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Derek, Margie, and Carol are the sole shareholders in a closely-held corporation called Fun DMC, Inc.

Derek, Margie, and Carol are the sole shareholders in a closely-held corporation called Fun DMC, Inc. The corporation was formed in 2016 as a line-standing service operating primarily in downtown Charleston. For a fee, DMC will send one of their "line-standers" to stand in any line (for a concert at the Music Farm, a Spoletto event, a popular restaurant, etc.) to ensure customers get first dibs on the good seats without having wait in line themselves - "all the fun with none of the hassle." DMC leases office space and equipment but, otherwise, has little in the way of assets. In fact, the corporate operating account with BB&T has rarely had more than $20,000 and frequently drops to near zero to make payroll at the end of each week. The account is also kept low by the frequent withdrawals made by Derek, Margie, and Carol to cover personal expenses (dry-cleaning, eating out, gym memberships, etc.). The shareholders eventually refund the operating account but that sometimes takes weeks or even months. 

After about one year of operation, DMC hires an office manager. She is told generally to "run" the office but given little else in the way of specific directions. The office manager calls Office Depot and orders about $1,500 in office supplies (including a laser printer for flyers, ink cartridges, paper, pens, etc.). She tells Office Depot to send the bill to DMC.

1.            [8 Points] As directed, Office Depot sends the bill for office supplies to DMC. The office manager presents the bill to Carol to authorize payment but Carol refuses saying, "we didn't tell you to buy office supplies - you pay it!" Is DMC responsible for payment? If DMC refuses to pay, can Office Depot hold the office manager responsible for payment? Explain.

Fact Pattern - Continued.  During the height of the Spoletto festival, business is brisk and DMC hires ten new line-standers. Competition for choice seats at the major events is fierce and the line-standers find they have to be both fast and aggressive to get to the head of lines. One evening, a line-stander is a little too aggressive and accidentally shoves a visiting tourist into the street where she is run over by a passing carriage. She suffers significant injuries requiring multiple surgeries and a lengthy hospital stay.

2.            [8 Points] Suppose the tourist files suit against both Fun DMC, Inc., seeking $1 million for her injuries. Assuming the line-stander was negligent, is DMC likely to be found liable for the tourist's injuries? Explain.  

3.            [9 Points] After filing suit, the tourist learns Fun DMC, Inc. has minimal assets and no insurance. She amends her complaint to include the corporation's shareholders as defendants. Are Derek, Margie, and Carol subject to liability for the tourist's injuries? Explain. 

Top Answer

DMC is liable to pay for the office supplies and not the manager. DMC is... View the full answer

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