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					                    CALIFORNIA STATE UNIVERSITY, FULLERTON
                      COLLEGE OF BUSINESS AND ECONOMICS
                          DEPARTMENT OF MANAGEMENT
                 BUSINESS AND ITS LEGAL ENVIRONMENT (MGMT 246)
                          PRACTICE EXAM FOR FALL 2009
                           PROFESSOR CHARLES H. SMITH

                                         INTRODUCTION

        This practice exam is comprised of the two quizzes and two exams that were given in my
classes during Fall 2006. Correct answers will be set forth in bold. There are some different chapter
numbers due to the new edition of the textbook. Therefore, if a chapter number has changed, I have
deleted the chapter number and substituted the topic (e.g., "International Business Law") in its place
in the headings for the various quizzes and exams. However, where the chapter number has
remained the same, I have retained the chapter number in the heading.

                               FIRST QUIZ RE CHAPTER 3 ONLY

       1. What are the qualifications to serve as a mediator?

       A.   There are no qualifications to be a mediator.
       B.   The mediator must be a retired judge.
       C.   The mediator must have passed on the bar exam.
       D.   The mediator must hold a license from the state in which his or her office is located.

       2. Which of the following is not a true statement?

        A. ADR is generally more flexible than court proceedings.
        B. Getting a final decision usually costs less in ADR than it would in the court system.
        C. The parties to a dispute will typically have a greater chance to continue their relationship
if they use ADR instead of the court system.
        D. The parties to a dispute are more likely to get a final decision in their favor in ADR
as opposed to the court system.

       3. Which of the following is much like a non-jury trial in court?

       A.   Negotiation.
       B.   Litigation.
       C.   Mediation.
       D.   Arbitration.

       4. Which of the following is not a way to get to alternative dispute resolution?

       A. Voluntary compliance with a contract made before the dispute has arisen.
       B. Voluntary compliance with a contract made after the dispute has arisen.


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         C. A court orders the parties to submit their dispute to mediation.
         D. A court orders the parties to submit their dispute to litigation.

        5. Lilianna and Natasha got into an automobile accident and agreed to mediation before
Retired Judge Nguyen. During the mediation, Natasha said to Lilianna: “The accident was my fault.
 I’m sorry I hurt you, Lilianna.” No settlement was reached at the mediation and Lilianna filed a
lawsuit against Natasha based on their automobile accident. Would Natasha’s statement of fault be
admitted into evidence at trial?

         A.   Yes, because Natasha’s statement of fault is relevant.
         B.   Yes, because Natasha’s statement of fault was made during mediation.
         C.   No, because Natasha’s statement of fault is not relevant.
         D.   No, because Natasha’s statement of fault was made during mediation.

         6. Which of the following is the best example of the “repeat customer” problem discussed in
class?

        A. The Bank of America fires one of its employees, who claims discrimination; the
bank and the employee agree to submit their dispute to arbitration before Retired Judge
Monir.
        B. The Bank of America fires one of its employees, who claims discrimination; the bank and
the employee agree to submit their dispute to mediation before Retired Judge Monir.
        C. Two people who were involved in an automobile accident agree to submit their dispute to
arbitration; neither party has insurance.
        D. Two people who were involved in an automobile accident agree to submit their dispute to
mediation; both parties have insurance.

         7. The current practice for discovery before arbitration is:

        A. Most arbitrators will permit some limited discovery, such one deposition for each
side and an exchange of documents.
        B. Most arbitrators will permit the same amount of discovery that is permitted in court
proceedings.
        C. Most arbitrators will not permit any discovery at all due to time and cost issues.
        D. Most arbitrators will not permit any discovery at all since there is no right to a jury trial in
arbitration.

       8. Ulrich sued Hetfield for $50,000.00 based on a business deal. They went to arbitration
and the arbitrator ruled that Hetfield did not owe any money to Ulrich. Which of the following
would be an example of Ulrich’s voluntary compliance with the arbitrator’s decision?

         A.   Ulrich would not file a subsequent lawsuit based on the same business deal.
         B.   Ulrich would file a subsequent lawsuit based on the same business deal.
         C.   Ulrich would not do business with Hetfield in the future.
         D.   Ulrich would business with Hetfield in the future.


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        Questions 9 through 11 are based on the following: Negrete was employed at Nagy’s Bar and
Grill as a bookkeeper. When she first started working at Nagy’s, Negrete signed an employment
contract that read in pertinent part:

               “Any dispute pertaining to your employment at Nagy’s shall be resolved in
       arbitration. You are hereby giving up your right to resolve any such dispute in the
       court system, which includes but is not limited to waivers of a jury trial and appeal.
       Court involvement in any such dispute shall be limited to a motion to compel
       arbitration pursuant to this contract and motions to confirm, vacate and correct the
       arbitrator’s award.”

         After Negrete had worked at Nagy’s for approximately six years, she was fired because, as
the owner told her, there had been an accusation that she had mishandled Nagy’s funds. However,
Negrete was secretly advised by another Nagy’s employee that the owner fired Negrete because of
her status as a Latina woman and that Nagy’s management knew that the accusation of mishandling
of funds was false. To make matters worse, Nagy’s hired a white man to replace as Negrete’s
replacement. Negrete knew she was a victim of illegal discrimination because she had learned about
it in her business law class at Cal State Fullerton. Negrete really got mad when she discovered that
Nagy’s had a history of discrimination on the basis of race, color, sexual orientation, national origin,
religion, gender, age and disability. Negrete decided to take legal action against Nagy’s in order to
win a bunch of money and to teach Nagy’s a lesson in law and good manners. Negrete filed a
lawsuit for damages (money) against Nagy’s for discrimination based on Title VII (federal
discrimination statute). Instead of filing an answer to Negrete’s complaint, Nagy’s filed a motion to
compel arbitration in accordance with the employment contract Negrete had signed six years earlier.
(Question 9 is on this page; questions 10 and 11 are on the next page.)

       9. Which of the following would be the best reason for Negrete to file a lawsuit instead of
submitting her dispute with Nagy’s to arbitration?

         A. Negrete would have a right to a jury trial in court but would have no right to a jury
trial in arbitration.
         B. Negrete would have a right to a jury trial in arbitration but would have no right to a jury
trial in court.
         C. Negrete was worried about the fact that arbitration is a public place.
         D. Negrete was worried about the fact that the court system is a private place.

       10. What should be the result of Nagy’s motion to compel arbitration?

        A. The motion should be granted because arbitration is generally faster and cheaper than the
court system.
        B. The motion should be granted because the arbitration provision in her employment
contract is enforceable.
        C. The motion should be denied because arbitration is not generally faster and cheaper than
the court system.


                                                   3
      D. The motion should be denied because Negrete because the arbitration provision in her
employment contract is not enforceable.

         11. Assume for the purposes of this question only that the court granted Nagy’s motion to
compel arbitration and, at the arbitration, the arbitrator stated that she did not want to hear any
testimony from witnesses but, instead, she just wanted a short written summary of the case from
Negrete and Nagy’s (both of whom complied with the arbitrator’s request without objection).
Assume further that the arbitrator then ruled in favor of Negrete and, in her award, ordered Nagy’s to
pay $500,000.00 to Negrete even though she had requested only $100,000.00. What should be the
result if Nagy’s filed a motion to vacate the arbitrator’s award?

       A. The motion should be granted since the arbitrator was required to follow the rules of
evidence.
       B. The motion should be granted since Negrete did not request $500,000.00.
       C. The motion should be denied since the arbitrator is not required to follow the rules
of evidence.
       D. The motion should be denied since Negrete did not request $500,000.00.

         Questions 12 through 15 are based on the following: Aguilar and Benavidez signed a
contract. According to this contract, Aguilar agreed to perform personal services for Benavidez, who
in exchange agreed to pay Aguilar a monthly salary plus bonuses. A dispute arose between Aguilar
and Benavidez; Aguilar claimed that he was being paid the monthly salary but not bonuses he had
earned, while Benavidez claimed that Aguilar had not completed all of the requirements in the
contract and thus Aguilar had not earned any bonuses. The lawyers for Aguilar and Benavidez
discussed the matter but could not agree on a resolution, so Aguilar sued Benavidez for the claimed
bonuses. The lawsuit was filed in the Orange County Superior Court. At a status conference, the
trial judge (Judge Bauer) suggested that the parties submit their dispute to a retired judge (Retired
Judge Brickner) for a “final decision.” Aguilar would not agree to this but the parties eventually
agreed to discuss the dispute with Retired Judge Brickner with the goal of resolving the matter.
Aguilar, Benavidez and their lawyers met with Retired Judge Brickner, and they talked for several
hours about how Aguilar and Benavidez could resolve their dispute. Some of the discussions with
Retired Judge Brickner took place with all parties and their lawyers present, and other discussions
took place with the lawyers only. At the end of the day, Retired Judge Brickner stated: “I’ve learned
quite a bit about this dispute today and I’m ready to rule on this lawsuit.” Aguilar’s lawyer said that
he was “ready for a resolution” but Benavidez’ lawyer said “we’re not here for a trial or arbitration,
so there’s no reason for Your Honor to make a ruling.” Retired Judge Brickner then announced that
his ruling was that Aguilar’s claim had no merit and that judgment would be entered in favor of
Benavidez. A few weeks later, Benavidez filed a motion to confirm Retired Judge Brickner’s ruling
as a judgment at the Orange County Superior Court. Aguilar opposed the motion on the grounds that
he had never agreed that Retired Judge Brickner could make any kind of a decision that could be
confirmed as a judgment by any court. It was uncontested that Retired Judge Brickner had listened
to what everyone had to say and had considered the matter thoroughly before making his ruling.

       12. How should the court rule on Benavidez’ motion to confirm?




                                                  4
       A. The motion should be granted because the parties had a hearing that complied with due
process.
       B. The motion should be granted because the parties had agreed that Retired Judge Brickner
could make a ruling that could be confirmed as a judgment.
       C. The motion should be denied because the parties did not have a hearing that complied
with due process.
       D. The motion should be denied because the parties did not agree that Retired Judge
Brickner could make a ruling that could be confirmed as a judgment.

