Business Associations Cases & Statutes Simplified

Haas - Spring 2026

Martin v. Peyton (1927)

Lenders who receive profit participation and protective control rights are not partners unless they actually co-own and run the business.

Lupien v. Malsbenden (1984)

A creditor who exercises substantial control over a business may be treated as a partner and held liable as one.

Hilco Property Services, Inc. v. United States (1996)

A partnership exists for tax purposes when parties intend to jointly conduct business and share profits and losses.

UPA §§6(1), 7, 17–21, 27(1), 29–31

The UPA defines partnership formation, partner liability, fiduciary duties, transfer of interests, and rules for dissolution.

RUPA §§102, 105, 202, 301, 303, 306, 401–405, 409, 502–503, 601, 801

RUPA modernizes partnership law by defining partnership formation, partner authority, fiduciary duties, liability rules, transferability of interests, and dissolution.

Summers v. Dooley (1971)

In a two-partner firm, one partner cannot bind the partnership to an expense over the objection of the other.

Sanchez v. Saylor (2000)

Partners generally have equal management rights and disputes over ordinary matters are resolved by majority vote.

Meinhard v. Salmon (1928)

Partners owe each other the highest duty of loyalty and must share business opportunities arising from the partnership.

Latta v. Kilbourn (1893)

A partner may engage in separate businesses unless the activity directly competes with or harms the partnership.

Gateway Potato Sales v. G.B. Investment Co. (1991)

A partnership can be formed by conduct showing co-ownership of a business for profit even without a written agreement.

In re USA Cafes, L.P. Litigation (1991)

Directors of a corporate general partner owe fiduciary duties directly to the limited partnership and its limited partners.

ULPA §§101, 201, 302–303

The ULPA defines limited partnerships and establishes formation requirements and limited partner liability protections.

RUPA §§102(9), 306(c)–(e), 901–902

RUPA provisions governing LLP status, liability shields for partners, and conversion/merger of partnerships.

Sky Harbor Hotel Props., LLC v. Patel Props., LLC (2019)

Managers or controlling members of an LLC may breach fiduciary duties by diverting business opportunities belonging to the entity.

ULLCA §§102, 104, 108, 201–202, 301–304

The ULLCA governs LLC formation, operating agreements, member authority, and management structure.

DGCL §141(a)

The business and affairs of a Delaware corporation are managed by or under the direction of the board of directors.

MBCA §8.01(b)

The board of directors manages the business and affairs of the corporation unless otherwise provided.

ABA-MRPC §§1.7 & 1.13

Lawyers representing organizations must avoid conflicts of interest and represent the entity rather than its individual constituents.

NYBCL §630

New York law may impose personal liability on certain shareholders for unpaid wages owed by closely held corporations.

MBCA §6.22(b)

Shareholders are generally not personally liable for corporate obligations beyond their investment.

DGCL §§151(a), 152, 154

Delaware law governs the creation of stock classes and the issuance of shares for valid consideration.

MBCA §6.21 Official Comment

The board must determine that consideration for shares is adequate before issuance.

DGCL §§102(a)(4), 153–154, 162, 170(a), 172–174

Delaware legal capital rules govern stock issuance, surplus calculations, dividends, and director liability for unlawful distributions.

MBCA §§6.01–6.02, 6.21–6.22, 6.40, 8.30, 8.32

The MBCA regulates share issuance, shareholder liability, distribution limits, and director duties.

DGCL §§101–103, 105–109, 241–242

These provisions govern corporate formation, charter amendments, and corporate governance authority.

MBCA §§2.01–2.06, 3.01–3.02, 4.01–4.02, 6.01–6.04, 10.02–10.07, 10.20

The MBCA provides rules for incorporation, corporate powers, share structures, and amendments to corporate charters.

Goodman v. Ladd Estate Co. (1967)

Controlling shareholders owe fiduciary duties to minority shareholders and may not use their control for personal benefit.

DGCL §§121–122, 124

Delaware statutes defining corporate powers and limiting ultra vires challenges.

MBCA §§3.01–3.02, 3.04

The MBCA grants corporations broad general powers and limits ultra vires claims.

Dodge v. Ford Motor Co. (1919)

Corporate directors must operate the corporation primarily for the benefit of shareholders.

A.P. Smith Mfg. Co. v. Barlow (1953)

Corporations may make reasonable charitable contributions consistent with long-term corporate interests.

ALI-PCG §2.01

The ALI Principles recognize that corporations may consider broader stakeholder interests while pursuing shareholder value.

DGCL §122(9) & (12)

Delaware corporations have statutory authority to make charitable contributions and engage in lawful business activities.

MBCA §§3.01(a), 3.02, 3.04 & 8.30(a)

Corporations have broad statutory powers but directors must exercise them with care and good faith.

Goodman v. Darden, Doman & Stafford Associates, Inc. (1983)

Corporate officers and directors are generally not personally liable for corporate obligations absent personal wrongdoing.

RSA §326

Promoters may be personally liable for pre-incorporation contracts unless the corporation adopts them and the parties agree to substitute liability.

DGCL §152

The board determines the adequacy of consideration received for corporate stock.

MBCA §§2.04 & 6.21(b)

Promoters are liable for pre-incorporation obligations and the board must authorize share issuance.

DGCL §329

Promoters must disclose profits received from transactions involving the corporation they helped form.

MBCA §§2.03 & 2.04

Individuals acting on behalf of a non-existent corporation may be personally liable for resulting obligations.

Fletcher v. Atex, Inc. (1995)

A parent corporation is not liable for its subsidiary’s acts absent veil piercing or agency.

