Business Law Study Set 1

Business

Quiz 41 :

Types of Business Organizations

Quiz 41 :

Types of Business Organizations

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In July 2008 Miller Brewing Co. and Coors Brewing Co. formed a joint venture to better compete with the dominant beer manufacturer, Anheuser Busch. The venture was named "MillerCoors LLC." Under the joint venture Miller Brewing Co. and Coors Brewing Company have a 50 percent voting interest in the entity, and each appoints half of the directors. Moreover, the CEOs of Miller and Coors resolve disputes, and all revenues are distributed directly to Miller and Coors, with cash returned to meet the operating needs of the joint venture. Ohio law requires just cause for the termination of beer distributors but allows a "successor manufacturer" to terminate existing distributorships without proving just cause so long as the predecessor does not exercise control over the successor. In accordance with the "successor manufacturer" exception, MillerCoors LLC notified Ohio wholesale beer distributors that it was terminating their distributorships. The distributorships sought injunctive relief. MillerCoors LLC moved for summary judgment. Decide. [ Beverage Distributors, Inc. v. Miller Brewing Co., 803 F. Supp. 2d 765 (S.D. Ohio)]
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The case facts:
The companies MI and CO formed a joint venture named MC to better compete with the dominant manufacturer in the beer industry. Both the companies had an agreement to resolve disputes, and distribute the revenue between them to carry out venture operations. Ohio Alcoholic Beverage Franchise Act caused termination of beer distributors. MC notified that Ohio law had terminated its distributorship.
Ohio Alcoholic Beverage Franchise Act :
The law regulates the franchise relationship between the Ohio distributors to re-sale alcoholic beverages and Ohio retailers. According to this act, no manufacturer or distributor would fail to act under the terms of franchise to sale or distribute alcohol.
The franchise act avails an exceptional cause for the termination if "a successor manufacturer acquires all of the stock of another manufacturer through merger or acquisition of one alcoholic manufacturer with another manufacturer".
Adhering to franchise act, MC declared that its venture was authorized to terminate distributorship by successor manufacturer. Therefore, the plaintiff, alcoholic distributor have the right to continue its distribution franchise.

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Katherine Apostoleres owned the rights to Dunkin Donuts franchises in Brandon and Temple Terrace, Florida. The franchisor offered all its franchisees the right to renew their existing franchise agreements if they agreed to abide by advertising decisions favored by twothirds of the local franchise owners in a given television market. Apostoleres refused the offer because she did not want to be bound by the two-thirds clause. Soon thereafter, Dunkin Donuts audited her two stores, and using a "yield and usage" analysis, it concluded that gross sales were being underreported. Based on these audits and a subsequent audit, Dunkin Donuts gave notice of immediate termination of Apostoleres's franchises, contending that the franchise agreement had been violated. Apostoleres stated that an implied obligation of good faith exists by operation of law in every contract, and she asserted that the audits were in retaliation for her refusal to accept the renewal agreement. The yield and usage test used in the audit was not specified in the franchise agreement as a measure to be used to enforce the franchisor's rights, and certain accounting experts testified as to the unreliability of this test. Was Dunkin Donuts liable for breach of its implied obligation of good faith in this case [Dunkin Donuts of America v Minerva, Inc., 956 F2d 1566 (11th Cir)]
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Refer to the case Dunkin Donuts of America v Minerva to answer question as below:
Facts to this case
• K is a franchisee of a nationally known donut franchise.
• K rejected the advertisement decision by the franchisor.
• The franchisor then audited her store. They cited K underreported sales and terminated her franchise.
• The auditing was not part of the franchise agreement.
Case Issue
The issue is whether there was a good faith termination of the franchise.
Relevant Terms, Laws, and Cases
Good Faith - franchisors are expected to act in good faith when dealing with franchisees. Franchisors can't terminate a franchise agreement without a valid reason.
Opinion
The court held for K. They argued that:
• The audits were a result of K 's rejection of the franchisor's advertisement plan.
• The audit test weren't disclosed in the franchise agreement with K.
• Termination seemed unwarranted as there wasn't intentional underreporting of sales.
Thus, the franchisor failed to uphold good faith in dealing with the franchisee.

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Brenner was in the scrap iron business. Almost daily, Plitt lent Brenner money with which to purchase scrap iron. The agreement of the parties was that when the scrap was sold, Plitt would be repaid and would receive an additional sum as compensation for making the loans. The loans were to be repaid in any case without regard to whether Brenner made a profit. A dispute arose over the nature of the relationship between the two men. Plitt claimed that it was a joint venture. Decide. [Brenner v Plitt, 34 A2d 853 (Md)]
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Refer to the case Brenner v Plitt to answer question as below:
Facts to this case
• P lent money to B to purchase scrap metal.
• B would purchase the scrap metal for resale and return's P 's money with compensation.
• P was compensated even if B made no profit.
• This happen frequently.
• P argued that they were in a joint venture.
Case Issue
The issue is whether P and B are in a joint venture for the scrap metal business.
Relevant Terms, Laws, and Cases
Joint Venture - an organization formed to make profit from a single event. For example, a couple of friends join to sell baked cookies for cash is a joint venture.
Opinion
The court held for B. They argued that:
• A joint venture is two or more people combine in a business relationship where profits and losses are shared.
• Furthermore, there must be intention to form a partnership.
• P did not share the loss in the business and there was no formation of the partnership.
Thus, the business between P and B was not a joint venture.

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Donald Salisbury, William Roberts, and others purchased property from Laurel Chapman, a partner of Chapman Realty, a franchisee of Realty World. The purchasers made payments directly to Laurel Chapman at the Realty World office, and Chapman was to make payments on the property's mortgage. However, Chapman did not make the payments and absconded with the funds. Salisbury and Roberts sued the franchisor, Realty World, claiming that Realty World was liable for the wrongful acts of the apparent agent, Chapman. Realty World and Chapman Realty were parties to a franchise agreement stating that the parties were franchisor and franchisee. The agreement contained a clause that required Chapman to prominently display a certificate in the office setting forth her status as an independent franchisee. Chapman displayed such a sign, but the plaintiffs did not recall seeing it. Chapman Realty hires, supervises, and sets the compensation for all of its employees. The plaintiffs pointed out that Chapman Realty used the service mark Realty World on its signs, both outside and inside its offices. They pointed out that a Realty World manual sets forth the general standards by which franchisees must run their businesses and that this represents clear control over the franchise. They contended that, all things considered, Realty World held out Chapman Realty as having authority to bind Realty World. Realty World disagreed, stating that both were independent businesses. Decide. [Salisbury v Chapman and Realty World, Inc., 65 NE2d 127 (Ill App)]
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Goodward, a newly hired newspaper reporter for the Cape Cod News, learned that the local cranberry growers had made an agreement under which they pooled their cranberry crops each year and sold them at what they determined to be a fair price. Goodward believes that such an agreement is in restraint of trade and a violation of the antitrust laws. Is he correct
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For a five-year period, Laurie Henry worked for James Doull, the owner of four Taco Bell franchises. During that time, she had an affair with Doull. He was the father of her two illegitimate children. Enraged over a domestic matter, Doull physically assaulted her at the Taco Bell Restaurant and then fired her and ordered her off the premises. Later, on Doull's recommendation, she was hired by a "company store" in an adjoining state. Henry brought suit against Doull, his corporate entity Taco Tia, Inc., and the Taco Bell Corporation (TBC). She did not characterize her suit as a case of sexual harassment. Rather, she contended that TBC was responsible for Doull's actions because he was TBC's agent. She sought damages for the loss of romantic and material satisfactions a person might expect from a traditional courtship and wedding. TBC denied that Doull was its employee or agent. The evidence showed that Henry knew that Doull's stores differed from TBC "company" stores. She insisted, having worked for four years for Doull at stores adorned with Taco-Bell signs, that Taco Bell was responsible for Doull's actions. Decide. [Henry v Taco Tia, Inc., 606 So2d 1376 (La App)]
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Food Caterers of East Hartford, Connecticut, obtained a franchise from Chicken Delight to use that name at its store. Food Caterers agreed to the product standards and controls specified by the franchisor. The franchise contract required the franchisee to maintain a free delivery service to deliver hot, freshly prepared food to customers. The franchisee used a delivery truck that bore no sign or name. Its employee Carfiro was driving the truck in making a food delivery when he negligently struck and killed McLaughlin. The victim's estate sued Chicken Delight on the theory that Carfiro was its agent because he was doing work that Chicken Delight required and that benefited Chicken Delight. Was Carfiro the agent of Chicken Delight [McLaughlin's Estate v Chicken Delight, Inc., 321 A2d 456 (Conn)]
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C. Blackwell Co. held a franchise from Kenworth Truck Co. to sell its trucks. After 12 years, the franchise was nearing expiration. Kenworth notified Blackwell that the franchise would not be renewed unless Blackwell sold more trucks and improved its building and bookkeeping systems within the next 90 days. Blackwell spent $90,000 attempting to meet the demands of Kenworth but could not do so because a year was required to make the specified changes. Kenworth refused to renew the franchise. Blackwell sued Kenworth for damages under the federal Automobile Dealers' Day in Court Act. Blackwell claimed that Kenworth had refused to renew in bad faith. Decide. [Blackwell v Kenworth Truck Co., 620 F2d 104 (5th Cir)]
