Identifies any claims that may be brought 1 against puntin


Prepare the 5-6 pages paper according to the instruction attached. Each question should be 3-4 pages,must be in memo format.

Question One

Imagine that you are an associate at Buckeye & Buckeye LLP, a law firm located in New York City. Further imagine that Brutus Buckeye, a senior partner in the firm, phones you in your office and asks you to come to his office. Now imagine that, as you enter his office, you observe that, while Mr. Buckeye is wearing his customary conservative suit, rather than a white dress shirt with a scarlet and grey tie as is his habit, Mr. Buckeye is wearing a flowered dress shirt with a maze and blue polka-dot bow tie. Finally, imagine that, upon seeing you in the doorway, Mr. Buckeye leaps from his chair and exclaims:

Spring has sprung! As you - and everyone else - sees, I celebrate the arrival of springtime by wearing vernal attire. And, as I'm sure you - and everyone else - knows, children all over the world revel in glorious days of warm sunshine and cool breezes by playing Puntin' the Pouch. Almost no one, however, is aware that Allen Allens and Becky Becks, the company's founders, recently engaged me as their attorney - something they now realize they should have done years ago, because they are facing a decade of pesky legal problems that my sage counsel would have allowed them to avoid. So, please have a seat, and I'll tell you the story of Puntin' the Pouch, and then I'll tell you what it is I need you to do to assist me in guiding them through their prolonged predicament.

In the Spring of 2005, Mr. Allens and Ms. Becks were finishing their junior year at The (Great) Ohio State University. One glorious day, they were studying for their final exams on the Oval (which, I assure you, is more beautiful than the Great Lawn in Central Park). Mr. Allens used a small pouch that he had crocheted and filled with flaxseed as a weight to keep the pages of his book from turning while he was working. After a few hours of intense studying, Ms. Becks picked up the pouch, tossed it in the air, and began kicking it to keep it from falling to the ground.

Mr. Allens soon joined her, and they used their feet to pass the pouch back and forth between them. As other people on the Oval -fellow students studying for their final exams, high school students touring the campus, and elementary school students visiting the Wexner Center for the Arts on a class trip - came upon them, they stopped to join the game.

After they completed their final exams, Mr. Allens and Ms. Becks began to develop their new hobby - which, I'm sure you've already guessed, they call Puntin' the Pouch - into a business. Mr. Allens visited his aunt, Aunt Allens, and Ms. Becks visited her uncle, Uncle Becks. After a few moments of watching Mr. Allens demonstrate the game to her, Aunt Allens joined him in playing Puntin' the Pouch. When they finished playing, Aunt Allens agreed to invest $60,000 in the new company. Ms. Becks had an identical experience with Uncle Becks - that is, he so enjoyed playing Puntin' the Pouch with her that he agreed to invest $60,000 in the new company.

Mr. Allens and Ms. Becks used the money to rent an apartment together on Lane Avenue in North Campus, as well as to buy crotchet needles, yarn, and flaxseed. Mr. Allens taught Ms. Becks to crotchet, and they spent the next few months making pouches and punting them back and forth to one another on the Oval. They discovered, however, that while their fellow college students were always happy to join their games of Puntin' the Pouch, they were reluctant to buy pouches for themselves.

To be able to expand their sales efforts beyond The (Great) Ohio State University, in the Autumn of 2005, Mr. Allens and Ms. Becks arranged their class schedules so that they would be free in the afternoons. Each weekday, they went to a local high school just before lunchtime, and they began playing Puntin' the Pouch in the parking lot. As the high school students exited the building for their lunch period, most of them stopped to join the game, and many of them used their lunch money to purchase pouches for themselves. Mr. Allens and Ms. Becks then went to a local elementary school just before dismissal, and they began playing Puntin' the Pouch in the parking lot.

As the children exited the building to meet their parents, most of them stopped to join the game, and many of their parents purchased pouches for them.

