Law, Business and Society: Law Study

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Table of Contents

Differences between Edgewater and Riviello Cases
The Consequences of Imposing Fiduciary Duties on Disloyal Partners
Insider Trading: Examining Primary Theories of Liability
References

The courts in the three cases do not interfere too much with private ordering. Instead, the cases indicate the connection between private ordering and public ordering—both should be legally guided. In Joanne Strawn v. John B. Canuso, for example, the court determined that the State of New Jersey did not have a specific statute that guarded or interpreted the issue of caveat emptor, which the plaintiffs had relied on as their defense. The judges first guided the court into understanding the origins of caveat emptor and why it would no longer apply in the issue at hand before suggesting a review of the applicable rule. The actors in the industry, therefore, would be guided by the decision to consider revising the disclosure rules, which will eliminate the impositions of caveat emptor in the future. However, such would have been impossible without public ordering.

In Clifton Jones et al. v. Star Credit Corp., the judges also tackled the issue of caveat emptor and guided the court to understand the need for having contractual terms that would maximize benefits for the poor and illiterate instead of taking advantage of their situation to exploit them financially, as the court found of the defendant. The judges did not set any standard procedure or contractual terms, which means that the issue was up to private ordering. In Jacob & Young’s Incorporated v. George E. Kent, the judges also guided the court into determining circumstances that would warrant a review of contract laws. The three cases collectively point at the possibilities of public ordering being applied to formulate laws that would better promote the wellbeing of contracting parties in the wake of growing legislative challenges that are industry-specific.

Differences between Edgewater and Riviello Cases

The approaches differed in the fact that while in Edgewater the judges interpreted whether by being found in a motel room at the time of the alleged incidence the employee was acting in the scope of his work. The court advised that in determining vicarious liability, it was necessary to first understand if the defendant was acting in the interest of his employer. The judges found that indeed, the client had checked into the motel room to fill his expense account, which affirmed the argument. During his time at the motel, he engaged in negligent cigarette smoking, which caused a fire that damaged a section of the building. Therefore, the court found that while the defendant had been in the building for agency issues, it would not shift the whole blame of his actions to the respondent since his negligent smoking was outside the scope of his professionalism.

Contrarily, the court did not need to ascertain whether the defendant in Riviello was acting in the interest of his employer. Instead, the judges wanted to determine if the employer would be held liable on account that the activities of the employee had deviated from his standard workplace procedures or whether he would have foreseen such conduct. The most important issue that the court found was that it was impossible to separate the employer from the actions of his employment when the alleged incident happened in the defendant’s normal workplace. Therefore, while the employer in Edgewater was liable because the defendant was in the motel to further workplace interests at the time of the alleged incidence, the one in Riviello was liable simply because much as he deviated from his duties, he was in his normal workplace when the incidence happened.

The Consequences of Imposing Fiduciary Duties on Disloyal Partners

The Meinhard v. Salmon case concerned a breach of loyalty in a business partnership. The facts indicate that the defendant had entered into another lease agreement without the knowledge of the plaintiff with whom he had co-owned the leased property. The court determined that the defendant had breached loyalty, which had financial consequences for the investors, especially the plaintiff. The case indicates the fact that investors are likely to lose on their investment when they impose fiduciary duties to persons like Salmon. The analysis of the judges indicated that Salmon was supposed to stick to the ‘for better for worse’ close in the agreement that he had entered with the plaintiff, which meant that he needed to have disclosed the deal to lease the property afresh to Meinhard because he was a business partner. While the two of them existed as partners, Salmon acted in a way that meant his partner would no longer have claims in the business since the nature of the new lease contract that he had entered into with the owner of the property did not include the plaintiff.

The Sullivan Case

I concur with the opinion of the dissenting judge in the Sullivan case. First, as the judge established, the majority did not set a clear standard for the exception to the at-will termination from the precedence ruling in Wieder. Precisely, no clear ideas were separating the nature of the facts in both cases that would make the plaintiff in Sullivan not be protected by common law against wrongful termination. Second, refusing to have exceptions to the at-will employee termination clause in common law limits the power of whistleblowing. As the dissenting judge indicated, the opinion rule meant that employees are no longer entitled to protesting nor are they supposed to raise concerns about illegal and unethical practices involving their seniors because they will be fired at will. Consequently, I feel that the dissenting opinion points at the need for courts to contribute to ethical and legal duty observance in the workplace and to uniformly apply the exceptions to the at-will rule as long as the actions of the involved persons genuinely promote ethical and legal standards in the workplace.

