The employees of the Lending Store, Inc. did join the union. The company was profitable for several years. However, the Phoenix economy recently took a severe downturn and business has slowed considerably. Also, a serious incident has occurred with one of their management employees, John Jones. While driving a company car with the Lending Store, Inc. logo printed on the side of the vehicle, this employee was involved in an auto accident. The driver of the other vehicle was seriously injured. The employee admits he purposely hit the other car when this driver shouted negative comments to him about the Lending Store apparently after seeing the company’s name on the vehicle. The employee also admits he had been drinking alcoholic beverages during his lunch hour in violation of company policy. He was on his way home when the accident occurred. The driver of the other vehicle files a lawsuit demanding reimbursement for medical bills and One Million Dollars in “other” damages. He names both John Jones and the company as co-defendants. The company does not have enough insurance coverage to pay for the damages claimed. In addition to this bad news, the poor economy has caused a significant decline in business. Now the company is losing money every month and has almost no cash on hand. The company is unable to pay this accident claim, the monthly rent for office space or its employees’ wages. Because the employees have not been paid for over a month, the employee’s union has threatened a strike. Albert and Baker have not taken their salary for the past six months in order to help the company financially. They are both very concerned that the company may not be able to continue in business given these recent and significant financial setbacks.
1. Explain the theory of law that would allow the third party injured in the auto accident to make a claim against the Lending Store, Inc. for damages. Include in your explanation the applicability of this general theory of law to the facts of this particular case.
2. Explain the defenses the company could possibly assert against this third party’s lawsuit. Include in your explanation the applicability of these legal defenses to the facts of this particular case.
3. What decision do you believe the court would most likely come to with regard to the claims for damages made by the injured driver against (a) the employee and (b) the company? Explain the legal rationale for each decision.
4. Since Albert and Baker have not been paid for six months, they have serious financial problems of their own. They are considering filing personal bankruptcy. Explain the process they would go through and the impact on their finances if they were to file a Chapter 7 bankruptcy.
5. Albert and Baker believe they can revive the company into a profitable enterprise again if they have some immediate financial relief. Explain how a Chapter 11 bankruptcy filing by the company would be relevant in this situation. Include in your explanation the likely outcome for the Lending Store, Inc. if it would successfully complete this type of bankruptcy process.
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