SD Bar Multistate Essay 3 — Questions and Answers
Question 1: A debtor files for Chapter 7 bankruptcy. A creditor held a perfected security interest in the debtor's inventory. Under § 544 of the Bankruptcy Code, the trustee may avoid the security interest if:
- The security interest was perfected more than 90 days before the petition
- The security interest was unperfected at the time of the bankruptcy filing (Correct answer)
- The creditor failed to file a proof of claim within 60 days
- The collateral depreciated in value after the petition date
Correct answer: The security interest was unperfected at the time of the bankruptcy filing
Under Bankruptcy Code § 544, the trustee has the status of a hypothetical lien creditor and may avoid security interests that were unperfected at the time of filing.
Question 2: On an MEE Torts question, a driver rear-ends another car because she was distracted by a passenger. The injured driver sues both. The passenger is liable for negligence if:
- The passenger was in the car during the accident
- The passenger actively distracted the driver in a manner a reasonable person would recognize as dangerous (Correct answer)
- The passenger and driver shared a common destination
- The passenger had a duty to monitor the driver's attention
Correct answer: The passenger actively distracted the driver in a manner a reasonable person would recognize as dangerous
A passenger is not ordinarily liable for a driver's negligence but may be liable if the passenger's own affirmative conduct (active distraction) creates an unreasonable risk of harm.
Question 3: A landlord leases an apartment to a tenant for one year. The tenant sublets to a subtenant without the landlord's consent. The lease prohibits subletting without consent. The landlord's best remedy is:
- Sue the subtenant directly for unpaid rent
- Terminate the lease for breach of the anti-subletting covenant (Correct answer)
- Seek an injunction against the original tenant only
- Accept the subletting as a waiver of the anti-subletting clause
Correct answer: Terminate the lease for breach of the anti-subletting covenant
An anti-subletting covenant is an enforceable lease condition; the landlord may terminate the lease if the tenant breaches it by subletting without consent.
Question 4: Under the Confrontation Clause analysis after Crawford v. Washington, a co-defendant's out-of-court statement implicating the defendant is inadmissible against the defendant at a joint trial if the statement is:
- Hearsay and not subject to any recognized exception
- Testimonial and the co-defendant does not testify (Correct answer)
- Non-testimonial but made in furtherance of a conspiracy
- Offered only for impeachment purposes by the prosecution
Correct answer: Testimonial and the co-defendant does not testify
Crawford held that the Confrontation Clause bars admission of testimonial hearsay unless the declarant is unavailable and the defendant had a prior opportunity to cross-examine.
Question 5: A corporation's board of directors approves a self-dealing transaction in which the CEO buys corporate property at below-market value. Shareholders challenge the transaction. Under the duty of loyalty, the transaction will be upheld only if:
- The board followed proper notice procedures before voting
- It was fair to the corporation or was approved by disinterested directors after full disclosure (Correct answer)
- The CEO abstained from the board vote
- The transaction was completed at arms' length through a third-party broker
Correct answer: It was fair to the corporation or was approved by disinterested directors after full disclosure
Interested director transactions survive duty-of-loyalty scrutiny if the transaction was fair to the corporation or was approved by a majority of disinterested directors with full disclosure.
Question 6: In an essay on constitutional law, a city ordinance bans all political signs on residential property. A homeowner challenges it. Under the First Amendment, the ordinance is most likely:
- Valid as a reasonable time, place, and manner restriction
- Invalid as a content-based restriction subject to strict scrutiny (Correct answer)
- Valid because private residential areas are nonpublic forums
- Invalid only if it targets a specific political viewpoint
Correct answer: Invalid as a content-based restriction subject to strict scrutiny
Reed v. Town of Gilbert held that laws distinguishing between categories of signs based on their content are content-based and subject to strict scrutiny.
Question 7: A seller contracts to deliver 500 units of goods by June 1. On May 20, the seller informs the buyer she will not deliver. The buyer immediately purchases substitute goods at a higher price. Under the UCC, the buyer's remedy is best described as:
- Consequential damages only, limited to lost profits
- Cover damages: the difference between cover price and contract price, plus incidentals (Correct answer)
- The contract price, held by the seller as a constructive trust
- Rescission of the contract with no further damages
Correct answer: Cover damages: the difference between cover price and contract price, plus incidentals
UCC § 2-711 and § 2-712 allow the buyer to 'cover' by purchasing substitute goods and recover the difference between cover price and contract price plus incidental and consequential damages.
SD Bar Multistate Essay 3
A debtor files for Chapter 7 bankruptcy.
A creditor held a perfected security interest in the debtor's inventory.
Under § 544 of the Bankruptcy Code, the trustee may avoid the security interest if: