Home >>Summary of Contents

Contents xi
Preface xxix
Acknowledgments xxxiii

Part I. THE PRACTICE OF BUSINESS LAW 1

Part II. AGENCY 83

Part III. CORPORATIONS 113

Part IV. UNINCORPORATED ENTITIES 685

Part V. CHOICE OF FORM 771

Glossary 793
Table of Cases 809
Index 813


Contents
Preface xxix
Acknowledgments xxxiii

Part I. THE PRACTICE OF BUSINESS LAW 1

Chapter 1. Practicing Corporate Law 3

  1. What Do Corporate Lawyers Do? 3
    1. A Different Paradigm from Litigators 3
    2. The Typical Roles of the Corporate Lawyer 5
    Notes and Questions 8
  2. Where Do Corporate Lawyers Work? 10
    1. Private Practice 10
    2. Corporations (In-House Lawyers) 11
    3. Other Practice Settings 13
    4. Who Practices Corporate Law? 13
    Notes and Questions 15
  3. What Do Corporate Lawyers Need to Know? 15
    1. Core Areas of Knowledge 15
    2. Secondary Areas of Knowledge 16
    Notes and Questions 17
  4. Federal Securities Regulation 17
  5. Terms of Art in This Chapter 18

Chapter 2. Business and Businesses 19

  1. What Is a ‘‘Business’’? 19
    1. Why Businesses Vary in Size 19
    1. Background and Context—An Example 21
    Fitting In: In Bow to Retailers’ New Clout, Levi Strauss Makes Alterations 21
    Notes and Questions 24
  2. The Development of Big Business in America 25
    Alfred D. Chandler, Jr., The Visible Hand: The Managerial Revolution in American Business 25
    Notes and Questions 28
    1. Management Patterns in Large Corporations 28
    Alfred D. Chandler, Jr., The Visible Hand: The Managerial Revolution in American Business 29
    Notes and Questions 31
  3. Form Follows Function—Entities for Businesses 32
    1. The Current Setting—From Partnerships to Corporations 32
    Alfred D. Chandler, Jr., The Visible Hand: The Managerial Revolution in American Business 32
    Margaret M. Blair, Locking in Capital: What Corporate Law Achieved for Business Organizers in the Nineteenth Century 33
    Notes and Questions 34
    2. Background and Context—A Vignette 34
    Margaret M. Blair, Locking in Capital: What Corporate Law Achieved for Business Organizers in the Nineteenth Century 35
    Notes and Questions 36
    3. Which State’s Law?—The Rise of Delaware 36
    William E. Kirk, III, A Case Study in Legislative Opportunism: How Delaware Used the Federal-State System to Attain Corporate Pre-Eminence 37
    Notes and Questions 38
    4. Which Nation’s Law?—Globalization and Corporation Law 39
    Ronald J. Gilson, Globalizing Corporate Governance: Convergence of Form or Function 39
    Douglas M. Branson, The Very Uncertain Prospect of ‘‘Global’’ Convergence in Corporate Governance 40
    Notes and Questions 41
  4. Terms of Art in This Chapter 42

Chapter 3. Economics 43

  1. Risk 43
    Notes and Questions 47
  2. Valuation 48
    1. Value as Discounted Cash Flow 49
        a. ‘‘I’ll Gladly Pay You Tuesday, For a Hamburger Today’’—The Time Value of Money 49
        b. Discounting to Present Value 50
        c. An Example 51
    Notes and Questions 53
    2. A Practical Illustration 54
    Doft & Co. v. Travelocity.Com Inc. 55
    Notes and Questions 59
    3. Background and Context: Options and How to Value Them 59
  3. Making Economic Decisions 61
    1. Rational Self-Interest: The Classical Paradigm 61
    2. The Myth of Rational Self-Interest: How Humans Actually Make Economic Decisions 62
         a. Self-Interest 62
    Richard H. Thaler, The Winner’s Curse: Paradoxes and Anomalies of Economic Life 62
    Notes and Questions 63
         b. The Limits of Rationality 63
             i. Heuristics 64
    Amos Tversky & Daniel Kahneman, Judgment Under Uncertainty: Heuristics and Biases 64
    Notes and Questions 66
         c. The Affective Component of Economic Decision Making 67
    Notes and Questions 69
         d. The Ethical Component of Economic Decision Making 69
    Joseph L. Badaracco, Jr., The Discipline of Building Character 69
    Notes and Questions 72
  4. Accounting 73
    Notes and Questions 82
  5. Terms of Art in This Chapter 82

