Week 7 Problem – Small Business, Corporate Formation, LLC & Franchises

Facts: Ali is a manager member of IP Specialists, a 15-person member-managed LLC located in Hong Kong, with a branch office in Marina Del Rey, CA, engaged in helping startup companies get their products to market. Ali met with an entrepreneur named Enzo who had a new drug he wanted to market. Enzo provided copies of his research and financials to Ali. Soon thereafter, without Enzo’s permission, Ali told a Chinese company about the drug and provided them with Enzo’s research materials. The Chinese company quickly made a counterfeit copy of the drug and began marketing the drug in South America and Asia. Ali was granted a percentage of sales in the new drug and a large bonus from the Chinese company. He did not tell his LLC about this deal.

While driving to a bank in San Diego, CA, to deposit his bonus, Ali was drinking from a bottle of beer (his fourth of the hour) and hit the vehicle of a soccer mom carrying six children on their way to a post-game pizza celebration. Several of the children suffered severe personal and emotional injuries. However, before Ali can be served with a claim for damages, he flees to Dubai to avoid any legal problems. A few months later he writes the LLC that he is withdrawing from the LLC and is not responsible for any debts.

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The families of the children who were injured have sued Ali and the LLC in the U.S. District Court (federal) in San Diego, CA. In a separate lawsuit, the LLC is suing Ali for damages in federal court in Los Angeles, CA.

Ali was also in a relationship with Kara Le while he stayed in Marina Del Rey and they had a signed a “relationship contract” promising, among other things, to share their future in a mutually agreed upon location with two incomes. They exchanged dollar bills to “make the contract legal”. Upon learning that Ali has left for Dubai, Kara Le files a California state court lawsuit alleging breach of contract.

The cases have been referred to mandatory arbitration for resolution.

Assignment: You are an experienced business manager who has been chosen to resolve these cases. You must decide who wins and who loses. Write a decision based on the following outline:

First, summarize the relevant facts of the case as they relate to each party. A fact is relevant if it had an impact on the case’s outcome. Not all facts in the scenario are relevant. An effective method of summarizing relevant facts is to list them numerically in order as separate sentence. For example, the first relevant fact might be: “Ali is a manager member of the LLC”. This fact is relevant because it establishes the relationship between Ali and the LLC.
Second, list a summary of the issues as they relate to each party;
Third, identify and discuss the relevant law to be applied to each issue from the preceding paragraph;
Fourth, apply the relevant law to the facts to reach a reasoned conclusion. The reasoning of an arbitrator describes the rationale behind the decision. In summary, what are the legal principles you are applying to the facts of this case? Remember to integrate the textbook and the weekly course modules into your answer and use in-text citations to properly document your source material.
Fifth, state if you decided in favor of the Plaintiff’s (Families) or the Defendant’s (LLC & Ali)? Is there a valid contact between Ali and Kara? Do not spend time writing about your personal opinions. An arbitrator cannot use his or her personal beliefs in deciding cases. Arbitrators follow the law and apply it impartially to the facts. Write your opinion in an objective (not subjective) manner.
Sixth, determine the amount of damages and/or other relief awarded to the prevailing parties; and,
Finally, identify, analyze, and suggest how to resolve any ethical issues that exist in this scenario.

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