Please read the case below and answer in the following format: 1) Relevant Law 2

Question

Please read the case below and answer in the following format: 1) Relevant Law 2) Conclusion - the outcome, and why.

The book for this course is Business Law with UCC application - 14th edition

The case is the following one:

Klinicki and Lundgren incorporated to form an air taxi service known as Berlinair , Inc. Each of them owned one-third interest in the corporation. The final third was owned by Lelco , Inc., a company owned by Lundgren. In his capacity as pres i dent of Berlinair , Lundgren learned that the Berlinair Flug Ring (BFR), a business association of Berlin’s travel agents, was looking for an air charter service. Lundgren incorporated a new corporate entity called Air Berlin Charter (ABC). ABC then negotiated an air charter contract with BFR. Klinicki brought suit, demanding that Lundgren reimburse Berlinair for any profits made by ABC on the BFR contract. Was this a direct or derivative suit? Explain. Should the business judgment rule or the fairness rule be used by the court to measure Lundgren’s pe r formance? Explain. Who should have won the suit? Defend your choice. Klinicki v. Lundgren, 695 P.2d 906 (OR)

Explanation / Answer

This was a direct suit since it affected the profits of Berlinair Inc. directly due to the start of ABC. Court must incorporate business judgement rule to measure Lundgren's performance because this matter was pertinent to business performance and it bore a direct impact on the business of Berlinair Inc. In this case Klinicki should have won because the other party knowingly did it and should have informed him.

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