Board of Bar Examiners of the Supreme Court of Delaware
On July 4, 2003, Arthur attended a party in Rehoboth Beach, Delaware. After consuming over a dozen beers in less than 3 hours, Arthur attempted to drive home to Dover, Delaware. On the way, Arthur lost control of his car and struck four pedestrians walking on a sidewalk. Three of the pedestrians were seriously injured. The fourth pedestrian, before succumbing to his injuries and dying at the scene, told the ambulance paramedic that he recognized Arthur as the driver of the car that hit them.
Although Arthur sustained a head injury in the collision, he drove away from the accident scene before anyone else arrived. Arthur sought medical treatment at a hospital emergency room in Dover several hours after the accident.
On the day after the accident, Arthur's ex-wife told the police that Arthur confessed to her that he was driving the car that struck the pedestrians. On July 6, 2003, Arthur was arrested and charged with driving under the influence, leaving the scene of a personal injury accident, first degree vehicular homicide and three counts of first degree vehicular assault.
Answer the following questions by stating whether the proffered evidence IS or IS NOT admissible in the following proceedings. Explain each answer.
|A.||At Arthur's criminal preliminary hearing, the prosecution attempts to offer the following evidence:|
|(1)||Testimony from the investigating police officer that several of the party guests told him that they had observed Arthur at the party drinking beer and that Arthur appeared to be drunk.|
|B.||At Arthur's Delaware Superior Court criminal trial, the prosecution, during its case-in-chief, attempts to offer the following evidence:|
|(1)||Opinion testimony by the three surviving pedestrians that Arthur was speeding and driving recklessly;|
|(2)||The paramedic's testimony repeating the statement by the now-deceased pedestrian that Arthur was driving the car;|
|(3)||A party guest's testimony that Arthur stated just prior to leaving the party that he was "drunk as a skunk";|
|(4).||The hospital emergency room doctor's testimony that Arthur said he was recently involved in a motor vehicle accident;|
|(5)||Testimony by a qualified accident reconstruction expert that, based on the length of the tire skid marks at the collision scene, the car was exceeding the posted speed limit;|
|(6)||Certified copies of Arthur's three speeding and two driving under the influence convictions in Delaware over twelve years prior to the pedestrian collision; and|
|(7)||Testimony by the police officer regarding the ex-wife's prior out-of-court statement after the ex-wife admits at trial that she voluntarily talked to the officer about Arthur's accident, but claims she does not remember what she said.|
|C.||In December 2003, after Arthur's criminal charges were resolved in the Delaware Superior Court, the three surviving pedestrians and the estate of the deceased pedestrian filed civil suits against Arthur for the personal injuries sustained and wrongful death. At Arthur's Delaware Superior Court civil trial, the plaintiffs attempt to offer the following evidence:|
|(1)||Arthur's community reputation as someone who drinks to excess and then drives;|
|(2)||Arthur's pretrial oral offer to pay the medical bills for the three surviving pedestrians;|
|(3)||Arthur's "off-the-record" remark to a Delaware newspaper reporter that if he had backed up over the pedestrians there would not be so many witnesses now;|
|(4)||Arthur's $1,000,000 automobile insurance liability policy;|
|(5)||Arthur's membership in a cult of devil worshipers; and|
|(6)||A photocopy of Arthur's diary wherein he mentions hitting the pedestrians.|
In 1970, at age eighteen, Charlie disappeared from Paradise Farm near Dover immediately after the death of his brother and only sibling, Andy. Paradise Farm was owned in fee by the parents of Charlie and Andy. Charlie left no note or any explanation for leaving. Unbeknownst to Charlie when he left, Andy had fathered a son, Baker, by a woman who was a neighbor. Shortly after Baker's birth, the woman brought Baker to Andy's parents and renounced all parental rights. The grandparents raised Baker as their own. No one heard from Charlie for ten years and, in 1980, his parents petitioned the Court of Chancery for a Decree of his presumed death, which was granted.
In 1990, both of Baker's grandparents died intestate, one day apart. Baker remained on Paradise Farm, married Wilma and over the years paid for all expenses associated with the farm operation, as well as all taxes. Baker was very protective of Paradise Farm and posted "No Trespassing" signs. Anyone who came on the farm without permission was arrested for trespassing. He told anyone who would listen that the farm was solely his.