The BDO Case

In my opinion, the decision in the BDO case promotes efficient employment markets. In ruling that BDO’s restrictive clause was not enforceable suggests that employers should not always attempt to tie down their employees to serving their companies alone. Precisely, the facts of the case suggest that plaintiff had attempted to unfairly limit competition by preventing the defendant from serving former clients within the first eighteen months after the termination of an employment contract that it had entered with the defendant. While it is common and legal for a business to guard against unfair completion by employees and former employees, such arrangements, as the court determined, should be reasonably enforceable. For example, limiting a former employee from practicing all their life or anywhere else apart from the company that hired them is unreasonable. Employment markets should be such that they allow firms to hire and fire the same way they allow employees to serve or leave provided that such actions are done within the constructs of applicable laws.

Trustees of Dartmouth College v. Woodward Case

The plaintiffs, the old trustees of a privately financed institution, Dartmouth College, sued the New Hampshire State Legislature, the defendant, intending to regain control of the institution’s resources after the defendant had turned it into a state university against the plaintiffs’ wish.

The court was supposed to determine whether the New Hampshire Legislature unconstitutionally contravened the rights of Dartmouth College as provided by the Contract Clause.

The court reasoned that Article 1, Section 10, Clause 1 of the Contract Clause prohibited state governments from violating contracts with public and private corporations. The court found that the Contract Clause applied to the public as well as private corporations. Consequently, the majority opinion argued that the corporate charter of the college served as a contract between private parties and found that the state could not breach. According to the decision of the court, the fact that the state had commissioned the charter did not imply that the college had been transformed into a civil institution.

The court set precedence for interpretation of the term contract in the future. Precisely, Chief Justice Marshall indicated that in its legal sense, ‘contact’ referred to the transactions that entail individual property rights as opposed to the political relationships between citizens and their government.

Smith v. van Gorkom

Alden Smith and John Gosselin, plaintiffs sued Trans Union, corporation, and its directors objecting to the decision of the Board to approve a proposal for a merger that a fellow defendant, Jerome van Gorkon had submitted.

The court was to determine whether the business judgment rule applied to the Board in their vote for the merger.

The court held that business judgment by the Board was gross negligence, which was the standard for the determination of whether such judgment was informed. Furthermore, the court reasoned that the Board had the duty of giving informed decisions concerning important issues, including mergers, and that it could not avoid the responsibility through its claim that shareholders also consented to the deal. Furthermore, the directors were protected only when they depended in good faith on the propositions that their officers submitted, but none of the propositions qualified as a report under the applicable rule. In a dissenting opinion, the court reasoned that the majority had mischaracterized the director’s ability to act soundly on the information submitted during the merger meeting. The presence of the directors implied that they offered informed business judgment, which is why they needed to be guarded by the business judgment rule.

The court set a precedence that the duty of a director to exercise informed judgment for their business is one of care and not loyalty. Consequently, the motive of such directors could be irrelevant, which does not raise the need to prove dishonesty, conflict of interests, or fraud.

Citizens United v. Federal Election Commission

In this case, Citizens United was seeking a restriction against the Federal Election Commission from using the Bipartisan Campaign Reform Act, BCRA, to film a movie called Hillary: the Movie, which aired opinions on whether Hillary Clinton would be good for US Presidency.

Several questions were to be determined by the court as follows:

Did the decision of the Supreme Court in McConnell deal with all constitutional challenges to the BCRA through upholding the requirements for disclosure of the statute?
Do the requirements for disclosure by the BCRA pose an unconstitutional burden in their application to the requirements for electioneering because they are protected political speech?
If any communication does not have a clear plea to vote against or for a specific candidate, does it still fall under the regulation of the BCRA?
Can a featured-length documentary on any candidate running for an elective position be treated in the same way as the advertisements in McConnell?

The court overruled its earlier decisions in McConnell and Austin that had determined that political speech could be banned because of the corporate identity of the speaker. The court also held that corporate funding for political broadcasts could not be limited. The majority opinion found that political speech is always indispensable to democracy and that the BCRA requirements for disclosure applied to the movie in question. The court also decided to uphold a ban on corporate funding of political campaigns.

The First Amendment guarantees freedom of speech despite the corporate identity of the speaker. Furthermore, the restrictions of the BCRA on adverts concerning the ‘Hillary’ film did not violate the First Amendment.

Insider Trading: Examining Primary Theories of Liability

An investor in a company should not sell their shares when they receive a private call from their CEO to invest additional stock for the fear that their company could be running bankrupt. Instead, the investor should be aware of the implications of prohibited insider trading. In this case, the CEO could have taken advantage of the fact that he has access to information about securities that are not available to the public to exploit the rest of the shareholders for profit, which misappropriation theories of prohibited insider trading describe. Instead, it would be advisable that the investor questions why the CEO makes such a call and if such information has been made available to the rest of the stakeholders. The reason for this suggestion is the fact that prohibited insider trading is an issue with many companies, and it results in many legal consequences, most of which are punishable by imprisonment. The investor should not sell their shareholding because, through disclosure, they can avoid the challenges that would come with prohibited insider trading. The practice has implications for society and markets in the sense that it could potentially lead to litigation while benefiting from high share prices on the securities market.

