witnesses, documents, and other evidence. In response to such arguments, U.S. courts generally hold that alien corporations, by marketing their goods in the United States, should expect to be “haled into court” in this country. As one court stated, any such inconvenience “must be weighed against a public policy which favors providing a forum for an injured resident to bring an action against a non-resident manufacturer.” a F OR C RITICAL A NALYSIS How might a foreign manufacturer that sells its products in the United States avoid being “haled into court” in this country to defend against a product liability action? a. Loral Fairchild Corp. v. Victor Co. of Japan, Ltd., 803 F.Supp. 626 (E.D.N.Y. 1992). 2. Public and Private Corporations A public corporation is formed by the government to meet a political or governmental purpose. Private corporations are created for private benefit. Most corporations are private. 3. Nonprofit Corporations Corporations formed without a profit-making purpose are nonprofit corporations. Usually pri- vate, these firms include hospitals and universities.
CHAPTER 38: CORPORATIONS—FORMATION AND FINANCING 243 4. Close Corporations A close corporation is one whose shares are held by relatively few persons (who also often are its directors or officers). Generally, because the number of shareholders is small, there is no market for the shares. Some states have special statutes that cover close corporations. Permitting them to avoid many of the formalities of other corporations [RMBCA 7.32]. a. Management of Close Corporations The shareholders are often the firm’s directors and officers. More than a simple majority vote may be requited to prevent a majority shareholder from dominating the firm. b. Misappropriation of Close Corporation Finances The remedies available to minority shareholders for a majority shareholder’s commission of this tort follow the remedies available to other corporations in the same circumstances. C ASE S YNOPSIS — Case 38.2: Williams v. Stanford Paul and James Williams held 30 percent of the stock in Brown and Standard Inc. (B&S), a con- struction company. John Stanford owned the other 70 percent. On learning that Stanford had misap- propriated at least $250,000 from B&S, the Williamses filed a shareholder’s derivative suit in a Florida state court on B&S’s behalf against Stanford. Stanford quit B&S, and gave its assets and liabilities to a new company, J.C. Stanford & Sons. He offered the Williamses $25,000 each for their B&S stock. They asked for $125,000. The court held that the Williamses’ counteroffer undercut their right to maintain
- Fall '09
- Business Law, Corporation, .........