        13. What is the best characterization of the discussions between the lawyers before Aguilar
filed his lawsuit against Benavidez in the Orange County Superior Court?

       A.   Litigation.
       B.   Arbitration.
       C.   Mediation.
       D.   Negotiation.

       14. What is the best characterization of the discussions between Retired Judge Brickner,
Aguilar, Benavidez and the lawyers?

       A.   Litigation.
       B.   Arbitration.
       C.   Mediation.
       D.   Negotiation.

        15. Assume for the purposes of this question only that the contract between Aguilar and
Benavidez included a statement that “any dispute under this contract shall be submitted for decision
to arbitration instead of the court system.” Would Judge Bauer have acted properly if, at the status
conference, he had ordered the parties to submit their dispute to Retired Judge Brickner for a “final
decision?”

       A.   Yes, since the parties can agree before any dispute arises to submit to arbitration.
       B.   Yes, since Judge Bauer should make all efforts to reduce his case calendar.
       C.   No, since the parties cannot agree before any dispute arises to submit to arbitration.
       D.   No, since Judge Bauer should not make all efforts to reduce his case calendar.

                  FIRST EXAM (PART 1) RE CHAPTERS 1, 2 AND 4 ONLY

       1. The use of a phrase such as “reasonable person” in a statute can create:

       A.   An ethical nightmare.
       B.   A legal bonanza.
       C.   A legal “gray area.”
       D.   An ethical “gray area.”




                                                 5
        2. In 2000, Merck started to market a drug called Vioxx designed to help people with chronic
pain. What position did Merck’s executives take when advised of a study showing that patients
taking Vioxx for more than eight months had up to four times as many heart attacks and strokes as
patients who took Naproxen (another painkiller drug)?

      A. The executives took the position that Vioxx should be taken off of the market
immediately.
      B. The executives took the position that Vioxx should be taken off of the market gradually.
      C. The executives took the position that Vioxx had many good qualities.
      D. The executives took the position that Vioxx was safe until proven otherwise.

       3. The Foreign Corrupt Practices Act (1977) prohibits:

       A.   Bribery of foreign government officials.
       B.   Bribery of American government officials.
       C.   Illegal oil drilling in foreign countries.
       D.   Illegal oil drilling in the United States.

        4. In January 2005, the Major League Baseball team called the Anaheim Angels changed its
name to the Los Angeles Angels of Anaheim. Within days, the City of Anaheim filed a lawsuit
against the Angels alleging that the Angels were not in compliance with a contract signed by the City
and the Angels in 1996 that required the Angels in include the name “Anaheim” in the team’s name.
 Which of the following is the most accurate statement?

       A. The trial court ruled that Angels were in compliance with the 1996 contract and the
Angels were criticized on ethical grounds.
       B. The trial court ruled Angels were in compliance with the 1996 contract and the Angels
were not criticized on ethical grounds.
       C. The trial court ruled that Angels were not in compliance with the 1996 contract and the
Angels were criticized on ethical grounds.
       D. The trial court ruled that Angels were not in compliance with the 1996 contract and the
Angels were not criticized on ethical grounds.

       5. Maria, a new employee, noticed that her supervisor, Jasmine, approved an expense report
submitted by a co-worker that resulted in the company for which they both worked paying for the co-
worker’s car repairs that were needed due to an accident that happened when co-worker was on a
personal errand instead of company business. Jasmine’s actions could encourage Maria to:

       A.   Steal from the company.
       B.   Buy a newspaper.
       C.   Exercise more.
       D.   Read the Sarbanes-Oxley Act.

       6. Every religion has rules that are:




                                                 6
       A.   Absolute.
       B.   Based on compassion.
       C.   Both absolute and based on compassion.
       D.   Neither absolute nor based on compassion.

       7. Which of the following is the best example of a person’s observing a fiduciary duty?

        A. Rebecca and Rocio were partners in a business; Rebecca advised Rocio that Ivan
had offered to buy Rebecca’s share of the partnership.
        B. Amanda and Kaiulani were partners in a business; Amanda failed to tell Kaiulani that
Patel had offered to buy Amanda’s share of the partnership.
        C. Hirshberg and Goldman were partners in a business; they decided to hold their annual
partnership retreat in San Diego.
        D. Ileana and Alina were partners in a business; they had a disagreement over whether to fire
an employee who had stolen from the business.

       8. Which of the following is the best example of utilitarianism?

        A. Ordaz, the owner of a company, decided to keep an employee on the company’s payroll
even though the employee’s productivity was suffering due to some recent tragedies in the
employee’s family.
        B. Wernke, the office manager of a law firm, decided to fire a secretary because the secretary
had declined the sexual advances of the law firm’s senior partner who threatened to fire Wernke if
she did not fire the secretary.
        C. Monugian, a member of a large corporation’s board of directors, voted that the
corporation should buy land in order to increase the value of the corporation even though
some low-income families would be evicted as a result.
        D. Nino, a salesperson at a pet store, stole a puppy from the store because she reasonably
believed that the store was charging an unreasonable price for the puppy and the ordinary consumer
could not afford that price.

       9. Which of the following is the best description of business ethics?

       A. Business ethics has its focus on what is right and wrong in the workplace.
       B. Business ethics is fundamentally different from ethics in general.
       C. Business ethics provides justifications for actions in the workplace that would unethical
elsewhere.
       D. Business ethics is the functional equivalent of limitations set by the law.

       10. Which of the following is a true statement?

       A.   Every law is the product of someone’s ethics.
       B.   Every ethical belief is the product of someone’s law.
       C.   Laws are never the product of someone’s ethics.
       D.   Ethics are never the product of someone’s laws.


                                                  7
       11. In a civil lawsuit, discovery can be best characterized as:

      A. Informal investigation since witnesses do not have to be cooperative.
      B. Formal investigation since statutes and court rules require witnesses to be
cooperative.
      C. Informal proceedings since judges do not have to be cooperative.
      D. Formal proceedings since statutes and court rules require judges to be cooperative.

         Questions 12 through 13 are based on the following: Taylor owned a deep-sea fishing
business, which had its main office in Long Beach, California and a small branch office in Crescent
City, California. He wanted to diversify his business to include whale-watching trips. He knew that
he needed a custom-made boat for these whale-watching trips and, on a friend’s recommendation, he
contacted Billy Bob’s Boats, Inc. in Galveston, Texas to design and build a boat for Taylor. Billy
Bob (the president of Billy Bob’s Boats, Inc.) and Taylor communicated several times by telephone
and e-mail about the boat’s design and progress, and Taylor even stopped by Billy Bob’s factory
while on vacation to check on his new boat. Taylor made it clear to Billy Bob that the boat would be
moored in Long Beach and would be used for whale-watching trips in and around Southern
California. In fact, their contact stated that “Boat shall be delivered by Billy Bob to Taylor’s
mooring in Long Beach, California.” After the boat was completed and delivered to Taylor,
problems with the hull and engine arose. Taylor’s attempts to get Billy Bob to fix the problems were
unsuccessful, so Taylor filed a complaint for breach of contract and fraud against Billy Bob’s Boats,
Inc. in the Los Angeles County Superior Court in Long Beach. Billy Bob’s Boats, Inc. filed a motion
to dismiss the complaint on the grounds that neither he nor his company had ever done any business
in California (except for Taylor’s boat) and, alternatively, the case should have been filed in federal
court, not state court.

        12. What is Taylor’s best argument in opposition to the personal jurisdiction argument made
in the motion to dismiss by Billy Bob’s Boats, Inc.?

       A. The work by Billy Bob’s Boats, Inc. was obviously substandard.
       B. Billy Bob’s Boats, Inc. “purposefully directed” its activities at a resident of
California.
       C. Billy Bob’s Boats, Inc. put the boat it sold to Taylor into the “stream of commerce.”
       D. Billy Bob’s Boats, Inc. should have done better work on the boat.

       13. How should the court rule as to subject matter jurisdiction argument made in the motion
to dismiss by Billy Bob’s Boats, Inc.?

        A. The motion must be granted, due to exclusive jurisdiction, since there is diversity
between Taylor and Billy Bob’s Boats, Inc.
        B. The motion must be granted since the Los Angeles County Superior Court is a court of
limited jurisdiction.
        C. The motion must be denied, due to concurrent jurisdiction, since there is no diversity
between Taylor and Billy Bob’s Boats, Inc.


                                                  8
       D. The motion must be denied since the Los Angeles County Superior Court is a court
of general jurisdiction.

       14. What is usually the result of a trial?

       A.   A judgment in favor of one side against the other.
       B.   A judgment in favor of both sides.
       C.   A judgment in favor of neither side.
       D.   A mistrial.

       15. Which of the following is a purpose of any constitution in the United States?

       A.   To establish government powers and structure.
       B.   To diminish government powers and structure.
       C.   To establish rights for government officials.
       D.   To diminish rights for government officials.

         Questions 16 and 17 are based on the following: The people living in Gold City have
suffered from an unusually high incidence of various cancers for the last ten years. After medical
examinations of the cancer victims as well as water and soil tests in Gold City, it was concluded that
this unusually high incidence of various cancers was due to illegal waste dumping by a large factory
owned and operated by Sludge, Inc. just outside of city limits. The cancer victims and their families
filed a lawsuit asking the court to issue an injunction against Sludge, Inc. to stop this illegal waste
dumping. The lawsuit also requested damages (money) to compensate the cancer victims and their
families for property damage, medical bills, and pain and suffering. Sludge, Inc. has requested a jury
trial.

       16. Who will decide whether the requested injunction is appropriate?

       A.   The judge.
       B.   The jury.
       C.   The judge and the jury together.
       D.   Neither the judge nor the jury.

       17. Who will decide whether the requested damages (money) are appropriate?

       A.   The judge.
       B.   The jury.
       C.   The judge and the jury together.
       D.   Neither the judge nor the jury.

