Smith, Brown and Jones were each working as sales reps for Mary Kay Cosmetics. Please explain to Sue Smith in detail the formation and operation of each of the following and the relative advantages and disadvantages to her of each:
I-A: Partnership
| Two or more general partners | 3 points _______ |
| To combine efforts or resources | 3 points _______ |
| Need not be in writing | 3 points _______ |
| Sharing of profits and losses | 3 points _______ |
| Equal unless otherwise agreed | 3 points _______ |
| Participation in management | 3 points _______ |
| Unlimited liability | 3 points _______ |
| Partnership taxation | 3 points _______ |
| Further excellent discussion | 3 points _______ |
I-B: Limited partnership
| At least one general, one limited partner | 3 points _______ |
| Liability limited | 3 points _______ |
| Except for contribution | 3 points _______ |
| May not manage | 3 points _______ |
| And may serve as employee | 3 points _______ |
| Commendam partner may consult and advise | 3 points _______ |
| Commendam partner may be surety | 3 points _______ |
| May vote on admission or expulsion | 3 points _______ |
| May vote on continuation or termination | 3 points _______ |
| Each other item on which may vote | 3 points _______ |
| Name may not appear in firm name | 3 points _______ |
| Unless also the name of general partner | 3 points _______ |
| Or of a predecessor firm | 3 points _______ |
| One general partner's name only is okay | 3 points _______ |
| Assumed name is fine | 3 points _______ |
| If commendam, firm name must so state | 3 points _______ |
| Articles must be in writing | 3 points _______ |
| And filed with secretary of state | 3 points _______ |
| Partnership taxation | 3 points _______ |
I-C: Limited liability company
| May have continuity of life | 3 points _______ |
| May have centralized management | 3 points _______ |
| May have free transferability | 3 points _______ |
| May have limited liability | 3 points _______ |
| For tax treatment, any two of above | 3 points _______ |
While still working for Mary Kay, articles for Cajun Classic Cosmetics were drafted by the other lawyer and signed, but not filed or recorded. Only when the shipment arrived did the three submit their resignations to Mary Kay. Each of the trio's salespesons was given a written "dealer's contract" as an independent contractor and was required to attend weekly sales meetings and to memorize and use the company sales pitch word for word. The sales pitch was copied verbatim from the Mary Kay handbook.
All three partners had written contracts with Mary Kay. Only Janice Jones's contract contained any prohibition against competition after termination. Her contract provides: "After termination, the sales representative shall not engage in the cosmetics business for ten years anywhere in the continental United States."
II-A: Mary Kay's district manager is disappointed the company lost these salespersons. "They had a duty of loyalty until they quit. They breached that duty by organizing while still employed at Mary Kay. I want to sue." Discuss Mary Kay's chances of winning.
| Duty not to compete while still employed | 3 points _______ |
| May lay preparations to compete | 3 points _______ |
| As to Smith and Brown, Mary Kay loses | 3 points _______ |
| Jones's agreement reasonable as to time | 3 points _______ |
| Presumed reasonable if under two years | 3 points _______ |
| Must be reasonable as to geographic area | 3 points _______ |
| Must be reasonable as to scope of activity | 3 points _______ |
| Brown's unreasonable as to time and place | 3 points _______ |
| Question whether court will "blue pencil" | 3 points _______ |
II-B: Mary Kay's manager continues: "They stole our standard sales pitch. Even though it wasn't copyrighted, the idea is a trade secret. I want to sue." Discuss Mary Kay's remedies, if any, and their chances of winning.
| Employee has duty not to steal trade secret | 3 points _______ |
| Definition of trade secret | 3 points _______ |
| Discusion of reverse engineering | 3 points _______ |
| Lack of copyright is no defense | 3 points _______ |
| But is this sales pitch obvious? | 3 points _______ |
| If this sales pitch truly a "secret"? | 3 points _______ |
| Mary Kay will win | 3 points _______ |
| Mary Kay may obtain damages | 3 points _______ |
| And injunctive relief | 3 points _______ |
III-A. Three months later, the partners decided to change lawyers. Sut Smith convinced them to come to your law office. Assuming they still wish a general partnership, what steps should you take on their behalf to prepare or file any existing or additional documents? Discuss.
| Prepare partnership agreement | 3 points _______ |
| File with secretary of state | 3 points _______ |
| Record with parish clerk of court | 3 points _______ |
| Trade name affidavit on assumed name | 3 points _______ |
| File with parish clerk of court | 3 points _______ |
| Required for protection of creditors | 3 points _______ |
| May also register trademark | 3 points _______ |
| With secretary of state | 3 points _______ |
III-B. You learn Belinda Brown is being sued. You also learn that two months ago, a month after the articles of partnership were signed, the partnership bought real property. What steps, if any, should you take to protect the office building? Discuss.
| File agreement with secretary of state | 3 points _______ |
| And record same with parish | 3 points _______ |
| If unrecorded, land is partners' property | 3 points _______ |
| At least as to third-party creditors | 3 points _______ |
| Creditors may then seize property | 3 points _______ |
| After recordation, land is partnership | 3 points _______ |
| Creditor may only charge partner's share | 3 points _______ |
| Partner has 30 days to release | 3 points _______ |
III-C. What difference, if any, would it make and what steps, if any, would you take if the partners had purchased the office building in the partnership name four months ago, one month before they signed their articles of partnership? Discuss.
| Recordation alone is here insufficient | 3 points _______ |
| Partnership agreement must be filed | 3 points _______ |
| Then partners must re-convey to entity | 3 points _______ |
| And act of sale must be recorded | 3 points _______ |
| In parish conveyance office | 3 points _______ |
III-D. Two days after the three visit your law office, Sue Smith calls and tells you to proceed with your proposed work. You and she agree on a fee, but on completion the other two partners protest your bill. "We never authorized all this and it takes a majority to bind the partnership," says Brown. Is the partnership bound? Discuss.
| Partnership is bound | 3 points _______ |
| Partner has apparent authority | 3 points _______ |
| Partner has actual authority | 3 points _______ |
| Partner is mandatary or agent | 3 points _______ |
| As to all matters in ordinary course | 3 points _______ |
| List of items in which not mandatary | 3 points _______ |
When applying a sample of lipstick to her own lips Sunday, salesperson Ursula Urquhart was disfigured due to the Mexican manufacturer's accidental addition of lye to the lipstick. Discuss Ursula Urquhart's remedies. Cover all theories of liability and damages, all potential defendants and the extent of liability of each, and all defenses.
| Control of conduct test | 6 points _______ |
| Tools (car) furnished | 6 points _______ |
| Sales pitch is mandatory | 6 points _______ |
| She is statutory employee | 6 points _______ |
| Sales of cosmetics is Cajun Classic Cosmetics' business | 6 points _______ |
| She is always "on duty" | 6 points _______ |
| Dual capacity doctrine inapplicable | 6 points _______ |
| But Cajun Classic Cosmetics is estopped to deny contract | 6 points _______ |
| In any case, Billiot applies | 6 points _______ |
| Third-party against Mexican manufacturer | 6 points _______ |
| Subrogation issue | 6 points _______ |
| Additional excellent points made, each | 6 points _______ |
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