Exam 2 Question 1

Jane, Sally and Marc, who have all been friends since high school, form a partnership called Shop Til You Drop to develop three shopping centers in their home town. Because they have been friends for so long and trust each other, they do not enter into a written partnership agreement. Instead, they simply agree that they will equally share in the profits and losses of the partnership. Marc soon discovers that Jane and Sally are extremely capable and hard workers and begins cutting down the time that he devotes to the partnership. Soon, Marc is coming into the office only one day a week. He spends the other days golfing. Marc brags on the golf course about what an accomplished shopping center developer he is, and attracts the attention of two other golfers, Manny and Jack, who also want to get into the business of developing shopping centers. Marc convinces Manny and Jack to hire him as a consultant, and Manny and Jack agreed to pay him $5.000/week for his consulting services, which money Marc keeps for himself. During the course of his consulting, Marc provides Manny and Jack with plans for a shopping center marked “SECRET” that were created by Shop Til You Drop. in order that Manny and Jack can use them as a basis for their development.

Eventually, at the urging of Manny and Jack, Marc leaves Shop Til You Drop before the three shopping centers have been completed and becomes partners with Manny and Jack in developing shopping   centers that will directly compete with Shop Til You Drop.

• Has Marc breached any fiduciary duties to Shop Til You Drop and Jane and Sally? Which ones?

What specific facts support the breach of each duty that you identify?

• Is Marc entitled to be paid for his partnership interest In Shop Til You Drop? If so, how will the

buyout price for his interest be calculated? When ¡s Marc entitled to receive payment?