biz org class 6

limited liability - basic rules

- shareholders are not liable for the debts of the corp

- officers and directors are not liable for the debts they cause a corp to

   incur

- GP are personally liable for partnership debts

- LP enjoy LL unless they help to manage

frigidaire. 
this case sanctions the use of a corp as a GP, which is not initially
what the LLP was envisioned to encompass....

hypo.

1st level: loan brokers -- buyer

- broker says, "don't worry about the rate reset, you can refinance."

2nd level: wall st buys the mortgages and bundles them

- for sale to investors

shareholder of wall st bank comes in and wants to sue the

directors as individuals

what do you do?

derivative suit is a situation where the plaintiff is pleading, "i am harmed

indirectly because the company has been harmed."

procedural hurdles.

1. in this case, in NY and NJ, as an attorney you must post security for the client.

2. was a demand made?

flying tiger and cohen v. beneficial
why did the plaintiff in cohen have to post security for expenses, but
eisenberg did not have to post security for expenses?
- in cohen, the harm was derivative to the harm suffered by the company. in
eisenberg, the structural changes denied the shareholder his rights to vote.

analysis #1 p. 218: think about the role of the shareholder in the legal 

structure of the corp. why is the derivative action in equity instead of at law? 

because it's the corporation suing itself, and so it doesn't exist as a matter 

of law -- as a matter of law, there would be no standing because you can't

harm yourself, but the corporation is a separate entity. the officers and directors

run the corporations, and sometimes, they can't be expected to run the suit. 

so instead, shareholders who have been harmed derivatively can bring an 

action but as a matter of law the shareholder has no standing.

is there anything unique about derivative actions that has led NJ and NYS
to reject the normal rule of american law that each party bears her or his
own legal expenses, regardless of who prevailed?

why make shareholder claimants jump through hoops? the suit isn't the
shareholder's. they may claim an egregious conduct has caused them harm
indirectly.

parent company; holding company
- a parent corp is any company that owns more than 50% of voting shares
of another company, its subsidiary (see in re silicone)
- a holding company is a company that confines its activities to owning stock in
and supervising the management of other companies.
- a holding company usually owns a controlling interest (more than 50% of the
voting stock) in the company who's stock it holds.

flying tiger.
flying tiger disappeared because of a merger to FTO (it was absorbed and
therefore ceased to exist).