July 2022 Questions and Sample Answers
July 2022 Questions
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Sample Answers
MPT-1
Sample Answer
To: Marianne Morton
From: Examinee
Date: July 26, 2022
Re: Walter Hixon Matter
You have asked me to prepare a memorandum addressing a number of questions regarding Mr. Walter Hixon's marital status and future annulment actions. Please see below.
1) Columbia Law Governs the Annulment
Columbia law governs the grounds for annulling Mr. Hixon's marriage to Ms. Tucker. The issue here is whether Columbia or Franklin has the most significant relationship with the marriage and parties. Columbia has the most significant relationship with the marriage and the parties based on the factors of the Second Restatement.
Restatement (Second) of Conflict of Laws (1971)
Under § 283 Validity of Marriage, "the validity of a marriage will be determined by the local law of the state which ... has the most significant relationship to the spouses and the marriage under the principles stated in § 6." A comment to this section states that this Section is concerned primarily with what law determines whether parties are lawfully married. § 6 Choice-of-Law Principles states that a court will first follow a statutory directive of its own choice but, in the absence of such a directive, will apply applicable factors to determine the rule of law. These factors are 1) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, 2) the protection of justified expectations, 3) certainty, predictability, and uniformity of result, and 4) ease in the determination and application of the law to be applied. There is no set statutory directive of its own choice in Franklin. As such, the four factors must be applied to determine the applicable rule of law.
Relevant Policies of Interested States
Columbia and Frankin are equally interested. In Fletcher v. Fletcher, the Court analyzed the four factors. Under this first factor, they stated that all states have legitimate policy interests in defining the initiation and ending of marriage relationships, and that the fact that Columbia and Franklin had different annulment standards indicated the strength of the policy interests on both sides. There are still different standards for annulment in Columbia and Franklin; as such, there are equal interests of these states.
Protection of Justified Expectations
The protection of justified expectations is stronger in Columbia. Fletcher v. Fletcher, in determining which state the parties would have a justified expectation of governing their marriage, considered where the marriage took place, where the parties lived during the time of their marriage, if they had children there, and whether they owned property together there. Mr. Hixon and Ms. Tucker were married in Columbia in 2012. They lived together in Columbia for seven years, until 2019. They had no children together. They purchased a home in Columbia in 2015, and they were both on the deed and the mortgage. Mr. Hixon moved to Franklin in 2019 and Ms. Tucker remained in Columbia, never visiting Franklin, though Mr. Hixon visited Columbia occassionally. Taken together, these factors show little connection to Franklin and strong connection to Columbia. As such, there is a justified expectation that the parties' marriage would be governed under Columbia law.
Certainty, Predictability, and Uniformity of Result
This factor is not determinative of the issue at hand. The court in Fletcher v Fletcher stated "people often move between states, creating the need for a system of well-defined rules to govern which state's laws apply to the creation and termination of marriages." This is true, but does not change the status of Mr. Hixon's case much aside from reiterating the need for his annulment to be consistent with preexisting law.
Ease in Determination and Application of Law
Columbia is strongly suggested to be the most appropriate forum for ease in determination and application of law. As in Fletcher v Fletcher, all of the important events of the marriage - the marriage itself, the cohabitation of the parties, the purchase of a home - occured in one state; here, Columbia. It would be easier and more efficient for Columbia courts to determine Columbia law. As such, Columbia would be the most appropriate forum.
Columbia Law Is Applicable
Under the factors stated in the Restatement as described by the Court in Fletcher v. Fletcher, Columbia would be the state with the most significant relationship to the spouses and the marriage. As such, Columbia law will determine the validity of the marriage.
2) Mr. Hixon Must File a Lawsuit for Annulment
Mr. Hixon must file a lawsuit for annulment under Columbia law. As determined above, Columbia law would apply to govern the dissolution of Mr. Hixon's marriage. Columbia Revised Statutes § 718.02 - Voidable Marriages states that "a mariage is voidable if ... the spouse of either party was living and the marriage with that spouse was then in force and that spouse was absent and not known the the party commening the proceeding to be living for a period of five successive years immediately preceding the subsequent marriage for which the annulment decree is sought." In order for a voidable marriage to be declared void, a party must seek and a court must issue an annulment decree. As such, Mr. Hixon would need to file a lawsuit to have the marriage annulled under Columbia Law.
Mr. Hixon Would Be Able to Obtain an Annulment
Under the factors listed above, Mr. Hixon would be able to obtain an annulment for his marriage to Ms. Tucker. Ms. Prescott was living at the time of Mr. Hixon's marriage to Ms. Tucker. The marriage between Mr. Hixon and Ms. Prescott was still in force at the time, as neither party had taken steps to end the marriage in any way. Mr. Hixon believed that Ms. Prescott had died as of 2001. They had not spoken since 1993. Mr. Hixon married Ms. Tucker in 2012. Mr. Hixon did not learn that Ms. Prescott was alive until 2022. The final requirement is therefore valid - Mr. Hixon, as the commencing party, did not know that Ms. Prescott, the absent spouse, was alive for 11 years prior to his second marriage, far exceeding the requirement of five years. As such, Mr. Hixon would be able to obtain an annulment decree under Columbia law.
3) Franklin Has Jurisdiction to Annul the Marriage, Not to Divide Property
The Franklin court would have jurisdiction to annul the marriage. In Daniels v. Daniels, the court managed a divorce case where one party objected to the court's jurisdiction over both the res of the marraige and the in rem of the property located within the state. Though this was a divorce action, Walker's Treatise on Domestic Relations § 1.7 clarifies that "an annulment action may adress the same issues as those that arise in a divorce" and that a Franklin court can issue orders dividing property interets of parties in an annulment just like it would when determining the equitable division of property in a divorce. As such, the Daniels v. Daniels case would apply here even as an annulment action.
Jurisdiction Over the Marriage
Franklin has jurisdiction over the marriage relationship. In personam jurisdicton over both parties in a marriage is not required by a Franklin Court, a party must only show that the trial court has jurisdiction over the res of the marriage. "A court has jurisdiction over the res of the marriage relationship when one of the parties to the marriage has been domiciled with the state for the requisite period, which in Franklin is six months." Mr. Hixon moved to Franklin in 2019 and has resided there ever since, greater than the six month requirement. The fact that Ms. Tucker has never visited Franklin is irrelevant. As such, Franklin has jurisdiction over the marriage and can annul the marraige by applying Columbia law.
Jurisdiction Over Property
Franklin does not have jurisdiction to dispose of the parties' property. The property at issue is the house in Columbia. In Daniels v. Daniels, the court held that "a Franklin court can render a valid judgment with respect to real property located within Franklin." In that case, the property was located in Franklin and therfore could be disposed of by Franklin courts. Here, the property is the home Mr. Hixon and Ms. Tucker purchased together in Columbia. As such, Franklin courts would not have jurisdiction to dispose of that property.
4) Mr. Hixon Should File in Columbia
Mr. Hixon should file in Columbia for ease of administration and proper disposal of the marital property. Though Franklin courts could dispose of the marriage, they could not dispose of the Columbia house. As Mr. Hixon wants his fair share of that house, it is important that it be divided in this action. Otherwise, he would have to file separate actions in each state, which would be more time consuming and expensive. Additionally, Columbia law applies, and Columbia courts would be more familiar with it. Therefore, Mr. Hixon should file for annulment in Columbia to properly achieve his goals.
Sample Answer
MEMORANDUM
TO: Marianne Morton
FROM: Examinee
DATE: July 26, 2022
RE: Walter Hixon Matter
INTRODUCTION
You asked me to prepare a memorandum reponding to the following questions:
(1) Whether Columbia or Frankin law governs the grounds for annulling Mr. Hixon's marriage to Ms. Tucker
(2) Whether Mr. Hixon must file a lawsuit to annul his second marriage, and if so, would he be able to obtain an annulment under the applicable law.
(3) Whether, if Mr. Hixon files an annulment action in Franklin, a Franklin court have jurisdiction to annul the marriage and dispose of the parties' property.
(4) Whether Mr. Hixon should file in Columbia or Franklin.
STATEMENT OF FACTS
[omitted]
DISCUSSION
(1) Whether Columbia or Frankin law governs the grounds for annulling Mr. Hixon's marriage to Ms. Tucker.
Restatement Second of Conflict of Laws provides that the validity of marriage will be determined by the local law of the state that has the most significant relationship to the spouses and the marriage, considering the following principles: (1) relevant policies of other interested states, (2) protection of justified expectations, (3) certainty, predictability, and uniformity of result, and ease in determination and application of the law to be applied. See § 6 and 283.
In Simeon v. Jaynes, (FR. Sup. Ct. 2009), a spouse sought to use a Franklin court to annul a marriage entered into in Columbia on account of bigamy. The Franklin Court of Appeal held that the Columbia trial court erred when they applied Columbia law. As a result, the annulment order was improperly invalidated, maintaining the marriage's full faith and credit in all states. In considering the Restatement factors, the court found that both Franklin and Columbia were interested in the marriage because all states have legitimate policy interests in defining how a relationship as fundamental as marriage can be initiated and ended. However, the court found that the spouses had a justified expectation that Franklin law would govern their marriage because they lived their entirety of their married life there, had children there, and owned property there. Further, Franklin provided the most appropriate forum for ease and administrative efficiency.
Here, Franklin and Columbia are both interested in the Marriage of Mr. Hixon and Ms. Tucker by virute of domicile. Franklin has an interest in the termination of the marriage of their domicilary, Mr. Hixon, and Columbia has an interest in the termination of the marriage of their domicilary, Ms. Tucker. Franklin and Columbia have differing laws on the termination of marriage, demonstrating the strength of such interests. However, the couple executed their marriage in 2012 in the State of Columbia. Further, the couple lived together only in Columbia, owned a home in Columbia, and incurred debt via mortgage for such home in Columbia. While Mr. Hixon moved to Franklin upon the separation, Ms. Tucker remains in Columbia and the couple still jointly owns and pays the mortgage in Columbia. Additionally, the couple has a justified expectation that Columbia law will apply to their married life because they spent the entirety of their married life in Columbia, entered their marriage under Columbia law, and owned property there.
Ultimately, Columbia has the most significant relationship to the couple and their marriage. Columbia is the most appropriate law to apply for judicial efficiency and ease in application. Therefore, Columbia law should govern the annulment proceeding to ensure that the annulment order is given full faith and credit in all states and the marriage is no longer recognized as valid in all states.
A marriage which satisfies the requirements of the state where the marriage was contracted will be recognized as valid everywhere else unless it violates the strong public policy of another state which had the most signficant relationship to the spouses at the time of the marriage. See Restatement Second §283(2).
