Solution Manual For SM Legal Environment, 8th Edition Jeffrey F. Beatty Susan S. Samuelson Patricia by StudyGuide

Solution Manual For: SM Legal Environment, 8th Edition Jeffrey F. Beatty Susan S. Samuelson Patricia Sanchez April 2022, 9780357634448;

Solution Manual For SM Legal Environment, 8th Edition Jeffrey F. Beatty Susan S. Samuelson Patricia Sanchez April 2022, 9780357634448; Chapter 1: Introduction to Law

Table of Contents Multiple Choice Questions .......................................................................................................................................... 1 Case Questions ................................................................................................................................................................ 2 Discussion Questions..................................................................................................................................................... 3

Multiple Choice Questions 1.

The United States Constitution is among the finest legal accomplishments in the history of the world. Which of the following influenced Franklin, Jefferson, and the rest of the Founding Fathers? A. English common-law principles B. The Iroquois‘ system of federalism C. Both A and B D. None of the above Answer: C. Both English common-law principles and the Iroquois’ system of federalism shaped the Constitutional framers’ ideas.

Which of the following parts of the modern legal system are ―borrowed‖ from medieval England? A. B. C. D.

Jury trials Special rules for selling land Following precedent All of the above

Answer: D. Countless parts of our modern system originated in Merry Olde England.

Union organizers at a hospital wanted to distribute leaflets to potential union members, but hospital rules prohibited leafleting in areas of patient care, hallways, cafeterias, and any areas open to the public. The National Labor Relations Board (NLRB), a government agency, ruled that these restrictions violated the law and ordered the hospital to permit the activities in the cafeteria and coffee shop. What kind of law was it creating? A. A statute B. Common law C. A constitutional amendment D. Administrative regulation

Solution Manual For: Chapter 1: Introduction to Law

Answer: D. The NLRB, as an agency, creates regulations. Congress creates statutes, and judges shape the common law.

If the Congress creates a new statute with the president‘s support, it must pass the idea by a ____________ majority vote in the House and the Senate. If the president vetoes a proposed statute and the Congress wishes to pass it without their support, the idea must pass by a ____________ majority vote in the House and the Senate. A. simple; simple B. simple; two-thirds C. simple; three-fourths D. two-thirds; three-fourths Answer: B. More than 50 percent to pass initially (a simple majority), two-thirds if an override is necessary.

Dr. Martin Luther King, Jr., wrote ―An unjust law is no law at all.‖ As such, ―One has … a moral responsibility to obey unjust laws.‖ Dr. King‘s view is an example of: A. legal realism. B. jurisprudence. C. legal positivism. D. natural law. Answer: D. It is an example of the natural law theory of jurisprudence.

Case Questions 1.

Lance, an Internet hacker, stole 15,000 credit card numbers and sold them on the black market, making millions. Police caught Lance, and two legal actions followed, one civil and one criminal. Who will be responsible for bringing the civil case? What will be the outcome if the jury believes that Lance was responsible for identity thefts? Who will be responsible for bringing the criminal case? What will be the outcome if the jury believes that Lance stole the numbers? Answer: The civil cases will be brought by the victims of identity theft, and the outcome of a successful case against Lance would be some type of monetary award for damages suffered. The criminal case will be brought by state prosecutors and the outcome would be imprisonment for Lance. As The Oculist’s Case indicates, the medical profession has faced large number of lawsuits for centuries. In Texas, a law provides that, so long as a doctor was not reckless and did not intentionally harm a patient, recovery for ―pain and suffering‖ is limited to no more than $750,000. In many other states, no such limit exists. If a patient will suffer a lifetime of pain after a botched operation, for example, they might recover millions in compensation. Which rule seems more sensible to you—the ―Texas‖ rule, or the alternative? Answer: Answers will vary. You Be the Judge: WRITING PROBLEM Should trials be televised? Here are a few arguments to add to those in the chapter. You be the judge.

Solution Manual For: Chapter 1: Introduction to Law

Arguments against Live Television Coverage: We have tried this experiment and it has failed. Trials fall into two categories: Those that create great public interest and those that do not. No one watches dull trials, so we do not need to broadcast them. The few that are interesting have all become circuses. Judges and lawyers have shown that they cannot resist the temptation to play to the camera. Trials are supposed to be about justice, not entertainment. If a citizen seriously wants to follow a case, they can do it by reading online news reports or the daily newspaper. Arguments for Live Television Coverage: It is true that some televised trials have been unseemly affairs, but that is the fault of the presiding judges, not the media. Indeed, one of the virtues of television coverage is that millions of people now understand that we have a lot of incompetent people running our courtrooms. The proper response is to train judges to run a tight trial by prohibiting grandstanding by lawyers. Access to accurate information is the foundation on which a democracy is built, and we must not eliminate a source of valuable data just because some judges are ill-trained. Answer: For most of the ―You Be the Judge‖ writing problems, we provide the case citation and holding. For this question, of course, there is no definitive answer. 4.

Leslie Bergh and his two brothers, Milton and Raymond, formed a partnership to help build a fancy saloon and dance hall in Evanston, Wyoming. Later, Leslie met with his friend and drinking buddy, John Mills, and tricked Mills into investing in the saloon. Leslie did not tell Mills that no one else was investing cash or that the entire enterprise was already bankrupt. Mills mortgaged his home, invested $150,000 in the saloon—and lost every penny of it. Mills sued all three partners for fraud. Milton and Raymond defended on the ground that they did not commit the fraud, only Leslie did. The defendants lost. Was that fair? By holding them liable, what general idea did the court rely on? What Anglo-Saxon legal custom did the ruling resemble? Answer: The partners are indeed liable. Bergh v. Mills, 763 P.2d 214 (Wyo. 1988). That is the essence of a partnership: All partners are liable for the acts of any partner committed in the partnership‘s normal business. This is the general idea of collective responsibility. It relates to the ―tithing‖ of English legal history, in which all tithing members were legally responsible for the conduct of the others. The father of an American woman killed in the Paris terrorist attacks sued Twitter, Facebook, and YouTube, alleging the sites knowingly allow ISIS terrorists to recruit members, raise money, and spread extremist propaganda. The sites defended themselves by saying that their policies prohibit terrorist recruitment and that, when alerted to it, they quickly remove offending videos. What type of lawsuit is this—criminal or civil? What responsibilities, if any, should social media sites have for the spread of terrorism? Answer: The case is a civil case, but answers will vary as to the scope of the responsibilities social media sites should have for the spread of terrorism.

Discussion Questions 1.

In the 1980s, the Supreme Court ruled that it is legal for protesters to burn the American flag. This activity counts as free speech under the Constitution. If the Court hears a new flag burning case in this decade, should it consider changing its ruling, or should it follow precedent? Is following past precedent something that seems sensible to you: always, usually, sometimes, rarely, or never? Answer: Answers will vary. When should a business be held legally responsible for customer safety? Consider the following statements, and consider the degree to which you agree or disagree: a. A business should keep customers safe from its own employees. b. A business should keep customers safe from other customers.

Solution Manual For: Chapter 1: Introduction to Law

A business should keep customers safe from themselves. (Example: an intoxicated customer who can no longer walk straight.) d. A business should keep people outside its own establishment safe if it is reasonable to do so. Answer: Answers will vary. 3.

In his most famous novel, The Red and the Black, the French author Stendhal (1783–1842) wrote: ―There is no such thing as ‗natural law‘: this expression is nothing but old nonsense. Prior to laws, what is natural is only the strength of the lion, or the need of the creature suffering from hunger or cold, in short, need.‖ What do you think? Does legal positivism or legal realism seem more sensible to you? Answer: Natural law should be a question in the back of our minds throughout the course, because it is a reminder of morality, and law without morality is despotism. Nonetheless, Stendhal is obviously correct that both strength and need help to create law. The important thing for this course is continually to apply moral principles to the rules you study, and make your own determinations about whether natural law really plays a role.

Before becoming a Supreme Court justice, Sonia Sotomayor stated in a speech to students: ―I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion than a white male who hasn‘t lived that life.‖ During her Senate confirmation proceedings, this statement was heavily probed and criticized. One senator said that the focus of the hearings was to determine whether Judge Sotomayor would ―decide cases based only on the law as made by the people and their elected representatives, not on personal feelings or politics.‖ (Sotomayor convinced many of her critics, because the Senate confirmed her by a vote of 68–31.) Should judges ignore their life experiences and feelings when making judicial decisions? Answer: Answers will vary.

The late Supreme Court Justice Antonin Scalia argued that because courts are not elected representative bodies, they have no business determining certain critical social issues. He wrote: Judges are selected precisely for their skill as lawyers; whether they reflect the policy views of a particular constituency is not (or should not be) relevant. Not surprisingly then, the Federal Judiciary is hardly a cross-section of America. Take, for example, this Court, which consists of only nine men and women, all of them successful lawyers who studied at Harvard or Yale Law School. Four of the nine are natives of New York City. Eight of them grew up in east- and west-coast States. Only one hails from the vast expanse in-between. Not a single Southwesterner or even, to tell the truth, a genuine Westerner (California does not count). Not a single evangelical Christian (a group that comprises about one quarter of Americans), or even a Protestant of any denomination. To allow [an important social issue] to be considered and resolved by a select, patrician, highly unrepresentative panel of nine is to violate a principle even more fundamental than no taxation without representation: no social transformation without representation. Do you agree? Answer: Answers will vary.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 2: Ethics and Corporate Social Responsibility

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 2: Ethics and Corporate Social Responsibility

Table of Contents Multiple Choice Questions .......................................................................................................................................... 5 Case Questions ................................................................................................................................................................ 6 Discussion Questions..................................................................................................................................................... 8

Multiple Choice Questions 6. The following statement is true: A. Milton Friedman argued that a corporate leader's sole obligation is to make money for the company's owners. B. Milton Friedman argued that corporate leaders should consider the well-being of all company stakeholders, not just shareholders. C. Milton Friedman argued that lying for prosocial reasons is appropriate. D. Milton Friedman argued that life prospects are a crucial determinant of success in life. Answer: A 7. Which of the following wrote the book Utilitarianism and believed that ethical actions should “generate the greatest good for the greatest number”? A. B. C. D.

Milton Friedman John Stuart Mill Immanuel Kant John Rawls

Answer: B 8. Which of the following believed that the dignity of human beings must be respected and that the most ethical decisions are made out of a sense of duty or obligation? A. B. C. D.

Milton Friedman John Stuart Mill Immanuel Kant John Rawls

Answer: C 9. Kant believed that:

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 2: Ethics and Corporate Social Responsibility

A. it is ethical to tell a lie if necessary to protect an innocent person from great harm. B. it is ethical to tell a lie if the benefit of the lie outweighs the cost. C. it is ethical to make a true, but misleading, statement. D. it is wrong to tell an outright lie or to mislead. Answer: D 10. The following statement is true: A. Most people rarely lie. B. Even people who do not believe in God are more likely to behave honestly after reading the Ten Commandments. C. Most people are accurate when comparing themselves to others. D. People make their best ethical decisions when in a hurry. Answer: B

Case Questions 1. Should engineers program driverless cars to protect pedestrians or the driver? Who gets to decide? In one study, participants said that, if a car had to choose between ten pedestrians and one driver, it should swerve into a wall, killing the driver and saving the ten people. But when asked what car they would actually buy, participants chose the one that would protect them— the driver. What would Kant and Mill say about this choice? What would result under the Front Page test? If drivers chose to protect themselves, would they be to blame, legally or ethically, for the deaths of the pedestrians? Answer: Both Kant and Mill would say that driverless cars should kill the driver and save the ten pedestrians. Under the categorical imperative, Kant believes you should not do something unless you'd be willing for everyone else to do it, but here you'd be making a different decision for yourself. Mill would say that saving ten lives maximizes overall happiness. It would be embarrassing under the Front Page test for everyone to know that you had chosen yourself over ten other people. It is difficult to think of the ethical argument for choosing one person over ten.

2. Located in Bath, Maine, Bath Iron Works builds high-tech warships for the Navy. Winning Navy contracts is crucial to the company’s success—it means jobs for the community and profits for the shareholders. Navy officials held a meeting at Bath’s offices with its executives and those of a competitor to review the specs for an upcoming bid. Both companies desperately wanted to win the contract. After the meeting, a Bath worker realized that one of the Navy officials had left a folder on a chair labeled “Business Sensitive.” It contained information about the competitors’ bid that would be a huge advantage to Bath. William Haggett, the Bath CEO, was notified about the file just as he was walking out the door to give a luncheon speech. What ethics traps did he face? How could he avoid these traps? What would result if he considered Mill, Kant, or the Front Page test? What should he do? How would you give voice to your values in this situation?

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 2: Ethics and Corporate Social Responsibility

Answer: Haggett ordered the file to be copied. By the time he got back from lunch, the company president had found out about the file and ordered the copy destroyed. But by then, other Bath executives had had a chance to examine the file. Haggett personally returned the file to the Navy, but by then it was too late. The Navy considered banning Bath from bidding on its contracts, which would have meant the end of the company. Haggett resigned. A much beloved CEO and an important figure in Maine, he had worked at Bath for 28 years and his father had been a pipe fitter there. The pitfalls were being in a hurry, money. 3. A group of medical schools conducted a study on very premature babies—those born between 24 and 27 weeks of gestation (instead of the normal 40 weeks). These children face a high risk of blindness and death. The goal of the study was to determine which level of oxygen in a baby’s incubator produced the best results. Researchers did not tell the families that being in the study could increase their child’s risk of blindness or death. The study made some important discoveries about the best oxygen level. These results could benefit many children. What would Mill and Kant say about this decision not to tell the families? Answer: Kant would say it was wrong. Mill would say that the study helped save the eyesight and lives of lots of other children. 4. Each year, the sale of Girl Scout cookies is the major fund-raiser for local troops. But because the organization was criticized for promoting such unhealthy food, it introduced a new cookie, Mango Cremes with Nutrifusion. It promotes this cookie as a vitamin-laden, natural whole food—“A delicious way to get your vitamins.” But these vitamins are a minuscule part of the cookie. The rest has more unhealthy fat than an Oreo. The Girl Scouts do much good for many girls. And to do this good, they need to raise money. What would Kant and Mill say? What about the Front Page test? What do you say? Answer: Mill would say that the benefit of selling the cookie is greater than the harm. Kant would say that it is the wrong thing to do. The Girl Scouts would not want this information on the front page. 5. The CEO of Volkswagen set an ambitious goal: to triple sales in the United States and become the largest car manufacturer in the world. Employees listened carefully because the CEO had a reputation for punishing those who did not make their goals. Then the VW engineers realized that the emissions equipment on the company’s cars could not meet tough U.S. standards. Fixing the equipment would take time, raise costs, and reduce sales. The engineers believed that other car companies had the same problem. Instead of fixing the equipment, an engineer figured out how to install software that would cheat on the emissions tests. Engineers predicted that the chance of being discovered was low, and executives thought the cost of being caught would be manageable. (Indeed, the company continued its cheating ways, even after it knew that regulators were investigating.) VW produced 11 million cars with this deceptive software. After the company was caught, it spent $18 billion on fines, legal costs, and car repairs. Its sales and stock price plummeted, and one of its top officials was sentenced to seven years in prison. Into what traps did these VW employees fall? Answer: Answers will vary. But ethics traps include money, competition, rationalization, following orders, and a short-term perspective.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 2: Ethics and Corporate Social Responsibility

Discussion Questions 1. Darby has been working for 14 months at Holden Associates, a large management consulting firm. She is earning $95,000 a year, which sounds good, but does not go very far in New York City. It turns out that her peers at competing firms are typically paid 20% more and receive larger annual bonuses. Darby works about 60 hours a week, more if she is traveling. A number of times, she has had to reschedule her vacation or cancel personal plans to meet client deadlines. She hopes to go to business school in a year and has already begun the application process. Holden has a policy that permits any employee who works as late as 8:00 p.m. to eat dinner at company expense. The employee can also take Uber home. Darby is in the habit of staying until 8:00 p.m. every night, whether or not her workload requires it. She then orders enough food for dinner, with leftovers for lunch the next day. She has managed to cut her grocery bill to virtually nothing. Sometimes she invites her boyfriend to join her for dinner. As a student, he is always hungry and broke. Darby often uses the Holden Uber to charge a ride back to his apartment, although the cost is twice as high as to her own place. Darby has also been known to return online purchases through the Holden mailroom on the company dime. Many employees do that, and the mailroom workers do not seem to mind. Is Darby doing anything wrong? What ethics traps is she facing? What would your Life Principle be in this situation? Answer: Answers will vary. 2. Steve supervises a team of account managers. One night at a company outing, Lawrence, a visiting account manager, made some wildly inappropriate sexual remarks to Maddie, who is on Steve’s team. When she told Steve, he was uncertain what to do, so he asked his boss. She was concerned that if Steve took the matter further and Lawrence was fired or even disciplined, her whole area would suffer. Lawrence was one of the best account managers in the region, and everyone was overworked as it was. She told Steve to get Maddie to drop the matter—just tell her that these things happen and Lawrence did not mean anything by it. What should Steve do? What ethics traps does he face? What would be your Life Principle in this situation? What should Maddie do? Answer: Answers will vary. 3. Many people enjoy rap music at least in part because of its edgy, troublemaking vibe. The problem is that some of this music could cause real trouble. Thus, Ice-T’s song “Cop Killer” generated significant controversy when it was released. Among other things, its lyrics celebrated the idea of slitting a policeman’s throat. Rick Ross rapped about drugging and raping a woman. Time Warner Inc. did not withdraw Ice-T’s song, but Reebok fired Ross over his lyrics. One difference: Time Warner was struggling with a $15 billion debt and a depressed stock price. Reebok at first refused to take action, but then singing group UltraViolet began circulating an online petition against the song and staged a protest at the main Reebok store in New York. What obligation do media companies have to their customers? What factors matter when making a decision about the content of entertainment?

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 2: Ethics and Corporate Social Responsibility

Answer: Answers will vary. 4. You are negotiating a new labor contract with union officials. The contract covers a plant that has experienced operating losses over the past several years. You want to negotiate concessions from labor to reduce the losses. However, labor is refusing any compromises. You could tell them that, without concessions, the plant will be closed, although that is not true. Is bluffing ethical? Under what circumstances? What would Kant and Mill say? What is the result under the Front Page test? What is your Life Principle? Answer: Answers will vary. 5. Craig Newmark founded craigslist, the most popular website in the country for classified ads. Rather than maximizing its profits, craigslist instead focused on developing a community among its users. It was a place to find an apartment, a pet, a job, a couch, a date, a babysitter, and, it turned out, a prostitute. Most of the ads on craigslist were free, but blatant ads for sex were not. Much of the company’s revenue was from these illegal services. Many of the prostitutes available on craigslist were not independent entrepreneurs; they were women and girls bought and sold against their will. To fight sex trafficking, craigslist required credit cards and phone numbers, and it reported any suspicious ads. Law enforcement officials pressured craigslist to close the sex section of its website. But some people argued that blocking these ads was a violation of free speech and would just drive this business more underground where law enforcement officials were less likely to be able to find it. Others said that banning these ads made the business model of selling children for sex less profitable. Does it seem that trafficking women and children was in keeping with the founder’s Life Principles? What were his options? Could he have had any real impact on this thriving industry? What pitfalls did he face? Answer: Answers will vary. Craigslist ultimately shut down the sex section, but a look at the “therapeutic services” section reveals that prostitution still thrives on craigslist. 6. Many socially responsible funds are now available to investors who factor their values into their investment choices. For example, the Appleseed Fund avoids tobacco products, alcoholic beverages, gambling, weapons systems, or pornography. The TIAA-CREF Social Choice Equity Premier Fund invests in companies that are “strong stewards of the environment,” devoted to serving local communities and committed to high labor standards. Are socially responsible funds attractive to you? Would it matter if they are less profitable than other alternatives? How much less profitable? Do you now, or will you in the future, use them in saving for your own retirement? Answer: Answers will vary.

7. What percentage of your income should you donate to charities? Which charities are most worthwhile? Peter Singer, a Princeton professor, argues that people should give away one-third of their income to worthy charities. But, when entertainment mogul David Geffen donated $100 million to renovate a New York concert hall, Singer said that he could not understand “how anyone could think that giving to the renovation of a concert hall that could impact the lives of © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 3: Dispute Resolution

generally well-off people living in Manhattan and well-off tourists that come to New York could be the best thing that you could do with $100 million.” He added that a donation of less than $100 million could restore sight to someone who is blind. To what theory of ethics is Professor Singer subscribing? Do you agree with him? What obligation do you have to help others? What is the best way to help others? Answer: Answers will vary. 8. Wei was working on a trading desk. One year, his team did not make its number, which ordinarily would mean no bonuses and perhaps some people would be fired. But Wei’s boss was a good friend of the head of the division, who agreed to “reallocate” some of the profit from other teams to theirs. So his team got a bonus. When Wei asked his boss about the ethics of this action, she was annoyed that he was not simply grateful. What ethics traps did Wei face? What should he have done? What is the best way to implement his decision? Answer: Answers will vary. 9. Carlos was a plant manager at a factory that used a lot of steel equipment. When a piece of equipment failed and was not worth repairing, it was sold for scrap. Plant managers usually kept the scrap money for themselves without telling headquarters. That money was considered an unofficial bonus. (After all, the equipment was no longer functional, and plant managers are underpaid.) Carlos felt a little uncomfortable taking the money, but his boss warned him that, if he didn’t, he would make the other plant managers look bad. Carlos could have paid off his credit card debt with that money, but instead, he hosted an employee BBQ and bought work boots for the low-wage workers. Did Carlos do the right thing? What traps did he face? Answer: Answers will vary.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 3: Dispute Resolution

Table of Contents Multiple Choice Questions ....................................................................................................................................... 11 Case Questions ............................................................................................................................................................. 12 Discussion Questions.................................................................................................................................................. 13

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 3: Dispute Resolution

Multiple Choice Questions 11. Nitesh sues Omar for breach of contract. Which of the following is true? A. Nitesh must prove Omar breached the contract beyond a reasonable doubt. B. Nitesh must prove Omar breached the contract by a preponderance of the evidence. C. Omar must prove that he did not breach the contract beyond a reasonable doubt. D. Omar must prove that he did not breach the contract beyond a preponderance of the evidence. Answer: B 12. Naquia is suing Allied Corporation. After the discovery process, Naquia believes that no relevant facts are in dispute and that there is no need for a trial. She should move for a _______________. A. B. C. D.

judgment on the pleadings directed verdict summary judgment JNOV

Answer: C 13. Giuliana lives in Illinois. She applies for a job with a Missouri company, but is rejected because the job is open only to people under 30. She decides to sue the Missouri company under the Age Discrimination in Employment Act, a federal statute. Can Giuliana sue in federal court? A. Yes, absolutely. B. Yes, but only if she seeks damages of at least $75,000. Otherwise, she must sue in a state court. C. Yes, but only because she and the company are citizens of different states. D. No, absolutely not. He must sue in a state court. Answer: A 14. A default judgment can be entered if which of the following is true? A. A plaintiff presents their evidence at trial and clearly fails to meet their burden of proof. B. A defendant loses a lawsuit and does not pay a judgment within 180 days. C. A defendant fails to file an answer to a plaintiff‘s complaint on time. D. A citizen fails to obey an order to appear for jury duty. Answer: C 15. Bruno and Cedric are next-door neighbors. Bruno‘s dog digs under Cedric‘s fence and does $500 worth of damage to Cedric‘s garden. Bruno refuses to pay for the damage, claiming that Cedric‘s cats ―have been digging up my yard for years.‖ The two argue repeatedly, and the relationship sours. Of the following choices, which has no outside decision maker and is most likely to allow the neighbors to peacefully coexist after working out the dispute? A. Trial B. Arbitration C. Mediation Answer: C

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 3: Dispute Resolution

Case Questions 6.

You plan to open a store in Chicago, specializing in rugs imported from Turkey. You will work with a native Turk who will purchase and ship the rugs to your store. You are wise enough to insist on a contract establishing the rights and obligations of both parties and would prefer an ADR clause. But you do not want a clause that will alienate your overseas partner. What kind of ADR clause should you include, and why? Answer: Yes. Try blending ADR mechanisms. Have the ADR clause state that in the event of a dispute, the parties will negotiate it in good faith, and take no further steps for 30 days. If negotiation fails, an additional 30-day cooling-off period follows. The next step could be a minitrial in front of three people, two of whom represent the parties, respectively, and the third acts as a neutral mediator. Finally, if the minitrial fails to produce a settlement, the parties will hire an arbitrator. You might require that the arbitrator be a national of neither Turkey nor the United States. You must specify the law to be applied and where the arbitration will take place. List any claims that are not arbitrable, such as antitrust or securities claims. This should preserve a working relationship while ensuring that disputes will be settled rapidly. Which court(s) have jurisdiction as to each of these lawsuits—state or federal? Explain your reasoning with each. A. Petra wants to sue her next-door neighbor, Dylan, claiming that Dylan promised to sell her the house next door. B. Priscilla, who lives in New York City, wants to sue Dizzy Movie Theatres, whose principal place of business is Dallas. She claims that while she was in Texas on holiday, she was injured by their negligent maintenance of a stairway. She claims damages of $30,000. C. Phoenix lives in Tennessee. He wants to sue Derrick, who lives in Ohio. Phoenix claims that Derrick agreed to sell him 3,000 acres of farmland in Ohio, worth more than $2 million. D. Paxton, incarcerated in a federal prison in Kansas, wants to sue the U.S. government. He claims that his treatment by prison authorities violates three federal statutes. Answer: A. The state trial court of general jurisdiction may hear the case. There is no federal court jurisdiction. B. The general trial court of Texas, only. There is no federal court diversity jurisdiction because the money sought is less than $50,000. C. Ohio‘s general trial court has jurisdiction. United States District Court has concurrent jurisdiction, based on diversity. The parties live in different states and the amount in question is over $50,000. D. United States District Court has federal question jurisdiction, based on the federal statutes at issue. The general trial court of Kansas has concurrent jurisdiction. British discovery practice differs from that in the United States. Most discovery in Britain concerns documents. The lawyers for the two sides, called solicitors, must deliver to the opposing side a list of all relevant documents in their possession. Each side may then request to look at and copy those it wishes. Depositions are rare. What advantages and disadvantages are there to the British practice? Answer: Discovery is more efficient in Britain, since the solicitors are honor-bound to notify of relevant documents. The fighting over discovery motions that drains time and money in the United States is uncommon there. However, the absence of depositions means that the parties go into court with less information about the opponent‘s case, making trials more open to surprise. After Sam got a tattoo of Mickey Mouse on his arm, he was fired by his employer, Douglas Corp. Irate, Sam sued Douglas for discriminating against people with tattoos. His complaint alleged that he was fired days after he showed his supervisor the new tattoo. Although employers cannot

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 3: Dispute Resolution

discriminate against tattoos that are part of an employee‘s religious beliefs, there is no law prohibiting discrimination against Sam‘s tattoo. And the Douglas employee handbook clearly stated that employees should have no visible tattoos. What will likely happen in court after Sam‘s attorney files the complaint? Answer: The defendant, Douglas Corp, will file a motion to dismiss the lawsuit for failure to state a cause of action on which relief can be granted. The Judge will dismiss the lawsuit. 10. When Giant, Inc., hired Kelly, it gave her an entire binder of papers to sign. Buried in the fine print was a clause requiring any future dispute between the parties to go to arbitration, employees could not be represented by a lawyer, and Giant alone would choose the arbitrators. Years later, Kelly filed a sexual harassment suit claiming that her boss fondled her. She demanded her day in court, but Giant‘s attorneys claim she was barred due to the arbitration clause. Will Kelly prevail? Answer: Likely yes, because the arbitrator is not neutral, since the arbitrator was to be chosen by Giant, the court will be likely to hold the arbitration clause invalid, and Kelly will proceed with her lawsuit.

Discussion Questions 6.

In the Tony Caruso case described throughout this chapter, the defendant offers to settle the case at several stages. Knowing what you do now about litigation, would you have accepted any of the offers? If so, which one(s)? If not, why not? Answer: Answers will vary. The burden of proof in civil cases is fairly low. A plaintiff wins a lawsuit if they are 51 percent convincing, and then they collect 100 percent of their damages. Is this result reasonable? Should a plaintiff in a civil case be required to prove their case beyond a reasonable doubt? Or, if a plaintiff is only 51 percent convincing, should they get only 51 percent of their damages? Answer: Answers will vary.

The Supreme Court has held that businesses can force consumers to arbitrate rather than bring class actions. But at least one study found that individuals rarely sue on their own because it is too expensive. Various consumer groups have proposed rules to block banks and credit card companies from this practice. Should the law ban consumer arbitration agreements? Answer: Answers will vary.

Imagine a state law that allows for residents to sue ―spammers‖—those who send uninvited commercial messages through email—for $30. One particularly prolific spammer sends messages to hundreds of thousands of people. John Smith, a lawyer, signs up 100,000 people to participate in a class action lawsuit. According to the agreements with his many clients, Smith will keep one-third of any winnings. In the end, Smith wins a $3 million verdict and pockets $1 million. Each individual plaintiff receives a check for $20. Is this lawsuit a reasonable use of the court‘s resources? Why or why not? Answer: Answers will vary.