Baker had his attorney prepare a deed conveying the property to both Baker and Wilma. There was no special consideration paid by Wilma. Rather, Baker gifted his interest to her. No title search was done on the property when the deed was prepared. After signing, it was properly recorded in the Office of the Recorder of Deeds in Kent County on June 30, 1991.
In 2000, Wilma decided farm life was not for her and divorced Baker. Wilma did not ask the Family Court to retain ancillary jurisdiction for property division. Assume ownership of Paradise Farm after the divorce was dictated by common law. Baker was too distraught to continue farming, and he entered into a written farm lease with Greg Green for Green to have all agricultural rights to Paradise Farm. The lease was for five years beginning January 1, 2002. Baker moved off the farm to a house in Milford. Baker deposited all the rent he received for use of the farm into his own account for his own expenses.
In December 2003, Dan Developer contacted Baker and offered him $5 million for Paradise Farm. Dan intended to build a housing development. Dan and Baker signed a contract to sell the farm to Dan. Baker received a substantial deposit, which he immediately used to purchase his dream pick-up truck.
On January 1, 2004, Charlie returned to the area and learned his parents were deceased. By word of mouth he discovered Baker's existence. When Charlie appeared at Baker's door, Baker and Charlie were both surprised about each other's existence. Each claimed sole ownership of Paradise Farm. Baker told Charlie he intended to sell the farm. Charlie stated he would never sell his birthright and would seek Court action to enforce his rights. Dan Developer took his contract to Larry Lawyer, who conducted a title search. Larry, who went to high school with Charlie, had recently seen Charlie in town so he knew he was, in fact, not deceased. In his search, Larry discovered that Charlie's parents (and Baker's grandparents) died intestate. He also found the deed with Wilma's name, the Divorce Decree and the Decree of Presumption of Death of Charlie. Despite these findings, Dan wants to purchase the property.
As an associate in Larry Lawyer's firm, you have been asked to prepare a memorandum answering the following:
|(1)||From the time of the death of Baker's grandparents to the present, what are the tenancies by which Paradise Farm has been owned? State what, if any, rights and obligations Baker, Wilma and Charlie have against each other. Explain your answer.|
|(2)||Can Dan enforce the contract of purchase of Paradise Farm and, if so, how and, if not, why not? What other rights and remedies may he have under the facts stated? Explain your answer.|
|(3)||Can Baker force Charlie to sell Paradise Farm? What defenses could Charlie raise? If Baker can force a sale, explain how proceeds would be divided.|
|(4)||Can Baker claim Paradise Farm as his own by adverse possession? Explain your answer.|
Assume Dan Developer purchased Paradise Farms at Baker's forced sale. At the sale, no mention was made of the fact the farm was encumbered by a lease. Rather, it was represented that the property was free and clear of all liens and encumbrances. Shortly thereafter, Dan went to the farm to begin demolition of some buildings where, to his surprise, Green was plowing one of the fields. Dan ordered Green off of the property, but Green refused to vacate the premises and told Dan he had an agricultural lease valid until December 31, 2006. Green's lease is not recorded.
|(5)||Dan seeks advice from you and wants to know if he can have the sale invalidated because nothing was said about the farm lease at the time the property was purchased in the forced sale. Explain your answer.|
|(6)||If Dan cannot have the sale set aside, what are the rights of Dan and Green? Explain your answer.|
|(7)||What would you advise Dan to do? Explain your answer.|
Farmer Frank lives on a farm adjacent to Paradise Farm and he owns a landlocked field, Redacre, that was purchased by his ancestors from Charlie and Baker's predecessors in title over a hundred years ago. Redacre had at one time been part of Paradise Farm. To access Redacre, Frank uses a road over Paradise Farm that goes directly through the middle of the farm's largest field. It had been the only means of access to Redacre and has been used by Frank and his ancestors since they bought Redacre because it is the shortest way from Frank's farm to Redacre. Ten years ago the State built a new highway that now borders Redacre, but it is very inconvenient for him to use it to get to his land.
