1. Three professors from Keller's New Jersey campus, Robinson, Romney, and Obama, decide to visit ABC Go-kart facility together in Pennsylvania. This decision is made after a lengthy faculty brunch, at which unlimited alcoholic mimosas were served. ABC Go-kart advertises at the college's various campuses and, in fact, the professors use their faculty discount at the facility. At the facility signs are posted everywhere in bold: "BY PARTICIPATING IN Go-KART RACING, YOU VOLUNTARILY ASSUME THE RISK OF ANY DEATH OR INJURY THAT MAY RESULT. " Additionally, the professors hurriedly sign a contract, which states: "YOU ARE GIVING UP ALL LEGAL RIGHTS"; "ABC WILL NOT BE HELD LIABLE FOR ANY NEGLIGENCE RESULTING IN YOUR INJURY OR DEATH"; and "THE PARTIES AGREE THAT ANY POSSIBLE LEGAL ACTION WILL BE HEARD IN THE STATE OF PENNSYLVANIA."
Professor Robinson, who lives in New York City, is sick and sweating profusely after consuming a great deal of alcohol. He decides not to race. He suspects that he is having a minor reaction as he is diabetic and drank more than he intended. In the Waiting Area, which is located next to the track, he takes off his helmet. There is a sign posted that says "KEEP YOUR RACE HELMET ON WHILE IN THE WAITING AREA!"
Obama and Romney, who dislike each other for unknown reasons, are the only ones on the track. They use go-carts manufactured by Kartmatic. As they begin the race they drive very aggressively. Unbeknownst to either party, Fred, ABC's mechanic, fed up with low pay, did not do the usual morning inspection of the brakes and tires on either vehicle that morning. ABC had been contemplating firing Fred due to his erratic work habits. ABC instructed Fred to inspect the Kartmatics daily as they never trusted their brake mechanism. Kartmatics are regularly marketed to amusement parks. Their instruction manual states that they are not to be used for racing.
After two laps, Obama's brakes fail as he tries to aggressively pass Romney. He crashes into Romney's kart near the waiting area. The brakes on both vehicles fail to hold. A tire dislodges at a high-rate of speed, and hits Professor Robinson in the head, rendering him unconscious and bleeding from head injuries. His helmet is lying on the ground nearby. An ambulance is called. The medical technicians, seeing the head injuries, fail to notice the medical alert bracelet on Professor Robinson's wrist. At the hospital, Robinson dies from insulin shock and other complications due to his diabetes while the emergency room doctor was doing a procedure to prevent blood clots and a possible stroke from the head injury. At autopsy, it was later learned that Professor Robinson had been rendered brain dead by accident at the ABC Go-kart facility.
(a) What claims may Professor Robinson's widow bring against the various parties?
(b) What defenses might each party bring against the possible claims asserted by Professor Robinson's widow?
(c) In what state should the case be brought?
2. Judy Collinsworth, a then-unknown folk singer, signed a three album recording contract with Mercury Apollo Music, Inc. Mercury Apollo Music was a boutique label specializing in folk artists. Collinsworth's first album for Mercury Apollo was moderately successful. The second album, unfortunately, was panned by the critics and did not sell. Mercury Apollo Music was acquired by NastiCondiMedia, Inc. NastiCondiMedia, in an effort to re-vitalize Collinsworth's career, encouraged her to leave the folk style she was committed to and do more commercially viable pop material. Collinsworth rejected this request. Furious with NastiCondiMedia, Collinsworth wanted to end the contract. On her own, with what remaining personal funds she had left, she immediately went to an independent recording studio and did sessions toward a third album without approval or consent by NastiCondiMedia. Using her concert band, she recorded tracks for over 30 songs. Due to the financial failure of Collinsworth's second album and her recent unsuccessful concert tour, NastiCondiMedia did not do the final production work on Collinsworth's third album.
Collinsworth then entered into a contract with EasyListening Communications, Inc. She began recording a new folk album with EasyListening in conjunction with a concert tour that they financed and produced. At her concerts, Collinsworth would regularly introduce the new material that would be on her new album.
