Hartford Fire Insurance Co, v. California case brief

Hartford Fire Insurance Co. v. California, 509 US 764 (1993).

• Defendants, acting in London, were charged with conspiring to restrict the terms of certain kinds of insurance available in the US, in violation of the Sherman Act
• Issue: is there prescriptive jurisdiction to apply the Sherman Act, or any US law, to conduct that occurs in another country?
• The Sherman Act has typically been interpreted according to the objective territorial principle – it deals with conduct that occurs outside the US but has a substantial and harmful effect inside the United States
• Previous decisions found that he Sherman Act extended overseas; the new question was how far the Sherman Act extended
• Majority Opinion (Souter): the Sherman Act does apply to the acts in question
• Does not address international law in depth; he merely addresses comity
• He frames the question as whether principles of comity ought to lead the court to exercise judicial restraint and not exercise jurisdiction over the London insurance companies
• He says that there is only an issue where the laws of two states conflict in such a way that one cannot comply with the laws of one country without violating the laws of the other country: “The only substantial question in this case is whether ‘there is in fact a true conflict between domestic and foreign law’.”
• He finds that there is no conflict between US and British law (seems though he almost jumps right to the third part of the Restatement test in Section 403)
• Though the US made illegal what was legal in England, compliance with US law would not require violation of British law, so it’s ok
• Is Souter right in suggesting that this is the only question that needs to be addressed?
• The Restatement reasonableness test says no – you still have to establish 1) that there is a recognized basis for prescriptive jurisdiction, and then 2) that it is reasonable for the state to exercise jurisdiction in the given case (look to reasonableness factors in Restatement); then you would perform Souter’s analysis

• Dissent: Scalia
• The principle question is whether the Sherman Act reaches the conduct in question
• First, he looks at two cannons of statutory construction in American law:
• 1) “legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States”
• Sherman Act was already found to apply extraterritorially
• 2) “an act of Congress ought never to be construed to violate the laws of nations if any other construction remains” (Charming Betsy)
• prescriptive jurisdiction
• He then performs the analysis Souter should have performed to determine if the Sherman act applies to the case at hand:
• you have to establish 1) that there is a recognized basis for prescriptive jurisdiction, and then 2) that it is reasonable for your state to exercise jurisdiction in the given case (look to reasonableness factors in Restatement); then perform an analysis similar to Souter’s analysis (can you apply the law of your state without requiring the defendant to violate the laws of the other state?)
• Reasonableness analysis:
• He recognizes that the UK has a great interest in maintaining jurisdiction over this issue
• He also says that the US interest in regulating here is slight, because of another act that allowed for the Sherman Act to be overridden (if the Sherman Act can be overridden, it can’t be that important)
• Scalia concludes that it is unreasonable for the United States to apply its law here
• Is it really unreasonable for the US to apply its law in this situation, given that the act in question was intended to have a negative effect on the United States?
• Why did Scalia reach this result?  Are there any advantages to the result he reached?
• It may be better to be certain which country gets to regulate the actions of companies
• It may be easier for US companies to compete on a level playing field in the UK if they aren’t subject to US regulation
• Flip the sides – do we want the UK to be able to do this to the US
• Whose opinion was better – Souter or Scalia?
• We think Souter’s outcome might have been better, but Scalia’s analysis was definitely better – follow this analysis

Compagnie Europeenne des Petroles S.A. v. Sensor Nederland B.V. case brief

Compagnie Europeenne des Petroles S.A. v. Sensor Nederland B.V. 

• US prohibited sales that would support the Soviet pipeline; this affected subsidiaries of US corporations and companies incorporated in Europe and elsewhere
• Dutch company (subsidiary of a US company) was sued by a French company because the Dutch company did not want to comply with the terms of a contract it made with the French company
• Dutch company said it was subject to US regulations prohibiting the sale, and would have to pay fines if it complied with the contract (International law comes up in this case through the defense asserted by the Dutch company)
• The Dutch court seems to assume that the Dutch company might have a valid defense if the US has the jurisdiction to prescribe this law
• Carefully analysis of bases for jurisdiction
• There is no choice of law clause in the contract, so then we look to see whether the US has prescriptive jurisdiction
• Nationality: if Sensor were a US corporation, the US could have regulated it even as it acted outside the US; test for nationality is not determined by ownership interest (as US would argue), but by incorporation and place of registered business, and the Dutch company was incorporated in the Netherlands
• Protective principle – protective principle does not justify one country’s forcing another country’s companies to advance US foreign policy
• Territorial (objective) – the court could not see how the export to Russia of goods not originating in the Untied States by a non-American exporter could have any direct and illicit effect in the US
• Note: remember that the US was indirectly limiting the operation of the French company by limiting the operation of the Dutch company; the connection between the US and the French company is even more tenuous