|(8)||Dan asks you what rights does Frank have to use the access road to Redacre and what right does Dan have to prevent it? Explain your answer.|
|(9)||Dan also wants to know what rights he and Frank would have if Dan offered him a reasonable alternate access over Paradise Farm directly to a public road but at a location other than directly across the large field. Explain your answer.|
Adams and Butler agreed to start a home improvement business in Delaware. To formalize their agreement, they signed the following:
This 1st day of June, 2002, we, the undersigned, agree to form and carry on as co-owners for profit a home improvement business in Delaware named Home Improvement Partners ("Home Improvement"), for a period of two years from the date hereof or such later date as we shall mutually agree in writing. We each promise to contribute $25,000 in cash to Home Improvement upon signing this agreement, to perform services exclusively for Home Improvement for the period of this agreement and to share profits from the business equally.
Butler contributed $25,000 on June 1, 2002. Adams orally promised to Butler that he would deposit his $25,000 contribution in Home Improvement's bank account within 30 days.
Without Butler 's knowledge, one week later, on June 9, 2002, Adams entered into an agreement with Regional Properties, Inc. ("Regional") to improve two buildings in the City of Wilmington. Adams set forth the terms of the agreement in a letter to Regional on Home Improvement letterhead, which Adams signed as "Partner." The agreement provided that Regional would advance funds upon request to Home Improvement to pay for all building materials for Building #1 and Building #2 and, in addition, Regional agreed to pay Home Improvement $30,000 upon completion of work on Building #1 and an additional $30,000 upon completion of work on Building #2.
Adams did not inform Butler of the agreement with Regional. Adams intended to keep the agreement with Regional secret from Butler, complete the work himself and keep the $60,000 profit for himself.
At Adams' request, on June 9, 2002, Regional advanced $10,000 to Adams to pay for materials for Building #1. Adams deposited the $10,000 into his personal bank account and purchased the materials for Building #1 with a personal check in the amount of $10,000. Adams completed the work on Building #1 on June 23, 2002, at which time Regional paid Adams, as agreed, the additional $30,000 for Building #1. Adams immediately deposited the $30,000 into his personal bank account.
On June 30, 2002, at Adams' request, Regional advanced to Adams another $10,000 for materials for Building #2, which Adams deposited into his personal account. On July 1, 2002, before Adams purchased any materials for or began work on Building #2, Butler received Home Improvement's bank statement and discovered that Adams had not made his initial $25,000 contribution to the business as promised. Angry about Adams' failure to make his contribution, on July 2, 2002, Butler sold his entire interest in Home Improvement to Clark for $25,000. Butler also advised Adams by letter on July 2, 2002: "I am hereby withdrawing from Home Improvement and Clark is now your new business partner."
Adams, Butler and Clark have sued each other in Delaware. You are a law clerk for the Judge who has been assigned to resolve the dispute among Adams, Butler and Clark. The Judge has asked you to answer the following questions:
|1.||Were Adams and Butler partners on June 9, 2002 when Adams signed the agreement with Regional? Explain your answer.|
|2.||Assume, for this question only, that Adams and Butler formed a partnership on June 1, 2002. Did Butler's July 2, 2002 letter dissolve the partnership effective July 2, 2002? Explain your answer.|
|3.||Were Adams and Clark partners on July 3, 2002? Explain your answer.|
|4.||If Adams refuses to do the work on Building #2 and Regional is entitled to damages for breach of contract, discuss the liability, if any, of Adams, Butler, Clark and Home Improvement. Explain your answer.|
|5.||advanced by Regional for materials for Building #2 and refuses Regional's request to return the $10,000, is Home Improvement liable to Regional for the $10,000? Explain your answer.|
|6.||Can Home Improvement seek to recover from Adams (1) the $25,000 contribution promised but not paid by Adams, and (2) the $30,000 profit paid to Adams by Regional for the work on Building #1? Explain your answer.|
|7.||Assume, for purposes of this question only, that after July 2, 2002, Adams purchased the necessary materials with the $10,000 advanced by Regional for Building #2, completed the work on Building #2 and was paid, as agreed, a further $30,000 by Regional upon completion of the work on Building #2. Assume further that Home Improvement is dissolved after work is completed on Building #2 and Home Improvement has a net profit of $30,000 after all of Home Improvement's debts and obligations are paid. Discuss the entitlement, if any, of Adams, Butler and Clark to a distribution upon the dissolution and winding up of Home Improvement.|
Henry Headmaster was the principal of a private school located in Sussex County, Delaware. The football team won the school's first-ever championship in the fall of 2003 due to the efforts of new coach and teacher, John Jock. Shortly before the end of the football season, Jock and the team encountered two students, Tom and his girlfriend, Amy, outside the entrance to the gym. Tom was well known as the smartest student in the school, and he was showing Amy a $1,500 cash prize he had just been awarded by a local service club for his essay on democracy. Jock told Tom to give the team his prize money as a token of appreciation for their winning streak, but Tom merely laughed at him. Jock and the team then forced the couple through the gymnasium and into the boys' locker room. Once inside the room, Jock demanded Tom's prize money. When Tom again refused, Jock told quarterback Dan Davis to shoot Tom's girlfriend if Tom did not comply. Davis pulled out a handgun from his locker and pointed it at Amy. Before Tom was forced to hand over his money, however, he and Amy were able to escape when the gym teacher and some other students entered the locker room.
When Amy told her mother, Pam Pyro, about this incident, Pyro immediately withdrew her daughter from the school and called the police. The police investigated Pyro's complaint, but Headmaster provided an alibi for Jock. Headmaster silenced Tom by threatening to alter his high school transcript and called Amy a pathological liar. Pyro stormed into Headmaster's office and accused him of slander and a cover-up. Headmaster threw Pyro out and told her never to return to the school.
After the 2003 football season ended, the school held a banquet for Jock and the team. Headmaster left the celebration early with teacher Carla Collins. Pyro heard about the banquet being held that night and saw her chance for revenge on Jock and the football team. She drove to a convenience store where she purchased some gasoline and a small bottle of iced tea. She poured out the tea and filled the glass bottle with gasoline. Then she stuck in a wick and wrapped a bandana around the wick inside the top of the bottle. Pyro drove to the school and parked her car next to a railroad crossing about 300 yards east of the school's entrance. Pyro walked westward along an unlit two-lane road and onto the school's property. Pyro observed that the gymnasium wing was illuminated and there were cars parked near the gym entrance, including a sports car convertible that Pyro recognized as belonging to Jock. Pyro lit the wick with a lighter, threw the bottle against the wall of the gymnasium and ran back to her car. An explosion occurred and the gymnasium was soon engulfed in flames.
Headmaster and Collins were returning to school, traveling westbound on the two-lane road, when Headmaster saw flames in the distance. Headmaster accelerated but was forced to brake suddenly when Pyro's car abruptly turned in front of him as she fled the scene. The rapid de-acceleration stalled Headmaster's car as it crossed the railroad tracks. He got out and started to run to the school. Jock, who had been drinking beer in the locker room, realized the gymnasium was on fire and ran outside to his car. Jock drove the convertible eastbound on the two-lane road at a speed considerably in excess of the road's posted speed limit. Reaching for another beer, Jock looked over his left shoulder at the fire. Jock's convertible swerved across the center line, across the westbound lane and onto the shoulder where it struck Headmaster, who flew over the windshield and landed in the convertible.
When emergency personnel arrived at the railroad crossing, they discovered Headmaster's vehicle still on the tracks with the key in the ignition and Collins in the driver's seat trying to start the vehicle. However, after several attempts by emergency personnel, no one could start the vehicle to move it off the tracks. Jock's convertible had stopped about 50 yards west of the crossing. While removing Headmaster from Jock's convertible, emergency personnel discovered 150 grams of crack cocaine and a box of small, clear, plastic baggies underneath the passenger seat. Headmaster, who had suffered serious internal injuries and lost a lot of blood, was taken to a hospital where a nurse confused Headmaster's paperwork with that of another patient. Headmaster died in the emergency room when he was given a transfusion of the wrong blood-type. After firemen extinguished the fire at the gymnasium, they discovered in the ruins the bodies of two football players who had been overcome by smoke.
