STUDENT EXAM NO. _________________________________________

 

Final Examination

Lawyering: Problem-Solving and Dispute Resolution - Winter 2006

Professor John Lande

University of Missouri School of Law

 

INSTRUCTIONS

 

1. This is a take-home examination that will be sent to you by email (at your mizzou email address) at 8:00 a.m. on May 12. If it is a problem to get your exam by email, you may pick up the exam in room 203. In any case, you must return your answer sheets in person to room 203 no later than 2 p.m. on May 12. Your grade may be reduced if you submit your exam after 2 p.m.

 

2. You must use exam identification numbers from room 203, which you may pick up in advance. Be sure to allow space on your exam answer cover sheet for the sticker with the identification number. PUT YOUR EXAMINATION NUMBER ON THE LINE ABOVE AND ON EACH PAGE OF YOUR ANSWER SHEETS in case the sticker becomes separated from your exam answer. Do not put your name on the exam or your answer sheets and do not identify yourself in any way.

 

3. This exam consists of four (4) essay questions, which appear on five (5) pages, including this page. You must answer each question. Define and apply relevant concepts whenever appropriate. Focus your answers to address the questions asked.

 

4. THE ANSWER TO EACH QUESTION IS LIMITED TO A MAXIMUM OF TWO (2) PAGES. Each answer must be self-contained. Do not "incorporate by reference" any material from one answer to another. Some questions are made up of subquestions. You are not required to answer the subquestions in the order in which they appear or to label the portions of your answer accordingly, though you may choose to do so if it helps to write a coherent and persuasive answer. You must type or word-process your answers. Pages must be 8½" by 11" with minimum 1" margins on all sides. Type must be double-spaced in 12-point Times New Roman type or another font that is similar in size and easily readable. The answer to each question must begin on a new page. Put page numbers on all answer sheets. ANSWERS OR PORTIONS OF ANSWERS NOT CONFORMING TO THESE INSTRUCTIONS MAY BE DISREGARDED.

 

5. This is a take-home exam for which you may consult your notes, the textbook, or any written materials. You may not consult any person or receive any other type of assistance.

 

6. The honor code applies to this take-home examination. You must perform all work on your own and abide by the instructions on this page.


1. About 15 minutes ago, you began an initial consultation with Joe Kolb, vice-president for sales of Starlight Corporation, a publicly-traded telecommunications firm. Joe is extremely agitated because he learned that the US Attorney has been investigating Starlight, apparently looking into charges of insider trading and Joe is worried that he might be indicted. (Federal "insider trading" law prohibits transactions in certain securities based on non-public information and Joe could be charged with conspiracy related to such transactions.) He said that several of his co-workers had been interviewed by FBI agents who wanted to know why some of Starlight's customers had bought large blocks of Starlight stock shortly before the announcement of a major contract with Microsoft. The announcement prompted a big jump in Starlight's stock price and the customers sold the stock soon afterward. As the VP for sales, Joe talked with these customers "all the time." He is from a prominent, wealthy family and you are a good friend of his father, who referred him to you. Joe is very worried and has already had some outbursts in your interview, harshly criticizing the government as well as some of his co-workers and superiors. Obviously he is used to getting his way and has taken a tone of ordering you to take care of this so that he doesn't get charged in this case. He denies any guilt, though some of his statements make you wonder whether he understands the situation accurately and/or is telling you the whole truth about his conversations with the customers.

 

(a) Explain how you will proceed with this interview, including:

 

(1) the type of lawyer-client relationship you want with Joe, and why, and

 

(2) how you would conduct the interview, including some specific questions you would ask Joe that you think would be most helpful.

 

(b) Assume that you take Joe's case and, several weeks later, you get a call from the prosecutor. She threatens to charge Joe unless he cooperates with her investigation. Clearly she wants evidence incriminating Starlight's CEO. From your investigation, you believe that Joe probably is not, in fact, guilty but there is enough evidence to take him to trial and even some risk of conviction. If Joe is convicted at trial, he would probably get a sentence of up to two years in prison and a $50,000 fine. He would also have a record as a felon with all the related consequences. If he cooperates, you might be able to negotiate immunity from prosecution or, at most, a guilty plea to a misdemeanor with no jail time. From your conversations with Joe, you believe that his immediate reaction will be anger and refusal to consider the prosecutor's overture. You feel ambivalent because you hate to see innocent people get convicted or plead guilty, but you are afraid that things will not go well if Joe doesn't cooperate with the prosecutor. He can be a "loose cannon," saying or doing stupid things. You are afraid that this case could drag on for a long time, harming his reputation and his family's. You are going to meet Joe soon to discuss your conversation with the prosecutor. What are your goals for this meeting? What specific things would you do to achieve those goals?


2. Your client, Harry Equus, is the owner of Equus Properties, Inc. and wants to purchase a restaurant and sports bar called "Jersey Tavern" in Springfield, Missouri. Harry is very excited about this potential purchase; he has worked in the restaurant industry all of his life and now wants the opportunity to own his own restaurant. Harry came to your office today bringing the business broker listing for the restaurant and wants you to handle the negotiations.

 

According to the listing, the owner is Longhorn Investments, LLC., the holding company controlled by Bev O. Naranja that owns her three restaurants - Jersey Tavern, Bev O's, and Lucky's. Harry only wants to buy the Jersey Tavern. The listing says that Bev wants to retire. It describes Jersey Tavern as having opened in 1985 in 7,000 square feet of space and having 20 employees, including a manager who handles the day-to-day operations of the restaurant. The building and land are owned by a separate company (which is not controlled by Bev or Harry). Longhorn leases this property at the rate of $1/sq. foot per month on a long-term lease.

 

The restaurant equipment is included in the sale price, but some equipment is showing its age. Harry estimates that replacing the aging equipment would cost about $50,000 in the first year of operation. He would also like to spend about $20,000 on remodeling the bar area. He says if he pushes it, he might make it 18 months before he has to spend that money. Of course, that will depend somewhat on the level of usage - the greater the number of customers, the sooner he would need to replace equipment.

 

The asking price is $220,000. Harry says that he has $150,000 in liquid cash, and will be borrowing the balance from a bank. He says that he could go up to $220,000 as a purchase price, but that would mean he would definitely need to delay remodeling and replacing the equipment until the second year of ownership.

 

(a) Assuming you will handle the negotiations for Harry, what additional information would you want to get before contacting Bev or her representative? Why?

 

(b) How would you plan for this negotiation? Why?

 

(c) What would your opening offer be? Why?


3. You represent Statewide Charities, Inc., a non-profit organization that manages an organization that funds and/or operates local charities in your state. Lola Almeda has been the president of Statewide for the past 15 years and she hired you to represent Statewide in an employment matter involving Cindy Woodrich. Cindy has worked for Statewide for 10 years, including the last three years as business manager. Statewide is not unionized and Cindy is an at-will employee. Lola told you that Cindy started behaving erratically about a year ago and despite efforts to identify and solve the problems during the past few months, Cindy's performance hasn't improved. Cindy has been making increasingly serious errors in the information that she has provided to others in the organization and she became belligerent several times when confronted, blaming others for the problems. Lola reassigned to other employees some of Cindy's critical functions because Lola couldn't trust her any more. Lola wants to fire her and wants to do it without litigation if at all possible.

 

Cindy apparently anticipated Lola's reaction and hired an attorney, Frank Dubois, who called Lola. Frank seemed to want to work something out so that Cindy could continue working at Statewide. He said that Cindy could file suit claiming that the reassignment of Cindy's responsibilities constitutes a constructive discharge, in violation of the laws prohibiting gender discrimination. Lola said that Frank seemed to want to work something out rather than file suit, though it seemed clear that Cindy definitely expected to continue working at Statewide. You have had a number of cases with Frank and have always found him to be reasonable and easy to work with. Lola can't imagine having Cindy continue at Statewide but is concerned about the cost, adverse publicity, and distraction of a lawsuit. Based on the information that Lola provided, you feel pretty confident that you would win if you went to trial although you can never be sure. If you lost, you guess that damages would be about $40,000, which is considerable but well within Statewide's ability to absorb. Lola has used mediation once or twice before and asked you whether you think that this would be appropriate in this case.

 

(a) Would you recommend that Statewide use mediation in this situation (as opposed to negotiating directly with Frank without a mediator)? Why or why not?

 

(b) If the parties decide to mediate this case, what would you look for in hiring a mediator? Why?

 

(c) What would you propose in structuring the mediation process to make it as effective as possible in achieving your client's interests?

 

 

 


4. You are an experienced litigation associate in a large law firm. Write a response to the following email that a partner in your firm sent to you:

 

I need your help in a case involving our client, Gatehouse, which is a large U.S. manufacturer of computer equipment. On December 1, 2003, Gatehouse made a two-year contract with Asiaway for Asiaway to sell Gateway's Arpex computer systems. Asiaway is a small Southeast Asian computer equipment distributor seeking to penetrate the Malaysian and Singapore marketplaces. The contract provided that Asiaway would be the exclusive Arpex distributor in Malaysia and Singapore. It also provided that Asiaway would sell at least an average of two Arpex systems per month though both sides expected that Asiaway would sell a lot more. The systems would be priced so that each sale would yield a profit of $20,000 for Gatehouse and $10,000 for Asiaway.

 

Asiaway sold two Arpex systems to its parent company in the U.S., a clear violation of the spirit (and arguably the letter) of the contract, which was geared to Asian sales. During the term of the contract, Asiaway sold a total of only eight Arpex systems in Singapore and Malaysia. Asiaway negotiated with SSI (Singapore Systems, Inc.) to sell SSI some Arpex systems, but their talks broke down and then SSI negotiated directly with Gatehouse. On February 1, 2005, Gatehouse made a direct sale of Arpex systems to SSI, which then sold the systems in Singapore (selling an average of five systems per month). SSI's success can be attributed to its great marketing plan and terrific contacts. By contrast, Asiaway was a poor vendor. Asiaway complained about inadequate technical support from Gatehouse, but even if the support was not up to usual standards, SSI was much more successful with the same level of support.

 

On March 1, 2006, Asiaway filed suit in U.S. federal district court against Gatehouse, seeking $380,000 in damages for breach of contract, calculated as $10,000 for 38 sales not made during the contract term. Their claim is totally ridiculous and our client told me that it will not pay any more money to Asiaway.

 

We just received a notice from the court assigning this case to the court's "Multi-Door Courthouse Program." The program rules provide that the case would be assigned to an ADR process. The parties would select either mediation or binding arbitration. If the parties choose ADR, they would agree on the mediator or arbitrator or, if they could not agree, the court would appoint one. Either party can opt out of the program, however, in which event the case would stay on the trial docket.

 

I am not very familiar with ADR and need your advice about how to respond to the court's notice. (I have done corporate securities and financial planning work for Gatehouse and they trust my judgment, so they want me to handle this case even though I don't have much litigation experience.) Should we propose to Asiaway that we use mediation or arbitration? If so, which one? Be sure to explain your reasoning so that I can convey it to our client. If there is any specific information I haven't provided that would affect your recommendation, please indicate in the memo what else you would want to know.