Question C.Fact Pattern.Eric, Neil, and Lyle all sit on the Board of Directors of Fretful, Inc., an instrument repair and manufacturing company specializing in guitars for all musical styles.Eric had received a proposal from one of the company's officers for a completely new advertising campaign that would utilize performances from as many contemporary musicians as possible.The ad campaign was a major departure from the company's previous approach and would be very expensive, so it was brought up for a vote at a Directors meeting.After a five-minute presentation by Eric alone, the Board approved the ad campaign.Unfortunately, it was a disaster.The cost of the ad campaign was enormous and sales during that period declined.As a result, Fretful, Inc. was unable to declare a dividend for the next two years and the stock price declined markedly.A group of shareholders sued the members of the Board of Directors.

What is the likely result of such a lawsuit?

Additionally, note that Eric was featured in one of the ads, because of his place in the world of instrumental guitar, and got paid a sizeable amount for the performance, although no more than he would usually get for playing the guitar.The Board of Directors knew he was being included and approved the use of Eric in the campaign.If the Board of Directors was sued for Breach of the Duty of Loyalty, what would be the likely result?

Question D.Fact Pattern I.Mary, Patty, Dar, Shawn, Sarah, and Joan are all Directors of Lilith Corporation, a small record label that features singer/songwriters playing primarily folk rock and acoustical guitar.Mary is also the sole shareholder and director of Twist and Shout, Inc., an equally small label that features Cajun music.Mary has fully disclosed to everyone at Lilith Corporation her involvement with Twist and Shout, Inc.

A group, known as the Louisiana Bayou Boys, approaches Mary in her capacity as the owner and director of Twist and Shout, Inc. and asks Mary if Twist and Shout, Inc. would be interested in producing their next album. They are a very popular, up and coming group and their album would probably be very profitable.Mary signs them with Twist and Shout, Inc., because she doesn't think it is a project that Lilith Corporation would take given Lilith Corporation's focus on folk rock and acoustical guitar performances and the Louisiana Bayou Boys had made some remarks about how Lilith Corporation would not meet their musical needs.Mary does not discuss the matter with the Board of Directors of Lilith Corporation, but she mentioned it to Patty and Sarah.

Another group, Singing Quietly Together, talks with Mary about a record deal during a convention at the Lilith Corporation Booth.Mary signs them with Twist and Shout, Inc. without discussing it with anyone on Lilith's Board of Directors.

Mary, Patty, and Sarah have all been diverting significant amounts of money from the corporation into their own private accounts, but the accounting records of Lilith Corporation would reveal the misdeed if closely examined.Also, the Board of Directors approved large salaries for Mary, Patty, and Sarah.Joan has been very busy with her political activism and has not attended a board of directors meeting for a very long time nor did she ever send any notes or say anything to anyone about her absences.She was absent on the day that the large salaries were approved.She also claims that she knows very little about accounting or numbers and wouldn't know what to do even if she were to come to the meetings; she really only agreed to sit on the board to help give the endeavor a sense of history by virtue of her many contributions to folk singing.The shareholders are thinking about suing the Board for the resulting loss in value of their shares.

If a breach of the duty of loyalty suit is initiated against Mary for Twist and Shout, Inc.'s involvement with the Louisiana Bayou Boys, what result?

If a breach of the duty of loyalty suit is initiated against Mary for Twist and Shout, Inc.'s involvement with Singing Quietly Together, what result?

If Joan is sued for breach of the duty of care because of the diverted funds, what result?

If Joan is sued for breach of the duty of care because of the large salaries, what result?