10. Higher courts are reluctant to review a lower court‘s factual findings. Should this be so? Would appeals be fairer if appellate courts reviewed everything? Answer: Answers will vary.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 4: Common Law, Statutory Law, and Administrative Law

Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 4: Common Law, Statutory Law, and Administrative Law

Table of Contents Multiple Choice Questions ....................................................................................................................................... 14 Case Questions ............................................................................................................................................................. 15 Discussion Questions.................................................................................................................................................. 16

Multiple Choice Questions 16. A bill is vetoed by _______________. A. the speaker of the House B. a majority of the voting members of the Senate C. the president D. the Supreme Court Answer: C 17. If a bill is vetoed, it may still become law if it is approved by _______________. A. B. C. D. E.

two-thirds of the Supreme Court two-thirds of registered voters two-thirds of the Congress the president an independent government agency

Answer: C 18. When courts interpret statutes, they ask _______________. A. what the words in the statute ordinarily mean B. which political parties endorsed the law C. what Congress intended the law to do D. whether or not the law supports good public policy E. all of the above, except (B) Answer: E 19. Under the Freedom of Information Act (FOIA), any citizen may demand information about ____________. A. how an agency operates B. how an agency spends its money C. files an agency has collected on the citizen themself D. all of the above Answer: D 20. If information requested under the FOIA is not exempt, an agency has _______________ to comply with the request. A. 10 days

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 4: Common Law, Statutory Law, and Administrative Law

B. 30 days C. 3 months D. 6 months Answer: A

Case Questions 11. In 1988, terrorists bombed Pan Am Flight 103 over Lockerbie, Scotland, killing all passengers on board. Congress sought to remedy security shortcomings by passing the Aviation Security Improvement Act (ASIA) of 1990, which, among other things, ordered the Federal Aviation Authority (FAA) to prescribe minimum training requirements and staffing levels for airport security. The FAA promulgated rules according to the informal rulemaking process. However, the FAA refused to disclose certain rules concerning training at specific airports. A public interest group called Public Citizen, Inc., along with family members of those who had died at Lockerbie, wanted to know the details of airport security. What steps should they take to obtain the information? Are they entitled to obtain it? Answer: The groups should, and did, file an ―FOIA request‖—that is, a request for documents pursuant to the Freedom of Information Act. Most agency information must be made available to the public. But certain information may be exempt. The FOIA exempts matters pertaining to national security. In addition, the ASIA of 1990 added additional documents that can be exempt— namely, those pertaining to airport security. 12. The ASIA states that the FAA can refuse to divulge information about airport security. The FAA interprets this to mean that it can withhold data in spite of the FOIA. Public Citizen and the Lockerbie family members interpret FOIA as being the controlling statute, requiring disclosure. Is the FAA interpretation binding? Answer: No. Pursuant to the Chevron case, a court will look to see if there is clear congressional intent. If there is, it must be followed. If there is not, then the agency's interpretation will be followed if it is ―permissible,‖ meaning reasonable. In Public Citizen, Inc. v. FAA, 988 F.2d 186, 1993 U.S. App. LEXIS 6024 (D.C. Cir. 1993), the court found that there was a clear congressional intent: to permit the ASIA to exempt additional information from public disclosure for purposes of airport security. The agency's view became irrelevant, but plaintiffs lost anyway. 13. Federal antitrust statutes are complex, but the basic goal is straightforward: to prevent a major industry from being so dominated by a small group of corporations that they destroy competition and injure consumers. Does Major League Baseball violate the antitrust laws? Many observers say that it does. A small group of owners not only dominate the industry, but actually own it, controlling the entry of new owners into the game. This issue went to the United States Supreme Court in 1922. Justice Holmes ruled, perhaps surprisingly, that baseball is exempt from the antitrust laws, holding that baseball is not ―trade or commerce.‖ Suppose that members of Congress dislike this ruling and the current condition of baseball. What can they do? Answer: The congressperson could introduce a bill overruling the Supreme Court's interpretation of federal antitrust statutes. The bill would specify that baseball is part of trade and commerce, and that Congress intends that it be subject to the antitrust laws, the same as any other nationwide industry. 14. Iseberg, Slavin, and Gross were business partners. After Iseberg forced Slavin out of the business, Slavin told Gross he wanted to shoot Iseberg. Two years later, Slavin did just that, rendering Iseberg a paraplegic. Iseberg sued Gross, arguing he had a duty to warn his former partner of the danger. Who wins and why?

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 4: Common Law, Statutory Law, and Administrative Law

Answer: The Supreme Court of Illinois held that there was no affirmative duty to warn or protect against the criminal conduct of a third party, and that such a duty would exist only if there was a special relationship between the parties. The court found no special relationship between the parties. Iseberg v. Gross, 879 NE 2d 278 (2007). 15. The FDA issued regulations requiring tobacco companies to put graphic warning images on their packages. The mandatory images included a corpse after an autopsy, a smoker‘s damaged lung, and a man exhaling smoke out of a hole in his neck, among others. What recourse do tobacco companies have if they want to challenge the FDA‘s rule? Answer: The tobacco companies could file suit against the FDA, challenging the legality or constitutionality of the regulations. The FDA gained the authority to regulate the tobacco companies when Congress passed the Tobacco Control Act. The tobacco companies challenged that law and lost. But when they challenged the constitutionality of the regulations themselves, charging that they were in violation of their First Amendment free speech rights, the Court agreed, and the regulations were stricken. The government did not appeal that ruling. R.J. Reynolds Tobacco Co. v. U.S. Food and Drug Administration, 696 F.3d 1205, U.S. Ct. App, Dist. Of Columbia Circuit (2012).

Discussion Questions 11. Courts generally follow precedent, but in the Tarasoff case discussed early in this chapter, they did not. Consider the opening scenario based on the Seinfeld season finale. Should Jerry and his friends bear any civil legal responsibility for the carjacking or should a court follow precedent and hold the smug bunch blameless? Answer: Answers will vary. 12. Revisit the Fox case. Do you agree with the opinion? What would a sensible broadcast obscenity policy contain? When (if ever) should a network face fines for airing bad language? Answer: Answers will vary. 13. This chapter presents various examples where the law intersects with ethics. Jerry and his friends were rude and refused to help. Cher and Nicole Ritchie uttered profanity on live national television at a time when children were watching. What are your Life Principles on these issues? Answer: Answers will vary. 14. During live national coverage of a Super Bowl half-time show, Justin Timberlake tore off part of Janet Jackson‘s shirt, exposing her breast for nine-sixteenths of a second. Television network CBS called it a ―wardrobe malfunction,‖ but the ―malfunction‖ coincidentally occurred just as Timberlake was singing the lyrics, ―Gonna have you naked by the end of this song.‖ The FCC fined CBS $550,000 but the network challenged the fine in court. The appeals court held CBS did not have to pay because the FCC did not have a clear policy on momentary displays of nudity. Do you agree with this conclusion? Do you think the incident was intentional or truly accidental? If it was intentional, should CBS have known better, regardless of FCC policies? If it was accidental, should CBS still be held accountable? Should it matter if it was intentional or accidental? Answer: Answers will vary. 15. Should the law require restaurant employees to know and employ the Heimlich maneuver to assist a choking victim? If they do a bad job, they could cause additional injury. Should it permit them to do nothing at all? Is there a compromise position? What social policies are most important? Answer: Answers will vary.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 5: Constitutional Law

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 5: Constitutional Law

Multiple Choice Questions 21. Greenville College, a public community college, has a policy of admitting only male students. If the policy is challenged under the Fourteenth Amendment, _______________ scrutiny will be applied. A. strict B. intermediate C. rational D. none of the above Answer: B 22. On your second day at work at Everhappy Corp., you wear a political button supporting your choice for governor in the upcoming election. Your boss glances at it and says, ―Get that stupid thing out of this office or you‘re fired.‖ On the walk home after work, you put the button back on. You pass a police officer who blocks your path and says, ―Take off that stupid button or I will arrest you.‖ Which of the following is true? I. Only your boss violated your First Amendment right. II. Only the police officer violated your First Amendment right. III. Both your boss and the officer violated your First Amendment right. IV. Neither violated your First Amendment right. A. B. C. D.

I II III IV

Answer: C 23. Which of the following statements accurately describes statutes that Congress and the president may create? A. Statutes must be related to a power listed in Article I, section 8, of the Constitution. B. Statutes must not infringe on the liberties in the Bill of Rights. C. Both A and B D. None of these Answer: C

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 5: Constitutional Law

24. Which of the following is true of the origin of judicial review? A. It was created by Article II of the Constitution. B. It was created by Article III of the Constitution. C. It was created in the Marbury v. Madison case. D. It was created by the Fifth Amendment. E. It was created by the Fourteenth Amendment. Answer: C 25. Which of the following violate the Free Exercise Clause of the Constitution? I. State bans use of peyote (a hallucinogenic drug) in religious ceremonies. II. State prohibits polygamy generally, but a religious group that encourages the practice is affected. III. State erects a monument to the Ten Commandments in a public park. A. I B. II C. III D. I and II E. I and III Answer: A

Case Questions 16. In the landmark 1965 case of Griswold v. Connecticut, the Supreme Court examined a Connecticut statute that made it a crime for any person to use contraception. The majority declared the law an unconstitutional violation of the right of privacy. Justice Black dissented, saying, ―I do not to any extent whatever base my view that this Connecticut law is constitutional on a belief that the law is wise or that its policy is a good one. [It] is every bit as offensive to me as it is to the majority. [There is no criticism by the majority of this law] to which I cannot subscribe— except their conclusion that the evil qualities they see in the law make it unconstitutional.‖ What legal doctrines are involved here? Why did Justice Black distinguish between his personal views on the statute and the power of the Court to overturn it? Answer: The right of privacy is nowhere stated in the Constitution, and its enforcement is an example of the Court applying substantive due process. Justice Black thought the law was terrible but he thought it was even worse for the Court to invent constitutional doctrine simply because it disliked a particular law. He would have preferred to practice judicial restraint—that is, to leave it up to the voters and the state legislature to decide the matter. Clearly a court should not go so far with judicial activism that it becomes a superlegislature. The constitution makes it clear that courts should have a more limited role. Yet since Marbury v. Madison, federal courts have taken it upon themselves to say what the law is, and that frequently means overturning state and federal statutes. An activist court presents society with the danger of unelected judges, with lifetime tenure, foisting their own social agenda on an unwilling populace—but it also offers the potential for powerful officials, who do not have to worry about polls or reelections, to protect the people and the rights that are most vulnerable. 17. Carter was an employee of the Sheriff‘s office in Hampton, Virginia. When his boss, Sheriff Roberts, was up for reelection against Adams, Carter ―liked‖ the Adams campaign‘s Facebook page. Upon winning reelection, Sheriff Roberts fired Carter, who then sued on free speech grounds. Is a Facebook ―like‖ protected under the First Amendment?

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 5: Constitutional Law

Answer: This question is based on Bland v. Roberts (4th Circuit, 2013). The district court had held that ―merely liking a Facebook page is insufficient speech to merit constitutional protection,‖ but the Fourth Circuit disagreed. 18. A state statute prohibits advertising by any sexually oriented business within 1 mile of the state highways. The state argues that the law protects minors and reduces prostitution. The businesses object, claiming that it is an impermissible restriction on commercial speech. Who should prevail? Answer: Answers will vary. But Missouri had such a statute that was challenged by the sex-related businesses on the grounds that it was a violation of free speech and a denial of equal protection. A federal district court concluded that the law did not infringe on those rights. However, the 8th Circuit Court of Appeals reversed and remanded the decision, among other reasons, because the restrictions were not narrowly drawn. Passions Video, Inc, K.C. v. Nixon, 458 F.3d 837, 8th Circuit (2006). 19. The year is 1964. Ollie‘s BBQ is a family-owned restaurant located on a state highway in Georgia, 11 blocks from an interstate highway. The restaurant does not allow African-Americans to eat inside; they must get takeout. More than half of the food served in the restaurant had passed through interstate commerce. According to Title II of the Civil Rights Act of 1964, the federal government has the right to prohibit racial discrimination in hotels, restaurants, and other public facilities because local activities have a substantial effect on interstate commerce. The owner of Ollie‘s BBQ argues that his business is local and has no impact on interstate commerce. Whose argument will win? Answer: The United States Supreme Court ruled that discrimination in restaurants posed significant burdens on ―the interstate flow of food and upon the movement on products generally,‖ and further imposed restrictions on blacks who traveled from state to state. Congress‘s solution to this problem was appropriate and within its bounds to regulate state commerce. Katzenbach v. McClung, 375 U.S. 294 (1964). 20. Edward Salib owned a donut shop. To attract customers, he displayed large signs in his store window. The city ordered him to remove the signs because they violated its Sign Code, which prohibited covering more than 30 percent of a store‘s windows with signs. Salib sued, claiming that the Sign Code violated his First Amendment free speech rights. What result? Answer: In his lawsuit, Salib‘s main argument was that the Sign Code was not narrowly drawn, as to time, place, and manner, and that the Arizona Constitution provided more stringent protections in that regard than the Federal Constitution. However, the Arizona Court of Appeals ruled that the protections were the same, and found the Sign Code valid. Salib v. City of Mesa, 133 P.3d 756 (Ariz. Ct. App. 2006).

Discussion Questions 16. What is the proper role of a judge in interpreting the Constitution? Do you believe in judicial activism or judicial restraint? Answer: Answers will vary. 17. ETHICS: The Supreme Court has stated that ―although one may find sexually explicit material tasteless and even immoral, it is constitutionally protected so long as it is not obscene.‖ This chapter discusses the guidelines that determine if speech is obscene for purposes of the First Amendment. Should obscenity ever be protected under the First Amendment? Where do you draw the line? Answer: Answers will vary.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 6: Torts and Product Liability

18. Do you believe that the federal government should be able to create whatever laws it deems to be in the country‘s best interests, or do you believe that individual states should have more control over the laws within their own borders? Answer: Answers will vary. 19. This chapter is filled with examples of statutes that have been struck down by the courts. Do you like the fact that courts can void laws that they determine to be in violation of the Constitution? Or is it wrong for appointed judges to overrule ―the will of the majority,‖ as expressed by elected members of Congress and state legislatures? Answer: Answers will vary. 20. Gender discrimination currently receives ―intermediate‖ Fourteenth Amendment scrutiny. Is this right? Should gender receive ―strict‖ scrutiny as does race? Why or why not? Answer: Answers will vary.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 6: Torts and Product Liability

Multiple Choice Questions 26. Jane writes an article for a newspaper reporting that Ann was arrested for stealing a car. The story is entirely false. Ann is not a public figure. Which of the following torts has Jane committed? A. Ordinary slander B. Slander per se C. Libel D. None of these Answer: C 27. As a practical joke, Sami sneaks up on Tito, hits him with a baseball bat, and knocks him unconscious. Tito never saw Sami coming. He wakes up with a horrible headache. Which of the following torts has Sami committed? A. Assault B.

Battery

C. Both assault and battery D. Neither assault nor battery because it was a practical joke

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 6: Torts and Product Liability

Answer: C 28. Aldo runs a red light and hits Carol‘s car. She suffers serious injuries and is unable to work for two months after the accident. Carol sues, claiming the following losses: I. $10,000—car repairs II. $10,000—medical expenses III. $10,000—lost wages IV. $10,000—pain and suffering If the jury believes all of Carol‘s evidence and she wins her case, how much will she receive in compensatory damages? A. $40,000 B.

$30,000

C. $20,000 D. $10,000 E.

Answer: A 29. Amil hired Barney, a realtor, to sell his house in exchange for a 3 percent commission. Barney showed the house to Courtney, who pretended she was not interested, but then secretly approached Amil with an offer: Cut Barney out of the deal and she would pay full price. Amil accepted and sold the house to Courtney. When Barney found out, he was furious. What tort might Courtney have committed? A. Fraud B.

Tortious interference with contract

C. Tortious interference with prospective advantage D. Intentional infliction of emotional distress Answer: B 30. Zack lives in a state that prohibits factory laborers from working more than 12 hours in any 24hour period. The state legislature passed the law to cut down on accidents caused by fatigued workers. Ignoring the law, Zack makes his factory employees put in 14-hour days. Eventually, a worker at the end of a long shift makes a mistake and severely injures a coworker. The injured worker sues Zack. Which of the following terms will be most relevant to the case? A. Res ipsa loquitur B.

Assumption of the risk

C. Negligence per se D. Strict liability Answer: C

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 6: Torts and Product Liability

Case Questions 21. Tata Consultancy of Bombay, India, is an international computer consulting firm. It spends considerable time and effort recruiting the best personnel from India‘s leading technical schools. Tata employees sign an initial three-year employment commitment, often work overseas, and agree to work for a specified additional time when they return to India. Desai worked for Tata, but then he quit and formed a competing company, which he called Syntel. His new company contacted Tata employees by phone, offering higher salaries, bonuses, and assistance in obtaining permanent resident visas in the United States if they would come work for Syntel. At least 16 former Tata employees left their jobs without completing their contractual obligations and went to work for Syntel. Tata sued. What did it claim, and what should be the result? Answer: Tata sued for interference with contractual rights. The U.S. District Court granted summary judgment for Syntel, but on appeal the court of appeals reversed. The court stated that Syntel had ―sought to reap where it had not shown by actively and systematically soliciting Tata employees . . . before they were legally free to do so. . .‖ It remanded the case for trial. 22. YOU BE THE JUDGE: WRITING PROBLEM Johnny Carson was for many years the star of a wellknown television show, The Tonight Show. For about 20 years, he was introduced nightly on the show with the phrase, ―Here‘s Johnny!‖ A large segment of the television-watching public associated the phrase with Carson. A Michigan corporation was in the business of renting and selling portable toilets. The company chose the name ―Here‘s Johnny Portable Toilets,‖ and coupled the company name with the marketing phrase, ―The World‘s Foremost Commodian.‖ Carson sued, claiming that the company‘s name and slogan violated his right to commercial exploitation. Argument for Carson: The toilet company is deliberately taking advantage of Johnny Carson‘s good name. He worked hard for decades to build a brilliant career and earn a reputation as a creative, funny, likable performer. No company has the right to use his name, his picture, or anything else closely identified with him, such as the phrase ―Here‘s Johnny.‖ The pun is personally offensive and commercially unfair. Argument for Here’s Johnny Portable Toilets: Johnny Carson doesn‘t own his first name. It is available for anyone to use for any purpose. Further, the popular term ―john,‖ meaning toilet, has been around much longer than Carson or even television. We are entitled to make any use of it we want. Our corporate name is amusing to customers who have never heard of Carson, and we are entitled to profit from our brand recognition. Answer: Decision for Defendant overturned on appeal. A celebrity‘s right of publicity is invaded whenever the celebrity‘s identity is intentionally appropriated for commercial purposes. And Identity is not limited to the celebrity‘s name or likeness. It includes any characteristic that is clearly associated with the celebrity. Carson‘s claim that his right of privacy was invaded it not supported by the law or the facts, but his right of publicity clearly has. The theory of the right is that a celebrity‘s identity can be valuable in the promotion of products, and the celebrity has an interest that may be protected from the unauthorized commercial exploitation of that identity. Carson v. Here’s Johnny Portable Toilets, Inc., 698 F.2d 831 U.S.Ct.App (6th Cir. 1983) 23. Andrew Greene sued Paramount Pictures for defamation arising out of the film The Wolf of Wall

Street. Although the film did not use his name, Greene alleged that the fictitious toupee-wearing character Nicky “Rugrat” Kosksoff was based on him. The film portrayed Rugrat as a “criminal, drug user, degenerate, depraved, and devoid of any morality or ethics.” What would Greene need to prove to be successful in his claim? Answer: To prove defamation, a plaintiff must prove a defamatory statement that was false and communicated to others. He must also prove that the statement caused injury. The District Judge

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 6: Torts and Product Liability

denied Paramount‘s motion to dismiss the lawsuit as to defamation. Even though the movie did not use Greene‘s name or image, the court found that making the connection to the plaintiff was reasonable and the likeness ―unmistakable.‖ Greene v. Paramount Pictures corp., 138 F.Supp.3d 226 (2015). 24. At the end of a skateboard exhibition, one of the performers tossed a skateboard into the rowdy crowd. David rushed to catch the prize but was injured when his fellow spectators trampled him to snatch it away. What is the likely outcome if David sues the promoter of the skateboarding show for negligence? Answer: The promoter of the skateboarding show will argue that David assumed the risk, especially when he tried to catch the skateboard thrown to the crowd, knowing he could be injured. 25. Jane Doe, an aspiring model, created a profile on ModelMayhem.com, a networking website for models. Two men used the site to lure her to a fake audition, where they drugged and sexually assaulted her and recorded a video of the act for sale as Internet porn. The website had reason to know that some men posed as fake talent scouts. Doe sued ModelMayhem, alleging that site knew of her assailants‘ criminal histories and failed to warn her. What result? Answer: California law imposes a duty to warn a potential victim of third-party harm when a person has a ―special relationship to either the person whose conduct needs to be controlled or ... to the foreseeable victim of that conduct.‖ On a motion to dismiss, the court allowed the model‘s failure to warn claim. Students should assess whether and to what extent the website had a duty to the user. Jane Doe v. Internet Brands, Inc. ___Fd.___ (2016).

Discussion Questions 21. You have most likely heard of the Liebeck v. McDonald’s case. Liebeck spilled hot McDonald‘s coffee in her lap and suffered third-degree burns. At trial, evidence showed that her cup of coffee was brewed at 190 degrees, and that, more typically, a restaurant‘s ―hot coffee‖ is in the range of 140 to 160 degrees. A jury awarded Liebeck $160,000 in compensatory damages and $2.7 million in punitive damages. The judge reduced the punitive award to $480,000, or three times the compensatory award. Comment on the case and whether the result was reasonable. Answer: Answers will vary. 22. Self-driving cars are programmed to use lasers, sensors, software, and maps to drive themselves. Some states have passed laws allowing driverless technology on the road. But what happens when a driverless car harms someone? Who should be at fault? The passenger? The programmer? The manufacturer? Answer: Answers will vary. 23. Many retailers have policies that instruct employees not to attempt to stop shoplifters. Some store owners fear false imprisonment lawsuits and possible injuries to workers more than losses related to stolen merchandise. Are these ―don‘t be a hero‖ policies reasonable? Would you put one in place if you owned a retail store? Answer: Answers will vary. 24. Imagine an undefeated high school football team on which the average lineman weighs 300 pounds. Also, imagine a 0–10 team on which the average lineman weighs 170 pounds. The undefeated team sets out to hit as hard as it can on every play and to run up the score as much as possible. Before the game is over, 11 players from the lesser team have been carried off the field with significant injuries. All injuries were the result of ―clean hits‖—none of the plays resulted in a

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 7: Privacy and Internet Law

penalty. Even late in the game, when the score is 70–0, the undefeated team continues to deliver devastating hits that are far beyond what would be required to tackle and block. The assumption of the risk doctrine exempts the undefeated team from liability. Is this reasonable? Answer: Answers will vary. 25. People who serve alcohol to others take a risk. In some circumstances, they can be held legally responsible for the actions of the people they serve. Is this fair? Should an intoxicated person be the only one liable if harm results? If not, in what specific circumstances is it fair to stretch liability to other people? Answer: Answers will vary.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 7: Privacy and Internet Law

Multiple Choice Questions 31. The following agency is charged with the regulation of electronic communications: A. National Security Agency B. Federal Trade Commission C. Federal Communications Commission D. None of the above Answer: C 32. Which of the following is not protected by the First Amendment? A. True threats B. Rap lyrics C. Offensive language D. Insults Answer: A 33. Which of the following is not permitted under the Fourth Amendment? A. The police obtain information about Iris‘s location through smart city cameras. B. The government monitors Lina‘s public Twitter account for hate speech. C. During a routine traffic stop for speeding, a police officer takes away Nadya‘s smart phone and swipes through the apps. D. None of these are protected by the Fourth Amendment. Answer: C

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 7: Privacy and Internet Law

34. An employer has the right to monitor workers‘ electronic communications if: A. the employee consents. B. the monitoring occurs in the ordinary course of business. C. the employer provides the computer system. D. All of these E. None of these Answer: D 35. Sushila suspects that her boyfriend Plum is being unfaithful. While he is asleep, she takes his smartphone out from under his pillow and goes through all of his texts. Which law has Sushila violated? A. The First Amendment B. The Communications Decency Act C. The Stored Communications Act D. The Wiretap Act E. None of these Answer: C

Case Questions 26. ETHICS Chitika, Inc., provided online tracking tools on websites. When consumers clicked the ―opt-out‖ button, indicating that they did not want to be tracked, they were not—for ten days. After that, the software would resume tracking. Is there a legal problem with Chitika‘s system? An ethical problem? What Life Principles were operating here? Answer: The FTC found that this system was unfair and deceptive under Section 5 of the FTC Act. Chitika entered into a consent order under which opt-out provision would last five years. 27. You Be the Judge: WRITING PROBLEM Jerome Schneider wrote several books on how to avoid taxes. These books were sold on Amazon.com. Amazon permits visitors to post comments about items for sale. Amazon‘s policy suggests that these comments should be civil (e.g., no profanity or spiteful remarks). The comments about Schneider‘s books were not so kind. One person alleged Schneider was a felon. When Schneider complained, an Amazon representative agreed that some of the postings violated its guidelines and promised that they would be removed within one to two business days. Two days later, the posting had not been removed. Schneider filed suit. Argument for Schneider: Amazon has editorial discretion over the posted comments. It both establishes guidelines and then monitors the comments to ensure that they comply with the guidelines. These activities make Amazon an information content provider not protected by the Communications Decency Act. Also, Amazon violated its promise to take down the content. Argument for Amazon: The right to edit material is not the same thing as creating the material in the first place. Answer: The court held for Amazon. Editing material does not create liability under the CDA. The court also ruled that Amazon was not liable for failing to remove the offending comments—that failure to act is also protected under the CDA. Note that the court in the Yahoo! case would have held Amazon liable, under promissory estoppel, for not taking down the material after promising to do so. 28. Barrow was a government employee. Because he shared his office computer with another worker, he brought in his personal computer from home to use for office work. No other employee

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 7: Privacy and Internet Law

accessed it, but it was connected to the office network. The computer neither was password protected nor was it regularly turned off. When another networked computer was reported to be running slowly, an employee looked at Barrow‘s machine to see if it was the source of the problem. He found material that led to Barrow‘s termination. Had Barrow‘s Fourth Amendment rights been violated? Answer: No. First, the person who accessed Barrow’s computer was not a representative of any

government, but a private person, another employee of his employer. The Fourth Amendment prohibits only government activity. Second, Barrow did not demonstrate an expectation of privacy in his computer. He did not password-protect it, he left it on for long periods of time, and he left it unattended. 29. Someone posted a fake profile of actor Christianne Carafano on a dating website, Matchmaker.com. The profile, which included Carafano‘s photo, telephone number, and home address, invited men with ―a strong sexual appetite‖ to join her in a one-night stand. Carafano received many sexually explicit and threatening messages and was forced to move out of her home. She sued Matchmaker, arguing that the company was liable for invasion of privacy, defamation, and negligence. What result? Answer: The Ninth Circuit Court of Appeals ruled that the website was not liable because it did not create the content that was posted. This case represents the purpose of the CDA, to protect internet service providers from liability for material posted by third parties. Carafano v. Metrosplash.com, Inc., 339 F.3d 1119; 2003 U.S. App. LEXIS 16548 United States Court of Appeals for the Ninth Circuit, 2003. 30. Suspecting his wife was unfaithful, Simpson attached a recording device to the telephone lines in their home. Through the secret recordings, he was able to prove that she was indeed having an affair. Simpson‘s wife sued her husband under the Federal Wiretap Act. Who wins and why? Answer: Simpson‘s wife wins, because she, and other parties to whom she spoke, had a reasonable expectation of privacy.

Discussion Questions 26. Marina Stengart used her company laptop to communicate with her lawyer via her personal, password-protected, web-based email account. The company‘s policy stated: Email and voice mail messages, internet use and communication, and computer files are considered part of the company‘s business and client records. Such communications are not to be considered private or personal to any individual employee. Occasional personal use is permitted; however, the system should not be used to solicit for outside business ventures, charitable organizations, or any political or religious purpose, unless authorized by the Director of Human Resources.

After she filed an employment lawsuit against her employer, the company hired an expert to access her emails that had been automatically stored on the laptop. Are these emails protected by the attorney-client privilege? How does this case compare with Scott v. Beth Israel earlier in the chapter? Answer: The court ruled the attorney-client privilege protected these emails. Stengart had a reasonable expectation of privacy because she had taken steps to protect the privacy of those emails and shield them from her employer. She used a personal, password-protected email account instead of her company email address and did not save the account‘s password on her computer. Also, the company policy did not clearly reveal that it had the right to read emails stored on a company computer. Stengart v. Loving Care Agency, Inc., 201 N.J. 300.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 8: Crime

27. Eric Schmidt, former CEO of Google, has written: The communication technologies we use today are invasive by design, collecting our photos, comments, and friends into giant databases that are searchable and, in the absence of outside regulation, fair game for employers, university admissions personnel, and town gossips. We are what we tweet.

Do you consider this a problem? If so, can the law fix it? Answer: Answers will vary. 28. Imagine that you are the judge in the Elonis case. Would you have excused Elonis‘s conduct under the First Amendment? When is a threat a true threat, and when is it just social media banter? Answer: Answers will vary. 29. The GDPR includes a ―right to be forgotten‖ online. This right allows Europeans to request that websites take down their personal information, as long as it is not in the public interest. For example, a person would be able to request that Instagram delete their unflattering photograph, if it is outdated and is not newsworthy. Is this law a good idea? Would U.S. lawmakers ever consider a law like this? Why or why not? Answer: Answers will vary. 30. ETHICS JuicyCampus.com was a website where college students could anonymously gossip about their schools. To encourage users to ―dish dirt,‖ the site promised total anonymity: It did not require a login or username; its slogan was ―Always anonymous . . . .Always juicy‖; and it assured its users that it was impossible ―for anyone to find out who you are and where you are located.‖ The site also instructed users on how to download IP-cloaking software to further ensure anonymity. As a result, most of the Juicy Campus posts were more than just juicy: They ranged from shocking accusations to harassment and revenge. These rumors tarnished reputations, hurt feelings, and tore apart college communities. Women, minorities, and gay students were disproportionately affected. Whether or not It is legally liable, does JuicyCampus.com have an ethical duty to its users? What Life Principles are at stake? Answer: Answers will vary.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 8: Crime

Table of Contents Multiple Choice Questions ....................................................................................................................................... 27 Case Questions ............................................................................................................................................................. 29 Discussion Questions.................................................................................................................................................. 30

Multiple Choice Questions

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 8: Crime

36. In a criminal case, which statement is true? A. The prosecution must prove the government‘s case by a preponderance of the evidence. B. The criminal defendant is entitled to a lawyer even if them cannot afford to pay for it themself. C. The police are never allowed to question the accused without a lawyer present. D. All federal crimes are felonies. Answer: B 37. The police are not required to obtain a warrant before conducting a search if: A. a reliable informant has told them they will find evidence of a crime in a particular location. B. they have a warrant for part of a property and another section of the property is in plain view. C. they see someone on the street who could possibly have committed a criminal act. D. someone living on the property has consented to the search. Answer: D 38. Under the exclusionary rule, which statement is true? A. Evidence must be excluded from trial if the search warrant is defective, even if the police believed at the time of the search that it was valid. B. The prosecution cannot use any evidence the police found at the site of the illegal search, but it can use any evidence the police discover elsewhere as a result of the illegal search. C. Any statements a defendant makes after arrest are inadmissible if the police do not read them their Miranda rights. D. If a conviction is overturned because of the exclusionary rule, the prosecution is not allowed to retry the defendant. Answer: C 39. Henry asks his girlfriend, Alina, to drive his car to the repair shop. She drives his car all right—to Las Vegas, where she hits the slots. Alina has committed: A. fraud. B. embezzlement. C. larceny. D. a RICO violation. Answer: C 40. Which of the following elements is required for a RICO conviction? A. Investment in a legitimate business B. Two or more criminal acts C. Maintaining or acquiring businesses through criminal activity D. Operating a business through criminal activity Answer: B

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 8: Crime

Case Questions 31. You Be the Judge: WRITING PROBLEM An undercover drug informant learned from a mutual friend that Philip Friedman ―knew where to get marijuana.‖ The informant asked Friedman three times to get him some marijuana, and Friedman agreed after the third request. Shortly thereafter, Friedman sold the informant a small amount of the drug. The informant later offered to sell Friedman three pounds of marijuana. They negotiated the price and then made the sale. Friedman was tried for trafficking in drugs. He argued entrapment. Was Friedman entrapped? Argument for Friedman: The undercover agent had to ask three times before Friedman sold him a small amount of drugs. A real drug dealer, predisposed to commit the crime, leaps at an opportunity to sell. If the government spends time and money luring innocent people into the commission of crimes, all of us are the losers. Argument for the Government: Government officials suspected Friedman of being a sophisticated drug dealer, and they were right. When he had a chance to buy three pounds, a quantity only a dealer would purchase, he not only did so, but he bargained with skill, showing a working knowledge of the business. Friedman was not entrapped—he was caught. Answer: Friedman argued entrapment, claiming that there was no evidence of his predisposition to traffic in drugs. The Alabama Supreme Court ruled against him. The court noted that Friedman admitted to occasional use of marijuana, that he had been able quickly to locate marijuana to resell to the agent, and that he showed a sophisticated knowledge of the drug when bargaining over the price of three pounds. The court held that there was no evidence of entrapment. Friedman v. State, 654 So.2d 50, 1994 Ala. Crim. App. LEXIS 179 (1994). 32. Conley owned video poker machines. Although they are outlawed in Pennsylvania, he placed them in bars and clubs. He used profits from the machines to buy more machines. Is he guilty of money laundering? Answer: Yes. It is money laundering to take the proceeds of illegal acts and either conceal them or, as he did, use them to promote additional crimes. 33. Shawn was caught stealing letters from mailboxes. After pleading guilty, he was sentenced to two months in prison and three years‘ supervised release. One of the supervised release conditions required him to stand outside a post office for eight hours wearing a signboard stating, ―I stole mail. This is my punishment.‖ He appealed this requirement on the grounds that it constituted cruel and unusual punishment. Do you agree? Answer: The appeals court affirmed the sentence on the grounds that it did not violate standards of decency. United States v. Gementera, 379 F.3d 596 (2004).

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 8: Crime

34. After a high school girl in South Carolina refused a teacher‘s order to put away her cellphone or leave class, a sheriff‘s deputy dragged the girl out of her chair, threw her on the floor, and handcuffed her. A classmate, Niya Kenny, stood up and swore at the officer, telling him he was acting unfairly. Both girls were arrested and charged with violating a state criminal law that prohibits disturbing ―in any way or in any place the students or teachers of any school‖ or ―acting in an obnoxious manner.‖ On what grounds could this statute be challenged? Answer: The American Civil Liberties Union challenged this statute on the grounds that it is unconstitutionally vague under the Fourteenth Amendment. The ACLU argued that the statute ―creates an impossible standard for school children to follow and for police to enforce with consistency and fairness.‖ A sheriff‘s group argued that the law is a necessary tool at a time when more students are refusing to obey school rules. 35. Police arrested Hank on a warrant issued in a neighboring county. When they searched him, the police found drugs and a gun. Only later did the police discover that the warrant had been recalled months before they used it. The notice of recall had not been entered into the database. Should the evidence of drugs and a gun be suppressed under the exclusionary rule? Answer: No. The police conduct at issue here comes under one of the exceptions to the exclusionary rule–the good faith exception. The police acted under what appeared to be a valid warrant, and there was no indication that it had been recalled.

Discussion Questions 31. Under British law, a police officer must say the following to a suspect placed under arrest: ―You do not have to say anything. But if you do not mention now something which you later use in your defense, the court may decide that your failure to mention it now strengthens the case against you. A record will be made of anything you say and it may be given in evidence if you are brought to trial.‖ What is the goal of this British law? What does a police officer in the United States have to say, and what difference does it make at the time of an arrest? Which approach is better? Answer: Answers will vary. 32. ETHICS You are a prosecutor who thinks it is possible that Nonnie, in her role as CEO of a brokerage firm, has stolen money from her customers. If you charge her and her company with RICO violations, you know that she is likely to plea bargain because otherwise her assets and those of the company may be frozen by the court. As part of the plea bargain, you might be able to get her to disclose evidence about other people who have taken part in this criminal activity. But you do not have any hard evidence at this point. Would such an indictment be ethical? Do the ends justify the means? Is it right to harm Nonnie for the chance of protecting thousands of innocent investors? Answer: Answers will vary. 33. Officer Trottier stopped Marie for driving 20 miles over the speed limit. He then became suspicious because she was eating a Powerbar in a ―hurried manner‖ and her son would not make eye contact. The officer asked for and Marie granted him permission to search her car. During the search, he found a letter, which he read. Has he committed an illegal search? Answer: Answers will vary. 34. Mickle pleaded guilty to rape. The judge sentenced him to prison for five years and also ordered that he undergo a vasectomy. Was this cruel and unusual punishment? Answer: The appeals court ruled that this sentence was cruel and unusual. Although the operation in itself is not cruel (indeed, many men voluntarily undergo it), when imposed as

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 8: Crime

punishment, it is degrading and in that sense cruel. It is also an unusual punishment. Mickle v. Henrichs, 262 F. 687 (1918). 35. Ramona Fricosu was indicted on charges of real estate fraud. During a legal search of her home, the police found a computer with encrypted files. Would it be a violation of her Fifth Amendment right against self-incrimination to force her to unencrypt these files? Answer: The courts are divided on this topic. This court did order Fricosu to unencrypt the files on the theory that she was already incriminated because the police knew the laptop was hers. United States v. Fricosu, 841 F. Supp. 2d 1232 (D. Colo. 2012). But a different court ruled that a man suspected of having child pornography on his computer did not have to unencrypt the files. United States v. Doe, 670 F.3d 1335 (11th Cir. Fla. 2012). 36. Suppose two people are living together: the suspect and a tenant. If the tenant consents to a police search of the premises, then the police are not required to first obtain a warrant. What if the suspect and the tenant disagree, with the tenant granting permission while the suspect forbids the police to enter? Should the police be required to obtain a warrant before searching? Or what if the suspect denies permission to enter but the police go back later and the tenant consents? Answer: In the first situation, the Supreme Court ruled that if the suspect is standing there and denies consent, the police may not conduct a search. Georgia v. Randolph, 547 U.S. 103 (U.S. 2006). As for the second situation, in 2014, the Supreme Court refused to extend Georgia v. Randolph’s requirement of a co-occupant consent to a situation where the objecting occupant is absent from the property. The decision has implications for people who live with others. Cooccupants should be aware that their fellow co-occupants may consent to a police search if they are not there, even if they previously objected to the consent search. Fernandez v. California, 34 S. Ct. 1126 (2014). 37. Hiring relatives of foreign officials for no-show jobs is a violation of the FCPA. But what about hiring children of government officials into real jobs? The U.S. government investigated JPMorgan Chase & Co.‘s practice of hiring the children of top Chinese officials. For example, the bank hired Gao Jue, the son of China‘s commerce minister, even though his interviewers described him as ―the worst BA candidate they had ever seen.‖ But Gao‘s father promised ―he was willing to go extra miles to help JPM in whatever way we think he can.‖ What are the rules in this situation? What should they be? Answer: According to the WSJ, ―Factors that would help a company fend off bribery inquiries would include proof that there was a vacant position to start with (as opposed to the company

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 9: International Law

having created a new position for the official‘s relative); that the relative was qualified to fill it; and that the relative performed the duties of the position satisfactorily, legal experts said.‖ Of concern would be any evidence of a quid pro quo around the time of hiring. JPMorgan paid a roughly $264 million fine to settle this case. No criminal charges were brought. The Bank of New York Mellon paid a fine for having given internships to relatives of officials at a Middle Eastern investment fund. 38. A police officer in North Carolina stopped Nick‘s car because it had a broken brake light. Nick allowed the officer to search the car and, during the search, the officer found cocaine. It turns out that the original stop was invalid because drivers in North Carolina are allowed to drive with only one brake light. The cop did not know the law. Does the exclusionary rule prevent the cocaine from being admissible in court? Answer: If the original stop was illegal, then the search following from it, even though Nick gave permission, cannot stand. The exclusionary rule will apply.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 9: International Law

Multiple Choice Questions 41. For which of the following activities can a foreign sovereign be sued? A. Operating a factory dangerously B. Issuing a law that discriminates against a certain group C. Suspending the civil rights of its people D. None of the above Answer: A 42. Outdoor Technologies (an Australian company) obtained a judgment for $500,000 against Silver Star (a Chinese company) in a court in Australia. Silver Star owned property in Iowa, so Outdoor filed suit in Iowa to collect the judgment. Which of the following statements is true? A. Outdoor cannot collect in the United States a judgment that was issued by an Australian court.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 9: International Law

Outdoor cannot collect in the United States because Silver Star is not an American company. C. Outdoor can collect in the United States if the Australian court was fair and proper. D. Outdoor can collect in the United States because both the United States and Australia have common law systems. Answer: C 43. The president negotiates a defense agreement with a foreign government. To take effect, the agreement must be ratified by which of the following? A. Two-thirds of the House of Representatives B. Two-thirds of the Senate C. The Supreme Court D. A and B E. A, B, and C Answer: B 44. Lynn is an author living in Nevada. She contracted with a company in China, which promised to print her custom children‘s books. After receiving Lynn‘s payment, the company disappeared without performing. Lynn wants to sue for fraud, but the contract does not say anything about which country‘s law will be used to resolve disputes. Both China and the United States are signatories of the CISG. Will the CISG apply in this case? A. Yes, because both countries are signatories. B. Yes, because the parties did not opt out of the CISG. C. No, because the contract does not involve goods. D. No, because the CISG does not establish rules for fraud. Answer: C 45. Austria, Indonesia, and Colombia are all members of the WTO. If Austria imposes a tariff on imports of coffee beans from Colombia, but not from Indonesia, is it in violation of WTO principles? A. Yes, the WTO prohibits tariffs. B. Yes, the WTO prohibits excise taxes. C. Yes, Austria is violating the WTO‘s most favored nation rules. D. No, the WTO‘s most favored nation rules permit Austria to do this. Answer: C

Case Questions 36. A Saudi Arabian government-run hospital hired American Scott Nelson to be an engineer. The parties signed the employment agreement in the United States. On the job, Nelson reported that the hospital had significant safety defects. For this, he was arrested, jailed, and tortured for 39 days. Upon his release to the United States, Nelson sued the Saudi government for personal injury. Can Nelson sue Saudi Arabia? Answer: Based on Saudi Arabia v. Nelson (US S. Ct. 1993). The Supreme Court found that FSIA applied to immunize Saudi Arabia from the suit. While employing someone is a commercial activity, the Court reasoned that the injury stemmed from his arrest. Since a private citizen cannot jail someone, this is purely a governmental activity.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 9: International Law

37. The Instituto de Auxilios y Viviendas is a government agency of the Dominican Republic. Dr. Marion Fernandez, the general administrator of the Instituto and Secretary of the Republic, sought a loan for the Instituto. She requested that Charles Meadows, an American citizen, secure the Instituto a bank loan of $12 million. If he obtained a loan on favorable terms, he would receive a fee of $240,000. Meadows secured a loan on satisfactory terms, which the Instituto accepted. He then sought his fee, but the Instituto and the Dominican government refused to pay. He sued the government in U.S. district court. The Dominican government claimed immunity. Comment. Answer: The suit arose out of a loan agreement. Since this is an activity that an individual can engage in, the Dominican government is not immune. 38. Many European nations fear the effects of genetically modified foods, so they choose to restrict their importation. The EU banned the entry of these foods and subjected them to strict labeling requirements. Does this policy contravene the principles of WTO/GATT? Answer: The United States challenged this practice, and WTO ruled that genetically modified food had to be allowed into the EU. The WTO held that no scientific evidence supported the EU‘s fears, and therefore the regulation unduly burdened trade. 39. Boston Scientific (BSC), an American multinational, hired Carnero to work in its Argentine subsidiary. Carnero was paid in pesos, and his contract was governed by Argentine law. After BSC fired Carnero, he sued in the United States, claiming that the company terminated him for blowing the whistle on its accounting fraud. If this allegation was true, BSC would be in violation of an American statute, the Sarbanes-Oxley Act (SOX). BSC argued that, because SOX made no mention of extraterritorial application, it did not apply to overseas employees. Should SOX apply to an employee of a U.S. subsidiary working abroad? Answer: Citing the ―well-established presumption against the extraterritorial application of Congressional statutes,‖ the Court declined to extend whistleblower protection to overseas workers of U.S. corporations. 40. Chateau, a Canadian winery, contracted over the phone to buy 1.2 million wine corks from Sabate USA, the U.S. subsidiary of Sabate France. The parent company shipped the corks from France to Canada, along with a pre-printed invoice. The invoice contained a forum selection clause providing that any dispute would be heard in a French court. When Chateau realized that the corks altered the taste of its wine, it sued Sabate in California for breach of contract. Chateau argued that the forum selection clause was not part of the original deal. Furthermore, it had an enforceable oral agreement with Sabate USA, which was governed by the CISG because both Canada and the United States were signatories. Did the CISG govern the dealings between Chateau and Sabate USA? If so, did the contract between Chateau and Sabate USA have to be in writing? Was the forum selection clause enforceable against Chateau? Answer: Yes, the CISG did govern the dealings between the parties, and the agreement did not have to be in writing, as oral contracts were sufficient. But the forum selection clause, the court ruled, was a later attempted modification of an existing contract, and therefore, unenforceable.

Discussion Questions 39. Should the United States be bound by the rulings of international tribunals like the WTO and the ICJ? On one hand, sovereignty demands that others do not meddle in domestic affairs, especially laws. On the other hand, the United States was a founding member of both the WTO and the ICJ. If it ignores their rulings, what is the use of these international bodies?

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 10: Introduction to Contracts

Answer: Answers will vary. 40. After the 9/11 terrorist attacks, the U.S. government imprisoned suspected terrorists in Guantanamo Bay, Cuba. Officials argued that these detainees did not enjoy constitutional rights because they were not on U.S. soil, even though they were held by Americans. Are the freedoms guaranteed by the U.S. Constitution reserved for U.S. citizens on U.S. soil or do they apply more broadly? Answer: In Boumediene v. Bush, 553 U.S. 723 (2008), the Supreme Court disagreed, holding that the Constitution protected the rights of noncitizens outside U.S. borders. 41. The United Kingdom has not signed the CISG. Until recently, major world traders like Japan and Brazil had refused to sign. Imagine that you are a legislator from one of these countries. What might your objections be to ratifying a treaty on sales law? Answer: Answers may include the following:  

  

Legal uncertainty caused by introducing a new set of rules of sale. Who will interpret new rules and how? These broadly formulated rules contain many undefined and new terms, which have to be developed in the international arena by courts and arbitral tribunals and no principles of stare decisis. The introduction of foreign solutions to well-known problems. The absence of certain underlying principles. The law is robbed of its flexibility and is fossilized in a code, which is almost impossible to change.

The integrity of the Convention is threatened by diverse interpretational approaches and tradition. 42. Generally speaking, should a country pass laws that seek to control behavior outside its borders? Or, when in Rome, should our companies and subsidiaries be allowed to do as the Romans do? Answer: Answers will vary. 43. What responsibility, if any, does the United States have to obey international law? Is it any different from other countries‘ responsibility to uphold international law? Why or why not? Answer: Answers will vary. 44. Supreme Court Justice Ruth Bader Ginsburg has cited foreign court rulings and jus cogens to argue against the constitutionality of the death penalty. Should the decisions of foreign courts and international law inform our interpretation of our own Constitution? Answer: Answers will vary.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 10: Introduction to Contracts

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 10: Introduction to Contracts

Discussion Questions..................................................................................................................................................... 3

Multiple Choice Questions 46. A sitcom actor, exhausted after their 10-hour workweek, agrees to buy a briefcase full of cocaine from Lewis for $12,000. Lewis and the actor have a _______________ contract. A. valid B. unenforceable C. voidable D. void Answer: D 47. Which of the following scenarios is governed by the UCC? I. Linda goes to an electronics store and buys a smart TV. II. Lauren hires a company to clean her swimming pool once a week. III. Adolfo purchases groceries through a supermarket delivery app. A. B. C. D.

I II III I and III

Answer: D 48. Consider the following scenarios: I. Madison says to a group of students, ―I‘ll pay $35 to the first one of you who shows up at my house and mows my lawn.‖ II. Lea posts a flyer around town that reads, ―Reward: $500 for information about the person who keyed my truck last Saturday night in the Wag-a-Bag parking lot. Call Lea at 555–5309.‖ Which of these proposes a unilateral contract? A. I only B. II only C. Both I and II D. None of these Answer: C 49. Which of the following amounts to an offer? I. Ed says to Carmen, ―I offer to sell you my pen for $1.‖ II. Ed says to Carmen, ―I‘ll sell you my pen for $1.‖ III. Ed writes, ―I‘ll sell you my pen for $1,‖ and gives the note to Carmen. A. I only B. I and II C. III only D. I and III E. All of these are valid offers. Answer: E

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 10: Introduction to Contracts

50. Rebecca, in Honolulu, faxes a job offer to Spike, in Pittsburgh, saying, ―We can pay you $55,000 per year, starting June 1.‖ Spike faxes a reply, saying, ―Thank you! I accept your generous offer, though I will also need $3,000 in relocation money. See you June 1. Can‘t wait!‖ On June 1, Spike arrives and finds that his position is filled by Gus. He sues Rebecca. A. Spike wins $55,000. B. Spike wins $58,000. C. Spike wins $3,000. D. Spike wins restitution. E. Spike wins nothing. Answer: E

Case Questions 41. Jennifer worked as a grant writer for Brightway, a Christian nonprofit. When she announced she was moving in with her boyfriend, all of her supervisors, including the company‘s president, congratulated her and expressed their support. No one told her that her job was in jeopardy. Months later, Brightway fired Jennifer because ―living together outside marriage is forbidden by the Scriptures.‖ Suppose Jennifer sues under the theory of promissory estoppel. What is her best argument? Answer: Jennifer‘s best argument is that she relied on the congratulations and alleged support of her coworkers and did not seek other employment. No one told her, as they congratulated her, that her job was in jeopardy. Even though there was no explicit promise, their silence in this circumstance gives rise to promissory estoppel, since ordinarily, where an objection existed, reasonable people would have made a statement or taken action. If they had, Jennifer could have searched for another job, or reconsidered her decision. Trehar v. Brightway Center, Inc., 2015Ohio-4144. 42. Interactive Data Corp. hired Daniel Foley as an assistant product manager at a starting salary of $18,500. Over the next six years, Interactive steadily promoted Foley until he became Los Angeles branch manager at a salary of $56,116. Interactive‘s officers repeatedly told Foley that he would have his job so long as his performance was adequate. In addition, Interactive distributed an employee handbook that specified ―termination guidelines,‖ including a mandatory seven-step pre-termination procedure. Two years later, Foley learned that his recently hired supervisor, Robert Kuhne, was under investigation by the FBI for embezzlement at his previous job. Foley reported this to Interactive officers. Shortly thereafter, Interactive fired Foley. He sued, claiming that Interactive could fire him only for good cause and after the seven-step procedure. What kind of a claim is he making? Should he succeed? Answer: Foley is arguing that he has an implied contract with Interactive based on the informal discussions concerning his future and the employee handbook. His argument convinced the California Supreme Court. Foley v. Interactive Data Corp., 47 Cal. 3d 654, 765 P.2d 373, 1988 Cal. LEXIS 269 (1988). Foley had no express contract for any period, and thus he started work as an employee-at-will. But the company‘s repeated assurances, plus the handbook, created an implied contract. 43. You Be the Judge: WRITING PROBLEM John Stevens owned a dilapidated apartment that he rented to James and Cora Chesney for a low rent. The Chesneys began to remodel and rehabilitate the unit. Over a four-year period, they installed two new bathrooms, carpeted the floors, installed new septic and heating systems, and rewired, replumbed, and painted. Stevens

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 10: Introduction to Contracts

periodically stopped by and saw the work in progress. The Chesneys transformed the unit into a respectable apartment. Three years after their work was done, Stevens served the Chesneys with an eviction notice. The Chesneys counterclaimed, seeking the value of the work they had done. Are they entitled to it? Argument for Stevens: Mr. Stevens is willing to pay the Chesneys exactly the amount he agreed to pay: nothing. The parties never contracted for the Chesneys to fix up the apartment. In fact, they never even discussed such an agreement. The Chesneys are making the absurd argument that anyone who chooses to perform certain work, without ever discussing it with another party, can finish the job and then charge it to the other person. If the Chesneys expected to get paid, obviously they should have said so. If the court were to allow this claim, it would be inviting other tenants to make improvements and then bill the landlord. The law has never been so foolish. Argument for the Chesneys: The law of quasi-contract was crafted for cases exactly like this. The Chesneys have given an enormous benefit to Stevens by transforming the apartment and enabling him to rent it at greater profit for many years to come. Stevens saw the work being done and understood that the Chesneys expected some compensation for these major renovations. If Stevens never intended to pay the fair value of the work, he should have stopped the couple from doing the work or notified them that there would be no compensation. It would be unjust to allow the landlord to seize the value of the work, evict the tenants who did it, and pay nothing. Answer: Yes, they are entitled to the value of their work, said the court in Chesney v. Stevens, 435 Pa. Super. 71, 644 A.2d 124.0, 1994 Pa. Super. LEXIS 2388 (Pa. Super. Ct. 1994). They have neither an express nor an implied contract for the work. Stevens did nothing to create either. But he was aware of the work they were doing, and he should know that they would reasonably expect compensation. It would be unjust, said the court, to permit him to keep the benefit without paying anything, and so the Chesneys won their case of quasi-contract, receiving quantum meruit damages for the value of their work. 44. The town of Sanford, Maine, decided to auction off a lot it owned. The town advertised that it would accept bids through the mail up to a specified date. Arthur and Arline Chevalier mailed in a bid that turned out to be the highest. When the town refused to sell them the lot, they sued. Result? Answer: No contract, no sale. An auction is with reserve unless stated otherwise. The ad was silent on the subject, so this auction was with reserve. That means that all of the bids, including the highest, are merely offers. The auctioneer, in this case the town, has the right to reject all of the offers, and the Chevaliers have no right to the lot. Chevalier v. Town of Sanford, 475 A.2d 1148 (Me. 1984). 45. The Dukes leased land from Lillian Whatley. Toward the end of their lease, they sent Ms. Whatley a new contract, renewing the lease for three years and giving themselves the option to buy the land at any time during the lease for $50,000. Whatley crossed out the clause giving them an option to buy. She added a sentence at the bottom, saying, ―Should I, Lillian Whatley, decide to sell at end [sic] of three years, I will give the Dukes the first chance to buy.‖ Then she signed the lease, which the Dukes accepted in the changed form. They continued to pay the rent until Whatley sold the land to another couple for $35,000. The Dukes sued. Are the Dukes entitled to the land at $50,000? At $35,000? Answer: No. The agreement as modified by Ms. Whatley did not specify a price. It merely said she would give them the first opportunity to buy. Therefore, the agreement is not definite enough to enforce specific performance. Duke v. Whatley, 580 So.2d 1267 (1991).

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 10: Introduction to Contracts

46. In the bleachers . . . ―You‘re the best, George!‖ Mike exclaimed. ―Who else would give me a ticket to the big game?‖ ―No one, Mike, no one.‖ ―Let me offer my thanks. I‘ll buy you a beer!‖ ―Ah,‖ George said. ―A large beer would hit the spot right now.‖ ―Small. Let me buy you a small beer.‖ ―Ah, well, good enough.‖ Mike stood and took his wallet from his pocket. He was distressed to find very few bills inside. ―There‘s bad news, George!‖ he said. ―What‘s that?‖ ―I can‘t buy you the beer, George.‖ George considered that for a moment. ―I‘ll tell you what, Mike,‖ he said. ―If you march to the concession stand right this minute and get me my beer, I won‘t punch you in the face.‖ ―It‘s a deal!‖ Mike said. Discuss the consideration issues raised by this exchange. Answer: Mike‘s initial promise to buy the beer is a gratuitous promise. He did receive a ticket from George, but the ticket was not given to induce Mike to promise to buy the beer. In the second half of the dialogue, George does not commit a forbearance when he agrees not to punch Mike, because he has no legal right to hit him. And so, Mike is under no contractual obligation to buy the beer.

