OFFICERS are AGENTS OF CORPORATIONS
Authority
PRES has inh auth to bind C for K
Actual
Apparent
Inherent
Ratification
Estoppel
RTA s.2.01
RTA s.2.03
RSA 8A (RTA Strikes)
RTA 4.01
RTA s2.05
P to A
P to TP
P gen. Undiscl.
P ratifies A
NO AGENT
Power held by A to affect P when TP rbly believes A has authority to act based on Ps manifestation to TP
P liable for A if A’s acts are within auth usually confided in an agent who normally has that auth (can K out)
Affirmance of prior act done by A
No act or app – P may be liable to TP based on A if:
Express
Implied
Agent acts reasonably on Ps manifestations that P wants A so to act.
App Imp Authority: put agent in place for TP to rbly believe A has auth.
Conduct, words, or implied by conduct
Based on A’s reasonable perception
R3rd s.6.03 Duty is on A to disclose P
Undisclosed Principal Or “Rogue” A
Agent & TP are parties to agree.
P must have choice, cannot be AFTER act
capture “Rogues”
Liability of P on TP on Tort Not on Agency, on KIND of Ag
clarify A’s Day-to-day control, distinct operation, custom, skill, tools, time, compensation, party belief, business or not (7.07)
authority
Employee
Liability of Agent on K
A & TP ARE party UNLESS agree otherwise
P is on notice of TP belief and does not try to stop
RTA expands RSA
Look to K to
Undisclosed Principal
P is intention or careless of TP belief
IMPLIED affirmance = P conduct, P must have reason to know
Look for undisclosed P “Such powers are as reasonably necessary to carry out the duties”
P acts to justify rnbl assumptn of consent
A must be acting ON P’s BEHALF!
RSA 161
Sub Agent RTA 1.04(8) A of A to conduct P’s business in scope of A authority
Look to past conduct
Manifest assent that act will affect legal relations
Unidentified Principal
A IS party UNLESS agree otherwise
P liable if within scope of employment CONTROL Disclosed Principal
A is NOT party UNLESS agree otherwise
Nonemplee Agent
P NOT liable unless:
Nonagent Ind. Contractor
RTA 7.07 Employee RTA 7.08 Apparent A
P negligent Non-delegable
RSA 1.01 – P must have control Control over actual instrument Respondeat superior as limit
“Nuisance per se”
Incompt Contractor OR Financ. Incom.
P volunteers to take duty Apparent Authority
Labels don’t matter
NOT Liable NO CONTROL UNLESS:
P assert control RTA 7.03(1) Direct
POLICY – Control, esp ownership and profits tends to infer agency
Nondelegable duty
7.07 – SCOPE: SCOPE: Engaging in conduct subject to P’s control Liability = if harm is foreseeable from conduct of EEs
7.07 – Intentional Look at type of tort
Agent’s Duties
If Breach: P MAY consent to Conflict of Interest 8.01
Fiduciary Duties
A must act in good faith
Disclose MATERIAL information
Deal fairly
P’s consent must be specific to act or transaction
Disgorge profits to P
Waiver
Duty of Care RTA 8.08, .09
Reasonable Care 8.08
Worse than K case b/c not damages, disgorge
W/in Scope & Comply w/ Instructions 8.09
Good Conduct “catch-all” 8.10 Loyalty Personal Benefit 8.02
Adverse Dealings 8.03
Competing 8.04
Proprietary Inform 8.05
Waiver
Waiver
Waiver
Waiver
When in connection to agency relationship
May take steps in preparation to compete
Not use property of P for own or TP
Personal Profits from Position Reading
Grabbing & Leaving Town & Contry
Usurping Business Singer
Trade secured through years of bus. and advertise, $$
Cannot communicate confidential information for A or TPs benefit
Partnership Duty
RUPA 404(b): duty of loyalty, inc “approp of partnership opportunity”
“Punctilio of an honor most sensative” Meinhard
Partnership
101(6); assc of 2 or more as co-owners, for profit
101(10): almost any entity can be partner
Unlimited liability, limit transferability, single taxation, limited access to capital, informal, less regulation w/in PS agreement, life limited to partner
(1) Agreement b/t parties
(2) Written, not needed
Notice + Opportunity
RUPA 103b3: 103b3: Cannot elim loyalty, but can id certain categories, if not manifestly unreasonable
201(a): PS is distinct from partners
RUPA is basis default rules
(3) Coproperty not determinative
(4) Share in profits, presumed, UNLESS
(5) Share in management 401(f)
Allows APPARENT AGENCY (ordinary)
Partnership Windup
306(a): All Ps j/s liable for all liabilities
807(a): after creditors, surplus to PS by rights to distribution
308(e): if not PSs w/ each other, not PSs to 3rd parties
504(a)-(b): Creditor MAY get judgment against P interest
305(a): PS is liable for act of Ps if act in ordinary course of business
306(a): all Ps j/ s/l for all
wages
Late-Coming Partners NOT liable for previous incurred oblg
rent
RUPA 404(d): PS must discharge w/ obligation of good faith & fair dealing
Duty of Loyalty, Care, Good Faith, Inspection
Non-Waivable
(6) Partners may be creditors
(7) Look at who’s at risk at dissolution
(8) Mgmt equal rights for all Ps unless PS Ag says otherwise
401(j): Diff in mgmt, majority wins, if not ordinary, must have consent of all Ps
debt 301(1): Each partner is agent of all UNLESS (1) P does not have authority, AND (2) TP knows or should know P doesn’t have author
Interested party cannot vote in ratification of selfinterested opportunity Perreta v. Prometh