Part II. AGENCY 83

Chapter 4. Agency 85

  1. Background and Context 85
    1. The Economic Concept of ‘‘Agency’’ and the Problem of Agency Costs 85
    2. Where Do Agency Questions Arise? 88
    Notes and Questions 89
  2. The Current Setting 90
    1. Definition of the Agency Relationship 90
    2. Creation of the Agency Relationship 91
    Basile v. H & R Block, Inc. 91
    Notes and Questions 94
    3. Relation of the Principal to Third Parties 95
        a. Actual Authority 95
        b. Apparent Authority 96
    In the Matter of McDuffie 96
    Notes and Questions 97
        c. Principal’s Liability to Third Parties for Actions Actually or Apparently Authorized 99
        d. Estoppel 99
        e. Ratification 100
        f. Restitution 100
        g. Principal’s Liability for Agent’s Torts 100
    Fisher v. Townsends, Inc. 101
    Notes and Questions 103
        h. Liability of the Third Party to the Principal 105
    4. Relation of the Agent to Third Parties 105
        a. Agent’s Liability on Contract 105
    Benjamin Plumbing, Inc. v. Barnes 106
    Notes and Questions 108
        b. Other Sources of Agent’s Liability to Third Party 109
    5. Relation of the Principal to the Agent 109
        a. Duties of the Agent 109
        b. Duties of the Principal 110
    6. Termination of the Agency Relationship 110
        a. Termination of Actual and Apparent Authority 110
  3. Terms of Art in This Chapter 111

Part III. CORPORATIONS 113

A. Creation

Chapter 5. The Incorporation Process 115

  1. Promoter Liability 115
    Moneywatch Companies v. Wilbers 115
    Notes and Questions 118
  2. Choice of Jurisdiction 119
    1. Why the Corporation’s Jurisdiction Matters—The Internal Affairs Doctrine 119
        a. The Current Setting 119
        b. Background and Context 121
    Notes and Questions 122
    2. The Special Role of Delaware 122
  3. Incorporation Mechanics 123
    1. Reserving the Name 124
    2. The Incorporation Documents 124
    3. Filing 125
    4. Organizing the New Corporation 126
  4. Defective Incorporation 126
    1. Background and Context 127
    Robert S. Stevens, Handbook on the Law of Private Corporations 127
    2. The Current Setting 130
        a. De Facto Corporations 130
    Hill v. County Concrete Company, Inc. 130
    Notes and Questions 132
    Harris v. Looney 133
    Notes and Questions 135
        b. Corporations by Estoppel 136
    American Vending Services, Inc. v. Morse 136
    Notes and Questions 138
  5. Lawyer’s Professional Responsibility to Multiple Clients and Entity Clients 139
    Detter v. Schreiber 140
    Notes and Questions 142
    Utah Rules of Professional Conduct 144
  6. Terms of Art in This Chapter 149