|1.||Ignoring any possible Conspiracy and Endangering the Welfare of a Child charges, identify all Delaware State criminal charges for which Jock may reasonably be prosecuted and separately sentenced in connection with the incident involving Tom and Amy. If a crime has more than one degree, state the specific degree that should be charged. Explain your answer.|
|2.||Assuming that Jock was not under the influence of alcohol or drugs at the time of his motor vehicle collision with Headmaster, identify all Delaware State criminal charges (excluding motor vehicle or traffic violations) for which Jock may reasonably be prosecuted and separately sentenced in connection with the collision. If a crime has more than one degree, state the specific degree that should be charged. Explain your answer.|
|3.||Discuss any defense(s) Jock may assert relating to causation in connection with his motor vehicle collision with Headmaster and the likelihood of that defense succeeding. Explain your answer.|
|4.||Identify all Delaware State criminal charges for which Jock may reasonably be prosecuted and separately sentenced in connection with the items found under the passenger seat of his convertible. If a crime has more than one degree, state the specific degree that should be charged. Explain your answer.|
|5.||Identify all Delaware State criminal charges for which Pyro may reasonably be prosecuted and separately sentenced arising from the fire. If a crime has more than one degree, state the specific degree that should be charged. Explain your answer.|
|6.||Assuming that Collins' blood alcohol concentration was above the legal limit when she was found attempting to start Headmaster's car, identify all Delaware State criminal charges for which Collins may reasonably be prosecuted and separately sentenced in connection with that incident. If a crime has more than one degree, state the specific degree that should be charged. Explain your answer.|
|7.||Discuss any defense(s) Collins may assert in connection with her charge(s) and the likelihood of that defense succeeding. Explain your answer|
On May 2, 2004, Harry Homeowner went to Superior Window Company's showroom to purchase new windows for his home. Homeowner explained to Sally Salesperson that he needed custom-made windows to replace his current windows, which were larger than any of the standard size windows that Superior sold. Homeowner provided Sally with the measurements for his windows and selected the type of windows that he wanted. Based on this information, Sally advised Homeowner that the new windows would cost $3,000, plus an additional $1,000 for installation. Homeowner responded that the price was fine, and they agreed that Superior would install the windows by June 30, 2004.
Superior installed the windows on June 6, 2004. Following the installation, Homeowner noticed that several of the new windows were cracked. On June 8, 2004, Homeowner called Sally to tell her about the cracked windows, and stated that because of the defects he would not pay for the windows. During the call with Homeowner, Sally offered to replace the cracked windows on June 22, 2004. Homeowner, however, refused and advised Sally that he intended to have another company install the windows. Superior filed a lawsuit against Homeowner in the Delaware Superior Court to recover the $4,000 that he had agreed to pay for the windows and installation.
|1.||Is the transaction between Homeowner and Superior covered by Article 2 of the Delaware Uniform Commercial Code ("Article 2")? Explain your answer.|
|2.||As a defense to the lawsuit, Homeowner argues that no contract was formed because there was no written agreement. Assuming Article 2 applies, will Homeowner succeed with this defense? Explain your answer.|
|3.||In support of its claim, Superior asserts that it offered to replace the defective windows. Assuming Article 2 applies and a valid contract was formed, was Homeowner obligated to accept the replacement windows? Explain your answer.|
Assume that Homeowner permitted Superior to replace the cracked windows and paid the $4,000 to Superior after the replacement windows were installed. Approximately two months later, Homeowner discovers numerous leaks around the windows. Upon further inspection, Homeowner discovers that the windows are fine, but that they were installed improperly. Homeowner pays $1,500 to Fred Fixit to reinstall the windows properly. Shortly thereafter, Homeowner files a lawsuit against Superior relating to its defective installation of the windows.
|4.||Is the new dispute between Homeowner and Superior covered by Article 2? Explain your answer.|
On April 12, 2004, Homeowner went to Cycle City in Dover to purchase a new bike for his adult son, Skippy. Billy Bike, the owner of Cycle City, assisted Homeowner in selecting a bike for Skippy. Homeowner advised Billy that Skippy would use the bike primarily to ride on the dirt trails outside of Dover . Billy recommended a bike manufactured by Speedy Bikes that cost $2,000. Homeowner purchased the bike and signed the Purchase Agreement supplied by Billy. The Purchase Agreement contained numerous provisions, including the following:
In any action against Cycle City relating in any way to the purchase of a bicycle or other equipment, purchaser agrees that the amount of damages that purchaser may recover against Cycle City shall not exceed $500. Purchaser further agrees that Cycle City shall have no liability for personal injuries relating to the use of any products sold by Cycle City.
