b. A defendant is found liable for false imprisonment
c. A defendant is found liable based on successor liability
d. A defendant is found liable for invasion of privacy
Answer:
In the caseDistrict of Columbia v. Hellerreferenced in the text, the U.S. Supreme Court
invalidated DC’s total ban on handguns.
a. True
b. False
Answer:
Researchers have determined that Fortune 500 firms convicted of illegal conduct earned
significantly lower returns on assets than firms that had not been convicted of
wrongdoing.
a. True
b. False
Answer:
Which of the following is NOT a part of a patent application?
a. The specifications
b. The claims
c. The drawings
d. The declaration of prior art
Answer:
The preemption defense involves certain __________, which set minimum safety
standards for products.
a. federal laws
b. court decisions
c. state laws
d. private guidelines
Answer:
A __________ offering of securities is a subsequent offering by a person other than the
issuer.
a. secondary
b. restricted
c. blank check
d. shelf
Answer:
A(n) __________ is defined under the 1933 Act as any person who has purchased from
an issuer with a view to, or offers or sells for an issuer in connection with, the
distribution of any security.
a. investment banker
b. underwriter
c. dealer
d. secondary seller
Answer:
The Omnicare, Inc. v. NCS Healthcare, Inc. casediscussed in the text, involved a
question of whether directors of an insolvent publicly traded company violated their
fiduciary duty when they entered into an agreement for the sale of the company to a
particular interested buyer regardless of other offers. The court ruled that:
a. the directors violated their fiduciary duty and lacked the authority to agree to an
absolute lock-up guaranteeing the sale and agreeing to forgo consideration of future
offers.
b. the directors violated their fiduciary duty because the agreement was kept secret from
majority shareholders but that, otherwise, the agreement foregoing consideration of
future offers would have been valid.
c. the directors violated their fiduciary duty because the agreement was kept secret from
minority shareholders but that, otherwise, the agreement foregoing consideration of
future offers would have been valid.
d. the directors satisfied all fiduciary duties because there was no evidence of bad faith
or self dealing.
Answer:
Fact Pattern 4-1
Martin is a legal secretary for Allison, a partner in a large law firm in Knoxville. Allison
finds Martin quite annoying. The last straw occurs when Martin tells Allison that she
looks pale and appears to have been partying a bit too hard. Allison fires Martin on the
spot. Martin tells Allison that he has been studying constitutional law, and that she is
guilty of violating not only his due process rights but his equal protection rights as well.
Martin says that he was entitled to a hearing before any disciplinary action was taken,
and that the firm’s practice is that all secretaries are entitled to tell attorneys when they
do not appear to be functioning at their best. Martin says that he is filing suit tomorrow.
Refer to Fact Pattern 4-1. Which of the following is true regarding Martin’s ability to
win on a claim alleging violation of the equal protection clause of the fourteenth
amendment to the U.S. Constitution?
a. Martin will lose because no statute or other action involving the government was
involved.
b. Martin will lose only if other female secretaries have been fired under similar
circumstances.
c. Martin will lose only if other female and male secretaries have been fired under
similar circumstances.
d. Whether Martin will lose or win depends on whether the judge decides to apply a
rational basis test or a strict scrutiny test to his claims.
Answer:
While state restrictions may apply, there are no federal restrictions on lenders and
borrowers entering into transactions whereby secured credit will be sued to acquire
stock.
a. True
b. False
Answer:
Under CERCLA the Superfund money is spent:
a. on a first come first served basis.
b. based in part on a national priorities list.
c. in chronological order from the date of the discovery.
d. according to the allocation voted by Congress.
Answer:
__________ is the legal procedure by which a creditor may collect a debt by attaching a
portion of a debtor’s weekly wages.
a. Rescission
b. Garnishment
c. Joinder
d. Attachment
Answer:
When would the “aided-in-the-agency” theory likely be asserted?
a. By a defending employer in an attempt to show that although an employee was acting
within the scope of employment, the employer should not be held responsible for the
employee’s actions because the employee was aided by a non-employee.
b. By a plaintiff in an attempt to show that even if an employee was acting outside the
scope of employment, the employer may be liable for the employee’s action because the
employee was aided by the agency relationship.
c. By a defending employer in an attempt to show that an employee was acting outside
the scope of employment and that the employer should not, therefore, be held liable for
the employee’s actions.
d. By a plaintiff in an attempt to show that an employee was acting within the scope of
employment and that the employer should, therefore, be held liable for the employee’s
actions.
