Facts:
A Big Company (ABC) is one of several corporations ownedentirely by XYZ corporation. XYZ is publicly traded on a stockexchange. ABC makes an over-the-counter vitamin pill that has beenvery popular for many years.
ABC engaged the services of a marketing firm, SellALot, LLC, tomarket this diet pill. Mr. Bragger, the member of the LLC with whomthe CEO of ABC directly dealt, had previously told many ofSellALot’s clients that he worked for ABC. SellALot was theexclusive distributor for this vitamin pill in the US. Mr. Braggeris also a member of the Board of Directors of XYZ. SellALot has 4other members of this LLC.
The CEO of ABC, Mr.Successful, was also on the board of XYZ. Heand his partner, Counts Fingers (who was also Mr. Successful’s CPA)owned approximately 25% of the outstanding stock of XYZ. Thegeneral partnership was known as S and C Partnership (a limitedpartnership with Mr. Bragger as the only limited partner and thepartner who provided the funds to buy the stock from Mr. Successfuland Counts Fingers) actually owned this stock after Mr. Successfuland Counts Fingers transferred the stock to the partnership.
Counts Fingers is also the Chief Financial Officer for MegaBucks Bank which made the loan to Mr. Bragger- he used those loanproceeds to contribute to the S and C Partnership to buy the XYZstock from Mr. Successful and Counts Fingers. Mr. Bragger is amember of the Board of Directors of Mega Bucks Bank.
ABC’s vitamin pill has recently been the subject of muchattention and litigation. The pill has apparently caused manyhealth problems with those who have taken it for more than a coupleof weeks. Over 1,000 of those who took the pill for more than 4weeks at a time have had heart valve replacement surgery and itappears that this surgery was necessitated by the vitamin pillwhich ABC makes. There is a class action lawsuit with more than onemillion class members who have been harmed in some fashion by thisvitamin pill. The class action lawsuit filings have demanded 5billion dollars in damages for all of these litigants.
XYZ is currently considering selling ABC to an investor (PrivateEquity, LLC.). You have been hired to determine how much money ABCmight be worth and to assess the litigation exposure of ABC forthis vitamin pill made by ABC.
Questions:
1. Describe the agency relationships of the businessorganizations and the individuals named in this fact situation anddescribe the duties of each to the other. (You only have todescribe the duties once and then you can refer to this list withall of the other agency relationships you discuss) If the partiescould be in more than one agency relationship, the be sure toinclude all of the possibilities in your response.
2. Explain the legal theory that would make XYZ liable for theABC lawsuit.
Would there be any viable defense to this liabilityclaim against XYZ?
3. Describe and explain how SellALot, LLC, C and SPartnership,and Mega Bucks Bank would each be liable for thevitamin pill litigation.
4. What is your recommendation to your client, Private Equity,LLC and why is this your recommendation?
this is a business law question