Elim duty of loyalty when poss, limit notice, time period limit, change “PS opportunity” meaning
103(a) – PS Ag may alter relations B/T Ps & 103(b) lists non-alter in PS Ag
Annuity/retire
Partnership By Estoppel
Debt service Sale goodwill or property
Partnership Disassociation
P must show express or implied holding out of PS by D
Represent was made by D or person alleged PS
Reason. Reliance by TP in good faith
TP is harmed
Partnership Transfer RUPA 601(3) P may be expelled as terms of PS Agr
RUPA 602b1: Wrongful expel ONLY IF breach express term of PS Ag
PS FREEZEOUTS! – P v. TP 305(c) & 401(c): PS is liable for ordinary bus of P tort, must indemnify P if in ordinary course
401(i): All Ps must consent to sell PS interest
502 & 503: PS has personal interest in prof & losses & distributions
501: P is not coowner of PS property, cannot transfer
Effect of PS by Estoppel
If D purports to be PS and TP relies, D is liable to TP
IF MADE IN PUBLIC MANNER, D as PSbE is liable even if doesn’t know
If PS liability, then that PSbE is liable as if P were partner
Partnership Disassociation 603(a)
Continuation of Business Article 7
Dissolution & Wind Up Article 8
602(a) P may disass any time, right or wrong, by express will
RUPA 701
(i) economic purpose frustrated
RUPA 801(5)
P may be creditor and P, and may pursue own interests - 404(d)
(ii) one P engag in conduct that makes PS not reasonably conduct
(iii) no longer reasonably practicable to contin PS under PS Ag
FOR TERM 602(b)(2): if in term:
Wind Up Process
803c: person WU may dispose of and transfer the assets Kovacik Rule: Ps share in profits and l osses UNLESS one P is only skill & labor
(i) P withdraws by express will
(ii) P expelled by judicial determ.
(iii) P becomes debtor in bankrupt.
(iv) P expelled or disass b/c dissolv or termination
Conflict w/ 401(b) – proportionate shares Amount = Capital Account (book) + avg prior 3 years profits/gains paid to GP 802(a) – PS continues after dissol and terminates when WU done – fees split as in PS
Evaluate the HARM, who is harmed?
Direct
Shareholder Suits
SH
Derivative (recovery goes to Corp)
C Who would recover?
(1) personal action by SH for injury of SH (2) SH as individual (3) recovery to P-SH
(1) SH files on behalf of injury to corporation (2) COA belongs to corp (3) recovery to corp (4) special pleading required 23.1
MBCA 7.41 Blasius Standard: (1) P must show Bd acts with effort to deny SH vote right
(2) Bd must provide “compelling justification”
Revlon Duty: Duty of Bd changes on liquidation – duty to max value for SHs
Standing
MBCA 7.42 Demand Requirement FRCP 23.1 – Must state desired result in demand
Demand Sent BD Accepts
90 days have expired from demand, OR demand refused, OR 90 too long
When Ds are def in case
Demand Futility (1 of 3)
If demand made, cannot claim futility
Majority BoD conflicted int
Special Litigation Committee (SLC) – small comm of non-interest BD members to review demand
NY
Auerbach standard
Presume BD acts with good faith and promoting best int of corp Overturned w/ part. facts showing bad faith, conf int, AND breach of fid duty
SH fairly & adequately represents interests of corp in enforcing corp Show by reason. Doubt that BD cannot decide demand w/ part. facts
Charged transaction not subject to BJR – BD no BJR
P-SH must overturn BJR to pass denial
BUSINESS JUDGMENT RULE
P was SH at time of act or became through transfer of SH who was at time
NY Rule: part facts – (2) fail to inform (3) trans = BJR not possible
Del: Majority BoD not indp by domination or control (NY: not informed themselves)
BD takes over the lawsuit
If SH loses derivative suit – SH may have to pick up tab for D/O and must pay own fees
Demand Requirement
Written, specific demand made upon C to take suitable action (wrongdoers)
BD Denies
Denial is subject to BJR
“Some objective determination of value” needed Fair Market Value
Liquidation value, OR
807b: profits & losses from liquidation charged to Ps accounts
Owen v Cohen : if P provides loan to PS, presumed “for term” if pay of loan is out of profits
AT WILL 601(1): notice by P to withdr
BUYOUT:
807a-b: Creditors paid, then Ps
602(c) Wrongful disass = P liable for damages to PS for disass
EXPULSION: EXPULSION: if not permitted in PS Ag, cannot expel, can seek dissolve but 404d
(1) Voluntary Association (2) Primacy of K PS Ag
Value based on sale of bus as going concern w/o disass P
Value at windup is greater of:
(1) SLC member selc process review
(2) proced used by SLC to reach sub review
(3) Substan outcome NOT reviewed
Bd member experience with contested trans, prior affilitations, completeness of inquiry, good faith, no pro-forma/shallow investig, “eminent special counsel” - but TAINTED BD can appoint SLC members
Del
Del Rule: reas doubt (2) bd lacks indp (3) trans not valid exercise of BJR
Zapata standard
(1) Bd Indp & good faith (2) Bases supp decision
(2) Ct applies own “indp BJ” whether to dismiss
More substantive review into decision & eliminates potential structural bias – subject to Summ Judgment Standard Rule 56 – look at personal ties (Stanford Conspir)