Discussion Questions 45. Have you ever made an agreement that mattered to you, only to have the other person refuse to follow through on the deal? Looking at the list of elements in the chapter, did your agreement amount to a contract? If not, which element did it lack? Answer: Answers will vary. 46. Consider promissory estoppel and quasi-contracts. Do you like the fact that these doctrines exist? Should courts have ―wiggle room‖ to enforce deals that fail to meet formal contract requirements? Or, should the rule be ―If it‘s not an actual contract, too bad. No deal.‖ Answer: Answers will vary. 47. Is it sensible to have two different sets of contract rules—one for sales of goods and another for everything else? Would it be better to have a single set of rules for all contracts? Answer: Answers will vary. 48. The day after Thanksgiving, known as Black Friday, is the biggest shopping day of the year. One

major retailer advertised a ―Black Friday only‖ laptop for $150. On Thanksgiving night, hundreds of people waited for the store to open to take advantage of the laptop deal—only to learn that the store only had two units for sale at the discounted price. Did the retailer breach its contract

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 11: Legality, Consent, and Writing

with the hundreds of consumers who sought the deal? What obligation, if any, does the retailer have to its consumers? Answer: These cases resulted in numerous complaints to the FTC. Students might note that after these incidents, retailers began listing how many products of each they would have in stock. Regardless of these consumer protection issues, an advertisement is not a valid offer to contract. It is merely an invitation to offer. 49. Someone offers to sell you a concert ticket for $50, and you reply, ―I‘ll give you $40.‖ The seller

refuses to sell at the lower price, and you say, ―OK, OK, I‘ll pay you $50.‖ Clearly, no contract has been formed because you made a counteroffer. If the seller has changed their mind and no longer wants to sell for $50, they don‘t have to. But is this fair? If it is all part of the same conversation, should you be able to accept the $50 offer and get the ticket? Answer: Answers will vary.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 11: Legality, Consent, and Writing

Table of Contents Multiple Choice Questions ....................................................................................................................................... 40 Case Questions ............................................................................................................................................................. 41 Discussion Questions.................................................................................................................................................. 43

Multiple Choice Questions 51. Ryder goes to a baseball game. The back of his ticket clearly reads: ―Fan agrees to hold team blameless for all injuries occurring at the stadium—pay attention to the game at all times for your own safety!‖ In which of the following scenarios can Ryder sue the baseball franchise? A. In the first inning, a foul ball hits Ryder in the elbow, injuring her. B. After Ryder heckles the star player for several innings, he grabs the ballboy‘s chair and throws it into the stands, injuring Ryder‘s other elbow. C. Ryder eats a stadium hot dog, which causes terrible stomach upset. D. None of these are actionable because Ryder agreed to the exculpatory clause. Answer: B 52. Kerry finds a big green ring in the street. She shows it to Leroy, who says, ―Wow. That could be valuable.‖ Neither Kerry nor Leroy knows what the ring is made of or whether it is valuable. Kerry sells the ring to Leroy for $100 saying, ―Don‘t come griping if it turns out to be worth two dollars.‖ Leroy takes the ring to a jeweler, who tells him it is an unusually perfect emerald, worth at least $75,000. Kerry sues to rescind. A. Kerry will win based on fraud. B. Kerry will win based on mutual mistake. C. Kerry will win based on unilateral mistake. D. Kerry will lose.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 11: Legality, Consent, and Writing

Answer: D Feedback: Kerry will lose, based on conscious uncertainty. If Leroy knew the ring was valuable, Kerry could win based on unilateral mistake. If both parties were certain that it was worthless, Kerry could win based on mutual mistake. But here, the parties are aware that it might be priceless and might be worthless. Each has accepted the risk and must live with the results. 53. CPA QUESTION: Two individuals signed a contract that was intended to be their entire agreement. The parol evidence rule will prevent the admission of evidence offered to: A. explain the meaning of an ambiguity in the written contract. B. establish that fraud had been committed in the formation of the contract. C. prove the existence of a contemporaneous oral agreement modifying the contract. D. prove the existence of a subsequent oral agreement modifying the contract. Answer: C Feedback: The rule prevents reliance on any oral agreements made while signing the integrated written contract. CPA Examination, November 1991, #23. 54. Which of the following must be in writing to be enforceable? A. Raul buys a small piece of land for $300. B.

Lila buys an antique table for $300.

C. DJ pays $300 for a kiteboarding lesson tomorrow. D. None of these must be in writing. Answer: A Feedback: Transfers of an interest in land must be in writing. Contracts for the sale of goods under $500 need not be in writing. 55. In December 2020, Eric hires a rock band to play at his graduation party in May 2022. He agrees to pay the band $450, but the deal is never put into writing. In January 2022, Eric decides he wants a reggae band instead and cancels the rock band. The rock band argues that they had an enforceable contract with Eric. Which of the following is true about Eric‘s contract with the band? A. A service contract does not have to be in writing to be enforceable. B. A contract of less than $450 does not require a writing to be enforceable. C. A contract that is not performable within one year must be in writing to be enforceable. D. None of these are true. Answer: C

Case Questions 47. Barbara Richards leased an apartment at a complex owned by Twin Lakes. The lease declared that Twin Lakes would maintain the common areas, but it would not be responsible for any harm, anywhere on the property, even if it was caused by Twin Lakes‘ negligence. Richards slipped and fell on snow-covered ice in the Twin Lakes parking lot. What result?

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 11: Legality, Consent, and Writing

Answer: The exculpatory clause was invalid as against public policy. Judgment for Plaintiff. Ransburg v. Richards, 770 N.E.2d 393 Indiana Court of Appeals, 2002. 48. Guyan Machinery, a West Virginia manufacturing corporation, hired Albert Voorhees as a

salesman and required him to sign a contract stating that if he left Guyan, he would not work for a competing corporation anywhere within 250 miles of West Virginia for a two-year period. Later, Voorhees left Guyan and began working at Polydeck Corp., another West Virginia manufacturer. The only product Polydeck made was urethane screens, which comprised half of 1 percent of Guyan‘s business. Is Guyan entitled to enforce its non-compete clause? Answer: No. The non-compete clause is unenforceable here because the two companies are not really in competition, and Guyan therefore has no confidential information or customer lists to protect. Voorhees v. Guyan Machinery Co., 191 W. Va. 450, 446 S.E.2d 672, 1994 W.Va. LEXIS 27 (1994). 49. Morell bought a security guard business from Conley, including the property on which the

business was located. Neither party knew that underground storage tanks were leaking and contaminating the property. After the sale, Morell discovered the tanks and sought to rescind the contract. Should he be allowed to do so? Answer: Yes. There was no fraud or misrepresentation because Conley knew nothing of the tanks. But there is mutual mistake: The parties were both in error about an important factual assumption––namely, the ground‘s condition. Morell was permitted to rescind. Morell v. Conley Detective and Security Guard Agency, Inc., Michigan Lawyers Weekly No. 18079, Nov. 28, 1994 (Mich. Ct. App. 1994). 50. Richard Griffin and three other men owned a grain company called Bearhouse, Inc., which needed to borrow money. First, National Bank was willing to loan $490,000, but it insisted that the four men sign personal guaranties on the loan, committing themselves to repaying up to 25 percent of the loan each if Bearhouse defaulted. Bearhouse went bankrupt. The bank was able to collect some of its money from Bearhouse‘s assets, but it sued Griffin for the balance. At trial, Griffin wanted to testify that before he signed his guaranty, a bank officer assured him that he would only owe 25 percent of whatever balance was unpaid, not 25 percent of the total loan. How will the court decide whether Griffin is entitled to testify about the conversation? Answer: Under the parol evidence rule, if the parties intended the guaranty to be integrated, which they almost certainly did, Griffin may testify only if the writing is ambiguous or incomplete. The state supreme court ruled that the document was complete and unambiguous, and Griffin owed the entire remaining balance. First National Bank v. Griffin, 310 Ark. 164, 832 S.W.2d 816, 1992 Ark. LEXIS 439 (1992). 51. When they were dating, Kris promised his wife Wendellyn that, if she moved to Wyoming and married him, he would take care of her for the rest of her life. Three years later, the couple filed for divorce and Wendellyn claimed that Kris‘s oral promise entitled her to care for life. Kris argued that his promise was unenforceable because it should have been in writing. Who is right? Answer: The court held for the husband. The husband‘s alleged promises relating to support should have been in writing, since it was a promise in consideration of marriage. Wendellyn Kay Dane v. Kris Alan Dane, 2016 WY 38; 368 P.3d 914, 2016 Wyo LEXIS 40.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 11: Legality, Consent, and Writing

Discussion Questions 50. ETHICS Richard and Michelle Kommit traveled to New Jersey to have fun in the casinos. While in

Atlantic City, they used their MasterCard to withdraw cash from an ATM conveniently located in the ―pit‖—the gambling area of a casino. They ran up debts of $5,500 on the credit card and did not pay. The Connecticut National Bank sued for the money. Law aside, who has the moral high ground? Is it acceptable for the casino to offer ATM services in the gambling pit? If a credit card company allows customers to withdraw cash in a casino, is it encouraging them to lose money? Do the Kommits have any ethical right to use the ATM, attempt to win money by gambling, and then seek to avoid liability? Answer: They should and did claim that they borrowed the money to gamble. They argued correctly that a gambling debt is unenforceable in Connecticut. The appellate court remanded the case so that the trial court could determine whether the bank knew that the money was borrowed for gambling. If the bank knew the intended use of the money (which a court could but need not infer from the location of the ATM), the debt is void. Connecticut National Bank of Hartford v. Kommit, 31 Mass. App. Ct. 348, 577 N.E.2d 639, 1991 Mass. App. LEXIS 660 (Mass. Ct. App. 1991). As to which party has the high ground, of course, the answer is that it is a tie for last place. Clearly the credit card company is encouraging people to gamble, by placing its ATM in the gambling pit. Just as certainly, the Kommits are trying to have it both ways, gambling in the hopes of a quick gain, then attempting to avoid liability by invoking this legal principle. Generally, when faced with two parties who are both less than saintly, courts attempt to make rulings that will be in the best interests of society, in the long term. 51. Should non-compete agreements in employment contracts be illegal altogether? Is there equality of bargaining power between the company and the employee? Should non-competes be limited to top officers of a company? Would you be upset if a prospective employer asked you to agree to a one-year covenant not to compete? Answer: Answers will vary. 52. Sixteen-year-old Travis Mitchell brought his Pontiac GTO into M&M Precision Body and Paint for

body work and a paint job. M&M did the work and charged $1,900, which Travis paid. When Travis later complained about the quality of the work, M&M did some touching up, but Travis was still dissatisfied. He demanded his $1,900 back, but M&M refused to refund it because all of the work was ―in‖ the car and Travis could not return it to the shop. The state of Nebraska, where this occurred, follows the majority rule on this issue. Does Travis get his money? Is this a fair result? Answer: Yes, Travis gets his money. In most states, a minor is permitted to disaffirm a contract and get a full refund of his money, even if he is unable to make restitution. Since restitution is impossible here, Travis wins his money while M&M gets nothing. Mitchell v. Mizerski, 1995 Neb. Asp. LEXIS 99 (Neb. 1995). The common law rule is intended to discourage wily hucksters from preying on minors, selling them goods they cannot afford and do not need. The best way to insure against such sales is to let the seller know the minor has the right to rescind, even if the goods are destroyed. Few judges have shown any inclination to change the rule. It is true that some minors are street smart, and might take advantage of the rule. However, the answer, in the opinion of most courts, is that a concerned seller can easily protect themself by not making the sale. 53. Contract law gives minors substantial legal protection. But does a modern high school student

need so much protection? Older teens may have been naive in the 1700s, but today they are quite savvy. Should the law change so that only younger children—perhaps those age 14 and under— have the ability to undo agreements? Or is the law reasonable the way it currently exists?

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 12: Contract Termination and Remedies

Answer: Answers will vary. 54. Is the Statute of Frauds reasonable, or does it unacceptably allow people to escape their obligations on a mere technicality? Would it be better to expand the law and require that all contracts be in writing? Or should the law be done away with altogether? Answer: Answers will vary.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 12: Contract Termination and Remedies

Multiple Choice Questions 56. Most contracts are discharged by: A. agreement of the parties. B. full performance. C. failure of conditions. D. commercial impracticability. E. a material breach. Answer: B 57. Big Co., a construction company, builds a grocery store. The contract calls for a final price of $5 million. Big Co. incurred $4.5 million in costs and stands to make a profit of $500,000. On a final inspection, the grocery store owner is upset. His blueprints called for 24 skylights, but the finished building has only 12. Installing the additional skylights would cost $100,000. Big Co. made no other errors. How much must the grocery store owner pay Big Co.? A. $5,000,000 B.

$4,900,000

C. $4,500,000 D. $0 Answer: B 58. Lenny makes K2, a synthetic form of marijuana, in his basement. He signs an agreement with the Super Smoke Shop to deliver 1,000 cans of K2 for $10,000. After the contract is signed, but before the delivery, Super Smoke Shop‘s state legislature makes the sale of K2 illegal. Lenny‘s contract will be discharged because of _______________.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 12: Contract Termination and Remedies

A. true impossibility B. commercial impracticability C. frustration of purpose D. None of these Answer: A 59. A manufacturer delivers a new tractor to Farmer Ted on the first day of the harvest season. But, the tractor will not start. It takes two weeks for the right parts to be delivered and installed. The repair bill comes to $1000. During the two weeks, some acres of Farmer Ted‘s crops die. He argues in court that his lost profit on those acres is $60,000. If a jury awards $1000 for tractor repairs, it will be in the form of ____ damages. If it awards $60,000 for the lost crops, it will be in the form of ____ damages. A. direct; direct B. direct; consequential C. consequential; direct D. consequential; consequential E. direct; incidental Answer: B 60. Julie signs a contract to buy Nick‘s 2002 Mustang GT for $5,000. Later, Nick changes his mind and refuses to sell his car. Julie soon buys a similar 2002 Mustang GT for $5,500. She then sues Nick and wins $500. The $500 represents her _______________.

A. B. C. D.

expectation interest reliance interest restitution interest None of these

Answer: A

Case Questions 52. Loehmann‘s clothing stores, a nationwide chain with headquarters in New York, was the anchor

tenant in the Lincoln View Plaza Shopping Center in Phoenix, Arizona, with a 20-year lease from the landlord, Foundation Development, beginning in 1978. Loehmann‘s was obligated to pay rent the first of every month and to pay common-area charges four times a year. The lease stated that if Loehmann‘s failed to pay on time, Foundation could send a notice of default, and that if the store failed to pay all money due within ten days, Foundation could evict. On February 23, 1987, Foundation sent Loehmann‘s the common-area charges for the quarter ending January 31, 1987. The balance due was $3,500. Loehmann‘s believed the bill was in error and sent an inquiry on March 18, 1987. On April 10, 1987, Foundation insisted on payment of the full amount within ten days. Foundation sent the letter to the Loehmann‘s store in Phoenix. On April 13, 1987, the Loehmann‘s store received the bill and, since it was not responsible for payments, forwarded it to the New York office. Because the company had moved offices in New York, a Loehmann‘s officer did not see the bill until April 20. Loehmann‘s issued a check for the full amount on April 24 and mailed it the following day. On April 28, Foundation sued to evict; on April 29, the company received Loehmann‘s check. Please rule. Answer: Motion granted. Nine Mile may have breached the agreement, but there is no evidence that Lewis lost money. To win, he must demonstrate a difference between the contract price and

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 12: Contract Termination and Remedies

the market value of the timber. There was no difference, and he recovers nothing. Lewis v. Nine Mile Mines, Inc., 886 P.2d 912, 1994 Mont. LEXIS 283 (Mont. 1994). 53. You Be the Judge: WRITING PROBLEM Kuhn Farm Machinery, a European company, signed an agreement with Scottsdale Plaza Resort, of Arizona, to use the resort for its North American dealers‘ convention during March 1991. Kuhn agreed to rent 190 guest rooms and spend several thousand dollars on food and beverages. Kuhn invited its top 200 independent dealers from the United States and Canada and about 25 of its own employees from the United States, Europe, and Australia, although it never mentioned those plans to Scottsdale. On August 2, 1990, Iraq invaded Kuwait, and on January 16, 1991, the United States and allied forces were at war with Iraq. Saddam Hussein and other Iraqi leaders threatened terrorist acts against the United States and its allies. Kuhn became concerned about the safety of those traveling to Arizona, especially its European employees. By mid-February, 11 of the top 50 dealers with expense-paid trips had either canceled their plans to attend or failed to sign up. Kuhn postponed the convention. The resort sued. The trial court discharged the contract under the doctrines of commercial impracticability and frustration of purpose. The resort appealed. Did commercial impracticability or frustration of purpose discharge the contract? Argument for Scottsdale Plaza Resort: The resort had no way of knowing that Kuhn anticipated bringing executives from Europe and even less reason to expect that if anything interfered with their travel, the entire convention would become pointless. Most of the dealers could have attended the convention, and the resort stood ready to serve them. Argument for Kuhn: The parties never anticipated the threat of terrorism. Kuhn wanted this convention so that its European executives, among others, could meet top North American dealers. That is now impossible. No company would risk employee lives for a meeting. As a result, the contract has no value at all to Kuhn, and its obligations should be discharged by law. Answer: Judgment for Scottsdale Resort. Kuhn has no claim for impracticability. Kuhn does not allege that it was impossible to make payment for the facilities. Rather, it contends that the value of the resort‘s counter-performance––the furnishing of convention facilities––was rendered worthless because of the Gulf War‘s effect on convention attendance. That is a claim of frustration of purpose. Kuhn‘s cancellation of the convention because of the perceived threat of terrorism was not an objectively reasonable response to an extraordinary and specific threat, so that frustration of purpose is not proven. 7200 Scottsdale Rd. Gen. v. Kuhn Mach., 184 Ariz. 341, 909 P.2d 408 (1995). 54. Lewis signed a contract for the rights to all timber located on Nine-Mile Mine. He agreed to pay

$70 per thousand board feet ($70/mbf). As he began work, Nine-Mile became convinced that Lewis lacked sufficient equipment to do the job well and forbade him to enter the land. Lewis sued. Nine-Mile moved for summary judgment. The mine offered proof that the market value of the timber was exactly $70/mbf, and Lewis had no evidence to contradict Nine-Mile. The evidence about market value proved decisive. Why? Please rule on the summary judgment motion. Answer: Motion granted. Nine Mile may have breached the agreement, but there is no evidence that Lewis lost money. To win, he must demonstrate a difference between the contract price and the market value of the timber. There was no difference, and he recovers nothing. Lewis v. Nine Mile Mines, Inc., 886 P.2d 912, 1994 Mont. LEXIS 283 (Mont. 1994).

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 12: Contract Termination and Remedies

55. Evans built a house for Sandra Dyer, but the house had some problems. The garage ceiling was too low. Load-bearing beams in the ―great room‖ cracked and appeared to be steadily weakening. The patio did not drain properly. Pipes froze. Evans wanted the money promised for the job, but Dyer refused to pay. Comment. Answer: The defects were serious enough to preclude Evans‘ recovery under substantial performance. Building a house that is not structurally sound, let alone the other problems, made the defects severe. Evans and Associates, Inc. v. Dyer, 185 Ill.Dec. 900, 246 Ill.App.3d 231, 615 N.E.2d 770 (1993). 56. The Madariagas owned a restaurant where they served ―Albert‘s Famous Mexican Hot Sauce.‖ They entered into a contract to sell the restaurant and the formula for the secret sauce to Morris. Although Morris paid the agreed-upon price, but the sellers refused to give him the recipe unless he also paid them lifetime royalties for the salsa. Which of these remedies should Morris seek: expectation, restitution, specific performance, or reformation? Why? Answer: Morris should seek specific performance, and compel the Madariagas to give him the recipe, as was set forth in their contract. Madariaga v. Morris, 639 S.W.2d 709 (1982).

Discussion Questions 55. Krug International, an Ohio corporation, had a contract with Iraqi Airways to build aeromedical

equipment for training pilots. Krug then contracted for Power Engineering, an Iowa corporation, to build the specialized gearbox to be used in the training equipment for $150,000. Power did not know that Krug planned to resell the gearbox to Iraqi Airways. When Power had almost completed the gearbox, the Gulf War broke out and the United Nations declared an embargo on all shipments to Iraq. Krug notified Power that it no longer wanted the gearbox. Power sued. Please rule. Answer: Power wins. Although it was impossible for Krug to complete its deal with Iraqi Airways, it was entirely possible for Krug to accept and pay for the gearbox. Defenses of commercial impracticability and frustration of purpose both fail because Power did not know that Krug intended to reship to Iraq. The international resale was not part of the Krug-Power contract, and its failure is no defense. Power Engineering & Mfg. v. Krug International, 501 N.W.2d 490, 1993 Iowa LEXIS 157 (Iowa 1993). 56. ETHICS The National Football League (NFL) owns the copyright to the broadcasts of its games. It licenses local television stations to telecast certain games and maintains a ―blackout rule,‖ which prohibits stations from broadcasting home games that are not sold out 72 hours before the game starts. Certain home games of the Cleveland Browns team were not sold out, and the NFL blocked local broadcast. But several bars in the Cleveland area were able to pick up the game‘s signal by using special antennas. The NFL wanted the bars to stop showing the games. What could it do? Was it unethical of the bars to broadcast the games that they were able to pick up? Apart from the NFL‘s legal rights, do you think it had the moral right to stop the bars from broadcasting the games? Answer: Answers will vary. 57. Consequential damages can be many times higher than direct damages. Consider the ―Farmer

Ted‖ scenario raised in the multiple-choice section of this review, which is based on a real case. Is it fair for consequential damages to be 60 times higher than direct damages? The Supreme Court

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 13: Practical Contracts

is skeptical that punitive damages should be more than nine times compensatory damages in a tort case. Should a similar ―soft limit‖ apply to consequential damages in contract cases? Answer: Answers will vary. 58.

PepsiCo entered into a contract to sell its corporate jet to Klein for $4.6 million. Before the deal closed, the plane was sent to pick up PepsiCo‘s chairman of the board, who was stranded at Dulles airport. The chairman then decided that the company should not part with the plane. Klein sued PepsiCo for specific performance, arguing that he could not find a similar jet on the market for that price. Should a court force PepsiCo to sell its plane? th Answer: Based on Klein v. PepsiCo 845 F.2d 76 (4 Cir. 1988). The court said that specific performance cannot be granted where damages are recoverable and adequate. The fact that there was no other plane on the market in that price range was not enough to say it was ―unique‖ for purposes of equitable relief.

59.

Is it reasonable to require the mitigation of damages? If a person is wronged because the other side breached a contract, should they have any obligations at all? For example, suppose that a tenant breaches a lease by leaving early. Should the landlord have an obligation to try to find another tenant before the end of the lease? Answer: Answers will vary.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 13: Practical Contracts

Multiple Choice Questions 61. Which of the following statements is true? A. Vagueness occurs when the parties do not want the contract to be clear. B. Ambiguity occurs when the parties do not want the contract to be clear. C. Vagueness in a contract is often appropriate as a way to clinch a deal. D. Ambiguity is an appropriate tactic, particularly by the party drafting the contract. Answer: A 62. A contract provided, ―On January 5, Purchaser shall provide Seller with a certified check in the amount of $100,000. Seller shall transfer a deed for the Property to Purchaser.‖ What is wrong with this provision? A. It is not clear who Purchaser and Seller are. B.

The number $100,000 should be written in words.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 13: Practical Contracts

C. The promises are reciprocal. D. The promises are conditional. Answer: C 63. In the case of a scrivener‘s error, what happens? A. A court will not reform the contract. The parties must live with the document they signed. B. A court will reform the contract if there is clear and convincing evidence that the clause in question does not reflect the true intent of the parties. C. A court will reform the contract if a preponderance of the evidence indicates that the clause in question does not reflect the true intent of the parties. D. A court will invalidate the contract in its entirety. Answer: B 64. A contract states (1) that Buzz Co. legally exists and (2) will provide 2,000 pounds of wild salmon each week. Which of the following statements is true? A. Clause 1 is a covenant, and Clause 2 is a representation. B. Clause 1 is a representation, and Clause 2 is a covenant. C. Both clauses are representations. D. Both clauses are covenants. Answer: B 65. Simon has signed a contract with Miley agreeing to provide her company with 1,000 frozen pizzas each week. The contract states: ―This agreement can only be modified by a written instrument signed by the party to be charged with such amendment.‖ But when Simon and Miley run into each other on the train, they agree that he will provide 750 pizzas instead. Which of the following statements is true? A. As long as they both agree, they can amend the contract orally. They do not have to sign anything. B. For the change to be valid, both parties must sign an amendment because both parties are affected by it. C. Only Miley has to sign the amendment because she is the one to be charged by it. D. Only Simon must sign the amendment because he is the one to be charged by it. Answer: D

Case Questions 57. Give an example of three types of contracts that should definitely be in writing and one that probably does not need to be. Answer: Should be in writing: The sale of stock, a merger agreement, the sale of land, anything

that falls under the statute of frauds. Need not be in writing: An agreement with friends in which not much money is involved—to chip in to buy a present together. It is with someone with whom you have an on-going relationship and who has proved to be trustworthy in the past, and you can afford the loss—a routine supplier. You do not have time to do a proper written contract, and you would prefer to bear the risk of loss over the risk of not getting the deal done.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 13: Practical Contracts

58.

List three provisions in a contract that would be material and three that would not be. Answer: Material: payment, item to be sold or services to be rendered, term of the contract; not material: notices, choice of law, arbitration, attorney’s fees.

59. Blair Co.‘s top officers asked an investment bank to find a buyer for the company. The bank sent an engagement letter to Blair with the following language: If, within 24 months after the termination of this agreement, Blair is bought by anyone with whom Bank has had substantial discussions about such a sale, Blair must pay Bank its full fee. Is there any problem with the drafting of this provision? What could be done to clarify the language? Answer: The main problem is that the language about ―substantial discussions‖ is vague or ambiguous, depending on whether or not the bank left the language deliberately unclear. The term ―substantial discussions‖ is not defined. A better measure might be any referral of a potential buyer made by the bank to Blair. Both parties would have records to such occurrences. 60. Juan purchased an insurance policy on his house that did not protect against vandalism or burglary. An arsonist burned down the house. Did the insurance company have to pay? Answer: Yes. Vandalism would be some relatively minor damage to the house not the destruction of the entire property. And burglary is not an issue in this case. 61. When Maria and Marcel divorced, their settlement agreement provided that they would act in good faith. It further stated that Maria would receive half the proceeds from an oil and gas lease. At the end of five years, all the proceeds from the lease would go to Marcel. But, in an impressive effort to cut off his nose to spite his face, Marcel let the lease expire and refused to negotiate a new one. He was willing to give up income to himself if that prevented his ex from getting any. When Maria sued, Marcel argued that the contract did not require him to negotiate a lease, only to pay Maria half if he did. What would you rule if you were the judge? Answer: In a similar case, the court ruled that the obligation to act in good faith required Marcel to negotiate an oil and gas lease.

Discussion Questions 60. In the movie contract, which side was the more successful negotiator? Can you think of any terms that either party left out? Are any of the provisions unreasonable? Answer: Answers will vary. 61. What are the advantages and disadvantages of hiring a lawyer to draft or review a contract? Answer: Advantages: Lawyers understand the law. They can protect you against unexpected events in the future. They can be the ―bad guys‖ in negotiations––you can blame them for playing hardball. Important signal to the other side that you are well-protected. Contracts are more likely to be internally consistent without obvious mistakes. Less likely to make typographical errors. Disadvantages: Lawyers cost time and money. 62. What are the penalties if Artist breaches the movie contract? Are these reasonable? Too heavy? Too light? Answer: Answers will vary. Producer does not have to pay Artist any further compensation, but Artist gets to keep what he has been paid to date.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 14: The UCC: Sales and Secured Transactions

63. Upon graduation from business school, Zoe has been offered a job as a product manager at a start-up, Appsley Co. She would be Employee #18. But first she has to negotiate a contract with the CEO, Phil. He would like to pay her $75,000, which is half of what a product manager at a more established company would earn. However, Appsley has yet to earn a profit and Zoe might also be able to negotiate an equity interest in the company. Do a role-play with another student in your class in which one of you takes the role of Zoe and the other is Phil. What terms should each party consider? What does each side want? Draft the contract. Now compare your results with others in the class. Who has negotiated the best deal? Who has written the best contract? Answer: Answers will vary. 64. ETHICS Sophia negotiated a contract with Pete under which she would buy his company for $10 million plus the amount of the company‘s outstanding debt (approximately $1 million). But when Pete sent a draft of the contract, it stated that the purchase price would be $10 million less the company‘s debt. What is Sophia‘s ethical obligation to Pete? Should she tell him about the mistake? What Life Principles would you apply in this situation? What would Kant say? Answer: Answers will vary.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 14: The UCC: Sales and Secured Transactions

Multiple Choice Questions 66. Which of the following transactions is not governed by Article 2 of the UCC? A. Purchasing an automobile for $35,000 B. Leasing an automobile worth $35,000 C. Purchasing a stereo worth $501 D. Purchasing a stereo worth $499 Answer: B 67. Chef Carolina sells 40 cakes to Natasha at a price of $25 each for a total of $1,000. Under the UCC Statute of Frauds, which of the following must be in writing? A. The name of the buyer: Natasha B. The name of the seller: Chef Carolina C. The quantity of goods: 40 D. The price to be paid: $25 E. The UCC Statute of Frauds does not require anything to be in writing in this case. Answer: C

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 14: The UCC: Sales and Secured Transactions

68. In which of the following cases must the contract modification have additional consideration to be binding? A. Tony‘s boss promises him a higher salary because he did a good job. B. Tiana‘s Toys agrees to upgrade Tal‘s order of tricycles to expedited shipping. C. Both require new consideration. D. Neither requires new consideration. Answer: A 69. CPA QUESTION Under the UCC Secured Transactions Article, which of the following actions will best perfect a security interest in a negotiable instrument against any other party? A. Filing a security agreement B. Taking possession of the instrument C. Perfecting by attachment D. Obtaining a duly executed financing statement Answer: B 70. CPA QUESTION Under the Article 9 of the UCC, perfection of a security interest by a creditor provides added protection against other parties in the event the debtor does not pay its debts. Which of the following parties is not affected by perfection of a security interest? A. Other prospective creditors of the debtor B. The trustee in a bankruptcy case C. A BIOC D. A subsequent personal injury judgment creditor Answer: C 71. When Michelle buys a laptop, she pays an extra fee so that the computer arrives at her door with the latest version of Microsoft Word preinstalled. Under Article 9, the software is considered: A. ―goods.‖ B. ―services.‖ C. ―software.‖ D. None of these Answer: C 72. Alpha perfects its security interest by properly filing a financing statement on January 1, 2016. Alpha files a continuation statement on September 1, 2020. It files another continuation statement on September 1, 2024. When will Alpha‘s financing statement expires? A. January 1, 2021 B. September 1, 2025 C. September 1, 2029 D. Never Answer: B

Case Questions 62. Lara owns a used car lot. She emails Seth, a used-car wholesaler who has a huge lot of cars in the

same city. The email reads, ―Confirming our agrmt—I pick any 15 cars from your lot—30 percent below blue book value.‖ Seth reads the email, laughs, and deletes it. Two weeks later, Lara arrives and demands to purchase 15 of Seth‘s cars beneath marked value. Is he obligated to sell?

