ALTERNATE CASE PROBLEM ANSWERS
CHAPTER 38
LIMITED LIABILITY COMPANIES
AND SPECIAL BUSINESS FORMS
38-1A. Joint ventures
The court held that two elements are necessary for a joint venture: “(1) a mutual understanding
for a common purpose, and (2) a right to a voice in the direction and control of the means used
38-2A. Joint ventures
The court held that Windy City and Bickett were engaged in a joint venture, with Bickett carrying
on the usual course of its business when the balloon struck the power lines and crashed to the
ground. The court defined a joint venture as “an association of two or more persons to carry on
B-2 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 38
38-3A. Foreign limited liability companies
The court denied Page’s motion to dismiss the case. The court acknowledged that “defendant’s
conclusion is reasonable from a casual reading of the statute,” but “it is not the law in New
Jersey. Time and time again, New Jersey courts have reiterated their understanding that a
company’s failure to register before filing does not require dismissal so long as the company
38-4A Joint ventures
The court found that the transaction between the parties was not a loan but a joint venture
“wherein the parties pooled their respective assets and talents for the completion of a specified
transaction, the salvage and sale of the lumber and agreed to divide between themselves the
38-5A. Limited liability companies
The court held that there was diversity of citizenship between the parties. The court recognized
that JMTR was organized in Rhode Island but emphasized that JMTR was a limited liability
company (LLC). “Other courts considering the question [of an LLC’s citizenship for purposes of
diversity jurisdiction] have held that a limited liability company is a citizen of the state or states of
APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 38 B-3
38-6A. Foreign limited liability companies
The Kansas Department of Human Resources (KDHR) applied Kansas corporate law, decided
that members of a foreign limited liability company doing business in Kansas are personally and
individually liable for unpaid wages, and ordered Matjasich and Hanson to pay the Heartland
employees. Matjasich and Hanson appealed to a Kansas state court, which applied both
Kansas and Utah state law to affirm the KDHR order. Matjasich and Hanson appealed to the
38-7A. Limited liability companies
The court issued a summary judgment in favor of the defendants, and Collins appealed to a
state intermediate appellate court, which affirmed the lower court’s judgment. The appellate
38-8A. Joint ventures
A joint venture is an enterprise in which two or more persons or business entities combine their
efforts or their property for a single transaction or project, or a series of related transactions or
B-4 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 38
38–9A . Limited liability companies
The reviewing court affirmed the decision of the state appellate court. When the New York
Limited Liability Company Law was enacted in 1994 it did not mention derivative suits.
38–10A. A QUESTION OF ETHICS
1. The court ordered Stoughton to stop making thin walled over-the-road containers.
(The court also ordered American President Lines, Limited (APL) to pay damages to Stoughton
for breach of contract.) Stoughton appealed to the U.S. Court of Appeals for the Seventh Circuit,
arguing that it could use, in its own business, information that it had developed. APL asserted
2. If joint venturers were not subject to a fiduciary duty of loyalty to their joint venture, it
would reduce the willingness of individuals to enter into this form of business enterprise. For this
reason, joint venturers should subordinate their own interests to the welfare of the joint venture.