B. The Corporation and Its Finances

Chapter 6. Capital Formation 151

  1. Financing: Getting Money into the Business 151
    1. Background and Context 151
    2. The Current Setting 153
        a. Corporate Securities 153
            i. (Common) Stock 153
            ii. Preferred Stock 154
            iii. Other Relative Rights 156
    Kaiser Aluminum Corporation v. Matheson 157
    Notes and Questions 159
            iv. Debt 160
                (A) Short-Term Debt 161
                (B) Long-Term Debt 162
            v. More Exotic Securities 164
        b. Planning the Corporate Capital Structure 165
            i. The Consequences of Debt–Leverage 166
            ii. The Economic Risks of Excessive Debt 168
            iii. Other Costs of Debt 170
            iv. The Legal Dangers of Excessive Debt 171
            v. Other Factors That Make Equity Attractive 172
            vi. Choosing a Capital Structure for the Start-Up Corporation 174
    Notes and Questions 175
            vii. Background and Context: A Note on Financing by Going Public and by Venture Capital 176
    Telcom-SNI Investors, L.L.C. v. Sorrento Networks, Inc. 178
    Notes and Questions 184
        c. The Mechanics of Issuing Stock 185
            i. Statutory Authorization 185
            ii. Issuance of Stock 185
                (A) Board Authorization 186
    Kalageorgi v. Victor Kamkin, Inc. 186
    Notes and Questions 193
                    (1) Subscription Agreements 194
                (B) Consideration 194
                    (1) The Problem of Ensuring Equal Payment by Contemporaneous Purchasers (Par Value) 194
                    (2) The Problem of Ensuring That the Corporation Receives the Consideration 195
                    (3) The Problem of Later Issuance at an Inadequate Price 196
                    (4) The Problem of Noncash Consideration 196
            iii. The Meaning of Outstanding 197
            iv. Preemptive Rights: The Economic Component 197
  2. Federal Securities Regulation 198
    1. Definition of a Security 199
    2. Registration 201
        a. Registration Requirements and Exemptions 201
        b. The Process of Registration—‘‘Going Public’’ 202
  3. Terms of Art in This Chapter 203

Chapter 7. Cashing Out: Distributing Money to Shareholders 205

  1. Making a Profit Part I: Dividends 206
    1. The Current Setting 206
        a. Board Discretion 206
    Notes and Questions 208
        b. Statutory Restrictions 208
        c. The Mechanics of Paying Dividends 210
    McIlvaine v. AmSouth Bank, N.A. 211
    Notes and Questions 213
        d. Stock Splits 213
    Lynam v. Gallagher 214
    Notes and Questions 217
        e. Reverse Stock Splits 217
    Reiss v. Financial Performance Corporation 218
    Reiss v. Financial Performance Corporation 222
    Notes and Questions 223
    2. Background and Context: The Difference Between ‘‘Stock Splits’’ and ‘‘Stock Dividends’’ 224
    In the Matter of the Estate of Dudley B. Dawson 225
    Notes and Questions 227
  2. Making a Profit Part II: Sale of Stock by Shareholders 227
    Harrison v. NetCentric Corp. 229
    Notes and Questions 232
    Man o’ War Restaurants, Inc. v. Martin 233
    Notes and Questions 235
    F.B.I. Farms, Inc. v. Moore 237
    Notes and Questions 242
    1. When the Purchaser Is the Corporation That Issued the Shares 243
        a. Limitations on a Corporation’s Power to Purchase Its Shares 243
        b. Motivations to Repurchase Shares 244
        c. The Metaphysics of Repurchased Shares 245
  3. Federal Securities Regulation 246
    1. Restrictions on Resale 246
        a. Section 16 (b) 246
        b. Rule 144 247
    2. Rule 10b-5 248
    Dura Pharmaceuticals, Inc. v. Broudo 248
    Notes and Questions 251
    Basic, Inc. v. Levinson 253
    Notes and Questions 258
        a. Insider Trading 259
    In the Matter of Cady, Roberts & Co. 260
    Notes and Questions 261
    Chiarella v. United States 262
    Notes and Questions 264
    Dirks v. SEC 265
    Notes and Questions 268
    United States v. O’Hagan 269
    Notes and Questions 272
  4. Terms of Art in This Chapter 273