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 14: The UCC: Sales and Secured Transactions

Answer: Probably. Under UCC §2-201(2), a signed memo between merchants that would be binding against the sender is sufficient to satisfy the statute of frauds against the recipient if he reads it and fails to object within 10 days. 63. A.C. Furniture (ACF) manufactured custom furniture for national restaurant chains. A representative of Arby‘s Restaurant Group emailed ACF an order for 4,500 chairs at $44 per chair, with detailed specifications of seat pads, model numbers, and Arby‘s signature colors. A year later, Arby‘s emailed a request for 3,300 more of the same chairs. ACF custom-made 7,800 chairs to Arby‘s specs, but Arby‘s only purchased 1,117. ACF sued Arby‘s, but the restaurant chain argued that the parties never had an enforceable contract and moved to dismiss. Who wins and why? Answer: Defendant‘s Motion to Dismiss was denied, and the case returned for trial. The court ruled that plaintiff had alleged sufficient facts to implicate the ―specially manufactured goods‖ exception to the statute of frauds. A.C. Furniture, Inc. v. Arby’s Ret. Grp., Inc., Case No. 4:14-cv00029 (W.D. Va. Oct 3, 2014). 64. Eugene Ables ran an excavation company. He borrowed $500,000 from the Highland Park State

Bank. Ables signed a note promising to repay the money and an agreement giving Highland a security interest in all of his equipment, including after-acquired equipment. Several years later, Ables agreed with Patricia Myers to purchase a Bantam Backhoe from her for $16,000, which he would repay at the rate of $100 per month, while he used the machine. Ables later defaulted on his note to Highland, and the bank attempted to take the backhoe. Myers and Ables contended that the bank had no right to take the backhoe. Was the backhoe covered by Highland‘s security interest? Did Ables have sufficient rights in the backhoe for the bank‘s security interest to attach? Answer: Yes to both questions. The bank had a valid security interest in all of Able‘s equipment, including after-acquired equipment. After-acquired clauses are valid. The only question is whether the bank‘s security interest could attach to the backhoe. Attachment requires that the debtor has rights in the collateral. But this does not mean that the debtor must own the goods. Here, Ablest had the lawful use and possession of the backhoe, based on his purchase agreement with Myers. He thus had rights in the backhoe, and as soon as he took possession of it, the bank‘s security interest attached. The bank gets the backhoe. United States v. Allies, 739 F. Supp. 1439, 1990 U.S. Dist. LEWIS 7064 (D. Kan. 1990). 65. Having heard that it was a profitable new business, Smith decided to breed emus. They are flightless birds that reproduce rapidly and provide high-quality meat. For $4,000, Penbridge Farms sold Smith a ―proven breeder pair,‖ guaranteeing that the lovebirds had already bred together. When the birds failed to mate, Smith discovered that they were both male. Penbridge refused to return Smith‘s money. Smith sued, asking the court for direct, as well as incidental and consequential damages. The evidence suggested that Smith stood to make $100,000 from one season‘s chicks. To what kind of damages is Smith entitled? Will he recover lost profits? Answer: Smith is entitled to both incidental and consequential damages. The statements were express warranties which were proven not to be true. He will recover not only his out of pocket costs but also his lost profit. Smith v. Penbridge Associates, Inc., 440 Pa. Super. 410, 655 A.2d 1015 (1995). 66. The state of Kentucky filed a tax lien against Panbowl Energy, claiming unpaid taxes. Six

months later, Panbowl bought a powerful drill from Whayne Supply, making a down payment of $11,500 and signing a security agreement for the remaining debt of $220,000. Whayne perfected the next day. Panbowl defaulted. Whayne sold the drill for

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 14: The UCC: Sales and Secured Transactions

$58,000, leaving a deficiency of just over $100,000. The state filed suit, seeking the $58,000 proceeds. The trial court gave summary judgment to the state, and Whayne appealed. Who gets the $58,000? Answer: It went to Whayne‘s world. Taking the money from the taxpayer‘s creditor, Whayne rather than the taxpayer Panbowl resulted in a windfall to the state. Whayne has a perfected PMSI in the equipment and superiority over all other security interests in the equipment, including prior filed security interests. Whayne Supply Company, Inc. v. Commonwealth of Kentucky Revenue Cabinet, 925 S.W.2d 185; 1996 Ky. LEXIS 64; 30 U.C.C. Rep. Serv. 2d (Callaghan) 948.

Discussion Questions Apply the following facts to the first two questions below. The publication of the original UCC in 1952 sparked an expansion of the Statute of Frauds in the United States to cover sales of goods of $500 or more. At about the same time (in 1954), the British Parliament repealed its long-standing Statute of Frauds as applied to sales of goods. Some have argued that we should scrap UCC §2-201 on the grounds that it encourages misdealing as much as it prevents fraud. Consider the following two hypotheticals: (In the United States) Johnny is looking at a used Chevy Tahoe. He knows that the $7,000 price is a good one, but he wants to go online and see if he can find an even better deal. In the 20 minutes he has been with the car‘s current owner, the owner has received three phone calls about the car. Johnny wants to make sure that no one else buys the car while he is thinking the deal over, so he makes a verbal agreement to buy the car and shakes the seller‘s hand. He knows that because of the Statute of Frauds and the fact that nothing is in writing, he does not yet have any enforceable obligation to buy the car. (In the United Kingdom) Nigel sells used Peugeots in Liverpool. When he senses interest from customers, he aggressively badgers them until they verbally commit to buy. If the customers later get cold feet and try to back out of the deal, he holds them to the verbal contracts. Because there is no longer a UCC-style Statute of Frauds in Britain, the buyers are stuck. 65. Rate the degree to which you believe Johnny and Nigel acted wrongfully. Did one behave more wrongfully than the other? If so, which one, and why? Answer: Answers will vary. 66. Do you think that the UCC Statute of Frauds as it currently exists is more likely to prevent fraud, or

is it more likely to encourage misunderstandings and deception? Why? Overall, is it sensible to require that purchases of big-ticket items be in writing before they are final? Answer: Answers will vary. 67. ETHICS The Dannemans bought a Kodak copier worth over $40,000. Kodak arranged financing by

GECC and assigned its rights to that company. Although the Dannemans thought they had purchased the copier on credit, the papers described the deal as a lease. The Dannemans had constant problems with the machine and stopped making payments. GECC repossessed the machine and, without notifying the Dannemans, sold it back to Kodak for $12,500, leaving a deficiency of $39,927. GECC sued the Dannemans for that amount. The Dannemans argued that the deal was not a lease, but a sale on credit. Why does it matter whether the parties had a sale or

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 15: Negotiable Instruments

a lease? Is GECC entitled to its money? Finally, comment on the ethics. Why did the Dannemans not understand the papers they had signed? Who is responsible for that? Are you satisfied with the ethical conduct of the Dannemans? Kodak? GECC? Answer: If the transaction is actually a sale with a security interest, Article 9 governs––and that

is precisely what the court held. The court granted the Danneman’s motion for summary judgment. The agreement, though called a lease, was actually a financing arrangement with a security interest. The “lessor” retained no real burdens of ownership. Further, GECC made a sweetheart sale back to the manufacturer, leaving the Danneman’s with a substantial deficiency. GECC failed to comply with the requirements of Article 9 and was not entitled to any money. As to the ethics, one could argue that the Danneman‘s are responsible for signing, but in reality, no one other than a lawyer would recognize the document for what it was. The document was drafted by Kodak, which knew or should have known what kind of a transaction it was. The sweetheart sale does not look good in the light of day, and many would find the court‘s holding legally and ethically right. G.E. Capital Corp. v. Dannemann Assoc, Inc., 1995 Del. Super. LEXIS 131 (Super. Ct. Dela. 1995). 68. After learning more about implied warranties and disclaimers, would you ever buy an item sold ―as is‖? Imagine a car salesman who offers you a car for $8,000 but who also says that he can knock the price down to $6,500 if you will buy the car ―as is‖. If you live in a state that does not give consumers special protections, which deal would be more appealing? Answer: Answers will vary. 69. European consumer laws are much more protective than the UCC. In the European Union, buyers

have an unqualified 14-day right of return for all goods—no questions asked. If a seller fails to inform the buyer of this right, the return window is extended for one year. Some commentators have suggested that the EU system is too consumer-friendly, and the American system is too merchant-friendly. Which one do you prefer? Is there a happy medium? If so, what would it look like? Answer: Answers will vary.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 15: Negotiable Instruments

Multiple Choice Questions 73. Which of the following statements is true?

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 15: Negotiable Instruments

A. B. C. D.

A draft is always a check. A check is always a draft. A note must involve at least three people. All statements are true.

Answer: B 74. Which of the following requirements are necessary for negotiability? A. The instrument must be signed by the payee. B. The instrument must be payable on demand. C. The instrument must contain a promise or order to pay. D. The instrument must be dated. Answer: D 75. Maria is not a holder in due course if she takes an instrument: A. believing that the underlying contract was honest, although it turned out to be dishonest. B. that is a consumer credit contract. C. that appeared commercially reasonable when made but turned out to be dishonest. D. All answers are correct Answer: B 76. CPA QUESTION In order to negotiate bearer paper, one must: A. indorse the paper. B. indorse and deliver the paper with consideration. C. deliver the paper. D. deliver and indorse the paper. Answer: C 77. What is the difference between a co-maker and an accommodation party? A. A co-maker is liable both to the holder and the other co-maker, while an accommodation party is liable only to the holder. B. A co-maker is liable to subsequent indorsers, while an accommodation party is not. C. A co-maker is liable only to the other co-maker, while the accommodation party is liable to the holder. D. A co-maker is not liable once a bank certifies a check, while an accommodation party is still liable even after certification. Answer: A

Case Questions 67. Roofing Company wrote a check to Dan for his work on a house. Dan cashed the check at Check Cashing, which deposited the check into its account at Bank. Roofing Company then discovered that Dan had not actually completed the work on the house so it placed a stop payment on the check it had issued to Dan. Because of the stop payment order, Bank refused to pay Check Cashing, which then sued Roofing Company for the amount of the check. Was Check Cashing a holder in due course? Was it entitled to be paid? Answer: The court found that the Check Cashing was a holder in due course because it took the check for value, in good faith, and without any notice that it was overdue or had been

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 15: Negotiable Instruments

dishonored. Check Cashing was entitled to be paid. Hurst Enters., LLC v. Crawford, 40 Kan.App.2d 1018 (Kan Ct.App. 2008). 68. Kay signed a promissory note for $220,000 that was payable to Investments, Inc. The company then indorsed the note over to its lawyers to pay past and future legal fees. Were the lawyers holders in due course? Answer: Words take precedence over numbers, so it is for $382. Handwritten terms prevail over typed, so it is payable August 3, 2013. 69. Shelby wrote the following check to Dana. When is it payable, and for how much?

Answer: It is payable on August 3, 2009 (because handwritten terms prevail over typewritten terms) for $382 (because words control figures.) 70. Teri and Jerry entered into a contract with a real estate developer who stated that he would build the house of their dreams on a lot that he owned. In payment for the property and the house, T&J signed a promissory note that was payable ―upon closing on sale of the house to be constructed on the below described lot or one year from the date of this Note, whichever event first occurs.‖ Is this note negotiable? Answer: No. To be negotiable, a note must be payable on demand or at a definite time. The due date of this note is unknowable at the time it was executed. 71. Ian was CEO of a company. He stole money from the company by writing a series of checks made

out to ―Cash,‖ which he deposited in his own personal account at Bank. (Please do not try this at home.) Of course, he then spent the money. The company sued Bank to get the money back. Was Bank a holder in due course? Answer: The court ruled that the Bank was a holder in due course because it did not know of Ian‘s wrongdoing. McConnico v. Third Nat’l Bank, 499 S.W.2d 874 (Tenn. 1973). 72. Railroad issued a check to Parris, which somehow came to be in Eddy‘s possession. Eddy indorsed the check ―Railroad Eddy‖ and deposited it in his own account at Bank. Parris sued Bank, alleging that it was liable to him for having paid the check over an unauthorized indorsement. Is Bank liable to Parris? On what theory? Answer: Yes, Bank is liable to Parris under Conversion Liability Theory. Conversion means that (1) someone has stolen an instrument, or (2) a bank has paid a check that has a forged indorsement. In this case, the bank paid the check made out to Parris even though it was indorsed ―Railroad Eddy.‖ Parris, as the rightful owner of the check (instrument) can either recover the funds from the thief or the bank. Therefore, Bank is liable to Parris. 73. One of Doris‘s job responsibilities at Winkie, Inc., was preparing company checks for the president, Willie, to sign. Using Winkie‘s check-signing machine, Doris forged $150,000 of checks

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 15: Negotiable Instruments

on her employer‘s account. Willie did not (1) look at the sequence of check numbers, (2) examine the monthly account statements, or (3) reconcile company records with bank statements. Winkie‘s bank, as a matter of policy, did not check indorsements on checks with a face value of less than $1,000. By accident, it paid a forged check that had not even been indorsed. Is the bank liable to Winkie, Inc., for the forged checks? Answer: The court found for the bank on the grounds that the owner of the company had been negligent in not reviewing his bank statements. If he had done so, he would have discovered forgeries early in the game and limited his losses. Winkie, Inc. v. Heritage Bank of Whitefish Bay, 299 N.W.2d 829 (S.Ct. Wis. 1981). 74. ETHICS When Steven was killed in an automobile accident, his wife, Debra, received $60,000 in life insurance benefits. She decided she needed a fresh start, so she sold her house in Bunkie and moved to Sulphur, Louisiana. Before she left, though, she signed several blank checks and gave them to her mother-in-law, Helen, with instructions to use them to pay off the remaining debt on Debra‘s mobile home. Instead, Helen used one of the checks to withdraw $50,000 from the account for her own personal use, not to pay off the debt. When Debra discovered the theft, she sued the bank for having paid an unauthorized check. How would you rule in this case? Debra has suffered a grievous loss—her husband died tragically in an automobile accident. She trusted her mother-in-law and counted on her help. Should the bank show compassion? If the bank made good on the forged checks, how great would be the injury to the bank‘s shareholders compared with the harm to Debra if she loses this entire sum? What would Kant and Mill say? Answer: The court held that Debra had been negligent in leaving blank checks with her motherin-law, and therefore the bank was not liable. Ortego v. Ortego, 471 So.2d 1106 (La. 1985).

Discussion Questions 70. Recall the Quimby case. This type of fraud is increasingly common. What could Quimby have

done to protect himself? Answer: When dealing with strangers, only accept cashier‘s checks. In this case, Quimby obtained a cashier‘s check himself, but by then it was too late because the check Quimby had used to pay for the cashier‘s check was invalid. He should have insisted that ―Szabo‖ send him a cashier‘s check—then the bank would have been liable. If you are dealing with smaller sums, use PayPal or some equivalent service, which will make good on bad payments. 71. Regions Bank refused to lend money to ZLM, Inc., unless its owner, Stewart, signed the note as an accommodation party. He did and, sadly, ZLM did not repay the loan. But because the note was due on February 16, which that year happened to be Mardi Gras Day (a major festival in Louisiana), the bank waited until the next day to declare the note in default. Stewart alleged that he was not liable on the note because the extension had discharged his liability. Do you agree? Answer: The court held that Stewart was liable for the debt. The ―extension‖ did not operate to relive Stewart of liability, since the note he signed made him liable regardless of the ―time, manner or place of payment . . . ‖ Regions Bank v. David Stewart, Civil Action 10-0145-M, U.S. D.C., Southern Dist. Ala, Southern Division (2010).

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 16: Bankruptcy

72. Catherine suffered serious physical injuries in an automobile accident and became acutely depressed as a result. One morning, she received a check for $17,400 in settlement of her claims arising out of the accident. She indorsed the check and placed it on the kitchen table. She then called Robert, her longtime roommate, to tell him the check had arrived. That afternoon, she jumped from the roof of her apartment building, killing herself. The police found the check and a note from her, stating that she was giving it to Robert. Had Catherine negotiated the check to Robert? Answer: The court held that Wagner had negotiated the check to Scherer. By indorsing the check and leaving it on the table, she had completed constructive delivery. Scherer v. Hyland, 380 A.2d 698, 1977 N.J. LEXIS 267 (N.J. 1977). 73. Banks are liable for forged checks except in the case of the three rules (Imposter Rule, Fictitious

Payee Rule, and the Employee Indorsement Rule). Do you think this is the proper allocation of liability? Why should banks be liable for forged checks in this era of automated check machines? Alternatively, could you argue that the three rules provide too much protection to banks? Answer: Answers will vary. 74. Kendall raised hogs. The Grain Company would provide him with hogs and grain and, in return, he would sign a promissory note in an amount equal to the value of these items. Once the pigs were grown, Kendall would sell them and repay the loan. One time, an officer of the Grain Company asked Kendall to sign not only his own but also his wife‘s name to the promissory note. Kendall did so, but put his initials, KH, after her name to indicate that he was the one who had signed the note. Grain Company sold this note to Bank. It turned out that the Grain Company did not actually own the hogs it had given Kendall and the true owner took them away. Bank sued Kendall for payment on the promissory note. Are Kendall and/or his wife liable on the note? Answer: The court ruled that Kendall was not liable because the Bank had not taken the note in good faith and, thus, was not a holder in due course. When the bank got the note, it could see Kendall‘s initials. Thus it knew that Kendall‘s wife had not signed the note and, therefore, the transaction was not honest in fact. Arcanum Nat'l Bank v. Hessler, 69 Ohio St. 2d 549 (Ohio 1982). 75. Mary wrote a check on her account at First Bank for $23,000.00 payable to the order of Eagle Construction Company. Sylvia, who was an Eagle employee, deposited Mary‘s check in her personal account at Second Bank, without first having someone indorse it. When the check was presented for payment, First Bank paid. Only later did it realize that the check had no indorsement. Meanwhile, Sylvia has stolen the funds and disappeared. Who is liable for the missing funds—First Bank or Second Bank? Answer: The court ruled that Second Bank was liable because it had violated its presentment warranties by presenting a check that had not been indorsed. United Carolina Bank v. First Union Nat’l Bank, 109 N.C. App. 201 (N>C> Ct. App. 1993).

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 16: Bankruptcy

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 16: Bankruptcy

Table of Contents Multiple Choice Questions ....................................................................................................................................... 60 Case Questions ............................................................................................................................................................. 61 Discussion Questions.................................................................................................................................................. 63

Multiple Choice Questions 78. CPA QUESTION A voluntary petition filed under the liquidation provisions of Chapter 7 of the federal Bankruptcy Code _______________. A. is not available to a corporation unless it has previously filed a petition under the reorganization provisions of Chapter 11 of the Code. B. automatically stays collection actions against the debtor except by secured creditors. C. will be dismissed unless the debtor has 12 or more unsecured creditors whose claims total at least $5,000. D. does not require the debtor to show that the debtor‘s liabilities exceed the fair market value of assets. Answer: D 79. CPA QUESTION Decal Corp. incurred substantial operating losses for the past three years. Unable to meet its current obligations, Decal filed a petition of reorganization under Chapter 11 of the federal Bankruptcy Code. Which of the following statements is correct? A. A creditors‘ committee, if appointed, will consist of unsecured creditors. B. The court must appoint a trustee to manage Decal‘s affairs. C. Decal may continue in business only with the approval of a trustee. D. The creditors‘ committee must select a trustee to manage Decal‘s affairs. Answer: A 80. CPA QUESTION Unger owes a total of $50,000 to eight unsecured creditors and one fully secured creditor. Quincy is one of the unsecured creditors and is owed $6,000. Quincy has filed a petition against Unger under the liquidation provisions of Chapter 7 of the federal Bankruptcy Code. Unger has been unable to pay debts as they become due. Unger‘s liabilities exceed Unger‘s assets. Unger has filed papers opposing the bankruptcy petition. Which of the following statements regarding Quincy‘s petition is correct? A. It will be dismissed because the secured creditor failed to join in the filing of the petition. B. It will be dismissed because three unsecured creditors must join in the filing of the petition. C. It will be granted because Unger‘s liabilities exceed Unger‘s assets. D. It will be granted because Unger is unable to pay Unger‘s debts as they become due. Answer: D 81. Dale is in bankruptcy proceedings under Chapter 13. Which of the following statements is true? A. His debtors must have filed an involuntary petition. B. His unsecured creditors will be worse off than if he had filed under Chapter 7. C. All of his debts are discharged as soon as the court approves his plan. D. His creditors have an opportunity to voice objections to his plan.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 16: Bankruptcy

Answer: D 82. Grass Co. is in bankruptcy proceedings under Chapter 7. Who will serve as trustee? I. The debtor in possession II. A person appointed by the U.S. Trustee III. The head of the creditors committee IV. The U.S. Trustee V. A person elected by the creditors. A. B. C. D. E.

All of these individuals are eligible; the judge decides which one will serve. III only Either II or V I only IV only

Answer: C 83. The Public Service Loan Forgiveness Program A. applies to everyone who works in public-service jobs. B. applies only to people who are in income-based repayment programs. C. applies to debtors who make payments to the best of their ability. D. allows forgiveness of any student loans. Answer: B

Case Questions 75. Mary Price went for a consultation about a surgical procedure to remove abdominal fat. When Robert Britton met with her, he wore a name tag that identified him as a doctor, and was addressed as ―doctor‖ by the nurse. Britton then examined Price, touching her stomach and showing her where the incision would be made. Britton was not a doctor; he was the office manager. Although a doctor actually performed the surgery on Price, Britton was present. The doctor left a tube in Price‘s body at the site of the incision. The area became infected, requiring corrective surgery. A jury awarded Price $275,000 in damages in a suit against Britton. He subsequently filed a Chapter 7 bankruptcy petition. Is this judgment dischargeable in bankruptcy court? Answer: Under Chapter 7, fraud claims are not dischargeable. IN RE Britton, 950 F.2d 602, 1991 U.S. App. LEXIS 28487 (9th Cir. 1991). 76. You Be the Judge: WRITING PROBLEM To finance her education at DeVry Institute of Technology, Lydia borrowed $20,000 from a private lender. After graduation, she could not find a job in her field, so she went to work as a clerk at an annual salary of $12,500. Lydia and her daughter lived with her parents free of charge. After setting aside $50 a month in savings and paying bills that included $233 for a new car and $50 for jewelry, her disposable income was $125 per month. Lydia asked the bankruptcy court to discharge her debt. Would paying this debt impose an undue hardship on her? Argument for Lydia: Although she saves money by living with her parents, she would still have to spend every single penny of her disposable income for nearly 15 years to pay back her $20,000 debt. That would be an undue hardship.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 16: Bankruptcy

Argument for the Creditor: Paying back this debt would not constitute undue hardship because Lydia could easily reduce her expenses. She should not be buying new cars and jewelry. Nor does she have the right to save money when she has outstanding debt. Answer: The court refused to discharge Lydia‘s debts. It reasoned that anyone who can afford to buy jewelry and a new car, while saving money, can also afford to pay her educational loans. If there was hardship, it was clearly caused by her extravagant purchases. IN RE D’Ettore, 106 Bankr. 715 (Bankr. M.D. Fla. 1989). 77. Dr. Ibrahim Khan caused an automobile accident in which a fellow physician, Dolly Yusufji, became a quadriplegic. Khan signed a contract to support her for life. When he refused to make payments under the contract, she sued him and obtained a judgment for $1,205,400. Khan filed a Chapter 11 petition. At the time of the bankruptcy hearing, five years after the accident, Khan had not paid Yusufji anything. She was dependent on a motorized wheelchair; he drove a Rolls-Royce. Is Khan‘s debt dischargeable under Chapter 11? Answer: The court would not permit this debt to be discharged because Dr. Khan was not acting in good faith. IN RE M. Ibrahim Khan, P.S.C., 34 Bankr. 574 (Bankr. W.D. Ky. 1983). 78. After filing for bankruptcy, Yvonne Brown sought permission of the court to reaffirm a $6,000 debt to her credit union. The debt was unsecured, and she was under no obligation to pay it. The credit union had published the following notice in its newsletter: If you are thinking about filing bankruptcy, THINK about the long-term implications. This action, filing bankruptcy, closes the door on TOMORROW. Having no credit means no ability to purchase cars, houses, credit cards. Look into the future—no loans for the education of your children. Should the court approve Brown‘s reaffirmation? Answer: The court refused to approve the reaffirmation because the credit union’s threats

constituted duress. [Source: In re Brown, 95 Bankr. 35; 1989 Bankr. LEXIS 543 (Bankr. Ct, E.D. Va., 1989)] 79. ETHICS On November 5, Hawes, Inc., a small subcontractor, opened an account with Basic Corp., a supplier of construction materials. Hawes promised to pay its bills within 30 days of purchase. Although Hawes purchased a substantial quantity of goods on credit from Basic, it made few payments on the accounts until the following March, when it paid Basic over $21,000. On May 14, Hawes filed a voluntary petition under Chapter 7. Why did Hawes pay Basic in March? Does the bankruptcy trustee have a right to recover this payment? Is it fair to Hawes‘s other creditors if Basic is allowed to keep the $21,000 payment? Answer: The bankruptcy court ruled that this payment was a voidable preference. It was not made in the ordinary course. Although Hawes was supposed to pay its bills within 30 days, it had in fact made no payments for four months and then promptly made a large one just before it th filed for bankruptcy. In re Fred Hawes Org., Inc., 957F.2d 239, 1992 U.S. App. LEXIS 2300 (6 Cir. 1990). 80. Terry and Kerry filed for divorce. Terry then filed for bankruptcy. What impact would the bankruptcy filing have on the divorce?

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 17: Agency Law

Answer: It will stay any decision on the division of property.