(2) Whether Mr. Hixon must file a lawsuit to annul his second marriage, and if so, would he be able to obtain an annulment under the applicable law.
Because the law of Columbia will likely govern the annulment of Mr. Hixon and Ms. Tucker, Mr. Hixon will have to file a lawsuit in Columbia to annul his marriage. Columbia Statute § 718.02 provides that "a marriage is voidable if ... the spouse of either party was living and the marriage with that spouse was then in force and that spouse was absent and not known to the party commencing the proceeding to be living for a period of 5 successive years immediately preceeding the subsequent marriage for which annulment is sought."
Mr. Hixon will have to file the lawsuit with the Columbia court. Mr. Hixon will likely obtain an annulment under Columbia law if he establishes his good faith belief that Ms. Prescott was dead beginning in 2001 when he learned of her "death" in a car accident via a friend. Further, Mr. Hixon will be able to meet the requisite time period for annulment because he believed that Ms. Prescott was dead beginning in 2001 and did not subsequently marry Ms.Tucker until 2011, 10 years later and well beyond the 5 successive year requirement.
Ultimately, Mr. Hixon must file his annulment in Columbia and will likely obtain annulment under Columbia law.
However, if the Franklin law governed the annulment proceeding, Mr. Hixon would not have to file a lawsuit to annul his marriage because his marriage to Ms. Tucker was automatically void at the time of execution, without the need for judicial determination. Franklin Domestic Relations Code § 19-5 provides that "all marriages between parties where either party is lawfully married to another person" are void without the need for any decree of divorce, annulment, or other legal proceeding.
(3) Whether, if Mr. Hixon files an annulment action in Franklin, a Franklin court have jurisdiction to annul the marriage and dispose of the parties' property.
(a) Jurisdiction to annul the marriage
The Supreme Court has held that "each state, by virtue of its command over its domiciliaries and its large interest in the instituion of marriage, can alter within its own borders the marriage status of the spouse domiciled there, even though the other spouse is absent." Williams v. North Carolina.
Franklin case law has long held that in personam jurisdiction over a nonresident spouse is not required to terminate the marriage relationship, whether through divorce or annulment. See Daniels citing Price v. Price and Carew v. Ellis. The court in Daniels held that the party seeking divorce need only show that the trial court has jurisdiction over the res of the marriage. Daniels. A court has jurisdiction over the res of the marriage when one of the parties to the marriage has been domiciled within the state for 6 months. Daniels.
Here, Mr. Hixon has been a Franklin resident since 2019, satisfying the requirement of residency in the state for at least 6 months prior to bringing an action for divorce. Therefore, the Franklin court does have jurisdiction over the res of the marriage because of Mr. Hixon's domicile in the state for more than 6 months without personal jurisdiction over Ms. Tucker.
(b) Jurisdiction to dispose of parties' property
While the Franklin court will have jurisdiction over the marriage and in personam jurisdiction will not bar the entry of a valid annulment proceeding under Franklin law, in personam jurisdiction must be established to divide the marital property located in Columbia.
In Daniel v. Daniels, the Franklin Court of Appeals held that a court may only, under due process, exercise jurisdiction over the division of property when the property is located in the state of the trial court. In Daniels, the court held that if a trial court has res jurisdiction over the marriage and in rem jurisdiction over the property of the marriage, then in personam jurisdiction over the nonresident spouse need not be established. Daniels. If the property is located outside of the state, the state must establish "minimum contacts" required for establishing in personam jurisdiction for the disposition of shared property. See Shaffer.
Unlike in Daniel, Mr. Hixon's and Ms. Tucker's marital property subject to disposition upon annulment is located exclusively in Columbia. Therefore, Franklin does not have in rem jurisdiction over the property and the Franklin trial court would have to establish in personam jurisdiction over Ms. Tucker to dispose of the marital property located in Columbia. Personal jurisdiction requires minimum contacts with the forum state. Here, Ms. Tucker has lived her entire life in Columbia, her family is in Columbia, and the only contact she has with Franklin is that her soon to be ex-husband lives there post separation. Ms. Tucker never even visited Franklin while her husband was residing there while the marriage was in tact.
Therefore, the Franklin court will have jurisdiction over the res of the marriage and may order the annulment by virtue of Mr. Hixon's residence in the state but does not have jurisidiction over the marital property in Columbia and will not be able to estabilsh minimum contacts over Ms. Tucker. Thus, the Franklin court may order the annulment but not dispose of the marital property.
(4) Whether Mr. Hixon should file in Columbia or Franklin.
Because Columbia law will likely govern the annulment proceeding, the forum of the annulment proceeding is insignificant. In either case, the Franklin court or the Columbia court will apply Columbia law as it is the state with the most signficant relationship with the marriage. Such application of law will ensure that the annulment is valid and the marriage is not entitled to full faith and credit in other states.
Because Columbia law will likely govern the annulment proceeding, Mr. Hixon will be required to bring a lawsuit to properly annul his marriage. Columbia law provides that the marriage may be annulled by judicial decree for a reasonable belief that the other spouse is dead for 5 successive years prior to the subsequent marriage. Mr. Hixon will likely establish the grounds for annulment under Columbia law.
However, the forum is significant when determining disposition of the marital property. Mr. Hixon will have to establish personal jurisdiction over Ms. Tucker to have the property disposed of under Franklin law because the marital property is not located in Franklin and Franklin does not have in rem jurisdiction over such property. However, if the action is brought in Columbia, Mr. Hixon will not have to establish personal jurisdiction over Ms. Tucker because Ms. Tucker is domiciled in Columbia, establishing minimum contacts as required by due process.Even further, the Columbia court will have both res jurisdiction over the marriage and in rem jurisdiction over the marital property. Therefore, in personam jurisdiction need not be established over Mr. Hixon. Even so, the Columbia court will have personal jurisdiction over Mr. Hixon by virtue of him voluntarily bringing his claim in the Columbia court.
Therefore, because the Columbia court can order the annulment, Columbia law governs the annulment, and the marital property is located in Columbia, Mr. Hixon should file for annulment in Columbia.
CONCLUSION
(1) Whether Columbia or Frankin law governs the grounds for annulling Mr. Hixon's marriage to Ms. Tucker
Columbia law governs the grounds for annuling Mr. Hixon's marriage to Ms. Tucker because Columbia has the most significant relationship to the couple.
(2) Whether Mr. Hixon must file a lawsuit to annul his second marriage, and if so, would he be able to obtain an annulment under the applicable law.
Mr. Hixon must file a lawsuit to annul his marriage and will be able to obtain an annulment under the applicable Columbia law.
(3) Whether, if Mr. Hixon files an annulment action in Franklin, a Franklin court have jurisdiction to annul the marriage and dispose of the parties' property.
A Franklin court will only have jurisdiction to annul the marriage, but will not have jurisdiction as required by due process to dispose of the marital property.
(4) Whether Mr. Hixon should file in Columbia or Franklin.
Mr. Hixon should file suit in Columbia.
MPT-2
Sample Answer
Zeller & Weiss LLP
Attorneys at Law
Franklin City, Franklin 33705
MEMORANDUM
To: Howard Zeller
From: Examinee
Date: July 26, 2022
Re: Briotti Request for Advice
You have asked me to inquire about the legality of Ms. Briotti recording her telephone conversation with her client, X, and whether that would violate both the law and the Rules of Professional Conduct. You have asked three specific questions: 1) may Ms. Briotti lawfully record her telephone conversation with X without informing X that she is doing so, 2) if Ms. Briotti is allowed to lawfully record the conversation, would doing so without the client's knowledge violate the Rules of Professional Conduct, and 3) if X asks if she's recording, must she inform him? Please see below for an analysis to the three questions that you presented.
1. Depending on the state where Ms. Briotti conducts the recording of her telephone conversation, she might be able to lawfully record her conversation with X.
Under Franklin law, recording a conversation is unlawful unless "the interception or attempted interception is made with prior consent of one of the parties to the communication." Franklin Criminal Code §200. Under Olympia law, recording a conversation is unlawful unless "the interception or attempted interception is made with prioer consent of all the parties to the communication." Olympia Criminal Code §500. With this conflicting law, it is important to know where the recording was made.
A recent Olympia court case discusses the interplay of two different states with a recording happening across state lines. In Shannon v. Spindthrift, the plaintiff alleged that the defendant violated his rights by recording a telephone conversation while he was on the phone with the call center. The plaintiff was a resident of Olympia and the defendant was located in Columbia. Columbia law stated that a recording of a communication was iunlawful unless the interception was made with prior consent of one party. Olympia is an "all party consent" state. Shannon. The Shannon court looked to an Olympia Supreme Court case which tackled the same issue and held that the interception was lawful at its inception in Columbia, and therefore, was allowed to be admitted into evidence in Olympia even though the "manner of interception would violate Olympia law had the interception taken place in Olympia." Shannon (citing Parnell v. Brant). Shannon affirmed this holding and applied it to a civil claim, stating that the statute does not apply when the act of interception takes place outside of Olympia, and that the interception occurs where they are made. Shannon.
Here, Ms. Briotti's law office is in Franklin, but X is located in Olympia. If Ms. Briotti initiates the recording of the conversation in her office in Franklin, then the recording would be legal. If X brought a claim against Ms. Briotti, and she used the recording as evidence to defend herself against a claim, then in Franklin, the recording would be legal because they only need one party to consent to the recording, which in this case would be Ms. Briotti, and in Olympia, per the holding of Shannon, as long as the recording was made in Franklin, it will be deemed legal in Olympia despite their "all parties consent" rule.
If Ms. Briotti records the conversation with X in her office in Franklin without X's, the recording will be deemed legal. If Ms. Briotti records the conversation with X where X is located in Olympia without X's consent, then it would be illegal and a violation of their criminal code.
2. Recording the conversation between Ms. Briotti and X would most likely not violate the ABA Model Rules of Professional Conduct because Ms. Briotti has a reasonable belief that X will commit a crime, and if X does sue Ms. Briotti, she could use the recording to rebut X's claim.
Under the ABA Model Rules of Professional Conduct, the general rule is that a lawyer may not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted. ABA Model Rules §1.6(a). A lawyer, however, may reveal information relating to the misrepresentation of a client to the extent reasonably necessary when: to prevent death or substantial bodily harm, to prevent a client from committing a crime or fraud that is reasonably certain to result in substantial injury, to prevent, mitigate, or rectify substantial injury to the financial interests or property of another, to secure legal advice in compliance with these rules, or to establish a claim or defense on behalf of the lawyer in controvery between the lawyer and the client, to establish a defense to a criminal charge against the lawyer for conduct the client is involved in, or to respond to any allegations in a proceeding concerning the lawyer's representation of the client. ABA Model Rules §1.6(b).
