ALTERNATE CASE PROBLEM ANSWERS
CHAPTER 38
LIMITED LIABILITY COMPANIES
AND SPECIAL BUSINESS FORMS
38-1A. Joint ventures
(Chapter 38—Pages 746–748)
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 to carry out
the common purpose.” When one participant in a joint enterprise negligently causes an injury while
38-2A. Joint ventures
(Chapter 38—Pages 746–748)
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
B-164 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 38
38-3A. Foreign limited liability companies
(Chapter 38—Page 744)
The court denied Page’s motion to dismiss the case. The court acknowledged that “defendant’s
38-4A Joint ventures
(Chapter 38—Pages 746–748)
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
38-5A. Limited liability companies
(Chapter 38—Pages 741–742)
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
38-6A. Foreign limited liability companies
(Chapter 38—Page 744)
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 Kansas Supreme Court. The state supreme court
38-7A. Limited liability companies
(Chapter 38—Pages 742–743)
The court issued a summary judgment in favor of the defendants, and Collins appealed to a state
38-8A. Joint ventures
(Chapter 38—Pages 746–748)
B-166 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 38
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 projects. In this
case, the court ruled that the “letter agreement” was an enforceable contract establishing a joint
38-9A. 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 that any information generated
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. When a joint ven–