Take Home Final Exam
Fall 1999
Randy Diamond, Associate Director of the Law Library
Instructions
You have twenty-four hours to complete this exam. Please turn in your completed exam in Room
203.
This exam consists of two essay questions and counts
for 40 points. The first question is
worth 30 points. The second question is
worth 10 points. You may write your
answers in the blue book or use a word processor/typewriter, whichever you
prefer. There are no minimum or maximum
page requirements or limits.
This is an open book exam. You may consult your class notes, readings, handouts, etc. but
you may not discuss the exam with anyone.
See me if you have any questions about these instructions or contact me
at diamondrj@missouri.edu or at 882-2935.
Question 1.
(30 points)
Bob Waters spent the first half of his career creating
many popular characters on children’s public television programs. In 1980, he left television to start his own
business, the Warm `N Fuzzy Toy Factory (“WNF”), in Happyville,
Massachusetts. WNF is a regional toy
manufacturer, marketing its own line of nurturing, cuddly-type toys primarily
to smaller, non-chain toy retailers throughout New England. The company began turning a profit in 1983
and enjoyed steady growth through 1989, when annual sales peaked at $12
million.
Waters is philosophically opposed to producing toys
that encourage or promote violence. His
nephew, who spent most of his free time playing action video games, has a
history of violent, delinquent behavior.
Waters refuses to have anything to do with online products for children,
because he believes the medium lacks proper safeguards for protecting children
from violent influences. Unwilling to
embrace the video generation and preferences of American youth for action toys,
WNF’s business declined precipitously from 1990 - 1993. In 1994, Waters was forced to sell half of
his interest in WNF to Profits `R Us (“PRU”) to avoid bankruptcy.
PRU’s CEO, Moore Mooney, and Waters, who stayed on as
WNF’s president, have had a rocky relationship. PRU owns many national businesses, but WNF is its first venture
into the toy industry. Mooney believes
that WNF must establish a national presence, like other PRU businesses. Waters
prefers to concentrate on regional growth so that WNF won’t get spread too thin
or lose sight of its mission of creating feel-good toys. In 1995, at Mooney’s suggestion, Waters
hired Todd Michaels to manage WNF’s daily operations. Michaels was considered a rising star in the toy industry,
combining sound business acumen with a creative streak for designing toys that
captured children’s imagination and parents’ pocketbooks. Michaels signed a non-competition agreement
providing that he would not compete within 100 miles of WNF’s Happyville
headquarters for two years after leaving the company. The agreement also provided that WNF would retain exclusive
rights to Michaels’ work product created at WNF.
Michaels succeeded in increasing WNF’s regional toy
sales through 1997, but became frustrated over Water’s reluctance to expand
online. Under the guise of market
research, Michaels developed a video game and web site featuring hipper
versions of the traditional WNF line of huggable characters. Michaels’ game is still very tame compared
to your average video game. Several
members of WNF’s management team agreed with Michaels that this would be an
excellent opportunity to take the business online without compromising the
traditional image of its major characters.
Waters and a few of the more senior managers disagreed and nixed the
project.
WNF’s business took a turn for the worse in 1998.
Michaels felt he was on a sinking ship.
He decided he had enough of trying to breathe life into the stale and
dated WNF line of toys and invented “Mad Morton,” a smart-talking, no-nonsense,
in your face, action figure. Market
tests indicated that 5-8 year old boys would fall hard for Mad Morton this
holiday season. Mad Morton bears a
striking resemblance to “Magnificent Marty,” an original WNF character. (Remove Mad Morton’s nose earring and
tattoos and you have Magnificent Marty.)
Waters was appalled and halted production before the first Mad Morton
hit the assembly line. Michaels
resigned.
Michaels has set up his own company in Sleazyville,
Connecticut, 85 miles from Happyville.
He sells Mad Mortons online through his web site, but doesn’t have the
production capacity PRU could have provided to fill all of his orders. His web site receives orders for Mad Morton
nationwide. Along with his production
woes, Michaels is not all that happy about his decision to leave WNF. The cost of living is higher in Sleazyville
than in Happyville, the schools aren’t as good (Michaels has six and eight year
old daughters), and he misses working with most of his former WNF
colleagues.
Waters is fit to be tied. He wants to sue Michaels for breaking their employment contract,
stop Michaels from selling Mad Morton and shut down the web site. Michaels claims that he is not competing
with WNF since WNF doesn’t sell its products online and that WNF waived any
ownership interest in Mad Morton when Waters rejected Michaels’ proposal to
manufacture and sell Mad Morton out of WNF.
Mooney, PRU’s CEO, believes there’s still money to be wrung from WNF,
but not without a drastic change in product and marketing philosophy. Mooney is intrigued by Michael’s web site,
but it was Mooney who originally insisted that Waters force Michaels to sign
the non-competition agreement.
Non-competition agreements have been required as a matter of course in
all PRU businesses. Mooney is
concerned, however, about unfavorable publicity resulting for PRU and WNF if
Waters succeeds in shutting down Michaels’ operations this close to Christmas
and in leaving legions of Mad Morton kids empty-handed come Christmas
morning.
Massachusetts courts have traditionally weighed the
employer’s interest strongly when construing non-competition agreements. The Massachusetts cases are based on common
law principles set out in a 1953 Massachusetts Supreme Judicial Court decision. Three years ago, the National Conference of
Commissioners on Uniform State Laws approved the Uniform Non-Competition Act
which, in part, attempts to address the law of non-competition agreements in
the modern e-commerce world.
Commentators suggest the Act is employee-friendly. New York, Michigan, Hawaii, Connecticut and
Maine enacted versions of this uniform act in January, 1998. Massachusetts and California enacted similar
versions in September 1999. (This
summary of the law is made up solely for the purposes of this exam and you
should assume it is accurate for purposes of this exam; in real-life there is
no such uniform act and I have not researched how Massachusetts courts construe
non-competition agreements.)
Your firm represents WNF and PRU. Waters and Mooney are going to meet with the
senior partner in a couple of weeks.
Prepare a comprehensive research plan to help you and the partner cover
all the bases. Assume that Michaels has
an equally savvy attorney and anticipate the research approach he/she will take
as you formulate your research strategy.
(Do not do any actual research; your task is to demonstrate your
skills as an advanced legal research strategist based on the facts and law
presented here. Be as precise as you
can about the avenues and methods of research you will need to pursue,
including points on which you would require additional information or
clarification.)
Postscript:
Waters calls you a couple of days before the meeting. The Children’s Toyhouse in Atlanta, Georgia, which operates
primarily in southeastern states, has contacted him about merging the two
companies. Children’s Toyhouse is on
solid economic footing. Based on
preliminary talks, Waters is satisfied that Children’s Toyhouse’s corporate
values are compatible with WNF’s and that a deal could be struck quickly
subject, of course, to Moore’s approval.
The Children’s Toyhouse’s main interest in WNF is the old Magnificent
Marty character, for which it sees great potential.
Question 2. (10 points)
How would you advise 1L students, who have just
completed a semester of learning how to use print resources and online citators
(KeyCite and Shepard’s), to prepare to use electronic resources in law
practice? Include an assessment of the
relative strengths and weaknesses of the
electronic research options available to practitioners today.