Steps For the Discussion:
Please remember as we discussed in the zoom session, you are debating the DEBATE THIS prompt. You are going to write an 1 introductory paragraph stating your position then 3 supporting paragraphs, and lastly 1 conclusion paragraph (total of 5 paragraphs). Feel free to incorporate the fact pattern I gave you as an example to help prove your point. But you do not necessarily have to answer the questions posed. I want to see reasoned analysis and critical thinking. There is no right or wrong answer. Feel free to use the internet for all supporting resources, cases, journal, articles, etc… Make sure that you cite your sources.
William Sharp was the sole shareholder and manager of Chickasaw Club, Inc., an S corporation that operated a popular nightclub of the same name in Columbus, Georgia. Sharp maintained a corporate checking account but paid the club’s employees, suppliers, and entertainers in cash out of the club’s proceeds. Sharp owned the property on which the club was located. He rented it to the club but made mortgage payments out of the club’s proceeds and often paid other personal expenses with Chickasaw corporate funds.
At 12:45 a.m. on July 31, eighteen-year-old Aubrey Lynn Pursley, who was already intoxicated, entered the Chickasaw Club. Chickasaw employees did not check Pursley’s identification to verify her age, as required by a city ordinance. Pursley drank more alcohol at Chickasaw and was visibly intoxicated when she left the club at 3:00 a.m. with a beer in her hand. Shortly afterward, Pursley lost control of her car, struck a tree, and was killed. Joseph Dan cause, Pursley’s stepfather, filed a tort lawsuit against Chickasaw Club and William Sharp. Using the information presented in the chapter, answer the following questions.
- Under what theory might the court in this case make an exception to the limited liability of share-holders and hold Sharp personally liable for the damages? What factors would be relevant to the court’s decision?
- Suppose that Chickasaw’s articles of incorporation failed to describe the corporation’s purpose or management structure as required by state law. Would the court be likely to rule that Sharp is personally liable to Dan cause on that basis? Why or why not?
- Suppose that the club extended credit to its regular patrons in an effort to maintain a loyal clientele, although neither the articles of incorporation nor the corporate bylaws authorized this practice. Would the corporation likely have the power to engage in this activity? Explain.
- How would the court classify Chickasaw Club, Inc.—domestic or foreign, public or private?
Debate This:
The sole shareholder of an S corporation should not be able to avoid liability for the torts of her or his employees