Foster v. Svenson

I opine that the State of New York should amend Section 51 of its Civil Rights Law to promote the right to privacy for families in situations such as the one in question. The reason for this opinion relates to the fact that the right to privacy is constitutional in the first place. I feel that the court ignored the fact that the defendant in the case spied on the plaintiff’s family when he used a super-camera to photograph them without their notice or consent. The two terms, consent and notice, are the core of the argument for privacy. Fundamentally, the right to privacy is guaranteed only when one is sure that no one is watching them for any reason provided that they are not engaging in illegal activity that warrants spying on them. New York could assure families their right to privacy by banning any activities that would collect private information, such as art, business, and others without the consent of their affected persons. Using such illegally acquired information for any material benefits should also be outlawed.

McPherson v. Buick Motor

MacPherson, the plaintiff, sued Buick Motor Co, the defendant, for compensation for body injuries he had sustained when a defective wheel of a car that he had bought from the defendant collapsed even when he had purchased the vehicle and wheel from a dealer other than the defendant.

The court was supposed to determine if the defendant owed the duty of care to any individual besides the immediate purchaser of the car, which for this case was the retailer.

The court affirmed the issue. The judges referred to several cases, such as Loop v. Litchfield, Devlin v. Smith, and others to determine that manufacturers owed a duty of care to their buyers only circumstances when the products in question are inherently dangerous or if it is foreseeable that the products will cause injuries if they are made negligently. Furthermore, two criteria were necessary for the duty of care to arise 1) the nature of the product in question should be such as that it will probably put life and limb in danger because of negligence in manufacturing and 2) there should be an understanding that in the normal course of events, the foreseeable danger will be shared by people other than the immediate buyer. In regards to the case, the court established that the defendant was liable because he place the product on the market without inspection by its customers.

The court established the precedence that the need for caution in such cases grows with the probability of danger for users.

Sturges v. Bridgman

The levels of noise in Sturges v. Bridgman differs from the one the community and children in a low-income area would experience. For example, a highway exit ramp near a local elementary school will always distract learners and their teachers who are supposed to concentrate on their learning and teaching activities for the better part of the day five days a week. Furthermore, considering that the children at the school are of varying ages, the younger ones are likely to develop hearing defects because of being subjected to constant high-pitched noise from the traffic. Contrarily, while the mortars cause a nuisance to the physician, the facts of the case suggest that he built his consultation room from a distance that does not expose him directly to the noise, which implies that the noise levels will not be as high as that which the children experience. Other than the nuisance for which the physician sued the confectioner, the noise is incapable of causing hearing impairment. The case also indicates the differences in the abilities of affected parties to litigate; the poor residents and children in the highway area will live with the noise forever because they cannot seek remedies for the same once a highway shall have been constructed.

References

BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 690 N.Y.S.2d 854, 712 N.E.2d 1220 (N.Y. 1999)
Citizens United v. Fed. Election Comm’n, 558 U.S. 310, 130 S. Ct. 876, 175 L. Ed. 2d 753, 78 U.S.L.W. 4078 (2010)
Dartmouth College v. Woodward, 17 U.S. 518 (1819)
Edgewater Motels, Inc. v. Gatzke, 277 N.W.2d 11 (Minn. 1979)
Foster v Svenson, 2015 N.Y. Slip Op 03068, 128 AD 3d 150 (N. Y. 2015)
Jacob Youngs v. Kent, 230 N.Y. 239, 129 N.E. 889 (N.Y. 1921)
Jones v. Star Credit Corp., 59 Misc. 2d 189, 298 N.Y.S.2d 264 (N.Y. Misc. 1969)
MacPherson v. Buick Motor Co., 217 N.Y. 382, 111 N.E. 1050 (N.Y. 1916)
Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545 (N.Y. 1928)
Riviello v. Waldron, 47 N.Y.2d 297, 418 N.Y.S.2d 300, 391 N.E.2d 1278 (N.Y. 1979)
Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985)
Strawn v. Canuso, 140 N.J. 43, 657 A.2d 420 (N.J. 1995)
Sturges v Bridgman (1879) LR 11 Ch D 852
Sullivan v. Harnisch, 2012 N.Y. Slip Op. 3574, 19 N.Y.3d 259, 946 N.Y.S.2d 540, 969 N.E.2d 758 (N.Y. 2012)

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