Chapter 8. Getting Money to Creditors When the Corporation Can’t Pay 275

  1. The Current Setting 276
    1. Individual Shareholder Liability by Piercing the Corporate Veil 276
    Brevet International, Inc. v. Great Plains Luggage Company 280
    Notes and Questions 282
    2. Enterprise Liability 284
    Smith v. McLeod Distributing, Inc. 285
    Notes and Questions 288
    In re U-Haul International, Inc. 290
    Notes and Questions 291
    Goldberg v. Lee Express Cab Corporation 293
    Notes and Questions 295
    3. Commercial and Bankruptcy Doctrines 296
    In the Matter of Herby’s Foods, Inc., Debtor 296
    Notes and Questions 300
    4. Successor Liability 301
    Pancratz v. Monsanto Company 302
    Notes and Questions 305
  2. Background and Context: Direct Liability of Corporate Officers 306
    Saltiel v. GSI Consultants, Inc. 307
    Notes and Questions 310
  3. Terms of Art in This Chapter 311

C. Board Power to Govern the Corporation

Chapter 9. How Corporations Take Actions 313

  1. A. The Board of Directors 313
    1. The Role of the Board of Directors 313
        a. The Current Setting 313
    Grimes v. Donald 315
    Notes and Questions 318
        b. Background and Context 320
    Victor Morawetz, A Treatise on the Law of Private Corporations 320
    Notes and Questions 321
    2. Number, Selection, Election, Term, and Removal of Directors 322
        a. Number and Selection of Initial Directors 322
        b. Election and Term of Directors 322
        c. Removal of Directors 323
    Notes and Questions 325
    Hoschett v. TSI International Software, Ltd. 325
    Notes and Questions 328
        d. Background and Context 329
    Victor Morawetz, A Treatise on the Law of Private Corporations 329
    Notes and Questions 330
    3. The Mechanics of Board Action 330
        a. The Current Setting 330
            i. Call 331
            ii. Notice 331
            iii. Quorum 332
            iv. Sufficient Vote 332
    Notes and Questions 333
    Adlerstein v. Wertheimer 333
    Notes and Questions 339
        b. Background and Context 340
    Victor Morawetz, A Treatise on the Law of Private Corporations 340
  2. Officers 340
    1. Officers and Agents 340
        a. Background and Context. Review of Chapter 4 on Agency 340
    H-D Irrigating, Inc. v. Kimble Properties, Inc. 340
    Notes and Questions 342
        b. The Current Setting 343
    Peter Bart, The Studios’ Plethora of Presidents 345
    Andrews v. Southwest Wyoming Rehabilitation Center 346
    Notes and Questions 347
    2. Power of Officers 348
        a. The Current Setting 348
    Snukal v. Flightways Manufacturing, Inc. 349
    Notes and Questions 353
        b. Background and Context 354
    Notes and Questions 354
  3. Federal Securities Regulation 354
  4. Terms of Art in This Chapter 355

D. Restrictions on the Board’s Power

Chapter 10. Restrictions on the Board’s Power 357

  1. Legislation That Restricts Board Power 357
  2. Ultra Vires 359
    Harbor Finance Partners v. Huizenga 360
    Notes and Questions 361
  3. Ultimate Beneficiaries 363
    1. The Current Setting 364
    William T. Allen, Our Schizophrenic Conception of the Business Corporation 364
    Notes and Questions 367
    2. Background and Context 368
    Adolf A. Berle, Jr., & Gardiner C. Means, The Modern Corporation and Private Property 368
    Notes and Questions 370
    Stephen M. Bainbridge, The Board of Directors as Nexus of Contracts 370
    Notes and Questions 371
    C.A. Harwell Wells, The Cycles of Corporate Social Responsibility: An Historical Retrospective for the Twenty-First Century 372
    Notes and Questions 37
  4. Federal Securities Regulation 377
    1. Foreign Corrupt Practices Act 377
  5. Terms of Art in This Chapter 378

Chapter 11. The Duty of Loyalty of Directors (and Officers) 379

  1. The Current Setting 380
    1. The Corporate Opportunity Doctrine 381
    Northeast Harbor Golf Club, Inc. v. Harris 382
    Notes and Questions 388
    2. Self-Dealing 390
    Tomaino v. Concord Oil of Newport, Inc. 391
    Notes and Questions 394
    3. Trying to Generalize 394
    Geller v. Allied-Lyons plc 396
    Notes and Questions 399
    4. Compensation of Directors and Senior Officers 400
  2. Background and Context 400
    1. Is There a Duty of Good Faith? 400
  3. Terms of Art in This Chapter 402

Chapter 12. The Duty of Care of Directors (and Officers) 403

  1. The Current Setting 403
    Crown v. Hawkins Co., Ltd. 403
    Notes and Questions 408
    In re Caremark International Inc. Derivative Litigation 410
    Notes and Questions 417
  2. Background and Context 419
    1. The Propriety of Analogy to Tort 420
    Notes and Questions 420
    2. Is There a Duty of Care? 421
    Notes and Questions 422
  3. Federal Securities Regulation 422
  4. Terms of Art in This Chapter 423

Chapter 13. Standards of Review of Board Actions 425

         Notes and Questions 426

  1. The Duty of Loyalty 427
    Orman v. Cullman 427
    Notes and Questions 433
    1. The Entire Fairness Standard 434
    HMG/Courtland Properties, Inc. v. Gray 434
    Notes and Questions 437
  2. The Duty of Care 437
    In re NCS Healthcare, Inc. Shareholders Litigation 438
    Notes and Questions 442
  3. Prevailing Despite the Application of the Business Judgment Rule 444
    Brehm v. Eisner 445
    Notes and Questions 453
  4. Amelioration of Liability for Violations of Fiduciary Duties 455
    1. Duty of Loyalty: Statutory Safe Harbor for Conflict of Interest Transactions 456
        a. The Current Setting 457
            i. Transactions Eligible to Be Affected 457
    Shapiro v. Greenfield 457
    Notes and Questions 461
            ii. Prerequisites to Being Affected by the CoI Safe Harbors 462
            iii. The Effect of Compliance with the CoI Safe Harbor 462
    Notes and Questions 463
        b. Background and Context 463
            i. A Note on Shareholder Ratification 463
    2. Duty of Care: Limitations Contained in the Articles of Incorporation 465
    Emerald Partners v. Berlin 465
    Notes and Questions 467
    3. Indemnification by the Corporation 468
        a. The Current Setting 468
            i. Advancement of Expenses 468
    Reddy v. Electronic Data Systems Corp. 469
    Notes and Questions 472
            ii. When Must the Corporation Indemnify? 473
    Notes and Questions 474
            iii. Procedural and Substantive Prerequisites to Indemnification 474
    4. Insurance 475
  5. An Exercise in Synthesis 476
    In re The Walt Disney Co. Deriv. Litig. 476
    Notes and Questions 482
    In re The Walt Disney Co. Deriv. Litig. 482
    Notes and Questions 488
  6. Terms of Art in This Chapter 489