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Wolf, King, and others sold business "opportunities" in vending machines by taking out ads in newspapers throughout the country. When individuals responded, telemarketers called "fronters" would tell them of false earnings estimates, and those who could afford $16,000 to $25,000 for vending machines were turned over to "closers" who promised wonderful results. References were provided who were "shills"-they did not own vending machines but were paid to tell "stories" that were monitored by Wolf, King, and other supervisors. None of the individuals was given franchise disclosure documents. King induced one investor to mortgage her house so that she could pay $70,000 for a number of vending machines. In three years Wolf, King, and others took in some $31.3 million. The FTC alleged that the defendants violated the FTC franchise disclosure rule. Is there a franchise disclosure rule violation if Wolf and King were merely selling vending machines What if Wolf and King promised exclusive territories for the machines Why would a franchise disclosure rule be necessary in this case Decide. [FTC v Wolf, Bus. Franchise Guide ¶ 27,655 (CCH D Fla)]
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Jerome, Sheila, Gary, and Ella agreed to purchase a tract of land and make it available for use as a free playground for neighborhood children. They called the enterprise Meadowbrook Playground. Jerome and Gary improperly hung one of the playground swings, and a child was injured. Suit was brought against Meadowbrook Playground. Can damages be recovered
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A joint venture is a(an):
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Morris Friedman was president of Tiny Doubles International, Inc. He sold business opportunities for Tiny Doubles Studios, which made small photographic statues of people for customers. Friedman was the primary negotiator with prospective buyers of these studio business opportunities. He advised buyers up front that the opportunities were not franchises, and accordingly, he did not provide all of the information set forth in the disclosure rule on franchising, although he did provide full answers to all questions asked. Many businesses closed, however, because of lack of success. The FTC claims Friedman violated its disclosure rule. Friedman disagrees. Decide. [FTC v Tiny Doubles Int'l, Inc., 1996 Bus. Franchise Guide (CCH) ¶ 10,831]
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The Armory Committee was composed of officers from various National Guard units. It organized a New Year's Eve dance at a charge of $2 per person to defray costs. Perry, along with others, was a member of the Armory Committee. Libby was a paying guest at the dance who was injured by slipping on frozen ruts in the immediate approaches to the steps leading to the armory building where the dance was held. He sued Perry, Turner, and the other committee members. The evidence showed that every member of the committee had taken some part in planning or running the dance with the exception of Turner. Was the Armory Committee an unincorporated association or a joint venture Decide. [Libby v Perry, 311 A2d 527 (Me)]
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Groseth had the International Harvester (IH) truck franchise in Yankton, South Dakota. The franchise agreement Groseth signed required dealers to "cooperate with the Company by placing orders for goods in accordance with advance ordering programs announced by the Company." IH wanted to terminate Groseth's franchise because he refused to comply with IH's requirement that a computerized "dealer communication network" (DCN) be set up. Under the DCN, each dealer was required to obtain a computer terminal, display screen, and software. The DCN was initially used for ordering parts and allowed IH to reduce the number of employees needed for manual processing of "parts" orders. Groseth refused to set up the DCN because of the expense. Moreover, he contended that the task of ordering parts was easily accomplished by telephone or written orders. Did IH have good cause to terminate Groseth's franchise [Groseth International Harvester, Inc. v International Harvester, 442 NW2d 229 (SD)]
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The Kawasaki Shop of Aurora, Illinois (dealer) advised Kawasaki Motors Corp. (manufacturer) that it intended to move its Kawasaki franchise from New York Street to Hill Avenue, which was in the same market area. The Hill Avenue location was also the site of a Honda franchise. The manufacturer's sales manager advised the dealer that he did not want the dealer to move in with Honda at the Hill Avenue site. In February, the dealer moved to the Hill Avenue location. Effective May 1, the manufacturer terminated the dealer's franchise. The dealer brought suit against the manufacturer under the state's Motor Vehicle Franchise Act, which made it unlawful to terminate franchises for site control (requiring that the dealer's site be used exclusively as a Kawasaki dealership). The manufacturer argued that it had a right to have its products sold by a dealer who was not affiliated with a competitor. Decide. [Kawasaki Shop v Kawasaki Motors Corp., 544 NE2d 457 (Ill App)]
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To establish that a business is a "franchisee" qualifying for protection under the Illinois Franchise Disclosure Act, the business must demonstrate that it paid a franchise fee either directly or indirectly to the "franchisor" to enter the business. To-Am Equipment Company believed it had paid an implied fee in excess of $500 to enter the forklift business as a dealer for Mitsubishi-Caterpillar Forklift of America (MCFA) when it paid $1,658 for service manuals, which MCFA had commanded it to possess. MCFA denied that it had charged To-Am a franchise fee and asserted that it was not obligated to To-Am under the state Franchise Disclosure Act. Decide. [To-Am Equipment co. v Mitsubishi-Caterpillar Forklift of America, 853 Supp 987 (ND Ill)]
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