Hello,First attachment is just a discussion and does not need to be a lengthy paper/report format it is simply a discussion that can be a few paragraphs for each of the chosen two scenarios.
discussion.docx
organizations_and_liability.docx
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Assignment 1: Discussion Questions
By Wednesday, April 26, 2017, submit your answers to this Discussion Area. Post the
assignment directly in the discussion thread and label the answers with the appropriate scenario
number. Do not copy the scenarios to the thread with the answers. Start reviewing and
responding to your classmates as early in the week as possible. You should review and critique
the work of other students as outlined in the rubric by Sunday, April 30, 2017.
Select two of the scenarios below and explain the best solution. Include comments related to any
ethical issues that arise. To support your answer, you should try to locate at least one case that
has been decided on the issue or one that is currently pending.
Scenario I—Bankruptcy
Rusty Weaver, a project manager for the Tipton Machinery, filed a petition in bankruptcy
under Chapter 7, seeking to discharge $75,000 in credit-card debts and $45,000 in student loans.
Weaver’s wife died and left him with two children, Paul, who attended college, and Diana, who
was thirteen years old. According to Weaver, Diana was an “elite” swimmer who practiced ten to
fifteen hours a week and placed between first and third at more than thirty competitive events.
Diana was homeschooled with academic achievements that were average for her grade level. His
petition showed monthly income of $5,325 and expenses of $5,200. The expenses included
annual homeschool costs of $8,200 and annual swimming expenses of $5,000. The expenses did
not include college costs for Paul, or airfare for his upcoming summer trip to Europe, and other
items. The trustee allowed monthly expenses of $4,227, with nothing for swimming, and asked
the court to dismiss the petition.
•
If Weaver qualified for Chapter 7, which debts would be discharged? Which debts
would not be discharged? Why?
•
Using the median income from your state, does Weaver qualify for Chapter 7?
•
Should the court grant the trustee’s request? Does Weaver have other options if
the Chapter 7 petition is dismissed?
Explain your answers and support them with relevant scholarly sources.
Scenario II—LLC Liability
Plaintiffs Karl and Ginny Drake were injured by lead paint while living in a house owned by
Riverwood Homes, LLC. The plaintiffs sued Bill Ding, a member of the LLC at the time it
owned the property, alleging that he was liable for their injuries. Ding had limited involvement
with the property. He has never visited the property, and neither he nor the LLC was aware that
the plaintiffs were occupying the property until after the LLC acquired it. Once they realized this
fact, they took legal action to have the plaintiffs removed. The applicable housing code imposes
liability on any individual who “owns, holds, or controls” the title to the property.
•
Is Ding liable for the plaintiffs’ injuries?
•
What are the policy arguments in favor of both parties?
Scenario III—Securities
In 2010, after working at Regions Bank for 6 years, Noah Lott helped found Nova Capital
Corporation, a venture capital firm that invested in the technology sectors. NCC went public in
2012, and Lott served as its CEO and chairman of the board. Various documents filed with the
SEC stated that Lott “earned his MBA in finance from Harvard University and an undergraduate
degree in management.” In fact, he attended Harvard for only one year and did not graduate.
After being pressured by a journalist, Lott disclosed the misrepresentation to the NCC board. The
same day, the company issued a press release correcting the statement.
The press responded negatively to “another CEO that lied about his resume” and speculated
about “what else might not be right.” On the day the press release was issued, NCC’s stock price
dropped from $33.58 per share to $26.40, but it fully recovered within six weeks.
Shareholders sued, alleging that the misrepresentation violated section 11 of the 1933 Act,
section 10(b) of the 1934 Act, and Rule 10b-5.
•
Was Lott’s lie about having a college degree material?
•
Would your answer be the same if a CEO lied about having helped to take a company
through an initial public offering and subsequent acquisition by another company and
having led a pharmaceutical company from incorporation through human clinical trials
and launch of a new drug?
•
If you were a member of the NCC board, would you be comfortable keeping Lott as CEO
once you learned that he had lied about having a college degree?
Assignment 2: Case Studies and Research Paper
This assignment consists of two parts.
Part I—Case Studies
Select one of the three case studies. Analyze the facts in the scenario and develop appropriate arguments and
recommendations using case laws and scholarly sources. Do not copy the case study to the paper. Cite your
sources in APA format on a separate page.
Case Study I—Organizations and Liability
Vance Armstrong was the sole incorporator of Triathlon Training Inc., a corporation designed to operate a
training center for triathletes of all ages. The business was incorporated according to Florida law in January
2015, with Armstrong as the sole director and shareholder. Armstrong contributed $20,000 of starting capital,
which was just enough to make minor repairs to the property he purchased for $400,000 with a loan from the
bank. The corporation had no liability insurance. On June 15, 2015, the center opened for business. Over the
next few months, the corporation operated with a profit.