Discussion Questions 76. Look on the internet for your state‘s rules on exempt property. Compared with other states and the federal government, is your state generous or stingy with exemptions? In considering a new bankruptcy statute, Congress struggled mightily over whether or not to permit state exemptions at all. Is it fair for exemptions to vary by state? Why should someone in one state fare better than his neighbor across the state line? How much should the exemption be? Answer: Answers will vary. 77. Some states permit debtors an unlimited exemption on their homes. Is it fair for bankrupts to be allowed to keep multimillion-dollar homes while their creditors remain unpaid? But other states allow as little as $5,000. Should bankrupts be thrown out on the street? What amount is fair? Answer: Answers will vary. 78. What about the rules regarding repeated bankruptcy filings? (See the chart in Exam Review.) Are these rules too onerous, too lenient, or just right? Answer: Answers will vary. 79. A bankrupt who owns a house has the option of either paying the mortgage or losing his home. The court cannot reduce the amount owed; its choice is to discharge the entire debt or leave it whole. Congress considered a bill that would permit a bankruptcy judge to adjust the terms of mortgages to aid debtors in holding onto their houses. Proponents argued that this change in the law would reduce foreclosures and stabilize the national housing market. Opponents said that it was not fair to reward homeowners for being irresponsible. How would you have voted on this bill? Answer: Answers will vary. (Ultimately, the Senate did not pass the bill.) 80. In the Grisham case, the debtor had virtually no income but owed about $200,000 in debts that could not be discharged. What kind of fresh start is that? Should limits be placed on the total debt that cannot be discharged? Is the list of nondischargeable debts appropriate? Answer: Answers will vary.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 17: Agency Law

Table of Contents Multiple Choice Questions ....................................................................................................................................... 64 Case Questions ............................................................................................................................................................. 65 Discussion Questions.................................................................................................................................................. 66

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 17: Agency Law

Multiple Choice Questions 84. At Business University, semester enrollment begins at midnight on April 1. Jasper asked his roommate, Alonso, to register him for an important required course as a favor. Alonso agreed to do so but then overslept. As a result, Jasper could not enroll in the required course he needed to graduate and had to stay in school for an additional semester. Is Alonso liable to Jasper? A. No because an agency agreement is invalid unless the agent receives payment. B. No because Alonso was not grossly negligent. C. No because the agreement was not in writing. D. Yes because Alonso was negligent. Answer: B 85. Finn learns that, despite his stellar record, he is being paid less than other salespeople at Barry Co., so he decides to start his own company. During his last month on the Barry payroll, he tells all of his clients about his new business. He also tells them that Barry is a great company, but his fees will be lower. After he opens the doors of his new business, most of his former clients move with him. Is Finn liable to Barry? A. No because he has not been disloyal to Barry—he praised the company. B. No because Barry was underpaying him. C. No because his clients have the right to hire whichever company they choose. D. Yes, Finn has violated his duty of loyalty to Barry. Answer: D 86. Kurt asked his car mechanic, Quinn, for help in buying a used car. Quinn recommends a Ford Focus that she has been taking care of its whole life. Quinn was working for the seller. Which of the following statements is true? A. Quinn must pay Kurt the amount of money she received from the Ford‘s prior owner. B. After buying the car, Kurt finds out that it needs $1,000 in repairs. He can recover that amount from Quinn, but only if Quinn knew about the needed repairs before Kurt bought the car. C. Kurt cannot recover anything because Quinn had no obligation to reveal her relationship with the car‘s seller. D. Kurt cannot recover anything because he had not paid Quinn for her help. Answer: B 87. Figgins is the dean of a college. He appointed Sue as acting dean while he was out of the country and posted an announcement on the college website announcing that she was authorized to act in his place. He also told Sue privately that she did not have the right to make admissions decisions. While Figgins was gone, Sue overruled the admissions committee to admit the child of a wealthy alumnus. Does the child have the right to attend this college? A. No because Sue was not authorized to admit him. B. No because Figgins did not ratify Sue‘s decision. C. Yes because Figgins was a fully disclosed principal. D. Yes because Sue had apparent authority. Answer: D 88. CPA QUESTION A principal will not be liable to a third party for a tort committed by an agent: A. unless the principal instructed the agent to commit the tort.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 17: Agency Law

B. unless the tort was committed within the scope of the agency relationship. C. if the agency agreement limits the principal‘s liability for the agent‘s tort. D. if the tort is also regarded as a criminal act. Answer: B 89. CPA QUESTION Cox engaged Datz as her agent. It was mutually agreed that Datz would not disclose that he was acting as Cox‘s agent. Instead, he was to deal with prospective customers as if he were a principal acting on his own behalf. This he did and made several contracts for Cox. Assuming Cox, Datz, or the customer seeks to avoid liability on one of the contracts involved, which of the following statements is correct? A. Cox must ratify the Datz contracts to be held liable. B. Datz has no liability once he discloses that Cox was the real principal. C. The third party can avoid liability because he believed he was dealing with Datz as a principal. D. The third party may choose to hold either Datz or Cox liable. Answer: D 90. In deciding whether workers are employees or independent contractors, courts have considered: A. the impact of their decision on the national economy. B. the impact of their decision on tax revenues. C. the amount of control that an employer exercises over its workers. D. whether workers in these companies are earning at least the minimum wage. Answer: C

Case Questions 81. An elementary school custodian hit a child who wrote graffiti on the wall. Is the school district liable for this intentional tort by its employee? Answer: Yes, because the custodian thought they were serving the purpose of their employer. 82. What if the custodian hit one of the schoolchildren for calling them a name? Is the school district liable? Answer: No, because the custodian was not serving the purpose of their employer. 83. One afternoon while visiting friends, tennis star Vitas Gerulaitis fell asleep in their pool house. A mechanic had improperly installed the swimming pool heater, which leaked carbon monoxide fumes into the house where he slept, killing him. His mother filed suit against the owners of the estate. On what theory would they be liable? Answer: Principals are liable for the torts of their independent contractors only if they have been negligent in hiring the contractors. Presumably, Gerulaitis‘s mother will try to prove that the owners were negligent in hiring the mechanic who installed the heater. 84. Fernando worked for Affinity, which made furniture deliveries for Sears. Fernando signed a contract stating that he was an independent contractor. He was paid $23 per delivery. He typically worked five to seven days a week, but Affinity would call him each day to tell him whether or not

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 17: Agency Law

he would be working the following day. Fernando was not required to, but he did, lease his truck from Affinity. The company handled upkeep on the truck. Affinity required all drivers to buy their mobile telephones and their uniforms from the company. It also established personal grooming requirements. Was Fernando an employee or independent contractor? Answer: Fernando was an employee. 85. Betsy has a two-year contract as a producer at Jackson Movie Studios. She produces a remake of the movie Footloose. Unfortunately, it bombs, and Jackson is so furious that he fires her on the weekend the movie opens. Does he have the power to do this? Answer: Jackson does not have the power to fire her unless the contract gives the studio the power to do so. If there is a clause defining these expectations unambiguously, or tying her continued performance to some unambiguous benchmark of success, then the studio would have the power to fire her.

Discussion Questions 81. ETHICS Mercedes has just begun work at Photobook.com. What a great place to work! Although the salary is not high, the company has fabulous perks. The dining room provides great food from 7 a.m. to midnight, five days a week. There is also a free laundry and dry-cleaning service. Mercedes‘s social life has never been better. She invites her friends over for Photobook meals and has their laundry done for free. And because her job requires her to be online all the time, she has plenty of opportunity to stay in touch with her friends by messaging, tweeting, and checking Facebook updates. She is, however, shocked that one of her colleagues takes paper from the office for his children to use at home. Are these employees behaving ethically? Are they meeting their obligations as agents? Answer: Answers will vary. 82. Kevin was the manager of a radio station, WABC. A competing station hired him away. In his last month on the job at WABC, he notified two key on-air personalities that if they were to leave the station, he would not hold them to their noncompete agreements. What can WABC do? Answer: Kevin has violated his duty of loyalty and would be liable to WABC. However, he had apparent authority to release the two on-air personalities, so WABC is bound by that decision. 83. Jesse worked as a buyer for the Vegetable Co. Rachel offered to sell Jesse 10 tons of tomatoes for the account of Vegetable. Jesse accepted the offer. Later, Jesse discovered that Rachel was an agent for Sylvester Co. Who is liable on this contract? Answer: Because Greenery was a fully disclosed principal, Greenery is liable but Jesse is not. Rachel, on the other hand, is an undisclosed principal, which means that both Sylvester and Rachel are liable. 84. The Pharmaceutical Association holds an annual convention. At the convention, Brittany, who was president of the association, told Luke that Research Corp. had a promising new cancer vaccine. Luke was so excited that he chartered a plane to fly to Research‘s headquarters. On the way, the plane crashed and Luke was killed. Is the Pharmaceutical Association liable for Luke‘s death? Answer: No, the Pharmaceutical Association had no control over the plane flight. Thus, there is no agency relationship and no liability

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 18: Employment and Labor Law

85. A year ago, Hot Air Systems installed a new heating system in Dolly‘s house. A month ago, Chuck called Dolly and told her he worked for Hot Air and it was time to perform the yearly inspection. After his inspection, Chuck said it was lucky he had called because her system needed urgent repairs. He then charged her $500 for the repairs. Later, Dolly discovered there had been nothing wrong with her system and Chuck had never worked for Hot Air. Is the company liable for Chuck‘s wrongdoing? Answer: No, if the company had nothing to do with Chuck‘s conduct. If the firm did anything to lend him apparent authority, that would be different, but he seems to have been a freelancer.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 18: Employment and Labor Law

Table of Contents Multiple Choice Questions ....................................................................................................................................... 67 Case Questions ............................................................................................................................................................. 68 Discussion Questions.................................................................................................................................................. 70

Multiple Choice Questions 91. When Brook went to work at an advertising agency, his employment contract stated that he was ―at will and could be terminated at any time.‖ After 28 months with the company, he was fired without explanation. Which of the following statements is true? A. The company must give him an explanation for his termination. B. Because he had a contract, he was not an employee at will. C. He could only be fired for a good reason. D. He could be fired for any reason. E. He could be fired for any reason except a bad reason. Answer: E 92.

CPA QUESTION An unemployed CPA generally would receive unemployment compensation benefits if the CPA _______________. A. was fired as a result of the employer‘s business reversals B.

refused to accept a job as an accountant while receiving extended benefits

C. was fired for embezzling from a client D. left work voluntarily without good cause Answer: A 93. During a job interview with Venetia, Jack reveals that he and his wife are expecting twins. Venetia asks him if he is planning to take a leave once the babies are born. When Jack admits that he

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 18: Employment and Labor Law

would like to take a month off work, he can see her face fall. She ultimately decides not to hire him because of the twins. Which of the following statements are true? I. Venetia has violated the Family and Medical Leave Act (FMLA). II. Venetia has violated Consolidated Omnibus Budget Reconciliation Acts (COBRA). III. Venetia‘s company is liable under the False Claims Act. A. All of these B. None of these C. I and II D. I E. I and III Answer: D 94. Which of the following statements is true? I. In about half the states, employees have the right to bring guns into their workplace. II. In about half the states, employees have the right to bring guns into their workplace parking lot. A. All of these B.

None of these

C. I D. II Answer: D 95. Alpha Company‘s workers go on strike. The company hires replacement workers so that it can continue to operate its business. When the strike ends, Alpha must rehire the original workers if the strike was over _______________. I. wages II. a unfair labor practice (ULP) A. All of these B. None of these C. I D. II Answer: D

Case Questions 86. You Be the Judge: WRITING PROBLEM Apex gave Marcie an employment handbook stating that (1) she was an at-will employee, (2) the handbook did not create any contractual rights, and (3) employees who were fired had the right to a termination hearing. The company fired Marcie, claiming that she had falsified delivery records. She said that Apex was retaliating against her because she had complained of sexual harassment. Apex refused her request for a termination hearing. Did the employee handbook create a contract guaranteeing Marcie a hearing? Argument for Apex: The handbook could not have been clearer—it did not create a contract. Marcie is an employee at will and is not entitled to a hearing.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 18: Employment and Labor Law

Argument for Marcie: Apex intended that employees would rely on the handbook. The company used promises of a hearing to attract and retain good employees. Marcie was entitled to a hearing. Answer: The Supreme Court of Texas ruled that there was no implied contract. Marcie was not entitled to a hearing. 87. Triec, Inc., is a small electrical contracting company in Springfield, Ohio, owned by its executives, Yeazell, Jones, and Heaton. After the International Brotherhood of Electrical Workers union began an organizing drive, 6 of the 11 employees in the bargaining unit signed authorization cards. The company declined to recognize the union, which petitioned the National Labor Relations Board (NLRB) to schedule an election. The company then granted several new benefits for all workers, including higher wages, and paid vacations. When the election was held, only 2 of the 11 bargaining unit members voted for the union. Did the company violate the NLRA? Answer: Yes, the company violated the NLRA by extending benefits during an organizing campaign, shortly before the election. An employer may not interfere or punish any worker, nor may it grant benefits in an effort to defeat the union. The timing here suggested anti-union motivation. Because the company committed certain other anti-union acts, the NLRB found its conduct extreme enough to justify a bargaining order, and the court of appeals affirmed. NLRB v. th Triec, Inc., 1991 U.S. App. LEXIS 25709 (6 Cir. 1991). 88. Marceline is sent home from school with the flu. The pediatrician says that she will be fine in about a week and in the meantime just needs bed rest and plenty of fluids. Is Marceline‘s father entitled to leave under the FMLA to care for her? Answer: No. There appears to be no continuing treatment by a healthcare provider that would qualify the absence for FMLA leave. Source: http://www.dol.gov/whd/opinion/FMLA/prior2002/FMLA-87.htm 89. Catherine Wagenseller was a nurse at Scottsdale Memorial Hospital and an employee at will. While on a camping trip with other nurses, Wagenseller refused to join in a parody of the song ―Moon River,‖ which concluded with members of the group ―mooning‖ the audience. Her supervisor seemed upset by her refusal. Prior to the trip, Wagenseller had received consistently favorable performance evaluations. Six months after the outing, Wagenseller was fired. She contends it was because she had not mooned. Is it legal for the hospital to fire Wagenseller for this reason? Answer: The Arizona Supreme Court ruled that the hospital had violated public policy by firing Wagenseller for refusing to break the law (indecent exposure). Wagenseller v. Scottsdale Memorial Hosp., 147 Ariz. 370 (Ariz. 1985). 90. Noelle was the principal of a charter school and an employee at will. The head administrator imposed a rule requiring cafeteria workers to stamp the hands of children who did not have sufficient funds in their lunch accounts. Some of these children were entitled to free lunches; others needed to ask their parents to replenish their accounts. Noelle directed the cafeteria workers to stop this humiliating practice. The administrator fired her. Does Noelle have a valid claim for wrongful termination? Answer: Is Noelle refusing to violate the law, performing a legal duty, exercising a legal right or supporting basic societal values? Is it a violation of public policy to fire her? This case has not yet been resolved.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 18: Employment and Labor Law

Discussion Questions 86. Debra Agis worked as a waitress in a Ground Round restaurant. The manager informed the waitresses that ―there was some stealing going on.‖ Until he found out who was doing it, he intended to fire a waitress each day, in alphabetical order, starting with the letter ―A.‖ Dionne then fired Agis. Does she have a valid claim against her employer? Answer: Answers will vary. 87. Walmart employees were not unionized. A group of outside organizers called ―Our Walmart‖ created an app that Walmart employees could use to communicate with one another and obtain legal and other workplace advice. Walmart told its managers to warn workers that the app was not made by Walmart and might be used to steal their personal information. Would that behavior on the part of managers be legal? Answer: This case has not been litigated. Walmart cannot interfere with employees‘ efforts to discuss working conditions. Is that their interest and goal here? 88. ETHICS As the manager of BigBox Store, you are afraid that, if your workers unionize, you will not be able to compete against stores with a non-union workforce. You would very much like to fire Geraldo, the employee who is leading the unionization effort. Of course, you know this action would be a violation of the NLRA. But you also know that, if you were found to have violated the law (after years of litigation), you would simply be required to reinstate Geraldo, pay him some back wages, and post a notice promising never to do it again. (After all that time, Geraldo probably would not even want his BigBox job back.) In the meantime, all the other employees would be so scared, they would not support the union. This strategy is cost effective, but is it the right thing to do? What would Mill and Kant say? Answer: Answers will vary. 89. Despite its detailed dress code for employees, Starbucks stores permitted workers to wear multiple pins and buttons, some of which, but not all, were related to its employee-reward and product-promotion programs. When a union tried to organize employees, management prohibited workers from wearing more than one pro-union pin at a time. (One employee had tried to wear eight union buttons.) Is this rule a ULP? Answer: Although the NLRB ruled that this prohibition was an ULP, the Second Circuit overruled the Board, on the grounds that management had a legitimate interest in protecting the company‘s image. NLRB v. Starbucks Corp., 679 F.3d 70 (2d Cir. 2012). 90. You Be the Judge: WRITING PROBLEM Nationwide Insurance Co. circulated a memorandum asking all employees to lobby in favor of a bill that had been introduced in the Pennsylvania House of Representatives. By limiting the damages that an injured motorist could recover from a person who caused an accident, this bill promised to save Nationwide significant money. Not only did John Novosel refuse to lobby, but he privately criticized the bill for harming consumers. Nationwide was definitely not on his side—it fired him. Novosel filed suit, alleging that his discharge had violated public policy by infringing his right to free speech. Did Nationwide violate public policy by firing Novosel? Argument for Novosel: The U.S. Constitution and the Pennsylvania Constitution both guarantee the right to free speech. Nationwide has violated an important public policy by firing Novosel for expressing his opinions. Argument for Nationwide: For all the high-flown talk about the Constitution, what we have here is an employee who refused to carry out company policy. If the employee wins in this case, where

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 19: Employment Discrimination

will it all end? What if an employee for a tobacco company refuses to market cigarettes because he does not approve of smoking? How can businesses operate without loyalty from their employees? Answer: The court held for Novosel. This case extends one step beyond Wagenseller: The court protected Novosel even though he was not being asked to violate the law.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 19: Employment Discrimination

Multiple Choice Questions 96. Gregg Young, the CEO of BJY Inc., insisted on calling Mamdouh El-Hakem ―Manny‖ or ―Hank‖ even when El-Hakem asked him not to. El-Hakem was of Arab heritage. Young argued that a ―Western‖ name would increase El-Hakem‘s chances for success and would be more acceptable to BJY‘s clientele. Which of the following statements are true? I. Young violated Title VII by discriminating against El-Hakem on the basis of his national origin. II. Young violated Title VII by creating a hostile work environment. III. Young did not violate Title VII because Manny is just a nickname. No harm was intended and, indeed, no harm resulted. IV. Young did not violate Title VII because customers did prefer a Western name. A. I and II B. III C. IV D. I E. II Answer: A 97. The CEO of BankTwo realized that not one single officer of the bank was female or a member of a minority group. He announced that henceforth, the bank would only hire people in these two groups until they comprised at least 30 percent of the officers. Is this plan legal? A. Yes, voluntary affirmative action plans are always legal. B.

No, only courts can authorize affirmative action plans.

C. No, Title VII prohibits affirmative action plans. D. No, the plan is too unfair to white men, who have no chance of being hired for a long time.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 19: Employment Discrimination

Answer: D 98. When Allain University was looking for a diversity officer, it decided it would only hire a person of color. Is this decision legal? A. Yes, color is a bona fide occupational qualification (BFOQ) for this position. B.

No, color is never a BFOQ, but race could be.

C. No, neither race nor color can be a BFOQ. D. No, race and color can be a BFOQ, but are not in this situation. A person does not have to be a member of a minority group to promote diversity. Answer: C 99. For 30 years, Ralph has built architectural models at Archway Architects. The firm replaces him with Charlotte, who is 24 and willing to work for much less than Ralph. The firm never offered to let him stay for less pay. When he left, one of the partners told him, ―Frankly, it‘s not a bad thing to have a cute young person working with the clients.‖ Which of the following statements is true? A. Archway is liable because it had an obligation to offer Ralph the lower salary. B. Archway violated the law by replacing an older worker with a younger one just to save money. C. Archway is liable because age was a factor in Ralph‘s firing. D. Archway is not liable because age was not the deciding factor in Ralph‘s firing. Answer: D 100. During chemotherapy for bone cancer, Mateo, a delivery man, is exhausted, nauseated, and weak. He has asked permission to come in later, work a shorter day, and limit his lifting to 10 pounds. Delivery people typically carry packages of up to 70 pounds. Does Mateo‘s employer, Vulcan, have the right to fire him? A. No, Vulcan must create a new position so that the employee can do something else. B. No, Vulcan must transfer the employee to another position, but only if one is vacant and he is able to perform it. C. Yes, Vulcan can fire the man because none of his major life activities have been affected. D. Yes, Vulcan can fire the man because he cannot perform the essential functions of his job. E. Yes, Vulcan can fire him because he is not disabled—once the chemotherapy treatments end, he will feel fine again. Answer: B

Case Questions 91. In the 2008 recession, Roger (age 52) lost his job as a comptroller. Desperate for work after a year of unemployment, he began to apply for any accounting job at any company. But no one would hire him because he was ―overqualified and overexperienced.‖ He repeatedly explained that he was eager to fill the job that was available. Have these companies that refused to hire Roger violated the Age Discrimination in Employment Act (ADEA)? Answer: In a similar case, the court ruled that, while qualifications and experience are correlated with age, mere correlation is not enough to constitute a violation of the ADEA. Moreover, saying

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 19: Employment Discrimination

that someone is ―overqualified‖ is not the type of negative stereotype that the ADEA was intended to combat. 92. FedEx refused to promote José Rodriguez to a supervisor‘s position because of his foreign accent and ―how he speaks.‖ Is FedEx in violation of the law? Answer: The Sixth Circuit Court of Appeals ruled that this behavior could be illegal discrimination based on national origin because ―accent and national origin are inextricably intertwined.‖ The employer would have to show that the accent and speech characteristics would prevent the employee from performing the job. 93. Pam Huber worked at Walmart filling grocery orders and earning $13 an hour. While on the job, she suffered a permanent injury to her right arm and hand. Both she and Walmart agreed that she was disabled under the Americans with Disabilities Act (ADA). As a reasonable accommodation, she asked for a job as a router, which was then vacant. Although she was qualified for that job, she was not the most qualified. Walmart filled the job with the most qualified person. It offered Huber a position as a janitor at $6.20 per hour. Did Walmart violate the ADA? Answer: The court ruled that Walmart was not in violation of the ADA. An employer is not required to provide an accommodation that is a perfect substitute or ideal from the employee‘s perspective, just one that is reasonable. Huber was treated as all other candidates were treated–– no better and no worse. Huber v WalMart 486 F.3d 480. 94. After the terrorist attacks of 9/11, the United States tightened its visa requirements. In the process, baseball teams discovered that 300 foreign-born professional players had lied about their age. (A talented 16-year-old is much more valuable than a 23-year-old with the same skills.) In some cases, the players had used birth certificates that belonged to other (younger) people. To prevent this fraud, baseball teams began asking prospects for DNA tests on them and their families to make sure they were not lying about their identity. Is this testing legal? Answer: There have not been any cases yet, but commentators speculate that the testing would violate the Genetic Information Nondiscrimination Act. It seems clear the teams would be in violation if they used the information to predict whether a player is susceptible to disease. 95. Many employers run targeted recruitment ads on Facebook that appear only in the feeds of people under 40. Is that practice legal? Answer: Employment lawyers argue that these ads are illegal because they discriminate against people over 40. The companies say that the ads are part of a recruitment process that reaches all age groups and that Facebook is not the most efficient method for contacting older workers. This issue is under litigation. 96. Atlas operated warehouses that stored food for grocery stores. Imagine the upset when a mystery employee began leaving their feces in a warehouse. To solve the mystery of the devious defecator, Atlas required cheek swabs from two of its workers so that it could compare their DNA with that of the feces. Was Atlas liable to the workers? Answer: A court held that Atlas had violated GINA, which prohibits employers from requesting genetic information from its workers. It doesn‘t matter that the DNA did not match. Lowe v. Atlas Logistics Group Retail Servs, Atlanta, LLC, 102 F.Supp 3d 1360 (N.D. Ga. 2015)

Discussion Questions 91. You are the hiring manager for a bus company. One of the applicants for a job as a bus driver seems perfectly qualified and he is a minority. You would like to hire him, but a background check reveals that he was convicted of second-degree murder 40 years before, when he was 15. Should you hire him?

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 20: Starting a Business: LLCs and Other Options

Answer: Answers will vary. 92. Generally, the BFOQ defense does not apply to customer preference. But recently, some clients have been pressuring their law firms to staff their cases with female and minority lawyers. If a firm does so, would the BFOQ defense be valid? Should it be? Answer: In essence, this would be a voluntary affirmative action plan, which is legal if it does not have too adverse an impact on white male workers. 93. A high-end boutique in Phoenix would hire only women to work in sales because fittings and alterations took place in the dressing room or immediately outside. The customers were buying expensive clothes and demanded a male-free dressing area. Has the store violated Title VII? What would its defense be? Answer: Customer preference is a BFOQ only in cases like this where gender privacy is an issue. If there was no sales position that a male could fill due to customer privacy issues, then Lillie Rubin has not violated Title VII. If there are sales positions available that do not involve doing fittings and alterations, then Lillie Rubin has violated Title VII. 94. Lisa T. Jackson, who was white, worked at Uncle Bubba‘s Seafood and Oyster House. She filed suit under Title VII, alleging that the restaurant discriminated against black employees. They had to enter through the restaurant‘s rear entrance and could not use the customer bathrooms. Neither of these prohibitions applied to white staff. Jackson‘s boss also repeatedly told racist jokes. Jackson stated that this behavior caused her great difficulty in managing the staff and also immense emotional distress because she had biracial nieces. In addition, one of her bosses asked her how she ―looked so white,‖ given that her father was of Sicilian descent. Can Jackson recover under Title VII? Answer: No. Although earlier cases would have permitted such a suit, the court noted that the Supreme Court had revisited the issue of standing under Title VII claims, and reevaluated its prior reasoning. Following the new decisions, the district court in this case held that plaintiff was not an ―aggrieved party‖ under Title VII because her interests were not those arguably sought to be protected by the statute. At best, Plaintiff is an accidental victim of the alleged racial discrimination. Workplace harmony is not an interest sought to be protected by Title VII. Jackson v. Deen, 959 F.Supp.2d 1346 (S.C. Ga. 2013). 95. Peter Oiler was a truck driver who delivered groceries to Winn-Dixie stores. He revealed to his boss that in his free time he liked to dress as a woman, even though he was happily married to a woman. Oiler had been diagnosed with transvestic fetishism with gender dysphoria and a gender identity disorder. Winn-Dixie fired him for fear that, if customers found out, they would go elsewhere to guy their groceries. Does Oiler have a claim against Winn-Dixie? Answer: The answer depends on the Supreme Court decision in Harris v. EEOC. When this case was decided in 2002, the court ruled that Title VII did not protect sexual orientation and sexual identity.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 20: Starting a Business: LLCs and Other Options

Table of Contents Multiple Choice Questions ....................................................................................................................................... 27

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 20: Starting a Business: LLCs and Other Options

Case Questions ............................................................................................................................................................. 29 Discussion Questions.................................................................................................................................................. 30

Multiple Choice Questions 101. A. B. C. D. E.

A sole proprietorship _______________. must file a tax return requires no formal steps for its creation must register with the secretary of state may sell stock provides limited liability to the owner

Answer: B 102. CPA QUESTION Assuming all other requirements are met, a corporation may elect to be treated as an S corporation under the Internal Revenue Code if it has _______________. A. B. C. D.

both common and preferred stockholders a partnership as a stockholder 100 or fewer stockholders the consent of a majority of the stockholders

Answer: C 103. A. B. C. D. E.

A limited liability company _______________. is regulated by a well-established body of law pays taxes on its income cannot have members that are corporations is a form of organization favored by venture capitalists can have an oral operating agreement

Answer: D 104. A. B. C. D.

CPA QUESTION A joint venture is a(n) _______________. association limited to no more than two persons in business for profit enterprise of numerous co-owners in a nonprofit undertaking corporate enterprise for a single undertaking of limited duration association of persons engaged as co-owners in a single undertaking for profit

Answer: D 105. A. B. C. D.

A limited liability partnership _______________. protects partners from liability for their own misdeeds protects the partners from liability for the debts of the partnership must pay taxes on its income has a general partner who is liable for the debts of the organization

Answer: B

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 20: Starting a Business: LLCs and Other Options

Case Questions 97. Alan Dershowitz, a law professor famous for his prominent clients, joined with other lawyers to

open a kosher delicatessen, Maven’s Court. Dershowitz met with greater success at the bar than in the kitchen—the deli failed after barely a year in business. One supplier sued for overdue bills. What form of organization would have been the best choice for Maven’s Court? Answer: A sole proprietorship would not have worked because there was more than one owner. A partnership would have been a disaster because of unlimited liability. They could have met all the requirements of an S corporation or an LLC. Result: In this situation, most entrepreneurs would choose an LLC because it would be easier than forming an S corp and registering with the IRS. However, they really should have a good operating agreement. 98. Ned and Sarah formed an LLC to buy and renovate apartment buildings. They did not sign an operating agreement but they orally agreed that they would dissolve the LLC if they could not get along. The two owners argued repeatedly and Ned refused to meet with Sarah, although he was willing to take her phone calls. Ned continued to work on the renovation that was then underway. Sarah asked a court to dissolve the LLC. Under state law, an LLC without an operating agreement could only be dissolved if (1) the management of the entity is unwilling to reasonably promote the stated purpose of the entity or (2) continuing the entity is financially unfeasible. What result in Sarah‘s lawsuit? What is the moral of this story? Answer: Although there is no written operating agreement, an oral agreement is enforceable in some states, unless it violates the Statute of Frauds. If it is possible that the apartment buildings could be renovated in one year, then the Statute of Frauds would not apply and the oral operating agreement would be enforceable. But if it was not enforceable, the court is unlikely to dissolve the LLC under the provisions of the state law. In a similar case, a court did not. The moral of the story is to have a good operating agreement! Who wants to litigate all these issues? 99. According to the company‘s website, ―d.light is a global leader in delivering affordable solarpowered solutions designed for the two billion people in the developing world without access to reliable energy.‖ It is a for-profit enterprise. What form of organization makes the most sense for this business. Why? Answer: d.light should organize as a social enterprise, because it seeks to make a positive impact on the world, providing an environmentally safe product, and contributing to social needs, while it still seeks to earn a profit. 100. Frankie and Johnny were friends who worked together to raise money for their college expenses. They shoveled snow, cut grass, and assembled IKEA furniture, but never chose a form of organization. One day when Frankie was in class, Johnny accidentally left a rake in a pile of leaves. A child jumped into the pile and was cut by the rake. Is Johnny liable? How about Frankie? Answer: Johnny is liable because of his own negligence in leaving the rake in the pile of leaves. Frankie is liable as a member of the partnership. At the time he acted negligently, Johnny was on partnership business, and so his negligence makes the partnership liable, and therefore, Frankie also. 101. Huma and Zuma want to start Spring High, a business that would take high school students on educational trips during spring break. Eventually, they hope to seek venture capital money and expand the business nationally. What form of organization should they choose? Answer: At the moment, they could qualify as a close corporation because they only have two shareholders. As long as neither of them is a nonresident alien, Spring High could also be an S

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 20: Starting a Business: LLCs and Other Options

corporation. Although Spring High could be an LLC, it is not a form favored by venture capitalists. Result: Spring High should not be an LLC because that would discourage venture capital investment. What type of corporation should they choose? There is little downside to being a close corporation. Indeed, in some states, they would qualify for close corporation status without having to do anything. Whether or not to be an S corporation and have income flow through to their personal returns depends on their individual tax situation. If not an S corp, then they could form a C corporation. 102. If you were to look online for a description of a professional corporation, you might find websites stressing that, in a PC, shareholders are still responsible for their own wrongdoing. For example: ―In some states, these professionals can form a corporation, but with the distinction that each professional is still liable for his or her own wrongful professional actions.‖ Why is this statement at best unnecessary and at worst misleading? Answer: Because in every organization, the professional is responsible for his or her own wrongful acts.