Although the ABA Model Rules have objected to revealing communications between a lawyer and their client, the Standing Committee has issued a formal opinion that addresses the issue of nonconsenual recording of a client by their lawyer. The opinion acknowledges at the outset that the rule that "a lawyer ethically may not record any conversation by electronic means without the prior knowledge of all parties to the conversation" is rigid. ABA Formal Opinion. After facing criticsm of the rule, the formal opinion states that it is a "prohibition of conduct only when it is accompanied by other circumstances that make it unethical." ABA Formal Opinion. The opinion also states that "a lawyer contemplating nonconsenual recording of a conversation should, therefore, take care to ensure that he is informed of the relevant law of the jurisdiction in which the recording occurs." ABA Formal Opinion.
The State of Franklin has also realized that it could be difficult to show whether a communications might rise to one of the requirements of an exception to the general rule and has indicated that one of the key questions is whether the recording of a conversation would violate the lawyer's duty of loyalty to the client. Franklin Rules of Professional Conduct Rule 8.4 Commentary [hereinafter Commentary]. Some of the considerations that Franklin has laid out include the facts, rather than the speculations, of the situation at hand, any alternative methods of memorializing the conversation, and the client's circumstances. The lawyer must be aware of the risks and must reasonably believe that recording the conversation is a necessity.
Looking at all of these authorities and putting it together, it is likely that Ms. Briotti might be able to record her conversation with X, but only if she reasonably believes that the recording of the conversation is necessary and the recording takes place in Franklin. Ms. Briotti indicated in her meeting that X seemed very desperate because his clients lost a lot of money and they are all demanding it within two weeks. The only way he can recover that amount of money in that short period of time is by taking the money out of a trust account, which is illegal. Ms. Briotti has indicated that this is a cause for concern, especially with the short amount of time that X has to find the cash and to be able to pay back his clients. X has also indicated that the only way out of his predicament is to use the money from the trust that he administers. X has stated that he could keep up with the trust payments himself and once he has more money, he could pay back the trust before anyone finds out. X has also appeared to be incredibly desperate to pay back his clients without using X's own money because he could not cover the losses and X would be financially ruined both professionally and personally. Ms. Briotti has a reasonable certainty to think that X would commit a crime.
The ABA Model Rules also state that communications between an attorney and a client only under an enumerated list of exceptions. One exception is to prevent X from committing a crime or fraud. Here, as discussed above, Ms. Briotti has a reasonable concern and certainty that X will commit a crime or fraud. Another one of the exceptions that is applicable here is that communications can be revealed to estalbish a claim or defense against a client concerning the representation of the client or a defense to a criminal charge or civil claim. Ms. Briotti has indicated is that she would use the recording as evidence that she gave him proper advice and that if he does sue her for any reason, that she has the recording to rebut his claim. This would fall under an exception to the ABA Model Rules in that it would be used to "establish a claim or defense...to respond to allegations in any proceeding concerning the representation of the client." ABA Model Rules §1.6(b). It is not unlikely that X could sue Ms. Briotti if he isn't able to pay back his clients. X could claim that he was acting on the advice of his attorney, and Ms. Briotti could be implicated. The recording can help to rebut this claim if X brings a case against Ms. Briotti.
Looking at all of the facts and authorities, Ms. Briotti will likely be able to make such a recording because of the threat of criminal conduct and the fact that he seems desperate to find another way to pay off his clients, seems to indicate that Ms. Briotti has a reasonable concern that X will engage in criminal conduct. X could also potentially file a lawsuit against Ms. Briotti, and the recording could help to rebut X's claim.
Ms. Briotti will likely not face any violations of the ABA Model Rules if she records her conversation with X because of the imminent criminal conduct and potential liability she could face against X.
3. Ms. Briotti must inform X that she is recording if X asks.
In the Formal Opinion, the ABA Standing Committee states that a lawyer may not falsely state to a client that the conversation is being recorded. ABA Formal Opinion. This would also be considered misconduct under the ABA Model Rules of Professional Conduct §8.4 which states that a lawyer may not engage in conduct that involves dishonesty, fraud, deceit, or misrepresentation. ABA Model Rules §8.4(c).
Here, Ms. Briotti cannot lie to X if X inquires whether she is recording the conversation. She must tell the truth or be in violation of the ABA Model Rules and, through the adoption of the ABA Model Rules, the Franklin Rules of Professional Conduct.
Ms. Briotti must inform X that she is recording their conversation if X asks.
Please let me know if you have any questions regarding this memorandum.
Sincerely,
Examinee
Sample Answer
To: Howard Zeller
From: Examinee
Date: July 26, 2022
Re: Briotti request for advice
I. Franklin law, which would apply if Ms. Briotti records her conversation with X in Franklin, allows recording without the consent of the other party to the conversation.
Franklin Criminal Code § 200 provides in relevant part that "it is unlawful for any person to intercept or attempt to intercept any wire communication unless . . . the interception or attempted interception is made with the prior consent of one of the parties to the communication" (emphasis added). The statute further provides that "interception of a wire communication includes the recording of that communication." Id. Olympia law, on the other hand, requires "the prior consent of all parties to the communication" for its analogous exception to apply. Olympia Criminal Code § 500.4 (emphasis added).
However, Olympia courts have held that Olympia law does not not apply where the recording of the communication takes place in another state. See Shannon. In Shannon, the plaintiff alleged that the defendant, operator of a call center in Columbia, violated his rights under Olympia Criminal Code § 500.4 (which provides a civil cause of action). See id. Columbia, like Franklin, is a "one-party consent" state, while, as noted above, Olympia is an "all-party consent" state. The plaintiff alleged that, because he was located in Olympia when the recorded call took place, and the relevant statute contained no "location-based limitations," Olympia law should apply. Id. The Olympia district court, in rejecting this argument, held that "OCC § 500.4 does not apply when the act of interception takes place outside of Olympia." Id. Thus, because the defendant recorded the call at issue at its Columbia call center, Olympia's law did not apply.
Here, Ms. Briotti seeks to record a conversation with X. As in Shannon, X - the individual whose call would be subject to unknowing interception - is located in Olympia, an all-party consent state. Thus, if Olympia's law applied, X would need to give prior consent for the interception to be lawful. However, if Ms. Briotti records the call from her office in Franklin, she can remove the call from the ambit of Olympia's laws under Shannon. As the Olympia courts have held, "interceptions and recordings occur where made." Shannon (citing Parnell). Consequently, simply recording the conversation in Franklin would subject the interception to Franklin law, which, as discussed above, requires the consent of only one party to the communcation - here, Ms. Briotti. Accordingly, as long as Ms. Briotti records her conversation with X in Franklin, she does not need to obtain his consent for the recording to be lawful.
2. Ms. Briotti's recording of her conversation with X would likely be permitted under the Franklin and Olympia Rules of Professional Conduct, as the recording may help her establish a defense relating to X's potential conduct.
The ABA Rules of Professional Conduct (RPC), which Franklin and Olympia have both adopted, provide in relevant part that "[a] lawyer shall not reveal information relating to the representation of a client unless . . . the lawyer believes [that such disclosure is] necessary . . . to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer's representation of the client." RPC 1.6.
The ABA Standing Committee on Ethics and Professional Responsibility (Committee) has discussed the limited circumstances in which a lawyer's surreptitious recording of a conversation between the lawyer and her client may be permitted under the RPC. The Committee has stated that "the proper approach to the question of legal but nonconsensual recordings by lawyers is not a general prohibition with certain exceptions, but a prohibition of the conduct only where it is accompanied by other circumstances that make it unethical." Formal Opinion 01-422.
Though the Committee was divided on some aspects of the application of this rule, one issue on which it found consensus was that "exceptional circumstances" permitted the legal but nonconsensual recording of lawyer-client conversations. Id. One such "exceptional circumstance" was when the recording was taken in compliance with certain provisions of RPC 1.6, such as "to establish a defense by the lawyer to charges based upon conduct in which the client is involved." Id. Under such circumstances, the Committee agreed that undisclosed recording of the conversation is permissible. Id.
Franklin State Bar Committee on Ethics and Professional Responsibility (Franklin Committee) has provided additional clarity as to when a recording is permissible under the "exceptional circumstances" exception discussed above. The Franklin Committee stated that, "[i]n deciding whether to undertake a recording of a conversation with a client without the client's knowledge, the lawyer should take care to act on facts and well-grounded judgment, rather than speculation, as to the client's intentions." Franklin Committee Commentary. This determination should be made with an eye to "the client's previous statements, the client's circumstances, and alternative methods of memorializing the conversation." Id. Taking these factors into consideration, a lawyer "must reasonably believe in the necessity of making such a recording."
Here, Ms. Briotti believes that X is preparing to imminently undertake illegal activity, namely invading the trust fund that he administers. She "want[s] to be sure that [she has] evidence that [she] properly advised him" if he undertakes this illegal activity, presumably to defend against any civil or criminal liability she could face. Transcript. As discussed above, recording a conversation for the purposes of establishing a defense to charges based upon the client's conduct is an "exceptional circumstance" in which it is ethically permissible to undertake an undisclosed recording of a client conversation. Formal Opinion 01-422.
The issue here is whether Ms. Briotti has a sufficiently concrete belief in X's intention to imminently commit unlawful activity, and it is likely that she does. X has "intimated that the only place he could get enough cash quickly would be from a trust fund he administers." Transcript. After Ms. Briotti informed him that invading the trust in this manner would be illegal, he remained silent. See id. Taken together with his circumstances - namely, his pressing need for cash - X's statements and silence indicate an intention to invade the trust. Thus, two of the factors set forth by the Franklin Committee indicate that undisclosed recording of the call would likely be permissible.
It is unclear, however, if there is an alternative method of memorializing the conversation that would serve Ms. Briotti's well-founded concerns without surreptitiously recording the conversation. It is possible that a memorandum or other notes could serve as exonerating evidence in a subsequent trial against Ms. Briotti for alleged participation in any illegal activity X commits. Still, a recording of the conversation would likely be substantially more persuasive. Ultimately, this determination must turn on whether Ms. Briotti "reasonably believe[s] in the necessity of making such a recording." Franklin Committee Commentary. It does appear that the "facts and [her] well-grounded judgment" support the necessity of such a recording, and as such, her proposed recording is likely ethical. However, if an alternative means of memorializing the conversation would be just as effective as recording it, she should consider pursuing that option instead.
III. Assuming that Ms. Briotti's undisclosed recording of her conversation with X is both legally and ethically permissible, she must nonetheless inform X of her intent to record the conversation if asked.
As discussed above, Ms. Briotti's undisclosed recording of her conversation with X is legally permissible if undertaken in Franklin. Moreover, it is likely ethically permissible, given her well-grounded suspicions of X's imminent unlawful activity and her intent to establish a defense to any liability she might incur related to that activity. However, the Committee has stated that the mere fact that the undisclosed recording of a conversation is permissible "does not mean that a lawyer may state falsely that the conversation is not being recorded." Formal Opinion 01-422. This unambiguous statement makes clear that, even if Ms. Briotti's undisclosed recording of her conversation with X is legally and ethically permissible, it is not ethically permissible for her to falsely state that such recording is not taking place, if asked. Accordingly, if X asks Ms. Briotti if the call is being recorded, she must truthfully inform him that it is.
MEE 1
Sample Answer
1. Expert Testimony of Gang Expert
The issue is whether the testimony of the detective is improper expert testimony. Under the Federal Rules of evidence, expert testimony is admissible when it is helpful to the trier of fact, based on scientific or specialized skills, and is reliable.
At issue here is whether testimony on gang identification is testimony that will be 1) helpful to the trier of fact, requires and based on specialized skills, and 3) reliable. First, this evidence will be helpful to the trier of fact because it goes to the theory that the defendant was a member of the Lions gang. The prosecution's theory is that the Victim and Defendant were members of that gang. The prosecutor believes that the shooting from defendant four months ago that seriously wounded Victim was a result of a gang dispute. Crucial to that theory then, is that Defendant was a member of the gang the lions. Thus, the opinion will be helpful to the trier of fact.
Next, the information must be based on specialized skills. The detective has learned how to identify gangs from training in his job. He worked as a detective for 6 years on the police force and his primary assignment was to investigate gands and criminal activity. Additionally, he worked with the federal drug and firearm task forces as they relate to gangs and worked as a corrections officers with the gang unit. He has also givcen 75 training sessions on gang structure, membership, and activities. Thus, this is the sort of specialized knowledge or training that an expert would have. A lay person testifies only to things that a reasonable person would be able to form an opinion of. A reasonable person would not be able to form an opinion to identify gang members of specific gangs. Thus, the testimony is based on specialized skills.
The Daubert factors apply to determine if the opinion is reliable. An opinion is reliable where it has been based on standards excepted in the industry. That is that the methods used to form the opinion are ones accepted in in the industry. The Daubert factors focus more on scientific expert knowledge specifically, like whether the testing mechanism was reliable, whether the method has been in peer reviewed journals and publications, etc. The idea behind the factors is to determine the nature of the acceptance within the field. Here, the expert's training comes from previous jobs all involving police and gangs or drugs and gangs. He has stated that there is a pattern - that they usually have clear leadership and strict codes of behavior. Further, that membership can be identified by clothing, tattoos, language, paperwork, or associations. Specifically, the Lions are a gang that the detective is personally familiar with. Experts may base their opinions on things that they became familiar with prior to, or at, or during trial. Thus, it is fine that the detective was already familiar with the Lions. His testimony that the Lions members can be identified with tattoos depicting symbols and unique to the gang comes from his prior specialized knowledge on how to identify gangs. This is reliable because his training methods came from jobs specifically with the police or in investigating gangs for the government and thus, the training he had and the courses he teaches are accepted among the rest of the police officers.
In short, the detective's anticipated testimony about gang identification, organization, and activities is proper expert testimony. Thus, the trial court should overrule Defendant's oobjection
2. Photo of Defendant
The issue is whether a photo that shows tattoos of a defendant to tie him to membership in a gang is improper character evidence. Under the Federal Rules, character evidence is not admissible to prove that the defendant has a propensity to act in accordance with that character trait. Further, in a criminal trial, the prosecution cannot offer character evidence in its case in chief, and can only offer it to rebut the defendant's showing of their relevant good character trait or to impeach defendant's credibility if the defendant testifies.
Here, the evidence is of a former leader of the lions with a photo of Defendant's tattooed arm. The testimony to go with that is that the former leader is certain it is a tattoo from the Lions gang because they had a similar one removed. Also, that the tattoo contains a shield with numbers for the police code for homicide and that Lions members frequently include police codes in their tattoos to indicate crimes that the gang has committed. The tattoo also has a shotgun and sword crossed as an X and a Lion - all symbols used by the Lions. The former leader opines that because of his experience, that Defendant is a member of the Lions gang. The prosecution may offer character evidence when it is not being used for propensity purposes. Some of those reasons include: motive, identity, mistake (absense of), etc. The prosecution is not offering this evidence to prove that defendant has a propensity to act as a gang member because of the tattoo or act in accordance with the character trait of a gang member. The prosecution is offering this evidence to prove the defendant's identity as a member in the Lions gang. In order to bring this evidence for the purpose of identification of the defendant, the defendant must first claim in his defense that he is not a member of the Lions gang. The Defendant has not done so according to our facts, but assuming that he does claim he is not a member of the Lions gang, then this would not be improper character evidence because it is not being offered for propensity purposes.
Thus, if the Defendant defends on the grounds that he is not a member of the Lions gang, the trial court should overrule Defendant's objection to exclude this evidence because it is being offered for identity purposes.
3. Victim's Testimony
The court should overrule Defendant's objection that the Victim's testimony is irrelevant. The Federal Rules of Evidence broadly admit all relevant evidence. Relevant evidence is evidence that has any tendancy to make a fact in controversey more or less probable.
The evidence here is relevant. It goes to the fact of motive. It explains why the defendant would have a reason to shoot the Victim. The evidence is that there was an argument between Victim and the gang boss right before the incident because Victim did not want to participate in an attack against another gang because their cousin was in that gang. The boss "looked at Defendant and nodded to him" and then right after Defendant pulled a gun and shot Victim. Victim believes that he did it because of the argument. The evidence here makes it more probable that defendant shot victim because it explains the circumstances immediately leading up to the conduct. This is highly relevant.
Defendant may argue that the probative value is substantially outweighed by prejudicial value. But a court is unlikely to find this to be the case because it is highly relevant to the fact finder that this argument occurred right before the incident and it tends to help prove that Defendant was in the gang with Victim and that he shot Victim because they refused to participate in the crime.
Thus, the trial court should overrule Defendant's objection to Victim's testimony because it is relevant.
Sample Answer
1. Whether detective's anticipated testimony about gang identification, organization, and activities is improper expert testimony.
The issues are whether the city detective can be qualified as an expert, and whether the proposed testimony would be proper within the scope of his expertise.
First, the detective can be qualified as an expert in all three areas: gang identification, gang organization, and gang activities within City. The rule is that an expert can be qualified as an expert if they have special expertise that would allow their testimony about their area of expertise to be helpful to the jury. Here, the detective has enough expertise to be qualified within all these areas. He can be qualified as an expert as to gang identification because he worked in corrections as an officer for 3 years in City's jail, which including identifying and investigating gang members. He can be qualified in gang activities because he has been a detective for 6 years, specializing in the investigation of gangs and criminal activity in the city. He has also worked with federal drug and firearm task forces as pertain to gangs. He also can testify about gang organization because he has taken training sessions on gang structure, membership, and activities. Finally, the detective has taught more than 75 trainings over the past three years on the very topics he proposes to testify about: gang identification, gang organization, and gang activities within the city.
While the detective will need to be qualified by the judge in court, listing many areas of these expertise in direct examination, as is expected (and being subject to cross examination on any of them by the defense), the detective should be qualified as an expert witness with the scope of expertise he is being offered to provide. He can therefore answer hypothetical questions and give his opinion on the gang membership of the defendant.
It is helpful to the jury --and therefore admissible -- to learn from this expert about the role of loyalty and violence in enforcement of that loyalty within City gangs, as well as the clear leadership structure and strict codes of behavior. This is relevant to the viability of the prosecution's theory of the case, which alleges that this was a shooting motivated by an internal gang dispute. Additionally, the detective's familiarity with the Lions and their clothing, tattoos, language, paperwork, or associations is relevant to whether this violent act would plausibly be within the scope of the Lions' activities.
If evidence is unduly prejudicial to the defense, or is introduced merely to show that the defendant has a propensity to act a certain way, it is inadmissible. The defense could try to argue that basic statements, like "street gangs generally engage in a wide variety of criminal activities" is not helpful to the jury, is unduly prejudicial, and therefore should not be admitted. They can also argue, likely unsuccessfully, that the statement that the Lions are the most violent and feared street gangs is irrelevant or unduly prejudicial because it is not specific to this case and would likely have the purpose of prejudicing the jury against the defendant solely based on association with the gang.
Overall, the detective will be qualified as an expert and will be permitted to testify as to all these issues
2. Whether the photograph of Defendant's tattoo and the former gang leader's anticipated testimony about it is inadmissible character evidence.
The issue is whether the gang leader's anticipated testimony about the tattoo is inadmissible character evidence.
The rule is that character evidence in a criminal case that is only introduced to show the defendant's propensity to commit a crime is inadmissible. However, if the evidence is used to show the defendant's contested motive for committing a crime, it is admissible. Here, this evidence would be used to show Defendant's motive (as set forth in Victim's testimony) for committing a shooting: namely, that they were part of the Lions gang and that this shooting was perpetrated as commanded by a senior gang member. Therefore, this evidence linking Defendant to the Lions would be admissible if Defendant does not stipulate that they are part of the Lions. If the defendant stipulated that they were a member of the Lions, then this would not be admissible as motive evidence.
Additionally, the defense could unsuccessfully argue that this is improper opinion testimony by a lay witness. Here, the witness will be testifying as to their opinion that Defendant's tattoo is a Lions tattoo. Lay witness opinion testimony is permissible if it is based on personal knowledge. Here, the witness would be testifying from their personal knowledge of Lions tattoos (including their own removed tattoo), and their personal knowledge of the Defendant's tattoo based on the authenticated photograph. They have a basis of knowledge of Lions tattoos from their time in the gang, including the usual contents of tattoos (shotgun, sword, lion, police codes). Therefore, the witness will be properly giving their opinion based on their personal knowledge and experience.
3. Whether the victim's anticipated testimony that Defendant shot him because of a gang dispute is relevant.
The issue is whether Victim's anticipated testimony is relevant.
The general rule is that evidence is relevant and admissible if it tends to make a material fact more or less likely. This is a very low bar. Here, Victim's testimony makes it more likely that Defendant committed the shooting. Victim is testifying from personal knowledge, since they are testifying to what they saw.
If Victim is found credible by the jury, the jury will be provided with additional information about why the shooting could have occurred - that it was based on an argument with the gang boss, that Victim refused to participate, that boss looked at and nodded at Defendant, and that Defendant then pulled a gun and shot Victim. This would help the jury understand the motivation and sequence of events, and it is therefore relevant.
The defense could argue that the Victim's statements or the boss' statement (the nod) were hearsay and therefore inadmissible, but that is not raised in this motion. Hearsay is generally inadmissible, and it applies to any out-of-court statement by a declarant that a party seeks to admit for the truth of the matter asserted. But if an evidentiary objection is not raised, it is waived unless an appellate court finds that it was plain error to allow the evidence in. However, even were the defense to raise this hearsay objection, it would be unsuccessful. Victim's statement that they would not participate is not required for its truth; only for the effect on the listener (the boss). The boss' nod is similarly nonhearsay because it is about the effect on the Defendant in telling him to shoot the victim.
For all of these reasons, the trial court should overrule all of Defense's objections.
MEE 2
Sample Answer
1. The issue is whether the parole evidence rule (PER) bars introduction of evidence of Seller's and Buyer's oral agreement that Buyer would use Seller's picture on red wine labels.
The PER bars introduction of evidence of prior or contemporaneous negotiations where the agreement between the parties is set forth in an integrated writing. If a writing is fully integrated, no such evidence is admissible; if a writing is partially integrated, such evidence is admissible only to supplement, but not to contradict, any of the contract's terms. While a merger clause generally creates a presumption that a writing is fully integrated, such a clause is not necessary to find full integration. A court may look to the length and detail of the written agreement to determine the extent of its integration.
Here, Buyer and Seller engaged in oral discussions regarding Buyer's continued use of Seller's picture on red wine labels. Subsequently, Buyer and Seller entered into and signed "a lengthy written agreement." The agreement did not contain the discussions between Buyer and Seller pertaining to the labels, nor did it contain a merger clause. The parties' oral agreement pertaining to the wine labels did not contradict any terms in the agreement, but rather supplemented them. Thus, if the court finds that the parties' written agreement is fully integrated, it could bar introduction of evidence of the parties' oral discussions, and if it finds that the agreement is partially integrated, it could admit this evidence. The agreement contains no merger clause, but it is lengthy, suggesting a high degree of detail. As such, a court could find that it is fully integrated.
Seller may argue that, even if the court finds that the parties' agreement is fully integrated, the court should admit evidence of their oral agreement as a condition precedent. Conditions precedent are conditions that must occur before a party's performance obligation is triggered. Evidence of such conditions is excepted from the general PER. Thus, if parties agreed to a condition precedent orally, then subsequently entered into an integrated written agreement, evidence of the prior oral agreement of the condition precedent is admissible notwithstanding the PER.
Here, Seller stated orally in negotations between the parties that she would not sell the winery unless Buyer agreed to continue using her label. However, the actual agreement between the parties stipulated that "if Seller sold the winery to Buyer, he would continue to use the label for as long as he sold red wines." This agreement is not a condition precedent, as it is not an event the occurrence of which Seller's performance obligation is conditioned.
Consequently, the key question is whether the written agreement is integrated. As stated above, a court could find that it is, and if it does, it should bar the introduction of evidence of the parties' oral agreement, rendering the agreement unenforceable. If the court finds that the written agreement is partially integrated, however, it could admit this evidence as supplementing the terms of the written agreement, rendering the oral agreement enforceable.
2. The issue is whether evidence of the parties' oral discussions regarding what would constitute a fair share of the winery's first-year profits would be admissible under the PER to help explain the meaning of the term "fair share."
As discussed above, the PER bars introduction of evidence of prior or contemporaneous negotiations when the parties' agreement is documented in an integrated writing. However, even if the parties' writing is fully integrated, such extrinsic evidence is admissible where a term in the agreement is ambiguous. The evidence is admissible in that case to resolve the ambiguity of the ambiguous term.
Here, the parties' written agreement states that Buyer would pay Seller a "fair share of the winery's profits." The term "fair share" is ambiguous, and the parties dispute the meaning of the term. Moreover, the facts do not indicate that this ambiguous term is defined anywhere in the writing. Consequently, irrespective of whether the writing is partially or fully integrated, evidence of the parties' prior oral negotiations pertaining to the meaning of the term "fair share of the winery's profits" is admissible to resolve the ambiguity of this term.
3. The issue is whether the noncompete clause in the parties' written agreement is enforceable.
Contractual restrictions such as noncompete clauses are enforceable only if they are limited in both time and scope. This determination must be made with reference to the particular facts of the business at issue. For example, because the purpose of a noncompete clause is to foreclose competition with the business at issue, such a clause would be unreasonably broad if its geographic scope extended beyond that of the business at issue.
Here, the parties' written agreement states that Seller is not permitted to own or operate a winery anywhere in the United States for 10 years after closing. Moreover, the winery at issue in the agreement is "a small winery that catered to a regional market." The facts do note that the winery "became wildly successful," but do not indicate that it expanded its geographic scope. Given this, it is unlikely that a noncompete clause that extends for 10 years to the entirety of the United States is enforceable. Moreover, Seller opened and began operating a winery "in another state in the United States far from her original winery." Consequently, it is unlikely that this new winery competes meaningfully with the winery sold to Buyer. As such, the noncompete clause in the parties' written agreement is likely unenforceable, and Buyer likely would not prevail in a claim against Seller based on breach of this clause.
Sample Answer
1. The issue is whether the seller and buyer's oral agreement that buyer would use seller's picture on the red wine labels enforceable when it was not included in the written agreement.
The parol evidence rule bars the admission of extrinsic evidence relating to prior or contemporaneous oral agreements when there is an integrated writing. A writing is at least partially integrated if the writing is final as to at least some terms. When a writing is partially integrated, extrinsic evidence is admissible when it is consistent with the terms of the writing. A writing is completely integrated when the writing is final as to all terms. Under the common law, courts look only to the "four corners" of the document to determine whether the agreement is fully integrated. A merger clause is strong evidence that an agreement is final as to all terms. If the writing is completely integrated, no extrinsic evidence is admissible unless it explains an ambiguous term or phrase. The parol evidence rule does not apply, however, to extrinsic evidence that is used to prove a condition precedent or a defense to formation.
Here, the seller could try to argue that the agreement is enforceable because it acted as a condition precedent. But that argument is not likely to prevail. A condition precedent is when a duty under a contract arises only upon the occurrence of another event. Unless it is clear, courts presume language is a promise (the failure of which gives rise to a breach) and not a condition (the failure of which excuses a duty to perform). The seller's duty to sell the winery did not depend on whether the buyer would continue using the seller's photo. Instead, the agreement was simply a promise.
The court must determine, then, whether the written agreement was partially or completely integrated, looking only to the contract itself. While the contract does not include a merger clause, it is likely that the contract is completely integrated. The contract is lengthy, which indicates the it covers the entire terms of the agreement. In addition, it includes all of the essential terms for a contract. It lists the parties, the price, the quantity, and the subject matter. And it does not leave any terms open. The seller could argue that the phrase "fair share" left the price term open. Under the common law, courts do not gap fill when a term is missing. However, the term "fair share" is likely definite enough, when considered with the price of $3 million, that the contract term for the price is not open. Because the contract is likely completely integrated, the seller cannot introduce extrinsic evidence of the oral agreement reached between the buyer and the seller.
Therefore, the seller cannot enforce the oral agreement to use the seller's picture.
2. The issue is whether the seller could introduce evidence of the negotiations to explain the term "fair share" when the term does not have a clear meaning.
As discussed above, even when a writing is completely integrated, extrinsic evidence is admissible to explain ambiguous terms or phrases of a contract. The term must be ambiguous on its face under the common law. A term is ambiguous when it is subject to two or more reasonable interpretations. If a term is ambiguous, prior negotiations or dealings between the parties, trade usage, or custom could all be used to explain the ambiguous term.
In this case, the term "fair share" is likely an ambiguous term. "Fair share" is subject to multiple reasonable interpretations. Reasonable parties could disagree as to what a "fair share" of first year profits are when a person sells a business to another individual. It could be interpreted as something small when it is supplementing a multi-million dollar purchase price, or the multi-million dollar purchase price could reasonably suggest a more significant share of the profits was expected. Because the term is ambiguous, the seller can introduce extrinsic evidence to explain the term. Prior negotiations between the parties are permissible evidence to explain ambiguous terms. Here, the parties agreed earlier that at least 20% was a "fair share" of the first year profits. While the seller believed 25% was fair, both parties at least viewed 20% as being fair. The seller can introduce evidence of those negotiations to explain the meaning of the ambiguous phrase "fair share."
Therefore, the seller can introduce evidence of the prior negotiations.
3. The issue is whether the seller breached her obligations under the agreement when she opened a new winery.
A covenant not to compete (or noncompete agreement) is an agreement where one party agrees to not compete with the other party's business. Generally, courts will uphold covenants not to compete if they are reasonable in scope and duration.
Here, the buyer included a covenant not to compete in the seller's agreement to sell the winery. Under the terms of the agreement, the seller could not "own or operate a winery anywhere in the United States for 10 years after closing." The non-compete provision is not likely to be upheld by a court. It is a closer call, but the duration of the agreement is not likely reasonable. Generally, the duration of the agreement is reasonable when it provdes the buyer of the business a few years to establish himself as the new owner without direct competition from the previous owner. The buyer exceeds that purpose here when he restricts the seller's ability to open a winery for 10 years, which is a significant period of time.
Even if the duration were reasonable, however, the scope is almost certainly not. Noncompete agreements typically need to be restricted a reasonable geographic scope. The area is typically limited to the surrounding area or where the clients are located. Here, the seller operated only in a regional market, not a national one. The seller does not have clients all over the country. To prohibit the seller from operating a winery within the regional market would have been much more likely to be found a reasonable scope. But to prohibit the seller from operating in the entire United States is far too broad. The seller had no national presence.
Therefore, the seller did not breach the agreement when she opened a new winery.
MEE 3
Sample Answer
1. The issue is if the Corp. ratified Carol's sale.
An agent is a person who agrees to act under the control of a principle. An agent has only the authority either express or apparent to a third party. Express authority is authority is either acutal or implied authority. Actual authority is authority which is given by the language or the principle. Implied authority are reasonable steps taken by the agent due to expressions of the principle including past dealings, or normal industry business practices. If an agent has actual or implied authority then the principle is bound. Further, an agent acting under a disclosed principle may have apparent authority when the principle manifests the intention to hold the principle out as having the authority to act on their behalf. Finally, even when an agent acts without express or apparent authority, the prinicple can ratify the contact by accpeting the contract's term so long as the principle does so within a reasonable amount of time and the principles knows all the material terms.
