Darren Troll CEO of Cash Cow Incorporated (CCI) brought CCI%u2019s two Vice Presidents John Quick and Dirk Driven into his office to unveil his new plan for
a CCI amusement park called FUN-A-MANIA-USA (FAMUSA). It was to be located outside Washington D.C. and its design was to be based on the design of D.C.
itself. He had pitched his idea to the Board of Directors but it was not approved. However Troll was confident that the project would be a cash cow. He felt
sure that once the Board saw the project succeed they would approve the 3.7 million dollar expenditure.
In Troll%u2019s mind the key was to get the project up and running before the next Board meeting some 11 months down the road. He assigns each VP tasks and
tells them that this is their number one priority. John Quick known for his fast work is first up. He is assigned the task of finding the money to support
the project from CCI%u2019s budget and to set up accounts for a new separate corporation named Fun-A-Mania-USA Inc. Quick is also expected to set up the
corporation. Troll tells Quick that he has until the next day Friday to get the money and accounts in place. Troll emphasizes to Quick and Driven that
everything has to be in the name of the new company because he doesn%u2019t want the Board to get wind of things until they are all in place. %u201CThink of it
as a surprise gift for them%u201D he said. Troll then turned to Quick and said %u201CYour job is to find the site buy the land and construct the amusement
park. You have 10 months to get the job done.%u201D Both men roll their eyes as they leave the office. The deadline is impossible.
Back in his office John Quick gets to work. John decides that his first priority is to find the funding for the project. After careful review of the CCI
budget John decided that there are two ways he can raise the money for the project quickly. The first way is to sell the 2.8 million dollar corporate
apartment in San Francisco. Overlooking the Golden Gate Bridge this apartment should be very easily sold even in today%u2019s market. In fact he thinks he
knows the perfect person Jack Yono. Yono had called Quick only the last week and asked if Yono knew a place in SF for sale as Yono was being transferred from
Japan to the Bay area by his company. Quick feels certain that Yono can afford the apartment and knows that Yono can save real estate broker-fees if the sale
is direct to Yono. He picks up the phone and called Yono who was more than delighted to get the apartment for 2.8 million. He would wire him half of the money
as a deposit this afternoon and pay the rest when he got the contract of sale and Deed. It would be a cash transaction. John told him the documents would come
via e-mail this afternoon after the deposit wire had been received. He could close the deal by tomorrow. Everyone was pleased when they hung up the phones.
Quick called the bank and arranged to set up a new account in the FAMUSA name.
The second part of John%u2019s plan was to fire two upper management people Joe Jolly and Jill Jackal. Joe was the Director of Sales and Dirk Driven%u2019s
gopher. The sales figures were down this year and this would be a perfect excuse to let him go. CCI could save $450000 dollars by letting him go and promoting
his immediate underling with a salary bonus of only $100000. John wanted to make sure first that CCI wouldn%u2019t have any problems with his employment
contract. He pulled Joe%u2019s file and found that he was correct in surmising that he had signed one of the old contracts. He was bound to a six year covenant
not to compete even if he was fired. Furthermore all disputes with the contract were to be handled through arbitration at Jolly%u2019s expense unless Jolly
won. John was sure that wouldn%u2019t happen because CCI would get to pick the person. John decided if he let him go with two weeks notice and severance pay
that would be enough to prevent any problems. What John forgot to check because it wasn%u2019t in the new contracts was the clause on dismissal of the
employee. It provided that when the employee was dismissed without thirty days notice and severance pay any disputes would revert to the Court system for
Jill Jackal though was another matter. She had negotiated her own contract and was sharp and talented. Her %u201CCow Time%u201D cartoon is a real hit. It
brings millions to the company each month. Dealing with her would prove a headache for sure. Quick needed her $500000 salary. Fortunately for him Jill
entered his office at the moment and informed him that she was resigning her position as Creative Director. She was giving her two weeks notice. She also said
that she wanted the $100000 per month %u201CCow Time%u201D royalty checks that Troll had promised her last month. The royalty checks were to begin that same
month and continue as long as %u201CCow Time%u201D was used by CCI. Quick wanted to laugh. Troll was always making promises like that to people but he never
paid. He said nothing. At least he no longer had to fire her.