       18. By what method can a person become a Justice of the United States Supreme Court?

       A. Only by nomination by the President.
       B. Only by confirmation by the Senate.



                                                    9
        C. By nomination by the President and subsequent confirmation by the Senate.
        D. By nomination by the President or confirmation by the Senate.

        19. Which of the following is the best example of informal investigation in a civil lawsuit?

        A. After the plaintiff filed his lawsuit based on an accident, Janelle, the plaintiff’s attorney,
sent a subpoena to the defendant’s bank in order to obtain the defendant’s financial records.
        B. After the plaintiff filed his lawsuit based on an accident, Frida, the plaintiff’s attorney,
filed a motion for summary judgment.
        C. Before the plaintiff filed his lawsuit based on an accident, Ejla, the plaintiff’s
attorney, went to the scene of the accident in which the plaintiff was involved.
        D. Before the plaintiff filed his lawsuit based on an accident, Luz, the plaintiff’s attorney,
signed a retainer agreement in which she agreed to represent the plaintiff.

        20. Why were the families of Nicole Brown Simpson and Ron Goldman successful in their
civil suit against O.J. Simpson despite the fact that he had been acquitted in a prior criminal case
based on the same incident?

        A. The jury in the civil case was obviously prejudiced against O.J. Simpson because he is an
African-American.
        B. The jury in the criminal case was obviously prejudiced in favor of O.J. Simpson because
he is an African-American.
        C. The standard of proof in a criminal case is lower than the standard of proof in a civil case.
        D. The standard of proof in a civil case is lower than the standard of proof in a
criminal case.

        21. What is the effect of the rule of stare decisis?

        A.   It ordinarily requires judges to follow past court decisions.
        B.   It rarely requires judges to follow past court decisions.
        C.   It ordinarily requires plaintiffs to follow past court decisions.
        D.   It rarely requires defendants to follow past court decisions.

        22. Which of the following is a true statement?

        A. The government is always a party to a criminal case but can never be a party to a civil
case.
        B. The government is always a party to a civil case but can never be a party to a criminal
case.
        C. The government is always a party to a criminal case but may or may not be a party
to a civil case.
        D. The government is always a party to a civil case but may or may not be a party to a
criminal case.

        23. Maghsoudi sued Kaur alleging that Kaur violated a statute which read in pertinent part:


                                                   10
“The prevailing party in any lawsuit under this statute shall be entitled to an award of reasonable
attorney’s fees.” Kaur’s motion for summary judgment was granted and the court entered judgment
in favor of Kaur. Maghsoudi then filed a motion for attorney’s fees based on the statute. How
should the court rule on this motion?

      A.    The motion should be granted based on the statute.
      B.    The motion should be granted since Kaur’s motion for summary judgment was granted.
      C.    The motion should be denied based on the statute.
      D.     The motion should be denied since Kaur’s motion for summary judgment was
granted.

        24. Which of the following is an example of a “federal question” for the purposes of subject
matter jurisdiction?

       A. Deloa sues Dominguez for breach of contract in the Orange County Superior Court.
       B. Deloa sues Dominguez for breach of contract in the United States District Court for the
Central District of California.
       C. Deloa sues Dominguez for violation of federal civil rights statutes in the Orange County
Superior Court.
       D. Deloa sues Dominguez for violation of federal civil rights statutes in the United
States District Court for the Central District of California.

        25. Nguyen sued Luchansky for breach of contract. After a jury trial, the jury decided that no
breach of contract had occurred and rendered its verdict in favor of Luchansky. While talking to a
juror after the verdict had been read, Nguyen discovered that the jury had decided to render its
verdict by flipping a coin; heads meant Nguyen would win and tails meant Luchansky would win
(obviously, it was tails). What should Nguyen do?

       A.   File a motion for judgment notwithstanding the verdict.
       B.   File a motion for new trial.
       C.   File a motion for summary judgment.
       D.   File a motion for dismissal.

                FIRST EXAM (PART 2) RE CONTRACTS AND TORTS ONLY


        1. Fraiser bought a 2006 Honda Civic for $15,000.00 from Norm Reeves Honda. He put
$2,000.00 down and signed a contract which provided, among other things, that the interest rate on
the money he was borrowing to pay the balance would be 7%. The next day, Fraiser discovered that
his brother, Niles, had also bought the exact same car for the exact same price (putting $2,000.00
down and borrowing the balance) at Norm Reeves Honda but the interest rate on Niles’ loan was
only 5%. Fraiser sued Norm Reeves Honda for breach of contract due to the difference in the
interest rates. What should be the result of Fraiser’s lawsuit?

       A. Fraiser should win since there was no consideration.


                                                 11
          B. Fraiser should win since his contract was required to be in writing.
          C. Fraiser should lose since there was consideration.
          D. Fraiser should lose since his contract did not have to be in writing.

        2. Diaz and Nieves enter into a contract, which reflects their agreement that Diaz will sell his
car to Nieves and, in exchange, Nieves will pay Diaz $250/month for 20 months. Nieves makes all
of the payments but he is one to five days late making several of the payments. Is Diaz required to
transfer title to the car to Nieves?

       A.    Yes, because Nieves fully performed all of his obligations under the contract.
       B.    Yes, because Nieves substantially performed all of his obligations under the
contract.
       C.    No, because Nieves did not fully perform all of his obligations under the contract.
       D.    No, because Nieves did not substantially perform all of his obligations under the contract.

        Questions 3 and 4 are based on the following: Attorney Larry H. Parker put a sign on his
office building that showed the picture of one of his former clients and the statement that “Larry H.
Parker got me $2.1 million!” On June 1, 2003, Nappy was injured in an accident with Grabby and
hired Larry to be his attorney for Nappy’s lawsuit for personal injuries. Larry entered into settlement
negotiations with Grabby’s insurance company. Larry also hired – the cost of several thousand
dollars – a physician and an accident reconstruction expert to serve as consultants on Nappy’s behalf.
 However, Larry was not able to negotiate a settlement, and the consultants he hired concluded that
Nappy did not have a very good case. Unfortunately, Larry never communicated any of this to
Nappy until July 1, 2005 (a month after the statute of limitations had expired). Nappy then sued
Larry for negligence and fraud, claiming general, special and punitive damages “in an amount to be
determined.” After a jury trial, judgment was entered in favor of Nappy against Larry in the amount
of $1,000,000.00 ($7,000.00 for general damages for emotional distress, $3,000.00 for special
damages for medical expenses, and $990,000.00 for punitive damages). Larry appealed.

        3. On appeal, Larry argued that he had not committed negligence. How should the appeal
court rule?

          A. Larry should win because he did not owe any duty of care to Nappy.
          B. Larry should win because negligence can be shown only by a violation of the statute of
frauds.
        C. Larry should lose because he owed a duty of care to Nappy.
        D. Larry should lose because negligence can be shown by other than a violation of the statute
of frauds.

       4. On appeal, Larry argued that the amount of punitive damages was too much. How should
the appeal court rule?

        A. The judgment as to punitive damages should be affirmed because the jury has great
discretion in determining the amount of punitive damages.
        B. The judgment as to punitive damages should be affirmed because the general rule is that


                                                   12
the amount of punitive damages should be at least ten times more than the amount of general and
special damages combined.
        C. The judgment as to punitive damages should be reversed because the jury has no
discretion in determining the amount of punitive damages.
        D. The judgment as to punitive damages should be reversed because the general rule is
that the amount of punitive damages should be less than ten times more than the amount of
general and special damages combined.

        Questions 5 through 7 are based on the following: On September 1, 2006, Carmen, a lawyer
visiting from El Salvador, signed a contract to purchase a car used in the upcoming James Bond
movie. Carmen paid the full purchase price when she signed the contract. The car had several
custom-made features such as a car alarm that played the original James Bond movie theme. Also,
the car’s driver’s seat had been autographed by Daniel Craig (the new “James Bond”). The seller of
the car, Moneypenny, did not want to sell the car but she felt forced to sell it because she had large
credit card balances that she needed to pay off immediately or she would have to file for bankruptcy.
 Moneypenny had several commissions owed to her from a former employer but she had been told
that she would not receive those commissions for at least six months and this would be too late to
avert bankruptcy. The car was due to be delivered on October 1, 2006. However, on September 28,
2006, Moneypenny unexpectedly received the commissions from her former employer and was able
to pay off all of her credit card balances that same day. Moneypenny then refused to deliver the car
as promised, telling Carmen that “the Bond car deal is off since I don’t need the money any more.”
Carmen was extremely upset by this and she had to be hospitalized for three days for depression. On
October 5, 2006, Carmen felt so much better that she filed a lawsuit against Moneypenny for breach
of contract (seeking specific performance) and fraud (seeking general, special and punitive damages).

       5. What should be the result of Carmen’s breach of contract cause of action?

       A.   Carmen should win because she suffered severe emotional distress.
       B.   Carmen should win because Moneypenny refused to deliver the car as promised.
       C.   Moneypenny should win because of the parol evidence rule.
       D.   Moneypenny should win because she was forced to sign the contract due to her financial
problems.

       6. What should be the result of Carmen’s fraud cause of action?

       A.   Carmen should win because Moneypenny refused to deliver the car as promised.
       B.   Carmen should win because Moneypenny should not have signed the contract.
       C.   Moneypenny should win because she was forced to sign the contract due to her financial
problems.
       D.   Carmen should win because Moneypenny had no intent to deceive.

#6 is a defective question since D (which was intended to be the correct answer) should have
read: “Moneypenny should win because she had no intent to deceive.” Therefore, credit was
given for any answer.




                                                 13
       7. Assume for the purposes of this question only that Carmen won on her breach of contract
cause of action. Would she be entitled to specific performance?

        A.   Yes, because the car was unique.
        B.   Yes, because Moneypenny breached the contract.
        C.   No, because the car was not unique.
        D.   No, because Moneypenny did not breach the contract.

