MGT393H5F2008DEC - UNIVERSITY OF TORONTO Faculty of Arts...

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Unformatted text preview: UNIVERSITY OF TORONTO Faculty of Arts and Science APRIL/MAY EXANIINATIONS 2008 MGT 393HIS g Duration - 2 hours ‘3’» NO AIDS ARE ALLOWED FOR THIS EXAMINATION This examination paper must be returned with the examination booklet. Please print your name and student number in the spaces 'provided below. Student name (LAST NAME FIRST) Student number CASE QUESTION (THERE IS ONE QUESTION TO THIS EXAMINATION) Cologne magnate Elliott Spritzer and cigar-chomping Bill Hintin’ are long-time friends who share a love for well, let’s just say they have much in common. Pooling their collective wisdom, they invest heavily in Ontario-based Bare Ferns Co. Inc., a global investment firm specializing in plants. “After all,” Bill smugly points out, “plants have been around forever!” Unfortunately, the popularity of sub—prime mortgages reaches the horticultural sector, and eventually leads to the collapse of many businesses in which Bare Ferns invests. This in turn causes Bare Ferns to wither, and Elliott and Bill’s investment along with it. One day, they receive a letter from JP Organ Case, a leading manufacturer of keyboard instrument frames. JP Organ offers to buy their investment in Bare Ferns for well, a song. The letter warns that Elliott and Bill could be personally liable for all Bare Fems’ debts incurred while they are owners. This greatly worries Elliott, so he arranges to meet Bill for lunch to talk this over. “We need to get to the root of the problem!” an agitated Elliott tells Bill over lunch at the posh Swiss Valet restaurant. Bill starts to make a witty comment, but Elliott cuts him off. “I think I’ve just twigged to something. If Bare Ferns had branched out into a more well—grounded investment portfolio, rooted in commodities like pulp and paper, its investments would have blossomed. In other words, they were barking up the wrong tree!” Bill eyes Elliott narrowly to see whether his friend is kidding, but apparently he is not, so Bill lets him continue. “Take ou and me, for exam le. We never make rash or im ulsive decisions and it shows in the wa our 3 careers have gone” Elliott says. “So 1 say we stem our personal liability exposure by uprooting our cash from Bare Ferns, and start our own investment firm.” MGT 393HIS Final Examination PAGE I of 5. Bill sensibly points out that neither of them have any experience in running an investment firm. But Elliott is not to be deterred. “Don’t sell us short!” Elliott exclaims. Bill looks up sharply, but Elliott appears to be serious. “We both appreciate art and music” Elliott reasons. “So we’ll set up an investment company specializing in works from up—and-coming artists and musicians. We can call our firm ‘Temper Roar’s Club VIP’ . . . that last part being short for ‘Value Investment Portfolios’. It’ll have real sex appeal . . . and we can target prominent politicians as clients — its sure to ignite a passion in them!” Bill clearly still has doubts about the whole thing, so Elliott quickly adds, “For some, it will be their first fling into artists and musicians. But once in, they’ll be hooked, and it’ll become part of their everyday affairs.” Bill figures they can’t do any worse than their investment in Bare Ferns, so he agrees. Later that day, they sell out to JP Organ. Then they arrange to meet with their accountants, D’Exploitte Truth, to sort out the details of their new business. After lunch, Elliott retrieves his coat from the coat check and then asks beer-loving Foamer Simpson, one of the valets, to go get his car. Foamer asks Elliott to describe his car. Elliott does so. Foamer says there is no car fitting that description in the restaurant parking lot. Elliott quite reasonably points out that there should be, since he gave his keys to one of the valets when he arrived. Foamer asks Elliott to describe the valet in question. Elliott does so. Foamer says there is no valet fitting that description. This exchange is really starting to irritate Elliott. So he reaches into his coat pocket for his cell phone to call the Boom Harangue satellite tracking service and have them locate his car. But his cell phone does not seem to be in his pocket. Now Elliott is really angry. He storms over to the restaurant coat check and demands that they find his cell phone. They tell him there are no cell phones in the coat check. He angrily replies that there was a cell phone in his coat pocket, and since his coat was checked into the coat check, there was a cell phone in the coat check, and since there is no longer a cell phone in his coat pocket, it must still be in the coat check. The woman in the coat check just looks uncomprehendingly at Elliott. He realizes that he lost her, somewhere around where he said there was a cell phone in his coat pocket. So he snatches up the house phone and calls Boom Harangue. The customer service rep tells him that she can’t seem to pick up a signal from the tracking unit in his car. She thinks the unit may be defective, so she asks him to bring it in. Elliott can’t believe she said that. He politely points out that the reason he is calling is that the unit is still in his car, and his car is missing. The customer service rep stubbornly insists that, in accordance with company policy, there is nothing she can do unless he brings the unit in to their service department. She then warns Elliott that there is only a 15-day warranty, which will expire in two days, so he’d better bring the unit in by then or he will have to pay for any necessary repairs. Elliott realizes he is out of his depth here, so he slams down the phone, then picks up the receiver and slams it down again. This seems to feel good for some reason, so he does it several more times before he realizes that he has broken the receiver and a sizeable chunk of plastic is now embedded in his hand near his thumb. He is bemused by this, until the shock wears off, at which point he almost passes out from the pain. He is not even aware that he is on the floor howling and moaning until someone starts vigorously shaking him and telling him to lie still. The “someone” turns out to be retired surgeon Dr. Merrywith Grey, who is there with her colleague, Dr. Dizzybell Stevens. It seems that the two surgeons were having lunch at Swiss Valet when this happened, and they came running over when Elliott started screaming. MGT 393HlS Final Examination PAGE 2 of 5. Dizzybell sees the plastic sticking out of Elliott’s hand. She goes to pull it out, but Elliott snatches his hand back. Dizzibell insists on removing the plastic, saying it could be a health risk to leave it in. Elliott insists that she go pull plastic out of someone else’s hand. Dizzibell gets a thoughtfill look on her face, then looks over Elliott’s shoulder and says, “Oh look .. . what is that?” Elliott turns to look, and Dizzibell yanks the plastic out of his hand. At this point Elliott passes out. When he comes to, he sees that his hand has been cleaned and bandaged up, and that Dizzibell has an annoyingly smug look on her face as she goes back to her table in the restaurant. After all of this, Elliott decides to take a couple of days off to rest and recuperate. He is still quite put out that Dizzibell did not listen to him, but he turns his mind to other things, including his missing car. Unfortunately, his car is never found, although the police are convinced that it was stolen. He goes back to Swiss Valet, and is surprised to see how easy it would be for someone to masquerade as a Swiss Valet attendant, since they are not even required to wear uniforms or name tags. Elliott and Bill finally go to see D’Exploitte Truth. There they meet with former politician George Ditherman CA. and ask for his help in structuring their proposed investment firm. George has “March Madness” college basketball on his Eye-Watch, so he isn’t paying close attention to what they are discussing. At one point, Elliott asks George whether they should incorporate. George looks blankly at Elliott for a moment, then tears his eyes away fi'om his Eye-Watch long enough to pull out a Loonie and ask Elliott to call heads or tails. Elliott stares blankly at George, sees that George is serious, and calls tails. George flips the coin, and it lands on heads. So he tells them to incorporate. Elliott looks at Bill, but Bill doesn’t seem to think anything is amiss, so Elliott cautiously says he supposes that’s what they’ll do then. Seeing new billable work, George becomes engaged in the conversation again, and says, “That’s just great. Now then, you can both be directors and equal common shareholders. Elliott, you will be Governor, and Bill, President. Agreed?” Elliott and Bill nod their heads in agreement. After the meeting, George goes ahead and incorporates Temper Roar’s Club VIP Inc. He then asks his secretary to prepare an invoice for this work. He tells her to charge a fee of $1,500, but she accidentally types $15,000 instead, and mails out the invoice. When Elliott sees the invoice several days later, he is shocked by the fee. He calls George and says he is upset about how much he has been charged. George thinks Elliott is referring to the $1,500 fee (which is admittedly still more than the generally going rate of about $600 - $800), and becomes quite defensive. To make a long story short, George basically tells Elliott to just pay the fee and quit whining, and Elliott basically tells George to stuff it (or words to that effect). Later that week, Elliott and Bill meet with two former hockey greats, Angelina Goalie and Doormats Sundin, to discuss hiring them to market Temper Roar’s to prominent politicians. Elliott offers them each a six-month contract. Doormats is between jobs, so he is willing to take the six-month contract - provided that it includes a ‘no—trade clause’. This seems reasonable to Elliott, so he agrees. Angelina has a rather large (and growing) family, and wants something more long-term. Elliott says he’s willing to extend the contract to “about a year”, provided that she meets with at least a dozen client prospects every week. Angelina says she’ll commit to this, provided that they provide her with the use of a company vehicle and provided it is her long—time fantasy vehicle (a Bummer B3 SUV). Elliott has to think about that for a minute, but he eventually agrees. Though nothing is signed, the whole meeting is recorded (with everyone’s permission) so there’ll be no uncertainty about what was agreed upon. Angelina points out that in order to successfully market Temper Roar’s, the company will first need to line up some artists and musicians. As luck would have it, Elliott knows Ashley Kristen Dupe-Prey, an aspiring musician whose songs have been getting a lot of attention of late on the internet. Ashley has just wrapped up her latest project (something about a trip to Washington), so she is willing to consider MGT 393HIS Final Examination PAGE 3 of 5. signing up with Temper Roar’s. But she wants assurances that Elliott and Bill have lots of experience with the kind of work she would be doing. “I won’t just bare my soul for anyone!” she exclaims. Elliott assures her that he and Bill have a great deal of experience in such matters. Ashley then says she’d