This strategy proved to be quite successful! Puntin' the Pouch generated a profit of $10,000. So, in January of 2006, each of Mr. Allens, Ms. Becks, Aunt Allens, and Uncle Becks received a distribution of $2,500 from the company. To ensure that Puntin' the Pouch had the necessary space to make enough pouches for the growing demand and a suitable location for marketing the pouches to students in high school and elementary school, in the Autumn of 2006, Aunt Allens contacted her good friend Rea Realtor, a real estate agent. Ms. Realtor showed Aunt Allens three vacant commercial spaces in Laney, an area to the north of North Campus with an excellent school district. At the end of the tour, Ms. Realtor, "I recommend the first place we visited - the one called Prime Properties. The owner, Land Lord, is an anxious chap, which makes him the best landlord, because his anxiety drives him to respond very quickly to every request from tenants. He is, alas, the worst client, because his anxiety also drives him to phone me twice every day for an update. If Puntin' the Pouch chooses Prime Properties, I'll give you half of the commission Mr. Lord pays me." Recognizing the benefits of a responsive landlord to a small company like Puntin' the Pouch, Aunt Allens accepted Ms. Realtor's proposal. The next month, Mr. Allens, Ms. Becks, Aunt Allens, and Uncle Becks held a meeting at Puntin' the Pouch's  new headquarters in Prime Properties. After they finished admiring the space, Aunt Allens showed the others pictures of the tables and benches she ordered for the work areas, and she also showed them pictures of the couches and chairs she ordered for the break room. Uncle Becks then said, "Let's buy the worktables and workbenches now, because we know we need them for the employees, but let's wait a year to see if they use the break room before we buy any couches or chairs." Aunt Allens replied, "We need furniture for the break room now, otherwise the employees will eat their lunches at their work stations, which will result in wasted yarn and wasted flaxseed, because drips and spills from food and drink are inevitable regardless of the care taken to avoid them. Plus, I already ordered all the furniture, and the folks at furniture store - Work Wonders - promised to deliver it at the beginning of next month." Uncle Becks responded, "I'm sure we can cancel the order for the couches and chairs, so let's not spend any more time on furniture today. Instead, let me tell you about our expanding business!

As we all agreed when we met last month, I contacted four of my associates - Evan Evans in Akron, Frank Franks in Cincinnati, Greg Greggs in Cleveland, and Henry Henrys in Dayton. Each of them accepted our offer to invest $15,000 in Puntin' the Pouch (for a total investment of $60,000) and to establish a branch in his city. So, Puntin' the Pouch now has five locations, and soon children throughout all of Ohio will be playing the game!" After a round of applause, the meeting ended. On his way home, Uncle Becks phoned Work Wonders, and he spoke with the manager. He advised her that Puntin' the Pouch did not presently need any furniture other than worktables and workbenches, and he instructed her to cancel the company's order for couches and chairs. As Work Wonders had promised Aunt Allens, all of the furniture was delivered on the first day of the next month.

In the Spring of 2007, the Dayton Consumer Affairs Commission levied a fine in the amount of $120,000 against Mr. Henrys for improper practices in selling games to school children, because the city's code prohibits all sales of goods and services on school property, other than those sanctioned by the school as part of student fund-raising efforts. Lacking the funds to pay the fine, Mr. Henrys resigned from Puntin' the Pouch, and the company hired Dana Daytona to operate the branch in Dayton, instructing her to be careful, when visiting high schools at lunchtime and elementary schools at dismissal, to play the game close to, but not in, each school's parking lot. Mr. Greggs was so alarmed by this unexpected development that he resigned from Puntin' the Pouch, and the company returned his ($15,000) investment to him. The company then hired Clea Cleavers to operate the branch in Cleveland.

In January of 2008, Puntin' the Pouch filed its Certificate of Incorporation with the Secretary of State of the State of Delaware. The charter provides, among other things, that the company is authorized to issue twenty million shares of common stock and that the Board of Directors may not exceed seven members. As part of the incorporation process, Mr. Allens and Ms. Becks each received 200 shares of common stock, Aunt Allens, and Uncle Becks each received 100 shares of common stock, and Mr. Evans and Mr. Franks each received 50 shares of stock - a total of 700 shares. In addition, Mr. Allens, Ms. Becks, Aunt Allens, and Uncle Becks were elected to the Board of Directors. The directors then appointed Mr. Allens and Ms. Becks as Chief Development Officers, Aunt Allens as the Chief Executive Officer, and Uncle Becks as the Chief Financial Officer.

At the end of the year, Puntin' the Pouch distributed a copy of its annual financial statements to each of the shareholders. The balance sheet as of December 31, 2008, which reflected the par value of $.01 per share and the initial sale price of $10 per share, showed:

Upon reviewing the balance sheet, Mr. Franks sent an e-mail message to Aunt Allens urging the Board of Directors to declare a dividend in the amount of $30 per share - a total of $21,000 for all shares - because holding more than $5,000 in cash is wasteful for a company like Puntin' the Pouch that has no liabilities other than accounts payable for the supplies needed to make pouches. Aunt Allens replied that his analysis is flawed, because the company continually places larger and larger orders for yarn and flaxseed to meet the growing demand for its pouches, and so it must hold at least $10,000 in cash. Rather than declaring the dividend he requested, Aunt Allens stated that Puntin' the Pouch would be happy to repurchase his shares for $15,000 (his investment), so long as he resigned from his position in the company. Mr. Franks immediately accepted her offer, and the transaction was completed the next day. At the beginning of the next week, Aunt Allens hired Cindy Nati to operate the branch in Cincinnati.