Discussion Questions 96. Leonard, an attorney, was negligent when he represented Anthony. In settlement of Anthony‘s malpractice claim, Leonard signed a promissory note for $10,400 on behalf of his law firm, an LLC. When the law firm did not pay, Anthony filed suit against Leonard personally for payment of the note. Is a member personally liable for the debt of an LLC that was caused by his own negligence? Answer: No. The promissory note was in the name of the LLC and only it is liable. 97. Think of a business concept that would be appropriate for each of the following: a sole proprietorship, a corporation, and an LLC. Answer: Answers will vary. 98. As you will see in Chapter 21, Facebook began life as a corporation, not an LLC. Why did the founder, Mark Zuckerberg, make that decision? Answer: The venture capitalists who invested preferred a corporation. He expected to take the company public, which would be easier for a corporation. 99. Corporations developed to encourage investors to contribute the capital needed to create largescale manufacturing enterprises. But LLCs are often start-ups or other small businesses. Why do their members deserve limited liability? Is it fair that LLCs do not pay income taxes? Answer: Limited liability and favorable tax treatment encourage entrepreneurs to start businesses, which creates jobs and aids the economy. 100. The Sackler family owned Perdue Pharma, which manufactured Oxycontin, a powerful narcotic pain reliever. The Commonwealth of Massachusetts sued Perdue alleging that, to increase profitability, the company had deliberately misled doctors and the public about the dangers of the drug. As a result of this misrepresentation, thousands of Massachusetts residents suffered, overdosed, or died. Massachusetts also sued members of the Sackler family who worked for the company. (Collectively, the family is worth $4 billion.) Richard Sackler, for instance, had sent emails encouraging (even ordering) company employees to mislead doctors and patients. If these allegations prove to be true, will the Sackler family lose anything more than their stock in Perdue? Answer: As in the Ridgaway case, people are liable for their own wrongdoing when acting as an employee even if they are also a shareholder. Family members could be liable.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 21: Corporations

101. ETHICS The Sackler family are generous philanthropists and, as a result, their name is on many buildings at universities and museums. Now, as the prior question indicates, their name is sullied by the family‘s connection with Perdue Pharma. Should nonprofits accept gifts from them? Keep their names on buildings? AnswerWhen the Sacklers entered into agreements with universities and museums to give money in return for naming a building, the contracts did not provide conditions under which the name could be removed. Do the non-profits have an obligation to comply with the terms of these contracts?

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 21: Corporations

Multiple Choice Questions 106. CPA QUESTION Generally, a corporation‘s articles of incorporation must include all of the following except the: A. name of the corporation‘s registered agent. B. name of each incorporator. C. number of authorized shares. D. quorum requirements. Answer: D 107. A. B. C. D.

CPA QUESTION A corporate stockholder is entitled to which of the following rights? Elect officers Receive annual dividends Approve dissolution Prevent corporate borrowing

Answer: C 108. If a manager violates the business judgment rule, which of the following answers will not protect him? A. The disinterested members of the board approved the transaction. B. The transaction was of minor importance to the company. C. The disinterested shareholders approved the transaction. D. The transaction was entirely fair to the corporation. Answer: C 109.

The duty of care: A. is not a requirement of the business judgment rule.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 21: Corporations

B. protects directors who make an uninformed decision if it was entirely fair to the company. C. protects a decision that has a rational business purpose, even if the activity was illegal. D. will not protect directors who make a decision that harms the company. Answer: B 110. The president of R. Hoe & Co., Inc., refused to call a special meeting of the shareholders although 55 percent of them requested it. One purpose of the meeting was to reinstate the former president. Do shareholders have the right to make these two requests? A. Yes to both B. No to both C. The shareholders have the right to call a meeting but not to reinstate the president. D. The shareholders have the right to reinstate the president but not to call a meeting. Answer: C 111. Oil Co. was a controlling shareholder of Pogo, a company that drilled for oil and gas in the Gulf of Mexico. When some additional leases became available, Oil Co. purchased all of them for itself. How could Oil Co. avoid liability? I. By first offering the leases to Pogo‘s board of directors II. By first offering the leases to Pogo‘s other shareholders III. By proving that Pogo could not afford to pay for the additional leases A. B. C. D. E.

I II III Either I or II I, II, or III

Answer: E

Case Questions 103. Michael incorporated Erin Homes, Inc., to manufacture mobile homes. He issued himself a stock

certificate for 100 shares for which he made no payment. He and his wife served as officers and directors of the organization, but, during the eight years of its existence, the corporation held only one meeting. Erin always had its own checking account, and all proceeds from the sales of mobile homes were deposited there. It filed federal income tax returns each year, using its own federal tax number. John and Thelma purchased a mobile home from Erin, but the company never delivered it to them. John and Thelma sued Erin Homes and Michael, individually. Should the court ―pierce the corporate veil‖ and hold Michael personally liable? Answer: The appeals court pierced the corporate veil and held the shareholder liable because the corporation had grossly inadequate capitalization, had disregarded corporate formalities, and the shareholder was also actively participating in the operation of the business. Laya v. Erin Homes, Inc., 177 W. Va. 343, 352 S.E.2d 93 (1986). 104. You Be the Judge: WRITING PROBLEM Stahl and Hyman owned and worked for a corporation named ―Ampersand‖ that produced plays. Both men were employed by the corporation. After producing one play, Stahl decided to write Philly’s Beat, focusing on the history of rock and roll in Philadelphia. As the play went into production, however, the two men quarreled. So Stahl resigned from Ampersand and formed another corporation to produce the play. Did the opportunity to produce Philly’s Beat belong to Ampersand?

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 21: Corporations

Argument for Stahl: Ampersand was formed for the purpose of producing plays, not writing them. When Stahl wrote Philly’s Beat, he was not competing against Ampersand. Argument for Hyman: Ampersand was in the business of producing plays, and it wanted Philly’s Beat. Answer: Producing Philly’s Beat was clearly within the scope of Ampersand‘s business. Although it was not clear if Ampersand could have raised enough money to produce the play, any doubt should be resolved in favor of Ampersand. Stahl was ordered to disgorge any profits from the play. Ampersand Productions, Inc. v. Stahl (Feb. 20, 1986), No. 85-435 (Dt. Ct., E.D. Pa.). 105. Rodney Platt was the vice chairman of the board of Mylan. He was also one of the owners of an office park that Mylan leased, making him Mylan‘s landlord. How could Mylan comply with the business judgment rule in connection with this transaction? Answer: Under the business judgment rule, either the disinterested members of the board of directors or the disinterested shareholders would have to approve the transaction. If they did not, then a court would have to determine whether the transaction was entirely fair. 106. Careless Inc. ran HIV/AIDS treatment clinics. Some of its employees violated federal law by paying kickbacks to doctors who referred patients to Careless facilities. The Careless employee in charge of preventing this kind of behavior failed to see some obvious problems. The board had never asked about the company‘s monitoring process. Was the board of directors liable for this employee‘s wrongdoing? Answer: In a similar case, the court said that, under the duty of care, the board cannot be expected to know what every employee does, but it should have asked about the company‘s overall monitoring process. 107. Pfizer, Inc., paid $2.3 billion to settle civil and criminal charges alleging that it had illegally

marketed 13 of its most important drugs. This settlement made history, but not in a good way. It was both the largest criminal fine and the largest settlement of civil healthcare fraud charges ever paid. Shareholders filed a derivative suit against the Pfizer board and top executives. Defendants responded with a motion to dismiss on the grounds that shareholders had not made demand on the board. Is demand necessary? Answer: The court excused demand because the complaint alleged ―misconduct of such pervasiveness and magnitude, undertaken in the face of the board‘s own express formal undertakings to directly monitor and prevent such misconduct, that the inference of deliberate disregard by each and every member of the board was entirely reasonable.‖ Short, the board was so careless in exercising its responsibilities that demand would be futile. 108. Congressional Airlines was highly profitable operating flights between Washington, D.C., and New

York City. The directors approved a plan to offer flights from Washington to Boston. This decision turned out to be a major mistake and the airline ultimately went bankrupt. Under what circumstances would shareholders be successful in bringing suit against the directors? Answer: Even if the plan was bad, it met the standard of having a ―rational business purpose.‖ Only if there had been self-dealing on the part of the board, or if they had made an uninformed decision would shareholders have a chance of being successful in their suit.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 22: Securities Regulation

109. When Comcast decided to hold a virtual annual shareholders meeting, an investor submitted a proposal that would have required the company to hold a hybrid meeting—that is, both in person and online. Must Comcast allow a vote on this proposal at its annual meeting? Answer: No, though their virtual meetings are unpopular with shareholders.

Discussion Questions 102. Corporate executives are not the only people to earn fabulous salaries. Some athletes earn even

more than CEOs. What is the difference between athletes and executives (besides a hook shot)? Answer: Athletes‘ salaries are negotiated at arm‘s length with the team owner who will actually be paying the bill. Rather than spending other people‘s money, the owner is using his own. Also, an athlete‘s performance is transparent and easy to measure. 103. Some companies have created multiple classes of common stock that enable the founders to control their company long after it goes public. Should corporate laws permit this? If the founders want to control a company, why shouldn‘t they own enough regular stock to do so? Answer: Answers will vary. 104. Some commentators have proposed tenure voting as an alternative to multi-class voting systems.

With tenure voting, the longer a shareholder owns the stock, the more votes it is worth. Thus, shares held for three years might be entitled to three votes each. The theory is that such a system would encourage long-term ownership and also serve as a counterweight to insiders who have multiple votes per share. Does such a system make sense? What are the pros and cons? Answer: Answers will vary. 105. Under Delaware law, corporations have the right to decide that the corporate opportunity doctrine does not apply to its managers. Thousands of companies have done so. Why would a company do that? Should it? Does such a decision help or hurt shareholders? Answer: Answers will vary. 106. For several years, CSK Auto fraudulently reported inflated earnings. During this period, Maynard

Jenkins was CEO. He was not involved in the fraud, however, and was never charged with a crime. Nonetheless, the SEC sought to clawback some of his earnings during this period. Is Jenkins financially responsible for fraud that occurred on his watch, even though he did not participate? Should he be liable? Answer: The SEC brought an action against Jenkins, seeking a clawback of $4 million. Jenkins motion to dismiss the action was denied, after which the case was settled for $2.8 million. Was this a message to CEOs to better monitor those who work under them? Answers will vary. 107. Shareholders at Citigroup offered a shareholder proposal that would require the bank to hold back a substantial percentage of its top executives‘ pay for ten years. This sum could then be used to pay any fines or other liability arising out of illegal activities that take place on the executives‘ watch. They would forfeit their pay even if they did not personally engage in any wrongdoing. Under SEC rules, is Citigroup required to include this proposal in its proxy material? If passed, must the company implement it? Is the proposal a good idea? Answer: Answers will vary.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 22: Securities Regulation

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 22: Securities Regulation

Multiple Choice Questions 112. CPA QUESTION When a common stock offering requires registration under the Securities Act of 1933, _______________. A. the registration statement is automatically effective when filed with the Securities and Exchange Commission (SEC) B. the issuer would act unlawfully if it were to sell the common stock without providing the investor with a prospectus C. the SEC will determine the investment value of the common stock before approving the offering D. the issuer may make sales ten days after filing the registration statement Answer: B 113. CPA QUESTION Pace Corp. previously issued 300,000 shares of its common stock. The shares are now actively traded on a national securities exchange. The original offering was exempt from registration under the Securities Act of 1933. Pace has $2.5 million in assets and 425 unaccredited shareholders. With regard to the Securities Exchange Act of 1934, Pace is _______________. A. required to file a registration statement because its assets exceed $2 million in value B. required to file a registration statement even though it has fewer than 500 unaccredited shareholders C. not required to file a registration statement because the original offering of its stock was exempt from registration D. not required to file a registration statement unless insiders own at least 5 percent of its outstanding shares of stock Answer: B 114. Lily would like to raise money for her video game start-up by selling shares. If she decides to raise money through crowdfunding, she _______________. A. can only sell to accredited investors B. can sell up to $5 million in stock during each 12-month period C. can sell through any website D. must file a report with the SEC Answer: D 115. If a publicly traded company wishes to issue more public stock: I. The company will undertake an IPO II. The investors must receive a copy of the registration statement III. The investors must receive a copy of the prospectus IV. The underwriters are not liable for any errors in the registration statement if they undertook a due diligence investigation.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 22: Securities Regulation

A. B. C. D.

All of these III and IV are correct II, III, and IV are correct I, II, and IV are correct

Answer: B 116. Three months ago, Noah bought stock under Rule 506 in TreesNFlowers, Inc. He has lost interest in the company and would like to sell the stock. Which of the following statements is true? A. He can sell the stock now, so long as he sells it to an accredited investor. B. He can sell the stock now, so long as the company grants permission. C. He must hold on to the stock for at least nine more months. D. He could sell the stock now, but only if the company has gone public in the meantime. Answer: D

Case Questions 110. Fluor, an engineering and construction company, was awarded a $1 billion project to build a coal gasification plant in South Africa. Fluor signed an agreement with a South African client that prohibited them both from announcing the agreement until March 10. Accordingly, Fluor denied all rumors that a major transaction was pending. Between March 3 and March 6, the State Teachers Retirement Board pension fund sold 288,257 shares of Fluor stock. After the contract was announced, the stock price went up. Did Fluor violate Rule 10b-5? Answer: Fluor was not in violation because the company lacked scienter. Fluor had no intent to defraud investors; it was simply making a good faith effort to comply with the terms of its contract. State Teachers Retirement Board v. Fluor Corp., 654 F.2d 843 (2d Cir. 1981). 111. Do you love ice cream? Here is an opportunity for you! For only $800, you can buy a cow from Berkshire Ice Cream. The company gets milk from the cow, and you get to share in the profits from the sale of the ice cream. Just last month, Berkshire mailed $32,000 worth of checks to investors, who are expecting a 20 percent annual rate of return. Are there any problems with this plan? Answer: This ice cream company is selling a security and must comply with both state and federal securities laws. Ellen Lahr, ―Investor Milks Profits of Ice Cream Firm,‖ Boston Globe, July 30, 1995, p. 38. 112. ETHICS Suppose that, while waiting in line at the grocery store, you overhear a stranger saying that the FDA is going to approve a new drug tomorrow—one that will be a huge success for Alpha Pharmaceuticals. Is it legal for you to buy stock in Alpha? Is it ethical? What would Kant and Mill say? Answer: Answers will vary. 113. ETHICS David Sokol worked at Berkshire Hathaway for legendary investor Warren Buffett, who is renowned not only for his investment skills but also for his ethics. Bankers suggested to both Sokol and the CEO of Lubrizol that the company might be a good buy for Berkshire. Sokol then found out that the CEO of Lubrizol planned to approach Berkshire about a possible acquisition. Sokol purchased $10 million worth of Lubrizol stock before recommending Lubrizol to Buffett. Sokol mentioned to Buffett ―in passing‖ that he owned shares of Lubrizol. Buffett did not ask any questions about the timing or amount of Sokol‘s purchases. Sokol made a $3 million

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 22: Securities Regulation

profit when Berkshire acquired Lubrizol. Did Sokol violate insider trading laws? Did he behave ethically? What are Buffett‘s ethical obligations? Answer: Was the information Sokol had material? Buffett defended the purchase by saying that Sokol had no way of knowing how Buffett would react to the purchase suggestion. Indeed, Buffett was originally skeptical. But Sokol was a top deputy often believed to be most likely to succeed Buffett as CEO. Sokol quit after the announcement of the purchase, but both he and Buffett said his departure was unrelated to Lubrizol. 114.

At an Alcoholics Anonymous meeting, a man told his mentor, Timothy McGee, that he

had started drinking again because he was so stressed out about his company being acquired. McGee bought stock in that company. Has McGee done anything wrong legally? Ethically? Answer: Yes. McGee was convicted of securities fraud based on insider trading, sentenced to six months imprisonment with two years of supervised release, and ordered to pay a $100,000 fine and a $200 special assessment. The SEC also brought a civil enforcement action against him imposing further sanctions in a settlement. 115. An employee in the credit card division of the Last National Bank could tell by looking at credit

card statements what restaurant chains were doing well. Then the stock of those companies would often go up. The employee began trading on this information, which he learned as part of his job. At the same time, Last National Bank sold data from its credit card statements to a hedge fund that also traded on information it could mine from these data. Has anyone violated the law? Answer: The employee is guilty of misappropriation because he obtained this information at work. But the hedge fund is not in violation because it is doing its research with permission.

Discussion Questions 108. Omnicare was a company that sold medication to nursing homes. When it made these sales, it often received rebates from drug companies. In its registration statement under the 1933 Act, the company stated that the rebates were legal. Ultimately, however, some states sued drug companies for making these payments, alleging that they were really illegal bribes. The drug companies then stopped making the payments. Investors sued Omnicare on the grounds that its statement in the registration statement was false and material. Was Omnicare liable under the 1933 Act? Answer: The Supreme Court resolved a split between the circuit courts regarding opinion statement liability, ruling that statements of opinion are not actionable under §11, unless the speaker either subjectively believes the opinion to be untrue or the statement of opinion includes a statement regarding an underlying fact that is untrue. A statement of a genuinely held opinion, regardless of whether it can ultimately be proved wrong, is not an ―untrue statement of material fact‖ under §11. However, the court also considered whether the registration statement ―omitted to state factors necessary ―to make the legal compliance ―not misleading,‖ and remanded the case for a determination of that issue. Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 135 S.Ct 1318 (2015). 109. Federal security laws assume that, as long as the issuer provides adequate disclosure, investors are knowledgeable enough to assess the quality of a stock. Many states take a different

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 23: Antitrust

approach—they refuse to permit the sale of securities that they deem to be of poor quality. Should securities laws protect investors in this way? Answer: Answers will vary. 110. As we learned in Chapter 35, Kenneth Chenault reportedly left Facebook‘s board after

disagreements with Mark Zuckerberg over important issues such as how to handle disinformation on its site. Does this event create any legal requirements for Facebook? Answer: Facebook did file a Form 8-K with the SEC reporting that Chenault would not stand for re-election ―in order to pursue other opportunities.‖ 111. The SEC believes that anyone in possession of material, nonpublic information about a company should be required to disclose it before trading on the stock of that enterprise, no matter how they acquired the information. Instead, the courts have developed a more complex set of rules. Do you agree with the SEC or the courts on this issue? Answer: Answers will vary. 112. Is regulation crowdfunding a good idea? Does it provide enough protection to investors? Answer: Answers will vary.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 23: Antitrust

Multiple Choice Questions 117. A. B. C. D.

Are horizontal price-fixing and vertical price-fixing per se violations of the Sherman Act? Yes; Yes Yes; No No; Yes No; No

Answer: B 118. If Sterling Steel (SS) refused to buy concrete from Carat Concrete (CC) unless CC bought steel from SS, would that arrangement be a violation of antitrust laws? A. B. C. D.

Yes, a per se violation. It used to be a violation but is no longer. Yes, if it has an anticompetitive impact. Yes, if SS has a monopoly.

Answer: C

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 23: Antitrust

119. Reserve Supply Corp., a cooperative of 379 lumber dealers, charged that Owens-Corning Fiberglass Corp. violated the Robinson-Patman Act by selling at lower prices to Reserve‘s competitors. It presented proof that these prices had harmed competition. Owens-Corning admitted that it had granted lower prices to a number of Reserve‘s competitors to meet, but not beat, the prices of other insulation manufacturers. Is Owens-Corning in violation of the RPA? A. Yes because the RPA requires that manufacturers charge all customers the same price. B. Yes because any difference in price is a per se violation of the RPA. C. Yes because these price variations harmed competition. D. No because a manufacturer is not liable under the RPA if it charges lower prices to meet competition. Answer: D 120. All the first-run movie theaters in Silicon Valley charge the same prices for tickets. If one cinema raises its prices, so do the others. What is this type of activity called, and is it a violation of the antitrust laws? A. Refusal to deal; it is a rule of reason violation. B. Conscious parallelism; it is not a violation in itself. C. Price-fixing; it is a per se violation. D. Resale price maintenance; it is a rule of reason violation. Answer: B 121. A. B. C. D.

A horizontal merger is automatically illegal if _______________. the resulting company controls at least 90 percent of the market the resulting company controls at least 50 percent of the market the resulting company has the ability to exclude competitors All of these

Answer: C

Case Questions 116. After acquiring the Schick brand name and electric shaver assets, North American Phillips controlled 55 percent of the electric shaver industry in the United States. Remington, a competitor, claimed that the acquisition of such a large market share was a violation of the law because the increased competition from Phillips would decrease Remington‘s profits. Does Remington have a valid claim? Answer: The court held that a 55 percent market share creates a presumption of antitrust illegality. It reasoned, however, that a decrease in Remington‘s profits did not constitute an antitrust injury. The law seeks to prevent injury from reduced competition, not from increased competition. As long as the market is highly competitive, the court was unwilling to intervene. It dismissed Remington‘s claim. This decision uses classic Chicago School analysis. Note the emphasis on protecting competition not competitors. Remington Products, Inc. v. North American Phillips Corp., 755 F. Supp. 52, 1991 U.S. Dist. LEXIS 494 (D. Conn. 1991). 117. It used to be that disposable contact lenses cost $169 a year. But then each of the five major manufacturers independently told retailers to charge at least $270 a year. Is this legal? Answer: Costco sued Johnson & Johnson over this pricing policy, alleging antitrust violations., but later dropped the suit after Johnson & Johnson announced it was discontinuing its unilateral

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 23: Antitrust

pricing policy. Costco Wholesale Corp., v. Johnson & Johnson Vision Care Inc., Case No. 3:15-cv00941, U.S. Dist. Ct., Northern Dist. Of California. 118. Businesses in Silicon Valley often struggle to recruit enough engineers and, as a result, salaries are highly competitive. Adobe, Apple, Google, Intel, Intuit, Pixar, Lucasfilm, and eBay entered into various agreements with each other not to recruit the other‘s employees. Is this legal? Answer: After the Department of Justice (DOJ) filed suit against the firms alleging ―facially anticompetitive‖ agreements, the parties entered into a settlement, and the anti-poaching agreements were terminated. 119. You Be the Judge: WRITING PROBLEM American Academic Suppliers (AAS) and BeckleyCardy (B-C) both sold educational supplies to schools. When B-C‘s sales began to plummet, it responded by reducing its catalog prices. It also offered an additional discount in states in which AAS was making substantial gains. What claim might AAS make against B-C? Is it likely to prevail in court? Argument for AAS: B-C has committed predatory pricing. The company is selling below cost for the purpose of driving us out of business. Argument for B-C: Even if we were to drive AAS out of business, we do not have enough market power to recoup our losses. Answer: AAS charged B-C with predatory pricing. The court, however, found for B-C because the company lacked monopoly power and because there was no showing of harm to consumers. The price cutting did not drive AAS from the market. In fact, AAS continued to grow, without reducing its own prices. American Academic Suppliers v. Beckley-Cardy, 922 F.2d 1317, 1991 U.S. App. LEXIS 630 (7th Cir. 1991). 120. In Boston, 50 restaurants threatened to stop accepting the American Express credit card if the company refused to reduce the commission it charged on each purchase. Visa International, one of America Express‘s rivals, offered to pay the group‘s legal expenses. American Express then lowered its commission for all restaurants except for those with a volume lower than $1 million a year. Have either the restaurants, Visa, or American Express potentially violated the antitrust laws? Answer: Answers will vary.

Discussion Questions 113. ETHICS To conceive a child, some infertile couples need an egg from a fertile woman. In this market, eggs from smart, pretty women are the most valuable. However, the American Society for Reproductive Medicine recommended that clinics cap any payments to donors at $10,000 per cycle. It was concerned that high prices might coerce women into donating, despite some risks to their health, or lead donors to conceal health issues that would make them ineligible to donate. Are these price limits legal? Ethical? Answer: A class action suit on behalf of women who donated eggs was brought against the American Society for Reproductive Medicine, alleging violations of the Sherman Act. When the class was certified, the suit was settled, and the price limits removed. Kamakahi v. American Society for Reproductive Medicine, et al, Case No. 11-cv-01781-JCS (2015). 114. If you go to Amazon.com you will see some items for which there is no price, just the note, ―To see our price, add this item to your cart.‖ Amazon does that for fear that, after the Leegin case, manufacturers will refuse to supply items that Amazon sells below the established retail price. Manufacturers worry that if they do not set some floor to their prices, other retailers will drop the products altogether. Amazon argues that the consumer is best served by a free market that permits them to set whatever prices they want. What is your view on RPM? © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 24: Intellectual Property

Answer: Answers will vary. 115. ETHICS Clarice, a young woman with a mental disability, brought a malpractice suit against a doctor at the Medical Center. As a result, the Medical Center refused to treat her on a nonemergency basis. Clarice then went to another local clinic, which was later acquired by the Medical Center. Because the new clinic also refused to treat her, Clarice had to seek medical treatment in another town 40 miles away. Has the Medical Center violated the antitrust laws? Was it ethical to deny treatment to a patient? What Life Principles are at issue? Answer: Clarice brought suit alleging that Medical Center had monopolized medical care in violation of §1 of the Sherman Act. The court denied the Medical Center‘s motion for summary judgment. The case then went to trial to determine the relevant market and the defendant‘s power in that market. 116. Antitrust regulators tend to focus on protecting consumers, and particularly on reducing consumer prices. Look at the five cases in this chapter. Are the courts‘ decisions likely to cause consumer prices to go up or down? Do you agree with the courts‘ decisions? Answer: Answers will vary. 117. Is it appropriate for U.S. antitrust laws to apply overseas? Should businesspeople who never set foot in the United States be liable for activities they conducted in their own countries? Answer: Answers will vary.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 24: Intellectual Property

Table of Contents Multiple Choice Questions ....................................................................................................................................... 88 Case Questions ............................................................................................................................................................. 89 Discussion Questions.................................................................................................................................................. 90

Multiple Choice Questions 122. Taylor Swift wanted to trademark her song lyrics: ―And I‘ll write your name.‖ She _______________. A. can trademark it because it is a short phrase associated with her entertainment services. B. can trademark it only if it is in a tangible form. C. cannot trademark it because it is generic. D. none of these because short phrases cannot be trademarked. Answer: D 123. Thomas‘s English Muffins wanted to protect the method by which it makes muffins with air pockets—what it calls ―nooks and crannies.‖ What would be the best way to achieve this goal? A. Patent B. Copyright C. Trademark

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 24: Intellectual Property

D. Trade secret E. This method cannot be protected. Answer: D 124. VitaminWater has become such a success that other companies are also now selling similar (but not identical) flavored colored water. Some competitors bottle their drinks in a similar bell-shaped bottle with a two-toned label that has a horizontal color band. What is the best infringement claim for VitaminWater to make against these competitors? A. Patent B. Copyright C. Trademark D. Trade secret E. There is no good claim. Answer: C 125. Faber-Castell began manufacturing pencils in 1761. Although pencils and erasers had both existed for some time, the company did not begin putting erasers on the ends of its pencils until the 1870s. The company was sued by an inventor who had previously patented this idea. The case went to the Supreme Court. Who won the case? A. The patent holder because no one had ever put an eraser on a pencil before B. The patent holder because the PTO had approved his patent C. Faber-Castell because the pencil with an eraser was not novel D. Faber-Castell because the pencil with an eraser was not useful Answer: C 126. A. B. C. D.