love to record a music video with well-known female rapper Miss Serious, and Elliott tells her that he and Miss Serious are actually very good friends (though in truth he doesn’t even know who Miss Serious is). Impressed, Ashley agrees to sign on with Temper Roar’s as one of its musicians. Now Temper Roar’s needs to start finding politician investors. So Elliott approaches Stefan di Yawn, twice nominated for most-boring-speaker awards. Stefan is very liberal-minded about most things, so he quickly warms up to the unusual investment concept. He agrees to invest $500,000 in Temper Roar’s return for “500 preference shares” of Temper Roar’s. He even persuades fellow politician Bob Eh? to get on board, investing $100,000 for “100 preference shares”. Buoyed by Temper Roar’s’ initial progress, Angelina celebrates by having lunch at the Eatin’ Centre with boyfriend Brad Spits. After lunch, the pair go for a walk on Young Street. At one point, Angelina coughs up and expels some phlegm that was lodged in her throat. She is seen doing so by a reporter, who photographs the incident. The following day, the photo appears on the front page of the Toronto Scar newspaper. The photo is doctored slightly so that it looks like she is spitting up a dead goldfish. The caption cleverly reads, ‘Hockey Star Acting Fishy’. This photo is seen by Tether Mills, a former exotic dancer and wife of disabled musical legend Fall Apartknee. Tether is a highly outspoken advocate for animal and fish rights. When she sees the photo, Tether goes ballistic. She spearheads a massive campaign in support of the humane treatment of “goldfish in captivity”. Though she never mentions Angelina by name, people remember “The Fishy Photo” in the Toronto Scar, and soon no one wants to do business with Angelina anymore. As a result, it becomes impossible for Angelina to meet with a dozen client prospects each week as required under her contract with Temper Roar’s; not surprisingly, no politicians want to be seen talking with her at all. Sad to say, things go downhill for Temper Roar’s from there. First, Elliott gets a call from Amy Whinermouse, the sales person from the dealership where Temper Roar’s had just purchased a Bummer B3 SUV. Amy tells Elliott that there was a fire in the dealership that destroyed all of the vehicles, including two identical Bummer B3’s that had just been delivered to the dealership for Temper Roar’s and another customer. Athough the B3’s had not yet been allocated as between Temper Roar’s and the other customer, one was clearly intended to be allocated to each of them. So the dealership feels that Temper Roar’s and the other customer should still pay for the Bummer B3’s and claim the loss on their insurance. Elliott thinks she must be kidding, and points out that Temper Roar’s does not yet have any insurance, since this was to be its first vehicle. Amy says that that’s a shame, and tells him she hopes the company will be better prepared next time. It takes Elliott another moment or two to realize that she is not kidding. Elliott can’t believe she could actually think Temper Roar’s was going to pay for a vehicle they had not yet driven off the lot. Unsure what to say next, he just hangs up. Several days later, Temper Roar’s receives a registered letter from the dealership, threatening to sue if the Bummer B3 is not paid for. A short time later, Ashley gets fed up waiting to record a music video with rapper Miss Serious. In a huff, she sends Elliott an e-mail that simply says, “I quit”. As if that wasn’t bad enough, Stefan and Bob somehow learn about this, and demand their money back. Then D’Exploitte sends Temper Roar’s a “final reminder” that their invoice is still outstanding. They threaten legal action against Temper Roar’s if the invoice is not paid immediately. MGT 393HIS Final Examination PAGE 4 of 5. Now Elliott is really sweating. Desperate to cut down on overhead expenses, he convinces another investment firm to take over the Temper Roar’s contract with Doormats. But when Doormats finds out about this, he refuses to cooperate, and threatens to sue Temper Roar’s. The final straw is when Elliott receives a letter from former Bare Ferns employees threatening to sue him and Bill for unpaid wages. Seeing potential financial ruin just around the comer, Elliott decides to seek legal advice. So he arranges to meet with famous litigation lawyer Arnold Tortsenegger. Arnold invites you, an articling student in his office, to join the meeting. In the meeting, Elliott recounts all of the facts set out above. He says he wants to know what legal issues are raised by these facts, and the likely legal outcome of each such issue. Then he recalls that he still has the coat check stub he got from Swiss Valet when he checked his coat the day his car went missing. So he pulls it out and hands it over to Arnold, saying that he isn’t sure if this is important. On the reverse side of the stub is the following wording (which Elliott never read until now): Customer assumes risk of loss or damage to customer property while on Swiss Valet premises. After Elliott leaves, Arnold turns to you and asks you to prepare a memorandum that identifies all of the legal issues raised by these facts. He wants you to analyse each such issue by applying the relevant legal principles, and to briefly conclude as to the likely outcome. REQUIRED: Prepare the memorandum requested by Arnold. END OF EXAMINATION Total marks = 100 MGT 393HlS Final Examination PAGE 5 of 5. ...
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MGT393H5F2008DEC - UNIVERSITY OF TORONTO Faculty of Arts...

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