       8. Nacho and Glenn sign a contract which obligates Nacho to deliver his 1992 Honda Civic
to Glenn. In return, Glenn is obligated to pay Nacho the amount of $500.00 upon delivery and
$500.00 within 30 days of delivery. Glenn is 16 years old and has a valid California driver’s license.
 Nacho delivers the car to Glenn, who pays him the first $500.00 payment. A few days later, Glenn’s
mother makes him give the car back to Nacho, and Nacho returns the $500.00 Glenn already paid
him. This is an example of:

        A.   Damages.
        B.   Rescission and restitution.
        C.   Reformation.
        D.   Specific performance.

        9. Craig and Brian were involved in an automobile accident. Craig sued Brian, who raised a
defense of comparative negligence. The jury found that Craig’s total damages were $100,000.00 but
that he was 25% comparatively negligent. Is Craig entitled to any damages?

        A.   Yes, since he was only 25% at fault.
        B.   Yes, since comparative negligence is not recognized in the United States.
        C.   No, since he was only 25% at fault.
        D.   No, since comparative negligence is not recognized in the United States.

        10. Soto lost his cat and posted signs in his neighborhood offering a $100.00 reward for the
cat’s return. Dominguez found Soto’s cat and returned the cat to Soto at Soto’s house. While
Dominguez was still at Soto’s house after returning the cat, Dominguez saw for the first time one of
Soto’s signs offering the reward. Dominguez asked for the reward, but Soto refused to pay. Is Soto
obligated to pay the reward to Dominguez?

        A. Yes, because Dominguez returned the cat to Soto.
        B. Yes, because Dominguez saw the sign offering the reward before returning the cat to
Soto.
        C. No, because Dominguez did not return the cat to Soto.
        D. No, because Dominguez did not see the sign offering the reward before returning the
cat to Soto.

       11. Which of the following is an example of where consequential damages would be
appropriate?




                                                 14
        A. Berger failed to deliver equipment to Bernal on the date stated in their contract, and
this caused Bernal to have to pay his employees overtime (twice their usual hourly rate) to
complete a big project on time.
        B. Gallinger failed to make two monthly payments to Gharibian, as required by their
contract, and this caused Gharibian to suffer shame and embarrassment in the local business
community.
        C. Neff failed to deliver equipment to Nguyen on the date stated in their contract, and this
caused Neff to suffer severe emotional distress.
        D. Orians failed the final exam in his business law class, and this caused him to have to take
the class again in the fall.

       12. Which of the following is an example of where reformation of a written contract would
be appropriate?

        A. Sacks and Trombone signed a written contract which had insufficient consideration.
        B. Drumm and Symball signed a written contract which was on 8½ by 14-inch paper instead
of the usual 8½ by 11-inch paper.
        C. Stick and Stone signed a written contract which mistakenly stated the price as
“three million dollars” instead of “three thousand dollars.”
        D. Jax and Jil signed a written contract which was unenforceable due to an illegal purpose.

       13. Which of the following is a characteristic of a unilateral contract?

       A.   The contract is in writing.
       B.   The contract involves two parties, who make promises to each other.
       C.   The contract involves two parties, one of whom makes a promise to the other.
       D.   The contract is not in writing.

        14. Genesis was driving her car on the 91 freeway when she decided to put her new Britney
Spears CD into her car’s CD player. She looked away from the road for a few seconds until she
found the CD on the floor of her car. When she looked at the road again, she discovered to her great
surprise that her car was inches from the center divider. Genesis turned the wheel suddenly and
smashed her car to a car driven by Exodus, who was injured. Exodus sued Genesis for personal
injury damages. Which of the following would be the most appropriate theory for Exodus’ lawsuit?

       A.   Negligence.
       B.   Breach of contract.
       C.   Strict liability.
       D.   Conversion.

       15. Which of the following is an example of defamation?

       A. One student said to another: “Dodgeball: A True Underdog Story is the worst movie I’ve
ever seen.” (This is a false statement.)
       B. One student said to another: “Leather and latex belong in the bedroom, not the dodgeball


                                                 15
court.” (This is a false statement.)
        C. One student said to another: “White Goodman’s butt is fat.” (This is a false
statement.)
        D. One student said to another: “Good luck to you and your mail-order bride.” (This is a
false statement.)

       16. Which of the following situations features a novation?

       A. Jose and Juan agreed that Jose would paint Juan’s house and Juan would pay Jose
$2,000.00 for the job.
       B. Kim and Park agreed that Kim would buy Park’s Honda Civic for $10,000.00; they later
agreed that Kim would buy Park’s Dodge Ram truck for $10,000.00 instead.
       C. Dimitri and Raj agreed that Dimitri would borrow $100,000.00 from Raj to be
repaid by December 31, 2006; Raj then assigned his rights to Paula.
       D. Jagger and Richards agreed that Jagger would sing a song at Richards’ wedding; Jagger
then got sick and could not sing at the wedding.

       17. All of the following choices involve a fraud cause of action. In which of the following
does the plaintiff have the best argument for reasonable reliance?

        A. The plaintiff bought a vacation package for a trip to Green River, Utah, because the
defendant, who was a member of the local chamber of commerce with the plaintiff, told him
that it was a “wild and crazy” place. Instead, there was no place for the plaintiff to have fun in
Green River, Utah.
        B. The plaintiff bought a vacation package for a trip to Green River, Utah, because the
defendant, who was known to be a dishonest person, told him that it was a “wild and crazy” place.
Instead, there was no place for the plaintiff to have fun in Green River, Utah.
        C. The plaintiff bought an umbrella that she later discovered did not work because the
defendant told her it was “indestructible.” The defendant also said, before he sold the umbrella to
the plaintiff, that he knew nothing about umbrellas.
        D. The plaintiff bought an umbrella that she later discovered did not work because the
defendant told her it was “indestructible.” The defendant also said, before he sold the umbrella to
the plaintiff, that “there are no guarantees.”

         Questions 18 and 19 are based on the following: Steffi always went to her local McDonald’s
before she went to school at Cal State Fullerton for breakfast. She usually ate inside but, one day,
she was in a hurry so she went through the drive-through to get her breakfast. She also decided on
that fateful day to get coffee since she was feeling sleepy (she had never ordered coffee from
McDonald’s before). When Steffi drank the coffee, she severely burned her mouth because the
coffee had been heated to approximately 180ºF according to company policy. Studies showed that, if
the temperature of the coffee had been 158°F instead of 180°F, Steffi would have thought the coffee
was “too hot” but she would not have been burned. In the five years before Steffi’s accident,
McDonald’s had received over 100 complaints throughout the country about its coffee being too hot.
 Steffi sued McDonald’s on negligence and products liability causes of action.




                                                16
       18. What should be the result of Steffi’s negligence cause of action?

       A.   Steffi should win since McDonald’s breached its duty of care to her.
       B.   Steffi should win since she was using the coffee as intended.
       C.   McDonald’s should win since it did not breach its duty of care to Steffi.
       D.   McDonald’s should win since Steffi was not using the coffee as intended.

       19. What would be Steffi’s best theory in support of her products liability cause of action?

       A.   Design defect.
       B.   Service defect.
       C.   Warning defect.
       D.   Manufacturing defect.

#19 is a defective question since design defect (A) or warning defect (C) are equally correct,
and a question can have only one “best” (correct) answer. Due to this confusion, credit was
given for any answer.

        20. Floopy worked at his job Monday through Friday, 8:00 a.m. to 5:00 p.m. One Tuesday
afternoon when he was at work, two men drove up in their pick-up truck, got out and started mowing
Floopy’s lawn. Floopy had not asked the men to mow his lawn, but he was happy when he got home
that evening to discover someone had done it because he had not mowed the lawn in six weeks. The
next day, the men gave Floopy a bill for their services. After discussing the matter, Floopy and the
men determined that the men had mistakenly mowed the wrong lawn. Should Floopy be obligated to
pay the men for their services?

       A.   Yes, because there was an implied-in-fact contract.
       B.   Yes, because otherwise unjust enrichment would result.
       C.   No, because there was no implied-in-fact contract.
       D.   No, because no unjust enrichment would result.

        21. Rose, the owner of a microbrewery, invented a new beer. To honor Governor
Schwarzenegger, Rose called it “Guvanator Beer” and put a picture of a muscular man (with no face)
on the label. He did not contact Governor Schwarzenegger before putting this new beer on the
market. Governor Schwarzenegger sued Rose for invasion of privacy. What would the correct
theory for this case?

      A. False light.
      B. Intrusion into a person’s private life.
      C. Public disclosure of private facts.
      D. Use of a person’s name, picture or likeness for commercial purposes without
permission.

        22. In which of the following situations would the statute of frauds require the contract to be
in writing?


                                                  17
       A.   Tony agreed to co-sign a loan so Terri could buy a car.
       B.   Tony agreed to buy a car from Terri.
       C.   Tony agreed to buy household furniture from Terri.
       D.   Tony agreed to help Terri buy household furniture.

        23. Sven bought what he thought was marijuana from Janne. However, it was actually
regular tobacco. Sven sued Janne in small claims court for breach of contract. What should be the
result?

       A.   Sven should win since Janne’s breach of the contract was material.
       B.   Sven should win since trafficking in illegal drugs like marijuana is illegal.
       C.   Janne should win since his breach of the contract was not material.
       D.   Janne should win since trafficking in illegal drugs like marijuana is illegal.

        24. Which of the following is the best example of intentional infliction of emotional
distress?

       A. Dean’s Mortuary agreed to bury Fritz Winters in a plot selected by the Winters
family; instead, Dean’s Mortuary threw Fritz Winters’ body in a large trash can.
       B. Del called Venegas “a stupid Mexican” when they were in the bathroom; because of this,
Venegas became depressed.
       C. Your business law professor gave you a “D” on the first exam; you had studied for twenty
hours and thought you had earned at least a “C” (if not a “B” or even an “A”).
       D. One of your friends called you “a queer” at your 21st birthday party; that person had been
drinking heavily at the time.

        25. Which of the following would be an example of where a judgment in favor of the
plaintiff in a breach of contract case would be considered to be liquidated damages?

