1. Disclosure under SEC Rule 10B-5. Dodona
I, LLC, invested $4 million and 2 securities offerings from Goldman Sachs &
Co. The investments were in collaterized debt obligations (CDOs). Their value
depended on residential mortgage back securities (RMDs), whose value in turn
depended on the performance of subprime residential mortgages. Before marketing
the CDOs, Goldman had noticed several “red flags” relating to investments in
the subprime market, in which it had invested heavily. To limit its risk,
Goldman began betting against subprime mortgages, RMDs, and CDOs, including the
CDOs it had sold to Dodona. In an internal email, one Goldman official
commented that the company had managed to “make some lemonade from some big old
lemons.” Nevertheless, Goldman’s marketing materials provided only boilerplate
statements about the risks of investing in the securities. The CDOs were later
downgraded to junk status, and Dodona suffered a major loss while Goldman
profited. Assuming that Goldman did not affirmatively misrepresent any facts
about the CDOs, can Dodona still recover under SEC rule 10b-5? If so, how?
2. Tying Arrangement.John
Sheridan owned a Marathon gas station franchise. He sued Marathon Petroleum Co.
under section 1 of the Sherman Act and section 3 of the Clayton Act, charging
it with illegally tying the processing of credit card sales to the gas station.
As a condition of obtaining a Marathon dealership, dealers had to agree to let
the franchisor process credit cards. They could not shop around to see if
credit card processing could be obtained at a lower price from another source.
The district court dismissed the case for failure to state a claim. Sheridan appealed.
Is there a tying arrangement? If so, does it violate the laws?
3. The Sherman Act.Together,
EMI, Sony BMG Music Entertainment, Universal Music Group Recordings, Inc., and
Warner Music Group Corp. produced, licensed, and distributed 80% of the digital
music sold in the US. The companies formed Musicnet to sell music to online
services that sold songs to consumers. Musicnet required all of the services to
sell the songs at the same price and subject to the same restrictions.
Digitization of music became cheaper, but Musicnet did not change its prices.
Did Musicnet violate the antitrust laws? Explain.
4. Price Discrimination.Dayton
Superior Court sells its products in interstate commerce to several companies,
including Spa Steel products Inc. The purchasers often compete directly with
each other for customers. From 2005 to 2007, one of Spa Steel’s customers
purchased Dayton Superior’s products from two of Spa Steels competitors.
According to the customer, Spa Steel’s prices were always 10-15% higher even
though they were for the same products. As a result, Spa Steel lost sales to at
least that customer and perhaps others. Spa Steel wants to sue Dayton Superior
for price discrimination. Which requirements for such a claim under section 2
of the Clayton Act does Spa Steel satisfy? What addition facts will it need to
prove?
5. Duties of Bailee.Alicia
owns a valuable speed boat. She is going on vacation and asks her neighbor,
Maureen, to store the boat in one stall of Maureen’s double garage. Maureen
consents, and the boat is moved into the garage. Maureen needs some grocery
items for dinner and drives to the store. She leaves the garage door open while
she is gone, as is her custom, and the speed boat is stolen during that time.
Discuss the standard of care traditionally required of the Bailee, and
determine whether Maureen breeched that duty.
6. Spotlight on Joint Tenancy-Property
Ownership.Vincent Slavin was a partner at Cantor Fitzgerald Securities
in the World Trade Center (WTC) in New York City. In 1998, Slavin and Anna Baez
became engaged and began living together. They placed both of their names on
three accounts at Chase Manhattan Bank according to the bank’s terms, which
provided that “accounts with multiple owners are joint, payable to either owner
or survivor.” Slavin arranged for the direct deposit of his salary and
commissions into one of the accounts. On Sept. 11, 2001, Slavin died when 2
planes piloted by terrorist crashed into the WTC towers, causing their
collapse. At the time, the balance in the 3 accounts was $656,944.36. On Sept.
14, Cantor Fitzgerald deposited an additional $58,264.73 into the direct
deposit account. Baez soon withdrew the entire amount from all of the accounts.
Married Jelnek, Slavin’s mother filed a suit against Baez to determine the ownership
of the funds that had been in the accounts. In what form of ownership were the
accounts held? Who is entitled to which of the funds and why?
7. Bad Faith Actions.Leo and
Mary Deters owned Deters Tower Service, Inc., in Iowa. Deters Tower serviced TV
and Radio towers and antennas in a multistate area. The firm obtained a
commercial general liability policy issued by USF Ins. Co. to provide coverage
for its officers, including Leo. One afternoon, Leo and 2 Deters Tower
employees were working on a TV tower in Counsel Bluffs when they fell from the
tower to their deaths. The workers’ families filled a negligence suit against
the Deters estate. USF refused to defend estate against the suit and pay any
resulting claim and did not provide a reason for this response. Is USF liable
to the Deters estate for this refusal? If so, on what basis might the estate
recover, and how much?
8.
Sovereign
Immunity.When Ferdinand Marcos was president of the Philippines, he
put asset into a company called Arelma. Its holdings are in New York. A group
of plaintiffs, referred to as the Pimentel class, brought a class action suit
in a US District Court for human rights violations by Marcos. They won a
judgment of $2 billion and sought to attach Arelma’s assets to help pay the judgment
period. At the same time, the Republic of the Philippines established a
commission to recover the property wrongfully taken by Marcos. A court in the
Philippines was determining whether Marcos’ property, including Arelma, should
be forfeited to the Republic or to other parties. The Philippine government, in
opposition to the Pimentel judgement, moved to dismiss the US court
proceedings. The District Court refused, and the US Court of Appeals for the
Ninth Circuit agreed that the Pimentel class should take the assets. The
Republic of the Philippines appealed. What are the key international issues?
9.
Dumping.The fuel
for nuclear power plants is low enriched uranium (LEU). LEU consists of feed
uranium enriched by energy to a certain assay- its percentage of the isotope
necessary for a nuclear reaction. The amount of energy is described by an
industry standard as a “separative work unit” (SWU). A nuclear utility may buy
LEU from an enricher, or the utility may provide an enricher with feed uranium
and pay for the SWUs necessary to produce LEU. Under an SWU contract, the LEU
returned to the utility may not be exactly the particular uranium the utility
provided. This is because feed uranium is fungible and trades like a commodity
(such as wheat or corn), and profitable enrichment requires the constant
processing of undifferentiated stock. LEU imported from foreign enrichers,
including Eurodif, S.A., was purportedly being sold in the US for “less than
fair value.” Does this constitute dumping? Explain. If so, what could be done
to prevent it?
10.
International
Agreements and Jurisdiction.US citizens who were descendants of
victims of the holocaust (the mass murder of 6 million Jews by the Nazi in
WWll) in Europe filled a claim for breach of contract in the US against an
Italian insurance company, Assicurazioni Generali, S.P.A. (Generali). Before
the holocaust, the plaintiffs’’ ancestors had purchased insurance policies from
Generali, but Generali refused to pay them benefits under the policies. Due to
certain agreements among nations after WWll, such lawsuits could not be filed
for many years. In 2000, however, the US agreed that Germany could establish a
foundation-The International Commission on Holocaust-Era Insurance Claims, or
ICHEIC-that would compensate victims who had suffered losses at the hands of
Germans during the war. Whenever a German company was sued in a US court based
on a Holocaust Era claim, the US govt. would inform the court that the matter
should be referred to the ICHEIC as the exclusive forum and remedy for the
resolution. There was no such agreement with Italy; however, o the Federal
District Court dismissed the suit. The plaintiffs appealed. Did the plaintiffs
have to take their claim to the ICHEIC rather than sue in a US court? Why or
why not?