John had one last thing to do before he could go home for the day. He had to get the corporation for FAMUSA formed. Normally he would have gotten legal to
handle this but they had gone home for the evening. He would just take one of the corporate books from the shelf and scan the documents into the computer. He
would edit the existing name and put Fun-A-Mania-USA in its place. He names Troll Driven and himself the shareholders and Board of Directors with the thought
that this could be changed later to CII when the Board approves the park plan. He had accomplished the job Troll gave him in one day.
The Board of Directors now very much aware of FAMUSA plan and not too happy come to you for advice. They want your legal opinion on the following questions.
Instructions: select the best answer and give a two-to-three sentence explanation as to why you believe it is correct
1. Can Troll justify his action to start the amusement park project by asserting the best business judgment rule?
a. Yes because Troll had diligently researched the project and in good faith felt it to be in the best interest of the company.
b. Yes because he exercised his judgment in believing that other CEO%u2019s like him would also make the same judgment that he did.
c. No because he failed to use care and diligence in executing his plan.
d. No because he failed to use care and failed to do so in a manner that a prudent person would believe to be in the best interest of the company.
2. Will the company be able to rescind John%u2019s sale of the condo to Yono?
a. Yes because John acted outside the scope of his employment by selling the condo to a friend.
b. Yes because Yono knew the condo was titled in the name of CCI not FAMUSA and that the proceeds of the sale were to go FAMUSA account.
c. No because Yono had no reason to believe that the FAMUSA account was not owned by CCI.
d. No because as Vice President of CCI John had the implied apparent authority to act as agent of CCI and bind CCI to the sales contract. Where the money
went was irrelevant.
3. Joe Jolly has brought a suit in the state court against CCI to have the employment contract held void because he claims the contract was against public
policy. The board wants to know if they can force him into arbitration as is stated in his contract.
a. Yes because the terms of the contract call for arbitration to settle disputes.
b. Yes because the courts will not hear contract cases when a contract calls for arbitration.
c. No because the Federal Arbitration Act will permit court suits in cases where equity or legal grounds exist to revoke them.
d. No because the terms of the contract itself allow him to bring the suit in the Court system as John did not give him thirty days notice.
4. Assuming that Jolly gets to keep the suit in the Court System under what legal theory is he most likely to win his case.
a. It is an adhesion contract which by definition is a contract whose terms he was unable to negotiate.
b. It is an unconscionable contract because CCI used their dominant position to impose an unfair %u201Ccovenant not to compete%u201D clause and Jolly had no
other job alternative at the time.
c. It is against public policy because the covenant not to compete is so long it approaches slavery.
d. It is an adhesion contract but its terms are so unfair that the court could use its equity power to make it fair.
5. Jill Jackal has also filed suit against CCI as she has not yet received her promised royalty checks. Will Jill win?
a. No because the oral agreement between Troll and Jackal cannot be heard by the court as it is not an exception to the parole evidence
b. No because even if the Court heard the evidence the oral agreement is not supported by any consideration.
c. Yes because the cartoon was her creation and CCI should have to pay her for her ideas.
d. Yes because her employment contract was amended by Troll when he verbally agreed to pay the royalty premium.
Instructions: In six to eight sentences explain your answers to the following questions
Can the Board sue Troll and John for negligence?
If so why?
If not why not?
Instructions: Frame a complete definition of the legal question asked and explain how the law applies to the facts. Suggested length is two to three
(1) Is FAMUSA a viable corporate entity in the eyes of the law? Explain. Be sure to include in your answer a discussion of the nature of a corporation.