        A. A contract that stated: “In the event of a breach of this contract, compensatory damages
only shall be available; there shall be no entitlement to consequential damages.”
        B. A contract that stated: “In the event of a breach of this contract, damages shall be
available to the fullest extent of the law.”
        C. A contract that stated: “In the event of a breach of this contract, the parties shall submit
their dispute to arbitration.”
        D. A contract that stated: “In the event of a breach of this contract, damages shall be
awarded in the amount of $2,000.00.”

                   SECOND QUIZ RE BUSINESS ORGANIZATIONS ONLY

      1. Which of the following would be the best example of where the business judgment rule
would be a defense?

       A. Swanson was the chief executive officer of Wong & Wong, Inc.; Swanson’s plan to open


                                                  18
a new branch office in Laguna Beach was a failure and he was fired due to this failure which cost the
corporation over $1,000,000.00.
        B. Padilla was the chief executive officer of Sewell Manufacturing, Inc.; Padilla’s plan
to open a new branch office in Laguna Beach was a failure and the corporation sued her to
collect damages caused by this failure.
        C. Ankush was the chief executive officer of Israni Corporation; Ankush’s plan to open a
new branch office in Laguna Beach was a success but Ankush was fired anyway because of his
national origin.
        D. Patricia was the chief executive officer of Pham Electronics, Inc.; Patricia’s plan to open
a new branch office in Laguna Beach was a success but she was sued for sexual harassment.

        2. Matsuhashi is a full-time student at Cal State Fullerton (after graduation, he plans to
become a CPA). He occasionally works as a photographer at weddings using cameras he owns. He
is paid by the wedding party at any wedding he works. His office is in his family’s home. Which of
the following would be the best business form for Matsuhashi?

       A.   General partnership.
       B.   Joint venture.
       C.   Franchise.
       D.   Sole proprietorship.

        Questions 3 and 4 are based on the following: Emma, Isabella and Connor are owners of a
company called Cute Babies LLC (“the LLC”), which imports baby-oriented products from Central
America. Recently, the LLC entered into a contract – which was negotiated by Emma on the LLC’s
behalf – with Cadwallader Industries to buy 10,000 “Stomp Me Elmo” dolls. While Cadwallader
Industries delivered the dolls, the LLC never paid for them because of lack of cash flow as well as
some personal difficulties between the owners. Since the LLC breached this contract, Cadwallader
Industries sued the LLC, Emma, Isabella and Connor for the money owed for the “Stomp Me Elmo”
dolls.

       3. Which of the following best describes Emma’s relationship to the LLC?

       A.   Partner.
       B.   Comrade.
       C.   Shareholder.
       D.   Member.

      4. Assume for the purposes of this question only that Cadwallader Industries won its lawsuit.
Against whom should the court enter judgment in favor of Cadwallader Industries?

       A.   The LLC only.
       B.   Emma only.
       C.   The LLC and Emma only.
       D.   The LLC, Emma, Isabella and Connor.




                                                 19
       5. Which of the following statements is the most accurate?

        A. A limited partnership is better than a limited liability partnership for a partner who wants
to be involved in the business on a day-to-day basis.
        B. A general partnership is better than a limited liability partnership for a partner who wants
to be involved in the business on a day-to-day basis.
        C. A limited liability company is better than a corporation for a business owner due to
the LLC’s “pass-through” status for income tax purposes.
        D. A corporation is better than a limited liability company for a business owner due to the
corporation’s “pass-through” status for income tax purposes.

       6. Which of the following would justify the piercing of the corporate veil?

        A. Witita, a shareholder of Tanawan Cosmetics, Inc., was unethical when dealing with a
client of Tanawan Cosmetics, Inc.
        B. Hema, a shareholder of Paliwal Construction Corporation, violated insider trading laws
with respect to her purchase of Paliwal Construction Corporation stock.
        C. Jode, a shareholder of Gasperich Computers, Inc., stole money from the corporation and
was sued by the corporation.
        D. Natalie, a shareholder of Osborne Corporation, wrote checks on an Osborne
Corporation account to pay for Natalie’s niece’s tuition at Sage Hill Academy.

       7. Haley and Bennett were lawyers who formed a partnership called the Law Offices of
Haley & Bennett. Both were active in the partnership. Without Bennett’s knowledge, Haley took
money from the firm’s client trust account (which contains money that belongs to clients but is
temporarily held in trust by the firm) and left the country. Bennett did not get any of the money
taken by Haley, who was charged with the crime of embezzlement. The clients whose money had
been taken by Haley sued Bennett to recover their losses. What should be the result of this lawsuit?

       A.   Bennett should win because Haley & Bennett was a general partnership.
       B.   Bennett should win because Bennett did not benefit from Haley’s crime.
       C.   The clients should win because Haley & Bennett was a general partnership.
       D.   The clients should win because Bennett did not benefit from Haley’s crime.

        Questions 8 and 9 are based on the following: Two lawyers named Razavi and Khatibloo
formed a law firm called Razavi & Khatibloo LLP. The firm as well as Razavi and Khatibloo as
individuals are defendants in two lawsuits. In the first lawsuit, the plaintiff alleges that Razavi
committed malpractice when she failed to properly calendar the statute of limitations for a personal
injury case by the plaintiff and this caused the plaintiff’s personal injury complaint to be dismissed.
In the second lawsuit, the plaintiff alleges that Khatibloo signed a contract on behalf of the firm to
purchase a computer system but the firm breached the contract by failing to pay for the computer
system after it was delivered to the firm’s offices.

       8. If the court decides that the firm is liable for breach of contract, can judgment also be
entered against Khatibloo personally?


                                                  20
        A.   Yes, because Khatibloo signed the contract herself.
        B.   Yes, because Khatibloo is a partner in the firm.
        C.   No, because Khatibloo cannot be personally liable for a firm debt.
        D.   No, because Khatibloo was not acting within the course and scope of employment.

      9. If the court decides that Razavi committed the alleged malpractice in the first lawsuit, can
judgment also be entered against the firm?

        A.   Yes, because Razavi committed the malpractice herself.
        B.   Yes, because Razavi is a partner in the firm.
        C.   No, because the firm cannot be vicariously liable for Razavi’s malpractice.
        D.   No, because Razavi was not acting within the course and scope of employment.

        10. Which of the following is true about a corporation’s articles of incorporation and by-
laws?

       A. The articles of incorporation and by-laws are both usually lengthy, detailed documents.
       B. The articles of incorporation and by-laws are both usually only one page long.
       C. The articles of incorporation usually contain a lot of details while the by-laws usually are
only one page long.
       D. The articles of incorporation usually are usually only one page long while the by-
laws usually contain a lot of details.

        Questions 11 and 12 are based on the following: Fred, Bob and Brett want to form a business
for the purpose of building a home for Marty. Fred agrees that he contribute all of the money needed
to build the home (he owns and operates a restaurant and does not have the time to work on the
home). Bob, an architect, agrees that he design the home and provide “artistic support.” Brett agrees
to serve as the general contractor since he is a licensed general contractor. Fred, Bob and Brett are
long-time friends and they trust each other totally, so they do not form an business organization nor
do they put anything in writing. Bob designs the home to Marty’s satisfaction. Brett obtains all of
the necessary materials by using Fred’s American Express “Platinum” card. Brett starts work at the
jobsite by using day laborers who are each paid $40.00 per eight-hour work day. Unfortunately,
Peter, one of the day laborers, is injured while working on the project. Peter sues Marty, Fred, Bob
and Brett for damages based on his personal injuries.

        11. Bob defends this lawsuit by arguing that, since it is undisputed that he performed his part
of the project properly, he cannot be liable for Peter’s injuries. How should the court rule?

        A.   The court should rule in favor of Bob since Bob was a general partner.
        B.   The court should rule in favor of Peter since Bob was a general partner.
        C.   The court should rule in favor of Bob since Bob was a limited partner.
        D.   The court should rule in favor of Peter since Bob was a limited partner.

        12. Fred defends this lawsuit by contending that his only contribution to the project was


                                                  21
money and he knew nothing about the details. How should the court rule?

       A.   The court should rule in favor of Fred since Fred was a general partner.
       B.   The court should rule in favor of Peter since Fred was a general partner.
       C.   The court should rule in favor of Fred since Fred was a limited partner.
       D.   The court should rule in favor of Peter since Fred was a limited partner.

         Questions 13 and 14 are based on the following: Russ and John want to form a business for
the purchase and sale of rock and roll memorabilia. Each man has an extensive knowledge of rock
and roll music, a substantial collection of rock and roll memorablia, and more than enough money to
fund the business for at least a year. Russ is an internet expert who has designed dozens of websites
for well-known bands such as Metallica and Iron Maiden. John has considerable bookkeeping and
retail sales experience. Both men anticipate spending at least 50-60 hours per week working at the
business for the first year or so with help from a few part-time employees. Their business will be
operated from a retail site at a strip mall located at the corner of Nutwood and State College in the
City of Fullerton (John’s father owns the strip mall). They plan to operate a website from the same
location for the purposes of buying and selling merchandise over the internet in addition to the retail
site. Russ and John are unsure of which business form they should use but have limited their choices
to a partnership or a corporation.

       13. What would be the best reason for them to form a partnership instead of a corporation?

       A.   Their contributions to the business would be approximately equal.
       B.   Their knowledge of the subject matter of the business would be approximately equal.
       C.   As a general rule, they would avoid double taxation.
       D.   As a general rule, they would avoid personal liability.

       14. What would be the best reason for them to form a corporation instead of a partnership?

       A.   Their contributions to the business would be approximately equal.
       B.   Their knowledge of the subject matter of the business would be approximately equal.
       C.   As a general rule, they would avoid double taxation.
       D.   As a general rule, they would avoid personal liability.

       15. Which of the following is a correct statement?

       A. The typical shareholder is usually very involved in the day-to-day activities of a large
corporation.
       B. The typical shareholder is usually very involved in the day-to-day activities of a
small corporation.
       C. A director of a corporation is prohibited from owning stock in the corporation.
       D. An officer of a corporation is prohibited from owning stock in the corporation.




                                                  22
SECOND EXAM RE INTELLECTUAL PROPERTY, AGENCY AND EMPLOYMENT LAW,
   ANTITRUST AND SECURITIES LAW, INTERNATIONAL BUSINESS LAW, AND
                     ENVIRONMENTAL LAW ONLY

        1. When an employee quits his or her job, is the employee required to give a two-week
notice to the employer?

        A. The two-week notice is required by law and it is also recommended if the employee wants
to get a good reference from the employer.
        B. The two-week notice is not required by law but it is recommended if the employee
wants to get a good reference from the employer.
        C. The two-week notice is required by law but it is not recommended if the employee wants
to get a good reference from the employer.
        D. The two-week notice is not required by law and it is not recommended if the employee
wants to get a good reference from the employer.

        2. A movie producer, Colton, wanted to make a movie about the life of Professor Charles H.
Smith at Cal State Fullerton. Colton told an African-American woman, Kersaundra, who applied to
play the part of Professor Smith: “Sorry, wrong color, wrong sex.” Kersaundra sued Colton for
discrimination under Title VII. Which of the following would be Colton’s best defense?

       A.   BFOQ.
       B.   At-will employment rule.
       C.   After-acquired evidence rule.
       D.   Fraud.

         3. Stalin, an employee of Siberian Camping Equipment, Inc., was told by his supervisor to
“lie, steal, cheat . . . anything to make a sale!” Stalin does not want to violate the duty of obedience
owed by an agent to his principal. What should Stalin do?

        A. Stalin should obey his supervisor’s directions even if such obedience would result in
violating the law.
        B. Stalin should not obey his supervisor’s directions if such obedience would result in
violating the law.
        C. Stalin should ask his priest for advice before acting.
        D. Stalin can avoid violating the duty of obedience by obeying his supervisor’s instructions
or the law; the choice is his.

        4. Cindy worked for Marquis Management for seven years as a property manager. She quit
Marquis Management to open her own competing property management company. Since Cindy had
been instrumental in compiling a customer list (a document kept in a locked safe) for Marquis
Management during these seven years, Cindy made a copy of the customer list and began using it
after she opened her company to get customers. Which of the following best describes Cindy’s
actions?




                                                  23
       A.   Cindy has misappropriated Marquis Management’s trade secret.
       B.   Cindy has not misappropriated Marquis Management’s trade secret.
       C.   Cindy has infringed Marquis Management’s copyright.
       D.   Cindy has not infringed Marquis Management’s copyright.

         5. The people living in Gold City have suffered from an unusually high incidence of various
cancers for the last ten years. After medical examinations of the cancer victims as well as water and
soil tests in Gold City, it was concluded that this unusually high incidence of various cancers was
due to illegal dumping by a large factory owned and operated by Sludge, Inc. just outside of city
limits. This illegal dumping continued for a number of years and, in fact, Sludge, Inc. is disputing
that its dumping was illegal. The cancer victims and their families filed a lawsuit asking the court to
issue an injunction against Sludge, Inc. to stop this illegal dumping. The lawsuit also requested
damages (money) to compensate the cancer victims and their families for their medical bills due to
the illegal dumping. Which of the following is the best description of the plaintiffs’ lawsuit?

       A.   The plaintiffs’ lawsuit is based on a public nuisance.
       B.   The plaintiffs’ lawsuit is based on a private nuisance.
       C.   The plaintiffs’ lawsuit is based on unethical nuisance.
       D.   The plaintiffs’ lawsuit is based on ethical nuisance.

        6. Monte owned a pet store in Santa Ana. He hired Reza, a man from Iran, to work as a
cashier. Monte had a customer, Linda, who had patronized his store for many years and generally
spent at least a few thousand dollars per year at Monte’s store. Linda saw Reza and told Monte: “I
don’t like seeing an Iranian in this store since those people scare me.” Monte then reluctantly
informed Reza that he was fired because of what Linda said. Reza filed a discrimination lawsuit
against Monte. What should be the result?

       A.   Monte should win because a customer expressed fear about seeing Reza in the store.
       B.   Monte should win because of the “at-will” employment rule.
       C.   Reza should win because he was fired due to his national origin.
       D.   Reza should win because Linda’s fears about him were misguided.

        7. Dawn owns and operates a website that provides free software for peer-to-peer file
sharing. Her website is used by approximately 1,000 people per day who share copyrighted music
files without compensation to or permission of the copyright holders. Dawn engages in no file-
sharing herself. Dawn is sued for copyright infringement by the copyright holders. What should be
the result?

       A. Dawn should win because she did not engage in any file-sharing herself.
       B. Dawn should win because she should be blamed for others’ illegal activities.
       C. Dawn should lose because the software she provided was free.
       D. Dawn should lose because the software she provided helped others to commit
copyright infringement.

       8. Which of the following is the best example of a whistleblower?


                                                  24
         A. Celia told her friend that her employer was illegally dumping toxic waste into the river.
         B. Joanna told her neighbor that her employer was illegally dumping toxic waste into the
river.
        C. Rebecca told a county environmental compliance officer that her employer was
illegally dumping toxic waste into the river.
        D. Brenda told her business law professor that her employer was illegally dumping toxic
waste into the river.

        Questions 9 and 10 are based on the following: Mr. Patel, who was born in East Los Angeles
but whose parents were from India, worked as a third grade teacher at a public school in Santa Ana.
It was his third year as a teacher and he had just earned tenure. Since he had grown up in East Los
Angeles, where his parents owned a motel, he had learned Spanish as a child and taken four years of
Spanish in high school and had a Spanish minor in college. Therefore, Mr. Patel was fluent in
Spanish. Many of the public school students in Santa Ana speak only Spanish and thus Spanish-
speaking teachers are valuable there. In fact, at Mr. Patel’s school, 68% of the students were Spanish
speakers with little to no ability in English. The principal at Mr. Patel’s school, Dr. Martinez,
doubted Mr. Patel’s ability to speak Spanish even though Mr. Patel had passed the school district’s
Spanish proficiency exam, which earned him a small monthly stipend. In particular, Dr. Martinez
said that “no one named Patel can actually speak Spanish.” Dr. Martinez had Mr. Patel transferred
to a new school with more English speakers; in fact, virtually all of his students were at least close to
grade-level in English. Due to this transfer, Mr. Patel was no longer paid the stipend since his ability
in Spanish was no longer needed. He felt badly about the situation but he became very angry when,
one day at lunch, he learned that four other non-Hispanic teachers had also been transferred by the
school district to the same school despite their fluency in Spanish. Mr. Patel filed a lawsuit for
discrimination against the school district and Dr. Martinez, alleging that he suffered compensatory
damages based on the loss of the stipend, special damages based on the cost of a doctor’s
consultation and a prescription for valium, and general damages based on his emotional distress.

         9. Does the school district have any obligation to pay for the defense of Dr. Martinez?

         A.   Yes, under the duty of reimbursement.
         B.   Yes, under the duty of care.
         C.   Yes, under the duty of compensation.
         D.   Yes, under the duty of indemnification.

       10. What should be the result if the school district and Dr. Martinez defend the lawsuit on
the grounds that worker’s compensation provided the exclusive remedy for Mr. Patel?

       A. The defense should succeed since Mr. Patel’s damages were sustained in the course and
scope of his employment.
       B. The defense should succeed since Mr. Patel’s damages were the result of an accident.
       C. The defense should fail since Mr. Patel’s damages were not the result of an accident.
       D. The defense should fail since Mr. Patel’s damages were not sustained in the course and
scope of his employment.


                                                   25
        11. Jackson was an employee of a limited liability company called Kids Fitness LLC. While
at work, he used the company’s computer to access a pornographic website. Another employee
reported this to Jackson’s supervisor, who fired Jackson. Jackson sued the company for violation of
his right to privacy since the other employee was in Jackson’s office without permission. Who
should win this lawsuit?

       A.   Jackson, because he had a reasonable expectation of privacy.
       B.   Jackson, because the other employee was in Jackson’s office without permission.
       C.   The company, because Jackson had no reasonable expectation of privacy.
       D.   The company, because the other employee was in Jackson’s office without permission.

     Questions 12 and 13 are based on the following: Castle was an employee of Moat Industries.
The Moat Industries’ employee handbook stated in pertinent part:

               “No employee shall be terminated except for good cause, which must be
       proved by a preponderance of the evidence by the employer at a hearing before an
       arbitrator selected and agreed upon by the employer and the employee. Pending such
       hearing, the employee may be placed on paid or unpaid administrative leave.”

        Castle was called into his supervisor’s office one Friday afternoon and told by his supervisor
that there was good cause for firing Castle due to multiple customer complaints. The supervisor
asked Castle to explain himself but Castle could not say anything but “I promise to try harder; please
don’t fire me!” The supervisor handed Castle a check and told Castle it was his final paycheck and
to vacate the premises immediately. No one else was present during this meeting. Castle sued Moat
Industries for wrongful employment termination.

       12. What is Castle’s best argument in favor of his wrongful employment termination
lawsuit?

       A.   The at-will employment rule.
       B.   Moat Industries did not comply with the process stated in its employee handbook.
       C.   Moat Industries could have handled Castle’s termination in a more ethical fashion.
       D.   Multiple customer complaints are good cause for terminating an employee.

       13. What is Moat Industries’ best argument in defense of Castle’s wrongful employment
termination lawsuit?

       A.   The at-will employment rule.
       B.   Moat Industries did not comply with the process stated in its employee handbook.
       C.   Moat Industries could have handled Castle’s termination in a more ethical fashion.
       D.   Multiple customer complaints are good cause for terminating an employee.

       14. Q was an employee of Prieto Industries whose job duties included retrieving items for
other employees. Q’s supervisor, Rose, told Q to use a certain ladder to retrieve some boxes from a


                                                 26
high shelf. Instead, Q stepped up on a chair to retrieve the boxes. The chair broke, which caused Q
to fall and break his right arm. Is Q entitled to receive worker’s compensation benefits from Prieto
Industries?

        A.   Yes, because he used a chair instead of the ladder.
        B.   Yes, because he was within the course and scope of his employment when he was
injured.
        C.   No, because he used a chair instead of the ladder.
        D.   Yes, because he was not within the course and scope of his employment when he was
injured.

       15. Nuno was an employee of McKnee’s Bar and Grill. While at work, Nuno was injured
when he carelessly dropped a keg of beer on his left foot (Nuno was talking on his cell phone when
he was injured). Is Nuno entitled to receive worker’s compensation benefits from McKnee’s Bar and
Grill?

        A.   Yes, because his own carelessness caused his injury.
        B.   Yes, because he was within the course and scope of his employment when he was
injured.
        C.   No, because his own carelessness caused his injury.
        D.   No, because he was not within the course and scope of his employment when he was
injured.

        Questions 16 and 17 are based on the following: Baum was an attorney who was an
employee of the law firm of Zadeh & Rappleye in Malibu, California. After Baum was fired by
Zadeh & Rappleye, she sued for discrimination under Title VII. Zadeh & Rappleye did not give a
reason for firing Baum. Baum claimed that her supervisor had repeatedly made tasteless comments
like “women belong in the kitchen, not the courtroom.” During discovery, Zadeh & Rappleye found
out for the first time that Baum had lied about being licensed to practice law in California (Baum
was licensed to practice law in Iowa only). Zadeh & Rappleye moved for summary judgment on the
grounds that their entire law practice was in California and, therefore, Baum was not qualified for the
job.

       16. Which of the following would be the best theory for Baum’s claim of discrimination
under Title VII?

       A.    Race discrimination.
       B.    Sexual orientation discrimination.
       C.    Religious discrimination.
       D.    Gender discrimination.

      17. Which of the following would be the best theory in support of the motion for summary
judgment by Zadeh & Rappleye?

       A. The at-will employment rule.


                                                  27
        B. Contract law.
        C. The after-acquired evidence rule.
        D. Good cause.

        18. In which of the following examples should Cosmo be personally liable?

        A. Cosmo, an employee of Lee Financial, Inc., signs a contract for the company to obtain
office supplies; Cosmo signs the contract “as agent for Lee Financial, Inc.”
        B. Cosmo, an employee of Lee Financial, Inc., signs a contract for the company to obtain
office supplies; Cosmo signs the contract “as an employee of Lee Financial, Inc.”
        C. Cosmo, an employee of Lee Financial, Inc., signs a contract for the company to obtain
office supplies; Cosmo signs the contract “as representative of Lee Financial, Inc.”
        D. Cosmo, an employee of Lee Financial, Inc., signs a contract for the company to
obtain office supplies; Cosmo signs the contract without any reference to Lee Financial, Inc.

         Questions 19 and 20 are based on the following: Buttar is a full-time business law professor
at Cal State Fullerton. He is also associated with the law firm of Seak & Destroi on a part-time
basis. The terms of his employment with the firm include (a) he is required to do all legal work
assigned by the firm at the firm’s offices, (b) he is not allowed to do any legal work other than legal
work assigned by the firm and (c) the written contract between the firm and Buttar refers to Buttar as
an “independent contractor.” While appearing in court on a case assigned to him by the firm, Buttar
is injured when he drops his briefcase on his right foot when he is bumped by court clerk. Buttar
files a lawsuit for personal injury damages against the firm at the Orange County Superior Court.
The firm defends this claim on the grounds that Buttar is an employee (and not an independent
contractor) and, therefore, his exclusive remedy is through the worker’s compensation system.

       19. Which of the following is an example of “behavioral control” as defined in IRS
Publication 15A?

       A. Buttar is required to all legal work assigned by the firm at the firm’s offices.
       B. Buttar is not allowed to do any legal work other than legal work assigned by the firm.
       C. The written contract between the firm and Buttar refers to Buttar as an “independent
contractor.”
       D. Buttar’s injuries were caused by the court clerk, not the firm.

       20. Which of the following is an example of “financial control” as defined in IRS
Publication 15A?

        A. Buttar is required to all legal work assigned by the firm at the firm’s offices.
        B. Buttar is not allowed to do any legal work other than legal work assigned by the
firm.
       C. The written contract between the firm and Buttar refers to Buttar as an “independent
contractor.”
       D. Buttar’s injuries were caused by the court clerk, not the firm.




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          21. Which of the following was the original basis for intellectual property law in the United
States?

          A.   The United States Constitution, Article I, Section 8.
          B.   The case of Marbury v. Madison, decided in 1803.
          C.   The passage of the Uniform Trade Secrets Act in 1985.
          D.   The Anticybersquatting Consumer Protection Act of 1996.

        22. Oscar invests in books as part of his business. Oscar introduced Vinny to his golfing
buddies as “my business associate; Vinny can negotiate deals for me.” In fact, Vinny was not in
business with Oscar. However, one of Oscar’s golfing buddies then called Vinny and negotiated a
deal with Vinny for the buddy to sell one hundred business law textbooks to Oscar. Would Vinny be
considered Oscar’s agent for this deal?

          A.   Yes, because of the statute of frauds.
          B.   Yes, because of the doctrine of estoppel.
          C.   No, because of the doctrine of estoppel.
          D.   No, because of the statute of frauds.

          23. In which of the following situations is the “business judgment rule” applicable?

       A. Bhate, an officer of Adheesh Markets, Inc., decided to implement the board of
directors’ policy of cutting costs by firing three employees.
       B. Miyano, an officer of Thomas Sailboats, Inc., was arrested for drunk driving.
       C. Wei, a director of Bobby’s Gadgets, Inc., sold the stock that he owned in the corporation.
       D. Lucy, a director of Le’s Bar and Grill, Inc., decided to change her hairstyle.

        24. Which of the following is not an example of the four elements of the plaintiff’s prima
facie case under Title VII?

      A. The plaintiff was born in Mongolia.
      B. The employer hired a person who was born in the United States instead of the plaintiff,
who was born in Mongolia.
      C. The plaintiff, who was born in Mongolia, applied and was qualified for the job.
      D. The employer had a pretext for not hiring the plaintiff, who was born in Mongolia.

          25. What is a cybersquatter?

      A. A person who sits on another’s computer without permission.
      B. A person who uses another’s computer without permission.
      C. A person who registers a domain name that is the same or similar to his own name.
      D. A person who registers a domain name that is the same or similar to another’s
trademark.

          26. As a police officer for the City of Santa Ana, Meza was required to take a physical


                                                   29
fitness test every year. In five years, he had never passed the part of the test in which he had to run a
mile in less than seven minutes, so he was not eligible for certain pay bonuses. One month before
the test, Meza’s immediate supervisor, Sergeant Rodriguez, ordered Meza to run at least a mile every
day after he left work for the day. Meza started to do this but, a week before the test, he fell and
broke his right arm during his daily off-duty run. Can Meza get worker’s compensation benefits due
to this injury?

        A.   Yes, since he was within the course and scope of his employment when injured.
        B.   Yes, since his injury was easily verified by a doctor.
        C.   No, since he was off duty at the time of his injury.
        D.   No, since his injury was a result of intentional conduct.

         Questions 27 through 29 are based on the following: Prefontaine started designing and
manufacturing running shoes in his garage in 1980. He called his business “Pre Shoes” and gave or
sold the shoes to local high school and college runners. He saved money from his “day job” (he was
an engineering professor at Cal State Fullerton) and was able to open a small manufacturing facility
for Pre Shoes in Fullerton in 1987; this facility also contained a retail store at which Pre Shoes and
other running gear were sold. Around this time, Pre Shoes developed a business slogan: “Pre Shoes
will take you to the finish!” Based on his engineering background as well as informal input from
some nationally-ranked runners, Pre Shoes gained a 25% market share for running shoes sold in
Orange County by 1995. Spurred on by this success, Pre Shoes opened another manufacturing
facility in Costa Mesa and five retail stores in Costa Mesa, San Clemente, Huntington Beach, Santa
Ana and Laguna Beach in 1996. By 2000, Pre Shoes had a 70% share of the Orange County running
shoe market, had several nationally-ranked runners under contract as consultants (they would provide
input about running shoes in exchange for a salary and expense money to travel to races) and started
a website through which Pre Shoes could take shoe orders from anywhere in the United States.
Currently, Pre Shoes still has about a 70% share of the Orange County running shoe market and only
does a very nominal amount of its business (about 2%) outside of Orange County. In its contracts
with retailers, Pre Shoes have always required that the retailers sell any shoes purchased from Pre
Shoes for specified prices.

       27. If Pre Shoes wanted to protect its intellectual property rights to its business slogan – “Pre
Shoes will take you to the finish!” – Pre Shoes would seek:

        A.   A trademark.
        B.   A patent.
        C.   A copyright.
        D.   A trade secret.

         28. Pre Shoes was charged with violating Section 1 of the Sherman Act based on the fact that
it required that retailers who bought shoes from Pre Shoes sell the shoes for specified prices. What
type of violation was this?

        A. Horizontal price-fixing.
        B. Monopoly.


                                                   30
       C. Tying arrangement.
       D. Vertical price-fixing.

       29. Pre Shoes was charged with violating Section 2 of the Sherman Act. What should the
prosecutor’s position be with respect to the relevant geographic market?

        A. It should be Southern California only because the weather is good for running throughout
the entire area.
        B. It should be Orange County only because most of Pre Shoes’ principal place of
business is in Orange County.
        C. It should be the United States because Pre Shoes sell shoes throughout the United States
through its website.
        D. It should be the State of California only because Pre Shoes is located in the state.

       30. Which of the following is the best example of something that could be protected under
trademark law?

       A. A property management company’s customer list, which had been compiled over a period
of several years.
       B. A device invented to warm a toilet seat on a cold morning.
       C. The band name of “Iron Maiden.”
       D. A song recorded by the Hot Hot Heat.

       31. Which of the following is the best example of something that could be protected under
copyright law?

       A. A property management company’s customer list, which had been compiled over a period
of several years.
       B. A device invented to warm a toilet seat on a cold morning.
       C. The band name of “Iron Maiden.”
       D. A song recorded by the Hot Hot Heat.