Time Value of Money, Present Value, Future Value, Bond Valuation, Net Present Value Method, Corporate Finance

TIME VALUE OF MONEY
-a dollar paid in the future is worth less than a dollar today.
-amounts to be received in the future must be discounted by some factor if one wishes to ascertain their present worth.
-the more distant the deferred service, the lower its present price.

PRESENT VALUE
P(1) = A / ( 1 + r )

6% interest rate (r)

$1 = current value (A)

deferred 1 year (1)

FUTURE VALUE
P(t) = (1 + r)^t = A

Capital Value - current price of the rights to the stream/series of receipts.

Annuity - the sequence of future amounts due.

BOND VALUATION

PV = (5)SUM(t=1): A(t) / [(1+r))^t]
If interest paid more than once a year:
PV = A(t) / [(1+r/m)^(m*t)]

m = # of times a year interest is paid or compounded.

A = future payment

r = discount rate

t = future year

THE NET PRESENT VALUE METHOD

1.  Estimate the returns that can be expected to be realized from the investment over time.
2.  Discount those projected returns to the present value.
3.  Investment is acceptable if present value of estimated returns = or > cash outlay required to finance it.

I.e., new machine costs $18,000.
     useful life of machine = 5 years.  (value = 0 at end of 5 years).
     machine adds $5,600 after taxes to firm’s annual income for 5 year period.
     assume 10% discount rate.

1.  discount cash flows of $5,600 per year at appropriate discount rate of 10%.

2.  Compare to outlay to determine if investment has a positive net present value.

PV = $21,224 (3.79 x $5,600)
Net Present Value = Discounted sum of expected inflows minus cost.
    ($21,224 - $18,000) = $3,224 (NPV)
NPV is positive, so investment is acceptable, outlay should be made.

Francis v. United Jersey Bank case brief

Francis v. United Jersey Bank

87 N.J. 15 (1981) 

 

OVERVIEW

NJ Supreme Court held that corporate directors owe a duty of care to their corporation and its shareholders. The court outlined the responsibilities that arise from the duty of care.

FACTS

Pritchard & Baird Intermediaries Corporation was a reinsurance broker. The company acted as a “middle man” between insurance companies seeking to indemnify each other for insurance claims. The company had begun as a partnership co-founded by Charles Prichard, Sr. (“Charles Sr.”) but eventually became a corporation whose whose board included Lillian Pritchard (“Lillian”), William Pritchard (“William”), and Charles Pritchard, Jr. (“Charles Jr.”). Following the death of Charles Sr., Charles Jr. and William began to abuse the company’s finances by withdrawing increasing sums of money from its accounts under the guise of “shareholder loans.” Although the withdrawals created enormous capital deficits that eventually forced the company into bankruptcy, Lillian did nothing to rein in the abuse.

ISSUE

(1) Did Lillian Pritchard breach a duty of care to the corporation and its

shareholders? 

(2) If so, was the breach a proximate cause of the bankruptcy?

HOLDING

(1) Lillian Pritchard breached a duty of care to the corporation and its share-

holders.  

(2) The breach was a proximate cause of the bankruptcy.

ANALYSIS

Corporate directors owe a duty of care to the corporation andits shareholders. While the specific responsibilities vary according to the nature of the corporation, the duty of care requires directors to have at least  a rudimentary understanding of the corporation’s business as well as up-to- date knowledge of the corporation’s activities. Although a director need not personally audit the corporation’s accounts, directors should review financial statements to keep abreast of its financial situation. Therefore, a director may not excuse his failure to discharge this duty by claiming ignorance of the corporation’s state. 

 

Despite being a director of Pritchard & Baird, Lillian was entirely detached from the company’s affairs. Had she reviewed its financial statements, she would immediately have realized that Charles Jr. and William were making improper withdrawals from the company’s accounts. The obviousness of the withdrawals means that Lillian also had an obligation to attempt reining in the abuse. Her failure to intervene was therefore a proximate cause of the bankruptcy.