Shortly after the concert tour began, NastiCondiMedia brings suit against Judy Collinsworth and EasyListening Communications, Inc.
(a) What causes of action might NastiCondiMedia bring against Collinsworth and EasyListening?
(b) What causes of action might Collinsworth and EasyListening bring against NastiCondiMedia?
(c) What types of relief might either party seek?
3. PART A
Paul and Thomas Geoffries, brothers, are college students and web designers. While at the University of Megalopolis, a private, for-profit college in the "Quad State" area, they started an online chat service called FaceSpace. Paul attended and resided at the college's campus in the State of Quadrahenria. Thomas, who was on probation during college for a low level felony drug conviction, could not be a resident student and took classes at the campus in the Commonwealth of New Guernsey campus. The chat service began by putting information from the school's student directory online, and also by offering blog, chat, and message board features. FaceSpace was such a hit that within a year, the school advised the brothers that they had to remove FaceSpace from the university's server as it was utilizing too many resources. This was not a problem as the Geoffries found advertisers, so they were able to move FaceSpace to a private server without charging user fees. In fact, FaceSpace was earning so much revenue that the Geoffries brothers were able to pay themselves and the six friends who helped them operate it salaries. The Geoffries brothers are graduating from the University of Megalopolis and will be attending separate graduate programs. Paul will attend Quadrahenria State University, and Thomas the College of New Guernsey. As FaceSpace is so successful, the brothers not only plan to expand it to the two new colleges that they are attending, but to as many other colleges within the four states comprising the "Quad State" area as possible. They even have hopes of "going national." As part of their plan to expand to other campuses, they expect to recruit a student from each of the new schools "to get them in." They wish to formalize FaceSpace by organizing it as a proper business. The brothers would like to maintain a majority interest in the business, give about 20 percent to the six friends from their undergraduate days who helped them run the service, and use the remaining interest in the business to attract other investors and use employee incentives.
The Geoffries seek your advice on (a) the form of business they should use, (b) who might have a claim on the business, and (c) how they might protect themselves from claims regarding a computerized internet platform?
PART B
FaceSpace has been a phenomenal success for over ten years. They are now a worldwide social networking phenomenon. Over the years and the various incarnations of the business enterprise, they are now a corporation with just under 100 shareholders. In anticipation of a public offering, they have just completed a private stock offering and allowed several of the initial equity owners to exercise stock options. The Geoffries brothers each exercised options to purchase 10,000 shares for $5 a share. Also in anticipation of the public offering, pursuant to the early intervention drug plea he made while in college, Thomas Geoffries had his conviction expunged. In addition, FaceSpace sold $10 million in two year advertising contracts, which would allow the clients to back out for a 90 percent refund. These unusual contracts increased their current revenue by 15%. As FaceSpace is such a phenomenon, the hype regarding the public offering has been enormous. Even college students are attempting to buy the stock. Days before the public offering, the following occurred: (a) a broker at their underwriter, Silversmith & Baggs, showed a pension fund director a draft version of the prospectus; (b) Paul sold 1000 shares of the stock that he purchased through the stock option plan for $45 a share, telling the private investor that the issue price for the public offering would be at least $60 a share; and (c) several of the people who bought stock in the private offering sold it at a nice profit. The initial public stock offering had many problems. The NASDAQ computer system, which was implemented pursuant to a recent regulation change by the Securities And Exchange Commission (SEC), could not keep up with the demand. The system could not accurately report the price, and many day traders, including Big Profit Hedge Fund, lost money. Big Profit had formally filed its opposition to the SEC's regulation when it was proposed. After the public offering was completed, FaceSpace stock stabilized at $40 a share, well below the initial offering price of $70 a share. In light of the fiasco of the public offering and the bad press that it generated, users began to drop FaceSpace in favor of a new, upstart rival service offered by TronCom. Fearful that the new advertisers would back out of their contracts, the Geoffries brothers sold a great deal of their stock.
What issues does FaceSpace, its officers, and stockholders face under (a) state securities law, (b) the Securities Act of 1933, and (c) the Securities and Exchange Act of 1934?