Mr. Evans, having heard from Mr. Franks of the terms on which Puntin' the Pouch purchased his shares, sent an e-mail message to Aunt Allens asking permission to attend the next monthly meeting of the Board of Directors. Aunt Allens forwarded his request to the other directors, suggesting that the board invite Mr. Evans to attend all board meetings as a special guest. After she received responses from all of the directors expressing their agreement, Aunt Allens sent Mr. Evans an e-mail message welcoming him to attend, as a special guest, every meeting of the Board of Directors and advising him that the meetings are held on the first Wednesday of every month in the company's headquarters in Prime Properties.

At the next monthly meeting of the Board of Directors, Mr. Evans requested that the Puntin' the Pouch purchase his shares for $15,000 (his investment), and he offered to resign from his position in the company. Uncle Becks then said, "Given the growing demand for pouches, which continually necessitates larger and larger orders of yarn and flaxseed, the company isn't in a position to buy any shares at any price. So, I have a better idea - you keep your shares and your position in the company, and we make you a director." Mr. Evans immediately accepted his offer, and without any discussion, Mr. Allens, Ms. Becks, Aunt Allens, and Uncle Becks unanimously agreed to appoint Mr. Evans to fill one of the three vacancies on the Board of Directors.

In January of 2012, Mr. Allens and Ms. Becks announced that they were engaged to be married in June (of 2012). At the next monthly meeting of the Board of Directors, Aunt Allens proposed that each of Mr. Allens and Ms. Becks receive a bonus of $15,000, and then she asked them both to leave the room so that she, Uncle Becks, and Mr. Evans could consider the proposal among themselves. After Mr. Allens and Ms. Becks left the room, Aunt Allens congratulated Uncle Becks, and then she called for a vote on her proposal. She and Uncle Becks voted in favor of the bonus payments, while Mr. Evans voted against it. The bonus payments were made the next day.

At the next monthly meeting of the Board of Directors, Mr. Allens and Ms. Becks jointly proposed that Puntin' the Pouch hire Eva Evans, the wife of Mr. Evans, to cater weekly lunches for employees, and then they asked Mr. Evans to leave the room so that they could discuss the proposal with Aunt Allens and Uncle Becks.

Mr. Allens explained to Aunt Allens and Uncle Becks that he and Ms. Becks had interviewed sixteen caterers for their wedding reception, and the food prepared by Ms. Evans was, without a doubt, the tastiest. Ms. Becks then added that the cost - approximately 50% greater than the other caterers - is, without a doubt, justified, because Ms. Evans uses only locally-sourced food seasoned with fresh herbs. Plus, she noted, catering weekly lunches for employees would surely save the company money, because Ms. Evans agreed to serve only foods that don't drip, resulting in less wasted yarn and wasted flaxseed, as well as fewer furniture stains. After an extensive discussion, all four directors voted in favor of hiring Ms. Evans to cater weekly lunches for employees, which she continues to do.

In January of 2013, Puntin' the Pouch completed an initial public offering of ten million shares of its common stock. As a result of the offering, 35% of the outstanding shares are traded on Nasdaq, Mr. Allens and Ms. Becks each own 20% of the outstanding shares, Aunt Allens and Uncle Becks each own 10% of the outstanding shares, and Mr. Evans owns 5% of the outstanding shares. In addition, Marion Mayer, the Mayor of Columbus, and Cro Cheter, the President of the Crochet Crafters of the Continents Club, were appointed to fill the two remaining vacancies on the Board of Directors.

Immediately after the offering, the price of one share of common stock of Puntin' the Pouch was $25. In the Spring of 2014, the Dayton Consumer Affairs Commission levied a fine in the amount of $120,000 against Ms. Daytona for improper practices in selling games to school children. On at least a dozen visits to high schools and elementary schools, she violated the branch's written policies, which she herself wrote after receiving instructions from the company at the time she was hired, by playing the Puntin' the Pouch in, rather close to, the school's parking lot. Although Puntin' the Pouch announced that, after an extensive investigation, the Board of Directors concluded that these violations of the city's code were inadvertent errors stemming from imprecisely marked parking lots, the price of one share of the company's common stock fell to $20.