        32. Slackers, Inc. filed a registration statement for new stock it planned to issue. The
registration statement said that Slackers, Inc. had earned a profit of $5 million last year. Tran knew
that this was false but decided to buy the new stock anyway. Tran then sued Slackers, Inc. for
violating the Securities Act of 1933. What is the best defense for Slackers, Inc.?

       A. Tran knew of the false statement regarding last year’s profits but decided to buy the
new stock anyway.
       B. Tran knew of the false statement regarding last year’s profits but any statement of profits
is immaterial anyway.
       C. Tran followed the business judgment rule when he decided to buy the new stock anyway.
       D. Tran followed the duty of loyalty when he decided to buy the new stock anyway.

       33. Nguyen’s Market usually sold one gallon of milk for $3.50. However, Nguyen’s Market


                                                 31
had a “Two For Tuesday” sale which featured a price of $4.50 for two gallons of milk. Do did not
want two gallons of milk and instead demanded that Nguyen’s Market sell one gallon of milk on
Tuesdays for $2.25 (half of $4.50). Nguyen’s Market refused Do’s demand. Has Nguyen’s Market
committed a violation of Section 1 of the Sherman Act?

        A. Yes, since the refusal to sell one gallon of milk on Tuesdays for $2.25 is a tying
arrangement.
        B. Yes, since the refusal to sell one gallon of milk on Tuesdays for $2.25 is vertical price-
fixing.
        C. No, since the refusal to sell one gallon of milk on Tuesdays for $2.25 is not a tying
arrangement.
        D. No, since the refusal to sell one gallon of milk on Tuesdays for $2.25 is not vertical price-
fixing.

        34. Holzer sold party supplies out of a large retail store in Fullerton. By working hard and
using methods such as vertical price fixing, he had a 90% share of the market for party supplies in
Fullerton. What would be Holzer’s best argument in his defense if he were sued under Section 2 of
the Sherman Act?

          A.   Vertical price fixing is not as bad as horizontal price-fixing.
          B.   He worked hard to get the 90% share of the market for party supplies in Fullerton.
          C.   A 90% share of the market is not a per se monopoly under Section 2.
          D.   He should plead guilty immediately and throw himself at the mercy of the court.

          35. Which of the following is the best example of something that could be considered a trade
secret?

       A. A property management company’s customer list, which had been compiled over a
period of several years.
       B. A device invented to warm a toilet seat on a cold morning.
       C. The band name of “Iron Maiden.”
       D. A song recorded by the Hot Hot Heat.

        36. Shirley and Ali were neighbors. Since Shirley worked at night, she was home most days.
 Ali’s dog, Sam, barked constantly during the day because he missed his master, who worked from
8:00 a.m. to 5:00 p.m. Sam’s constant barking caused Shirley to suffer emotional distress. Since all
of the other neighbors were at work or school during the day, they did not suffer any damages.
Shirley sued Ali for damages (money) and an injunction to force Ali to move so Shirley would not
have to suffer any more because of Sam’s constant barking. What is Ali’s best argument against
issuance of the requested injunction?

          A.   Sam’s constant barking is not sufficient to be a nuisance.
          B.   Sam’s constant barking is not sufficient to force Ali to move.
          C.   Sam’s constant barking is not sufficient to support any kind of injunction.
          D.   Sam’s constant barking is not sufficient to cause any kind of damages.


                                                    32
       37. Which of the following is not a remedy for unauthorized disclosure of a trade secret?

       A.   A court order requiring the defendant to apologize to the plaintiff.
       B.   Damages based on actual loss caused by the unauthorized disclosure of the trade secret.
       C.   Attorney’s fees if the claim or defense is in bad faith.
       D.   An injunction against further disclosure of the trade secret.

         Questions 38 and 39 are based on the following: Cohn and Izzy both own gas stations near
Cal State Fullerton. Cohn owns an Arco station, while Izzy owns an Exxon station. Cohn and Izzy
are married to each other’s sisters, so they see each other on a regular basis at family gatherings.
While they were attending a 75th birthday party for Cohn’s mother, Cohn and Izzy began to discuss
how they could work together in order to maximize their profits. They agreed to set a maximum
price of $2.499 for 87 octane gas for the next two weeks. Also, Cohn suggested that they require
anyone who wanted to buy gas also be required to buy a quart of motor oil, but Izzy rejected the idea
as being “too much trouble.” However, Cohn implemented his plan to require anyone who wanted to
buy gas to also buy a quart of motor oil at the same time that Cohn and Izzy implemented their plan
to set a maximum price of $2.499 for 87 octane gas for the next two weeks. The federal government
sued Cohn and Izzy for violations of Section 1 of the Sherman Act. Specifically, the federal
government alleged that the maximum price agreement by Cohn and Izzy was price-fixing, and
Cohn’s plan about the purchase of gas and motor oil together was a tying arrangement.

        38. What should be the result of the case against Cohn and Izzy based on the price-fixing
allegation?

        A. Cohn and Izzy should win because their agreement calls for a maximum price, which is
not a violation of Section 1 of the Sherman Act.
        B. Cohn and Izzy should win because the price to which they agreed is reasonable in the
current market.
        C. Cohn and Izzy should lose because their agreement calls for a maximum price,
which is a violation of Section 1 of the Sherman Act.
        D. Cohn and Izzy should lose because the price to which they agreed is unreasonable in the
current market.

        39. What should be the result of the case against Cohn based on the tying arrangement
allegation?

       A. Cohn should win because his requirement is not a tying arrangement that is illegal under
the Sherman Act.
       B. Cohn should win so long as he can prove that the average purchaser of gas also needs
motor oil.
       C. Cohn should lose because his requirement is a tying arrangement that is illegal
under Section 1 of the Sherman Act.
       D. Cohn should lose so long as he cannot prove that the average purchaser of gas also needs
motor oil.


                                                 33
       40. Was Martha Stewart convicted of the insider trading charges against her in 2004?

       A.   Yes, according to Professor Smith’s announcement in class.
       B.   Yes, according to Martha Stewart’s testimony in court.
       C.   No, according to Professor Smith’s announcement in class.
       D.   No, according to Martha Stewart’s testimony in court.

       41. Which of the following is currently the main source of law governing pollution?

       A.   Common law.
       B.   Common sense.
       C.   The United States Constitution.
       D.   Federal, state and local statutes.

       42. Kat loaned money to Fish after Fish promised to repay the money with 10% interest to
Kat within a month. In fact, Fish was lying when he made this promise since he planned to steal the
money from Kat. Fish did not repay the loan, so Kat sued Fish pursuant to the Securities Act of
1933. Which of the following would be Fish’s best defense?

       A.   Kat assumed the risk of loaning money to Fish.
       B.   The loan was not a “security.”
       C.   Fish reasonably relied on Kat.
       D.   The loan was not secured by collateral.

       43. Which of the following is the best example of something that is not noise pollution?

       A. Your neighbor’s band practicing in his garage at 2:00 p.m.; the music can be heard five
blocks away.
       B. Your neighbor’s band practicing in his garage at 2:00 a.m.; the music can be heard five
blocks away.
       C. Noise from an airport 100 feet from your home; no statute is violated.
       D. Noise from a car with no muffler 100 feet from your home; this violates the California
Vehicle Code.

        44. What is the purpose of filing a registration statement with the SEC pursuant to the
Securities Act of 1933?

       A.   Full and complete profitability regarding an issuance of new stock.
       B.   Full and complete disclosure of information regarding an issuance of new stock.
       C.   Full and complete profitability regarding an issuance of any stock.
       D.   Full and complete disclosure of information regarding an issuance of any stock.

       45. Which of the following is the federal agency that regulates securities transactions in the
United States?


                                                 34
       A.   Federal Aviation Agency.
       B.   United States Securities Law Association.
       C.   Securities Exchange Commission.
       D.   There is no such federal agency.

       46. Which of the following is the most common way to create an agency relationship?

       A.   Ratification.
       B.   Estoppel.
       C.   Court order.
       D.   Agreement.

        47. Wilmer and Julian agreed that Wilmer would build ten tables for Julian in exchange for
Julian’s payment of $2,000.00 plus expenses. Julian then used these tables for his business, which
made a profit of $1,000,000.00 in the next six months. Julian never paid Wilmer for building these
tables, so Wilmer sued Julian for breach of contract. If Wilmer won the lawsuit, which of the
following would be the correct amount of damages?

       A.   $2,000.00.
       B.   $2,000.00 plus expenses.
       C.   A reasonable amount based on the market value of Wilmer’s work.
       D.   A reasonable amount based on the market value of Julian’s business.

        48. Cesar was an employee of Gray Signs, Inc., which made signs for businesses, sports
teams, etc. Cesar discovered that Gray Signs, Inc. was negotiating to make signs for California State
University, Fullerton. Cesar told a competing sign company about the negotiations and that company
paid Cesar $5,000.00 for the information. Gray Signs, Inc. found out about what Cesar did and fired
him. Which of the following would be the best basis for firing Cesar?

       A.   Breach of the duty of loyalty.
       B.   Breach of the duty of care.
       C.   Breach of the duty of obedience.
       D.   Breach of the duty of indemnification.

       49. Atherton was the secretary to Lubsen, the company’s president. Atherton was African-
American. Atherton did not come into work for three days and did not call the company to give an
explanation for his absences. When Lubsen fired Atherton for these unexcused absences, Lubsen
said: “Unexcused absences are just wrong, especially for someone of your skin color.” Atherton
sued the company for discrimination under Title VII on the grounds of color. What would be the
company’s best defense?

       A. The duty of loyalty.
       B. Atherton’s unexcused absences.
       C. Title VII does not provide protection on the grounds of color.


                                                 35
       D. The after-acquired evidence rule.

       50. According to matters discussed in class this semester, which of the following is
Professor’s Smith’s favorite band? (Credit given for any answer!)

       A.   Iron Maiden.
       B.   Metallica
       C.   Milli Vanilli.
       D.   The Eagles of Death Metal.




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