The next day, Skippy was riding his new bike down a dirt trail outside Dover when the frame cracked, causing Skippy to fall off the bike and break his arm. Homeowner attempted to return the bike to Cycle City for a refund. Billy advised Homeowner that the dirt trails are too rugged for Speedy Bikes, which are designed for streets. Billy refused to give Homeowner a refund, but instead offered to sell him a trail bike.
|5.||Homeowner filed suit against Cycle City in the Delaware Superior Court for breach of warranty, seeking to recover the $2,000 that he paid for the bike. Assume that the Purchase Agreement does not contain any reference to warranties and that Article 2 applies. Will Homeowner succeed on his breach of warranty claim? Explain your answer.|
|6.||As a defense to Homeowner's lawsuit, Cycle City asserts that, based on the language of the Purchase Agreement, Homeowner may recover no more than $500 from Cycle City . Assuming Article 2 applies, will Cycle City prevail in limiting Homeowner's recovery to $500? Explain your answer.|
|7.||Assume that Skippy files a separate breach of warranty lawsuit against Cycle City to recover for the injury to his arm. As a defense, Cycle City asserts that Skippy was not a party to the Purchase Agreement. Assuming Article 2 applies, will Cycle City prevail on its defense? Explain your answer.|
|8.||Assume that Cycle City asserts, as a defense to Skippy's lawsuit, that the Purchase Agreement precludes the recovery of damages for personal injuries. Assuming Article 2 applies, is Cycle City likely to prevail on its defense? Explain your answer.|
You are a new associate in the law firm of Winn and Associates. Mr. Winn, the senior partner, has agreed to represent Mike Mechanic ("Mechanic"), an automobile repairman. Mechanic lives in Sussex County at Lewes, Delaware. Mechanic was seriously hurt while driving home from work on December 15, 2003. A car driven by Mechanic was struck by a tractor trailer driven by Tommy No Look ("No Look"), who lives in Sussex County at Dewey Beach, Delaware. No Look was employed by Over the Road Delivery, Inc. ("Over the Road"), a Florida corporation. The collision occurred in Sussex County when No Look made a U-turn from the northbound right hand lane of a four lane (two lanes in each direction) highway, into Mechanic's path. Mechanic was in the left northbound lane trying to pass the truck driven by No Look when the collision occurred. No Look was charged and pled guilty to the traffic offense of making an illegal U-turn. Mechanic has incurred medical bills which now total $20,000, and he will need extensive medical care in the future.
Mr. Winn comes to you to discuss a Complaint naming Mechanic as plaintiff and No Look and Over the Road as defendants.
|1.||In what Delaware courts could the Complaint be filed? Explain your answer.|
|2.||If you decided to file the Complaint in Sussex County Superior Court, what documents must be filed with the Complaint?|
|3.||How would you serve process on each of the defendants? Explain your answer.|
Assume that the Complaint was filed in Sussex County Superior Court. Following proper service of process on all defendants, No Look files an answer and counterclaim, claiming that Mechanic is liable for No Look's injuries sustained in the accident. Winn thereafter contacted Mechanic's insurance carrier, Anchor Insurance, Inc. ("Anchor"), a Connecticut corporation, and requested that Anchor provide a defense against the counterclaim, including the cost of legal services, as required by Mechanic's insurance policy. Anchor refuses.
|4.||Can Mechanic join Anchor as a defendant in the pending Superior Court action, asserting a claim to compel performance of the defense provisions of Mechanic's insurance policy? In what Delaware courts could a lawsuit to compel performance of the insurance policy be brought? Explain your answer.|
The Sussex County Superior Court lawsuit of Mechanic v. No Look and Over the Road has proceeded through the discovery stage. Following the close of discovery, Over the Road files a motion for summary judgment, claiming that it did not own the vehicle operated by No Look, and, therefore, is not liable for any damages. After briefing is completed, the Superior Court grants Over the Road's motion and dismisses Over the Road from the case. You believe that the Superior Court overlooked important factual evidence to the contrary and applied the improper legal standard in making its dismissal determination.
