Chapter 27 # 6

6.) Klinicki and Lundgren incorporated to form an air taxi service known as Berlinair, Inc. Each of them owned one-third interest in the corporation. The final third was owned by Lelco, Inc., a company owned by Lundgren. In his capacity as president of Berlinair, Lundgren learned that the Berlinair Flug Ring (BFR), a business association of Berlin's travel agents, was looking for an air charter service. Lundgren incorporated a new corporate entity called Air Berlin Charter (ABC). ABC then negotiated an air charter contract with BFR. Klinicki brought suit, demanding that Lundgren reimburse Berlinair for any profits made by ABC on the BFR contract. Was this a direct or derivative suit? Explain. Should the business judgment rule or the fairness rule be used by the court to measure Lundgren's performance? Explain. Who should have won the suit? Defend your choice. [See: Klinicki v. Lundgren, 695 P.2d 906 (OR).]

9.) Keith Harris, a shareholder of Fastway Airlines, Inc., discovered that Donald Fleure, chief executive officer of Fastway, had sold some of his own land to the corporation at what Harris believed to be excessive prices. Can Harris bring a direct or a derivative suit in this situation? Explain. Would the fairness rule or the business judgment rule be used to evaluate the activities of Fleure? Explain.

Chapter 28 4 and 5

4.) Enstrom purchased an aircraft from the Interceptor Corporation. When the aircraft crashed due to a design defect, Enstrom sued Interceptor. However, when Enstrom found out that Interceptor's assets had been purchased by the Interceptor Company (IC), it asked the court to join IC as a new defendant. IC argued that it was a different corporation involved in a different business. IC further argued that it had simply purchased the assets of Interceptor and was now involved in selling those assets, like the aircraft, to other buyers, like Enstrom. IC concluded that it was therefore not liable to Enstrom. Was IC correct? Why or why not? [See: R.J. Enstrom Corporation v. Interceptor Corporation, 555 F.2d 277 (10th Cir.).]

5.) C.E. Stumpf & Sons, Inc., was formed to conduct a masonry and general contracting business. The corporation was owned in equal shares by Stumpf and his two sons, who had previously operated the same business as partners. Hostility between the two sons grew so extreme that one, Donald, ended contact with his family and was allowed no say in the operation of the business. After Donald's withdrawal from the business, he received no salary, dividends, or other revenue from the company. He brought suit seeking involuntary dissolution of the corporation. Should the court of appeals of California uphold the trial court's dissolution order? Why or why not? [See: Stumpf v. C.E. Stumpf & Sons, Inc., 120 Cal. Rptr. 671 (CA).]

Chapter 27 # 6 6.) Klinicki and Lundgren incorporated to form a...