Board of Bar Examiners of the Supreme Court of Delaware
Chuck Coach ("Coach") is a full-time tenured mathematics professor and head soccer coach at United University ("United") in Smallville. Coach's soccer teams won the conference championship in each of his first seven seasons at United. As a result, United's home soccer games routinely drew in excess of 20,000 fans. In 2000, however, Coach had his first losing season. Attendance at home games that year was less than half of what it had been in prior years.
On September 7, 2001, the United soccer team played in its first game of the season at Centreville College and won 1-0. On September 12, the day after the terrorist attacks on the World Trade Center and the Pentagon, the United Board of Trustees met in an emergency session. All five Board members voted unanimously to cancel all sporting events and extra-curricular activities for five days. The Board also decided that, for the remainder of the year, a brief moment of silence would be observed at the beginning of all of United's home sporting events. In a press release announcing its decision, the Board noted the need for all Americans to honor the victims of September 11 and to stand united in the war against terrorism.
Just before the start of the next United home soccer game on Saturday afternoon, September 22, the United band played the National Anthem. Immediately thereafter Father Duffy, a Catholic priest who was dressed in casual clothes, was introduced. Father Duffy asked the crowd to observe a moment of silent meditation for the victims of the September 11 terrorist attacks. Jack Eagle ("Eagle"), one of United's Board members, had asked Father Duffy to lead the moment of silence because he was a personal friend who had served with Eagle in the Marines and because the priest had lost a sister in the attack on the World Trade Center on September 11. Throughout the moment of silent meditation, Coach continued to talk in a conspicuous way to one of his assistant coaches. Eagle was in the stands and was outraged by Coach's actions. He commented to those around him that he would not put up with this unpatriotic attitude. The United soccer team lost the ensuing game 2-1.
1. You are an attorney in Smallville. Al Adams, a United student who attended the soccer game on September 22, has come to your office. Adams tells you that he was offended by the religious nature of the pre-game ceremonies and he wants you to file an action against United.
(a) State what claims, if any, might be filed on behalf of Adams against United and discuss the likelihood that each claim would be successful. Explain your analysis.
(b) Assuming Adams prevailed, state what relief the Court might be expected to grant. Explain your answer.
Earlier, on September 13, 2001, a group of twenty United students had applied to the Smallville Police for a permit to hold a demonstration on Saturday morning, September 22, in Smallville's only public park, which is two blocks from the United soccer stadium. The park traditionally has been used for social and political gatherings and demonstrations. The purpose of the students' demonstration was to protest recent attacks on two Islamic businesses in Smallville. The application was denied based on a Smallville ordinance that prohibited the use of the park for any demonstrations or other mass meetings on days on which there were soccer games at United soccer stadium. The ordinance had been passed in 1969 after a riot had occurred when drunken fans from a United soccer game had confronted a group of over 200 anti-war demonstrators.
2. Assume that two of the United students who had applied for the permit contact you on September 14. They tell you that they wish to go forward with the demonstration but they do not want to violate the law.
(a) State what claims, if any, might be filed on the students' behalf against the Smallville Police and discuss the likelihood that each claim would be successful. Explain your analysis.
(b) Assuming the students prevailed, state what relief the Court might be expected to grant. Explain your answer.
On Monday, September 24, when Coach arrived at school, he was given a written notice stating that he had been terminated as head soccer coach effective immediately. No reasons were given for the termination.
3. Assume Coach comes to see you the next day, Tuesday, September 25.
(a) State what claims, if any, might be filed on his behalf against United and discuss the likelihood that each claim would be successful. Explain your analysis.
(b) Assuming Coach prevailed, state what relief the Court might be expected to grant. Explain your answer.
John Farmer owns a large piece of farmland near Laurel, Delaware. Farmer lives on the property, and raises crops and livestock. One 10-acre section of Farmer's property is partially wooded and is infested with groundhogs. Despite years of efforts, Farmer has been unable to rid that section of his property of the groundhogs and, therefore, it is of little use to him. As a result, Farmer allows We Got Paintballs, Inc. ("WGP"), a company that operates paintball war games, to use that section of his property for its outings free of charge.In the outings that it sponsors, WGP provides the members of two teams of combatants with the gear that they need for the game pursuant to an express bailment agreement. The gear includes helmets, goggles, military-style clothing, and paintball guns that fire small plastic balls filled with paint. The object of the game is for one team to capture the other team's flag, while preventing the other team from doing the same. Once a player is hit with a paintball, that player is out and must leave the game.
Because of the dangerous nature of the paintball games, WGP requires all players to sign a release form before allowing them to play. The release form reads as follows:
I request permission to participate in paintball games sponsored by We Got Paintballs, Inc. ("WGP"). I fully understand that paintball games may be extremely dangerous and involve the risk of serious injury or death and involve the risk of property damage.
I agree that I alone am responsible for my safety while playing paintball. I also specifically acknowledge that none of WGP, its owners, employees or guests, nor any landowners, landholders or other persons making property available to WGP, is responsible for my safety. I, for myself and for my heirs, assigns, guardians and legal representatives, specifically RELEASE and DISCHARGE, in advance, the parties listed above from any and all liability whether known or unknown, even though that liability may arise out of negligence or carelessness of the persons or entities mentioned above or of others.
Two brothers, Andy and Bob Prescott, went to WGP's offices to arrange a paintball game for a group of their friends. Andy and Bob explained to the WGP employee that they had never played a paintball game before, but they wanted to give it a try. WGP arranged for a game for Andy and Bob and their friends for the upcoming weekend at Farmer's farm. A WGP employee provided to Andy and Bob release forms for all of the players to sign and to bring with them to the game that weekend.
At the appointed time, all of the paintball players arrived at Farmer's property. A WGP employee first collected the signed release forms. Each of the players turned in a signed release form except Andy. The WGP employee did not notice that Andy had failed to turn in a signed release form. The WGP employee then distributed all of the equipment to the players. The WGP employee did not give the players any instruction on the use or the dangers of the paintball guns.
During the game, Andy was shot with a paintball by one of the other players. Because he was only "wounded," and intending to be funny in front of his friends, Andy decided to commit a mock suicide with his paintball gun. He pointed the paintball gun toward his helmet and fired. The paintball hit Andy's goggles. The goggles were not made of shatterproof material. The fragments of the shattered goggles entered Andy's right eye and caused permanent blindness.
1. Assume Andy filed suit against WGP.
(a) State what claims Andy should assert against WGP, the elements of any such claims and whether or not the requisite elements can be established in this case.
(b) State what defenses WGP should raise and whether or not the defenses are likely to be successful. Explain your analysis.
During the game, Bob was running across a field and stepped in a groundhog hole. He tore the ligaments in his knee and separated his shoulder when he fell.
2. Assume Bob filed suit against Farmer and WGP for the personal injuries that he suffered during the game.
(a) State what claims Bob should assert against Farmer and WGP, the elements of any such claims and whether or not the requisite elements can be established in this case.
(b) State what defenses WGP should raise and whether or not the defenses are likely to be successful. Explain your analysis.
(c) State what defenses Farmer should raise and whether or not the defenses are likely to be successful. Explain your analysis.
On December 15, 2001, Bill Builder ("Builder"), owner and operator of Bill Builder Construction, Inc. ("BBC"), entered into an agreement with Ralph Realtor ("Realtor"), a real estate agent, for Realtor to act as Builder's real estate agent in selling property in Builder's new housing development of Bubbling Creek. Builder told Realtor that the terms of any sale had to be approved by Builder. Builder gave Realtor an office in the model home and business cards bearing the BBC logo.
On January 1, 2002, Realtor obtained a signed contract from Otto Owner ("Owner") for the purchase of the property located on Bubbling Creek Lot #3 ("Lot #3") for $550,000. The contract provided in bold type: "ALL MODIFICATIONS OR ADDITIONS TO THIS AGREEMENT MUST BE APPROVED IN WRITING BY BILL BUILDER." Realtor submitted the contract to Builder on the same day Realtor received it. After Builder reviewed it, Builder signed the contract.
While negotiating that contract, Realtor had learned that Owner was considering listing his property in another neighborhood near Sandy Beach for sale at $250,000. Realtor knew Builder would soon publicly announce his plan to develop a boat marina and restaurant in Sandy Beach near Owner's lot and that the value of Owner's lot would likely increase substantially after that announcement. Realtor offered to buy the beach lot from Owner for $250,000. Realtor did not tell Owner about Builder's impending announcement regarding the boat marina and restaurant in Sandy Beach. Owner told Realtor he would consider Realtor's offer and respond shortly.
By the time the closing on Lot #3 was held on March 1, 2002, Owner had not yet responded to Realtor's offer to buy Owner's Sandy Beach lot. At the closing, Owner surprised Realtor by telling him that Owner would not close the sale of Lot #3 and would not sell the Sandy Beach lot to Realtor unless Builder agreed to remove three poplar trees from Lot #3. Owner knew that removal of the trees was not included in the original contract signed by Builder. Realtor told Owner that all changes to the contract required written approval by Builder. Realtor left the room, telephoned Builder and told Builder that Owner would not close on the sale unless Builder removed one tree from Lot #3. Builder responded, "Tell Owner that I will not agree to remove a tree, and I will not accept his conditions. This contract is cancelled. Besides, I have another buyer for Lot #3 at a higher price."
Realtor ignored what Builder told him and, instead, returned to the room and told Owner that it was fine to: "close the sale under the signed contract with Builder and the three poplar trees will be removed." Owner told Realtor: "I accept your promise to remove the three poplar trees and your offer to purchase my lot in Sandy Beach for $250,000."
1. Is Builder bound by Realtor's promise to remove the three poplar trees? Explain.
Immediately after the closing, Realtor called Builder and informed him that, despite Builder's instructions to the contrary, Realtor closed the sale to Owner and promised Owner that Builder would remove one poplar tree. Realtor said nothing to Builder about Realtor's purchase of the Sandy Beach lot from Owner. Builder was furious and told Realtor: "The tree removal is your problem and you owe me $150,000 because you disregarded my instructions and closed the sale of Lot #3 to Owner. I have a signed offer from another buyer for Lot #3 at $700,000."
2. Assuming that there was no binding contract between Builder and Owner for the sale of Lot #3 to Owner at any time prior to completion of the closing, is Realtor liable to Builder for closing the sale of Lot #3 to Owner contrary to Builder's instructions? Explain your answer.
Larry Landscaper ("Landscaper"), who handled all of the landscaping and tree-cutting services for BBC, had a contract with BBC that provided, among other things:
- Landscaper would provide all landscaping and tree-cutting services on all projects of BBC;
- The specific services to be rendered and the materials to be used by Landscaper were required to be specified and approved in advance by Builder; and
- Builder had sole authority to control and supervise Landscaper's work.
The contract between Landscaper and BBC stated in bold print: "LANDSCAPER UNDERSTANDS HE IS AN INDEPENDENT CONTRACTOR AND NOT AN EMPLOYEE OF BILL BUILDER CONSTRUCTION, INC. AND THAT THIS CONTRACT IS TERMINABLE AT WILL BY BILL BUILDER CONSTRUCTION, INC."
On January 2, 2002, the day after Owner and Builder executed the contract for the sale of Lot #3, Builder told Landscaper that the only work required on Lot #3 was sodding, which Landscaper completed the next day. Without Builder's authorization, on March 2, 2002, the day after the closing of the sale of Lot #3, Realtor told Landscaper to remove three poplar trees at the back corner of Lot #3 immediately. Landscaper was busy, so he told his 17-year old nephew, Ed Excavator ("Excavator"), to remove the three poplar trees at the back corner of Lot #3. Although Builder was unaware that Landscaper told Excavator to remove the three poplar trees, Builder knew Excavator routinely assisted Landscaper with work on his properties.
Later on, Builder had a change of heart regarding his refusal to remove one tree from Lot #3. Unaware of Realtor's instructions to Landscaper, Builder called Landscaper on March 2, 2002, and left a message on Landscaper's answering machine instructing Landscaper to "ask Owner to identify the tree he wished to have removed from Lot #3, remove only that tree and do nothing further on Lot #3."
3. Did Builder's message left on Landscaper's answering machine ratify Realtor's promise to Owner to remove three poplar trees? Did it ratify Realtor's instructions to Landscaper regarding the tree removal? Explain your answer.
Excavator met Owner when Excavator arrived at Lot #3 in Landscaper's truck. Owner instructed Excavator to remove three poplar trees in the back corner of the lot. Owner also offered to pay Excavator $100 cash on the side if Excavator would also remove a fourth tree between Owner's driveway and his neighbor's driveway. Excavator agreed. Excavator and Owner also agreed not to tell Landscaper or Builder about the removal of the additional tree. Unfortunately, Excavator was not very knowledgeable about tree species, and he negligently removed three pine trees instead of three poplar trees from Lot #3. Furthermore, while attempting to remove the tree between the driveways as Owner had requested, Excavator caused the tree to fall on and damage neighbor's car.
4. Assume that Excavator was negligent in removing the three pine trees. Are Landscaper and/or Builder liable to Owner for the negligence? Explain your answer.
5. Assume that Excavator was negligent in cutting down the tree between the driveways. Are Landscaper, Owner and/or Builder liable to neighbor for the negligence? Explain your answer. In answering this question, do not address whether Owner was negligent.
6. Is Realtor liable to Builder with respect to removal of the pine trees? Explain your answer.
Arthur, who is under the influence of alcohol, decides to steal a car rather than walk home from the neighborhood tavern. Brandishing a loaded handgun, he forces the driver of an idling car out of her vehicle and drives away in her car. As Arthur is driving, he suddenly hears the car owner's 8 month-old son crying in the backseat. Before Arthur can stop the car to release the infant, he notices a marked police car approaching at a high speed.
Arthur throws his gun out the window, turns the car around and drives away from the police. While the police are pursuing him, Arthur approaches an intersection traveling in excess of the speed limit for the two-lane roadway. Arthur, who is 80 feet from the intersection, moves to the left lane and attempts to pass a blue car in front of him even though a Delaware statute prohibits passing within 100 feet of an intersection. The blue car suddenly turns left in front of Arthur. The car Arthur is driving strikes the rear of the blue car. The blue car spins out of control and hits a utility pole, severely injuring the driver and passenger.
Arthur continues driving. The traffic light in his direction turns yellow. As Arthur is entering the intersection, a brown car on the intersecting roadway disregards the red light in its direction and pulls out in front of Arthur. Arthur hits the brown car broadside, killing the driver instantly. Arthur staggers from his stolen car and begins fighting with two police officers, both of whom are injured in the ensuing melee.
After giving the police a false name, Arthur offers the police officers $1,000 each to let him go. At the police station, Arthur signs a fictitious name on the arrest fingerprint card. In the police detaining cell, Arthur swallows contraband drugs he had hidden in his hollow shoe heel.
Assume that all of the above-described activities occur in the State of Delaware in calendar year 2002.
(a) Identify all Delaware State criminal charges for which Arthur may reasonably be prosecuted. If a crime has more than one degree, state the specific degree that should be charged and explain why.
(b) Discuss any defense that Arthur may assert relating to causation in connection with Arthur's two motor vehicle collisions.
Alice purchased a house near Dover, Delaware. After moving into her new house, Alice discovered that the hot water heater was not working. Alice called Pete, a local plumber. Pete inspected the water heater and informed Alice that it needed to be replaced. Pete stated that he would replace the water heater for $400, and would require a $200 deposit before any work began. Pete stated that he needed the deposit to pay for the new water heater. Alice explained to Pete that it was essential that the water heater be replaced by August 24 because her parents were coming to visit on August 25. Pete agreed that he would complete the job by August 24, and Alice gave him a $200 check for the deposit.
The day after meeting with Alice, Pete used the full amount of the deposit to purchase the water heater for Alice's home. Pete, however, got tied up on another job. He feared that the other job would prevent him from installing Alice's water heater until August 28. On August 23, Pete called Alice and explained that he would not be able to install her water heater until August 28. Alice was furious and told Pete that she would hire someone else to do it.
Alice called Casey, Pete's chief competitor, and asked if Casey could install the water heater the next day (August 24). Casey agreed to install the water heater for $400, but demanded an extra $50 for next day service. After Casey explained that the additional $50 charge was customary for such expedited service, Alice agreed to pay Casey $450 to replace the water heater and, on August 23, signed Casey's standard services contract. Casey installed the new hot water heater the next morning.
Pete believed that Alice was being unreasonable but he did not want to lose the job because he had already paid for Alice's water heater. Therefore, Pete left his other job early on August 24 and went to Alice's house to install the water heater. Alice informed Pete that Casey had already installed the water heater and demanded that Pete return her $200 deposit. Pete refused to return Alice's deposit, and stated that he was ready to install the water heater as required by their agreement. Pete threatened to sue Alice for the remaining $200 due under their agreement.
1. Can Pete enforce his verbal agreement with Alice and collect the remaining $200 that he claims he is due under that agreement? Explain your answer.
2. Is Pete required to return Alice's $200 deposit even though he used the deposit to purchase Alice's water heater? Explain your answer.
3. In addition to the $200 deposit, Alice would like to recover from Pete the additional $50 that she had paid to Casey for next day service. Can Alice recover the $50 from Pete? Explain your answer.
Approximately two months after Casey installed the water heater, Alice discovered that her basement was flooded. She immediately called another plumber, Bob, to determine the source of the water. Bob informed Alice that the water heater was leaking because it had not been properly installed. Alice paid Bob $500 to fix the water heater and pump the water out of the basement. As a result of the water in the basement, certain valuable antique furniture that Alice had stored in her basement was damaged. Prior to the flood, the furniture was worth $2,000. Alice obtained an estimate that repair of the furniture would cost $700. Alice elected not to repair the furniture, and instead donated the furniture to a local charity. Alice demanded that Casey reimburse her for the $500 that she paid to Bob, and pay her the full value of the furniture ($2,000). Casey refused to pay any amount to Alice.
4. Assuming that the flood in Alice's basement was due to Casey's failure to install the water heater properly, what amounts, if any, is Casey obligated to pay to Alice? Explain your answer. [Note: in answering this question, ignore the "Limitation of Damages" provision discussed in the enumerated paragraph 6 of this Question].
5. Assume Alice files suit against Casey. In the complaint, Alice requests an award of punitive damages. Is Alice likely to recover punitive damages in this case? Explain your answer. [Note: in answering this question, ignore the "Limitation of Damages" provision discussed in the enumerated paragraph 6 of this Question].
Assume that Casey's standard services contract, which Alice signed on August 23, contained the following provision:
Limitation of Damages
Customer agrees that his or her sole remedy in the event that Casey shall fail to perform properly the services referenced in this agreement shall be the return of half of the amount paid by Customer to Casey with respect to such services.
In response to Alice's repeated demands for payment, Casey agrees to return $225 of the $450 that Alice paid to Casey to install the water heater. Relying on the Limitation of Damages provision in the contract, Casey refuses to pay any additional amounts to Alice.
6. Is Casey's liability to Alice limited to $225? Explain your answer.
Shortly after the flood in her basement, Alice noticed water in her attic every time it rained. Alice called Ralph, a Dover roofer, to provide her with an estimate for a new roof. Alice explained to Ralph that she wanted a thirty (30)-year roof because she never wanted to replace her roof again. Ralph gave Alice an estimate of $1,500 for the job. Alice hired Ralph to install a new roof and signed the contract given to her by Ralph, which provided that:
Ralph shall install new standard shingles on Customer's roof. Customer shall make payment in the amount of $1,500 upon the completion of installation.
After the contract was signed, Ralph sent two of his employees to install the roof on Alice's house. When the job was done, Alice thanked the men and commented that she was glad she wouldn't have to replace her roof for at least another 30 years. The supervisor responded that the contract provided for the installation of standard shingles, which were only warranted for 20 years. Alice refused to pay anything for the roof because a 30-year roof had not been installed as requested.
7. Ralph files suit, claiming that he complied with the contract by installing 20-year shingles on Alice's roof and, therefore, Alice owes him $1,500. At trial, Alice seeks to introduce evidence regarding her discussion with Ralph prior to the execution of the contract in which she requested 30-year shingles. Should the Court consider such evidence? Explain your answer.
8. Assume that the Court interprets the contract to provide for the installation of 30-year shingles. Will Alice be able to obtain an order from the Court requiring Ralph to install 30-year shingles? Explain your answer.
Wendy Worth, a lifelong Delaware resident, died on March 1, 2002, at the age of 75. For the last year of her life, she lived in a nursing home in Wilmington, after having suffered a stroke in February 2001. The stroke had left her physically disabled and somewhat confused and forgetful, but still able to recognize people and hold occasional conversations.
At the time of her death, Wendy's second husband, Al, was still living. Wendy and Al had separated in 1997, but they never divorced. Wendy was also survived by two sons: Bob, a Delaware resident, a lawyer, and her son from her 1965 marriage to Al; and Chris, a California resident and her son from her prior marriage to Dan. Chris had not seen or spoken to Wendy for many years. Also surviving Wendy were Bob's minor children, Ellen and Fred. Wendy's first husband, Dan, who had divorced Wendy in 1963, was also still living when Wendy died.
During Wendy's last year, she rarely had any visitors, except Bob, who visited her every week. In December 2001, at Wendy's request, Bob prepared a will for Wendy. The will named Bob as executor of Wendy's estate and left all of her property to Bob (or to Bob's children if Bob were to predecease Wendy), except for any specific items of property to be disposed of pursuant to a separate writing that the will expressly authorized pursuant to 12 Del. C. § 212. In January 2002, Wendy executed the will, and two competent nursing home staff members duly signed as witnesses, all in accordance with the Delaware law requirements for valid execution of wills
(1) At the funeral, Chris learned from one of the nursing home aides that Bob had often been overheard telling Wendy that he (Bob) was happy to visit Wendy at the nursing home every week, but that he expected her to take care of him in return. Based on this fact and the other facts described above, Chris contends that the will should be invalidated. Is Chris likely to be successful in his contention? Explain your answer.
(2) Assume that Bob had falsely told Wendy, shortly before preparing her will, that Chris had a terminal illness and was expected to die soon. How would this fact affect Chris' contention that the will should be invalidated? Explain your answer.
(3) Assume that the January 2002 will is valid, and that it was found in a drawer of Wendy's desk at the nursing home, clipped to a note stating: "At my death, I want my coin collection given to my friend Greta, my vacation home in Rehoboth Beach given to my nurse Hilary, and my IBM stock given to my church." The note is in Wendy's handwriting but not signed by Wendy. The note is dated October 3, 1999. Is this note effective to make any or all of the three specified dispositions of property? Explain your answer.
(4) Assume that the January 2002 will is valid and that Wendy's property includes $10,000 in a bank account that Bob would prefer to have his daughter Ellen receive rather than keep for himself. Is there a process by which Bob can properly cause all or part of the $10,000 to be distributed directly to Ellen? Explain your answer.
(5) Assume that the January 2002 will is valid. What part of Wendy's estate, if any, is Al entitled to receive? Explain your answer.
(6) Assume that the January 2002 will is invalid, but that another will, dated May 15, 1960, was also found in Wendy's desk. The May 15, 1960 will provides for all of Wendy's estate to be given at her death "to my husband, Dan, if he shall survive me, or, if Dan shall not survive me, to my issue who shall survive me." Assuming that the May 15, 1960 will was properly executed and witnessed and is otherwise valid, who is entitled to receive Wendy's estate? If more than one person is entitled to share in the estate, in what proportions do they share in the estate? Explain your answer.
(7) Assume that both the January 2002 will and the May 15, 1960 will are invalid and there is no other will. Who is entitled to receive Wendy's estate? If more than one person is entitled to share in the estate, in what proportions do they share in the estate? Explain your answer.
Conglomerate Company ("Conglomerate") has holdings in various businesses throughout the world. Conglomerate is wholly owned by Mr. Giant, its chairman and CEO. Conglomerate's principal business interest in the United States is Health Drinks Sub, Inc. ("Sub"), a Delaware corporation, which manufactures and distributes popular, vitamin-rich drinks. To help finance its growth, in 1995, Sub successfully offered to the public 4.9 million of Sub's 10 million authorized and outstanding shares at $20/share, leaving Conglomerate with 5.1 million shares and a 51% interest in Sub. Sub has no provision in its Certificate of Incorporation exculpating directors from liability under 8 Del. C. § 102(b)(7). Sub's shares are traded on a national securities exchange.
At all relevant times following the offering, Sub's board of directors consists of five directors, two of whom are also employed by Conglomerate: Mr. Giant and Mrs. Money, Conglomerate's CFO. The other three directors of Sub are Able, Baker and Charlie (the "Outside Directors"). They are persons of considerable financial means and business experience who are employed by companies unaffiliated with Conglomerate or Sub. They each own 10,000 shares of Sub.
Sub's share price declined as many investors favored the more popular technology and biotech stocks. Believing that the market was significantly undervaluing Sub's stock, Conglomerate announced a tender offer on June 1, 2000 for the purpose of acquiring all of the outstanding shares of Sub that it did not own at $15/share, a premium over Sub's pre-announcement trading price of $10/share. The next day, the Sub board met to consider the offer. Mr. Giant and Mrs. Money announced they would not participate in the meeting, but urged Able, Baker and Charlie to act quickly. The Outside Directors retained an investment banking firm ("Banker") to advise them with respect to the adequacy of the offer.
After evaluating Sub, Banker advised the Outside Directors that Sub's fair value was in the range of $22?25/share. Conglomerate's tender offer materials accurately disclosed to Sub's shareholders that: (i) in the opinion of the Outside Directors, the fair value of Sub exceeded the tender offer price; (ii) Sub's stock might be delisted by the national securities exchange if only a small number of shares were left outstanding after the tender offer; (iii) delisting would affect the stock's liquidity; and (iv) the Outside Directors took no position with respect to whether shareholders should accept the tender offer. Sub's shareholders holding 3.1 million shares accepted Conglomerate's tender offer. As a result, as of June 30, 2000, Conglomerate became the owner of 82% of the outstanding Sub shares.
Three months later, on October 1, 2000, Conglomerate sent a letter to the Sub board expressing an interest in negotiating a merger of Sub with and into Conglomerate. Under the merger proposal, the shares of the remaining public shareholders would be cashed out for $19/share, and Sub would become a wholly owned subsidiary of Conglomerate. At a meeting of the Sub board, all five directors voted to approve the appointment of the Outside Directors as a committee of the Board (the "Committee") with authority to hire financial and legal advisors and to make a recommendation to the full board with respect to the merger proposal. The Committee hired legal advisers. Because of the cost incurred in connection with the earlier tender offer and the recent receipt of Banker's advice, the Committee decided to rely on Banker's earlier advice that the fair value of the Company was $22-25/share. The Committee advised Conglomerate that it could not approve a merger proposal for less than $23.50/share. Conglomerate countered by increasing its offer to $21/share, but stated that it would not pay more. Thereafter, the Committee received an expression of interest from Interloper, Inc., a third party, at $26/share, subject to due diligence and Conglomerate's agreement to support a merger at $26/share. Interloper was a competitor of Sub and held 1,000 shares of Sub stock.
The Committee informed Conglomerate of Interloper's interest. Conglomerate advised the Committee that (i) it would not sell its interest in Sub or approve a merger with another party, and (ii) its offer of $21/share would expire if not accepted within one week. Faced with Conglomerate's ultimatum, the Committee voted to recommend the merger agreement with Conglomerate at $21/share. Based on the Committee's recommendation, all of the directors of Sub voted to approve the merger and to authorize its officers to execute the merger agreement. Thereafter, Conglomerate recommended and Sub's board agreed to make approval of the merger subject to a condition that the merger be approved by a majority of the shareholders of Sub not affiliated with Conglomerate. A shareholder vote on the merger was set for a date 70 days thereafter. Accurate disclosures were sent to Sub's shareholders regarding Sub's financial condition, the course of the negotiations and other matters required by federal law. Banker, however, objected to the use of its prior report, and no disclosures were made of Banker's fair value analysis issued in connection with the earlier tender offer.
Interloper was surprised by the announced terms of the merger and immediately sent a notarized letter to the president of Sub demanding to inspect (i) the financial records of the company so that it could determine the value of its investment and (ii) the stockholder list so that it could communicate with other stockholders respecting the proposed vote on the pending merger. Interloper offered to pay the reasonable costs of inspection, and requested that inspection and copying of the requested materials occur one week later. Sub considered Interloper's demand a nuisance and declined to respond.
1. John Q. Public ("Public") held 1,000 shares of Sub stock before the tender offer. He sold 500 shares into Conglomerate's tender offer and he has consulted you about his rights, if any, under Delaware law with respect to the tender offer, which he now believes was coercive and inadequate. Public also consulted you with respect to the merger, which he likewise believes is unfair and against which he will vote his shares.
(a) Discuss whether Public may assert claims against Conglomerate or Sub's directors in connection with the tender offer and any defenses that these parties might raise. Discuss the legal standards that the Court of Chancery would likely employ in analyzing such claims and defenses.
(b) Discuss whether Public may assert fiduciary duty claims in connection with the merger, against whom the claims would be made and any defenses that the defendants might raise.
(c) Assume that a majority of the disinterested shareholders voted with Conglomerate to approve the merger transaction. Discuss the effect that this fact would have on the legal analysis of the Court of Chancery with respect to such claims.
(d) Discuss whether Public has other claims that he could assert in connection with the merger, the elements of any such claims, and any remedy that might be available to Public.
2. Interloper has asked your advice about obtaining access to the documents it requested so that it can better evaluate the merger and communicate with other shareholders about such merger. Identify and discuss any rights that Interloper has with respect to its inspection demands, how it would enforce any such rights, and any defenses thereto.
1. John Tenant ("Tenant") resides in an apartment complex in Kent County, Delaware, owned by Landlord, Inc., a Pennsylvania corporation registered to do business in Delaware ("Landlord"). Tenant complained to Landlord's resident maintenance man, Mr. Fixit, for several months that Tenant's upstairs neighbor's plumbing leaked into Tenant's apartment. Tenant's ceiling and carpet had water spots and some of his favorite DVD disks got wet, but were easily dried off. Landlord denied there were any leaks, and suggested that the moisture likely came from Tenant taking hour-long hot showers several times per day.
Tenant retained Betty Barrister ("Barrister") to remedy the situation. Barrister filed an unverified Complaint in the Court of Chancery seeking a temporary restraining order as well as a preliminary and a permanent injunction against Landlord. In her Complaint, Barrister alleged Tenant feared the ceiling in Tenant's apartment would crack and fall in if the leaks were not stopped, that the carpet would become moldy and that the leaks would damage Tenant's personal property. Barrister asked that Landlord be compelled to make the repairs to the plumbing and to Tenant's apartment. No further averments were made in the count for injunctive relief.
Barrister directed service upon Mr. Fixit at the apartment complex. Mr. Fixit's sole relationship to Landlord was that of a maintenance man at the apartment complex, a fact made known to all tenants when they leased an apartment. The deputy sheriff attempted service at Mr. Fixit's apartment but he was not home. The deputy, however, left the Complaint with Mr. Fixit's sixteen-year old son, who promptly tossed it in the trash and did not tell anyone about it.
(a) Under these facts, does the Court of Chancery have subject matter jurisdiction over this action and, if so, on what basis?
(b) May the Court exercise personal jurisdiction over Landlord?
(c) Assuming the Court does have proper jurisdiction, discuss whether the temporary restraining order, preliminary injunction and permanent injunction will issue based on the facts as stated. Explain the factors the Court would consider.
2. In the same Complaint filed in the Court of Chancery, Barrister has alleged a second count as follows:
Landlord was negligent in failing to investigate Tenant's complaint resulting in damages to Tenant.
No further mention of negligence, negligent acts or damages was stated in the Complaint. Tenant's prayer for relief included one million dollars ($1,000,000.00) for pain, suffering and mental anguish, twenty thousand dollars ($20,000.00) for damage to his cutting edge technology entertainment system as well as punitive damages, attorneys' fees and costs. The Complaint demanded a trial by jury without stating the number of jurors requested. No Certificate of Value was attached to the Complaint. After reviewing the Complaint and ruling on the injunctive relief, the Vice Chancellor to whom the Complaint was assigned transferred the Complaint to the Superior Court for further action.
Because Landlord was unaware of the Complaint, no answer was filed. Barrister, on the twenty-first day after the Complaint was left with Mr. Fixit's son, filed a praecipe with the Prothonotary for a default judgment in the amount of $1,020,000.00 plus $1,000,000.00 in punitive damages, plus $672,660.00, or one-third of the total damages, as attorneys' fees. Barrister filed the necessary execution papers to sell the apartment complex. Landlord received proper notice of the Sheriff's sale and, one week before the scheduled sale, came to you. Landlord has asked you to review the situation and advise it on the following:
(a) Could the Chancery Court have retained jurisdiction? On what basis could the Complaint be transferred to the Superior Court? What factors would the Vice Chancellor weigh?
(b) Was Count 2 of the Complaint properly pled? Explain your answer under the Superior Court Rules.
(c) What defenses or motions can Landlord raise to the Complaint and prayer for relief?
3. Landlord feels you are not being aggressive enough in dealing with Tenant. As a result, Landlord seeks other counsel, who files an action in the Court of Common Pleas to summarily evict Tenant. Landlord's new counsel also seeks damages against Tenant for abuse of process in the other litigation, demanding in excess of $100,000.00 in damages.
What motions might Barrister file on behalf of Tenant in this action? State the basis for the motion(s).
4. Tenant's suit against Landlord was tried in Superior Court before a jury of twelve people. At the close of all evidence, Landlord moved for a directed verdict, which was denied. Thereafter, the jury awarded Tenant $100,000,000.00 in damages, including punitive damages.
Assume that all issues regarding the Complaint were resolved before trial. Advise Landlord on what post-trial motions, pleadings or appeals concerning the trial and verdict can be filed and with which Court. Include in your answer the timing for such motions, pleadings or appeals. Do not discuss the likelihood of success of any such filings.
Board of Bar Examiners of the Supreme Court of Delaware
The Renaissance Centre
405 North King Street, Suite 420
Wilmington, DE 19801
P: (302) 651-3940 | F: (302) 651-3939