|5.||(a)||Can Mechanic seek immediate appellate review by the Supreme Court of Delaware of the Superior Court's decision to dismiss Over the Road from the case? Explain your answer.|
|(b)||What standard of review would apply? Explain your answer.|
|(c)||Would Mechanic be successful? Explain your answer.|
Biotech Inc. ("Biotech") is a Delaware corporation with several hundred employees and several thousand shareholders. Its Certificate of Incorporation is attached hereto as Exhibit A. Biotech develops and patents drugs for the treatment of disease. A board of directors, consisting of five members, manages its affairs. The Chairman of the Board and Chief Executive Officer is James Carter ("Carter"). He founded Biotech and, through family trusts, controls 55% of Biotech's stock. Each of the other four board members are prominent scientists recruited by Carter to serve on the Biotech board of directors. They are not related to Carter and they have no financial or business relationship with him except through their interaction as members of Biotech's board.
Although Biotech initially raised substantial capital through public offerings of its stock and has several drugs awaiting approval by the regulatory authorities, it has failed in several years to commercialize a drug. Its stock price has fallen dramatically, and several competitors have expressed an interest in acquiring Biotech because of its inexpensive stock price relative to Biotech's anticipated future value.
Carter sent Biotech's board of directors a letter on March 1, 2004 offering to acquire by merger all of the public shareholders' stock in Biotech that he did not already own for $100 per share in cash. This represented a premium of 25% over Biotech's trading price of $80 per share immediately before Carter's offer.
In light of the directors' fiduciary duties under Delaware law, please explain how you would advise the Biotech board of directors to proceed in considering and responding to Carter's merger offer. Explain your answer.
Assume that the Biotech board follows your advice and, after the requisite corporate approvals, a merger results between Biotech and Carter's acquiring company. This merger was approved by 70% of Biotech's shareholders (including 55% from Carter's family trusts and 15% from the remaining public shareholders).
|2.||What standard of review would a Delaware court apply if public shareholders who voted against the merger filed suit and challenged the transaction as a breach of the directors' duties under Delaware law? Explain your answer.|
Assume that Carter's merger proposal failed and that a group of shareholders announced their plans to seek an amendment of Biotech's bylaws at its next annual meeting to require a 75% shareholder vote to approve a merger with a person owning or controlling more than 20% of Biotech's stock. Assume further that, after a vote on the proposed bylaw amendment, the board of directors unanimously adopted a resolution amending the bylaws as follows: "The board of directors of Biotech shall have the exclusive power to amend Biotech's bylaws."
|3(a)||Is the board's bylaw amendment valid or invalid under Delaware law? Explain your answer.|
|3(b)||If the shareholder bylaw proposal was considered and it received a favorable vote from 55% of the Biotech shareholders, is the shareholder amendment valid or invalid under Delaware law? Explain your answer.|
After being named as a defendant in the shareholder action described in Question 2 above, one of the independent directors resigned from the board. She wrote to Biotech and requested that the corporation immediately pay the attorneys' fees she has incurred and expects to incur in defending against the shareholder action challenging the merger transaction between Carter and Biotech.
|4.||Does this director have a right to recover such fees before the underlying suit is finally resolved? Explain your answer.|
CERTIFICATE OF INCORPORATION OF BIOTECH INC.
FIRST: The name of the corporation is Biotech Inc.
SECOND: The address of the registered office of the corporation in the State of Delaware is located at 1 Market Street , in the City of Wilmington , County of New Castle . The name of the registered agent of the corporation at that address is Incorporation Company.
THIRD: The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law.
FOURTH: The total number of shares of stock which the corporation is authorized to issue is one million (1,000,000) shares of common stock, having a par value of one cent ($0.01) per share.
FIFTH : The business and affairs of the corporation shall be managed by or under the direction of the board of directors, and the directors need not be elected by written ballot unless required by the bylaws of the corporation.
SIXTH: The board of directors may designate one or more committees consisting of one or more directors, which committee(s), to the extent provided in a resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation.
SEVENTH: In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the board of directors is expressly authorized to make, amend and repeal the bylaws of the corporation.
EIGHTH: The corporation reserves the right to alter, amend or repeal any provision contained in this Certificate of Incorporation in the manner now or hereinafter prescribed by the laws of the State of Delaware. All rights herein conferred are granted subject to this reservation.