Answer:
Dave has been arrested in connection with a recent string of burglaries. While he was in
custody, he was shown falsified laboratory results that connected him with the crimes.
Based on the false evidence, Dave confessed to the crimes during interrogation. Dave
was then given his Miranda warnings and booked. What constitutional rights may Dave
assert to prevent his confession being used against him at trial? Does the state have any
defenses available? Discuss fully.
Answer:
Discuss what types of material is covered by the attorney work-product doctrine and
explain the rationale behind it.
Answer:
Set forth the ways described in the text in which ethics and law are related.
Answer:
In what five categories does the Franchise Rule require a franchisor to make material
disclosures to prospective franchisees?
Answer:
Paul is suing Dan for negligence arising out of a boating accident. What are the
elements that Paul must prove in order to win his case? Discuss fully.
Answer:
Under the resource-based view of a firm, when can a firm’s resources be a source of
sustained competitive advantage?
Answer:
Set forth the differences between the current British common law system and the U.S.
common law systems. Describe the difference between a solicitor and a barrister in the
British system.
Answer:
Discuss what is meant by the ripeness doctrine, why it is needed, when issues involve
ripeness usually occur, and when a dispute is generally ripe for determination.
Answer:
Mike owns a small but successful coffee house. He decides to incorporate. Considering
only tax benefits, should Mike form a C corporation or a subchapter S corporation and
why? Discuss taxation under both forms.
Answer:
Explain the purpose and scope of the Robinson-Patman Act. What factors will courts
use in determining whether or not a violation has occurred? Discuss fully.
Answer:
List the two main schools of ethical thought and their main focus.
Answer:
Officer Sam obtained a search warrant to search Susie’s apartment based upon a tip
from Alice, an informant, to the effect that Susie was selling drugs. Alice had actually
lied to Sam because she was angry with Susie for going out with Alice’s boyfriend. Sam
was suspicious of all the tenants in Susie’s building and got a search warrant authorizing
a search of the building for anything illegal. In Susie’s apartment he found a small
amount of marijuana that Susie used personally. Alice started feeling guilty and
confessed that she had lied about the whole matter. Susie is being prosecuted. Does she
have any defense based upon the warrant? Why or why not?
Answer:
Why do vendors today typically prefer to license software rather than sell it outright?
Answer:
Bertha works for Bad Taste, Inc. She has been employed for over 12 years by the
company without a written employment contract. Last year Bertha was promoted to the
position of executive secretary. The company policy manual issued 6 years ago
promises that no employee may be terminated without 2 prior written warnings
regarding poor job performance. Bertha has always received excellent job reviews.
Recently the president resigned and was replaced by Fred, who promised to improve
productivity by 20%. Bertha has just learned from Fred that she is being replaced by
Sheila, who was Fred’s former executive secretary. What claims may Bertha make
against Bad Taste, Inc. for wrongful discharge? Does the company have any defenses?
Discuss fully.
Answer:
You are the owner of a small Internet company. You are planning a public offering in 12
months. You ask your accountant to prepare an optimistic business model that shows a
greater profitability potential than a conservative estimate would produce. When the
accountant questions your profitability assumptions, you remind him that he has been
given 10,000 shares of the company stock at a low price. A public offering would
dramatically increase the value of those shares. Discuss the ethical issues faced by the
owner and the accountant. How should they be resolved?
Answer:
What was the conclusion of the court in Unocal Corporation v. Mesa Petroleum Co.
regarding the application of the business judgment rule to actions of directors in
response to a takeover attempt?
Answer:
Set forth the three tests under which a general partnership may be found to be a
security?
Answer:
Set forth the four main provisions of the CAN-SPAM Act.
Answer:
What are the four basic parts of the rationale for strict product liability?
Answer:
Define and explain the theory behind the economic loss rule.
Answer: