Corporations Outline
Introduction – Themes
Fiduciary Duties – Cases, Statutes, Enron
Company Culture v. State/Federal Statutes
Liability and Organizational Forms
· Sole Proprietorship: general liability
· Partnership: 2 people agreeing contractually to operate business, joint and separately liable
· Corporation
· Limited Liability Company: shield from liability, tax benefits
· Limited Liability Partnerships: form of a LLC, limited liability
AGENCY LAW
Overview:
Someone who acts on behalf of the principal, fiduciary relationship
The agent must act with principal’s best interests in mind, unless otherwise agreed upon.
Relationship may be terminated at will by agent or principal unless otherwise agreed
Restatement § 1 (513): Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control
Duties in Law of Agency
Duty of Agent to Principal: Community Counseling Service v. Reilly
· E/e quits job and has to wait-out 30 day notice period before he is unemployed by co., during notice period he solicits these companies (partner’s clients) to get services for himself instead
· Ct says he owed principal a fiduciary duty of loyalty while he was an agent, cannot solicit clients for your own business, could have waited until his employment was over (unless non-compete agreement was signed)
· He also violated a duty of candor, should have told his employer
· Duty of Candor: Restatement § 381 [520]: Unless otherwise agreed, an agent is subject to a duty to use reasonable efforts to give his principal information which is relevant to affairs entrusted to him and which, as the agent has notice, the principal would desire to have and which can be communicated without violating a superior duty to a third person.
When Duties End: Hamburger v. Hamburger
· Son leaves company and starts his own, takes father and uncle’s clients with him, uncle sues saying client lists are confidential
· Ct says it’s ok b/c he waited until his employment was terminated and lists that could be public info are not confidential, any “remembered information” is ok to use
Duty of Principal to Agent: Foley v. Interactive Data Corp.
· e/e discharged after telling company about their new executive’s prior history of embezzlement, company argues discharge due to e/e’s poor performance, but e/e argues good annual reviews and bonuses given
· Employee makes three arguments: against public policy, against employment contract, and against good faith and fair dealing principles
· Public Policy: e/e argued he told on executive b/c of hid duty of candor (Rest §381), but court
d Parties:
Apparent Authority: Blackburn v. Wittier
· Long is a stockbroker for Witter and convinces Blackburn (widow) to purchase fake stocks, B sues L and also W for being a principal
· Witter argues that Long was not their agent, Blackburn argues apparent authority b/c B had relied on L for years with authority from W and had no reason not to believe him in this case
· Civil Code § 2317: “Ostensible [Apparent] authority is such as a principal, intentionally or by want of ordinary care, cause or allows a third person to believe the agent to possess.”
· Rule: “Liability is based upon the fact that the agent’s position facilitates the consummation of the fraud, in that from the point of view of the third person the transaction seems regular on its face and the agent appears to be acting in the ordinary course of the business confided to him.”
Sennott v. Rodman & Renshaw
Broker J fraudulently told Sennott he was selling him stock options in a company that he did not actually sell him stock in, Sennott knew he was not dealing with Rodman the company but Broker J individually and signed a
