Business Law Fact Pattern?

Fact Pattern:

Jake and Susan own and manage a textbook resale business called Text Buy. After having operated the business for a year, they hired an attorney to form an LLC called Text Buy, LLC. The attorney filed the Articles of Organization for the LLC but a mistake was made. The secretary of state sent notice of the mistake but Jake and Susan never received this notice. The attorney also filed a federal trademark application for the word mark “Text Buy” which is still being reviewed by the Patent and Trademark Office.

Jake and Susan have been operating their business out of their dorm room taking phone orders. They want to expand to the internet in order to distribute nationally. However, someone already owns the domain name, The owner of the website is not using it for anything. When you go to the website it says “under construction”.

Jake and Susan are busy enough to have a couple of employees as well as a friend that has invested some money in the company in exchange for a share of the profits. However, an employee was recently fired because he spent more time on Facebook than he did taking phone orders. The disgruntled ex-employee thought it would be clever to act like he was still an employee and he did so by taking text book orders totaling over $2,000. He used the money to take his girlfriend to the Bahamas for spring break. Before leaving for the Bahamas, a few students had contacted the company to confirm their orders but there was no record. The company fulfilled the orders and sent the students a bill. The company never tried to contact the ex-employee.

Jake and Susan sometimes relied on their investor friend, Jerome, to take care of business for them. They had specifically given Jerome permission to buy some used textbooks from a local distributer named Use ‘em or Lose ‘em Books. That order fell through so Jerome took it upon himself to make a deal with another distributor based in China. Jerome ordered 5,000 books without doing his homework. When the books came in, they were all photocopies of original books. One of the employees signed off on the order and immediately began to fill used text book orders with them.

When Jake and Susan found out about the employee’s error, she was fired. While packing up her cubicle, she bent over to move some books and hurt her back. Her back is hurt so badly that she won’t be able to work anywhere else for months. She is wondering what she is going to do. Jake and Susan are hoping they never hear from her again.

On top of all of this, Jake has been using the company’s account to make payments on his personal credit card. Jake is the one that keeps up with the money so Susan is clueless about what he has been doing.

Based on the above facts, what issues will Jake and Susan have to deal with as business owners? How will the issues be resolved?
Asked Nov 12, 2011

* Susan sues Jake for the money he put on his credit card.

* The injured employee sues them since they had no workman's compensation insurance.

* Jake and Susan sue Use ‘em or Lose ‘em Books for misrepresenting their product.

* Jake and Susan sue the disgruntled employee for the money he embezzled.

* Jake and Susan sue the lawyer for for the faulty Limited Liability setup.

When the dust settles, the legal costs force all of them into personal bankruptcy and they came to the realization they aren't qualified to run a business. Jerome learns there is a risk to investing. Jake marries a rich southern widow and now answers to the name, "Dahhhling." Susan grows organic cabbage on a one acre plot in south Jersey.

Answered Nov 12, 2011

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Answered Dec 24, 2014
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Answered Jan 14, 2015

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