 

A.P. Smith Manufacturing Co. v. Barlow case brief

A.P. Smith Manufacturing Co. v. Barlow

13 N.J. 145 (1953) 

 

OVERVIEW

The New Jersey Supreme Court held that a corporation may make donations

to the public good.

FACTS

A.P. Smith Manufacturing Company made a donation to Princeton University. According to the president of the company, the donation was “good” business” because it helped to produce an educated citizenry from which the company could hire. The president further stated that such donations were a “reasonable and justified public expectation.” The company’s shareholders sued on the ground that the company’s charter allowed no such donations.

ISSUE

May a corporation make donations for the public good?

HOLDING

A corporation may make donations for the public good.

REASONING

The realities of the twentieth century have driven courts to

construe corporate powers more and more broadly. The original restrictions on corporate powers developed in the nineteenth century, when wealth was concentrated in private hands rather than corporations. As corporations became more powerful, new legislation allowed them to donate within broad limits. Since nothing suggests that the donation was made to a pet charity, the donation is valid

Lauritzen v. Larsen case brief (International Law)

Lauritzen v. Larsen - Law of the Sea


FACTS
-Danish seaman brought suit under Jones Act to recover for injuries on the Danish ship, the Randa, while docked in Cuba.  
-Larsen based assertion of federal jurisdiction on board reading of Jones Act, that encompassed all sailors and on Lauritzen company’s significant NY business contracts.
Statute stated: Any seaman who shall suffer personal injury in the course of his employment may, at his election, maintain an action for damages at law, with the right of trial by jury, and in such action all statutes of the United States modifying or extending the common-law right or remedy in cases of personal injury to railway employees shall apply...

ISSUE
Should the Danish law apply or should US law apply?

HOLDING
Danish Law should apply.

RULES
Law of the Flag- Each state under international law may determine for itself the conditions on which it will grant its nationality to a merchant ship, thereby accepting responsibility for it and acquiring authority over it.
-Nationality is evidenced to the world by the ship’s papers and its flag.
-Law of the flag supersedes the territorial principle (even for criminal jurisdiction of personnel of a merchant ship), because it is deemed to be a part of the territory of that sovereignty (whose flag it flies), and not to lose that character when in navigable waters within the territorial limits of another sovereignty.  
-All matters of discipline and all things done on board which affected only the vessel or those belonging to it, and do not involve the peace or dignity of the country or the port’s tranquility, should be left by the local government to be dealt with by the authorities of the nation to which the vessel belongs as the laws of that nation or the interests of its commerce requires.

Federal Income Tax - Basis

Section 61 of the IRS Code provides that gross income means income from whatever source derived.  When determining Gross Income as far as a business is concerned, we look towards regulation 1.61-3(a) which states that "gross income means the total sales less the costs of goods sold." 

Section 61(a)(3) includes in income "gains derived from dealings in property." 
Section 1001 describes a gain as the excess of the amount realized from the sale over the taxpayer's basis for the property. 

What then is Basis?  I have a law school exam in only a couple of weeks, and in order to do well, I want to know everything about Basis. 

The term, Basis, is a term of art in the tax law.  Section 1012 states: "the basis of a property is usually its cost to the taxpayer, except as otherwise provided." 
-Basis is a mechanism by which taxpayers are allowed to recover their capital investment when they sell property.
-Accounting for gain or loss is generally postponed until property is sold, however. 
-IRS code generally only taxes realized gains.

There are three ways in which a taxpayer accounts for costs.
1.  Immediately deductible expenses. 
-If there is enough income to offset the deductions, the tax-free recovery of these income producing is immediate.
2.  Capitalized expenses.
-Purchase price or cost is taken into account only when sold.  (i.e., stock). 
-Dividend income received while the stock is held is taxed fully without any offset for the capital which was invested.
3.  Depreciated asset.
-Periodic deductions are allowed for the asset's cost.

Purchased Property = The basis of property is its cost, except as otherwise provided.
-If taxpayer receives property in exchange for services, basis = fair market value of property received.
-Basis is cost even if the taxpayer has underpaid or overpaid for the property.

Property in exchange for other property = Generally equal value.
-Exchange is generally a realization event and any gain/loss on either side will be 'recognized'. 
-"Where the value of the property given up differs from the value of the property received, the taxpayer's basis in the property received is its value."

Basis of Property Acquired By Gift
-The basis of property for computing gains in the hands of a donee = basis in the hands of the donor.
-If donee can not acquire donee's basis, basis = FMV at the date the property was acquired by the donor.