Chapter 14. Do the Restrictions Work? 491

  1. Two Twenty-First Century Examples 491
    1. Enron 491
    2. WorldCom 493
    Report of Investigation by the Special Investigative Committee of the Board of Directors of WorldCom, Inc. 493
    Notes and Questions 496
  2. Structural Constraints 497
    1. Board of Directors 498
        a. Enron 498
    Permanent Subcommittee on Investigations of the Committee on Governmental Affairs United States Senate, The Role of the Board of Directors in Enron’s Collapse 498
    In re Enron Corp. Final Report of Neal Batson, Court-Appointed Examiner 500
    b. WorldCom 504
    Report of Investigation by the Special Investigative Committee of the Board of Directors of WorldCom, Inc. 504
    Notes and Questions 507
    2. Internal Actors Below the Board 507
        a. Officers 508
    In re Enron Corp. Final Report of Neal Batson, Court-Appointed Examiner 508
    Notes and Questions 508
        b. In-House Attorneys and Internal Auditors 509
    In re Enron Corp. Final Report of Neal Batson, Court-Appointed Examiner 509
    Report of Investigation by the Special Investigative Committee of the Board of Directors of WorldCom, Inc. 509
    Notes and Questions 510
    3. Reputational Intermediaries 510
        a. Outside Law Firms 510
    Susan P. Koniak, Who Gave Lawyers a Pass? We Haven’t Blamed the Real Culprits in Corporate Scandals 510
    Notes and Questions 512
        b. Independent Accountants 512
    Jonathan Weil, Missing Numbers-----Behind Wave of Corporate Fraud: A Change in How Auditors Work 512
    In re WorldCom, Inc. First Interim Report of Dick Thornburgh, Bankruptcy Court Examiner 514
    Report of Investigation by the Special Investigative Committee of the Board of Directors of WorldCom, Inc. 515
    Notes and Questions 516
        c. Credit-Rating Agencies 517
    Alec Klein, Borrowers Find System Open to Conflicts, Manipulation 517
    Notes and Questions 521
        d. Securities Analysts 521
    In re WorldCom, Inc. First Interim Report of Dick Thornburgh, Bankruptcy Court Examiner 522
    Randall Smith, et al., Wall Street Firms to Pay $1.4 Billion to End Inquiry-----Record Payment Settles Conflict-of-Interest Charges 526
    Notes and Questions 527
    4. Intentionality 527
    Evelina Shmukler, Back to School 527
    Notes and Questions 529
    Ronald Alsop, Right and Wrong 529
    Colleen DeBaise, Corporate-Governance Law Is the Rage 531
    Notes and Questions 531
    Lynn A. Stout, On the Proper Motives of Corporate Directors (Or, Why You Don’t Want to Invite Homo Economicus to Join Your Board) 532
    Notes and Questions 534
  3. Background and Context 535
    1. Are Reforms Working? 535
    Deborah Solomon & Cassell Bryan-Low, Companies Complain About Cost of Corporate-Governance Rules 535
    Notes and Questions 536
    2. Systemic Problem or Cyclical Anomalies? 536
    Joseph Nocera, et al., System Failure 536
    E.S. Browning, Burst Bubbles Often Expose Cooked Books and Trigger SEC Probes, Bankruptcy Filings 538
    Phyllis Plitch, When Market Scandals Erupt, Regulation Can Come in a Flood 539
  4. Federal Securities Regulation 540
  5. Terms of Art in This Chapter 541

E. Shareholder Power in Public and Private Corporations

Chapter 15. Shareholder Governance Powers: Paradigms and Public Companies 543

  1. Shareholders’ Power to Take Action 543
    1. Actions That the Shareholders May Take as a Group 543
    Notes and Questions 545
    2. How Shareholders Take Action in a Meeting 545
        a. The Current Setting 545
            i. Call 545
            ii. Notice 545
    McKesson Corp. v. Derdiger 546
    Notes and Questions 552
            iii. Quorum 553
            iv. Sufficient Vote 554
            v. The Importance of Being Present 555
        b. Background and Context—The Annual Meeting of the Public Corporation 556
    3. How Shareholders Take Action by Consent in Lieu of a Meeting 558
    4. Tabulating the Votes 559
        a. Whose Vote Counts? 559
        b. Who Counts the Votes? 562
  2. Shareholders’ Rights to Information 564
    1. Periodic and Transaction Reporting 564
    2. Inspection Right 565
        a. Background and Context 565
        b. The Current Setting 566
    Compaq Computer Corp. v. Horton 567
    Notes and Questions 570
    Parsons v. Jefferson-Pilot Corp. 571
    Notes and Questions 575
  3. Shareholders’ Power to Redress Harm to the Corporation 575
    1. The Current Setting 575
    Beam v. Stewart 577
    Notes and Questions 582
    2. Background and Context 583
    In re PSE&G Shareholder Litigation 583
    Notes and Questions 587
  4. Federal Securities Regulation 588
    1. Matters Requiring Shareholder Vote Under Federal Law 588
    2. Regulation of Proxy Solicitations 589
    3. Reporting Requirements 590
    4. Ownership Reporting Requirements 590
  5. Terms of Art in This Chapter 591