This past January (of 2015), Mr. Allens and Ms. Becks announced that they had reached an agreement with Amazing  Amusements Corporation, a toy company, to sell their shares of common stock of Puntin' the Pouch at a price of $26 per share. At the same time, Amazing Amusements announced that, in connection with purchasing the shares from Mr. Allens and Ms. Becks, the company would launch a tender offer for all other shares at a price of $26, which would be followed by a merger of the two companies at the same cash price. Amazing Amusements also stated that the company would retain both Mr. Allens and Ms. Becks as paid consultants for one year.

The week before Mr. Allens and Ms. Becks were to complete the sale of their shares of common stock of Puntin' the Pouch to Amazing Amusements, they announced that they had withdrawn from these arrangements, because they had sold their shares to Good Greed L.P., a hedge fund, at a price of $30 per share. They also stated that they had entered into an employment agreement with Good Greed under which they would continue to serve as Chief Development Officers of Puntin' the Pouch for at least the next five years. On the same day, Amazing Amusements announced that it had withdrawn its tender offer for shares of common stock of Puntin' the Pouch.

Puntin' the Pouch, it turns out, is not at all fun and it is not a game when its lawsuits, not pouches, that are being kicked about - a fact that Mr. Allens and Ms. Becks only realized when they received their first summons. So that I can explain to them all the pieces of their legal plight, please prepare a memo for me that:

(A) identifies any claims that may be brought (1) against Puntin' the Pouch and by Puntin the Pouch, (2) against the Board of Directors, and (3) ) against Mr. Allens and Ms. Becks (other than the breach of contract claim by Amazing Amusements), analyzes the strengths and weaknesses of each of these claims (including any defenses), and evaluates the likelihood of the success of each of these claims; and

(B) for the claims brought as derivative actions, (1) analyzes the likelihood that demand will be found to be futile and (2) identifies the directors who may be tapped to serve on an effective special litigation committee (and the reasons therefore).

For your answer to Question One, write the memorandum Mr. Buckeye has requested. In writing the memorandum, be sure to draw upon specific elements of the relevant materials included among the readings or the discussions that comprised our course in Corporations.

Question Two

Imagine that you are Chief Legal Counsel for Jeb Hensarling, the Chairman of the House of Representatives Committee on Financial Services. Imagine further that Congressman Hensarling phones you in your office and asks you to come to his office. When you arrive in his office, Representative Hensarling says to you:

As you know, my good friend and member of this Committee, Congressman Himes, recently introduced the Insider Trading Prohibition Act into the House of Representatives, and this proposed legislation has been referred to our Committee for consideration. Over the course of the past several weeks, the bill has generated a lot of publicity, probably because it has bipartisan support, having been cosponsored by one other Republican Representative and two Democratic Representatives.

The proposed Insider Trading Prohibition Act defines information that is wrongfully obtained as information that has been obtained through (a) the breach of any fiduciary duty or any other relationship of trust and confidence; (b) misappropriation; (c) bribery; or (d) theft. The proposed act then makes it unlawful for a person who has wrongfully obtained material, nonpublic information to: trade on that information;  orcommunicate that information to (that is, tip) another person when it is reasonably foreseeable that the person (the tippee) is likely to trade on the information, regardless of whether the person (the tipper) receives a personal benefit so long as the recipient of the information (the tippee) was aware, or recklessly disregarded the fact that, the information was wrongfully obtained.

As you also know, this type of proposed legislation - a seemingly simple solution to a certainly complex problem - makes me very anxious! And, this case is particularly perturbing. The Supreme Court spent thirty years working to articulate the parameters of the duty to disclose or abstain articulated by the Court of Appeals for the Second Circuit in Texas Gulf Sulfur.

So, before our Committee begins consideration of the Insider Trading Prohibition Act, please prepare a memo for me (1) identifying the ways in which the proposed legislation would alter existing law as developed by the Supreme Court since Texas Gulf Sulfur, (2) analyzing the benefits and costs of enacting the Insider Trading Prohibition Act, and (3) recommending the best course of action for me to take - that is, whether or not to support enactment of the Insider Trading Prohibition Act.

For your answer to Question Two, write the memorandum Representative Hensarling has requested. In writing the memorandum, be sure to draw upon specific elements of the relevant materials included among the readings or the discussions that comprised our course in Corporations.

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