In July, Armstrong took a two-week vacation in France and used a check written on the company bank
account to purchase his airline ticket. In September, Armstrong decided to have the pool resurfaced. Because
business had slowed and the corporation’s bank account did not have sufficient funds, Armstrong wrote a
personal check to cover the work. Armstrong feared he would not make enough money through the winter to
turn a profit, so he decided to work a part-time job selling fitness equipment as an independent contractor for
Bowflex. Armstrong used the training center’s office phone to make calls, the copy machine for copies, and
the computer for searches. He made a substantial profit, which was maintained in a third bank account not
associated with Triathlon Training or his personal account.
On April 1, 2016, a child with a mild learning disability drowned in the pool while training for the local
children’s triathlon. The parents brought a suit for wrongful death against Triathlon Training Inc. and against
Armstrong in his individual capacity as owner. At the time of the suit, the corporation had less than $2,500 in
its bank account. Because of these limited funds, the child’s parents hoped to recover most of their damages
directly from Armstrong, who lived in a mansion on the beach.
•
Will the parents be successful in holding Triathlon Training Inc. liable for the child’s death?
•
What should the parents argue in order to hold Vance Armstrong liable in his individual
capacity? Will the parents prevail? Why or why not?
•
How could Armstrong have protected himself against this type of potential liability?
Case Study II—Insider Trading
During a session with her doctor, Billy Mooney, Maggie Mason mentioned in confidence the imminent
merger of Walgreens with Rite-Aid. Mason’s ex-husband, Gus Mason, was on the board of directors at
Walgreens. Mooney communicated the information to a securities broker, Olive Green, who immediately
made trades in Walgreen’s securities for her own account and for her customers’ accounts.
•
Did Mooney, Maggie Mason, Gus Mason, or Olive Green engage in illegal insider trading?
Explain the potential culpability of each party. Include possible civil or criminal penalties for each
party.
•
Was the conduct of the parties ethical?
Case Study III—Securities
PEM, a pharmaceutical company created by the merger of Pfizer, Eli Lilly, and Merck, sells an over-thecounter cold remedy through its wholly owned subsidiary Mizac LLC. Between 2009 and 2013, PEM received
several complaints from physicians and Mizac consumers alleging a connection between the use of Mizac’s
leading product, Mizac Cold Remedy, and loss of smell (anosmia). Even after being notified of an American
Rhinologic Society presentation that described eleven Mizac users who lost their sense of smell after using the
product, PEM made announcements that Mizac was “poised for growth in the upcoming cough and cold
season” and that the company expected that revenues would “be up in excess of 50% and that earnings, per
share for the full year [would] be in the 25 to 30 cent range.” In an SEC report, Mizac reported the potential
“material adverse effect” that could result from consumer complaints of anosmia but did not disclose that two
consumers had already sued.
In early 2014, PEM’s stock price fell by about 22% when Dow Jones Newswires reported that, in light of at
least three lawsuits, the Food and Drug Administration was investigating complaints that Mizac may have
caused some users to lose their sense of smell. PEM revived its stock price with a press release stating that
there had been no reports of loss of smell in clinical trials of Mizac and that anosmia can result from the
common cold. The stock price fell again when Good Morning America reported that more than a dozen Mizac
users had lost their sense of smell. PEM reported to the SEC that, after meeting with “physicians and scientists
to review current information on smell disorders,” it concluded that “there is insufficient scientific evidence at
this time to determine if Mizac, when used as recommended, affects a person’s ability to smell.” A few weeks
later, PEM stated that it would begin “animal and human studies to further characterize these post-marketing
complaints.”
Shareholders brought a class action against PEM alleging that it violated SEC Rule 10b-5 and section 10(b)
of the 1934 Act when it made misleading statements that failed to disclose reports of the possible link between
Mizac and anosmia in an effort to maintain artificially high prices for PEM securities. PEM argued that the
adverse event reports were not material information, as no statistically significant relationship was shown
between reports of anosmia and use of the Mizac product. Plaintiffs countered that materiality should be
determined by the “total mix of information” test.
•
Did PEM have a legal obligation to disclose information about possible side effects of its drug
when there was no statistical information that linked use of the drug with the side effects?
•
What types of information will the court review to determine whether using the drug causes the
side effect?
•
What standard will the court apply to address evidence of the claim?
•
Have the plaintiffs stated a valid claim under Rule 10b-5 and section 10(b), or will the court
grant PEM’s motion to dismiss?
•
Did PEM act ethically?
Part II—Research Paper
This week, you should locate and examine at least two cases that are related to the topic you selected.
Summarize the cases and explain how they are related to your topic. If possible, review one state and one
federal case. You may review more than two cases. Westlaw Campus Research is a great resource for finding
specific state and federal cases. You must read and provide information from an actual court case. Do not
report on a case that has not been decided or that has been summarized in an article, blog, or law firm website.
For each case, provide the following information in paragraph format. This portion of your paper should
contain a minimum of two paragraphs, one for each case reviewed.
•
Case citation—include the names of the parties, reporter, court, and year. See the lecture on
Legal Citation in Week 1.
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State or federal court
•
Issue
•
Summary of events
•
Ruling
Be sure to use your own words when summarizing the cases.
Combine your response to Part I (case studies) and Part II (research paper) into one Microsoft Word
document.
Cite any sources using APA format on a separate page.
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