Chapter 16. Shareholder Governance Questions Most Often Seen in the Privately Held Corporation 593

  1. Self-Imposed Restrictions on Shareholder Governance Rights 593
    1. Preemptive Rights: The Management Component 593
    2. Supermajority Provisions 595
    Whetstone v. Hossfeld Mfg. Co. 595
    Notes and Questions 598
        a. Superquorum Provisions 599
    3. Cumulative Voting 599
    Notes and Questions 601
    4. Agreements Regarding Shareholder Voting 603
        a. The Current Setting 604
            i. Voting Trusts 604
    Notes and Questions 605
            ii. Pooling Agreements 606
        b. Background and Context 607
            i Vote Buying 607
    Notes and Questions 609
    5. Other Shareholder Agreements Affecting Shareholder Governance Power 609
    Notes and Questions 611
    6. The Problem of Deadlock 611
  2. External Restrictions on Shareholder Governance Rights 612
    1. Shareholder Fiduciary Duties 613
        a. The Current Setting 613
    Fought v. Morris 613
    Notes and Questions 617
        b. Background and Context 618
        c. The Current Setting 621
    2. Oppression and Unfairness by Shareholders 622
        a. From a New Remedy for Deadlock . . . 622
        b. . . . to a New Cause of Action . . . 623
    Charles W. Murdock, The Evolution of Effective Remedies for Minority Shareholders and Its Impact Upon Valuation of Minority Shares 623
    Notes and Questions 625
    Kiriakides v. Atlas Food Systems & Services, Inc. 626
    Notes and Questions 634
        c. . . . to More Remedies 637
    Charles W. Murdock, The Evolution of Effective Remedies for Minority Shareholders and Its Impact Upon Valuation of Minority Shares 637
  3. Terms of Art in This Chapter 638

F. Change of Control

Chapter 17. Change of Control 639

  1. Background and Context 639
  2. The Current Setting 641
    1. Motivations for Changing Control 641
    2. Techniques for Combining Entities 642
        a. Purchase of Assets 642
    Hollinger Inc. v. Hollinger International, Inc. 643
    Notes and Questions 650
        b. Purchase of Stock 651
        c. Merger 652
        d. Reverse Triangular Mergers 653
    3. Choosing the Appropriate Acquisition Technique 654
    Notes and Questions 656
    4. The Acquisition Process 656
    5. Corporate Law Issues 658
        a. Deal Protective Measures 658
        b. Sale of Control 661
    M. Thomas Arnold, Shareholder Duties Under State Law 661
    Notes and Questions 662
        c. Appraisal 663
            i. Which Transactions Trigger Appraisal Rights? 663
            ii. What Is ‘‘Fair Value’’? 664
    Matthew G. Norton Company v. Smyth 664
    Notes and Questions 668
  3. Background and Context—Hostile Takeovers 669
    1. Corporate Structures That Deter Hostile Changes of Control 670
    2. Standard of Review of a Target Board’s Actions When Responding to a Hostile Tender Offer 671
    Unitrin, Inc. v. American General Corp. 672
    Notes and Questions 675
    3. The Target Board’s Obligation to Maximize Shareholder Value 675
    Paramount Communications Inc. v. QVC Network Inc. 676
    Notes and Questions 679
    4. State Antitakeover Statutes 680
  4. Federal Securities Regulations 681
    1. ‘‘Groups’’ under Section 13(d) 681
    2. Going Private Transactions 681
    3. Tender Offers 682
  5. Terms of Art in This Chapter 683

