Please, read the three cases attached and respond to the questions below each of the three cases. This assignment should be around 500 words including only the answers. Thanks!Instructions: Please, read the three cases below and respond to the questions below each of the three cases. This assignment should be around 500 words including only the answers. Thanks! Case 36.3 – Spotlight on Holiday Inns – Holiday Inn Franchising, Inc. v. Hotel Associates, Inc. Court of Appeals of Arkansas, 2011 Ark.App. 147, 382 S.W.3d 6 (2011). Background and Facts Buddy House was in the
View complete question Please, read the three cases attached and respond to the questions below each of the three cases. This assignment should be around 500 words including only the answers. Thanks!Instructions: Please, read the three cases below and respond to the questions below each of the three cases. This assignment should be around 500 words including only the answers. Thanks! Case 36.3 – Spotlight on Holiday Inns – Holiday Inn Franchising, Inc. v. Hotel Associates, Inc. Court of Appeals of Arkansas, 2011 Ark.App. 147, 382 S.W.3d 6 (2011). Background and Facts Buddy House was in the construction business in Arkansas and Texas. For decades, he collaborated on projects with Holiday Inn Franchising, Inc. Their relationship was characterized by good faithmany projects were undertaken without written contracts. At Holiday Inns request, House inspected a hotel in Wichita Falls, Texas, to estimate the cost of getting it into shape. Holiday Inn wanted House to renovate the hotel and operate it as a Holiday Inn. House estimated that recovering the cost of renovation would take him more than ten years, so he asked for a franchise term longer than Holiday Inns usual ten years. Holiday Inn refused, but said that if the hotel was run appropriately, the term would be extended at the end of ten years. House bought the hotel, renovated it, and operated it as Hotel Associates, Inc. (HAI), generating substantial profits. He refused offers to sell it for as much as $15 million. Before the ten years had passed, Greg Aden, a Holiday Inn executive, developed a plan to license a different local hotel as a Holiday Inn instead of renewing Houses franchise license. Aden stood to earn a commission from licensing the other hotel. No one informed House of Adens plan. When the time came, HAI applied for an extension of its franchise, and Holiday Inn asked for major renovations. HAI spent $3 million to comply with this request. Holiday Inn did not renew HAIs license, however, but instead granted a franchise to the other hotel. HAI sold its hotel for $5 million and filed a suit in an Arkansas state court against Holiday Inn, asserting fraud. The court awarded HAI compensatory and punitive damages. Holiday Inn appealed. In the Language of the Court Raymond R. ABRAMSON, Judge. * * * * Generally, a mere failure to volunteer information does not constitute fraud. But silence can amount to actionable fraud in some circumstances where the parties have a relation of trust or confidence, where there is inequality of condition and knowledge, or where there are other attendant circumstances. [Emphasis added.] In this case, substantial evidence supports the existence of a duty on Holiday Inns part to disclose the Aden [plan] to HAI. Buddy House had a long-term relationship with Holiday Inn characterized by honesty, trust, and the free flow of pertinent information. He testified that [Holiday Inns] assurances at the onset of licensure [the granting of the license] led him to believe that he would be relicensed after ten years if the hotel was operated appropriately. Yet, despite Holiday Inns having provided such an assurance to House, it failed to apprise House of an internal business plan * * * that advocated licensure of another facility instead of the renewal of his license. A duty of disclosure may exist where information is peculiarly within the knowledge of one party and is of such a nature that the other party is justified in assuming its nonexistence. Given Houses history with Holiday Inn and the assurance he received, we are convinced he was justified in assuming that no obstacles had arisen that jeopardized his relicensure. [Emphasis added.] Holiday Inn asserts that it would have provided Buddy House with the Aden [plan] if he had asked for it. But, Holiday Inn cannot satisfactorily explain why House should have been charged with the responsibility of inquiring about a plan that he did not know existed. Moreover, several Holiday Inn personnel testified that Buddy House in fact should have been provided with the Aden plan. Aden himself stated that * * * House should have been given the plan. * * * In light of these circumstances, we see no ground for reversal on this aspect of HAIs cause of action for fraud. Questions: Legal Environment Why should House and HAI have been advised of Holiday Inns plan to grant a franchise to a different hotel in their territory? Economic A jury awarded HAI $12 million in punitive damages. The court reduced this award to $1 million, but the appellate court reinstated the original award. What is the purpose of punitive damages? Did Holiday Inns conduct warrant this award? Explain. Classic Case 37.1 – Meinhard v. Salmon Court of Appeals of New York, 249 N.Y. 458, 164 N.E. 545 (1928). Background and Facts Walter Salmon negotiated a twenty-year lease for the Hotel Bristol in New York City. To pay for the conversion of the building into shops and offices, Salmon entered into an agreement with Morton Meinhard to assume half of the cost. They agreed to share the profits and losses from the joint venture. (A joint venture is similar to a partnership but typically is created for a single project.) Salmon was to have the sole power to manage the building, however. Two mining companies getting together to explore for shale oil in a very specific geographic area; two technology companies joining forces to develop the next-generation smartphone; two biotech companies wishing to develop a new anti-cancer vaccine. Less than four months before the end of the lease term, the buildings owner, Elbridge Gerry, approached Salmon about a project to raze the converted structure, clear five adjacent lots, and construct a single building across the whole property. Salmon agreed and signed a new lease in the name of his own business, Midpoint Realty Company, without telling Meinhard. When Meinhard learned of the deal, he filed a suit in a New York state court against Salmon. The court ruled in Meinhards favor, and Salmon appealed. In the Language of the Court CARDOZO, C.J. [Chief Justice] * * * * Joint adventurers, like copartners, owe to one another, while the enterprise continues, the duty of the finest loyalty. Many forms of conduct permissible in a work-a-day world for those acting at arms length are forbidden to those bound by fiduciary ties. * * * Not honesty alone, but the punctilio [strictness in observance of details] of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate [entrenched]. Uncompromising rigidity has been the attitude of courts * * * when petitioned to undermine the rule of undivided loyalty. * * * The trouble about [Salmons] conduct is that he excluded his coadventurer from any chance to compete, from any chance to enjoy the opportunity for benefit. Did Salmons conduct demonstrate that he breached his fiduciary loyalty to Meinhard? * * * The very fact that Salmon was in control with exclusive powers of direction charged him the more obviously with the duty of disclosure, [because] only through disclosure could opportunity be equalized. Even though in general partnerships all partners have equal rights in managing, the partners can agree to designate one partner as the managing partner. * * * Authority is, of course, abundant that one partner may not appropriate to his own use a renewal of a lease, though its term is to begin at the expiration of the partnership. The lease at hand with its many changes is not strictly a renewal. Even so, the standard of loyalty for those in trust relations is without the fixed divisions of a graduated scale. * * * A man obtaining [an] * * * opportunity * * * by the position he occupies as a partner is bound by his obligation to his copartners in such dealings not to separate his interest from theirs, but, if he acquires any benefit, to communicate it to them. Certain it is also that there may be no abuse of special opportunities growing out of a special trust as manager or agent. [Emphasis added.] In virtually all situations of trust within a partnership, partners must communicate to the other partners any opportunities that might benefit them within the partnership. * * * Very likely [Salmon] assumed in all good faith that with the approaching end of the venture he might ignore his coadventurer and take the extension for himself. He had given to the enterprise time and labor as well as money. He had made it a success. Meinhard, who had given money, but neither time nor labor, had already been richly paid. * * * [But] Salmon had put himself in a position in which thought of self was to be renounced, however hard the abnegation [self-denial]. He was much more than a coadventurer. He was a managing coadventurer. For him and for those like him the rule of undivided loyalty is relentless and supreme. Probably because as the sole managing partner, Salmon would have known about all aspects of the joint venture and had a duty to communicate them to the other joint venturer. Impact of This Case on Todays Law This classic case involved a joint venture, not a partnership. At the time, a member of a joint venture had only the duty to refrain from actively subverting the rights of the other members. The decision in this case imposed the highest standard of loyalty on joint-venture members. The duty is now the same in both joint ventures and partnerships. Courts today frequently quote the eloquent language used in this opinion when describing the standard of loyalty that applies to partnerships. Questions: What If the Facts Were Different? Suppose that Salmon had disclosed Gerrys proposal to Meinhard, who had said that he was not interested. Would the result in this case have been different? Explain. Case 38.2 – Mekonen v. Zewdu Court of Appeals of Washington, 179 Wash.App. 1042 (2014). Background and Facts Green Cab Taxi and Disabled Service Association LLC (Green Cab) is a taxi service company in King County, Washington. The operating agreement requires the members to pay weekly fees. Members who do not pay are in default and must return their taxi licenses to the company. In addition, a member in default cannot hold a seat on the board or withdraw from the company without the consent of all of the members. A disagreement arose among the members concerning the companys management, and several members, including Shumet Mekonen, withdrew from the company without the consent of the other members. Both sides continued to drive under the Green Cab name. Mekonens group filed a suit in a Washington state court against a group of members who had not withdrawn, including Dessie Zewdu. In part, the Mekonen group sought the right to operate as Green Cab. The court held that the plaintiffs could not represent themselves as Green Cab and ordered them to return their taxi licenses to the company. The plaintiffs appealed the order to return their licenses. In the Language of the Court LAU, J. [Judge] * * * * * * * The [lower] court found in defendants favor regarding * * * the right of management and control over Green Cab. It found plaintiffs had no right to represent themselves as part of Green Cabs management or to operate under Green Cabs name. * * * * * * * Plaintiffs seek to retain the taxicab licenses affixed to the cars they own. According to Paragraph 6.4 of the LLC Operating Agreement, the Company shall hold all rights to any taxi and other licenses and permits necessary to operate its vehicles. The Plaintiffs have no right to use the taxicab licenses unless they are members of Green Cab LLC in good standing and are making any contributions toward the companys operating expenses that the board of directors deems necessary. Plaintiffs admit that they withdrew their membership from Green Cab LLC and that they have paid no weekly fees since [their withdrawal]. As a result, the Plaintiffs have no legal right to retain the King County taxicab licenses currently in their possession. [Emphasis added.] * * * The [lower] court deemed the members defaulting members. * * * * * * * Plaintiffs admitted to default both in failing to make weekly payments and in withdrawing from the company in violation of article 5.6 of the operating agreement. That article states, A Member may not withdraw as a Member prior to dissolution and commencement of winding up of the Company * * * without the written consent of all the other Members. The trial court imposed relief that was reasonably calculated to install defendants as the proper group to manage Green Cab and to preserve their interests in operating the company * * *. Given the relative interests of the parties and the LLC, the trial court acted well within its discretion to order plaintiffs to return their taxi licenses. Questions: What If the Facts Were Different? Suppose that Green Cab had maintained a company Web site on which it posted its operating agreement, conducted all internal company business, and offered a forum where members could vent their complaints. How might the result have been different? Why? Legal Environment During discovery, the plaintiffs were asked to answer requests for admission, but they did not respond. Does it seem likely that their failure to answer affected the outcome? Why or why not?
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