NINTH: Directors of the corporation shall be entitled to indemnification to the maximum extent permitted by law.
TENTH: The incorporator is John Smith, whose mailing address is 1 Main Street , Wilmington , Delaware 19801.
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a corporation under the laws of the State of Delaware do make, file and record this Certificate of Incorporation, do certify that the facts herein stated are true, and, accordingly, have hereto set my hand and seal this 1st day of April, 1994.
Sonny Smith, his 19-year-old brother, Bob, and their father, Fred, reside with Sonny's grandmother, Gert, at her home on Kirkwood Highway in New Castle County, Delaware. Sonny was involved in an automobile collision on his 17th birthday. Prior to the collision, Sonny attended a birthday party given at Gert's home by his father, Fred. Party Planner Co., a professional catering company hired by Fred, provided the food, beverages (including beer), and servers for the party.
During the party, while a bartender employed by Party Planner Co. was taking a break, Sonny secretly took two cans of beer and drank them in about ten minutes, causing Sonny to become intoxicated. Shortly after drinking the second beer, Sonny asked Gert if he could borrow her car to take a ride. Not realizing that Sonny had just consumed two beers, Gert gave him permission to use her car. Sonny's brother, Bob, who had seen Sonny drink the two beers, went along for the ride. While backing Gert's car out of the garage, Sonny knocked over and damaged a motorcycle owned by Nick, a neighbor who had driven his motorcycle to the party and parked it in Gert's driveway. Without noticing that he had run into Nick's motorcycle, Sonny then backed out of the driveway onto Kirkwood Highway, directly into the path of an oncoming car driven by Cal Carman, a car salesman employed by Ace Autos, Inc., who was driving his car back to work after a dinner break. The speed limit on Kirkwood Highway where the collision occurred is 35 miles per hour, but Cal was driving at a rate of 50 miles per hour. As a result of the collision, Cal Carman and Bob were injured.
|1.||Was Sonny negligent in knocking over Nick's motorcycle, and is he liable to Nick for the damage to the motorcycle? Explain your answer.|
|2.||Does Cal Carman have a cause of action against Gert for damages he sustained as a result of the collision in front of Gert's house? Explain your answer.|
Does either Nick or Cal have a cause of action to recover damages against Party Planner Co.? Explain your answer.
|4.||If Bob sues Cal Carman for damages resulting from Bob's injuries, can Cal successfully assert the defense of assumption of risk against Bob? Explain your answer.|
|5.||Assume that Cal's speeding contributed to causing the collision that injured Bob. To what extent, if any, is Cal's employer, Ace Autos, Inc., liable for Bob's damages? Explain your answer.|
|6.||Assume that Cal sues Sonny to recover damages for Cal's injuries, but Cal is found to be 60% responsible for the collision, notwithstanding the fact that Sonny was intoxicated. To what extent can Cal succeed in obtaining a judgment for damages against Sonny under these circumstances? Explain your answer.|
|7.||Assume that a newspaper reporter called and interviewed Cal on the day after the collision, and Cal told the reporter that Sonny Smith had been drunk, and that, in Cal's opinion, Party Planner Co. ought to lose its license for knowingly serving alcohol to minors. Cal's statements are accurately published in the newspaper. Can Sonny or Party Planner Co., or both, succeed in asserting a claim for defamation against Cal? Explain your answer.|
|8.||Assume that, following the collision, Sonny pays Bob $2,500 for medical expenses, in exchange for which Bob signs a document releasing Sonny from any and all liability for Bob's damages, and Bob later sues Cal Carman for damages. To what extent, if any, can Cal use this settlement and release to defend against Bob's suit? Explain your answer.|
|9.||Assume that Cal Carman's injuries were so serious that they caused his death six weeks after the collision. Cal was survived by a daughter, ex-wife (he was divorced), elderly parents and two adult sisters. Would Cal's daughter, ex-wife, parents and/or sisters have a right to sue Sonny for damages? To the extent that any of them would have a right to sue for damages, what kinds of damages are potentially recoverable by each? Explain your answer.|
Board of Bar Examiners of the Supreme Court of Delaware
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405 North King Street, Suite 420
Wilmington, DE 19801
P: (302) 651-3935 | F: (302) 651-3939