Part IV. UNINCORPORATED ENTITIES 685

Chapter 18. Partnerships 687

  1. A. General Partnerships 687
    1. Background and Context 687
    Notes and Questions 690
    2. The Current Setting 690
        a. Formation 691
    Tondu v. Akerley 691
    Notes and Questions 694
    MacArthur Co. v. Stein 695
    Notes and Questions 698
    Mims, Lyemance & Reich, Inc. v. UAB Research Foundation 699
    Notes and Questions 703
        b. Financing and Partners’ Ownership Interests 705
            i. Partner Contributions 705
            ii. Partnership Property 706
            iii. Partners’ Interest in the Partnership 707
            iv. Allocations and Distributions to Partners 708
    Starr v. Fordham 708
    Notes and Questions 710
        c. Personal Liability 711
        d. Management 712
    Kansallis Finance Ltd. v. Fern 713
    Notes and Questions 715
        e. Fiduciary Duties 717
    Meinhard v. Salmon 717
    Notes and Questions 722
    Baltrusch v. Baltrusch 725
    Notes and Questions 727
        f. Dissociation 727
        g. Dissolution 729
    McCormick v. Brevig 730
  2. Other Partnership Forms 733
    1. Joint Ventures 733
    2. Limited Partnerships 735
        a. Background and Context 735
        b. The Current Setting 736
    3. Limited Liability Partnerships and Limited Liability Limited Partnerships 737
  3. Federal Securities Laws 738
  4. Terms of Art in This Chapter 738

Chapter 19. Limited Liability Companies 739

  1. Background and Context 739
    Susan Pace Hamill, The Origins Behind the Limited Liability Company 739
    Notes and Questions 741
  2. The Current Setting 742
    1. Introduction 742
    Elf Atochem North America, Inc. v. Jaffari 742
    2. Formation 744
        a. Statutory Requirements 744
        b. Promoter Liability and Defective Formation 744
    P.D. 2000 L.L.C. v. First Financial Planners, Inc. 745
    Notes and Questions 747
        c. Operating Agreements 747
    3. Financing 748
        a. Capital Contributions 748
        b. Allocations and Distributions to Members 748
    4. Members’ Interest 750
        a. Financial 750
    New Horizons Supply Cooperative v. Haack 751
    Notes and Questions 753
        b. Managerial 753
        c. Additional Members, Transferability, and Dissociation 754
    Five Star Concrete, L.L.C. v. Klink, Inc. 755
    Notes and Questions 757
    5. Management 758
        a. Statutory Default Rules 758
        b. Manager-Managed Structures 759
        6. Fiduciary Duties 759
    McConnell v. Hunt Sports Enterprises 760
    Notes and Questions 764
    7. Dissolution 765
    New Horizons Supply Cooperative v. Haack 767
    Notes and Questions 768
  3. Federal Securities Laws 768
  4. Terms of Art in This Chapter 769

Part V. CHOICE OF FORM 771

Chapter 20. Choice of Entity 773

  1. Variable Characteristics Important in Choosing an Entity 774
    1. Organizational Differences 774
    2. Operational Differences 775
        a. Financial 775
        b. Managerial 775
    3. Differences Regarding Transferred Ownership Interest 776
  2. How to Choose the Appropriate Entity 778
  3. Fixing the Problem 779
    Harry J. Haynsworth, The Unified Business Organizations Code: The Next Generation 779
    Notes and Questions 782
    Richard A. Booth, Form and Function in Business Organizations 783
    Notes and Questions 790
  4. Terms of Art in This Chapter 791

Glossary 793
Table of Cases 809
Index 813