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).

proRo: problem 3

After a suspect is arrested, and after he has been given his Miranda rights, but before he has been arraigned (formally charged) and assigned counsel, the Queens County District Attorney’s Office conducts a videotaped interview with the suspect. During this interview, at which a prosecuting attorney and a detective are present, the detective and the district attorney introduce themselves to the suspect. The detective then informs the suspect of the charges against him. The detective and the district attorney also tell the suspect that they represent the government. If the suspect does not waive his Miranda rights, the interview ends.  If the suspect does waive his rights, the detective says the following:

· If you would like us to investigate an alibi, please give us as much information as you can, including the names of any people you were with.

· If your version of the events of the day differs from what we have heard, this is an opportunity, if you so choose, to tell us your story.

· If there is something you should like us to investigate concerning this incident, you must tell us about it now.

· This will be the only opportunity you will have to talk to me prior to your arraignment on these charges.

Does this procedure violate 4.2 (as interpreted by Hammad and cases at 126)?  Does it violate Rule 4.3?

proRo class 6

hammad. 
rule 4. 2 is at issue (btw, see additional practice questions on MRPC)

lawyer has no affirmative duty to clarify his/her role unless the person is somehow confused.
if the other party's interests are at odds with the lawyer's client, the lawyer
should not give legal advice to the unrepresented person other than advice
to find and consult with counsel.

see proRo problem 3.

fees.
an extension of the att-cli fiduciary relationship. if at some point, the cli
feels that the att is overcharging, the trust may rapidly evaporate.
high costs of legal info today increase this lack of trust.

rule 1.5 (a) and (b)
a few things to notice:
- the immense discretion that this rule gives to lawyers, especially
  given that so many clients have concerns about excessive fees, it is
  noteworthy that this rule requires so little by way of disclosure
- the rule with respect to contingent fees is much more demanding,
   and require that the fees be signed to by clients and determine how
   the fees can be created and applied (rule 1.5(c))
- most lawyers bill by the hour and not by contingency, and those that
   bill by the hour don't need to do much of anything other than tell
   their clients at what hourly rate they expect to bill. that rate is
   encouraged but not required by the rules to be in writing. the rule
   is particularly vague, and there have been many cases involving
   unethical billing practices.
- is the structure of rule 1.5 in itself problematic, because it appears to
   be mooshy and malleable?


brobeck v. telex corp
after the petition for cert is filed, IBM and telex settle. then brobeck
sends a bill to telex for $1M. the district court grants summ judg to
brobeck. there were a series of negotiations for fee that happened
between brobeck and telex, and there's disagreement about what
was decided would happen if the judgment was $0, and what equated
$0.

- lanksy says he gets a retainer of $25k if the petition for cert is denied
  and there's no settlement in excess of the counterclaim.
- if the case settles before the petition is filed, lansky gets billable hrs
   not to exceed $100k.
- once the petition is filed, the contingency can be up to 5% of $100M,
   but not less than $1M.
- then there are a number of hypos

the court says that this is a contract claim: telex wanted the best lawyer
and that's what it got, and it was telex who insisted on the contingency
and telex is comprised of reasonable, seasoned business people. the lack
of response to the lawyer's hypos was agreement on telex's part.

when first contacted, lansky didn't want the contingency and said that he
would like to set the fee after he did the work on the case. does that violate
rule 1.5? is a contract that includes no price terms enforceable? yes, when
the market rate is reasonably discernable. but there's not a "market rate" for
legal services.

paragraph 3 could obviously have been written much more clearly:
"no matter what, once i file i get $1M." this is not an arm's length
transaction, there's the complication of a fiduciary agreement with the
client. and both parties are savvy contractors. but the fact that lansky
filed the petition is the service provided -- anybody could have filed
a petition, but they wanted lansky's name and reputation attached.

in re matter of fordham.
fordham is a senior attorney with excellent credentials, but he's never
had done a drunk driving case before. fordham made this clear to the
clarks. the clarks knew that he would charge them for hours spent
preparing himself and preparing the case. fordham prepared an
impressive motion to dismiss limine and brings in a mathematician
who says that a 0.2 distance is not within 0.2 and gets the breathalyzer
test tossed and gets the defendant off. the bill is $50k, which is 5 - 17x
the reasonably similar fees.

typical fees are based on the public defender, who is

2. shouldn't be charging your clients for remedial learning. but does
this have a real relationship to how the law is really practiced? attornies
begin their careers by researching areas of the law that they are not
familiar with: is it true that lawyers shouldn't be paid for the knowledge
they must amass.

if the fordham fee is excessive, why isn't the brobeck fee?

billing question: p. 130 -- the oct. 13th bill has a retroactive rate increase.
suppose the client didn't know about or specifically agree to the increase -
is this okay? in most jurisdictions, you just have to give the client notice.

hypo. the state has an $8B case against a tabacco company, that is won and
the firm on contingency should receive $2B. charging at an hourly rate, the
cost would be $200M. but the AG says that this is unconscionable, and the
fee should not be paid. who wins? according to fordham, is the $2B
excessive? is not the risk of loss worth anything? the jury agreed
with the state, and the attorneys lost about $1B.

cooperman
general retainers have always been non-refundable, and they secure the
lawyer's availablity and exclude his/her availability to the other party,
and won't accept conflicting matters. actual legal services are billed
separately.

does promising availability have real value? absolutely.

why don't these legitimacies support a non-refundable retainer?

the retainer can be a deductable, but you have to return the general
retainer that was paid upfront and retain money used in quantum meruit.

NYS fee rules are different than the model rules on this point. NYS has rule
that a lawyer shall not enter into non-refundable fee retainer
agreement but may enter a retainer agreement so long as it sets forth how
the fee is assessed and used.