Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Chapter 41 - History and Nature of Corporations
V. ANSWERS TO PROBLEMS AND PROBLEM CASES
1. The advantage of free transferability of the shares does not exist in this context, because there
are not a large number of investors who are interested in buying into a closely held business
dominated by you and your four friends. Therefore, there is no market for resale of these
shares. Yet free transferability of the shares in this business is a problem, as sales of shares
2. No with regard to MWLP and yes with regard to MWINC. The court applied the rule of the
International Shoe case, finding that MWLP did not maintain sufficient minimum contacts
with Maryland, and therefore, the state’s the exercise of jurisdiction met the general test of
essential fairness. The court cited authority that when the cause of action does not arise out
of, or is not directly related to, the conduct of the defendant within the state, contacts
reflecting continuous and systematic general business conduct will be required to sustain
jurisdiction. Because the plaintiff introduced no evidence that MWLP had contacts with
3. No. 14th Street Photo does not have “certain minimum contacts” with Michigan justifying the
Michigan court’s litigating the merits of the sales transaction. While 14th Street Photo makes
Internet sales to residents in Michigan through its website, granting to Michigan special
jurisdiction over 14th Street Photo for those transactions, Michigan does not have general
jurisdiction for all of 14th Street Photo’s sales. More substantial contacts, such as having a
41-1
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 41 - History and Nature of Corporations
4. No. Note that although this case involved an LLC, the law applied is the same as if the
business were a corporation. The Court concluded that BN Online did not have a substantial
nexus with the parish to justify the imposition of a sales tax. The existence of a close
corporate relationship between various Barnes & Noble affiliates and a common corporate
name does not mean that the physical presence of one is imputed to the other. BN
Booksellers and BN Online were formally separate corporate entities that were wholly owned
5. The Supreme Court remanded the case. The Due Process Clause requires a definite link,
some minimum connection, between a state and the person, property, or transaction it seeks to
tax, as well as a rational relationship between the tax and the values connected with the taxing
state. The Commerce Clause forbids states to levy taxes that discriminate against interstate
6. Yes. The court found that Shrimp, Inc. was required to qualify to do business in Texas
because it was not engaged in a single transaction that could be completed within 30 days.
Therefore, by failing to quality, Shrimp, Inc. would have been unable to use Texas’s courts
7. Yes. The NCAA is clearly doing intrastate business in Texas. It is making many contracts in
Texas (for the rental of the Reliant Stadium and hotel rooms at least). Its employees are
41-2
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 41 - History and Nature of Corporations
8. No. Note that although this case involves an LLC, the law applied is the same as would apply
if the business were a corporation. The court of appeals affirmed the findings of the trial
court that Gasstop had not proved thin capitalization, alter ego, or failure to comply with the
formalities of LCC law. The failure of the LLC was not due to undercapitalization, but to a
9. No. The court held that it is permissible for a person to limit his liability by using the
corporate form. It was not enough for Walkovszky to allege that the assets of the corporation
10. REIS, Inc. should form 25 corporations, each of which owns one mall. The corporations will
be wholly owned by REIS. As a holding company, REIS will raise capital for all the
subsidiaries and allocate the capital to each subsidiary as necessary. REIS will be the
To prevent the piercing of the veils, REIS should adequate capitalize each subsidiary, make
sure each has its own board of directors and shareholder meetings, keep separate the assets of
11. Yes. The court pierced Elite Moving’s veil after finding that Branscum formed Elite Moving
to evade the obligation to Castleberry. “The variety of shams is infinite, but many fit this
12. No. The court found that there was no evidence that corporate formalities were not observed,
that there were non-functioning officers or directors, or that there were inadequate corporate
41-3
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 41 - History and Nature of Corporations
13. No. While Golino dominates J-Go, she is not engaging in any improper conduct, such as
treating the corporation as her alter ego or defrauding creditors by looting the corporation.
Although she elects her teenage daughter to the board of directors, the daughter receives only
41-4
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