Walkovszky v. Carlton (1966)

Corporate veil piercing requires misuse of the corporate form to commit fraud or injustice, not merely undercapitalization.

Minton v. Cavaney (1961)

Courts may pierce the corporate veil when a corporation is inadequately capitalized and corporate formalities are ignored.

Carte Blanche v. Diners Club Int’l (1993)

A parent company is not liable for a subsidiary unless the subsidiary functions as the parent’s alter ego.

Arnold v. Browne (1972)

Courts may disregard the corporate form when it is used to perpetrate fraud or injustice.

Slottow v. Fidelity Federal Bank (1993)

D&O liability coverage depends on the language of the insurance policy and the nature of the alleged misconduct.

Truckweld Equipment Co. v. Olson (1980)

Corporate officers breach fiduciary duties when they compete with or divert opportunities from the corporation.

Kinney Shoe Corp. v. Polan (1991)

Veil piercing is appropriate when a corporation is undercapitalized and used as a shell to avoid personal liability.

DGCL §102(b)(6)

A Delaware charter may impose shareholder liability only in limited circumstances authorized by statute.

MBCA §6.22

The MBCA limits shareholder liability to the amount invested in the corporation.

Kaycee Land and Livestock v. Flahive (2002)

Courts may apply veil-piercing principles to LLCs when the entity form is abused.

Sky Cable, LLC v. DIRECTV, Inc. (2018)

Courts may apply reverse veil piercing to reach LLC assets used to shield an individual’s liabilities.

Manichaean Capital v. Exela Technologies (2021)

Controlling shareholders may breach fiduciary duties by unfairly diluting minority ownership.

In re Equitable Equipment Holdings (2013)

Bankruptcy courts may equitably subordinate creditor claims when inequitable conduct harms other creditors.

Costello v. Fazio (1958)

Insiders’ creditor claims may be subordinated when owners manipulate capitalization to gain priority over other creditors.

Arnold v. Phillips (1941)

Courts may subordinate insider creditor claims when insiders exploit control to disadvantage outside creditors.

Schnell v. Chris-Craft Industries (1971)

Inequitable conduct is not permissible simply because it is legally authorized.

Coster v. UIP Companies (2023)

Stock issuances affecting voting power may receive enhanced judicial scrutiny when used to entrench control.

DGCL §§109, 141, 142, 211, 222–223, 228, 242, 271, 275

Delaware statutes governing bylaws, board authority, shareholder meetings, written consent, and major corporate transactions.

MBCA §§2.06, 7.01–7.05, 8.01–8.10, 10.03, 12.02, 14.02

The MBCA establishes governance rules for shareholder meetings, board authority, corporate changes, asset sales, and dissolution.

ALI-PCG §§3.01, 3.02, 3.05 & 3A.05

The ALI Principles outline governance authority of boards and fiduciary responsibilities of corporate actors.

CA, Inc. v. AFSCME Employees Pension Plan (2008)

Shareholders may adopt bylaws relating to the electoral process but not ones that interfere with the board’s managerial authority.

Williams v. Geier (1996)

A board’s adoption of a defensive voting structure may receive business judgment rule protection if approved by disinterested directors.

Smith v. Van Gorkom (1985)

Directors breach the duty of care when they approve a merger without adequate information or deliberation.

Reading v. Attorney-General (1951)

A fiduciary must disgorge profits obtained through misuse of their position.

Schoonejongen v. Curtiss-Wright Corp. (1998)

A corporation may amend employee benefit plans when the governing documents reserve that power.

Francis v. United Jersey Bank (1981)

Directors have a duty to monitor corporate affairs and may be liable for failing to supervise wrongdoing.

In re Emerging Communications Shareholders Litigation (2004)

Directors may be liable for approving unfair transactions when they consciously disregard their duty of care.

City of Coral Springs Police Officers’ Pension Plan v. Dorsey (2023)

Delaware courts evaluate board decision-making under enhanced scrutiny when conflicts or control issues are present.

Aronson v. Lewis (1984)

The business judgment rule presumes directors act in good faith and sets the demand-futility test for derivative suits.

Malpiede v. Townson (2001)

Exculpatory charter provisions may bar monetary liability for duty-of-care breaches but not for loyalty or bad faith.

In re Caremark International Inc. Derivative Litigation (1996)

Directors may be liable for failing to implement or monitor compliance systems necessary to detect corporate wrongdoing.

In re Walt Disney Co. Derivative Litigation (2006)

Grossly negligent decision-making alone does not constitute bad faith absent intentional misconduct.

DGCL §§102(b)(7) & 145

Delaware law allows charter provisions limiting director liability and permits indemnification of corporate officials.

MBCA §§2.02(b)(4)–(5) & 8.51

The MBCA authorizes charter provisions limiting director liability and provides indemnification standards.

Stone v. Ritter (2006)

Caremark oversight liability is a subset of the fiduciary duty of loyalty requiring bad faith failure of oversight.

Marchand v. Barnhill (2019)

Directors may face Caremark liability when they fail to implement board-level monitoring systems for mission-critical risks.

In re McDonald’s Corp. Stockholder Derivative Litigation (2023)

Corporate officers, like directors, owe fiduciary duties including oversight obligations under Caremark.

Lewis v. S.L. & E., Inc. (1980)

Transactions involving controlling shareholders may be scrutinized for fairness when conflicts of interest exist.

DGCL §144

Interested-director transactions are not automatically void if approved by disinterested directors, shareholders, or proven fair.

MBCA §§8.60–8.63 & 1.43

The MBCA regulates conflict-of-interest transactions involving directors and provides procedures for validation.

ALI-PCG §5.02

The ALI Principles require directors and officers to avoid conflicts of interest and act loyally toward the corporation.