If you buy a book, you have the legal right to _______________. read it as many times as you want and then give it away scan it to your computer and then email it to a friend scan it to your computer and sell the PDF All of these

Answer: A 127. A couple thought of a clever name for an automobile. They wanted to protect this name so that they could ultimately sell it to a car manufacturer. What would be the best method to attain this goal? A. Patent B. Copyright C. Trademark D. Trade secret E. This name cannot be protected. Answer: E

Case Questions 121. While in college, David invented a new and useful machine to make macaroni and cheese (he called it the ―Mac ‗n‘ Cheeser‖). It was like nothing on the market, but David did not apply for a patent. At that time, he offered to sell his invention to several kitchen products companies. His

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 24: Intellectual Property

offers were all rejected and he never sold the invention. Years later, he decided to apply for a utility patent. Is David entitled to a utility patent? Answer: No, while the Mac n‘ Cheeser was new, useful, and nonobvious at the time it was invented, David‘s disclosure to the kitchen products companies years before renders it not novel now. Inventors have a grace period of one year once disclosure is made to apply for a patent. That time lapsed. Patent rejected. 122. Alice Randall wrote a novel entitled The Wind Done Gone, which retells the Civil War novel Gone with the Wind from the perspective of Scarlett O‘Hara‘s (imagined) black half-sister and slave. The novel does not use any of the names of the original, but clearly references the same characters, places, and plot lines. Randall was sued, but alleged fair use. Should she win? Answer: Answers will vary. But the appeals court expressed doubt that the infringement claim would be proven, after which, the case settled. 123. Rebecca Reyher wrote (and copyrighted) a children‘s book entitled My Mother Is the Most Beautiful Woman in the World. The story was based on a Russian folk tale told to her by her own mother. Years later, the children‘s television show Sesame Street televised a skit entitled ―The Most Beautiful Woman in the World.‖ The Sesame Street version took place in a different locale and had fewer frills, but the sequence of events in both stories was identical. Has Sesame Street infringed Reyher‘s copyright? Answer: The court held that Sesame Street had not infringed Reyher‘s copyright because Reyher could not copyright the plot of a story, only her expression of the plot. 124. Hair Corp. sells shampoo in the United States and internationally. Its international prices are 30 percent less than its domestic prices. Big Seller, Inc., is in the business of buying products internationally in bulk and reselling them in the United States Big Seller buys Hair Corp‘s shampoos in Peru and imports them to the United States to be sold at international rates. Can Hair Corp successfully sue Big Seller for copyright infringement? Answer: Answers will vary. 125. Victoria‘s Secret, a well-known lingerie company, found out that a man named Victor Moseley was running a small store in Kentucky named ―Victor‘s Little Secret.‖ Moseley‘s shop sold clocks, patches, temporary tattoos, stuffed animals, coffee mugs, leather biker wallets, Zippo lighters, diet formula, jigsaw puzzles, jewelry, candles, and adult novelties. Women‘s lingerie represented about 5 percent of its sales. Does Victoria‘s Secret have a valid intellectual property claim? Answer: Yes, it won a claim under the Trademark Dilution Act. 126. Sequenom developed a noninvasive prenatal diagnostic test to assess the risk of Down syndrome or other chromosomal abnormalities in fetuses. The test analyzes DNA from the fetus that is found in the mother‘s blood. Prior to this test, women had to undergo invasive tests that carried a slight risk of miscarriage. The PTO awarded Sequenom a patent on the test, but other diagnostic testing companies sued to invalidate the patent. Is Sequenom‘s patent valid? Answer: In 2013, a California federal court invalidated Sequenom‘s patent on the basis that it covered a natural phenomenon—the presence of DNA from the fetus in the mother‘s blood. This was based on the Myriad precedent discussed in this chapter.

Discussion Questions 118. ETHICS Virtually any television show, movie, or song can be downloaded for free on the internet. Most of this material is copyrighted and was very expensive to produce. Most of it is also available for a fee through such legitimate sites as iTunes. What is your ethical obligation? Should

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 25: Property

you pay $1.99 to download an episode of The Big Bang Theory from iTunes or take it for free from an illegal site? What is your Life Principle? Answer: Answers will vary. 119.

For much of history, the copyright term was limited to 28 years. Now, because the term is

based on the life of the creator, the average copyright lasts about 150 years. What is a fair copyright term? Some commentators argue that because so much intellectual property is stolen, owners need longer protection. Do you agree with this argument? Answer: Answers will vary. 120. The America Invents Act allows inventors to expedite review of their inventions by paying a fee. This clearly favors those applicants with money. Do you agree with this practice? Why or why not? Answer: Answers will vary. 121. Should Amazon be able to patent the One-Click method of ordering? What about Facebook‘s patent on a process that ―dynamically provides a news feed about a user of a social network‖? Were these inventions really novel and nonobvious? What should the standard be for business method patents? Answer: Answers will vary. 122. In New Orleans, Mardi Gras ―Indians‖ are carnival revelers who dress up for Mardi Gras in costumes influenced by Native American ceremonial attire ―Indians‖ often spend the entire year and thousands of dollars crafting their intricate designs with feathers, beads, and other decorations. As cultural icons in New Orleans, their images are often captured by photographers, who profit from the sale of these pictures. The Indians‘ creations are not copyrightable because the law views costumes as functional, not aesthetic works. What are the Indians‘ best arguments to change the law? Should cultural works be owned? Answer: Answers will vary. 123. Music stars Beyoncé and Jay-Z named their newborn daughter Blue Ivy and then rushed to trademark the name because they planned to use it in commerce. Their application was denied because a wedding planner in Massachusetts was already using ―Blue Ivy‖ as the name of her business. Is this the correct outcome? Should people have priority in protecting personal names? Should a small business have priority over what would surely have been a much larger, more profitable use of this name? Answer: Answers will vary, however, this ruling did stand. The couple was able to secure a trademark for the child‘s full name ―Blue Ivy Carter.‖

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 25: Property

Table of Contents Multiple Choice Questions ....................................................................................................................................... 27 Case Questions ............................................................................................................................................................. 29 Discussion Questions.................................................................................................................................................. 30 © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 25: Property

Multiple Choice Questions 128. Quick, Onyx, and Nash were deeded a piece of land as tenants in common. The deed provided that Quick owned one-half the property and Onyx and Nash owned one-quarter each. If Nash dies, the property will be owned as follows: A. Quick 1/2, Onyx 1/2 B. Quick 5/8, Onyx 3/8 C. Quick 1/3, Onyx 1/3, Nash‘s heirs 1/3 D. Quick 1/2, Onyx 1/4, Nash‘s heirs 1/4 Answer: D 129. Which of the following forms of tenancy will be created if a tenant stays in possession of leased premises without the landlord‘s consent, after the tenant‘s one-year written lease expires? A. B. C. D.

Tenancy at will Tenancy for years Periodic tendency Tenancy at sufferance

Answer: D 130. Consider the following: I. A house (value: $250,000) II. A giant smart television in the house (value: $2,999) III. The land that the house sits upon (value: $30,000) IV. An old car in the house‘s garage (value: $5,001) How many of these items are personal property? A. All four of them B. Three of them C. Two of them D. One of them E. None of them Answer: C 131. Holding out an envelope, Alex says, ―Bo, I‘m giving you these opera tickets.‖ Without taking the envelope, Bo replies, ―Why would I want opera tickets? Loser.‖ Alex leaves, crestfallen. Later that day, a girl whom Bo has liked for some time says, ―I wish I were going to the opera tonight.‖ Bo scrambles, calls Alex, and says, ―Alex, my friend, I accept your gift of the opera tickets. I‘m on my way over to pick them up.‖ Does Bo have a legal right to the tickets? A. Yes because Alex intended to transfer ownership. B. Yes because offers to give gifts cannot be revoked. C. No because no consideration was given. D. No because Bo did not accept the gift when offered. Answer: D

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 25: Property

132. A tenant renting an apartment under a three-year written lease that does not contain any specific restrictions may be evicted for: A. counterfeiting money in the apartment. B. keeping a dog in the apartment. C. failing to maintain a liability insurance policy on the apartment. D. making structural repairs to the apartment. Answer: A

Case Questions 127. You Be the Judge: WRITING PROBLEM Frank Deluca and his son David owned the Sportsman‘s

Pub on Fountain Street in Providence, Rhode Island. The Delucas applied to the city for a license to employ topless dancers in the pub. Did the city have the power to deny the Delucas‘ request? Argument for the Delucas: Our pub is perfectly legal. Further, no law in Rhode Island prohibits topless dancing. We are morally and legally entitled to present this entertainment. The city should not use some phony moralizing to deny customers what they want. Argument for Providence: This section of Providence is zoned to prohibit topless dancing, just as it is zoned to bar manufacturing. There are other parts of town where the Delucas can open one of their sleazy clubs if they want to, but we are entitled to deny a permit in this area. Answer: Yes, the city could use its zoning powers to deny the license. Earlier zoning ordinances had allowed topless dancing in the section of the city where the pub was located, but the current ordinance prohibited such dancing in that section. The city had no obligation to grant a variance for the Delucas and denied the request. Jonathan Saltzman, ―License Is Denied for Topless Dancing at Downtown Pub,‖ Providence Journal-Bulletin, July 11, 1995, p. 2C. 128. Lisa Preece rented an apartment from Turman Realty, paying a $300 security deposit. Georgia law states: ―Any landlord who fails to return any part of a security deposit which is required to be returned to a tenant pursuant to this article shall be liable to the tenant in the amount of three times the sum improperly withheld plus reasonable attorney‘s fees.‖ When Preece moved out, Turman did not return her security deposit, and she sued for triple damages plus attorney‘s fees, totaling $1,800. Turman offered evidence that its failure to return the deposit was inadvertent and that it had procedures reasonably designed to avoid such errors. Is Preece entitled to triple damages? Attorney‘s fees? Answer: The court held the defendant liable for $900 (treble damages) and an additional $900 in attorney‘s fees. The rationale for treble damages is that, historically, landlords often willfully refuse to refund security deposits, knowing that most tenants would not bother to sue. That was obviously unethical. By trebling the damages, state legislatures have given landlords a financial incentive to be fair. By permitting attorney‘s fees, such laws ensure that injured tenants have access to court and a remedy. Preece v. Turman Realty Co., Inc., 228 Ga. App. 609, 492 S.E.2d 342, 1997 Ga. App. LEXIS 1216 (Ga. App. 1997). 129. Ronald Armstead worked for First American Bank as a courier. His duties included making

deliveries between the bank‘s branches in Washington, D.C. Armstead parked the bank‘s station wagon near the entrance of one branch in violation of a sign saying: ―No Parking—Rush Hour Zone.‖ In the rear luggage section of the station wagon were four locked bank dispatch bags containing checks and other valuable documents. Armstead had received tickets for illegal

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 25: Property

parking at this spot on five occasions. Shortly after Armstead entered the bank, a tow truck arrived and its operator prepared to tow the station wagon. Transportation Management, Inc., operated the towing service on behalf of the District of Columbia. Armstead ran out to the vehicle and told the tow truck operator that he was prepared to drive the vehicle away immediately. But the operator drove away with the station wagon in tow. One-and-a-half hours later, a bank employee paid for the car‘s release, but one dispatch bag, containing documents worth $107,000, was missing. First American sued Transportation Management and the District of Columbia. The defendants sought summary judgment, claiming they could not be liable. Were they correct? Answer: Judgment for First American. Transportation Management and the District of Columbia argued that they could not be liable because they were gratuitous bailees and therefore liable only for gross negligence. The appellate court determined that the bailment was not gratuitous bailment, but one for hire. A bailee for hire, one that receives compensation for its services, is held to a standard of ordinary care, not gross negligence. Although there was no explicit agreement between the bank and the District for the safekeeping of the vehicle, the District‘s impoundment of the bank‘s vehicle involved a mutual benefit so as to create a quasi bailment for hire. The District of Columbia and Transportation Management Inc. actively took possession of the bank‘s vehicle with the expectation of deriving benefit from it. Owners of vehicles, on the other hand, receive the direct benefit of having their vehicles safeguarded tin the city‘s impoundment lot until they retrieve them. The case was reversed and remanded for a determination by the trial court as to whether the city and Transportation Management Inc. exercised ordinary care in the safeguarding of the bank‘s vehicle and its contents. First American Bank v. District of Columbia, 583 A.2d 993 (1990). 130. You Be the Judge: WRITING PROBLEM Eileen Murphy often cared for her elderly neighbor, Thomas Kenney. He paid her $25 per day for her help and once gave her a bank certificate of deposit worth $25,000. She spent the money. Murphy alleged that shortly before his death, Kenney gave her a large block of shares in three corporations. He called his broker, intending to instruct him to transfer the shares to Murphy‘s name, but the broker was ill and unavailable. So Kenney told Murphy to write her name on the shares and keep them, which she did. Two weeks later, Kenney died. When Murphy presented the shares to Kenney‘s broker to transfer ownership to her, the broker refused because Kenney had never endorsed the shares as the law requires—that is, signed them over to Murphy. Was Murphy entitled to the $25,000? To the shares? Argument for Murphy: The purpose of the law is to do what a donor intended, and it is obvious that Kenney intended Murphy to have the $25,000 and the shares. Why else would he have given them to her? A greedy estate should not be allowed to interfere with the deceased‘s intentions. Argument for the Estate: Murphy is not entitled to the $25,000 because we have no way of knowing what Kenney‘s intentions were when he gave her the money. She is not entitled to the shares of stock because Kenney‘s failure to endorse them over to her meant he never delivered them, and that is an essential element of a gift. Answer: Murphy gets the $25,000. There was delivery, acceptance, and adequate evidence that Kenney intended the items as gifts. Murphy is not entitled to the shares, though, because without the endorsement there is no delivery, an essential element. Kenney lived for two weeks after instructing Murphy to write her name on the shares and during that time should have endorsed them to her, or caused a broker to do so. IN RE Estate of Kenney, 1993 Ohio App. LEXIS 2481, Ohio Ct. of App., 1993). 131. Angel and Linda Mendez bought a home next door to Rancho Valencia, a fancy hotel on 45 acres of land. The house was about 600 feet from the site where the hotel held outdoor wedding

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 26: Consumer Protection

receptions and parties. Even though the Rancho Valencia had installed noise-abating equipment, the Mendezes could still hear music and announcements from its sound system for about eight hours a month, mostly during the evenings. These noise levels complied with the applicable county noise ordinances. On what theory could the Mendezes sue Rancho Valencia? Will they succeed? Answer: The Mendezes sued claiming nuisance, but lost at the trial court and on appeal. The eight hours per month of noise did not violate the noise statute. Mendez v. Rancho Valencia th Resort Partners, 3 Cal.App.5 248, Court of Appeals of California, Fourth District, Division One, 2016.

Discussion Questions 124. Is it sensible to distinguish between inter vivos gifts and gifts causa mortis? Should someone ―on

his deathbed‖ be able to change his mind so easily? Answer: Answers will vary. 125. Donny Delt and Sammy Sigma are students and roommates. They lease a house in a neighborhood near campus. Few students live on the block. The students do not have large parties, but they often have friends over at night. The friends sometimes play high-volume music in their cars and sometimes speak loudly when going to and from their cars. Also, departing latenight guests often leave beer cans and fast-food wrappers in the street. Neighbors complain about being awakened in the wee hours of the morning. They are considering filing a nuisance lawsuit against Donny and Sammy. Would such an action be reasonable? Do you think Donny and Sammy are creating a nuisance? If so, why? If not, where is the line—what amount of late-night noise does amount to a nuisance? Answer: Answers will vary. 126. Imagine that you sign a lease and that you are to move into your new apartment on August 15. When you arrive, the previous tenant has not moved out. In fact, he has no intention of moving out. Should the landlord be in charge of getting rid of the old tenant, or should you have the obligation to evict him? Answer: Presumably, most will agree that the English rule is better for an incoming tenant, and an incoming tenant should not have the obligation to evict a previous tenant. 127. When landlords wrongfully withhold security deposits, they can often be sued for three times the amount of the security deposit. Is this reasonable? Should a landlord have to pay $3,000 for a $1,000 debt? What if you fail to pay a rent on time? Should you have to pay three times the amount of your normal rent? If your answers to these two questions are different, why is that? Answer: Answers will vary. 128. Historically, the law has viewed animals as personal property. As a result, when a pet is wrongfully

killed, its owner can only recover the cost of replacing the animal. Some groups have challenged this view, arguing that animals are fundamentally different from other forms of personal property. Do you agree? How should the law address the ownership of animals? Answer: Answers will vary.

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 26: Consumer Protection

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 26: Consumer Protection

Table of Contents Multiple Choice Questions ....................................................................................................................................... 27 Case Questions ............................................................................................................................................................. 29 Discussion Questions.................................................................................................................................................. 30

Multiple Choice Questions 133. Dell sold computers online that were supposed to be loaded with a particular software. But, because the software was not yet available, Dell sent customers a coupon for the software ―when available.‖ What did Dell do wrong? I. Failed to offer buyers the opportunity to cancel their orders II. Did not automatically cancel the orders III. Did not ship the software within 30 days A. I and II B. I, II, and III C. I and III D. II and III Answer: B 134.

If you receive a product in the mail that you did not order, _______________. A. B. C. D. E.

you must pay for it or return it you must pay for it only if you use it you must throw it away it is a gift to you you must return it, but the company must reimburse you for postage

Answer: D 135.

Zach sells Cutco Knives door to door. Which of the following statements is false? A. The buyer has three days to cancel the order. B. Zach must tell the buyer of their rights. C. Zach must give the buyer a written notice of their rights. D. The seller can cancel orally or in writing. E. If the seller cancels, Zach must return their money within ten days. Answer: D

136. Depending on state law, if a lender violates the usury laws, the borrower could possibly be allowed to keep_______. I. the interest that exceeds the usury limit II. all the interest III. all of the loan and the interest A. All of these B. Only I C. Only II D. Only III

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 26: Consumer Protection

None of these

Answer: A 137. Companies must obtain permission from a consumer before charging for overdrafts on _______________. A. debit cards B. credit cards C. neither D. both Answer: D 138. On the first of every month, your rent is automatically deducted from your bank account. You are moving out and want to make sure the payments stop. What should you do? I. Tell the bank at least three days before the first of the month. II. Write the bank at least three days before the first of the month. III. Have the landlord sign a form, which you then mail or deliver to the bank at least three days before the first of the month. A. I B. II C. III D. Either I or II Answer: D

Case Questions 132. A company offered credit cards to consumers with low credit scores. These cards had a $300 limit, a $75 sign-up fee, a $6 per month participation fee, and a $5 monthly fee for paper billing. Despite the fees, 98,000 people signed up. Is there anything wrong with that? Answer: Answers will vary. 133. Synchrony (formerly known as GE Capital) offered a special deal providing that if credit card holders paid part of what they owed, it would write off the rest and the customer would never have to pay it. The company did not offer this deal to people who lived in Puerto Rico or were native Spanish-speakers. Is there anything wrong with that? Answer: The Consumer Financial Protection Bureau (CFPB) ordered Synchrony to pay $225 million in consumer relief for deceptive and discriminatory credit card practices. 134. This post appeared on Instagram: khloekardashian Ever since I started taking two @sugarbearhair a day, my hair has been fuller and stronger than ever!! Even with all the heat and bleaching I do to it! #sugarbearhair Is there anything wrong with that? Answer: Khloe Kardashian did not disclose that he was paid to endorse the product. The Federal Trade Commission (FTC) gave her a week to amend her posting. 135. There you are on FindMeLove.com. You joined for free, but you have to upgrade to a paid version if you want to see full-size photos or send personalized messages. So far, you are fine with the free version. But then, a really attractive guy messages you and wants to chat. To respond, you have to upgrade. Once you do, you never hear from him again. Only later do you realize that his

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 26: Consumer Protection

profile had a little ―VC‖ in the upper corner. That meant he was a ―virtual cupid,‖ that is, not a real person. Is there anything wrong with that? Answer: Answers will vary. 136. Suppose that, when you apply for a job at Workleigh Inc., the interviewer asks you to sign a document releasing Workleigh from any claims for any information the company may seek about you when arriving at an employment decision. The employer is seeking protection from liability under a statute discussed in this chapter. Which one? Answer: The employer may have been trying to avoid liability under the Fair Credit Reporting Act, which prohibits a potential employer from requesting a consumer report on a job applicant without the applicant‘s permission.

Discussion Questions 129. Many people need a car to get to work, take care of their families, live their lives. But obtaining an auto loan can be difficult for those with a bad credit rating. Some finance companies are now willing to extend credit to people who are poor risks, on one condition: the company can install tracking software on the car that has the ability to disable the ignition if the debtor misses a payment. This procedure has left drivers stranded on highways and in dangerous neighborhoods. Is this practice unfair? Do the benefits of obtaining a loan outweigh the harm caused by this violation of privacy and loss of control? Answer: Answers will vary. 130. You Be the Judge: WRITING PROBLEM Process cheese food slices must contain at least 51 percent natural cheese. Imitation cheese slices, by contrast, contain little or no natural cheese and consist primarily of water, vegetable oil, flavoring, and ―fortifying agents.‖ Kraft, Inc., makes Kraft Singles, which are individually wrapped process cheese food slices. When Kraft began losing market share to imitation slices that were advertised as both less expensive and equally nutritious as Singles, Kraft responded with a series of advertisements informing consumers that Kraft Singles cost more than imitation slices because they are made from five ounces of milk. Kraft does use five ounces of milk in making each Kraft Single, but imitation slices contain the same amount of calcium as Kraft Singles. Are the Kraft advertisements deceptive? Argument for Kraft: This statement is completely true—Kraft does use five ounces of milk in each Kraft Single. The FTC is assuming that the only value of milk is the calcium. In fact, people might prefer having milk rather than vegetable oil, regardless of the calcium. Argument for the FTC: It is deceptive to advertise more milk if the calcium is the same after all the processing. Answer: The court agreed with the FTC that Kraft‘s ads were deceptive. Kraft, Inc. v. FTC, 970 F.2d 311, 1992 U.S. App. LEXIS 17575 (7th Cir. 1992). 131. ETHICS Should employers check an applicant‘s credit report as part of the hiring process? Each year retailers lose $30 billion a year from employee theft and $55 million because of workplace violence. Those who commit fraud are often living above their means, but there is no evidence that workers with poor credit reports are more likely to steal from their employers, be violent, or quit their jobs. And refusing to hire someone with a low credit score creates a sad catch-22: People have poor credit records because they are unemployed and because they have poor credit records they continue to be unemployed. What is the right thing for an employer to do? Answer: Answers will vary.

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 27: Environmental Law

132. Advertisements for Listerine mouthwash claimed that it was as effective as flossing in preventing tooth plaque and gum disease. This statement was true, but only if the flossing was done incorrectly. In fact, many consumers do floss incorrectly. However, if flossing is done right, it is more effective against plaque and gum disease than Listerine. Is this advertisement deceptive? Answer: The court held that this advertisement was deceptive and did violate §5. McNeil, Inc, v. Pfizer Inc. 351 F. Supp. 2d 226; 2005 U.S. Dist. LEXIS 184 (2005). 133. ETHICS After TNT Motor Express hired Joseph Bruce Drury as a truck driver, it ordered a background check from Robert Arden & Associates. TNT provided Drury‘s Social Security number and date of birth, but not his middle name. Arden discovered that a Joseph Thomas Drury, who coincidentally had the same birth date as Joseph Bruce Drury, had served a prison sentence for drunk driving. Not knowing that it had the wrong Drury, Arden reported this information to TNT, which promptly fired Drury. When he asked why, the TNT executive refused to tell him. Did TNT violate the law? Whether or not TNT was in violation, did its executives behave ethically? Who would have been harmed or helped if TNT managers had informed Drury of the Arden report? Answer: The Fair Credit Reporting Act required TNT to ask Drury‘s permission before

requesting a consumer report. Then, before firing him, TNT was required to give him a copy of the report and a description of his rights under this statute. Drury v. TNT Holland Motor Express, Inc., 885 F. Supp. 161, 1994 U.S. Dist. LEXIS 11583 (D.Ct. 1994).

Solution and Answer Guide Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 27: Environmental Law

Multiple Choice Questions 139. Suppose that you are the manager of a General Motors plant that is about to start producing Hummers. The Hummer requires special protective paint that, as it turns out, reacts with other chemicals during the application process to create a pollutant. What does the Clean Air Act (CAA) require of you? A. Reduce other emissions from the plant so that the total quantity of pollutants is the same B. Provide an analysis showing that the benefits outweigh the costs C. Provide the Environmental Protection Agency (EPA) with evidence that your plant meets the national ambient air quality standards D. Obtain a PSD certificate from the EPA Answer: C

Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 27: Environmental Law

140.

Which of the following statements is true? A. Only the EPA has the authority to regulate greenhouse gases (GHGs). B. Only the states have the authority to regulate GHGs. C. Both the EPA and the states have the authority to regulate GHGs. D. Neither the EPA nor the states have the authority to regulate GHGs; these gases are governed by the Paris Accord. Answer: C

141. Which of the following are a point source requiring a permit under the Clean Water Act (CWA)? I. Farm fields II. A waste treatment plant that dumps water into wells that then travel a brief distance through groundwater to the ocean III. A canal that collects water and discharges it into an intermittent stream that sometimes flows into a navigable water. A. I, II, III B. I, II C. II, III D. II Answer: D 142. You own property on which hazardous wastes are found. You know the identity of three former owners. You are _______________. A. liable for all the costs of the cleanup because you are the current owner B. liable for one-quarter of the costs of the cleanup C. liable for the percentage of the harm that you are able to show that you actually caused D. not liable for any of the costs of the cleanup because the damage occurred before you bought the land Answer: C 143.

The Toxic Substances Control Act _______________. A. requires manufacturers to test new chemicals, or old chemicals being used in a new way, for safety before they can be used in products B. requires the EPA to test new chemicals, or old chemicals being used in a new way, before they can be used in products C. does not allow any chemicals to be used in products before the EPA certifies that they are safe D. requires the EPA, within seven years, to test all chemicals that are currently being used in products E. permits the EPA to require testing of a chemical only if there is evidence that it is dangerous Answer: D

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Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 27: Environmental Law

Case Questions 1.

Tariq disposed of some of his laboratory‘s hazardous chemicals by shipping them via DHL to his home overseas. What law has Tariq violated? Answer: Tariq was convicted of transporting hazardous waste in violation of the Resource Conservation and Recovery Act (RCRA). You Be the Judge: WRITING PROBLEM The Lordship Point Gun Club operated a trap and skeet shooting club in Stratford, Connecticut, for 70 years. During this time, customers deposited millions of pounds of lead shot on land around the club and in the Long Island Sound. Was the Gun Club in violation of the RCRA? Argument for the Gun Club: The Gun Club does not dispose of hazardous wastes, within the meaning of the RCRA. Congress meant the statute to apply only to companies in the business of manufacturing articles that produce hazardous waste. If the Gun Club happens to produce wastes, that is only incidental to the normal use of a product. Argument for the Plaintiff: Under the RCRA, lead shot is hazardous waste. The law applies to anyone who produces hazardous waste, no matter how. Answer: The court held that the Gun Club was in violation of the RCRA because it was disposing of lead shot that was clearly hazardous waste as defined by the statute. It ordered the Gun Club to clean up the site and to obtain a permit for the operation of a hazardous waste disposal site. Connecticut Coastal Fishermen’s Assoc. v. Remington Arms Co., 989 F.2d 1305, 1993 U.S. App. LEXIS 6424 (2nd Cir. 1993).

The Department of Homeland Security wished to build a large office building on its campus in Washington, DC. What environmental step must it take first? Answer: Homeland Security had to file an Environmental Impact Statement (EIS) under the National Environmental Policy Act.

Rundy Custom Homes was building a subdivision of new houses next to a stream. During the building process, pipes on the property discharged storm water with sediment into the stream. Is this legal? What statute applies? Who would be liable? What if the EPA fails to act? Answer: No, it is not legal. The CWA applies. Rundy would be liable. If the EPA fails to act, citizens may sue under the CWA.

The Navy wanted to conduct training exercises off the coast of California for sonar submarines. Scientists were concerned that the sounds emitted by the sonar would harm marine mammals, such as whales, dolphins, and sea lions. Environmental groups filed suit, asking that the Navy prepare an EIS. The Navy argued that it should not have to do so because the submarine exercises were important for national security. Should the courts permit the Navy to proceed without an EIS? Answer: The court ruled that the Navy did not have to file an EIS. The president—the commander in chief—determined that training with sonar was essential to national security. The courts do not have enough information to overrule him on national security issues. Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7(S.Ct. 2008).

Discussion Questions 134. Life is about choices—and never more so than with the environment. Being completely honest,

which of the following are you willing to do? Why?

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Solution and Answer Guide: Beatty/Samuelson/Abril, The Legal Environment, 8e, 2022, 9780357634448; Chapter 27: Environmental Law

Drive a smaller, lighter, more fuel-efficient car Take public transportation or ride your bike to work Vote for political candidates who are willing to impose higher taxes on polluters and pollutants  Insulate your home  Unplug appliances when not in use  Recycle your wastes  Pay higher taxes to clean up Superfund sites Answer: Answers will vary.   

135. In a survey conducted by the Pew Research Center, about three-quarters of U.S. adults said ―the

country should do whatever it takes to protect the environment,‖ compared with 23 percent who said ―the country has gone too far in its efforts to protect the environment.‖ If a large majority of the population supports environmental protection, why has the EPA budget been cut by half over the past 20 years? Answer: Answers will vary. 136. ETHICS Externalities pose an enormous problem for the environment. Often, the people making decisions do not bear the full cost of their choices. And businesses tend to fight efforts to make them pay these externalities. For example, CropLife America lobbied against a bill that would support research on the effects of chemicals on children. On the other hand, Nike resigned its seat on the board of the U.S. Chamber of Commerce in response to the Chamber‘s active lobbying against legislation that would regulate GHGs. But Nike decided to remain a member of the group. What ethical obligation do American companies have to support environmental legislation that may impose higher costs? Do they have an obligation to look out for the greater good, or should they focus on maximizing their shareholder returns? What Life Principles would you apply? What would Kant and Mill say? Answer: Answers will vary. 137. The Supreme Court ruled that, under the CAA, the EPA may not consider cost when setting air-quality standards to protect the public health. A bipartisan group of 42 of the country‘s most respected economists filed a brief arguing that, from an economic perspective, it is wrong not to consider costs. Should the EPA consider costs in all of its decisions? Or are some decisions priceless? Answer: Answers will vary. 138. Is cost-benefit analysis an effective tool in environmental disputes? How do we measure the costs and benefits? How do we know what benefits we might gain from saving endangered species or reducing the arsenic level on a playground? Should you survey people to ask them how much it is worth? Or just think in terms of lives saved or sick days avoided? Answer: Answers will vary.

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