Here, Carol was acting as an agent of the corporation. She was hired by the corporation and was thus acting under their control. The principle was the board of directors and the corporation itself. Carol had no actual, express or apparent authority to sell off the property. The board of directors had approved for Carol to negotiate financing agreements on behalf fof the corporation with several banks and Danielle had only asked for Carol to act on behalf of the corporation to obtain loans. Carol then proceeded after only talking to one bank, to accept a contract for the sale of the entire property. This was neither her expressed will nor was this implied as the corporation was created for the purpose of dividing the land into residential lots and constructing single-family homes. This far exceeds the implied scope of obtaining the loan.
However, the corporation ratified the sale and is thus bound by the sale of the land. Carol told Danielle who thought that it was in the best interst of the company. The board then held a special meeting with proper notice so it was more than two where all the board was present and a majority of the board voted agreed to sell the property for a large profit. As long as all material terms were known to the board, then the contract is binding upon the Board.
2. The issue is if the bonus paid to Danielle is proper?
All member's of a corporation owe each other a duty of loyalty. The duty of loyalty includes no self-dealing between the members. When self-dealing occurs, the board of directors may vote to allow the dealing to occur so long as the board is fully informed and two-thirds of disinterested board members vote for the dealing. Further if two-thirds of stock holders agree with the transaction. Even if a majority of the shareholders or board members agree with the self-interested dealing, it must be foair to the corporation.
Here, Danielle's bonus is a self-dealing bonus as it will give her and her-alone without benefiting the company. It is giving her all the money that that the company made from the sale without regard to Brian. This is a self-dealing. Thus, she would need the approval of two-thirds of either the rest of the disinterested shareholders or the disinterested directors. However, she does not have even a majority of the disinterested members since she is not allowed to vote on the matter if it self-dealing. Thus she will have a 50/50 disinterested board since she is not permitted to vote and 100% of disinterested shareholders are Brian is the only one allowed to vote. Further, this sale seems unfair to the corporation because it is loosing all profits that the corporation was expected to make.
Further, all members owe a duty of care to the corporation. The duty of care requires all members of a board of directors to act as a responably prudent board of director would with the same lelvel of skill and training would under the circumstances. All actions of the board of directors, excpet self-dealing, are protected by the Business Judgment Rule (BJR) which creates a prsumption that directors acted with the duty of care so long as they were well informed business decisions and that a court will not second guess the decision without fraud, or self-dealing.
Here, the BJR will not protect Danielle because it she acted in self-dealing by giving herself a contract worth a third of the company's worth. Further, the BJR would likely protect the sale of the land though especially for a profit. However, it would not protect the third board member from selling off all profits to one shareholder over the other.
3. The issue is may Brian seek judicial dissolution from the corporation?
A court will rarely order dissolution. When a court does order disolution it usually because a majority shareholder is dominating the company preventing a minority shareholder from recieiving their reasonable expectations of the company. Further a court may order judicial disolution where the corporation is unlawfully limiting the rights of other board members or shareholders. A board member or shareholder is allowed to inspect the company books for a proper purpose so longas they provide a reasonable notice.
Here, Danielle is dominating the board as a majority shareholder and foiling the reasonable expectations of Brian. Brain and Danielle started a corporation to persue development opportunities. Danielle owns 80 percent of the company and has the majority of the Board seats. She has used this power to deviate from Brian's expecatations. Brian was expected to be paid a salary and work on the construction of all homes on the parcel with all proceeds being given to the corporation and then perodic dividends. Instead the board sold the property interest which Brian was expcted to make a salary from and awarded him nothing from the profits. Further, when Brian asked to review all accounting recoreds, a reaonasble inspection of the books, the corporation denied this request depsite being legally obligated to do so. The only way for Brian to see the profits that he expects and to follow the role would be for a court to order judicial dissolution.
Sample Answer
1. The issue is whether the corporation is bound by the land-sale agreement entered into by Carol when the board of directors approved the transaction by a majority.
A principal can be bound by the acts of the agent if the agent has authority to act or the principal ratifies the agent's actions. An agent has authority to act if there is actual or apparent authority. Actual authority can be express or implied. Express actual authority exists when the agent, based on the principal's words, subjectively believes his actions comply with the principal's instructions and the belief is reasonable. Implied actual authority is when the agent reasonably believes teh action is necessary to accomplish the principal's goals. Apparent authority exists when the third party, based on the principal's conduct, reasonably believes that the agent has the authority to act. Finally, a principal ratifies the agent's conduct if the principal timely agrees to accept the benefits of the contract with full knowledge of the material terms.
In this case, the corporation hired Carol to negotiate a financing agreement on behalf of the corporation with several banks. In doing so, Carol was acting as the corporation's agent. If Carol had authority to enter into the sale, or the corporation ratified her agreement, the corporation would be bound by the agreement.
Carol did not likely have actual authority. The corporation had hired Carol to negotiate a financing agreement with a bank for the recent purchase of a parcel of land. The corporation did not expressly state that she could not sell the land, but her belief that doing so is proper would not be reasonable. The corporation just purchased the property, and when asked to secure financing for the purchase, it would not be reasonable to instead sell the recently acquired property, especially when the corporation had significant plans to develop the property. Because her belief would not be reasonable, she would not have actual express or implied authority.
Carol likely did not have apparent authority. While hiring a person to fulfill a particular role usually represents that the agent carries the customary amount of authority, it is not likely customary that a consultant hired to negotiate a financing agreement has the authority to instead sell the property. The bank could not have reasonably believed that the person sent to negotiate financing for the purchase price would also have the authority to sell the building.
However, the corporation likely ratified the agreement signed by Carol. Carol informed Danielle of the terms of the sale with the bank. And after Danielle heard the terms, she called a special meeting for the board of directors. Carol then described to the board the terms of the agreement. Danielle and the third director both voted to approve the sale, which represented a majority vote (2/3). In the absence of a provision to the contrary, a majority vote of directors is sufficient to take official action. Thus, the corporation acquired full knowledge of the terms of the contract when Carol presented it to the board. And the corporation timely accepted the benefits of the contract three days later. The corporation ratified Carol's conduct.
Therefore, because the corporation ratified the agreement entered into by Carol, the corporation will be bound by it.
2. The issue is whether the bonus payment to Danielle, which was approved by the majority of the board of directors, was proper.
Shareholders who own a majority of the corporation owe fiduciary duties to other shareholders. A shareholder who owns more than 50% of the corporation is a majority shareholder. Directors also owe a fiduciary duty to the corporation. One of the fiduciary duties owed is the duty of loyalty. Under the duty of loyalty, majority shareholders cannot engage in self-dealing transactions. A transaction is self-dealing when it benefits the director or shareholder in a financially material way. The duty of loyalty also requires acting in the best interests of the corporation.
In this case, Danielle is both a director and a shareholder. Brian can argue that Danielle, by controlling the entire board, has engaged in a self-dealing transaction by distributing the purchase price of the land to her as a "bonus payment." Through her majority control of shares, she has control over the board because she is a director and she selects the third director (someone who is loyal to her). Danielle's actions are self-dealing because they are financially material. Danielle will profit $6 million dollars through her actions.
In addition, Danielle, as a director, must act in the best interests of the corporation. Originally, the land was to be used to be sold as individual parcels, and the sale of the parcels would go to the corporation. Now, the land is being sold altogether, and the entire price is going to Danielle, not the corporation. Decisions that result in self dealing will not be protected by the business judgment rule, which is rebuttable presumption that the director is acting in the corporation's best interests.
There are three safe harbors for self-dealing transactions: (1) approval by a majority of disinterested directors; (2) approval by a majority of disinterested shareholders; or (3) the fairness of the transaction. Danielle cannot get a majority of disinterested directors to approve. Without her, there are only two other directors, and Brian objects to the transaction. In addition, Danielle cannot get a majority of shareholders. Without her, there is only one shareholder, and Brian objects to the action. Danielle, then, must prove the fairness of the transaction. Danielle will not be able to prove that the transaction is procedurally and substantively fair. It is not substantively fair because the corporation is deprived of money that it should have had because the land was corporate property. And it was not procedurally fair because it was approved by Danielle and Danielle's personally selected director. Thus, the payment to Danielle was improper.
Therefore, the payment to Danielle was improper.
3. The issue is whether Brian has sufficient grounds to seek the judicial dissolution of the corporation.
A close corporation typically exists when there are only a small number of shareholders that own a corporation. For close corporations, the courts typically relax the rules that would apply to a normal corporation because shares of a close corporation are not liquid and provide little means to withdraw. As a remedy, courts allow minority shareholders of a close corporation to dissolve the corporation if the majority shareholders act oppressively towards the minority shareholder.
Here, the corporation is a close corporation; it has only two shareholders. Danielle holds a significantly larger percentage of the corporation (80%), giving her complete control of the corporation. Brian's shares are not very liquid (he would not likely find a buyer for his 20% share in the corporation). Thus, if Brian can show that Danielle is acting oppresively, he can request a judicial dissolution of the corporation.
It is likely that Danielle is acting oppressively towards Brian. Danielle recently distributed all of the sale proceeds to herself as a bonus payment, denying Brian any share of the sale. In addition, when Brian asked to seee the records of the corporation relating to the sale of the land, Danielle (and the third director, who is selected by Danielle) refused the request. Shareholders and directors (both of which Brian is) have a right to inspect corporate records. By denying Brian a share of the sale price and not allowing him to exercise his rights as a shareholder and director, Danielle is likely acting oppressively. Brian has no control in the corporation because Danielle holds 80% of the shares, and she selects the third member of the board. She is using the control of the corporation to prejudice Brian. As a result, she is acting oppressively, and Brian can likely dissolve the corporation.
Therefore, Brian can likely resolve the corporation because of Danielle's oppressive actions.
MEE 4
Sample Answer
I. The AD Trust was validly created 4 years ago and the trust was later effectively revoked because Arlene expressed her intent to revoke it.
1a. The first issue is whether the AD trust was validly created, and if so, when was it created. Trusts do not have to be in writing. They can be oral trusts as well. For their to be a trust, the Settlor has to indicate that she intends for the Trustee to hold the Settlor's property and there need to ascertainable beneficiaries of the trust. The settlor can also be the trustee. Here, Arlene stated that she created the trust, and named herself as the trustee. She also named ascertainable beneficiaries - Carla, Donna, and Edna.
The issue is that she wrote that she had not transferred any assets to the trust yet, but will before she dies. While Arlene had testamentary intent, she had not transferred any assets to the trust. A trust does not exist if the trust does not have any assets. 4 years ago, she bought bounds with her personal funds and revised Schedule A to list them as assets of the trust. It appears then, that at the moment, the trust came into existence because there were now assets in the trust. Therefore, the trust came into existence 4 years ago.
1b. The next issue is whether the AD Trust was validily revoked. The majority rule under the UTC states that a trust is presumed revocable. Under the minority rule, a trust is presumed irrevocable. Here, the trust instrutment has no provision regarding whether it was revocable or irrevocable. But, the jurisdiction in which Arlene died has adopted the Uniform Trust Code. Therefore, the trust is revocable.
A trust can be revoked by the Settlor at any time during her life if the trust is revocable. Here, Arlene revoked the trust. She wrote across the face of the Declaration of the Trust athta "This AD Trust is revoked) and "I'm taking back the assets." That was sufficient to revoke the trust. She brought the trust into existence by writing, and she revoked the trust through writing.
II. The trust for the benefit of Donna was valid because she was an ascertinable bneficiary, the settlor had intent, and because oral trusts are allowed.
2. The next issue is whether the trust for the benefit of Donna was valid. A valid trust can either be oral or in writing. A trust must have an ascertainable beneficiary. And, the settlor must have a testamentary intent. Here, those requirements are met. Donna is an ascertinable beneficiary because Donna is the intended beneficiary from the sale of the necklace and bonds for her college education. The trust is oral, but oral trusts are allowed. Arlene has intent here because she wants the trust to exist for Donna. Thus, the trust for the benefit of Donna is valid.
III. The trust for the benefit of the political party is not valid because it is not a charitable trust and because
3. The next issue is whether the testamentary trust for the benefit of the political party is valid. A testamentary trust for the benefit of a political party is not valid. This is not a charitable trust, because it isn't for ending poverty, the advancement of religion, helping the public at large, etc. The political party's exclusive mission is to support candidates for public office who accept its political view. This is not a charitable trust. The political party does not count as an ascertinable beneficiary. A trust for the benefit of a political party is not valid.
IV. Bob gets 1/3 of the bank account, Fred gets 1/3, and the nieces each get 1/9 under the Per Stirpes approach.
4. The final issue is whom should the bank account be distributed if the testamentary trust to the Political Party is invalid. The bank account, unlike the bonds and necklace, is not a part of the trust. We look to the statute which states that if a "decedent dies intestate without a suriving spouse, issue, or parent, the decedent's proeprty is distributed to the issue of his or her parents per stirpes." Here, the bank account is intestate property because the trust is invalid. Arlene did not have a spouse, issue, or parent. So, we look to her parents other issue. She had 3 siblings. Under per stirpes, each gets 1/3 of the bank account. Bob gets 1/3 of the bank account, so 100,000 dollars. Arlene's deceased older brother would get 100,000 as well but he is dead. The 100,000 passes to Fred. Finally, the deceased sister would get 100,000. But, she is dead, so it passes to Carla, Donna, and Edna who will each get 33,333.33, because that is 1/3 of 100,000 dollars.
Sample Answer
1a. The issue is whether and when the AD Trust was validly created.
A trust may be validly created in writing, signed by the settlor, with the express intent to create a trust. A trustee may be appointed, or the settlor may appoint themselves as trustee. The settler names beneficiaries of the trust. A trust is valid when assets are transferred to it.
Here, the AD Trust was properly created in writing, signed by Arlene, and expressed her specific intent to create a trust and how it should be administered. She appointed herself as trustee. However, when Arlene attempted to create the trust 10 years ago, she had not yet transferred assets into it. The trust therefore did not become valid until 4 years ago when Arlene bought bonds and revised the incorporated Schedule A attachment to list the bonds as assets of the trust.
1b. The issue is whether the AD Trust was effectively revoked.
Under the traditional rule, trusts are presumed irrevocable unless they are explicitly made revocable. However, under the modern trend, trusts are now presumed revocable in the absence of clear intent to make them irrevocable. A trust may be revoked by physically destroying the declaration of trust or writing words of revocation across it.
Here, the AD Trust was a revocable trust under the Uniform Trust Code. Arlene therefore validly revoked it when she physically wrote words across its face expressing her clear intent to revoke it. She also informed her friend in person that she had intended to revoke the trust and explain her reasons for doing so.
2. The issue is whether the trust for Donna's benefit was valid.
A trust may be made orally as well as in writing. The trustee must assent to the appointment. Here, Arlene expressed her clear intent to her friend to create a trust, named her niece as beneficiary, and conveyed trust assets (necklace and bonds) to her friend as trustee. She gave her friend as trustee instructions for the administration of the trust. Her friend assented to appointment as trustee by saying, "Okay."
3. The issue is whether the trust for Political Party was valid.
A settlor may create a charitable trust wherein income from trust assets is paid to a charitable organization whose primary purpose is in the public interest. Trusts are subject to the Rule Against Perpetuities. A charitable trust will not violate RAP if, in the event that the charity's mission becomes moot or substantially frustrated, a court could reasonably transfer the benefit of the trust to another charity who serves substantially the same purpose. Doing so must not contravene the clear intent of the settlor.
Here, the perpetual trust Arlene attempted to create for the Political Party will fail because her jurisdiction has adopted the common law Rule Against Perpetuities. Thus, her perpetual restriction on the distribution of the trust income to Political Party only violates RAP because the Political Party may dissolve or cease to find candidates for public office who continue to accept its particular views. In that case, a court would be unable to honor Arlene's intent by transferring the charitable trust to another substantially similar charity. Therefore, the trust for Political Party was invalid.
4. If the trust to Political Party is invalid, the issue is to whom the bank account should be distributed.
Intestate distribution by per stirpes involves distributing an estate according to the first generation where there is a living descendant or a descendant who is survived by issue. The distribution is made to the living relative and then drops down to surviving children.
Here, the jurisdiction distributes the property of a decedent who has no spouse, issue, or parent, to the issue of her parents, i.e., her siblings, per stirpes. Arlene has one living sibling, Bob. Her two other siblings are deceased but each have children. Carla, Donna, and Edna are the children of her deceased sister and Fred is Arlene's deceased brother's only child. One third of the bank account, $100,000, will be distributed to Bob. Fred will also receive $100,000. Carla, Donna, and Edna will each receive a third of $100,000, approx. $33,333 each.
MEE 5
Sample Answer
Probably. Under the principal of joinder, parties to a lawsuit can be joined in after the lawsuit has been initiated by either the plaintiff or the defendant. Two types of joinder exist: permissive joinder and compulsory joinder. Permissive joinder can allow a party to request that a party is joined in the litigation due to that additional party having an interest in the action. However, parties can also be required to join into an action if the failure to include that party would prevent the current parties from recieving a just adjudication of the issues, if failure to join the necessary party would cause that party to be adversely impacted without representation in the matter, or if the additional party's interests are not fairly represented by the parties of the lawsuit. If a party is considered to be necessary such that adjudication cannot be fairly obtained without the inclusion of that party to the lawsuit, that party must be joined or the court will be required to dismiss the lawsuit.
Here, the lawsuit is between the Builder and the Lender. However, the developer operated as a middle man between the Builder and the Lender. The Builder entered into a contract with the Developer to construct an office building on a vacant lot. The Developer then went to the Lender in order to obtain the financing required for the construction project. The agreement for funding was between the Developer and the Lender even though the Lender paid the Builder directly. While the Builder was a third party beneficiary of the contract between the Lender and Developer, the Developer was still a neecsary party in determining issues involving the contract between the Lender and Developer. Without the Developer involved, the contract dispute cannot be properly adjudicated. Additionally, funds provided by Lender and disbursed to the Builder would be added to the Developer's laon balance and repaid with interest. Therefore, the issue of disbussement of funds directly implicates the Developer's interest here. Without including the Developer, their interests may be infringed upon. Therefore, the Developer is a neceessary party and must be joined.
2) Would joinder of the Developer deprive the court of subject matter jurisdiction?
In order for a federal court to have proper jurisidciction over a matter, it must have both subject matter jurisdiction and personal jurisdiction over the defendants. Subject matter jurisdiction (SMJ) can come in two flavors, federal question jurisdiction and diversity jurisdiction. Federal question jurisdiction applies when ever a question of federal law is implicated. Diversity jurisdiction can apply when the plaintiff and defedant are from two different states, and the amount in controversy exceeds $75,000. For corporations, a party is considered to be domiciled in a state where it's pricinipal place of buisness is located and where it is incorporated. If a case proceeds under diversity jurisdiction, parties joined into the litigation generally must not destroy diversity jurisdiction.
Here, the Builder is a State B corporation with its principal place of buisness in State B. Lender is a State A corporation with its principal place of buisness in State A. Thus diversity exists as the Builder is seeking $100,000 in damages and the parties are from two different states. The problem here is that Developer is an LLC organized in State A. Developer would be joined as a third party defendant, meaning that it cannot be from the same state as the plaintiff (Builder). However, LLC's are said to be domiciled in the state in which they are organized and the states in which their partners reside. Thus, Developer is said to be domciled in both State A and State B. Therefore, inclusion of the developer here would destroy diversity as a defendant and a plaintiff would be domiciled in State B. And while the court has the ability to exercise supplimental jurisdiction in which the amount in controversy requirement is waived for an additional party if the claims arise out of the same transaction or ocurance, supplimental jurisdiction cannot exist if complete diversity is joined. Because the Developer and Builder are both domiciliaries of State B, subject matter jurisdiction would be destroyed if joineder occured.
3) If Developer cannot be joined, should the court grant the motion to dismiss?
Yes. When a necessary party cannot be joined in an action, the court must dismiss that action if joinder would destroy the court's subject matter jurisdiction. Here, adjudication of the matter without the Developer would both deprive the developer of their rights to protect their interests impliated in the matter and would prevent a just adjudication of the issues here. Therefore, the Developer is a necessary party. However, because the developer is domiciled in Both State A and State B, joinder would destroy diversity as the plaintiff is also domiciled in State B. Thus because the joinder of a necessary party would be impossible and no other remedy exists here, the court must grant the Lender's motion to dismiss.
Sample Answer
1. The issue is whether Developer must be joined under Federal Rule of Civil Procedure (FRCP) 19(a).
Under FRCP 19(a), a party must be joined if they are both a necessary party and adding the party would be feasible. A party is necessary where the court cannot grant complete relief without it, the party has an interest in the subject matter of the litigation that is not adequately represented by a current party to the litigation, and there is a significant risk of incurring mulitple liability or inconsistent obligations if the party is not joined. Whether joinder is feasible turns on whether the court will maintain both subject matter and personal jurisdiction over the litigation if the party is joined.
Here, Developer is likely a necessary party. Undoubtedly, Developer has a significant interest in the subject matter of the litigation, which is the building Builder built for it and the loan Lender made to it to allow it to pay for the building. Arguably, Developer has a greater interest in the subject matter of the litigation than either Builder or Lender, because it will be using the property to make money into the future. Builder simply wants to be paid for its contract, while Lender simply wants to ensure its loan is secured by a property sufficient to cover any default. Moreover, Developer is the party obligated on the contract to Builder, not Lender. Therefore, it is hard to imagine how the court could grant relief in this case without deciding issues that effect solely the interests between Developer and Lender, and between Developer and Builder specifically. For the court to grant relief, they must determine the relationship of Developer to each of the current parties to the litigation. Accordingly, Developer is a necessary party for purposes of FRCP 19(a).
2. The issue is whether joinder of Developer would destroy the court's subject-matter jurisdiction.
Diversity jurisdiction requires complete diversity of citizenship between plaintiffs and defendants, and an amount in controversy over $75,000. The amount in controversy requirement can be satisfied by aggregating multiple claims against one defendant, or by bringing one claim for relief above $75,000 against multiple defendants. For diversity purposes, a corporation is a citizen of the state in which it is incorporated and in which it has its principal place of business. LLCs are treated like partnerships, and are considered citizens of every state of its partners. Limited partnerships, are citizens of every state of its general partners. Therefore, a member-managed LLC, which operates more like a limited partnership, is only a citizen of the states of which its manager(s) are citizens.
Here, the amount in controversy is clearly satisfied, as the claim is for $100,000. Adding Developer may destroy complete diversity, however, if the LLC is treated as a citizen of each state of which its members are citizens. If, instead, it is treated as a citizen only of the state in which it is formed, or of which its manager is from, then it would not destroy diversity. That is the LLC is formed in State A and Amy, the manager, is a citizen of State A. Therefore, Developer would be added as a defendant, and Builder would maintain complete diversity from both Lender and Developer. If Developer is a citizen of the states of each of its members, however, then diversity would be destroyed, because Barbara is a citizen of State B.
3. The issue is whether Developer is an "indispensable party."
When it is not feasible to join a necessary party, a court must weigh several factors to determine whether to proceed in the absence of the party, or to dismiss the case. The court will consider things like whether any prejudice to the absent party can be reduced or whether there is some other forum in which the parties can obtain relief.
In this instance, assuming the joinder of Developer would destroy the court's diversity jurisdiction, the court would need to consider whether the prejudice to Developer of the case proceeding in their absence would outweigh the benefits. Here, deciding the case in favor of Lender would leave Developer on the hook for $100,000 to Builder, with potentially little recourse against Lender. By contrast, deciding in favor of Builder would benefit Developer. Moreover, if the court dismissed, the parties could simply bring the action in state court in State A. Given the potential detriment to Developer, the court should dismiss the action and allow the parties to obtain relief in a more appropraite forum: state court.
MEE 6
Sample Answer
1. Property taxes on the family home
As between Wanda and Frank, Wanda is obligated to pay property taxes on the family home. At issue is who must pay property taxes as between the holder of a life tenant and a remainderman. A life tenant has a few responsibilities when it comes to keeping their property in order. A life tenant must not commit waste so as to impair the interests of their remaindermen. A life tenant is also responsible for the general upkeep of the property, including reasonable repairs and property taxes.
Here, Wanda owns a life estate in the family home, having been given it via devise in Oscar's will in 2017. Upon Oscar's death, Adele was given the remainder interest in Wanda's life estate in the family home, and Adele began paying property taxes on the family home because she (accurately) believed that Wanda could not afford them. Adele, however, died in 2020 and, pursuant to her will, left her entire estate, including the remainder interest in the family home, to Frank. Thus, as of 2020, Frank owned a remainder interest in the family home. Just becasue Adele was paying the property taxes prior to her death does not eliminate the life estate holder's responsibility to keep the houe in order, make reasonable repairs, not commit waste, and pay property taxes. Thus, as between Wanda and Frank, Wanda is responsible for the payment of property taxes, even though she cannot afford to pay them from her limited income. Her best option is to move out and rent it, so that she can afford the taxes, assuming Frank continues to refuse to pay.
2. Oscar's interest in the apartment building
Upon conveying the apartment building to Frank, Oscar kept a possibility of reverter, which was valid. At issue here is the interest that accompanies a fee simple determinable, and whether that interest violates the Uniform Statutory Rule Against Perpetuities. A fee simple determinable is a property interest that comes when a property is granted with durational language such as "so long as" or "until" a condition arises. When a fee simple determinable has properly been granted, the future interest that accompanies it is called a possibility of reverter. The reversionary interest is held by the grantor, and it automatically springs if the condition occurs.
The Rule Against Perpetuities states that some interests in land are not valid if a condition accompanying the interest vests so far in the future (usually, more than 21 years after a measuring life in being) so that it cannot be readily determined who owns the land. The Rule Against Perpetuities voids any such condition, and rerwites the grant as if the condition did not exist. The Rule Against Perpetuities does not control reversionary interests that vest IN THE GRANTOR, however. The RAP typically applies to executory interests.
Here, Oscar granted Frank a fee simple determinable when he said "to my grandson Frank...so long as at least four apartments..." This clear durational language indicated that Oscar intended to convey his entire interest to Frank, but would take it back automatically if the condition fails to be abided by. The fee simple determinable is shored up even more by the language at the end of the grant which states "If at any time fewer than four apartments are being rented to below-median-income families, the apartment building automatically reverts to Oscar." This grant does not violate the Rule Against Perpetuities because, as stated above, the RAP is not violated when the future interest belongs to the grantor, here, Oscar. Thus, the conveyance is kept as is, and Oscar kept for himself a possibility of reverter.
3. Wanda's interest in the apartment building after Oscar's death
Upon Oscar's death, Wanda took Oscar's possibility of reverter in the apartment building. At issue is whether a possibility of reverter is devisible. A possibility of reverter, as stated above, is the future interest that accompanies a fee simple determinable. The possibility of reverter is freely transferable and devisible inter vivos and after death. The Rule Against Perpetuities declares a future interest invalid at its creation, not when it is transferred. Here, Oscar held a possibility of reverter, and then Wanda took it per Oscar's will. ("2. I give the entire residue of my estate [that is, everything except the life estate in the family home and the remainder interest] to my wife, Wanda.") Thus, upon Oscar's death, Wanda held the possibility of reverter in the apartment building. And because the Rule Against Perpetuities would treat the possibility of reverter in the grantor valid at origination, it is still valid upon transfer to Wanda.
4. Ownership of the apartment building after February 1, 2021
On February 1, 2021, Wanda owned the apartment building. At issue is who owns a piece of property that was given as a fee simple determinable when the condition is violated. When the condition following durational language ("so long as" or "until") in a fee simple determinalbe is met, the property automatically reverts back to the holder of the possibility of reverter, or the reversionary interest. Typically, the holder of this interest is the grantor, in this case, Oscar. However, the possibility of reverter can be freely devised and transferred.
Here, Frank owned the apartment building and abided by the condition imposed upon it and him by Oscar. For many years, Frank had leased four apartments in the building to below-median-income families. However, on February 1, 2021, Frank validly and lawfully terminated all leases of the tenants in the building. Frank planned to convert the apartments to luxury apartments. Unfortunately for Frank, at that moment, no apartments in the building were being rented to below-median-income families. Becasue the conditional language in the grant indicated that at least four apartments in the building must be rented to families with incomes below the state median income for a family of their size, and this condition was now no longer met, the possibility of reverter kicked in. Since Wanda was the owner of the possibility of reverter, on February 1, 2021, Wanda owned the apartment building in fee simple absolute, and Frank owned nothing (except the remainder on Wanda's life estate, discussed earlier.)
Sample Answer
1. The issue is who is obligated to pay the property taxes on the family home
A life estate gives the holder a fully ownership interest in the property for the duration of their life. The owner of a life estate in real property is obligated to pay property taxes for the duration of their life, so long as they do not sell or transfer their interest. A future interest holder is not required to pay property taxes during a life estate, because their ownership interest has not vested. However, the real property is subject to foreclosure if the life estate holder fails to pay timly mortgage payments.
Frank received an executory interest in the family home when Adele died and left her entire estate to Frank. Adele had recieved in Oscar's will, three years prior to her death, an executory interest in the family home, following Wanda's life estate. Here, there is no mortgage for Frank to worry about losing his future interest in the estate. Before her death Adele, the future interest holder in the family home, had been paying the property taxes as a gesture of good will. However, she was not required to do so. Frank observed that if Wanda moved out of the home, where she lives rent-free as life estate holder, she could make enough money in rent to pay the annual property tax out of her limited income. Therefore, Wanda will be liable for the annual property tax owed while she holds her life estate in the family home.
2. The issue is whether Oscar's future interest in the apartment building is valid
A fee simple determinable is a transfer of title to real property subject to a durational term. If a condition occurs, the property interest automatically reverts back to the grantor.
Here, Oscar validly conveyed an apartment building to his Grandson and his hears so long as at least four apartments in the building were rented to families below a certain income. "So long as" amounts to valid durational language creating a fee simple determinable. Once Frank, his heirs, or anyone to whom he transfers his fee simple determinable, stops renting to families that meet this income condition, Oscar immediately retains a right of reverter and he regains a fee simple absolute in the apartment building.
A future property interest cannot violate the Rule Against Perpetuities. Howeverer, the Rule Against Perpetuities does not apply to future interests held by the grantor. Therefore, the length of time it might take for the future interest to vest does not make the future interest held by Oscar or Oscar's estate invalid. Even if the Rule Against Perpetuties did apply, the Uniform Statutory Rule Against Perpetuities employs a 90 year "wait and see" approach to see if a future interest vest or fails. Here the future interest vested only six years after the conveyance, and therefore the future interest would still be valid.
3. The issue is what interest Wanda has in the apartment building after Oscar's death.
An executory interest exists when a third party has a right to take ownership of property that they will gain ownership from when the fee simple determinable subject to executory interest vests. Here, when Oscar died, Frank retained a valid fee simple determinable in the apartment building because he still was renting to the appropriate tenants as required in Oscar's conveyance. When Oscar died, he left the residue of his estate to Wanda. Therefore, after Oscar's death, Oscar's right of reverter turned into a executory interest held by Wanda.
4. The issue is who owns the apartment building once the apartment building no longer has any tenants that meet Oscar's specifications in the fee simple determinable.
As of February 1, the apartment building was no logner renting a single apartment to a family with incomes below the state median income for a family of their size. At that point, the apartment building ownership transferred immediately backto Oscar's estate. When Oscar died in 2017, he left the entire residue of his estate to his wife, Wanda. Therefore, as of February 1, Wanda owns the apartment building.