BUSINESS ORGANIZATION AND BUSINESS TORTS

Overview

As with all of your Case Study, make sure to thoroughly review all of the required readings before you start on your paper. Make sure you fully understand the main types of legal structures for a business, as well as the main principles of tort law.

Case Study

Go through the scenarios below. For each scenario, answer the questions and support each answer with at least one reference to one of the readings in the background materials. Be clear about how your reading supports your answer.

1.Suppose you form a corporation with two other investors. Laura is putting up 60% of the initial investment for the new corporation, while Terry and you are each putting up 20%. When you form the bylaws for the corporate charter, it is agreed that Laura will be able to choose six members of the board of directors and Terry and you will each be able to choose two members so your influence on the board is directly proportional to each of your investments. The board of directors is then given the authority to hire the CEO of the corporation, and they choose a CEO that all three of you are happy with. But then over the holidays Laura goes on vacation and several members of the board of directors are also on vacation. Terry and you decide the CEO should be fired and recommend to the six members of the board of directors who stayed in town that they do so. The six members vote to fire the CEO and appoint Terry's brother-in-law as the new CEO. Upon learning of the change, Laura is furious that the CEO was fired without anyone consulting her, especially since she owns 60% of the company stock. She is determined to regain control even if it means going to court. Do you think she would prevail in court?

2.Suppose you are visiting your regular hairdresser who runs an old-fashioned barber shop with a heavy barber pole mounted next to the front door. As another customer, Sam, grabs the front door handle to push the door open, the barber pole falls to the ground missing Sam's foot by inches. Sam faints. The hairdresser stops working on your hair and runs to Sam's side. Sam revives almost immediately and stands up with the hairdresser's help. The hairdresser is very apologetic. Sam seems fine and stays to get his hair cut once your cut is finished. A few days later, Sam calls the hairdresser and tells him he can't stop thinking about what happened; that the hairdresser could have killed him and that he is going to sue the hairdresser because it is the hairdresser's responsibility to make sure his barber pole is mounted safely. In this case, did the hairdresser commit a tort? If so, was it an intentional tort or an unintentional tort? Explain your reasoning.

3.Now suppose you are one of the owners of a limited liability corporation that owns some restaurants. One of your waiters takes an order for hot tea from a customer. The waiter places hot water in a tea pot and a teacup with tea bag on the table and turns to get another table's order. As the waiter turns, he bumps into another customer on his way to the restroom. The waiter falls back a bit and jostles the table with the teapot, spilling the hot water into that table's seated customer's lap. That customer, an overweight elderly woman, has to be taken to the hospital by ambulance because of the burns from the spilled hot water. Would this be a tort? If so, would it be an intentional or an unintentional tort? Finally, would you as an owner be personally liable if the customer decided to sue?

4.You are the sole proprietor of a small occupational therapy practice that is rapidly growing, but you need to raise additional money to fund your expansion. You talk to several friends and family members about making them partners in your business in exchange for investing in your business. However, they tell you that even though they have confidence in your business, they are too busy to be your business partners. They also do not want to be liable for your debts if you go bankrupt or for any lawsuit that you face. They also aren't interested in getting involved in the taxes due on dividends from stocks. Furthermore, you find out that limited liability companies are not allowed in your state for healthcare practitioners (LLC laws vary state by state). What kind of legal structure do you think you should switch to in order to help persuade your friends and family members to invest in your business? Explain.

5.Suppose you are the CEO of a corporation. After attending a business conference in Hawaii, you and some other CEOs you met at the conference decide to relax and unwind with a few drinks at the hotel bar. The hotel bar closes, so you and the other CEOs decide to go back to your room and continue the party. You proceed to raid the large whiskey collection in your minibar. Your memory becomes hazy at this point, but you wake up the next morning and find the hotel room is completely trashed. The hotel sends you a $50,000 bill for the damages. Are you personally liable for this bill, or is it only the corporation that is liable since you are a CEO and the incident happened during a business trip for the corporation?