homas Persson and Jon Nokes founded Smart Inventions, Inc., to market household consumer products. The success of their first product, the Smart Mop, continued with later products, which were sold through infomercials and other means. Persson and Nokes were the firm’s officers and equal shareholders. Persson was responsible for product development, and Nokes was in charge of day-to-day operations. In time, they became dissatisfied with each other’s efforts. Nokes represented the firm as financially “dying,” “in a grim state, . . . worse than ever,” and offered to buy all of Persson’s shares for $1.6 million. Persson accepted. On the day that they signed the agreement to transfer the shares, Smart Inventions began marketing a new product— the Tap Light. It was an instant success, generating millions of dollars in revenues. In negotiating with Persson, Nokes had intentionally kept the Tap Light a secret. Persson sued Smart Inventions, asserting fraud and other claims. Under what principle might Smart Inventions be liable for Nokes’s fraud? Is Smart Inventions liable in this case? Explain. [Persson v. Smart Inventions, Inc., 125 Cal.App.4th 1141, 23 Cal.Rptr.3d 335 (2 Dist. 2005)] (See Piercing the Corporate Veil.)
homas Persson and Jon Nokes founded
Smart Inventions, Inc., to market household consumer
products. The success of their first product, the Smart Mop,
continued with later products, which were sold through infomercials and other means. Persson and Nokes were the firm’s
officers and equal shareholders. Persson was responsible for
product development, and Nokes was in charge of day-to-day
operations. In time, they became dissatisfied with each other’s
efforts. Nokes represented the firm as financially “dying,” “in
a grim state, . . . worse than ever,” and offered to buy all of
Persson’s shares for $1.6 million. Persson accepted.
On the day that they signed the agreement to transfer the
shares, Smart Inventions began marketing a new product—
the Tap Light. It was an instant success, generating millions
of dollars in revenues. In negotiating with Persson, Nokes had
intentionally kept the Tap Light a secret. Persson sued Smart
Inventions, asserting fraud and other claims. Under what
principle might Smart Inventions be liable for Nokes’s fraud?
Is Smart Inventions liable in this case? Explain. [Persson v.
Smart Inventions, Inc., 125 Cal.App.4th 1141, 23 Cal.Rptr.3d
335 (2 Dist. 2005)] (See Piercing the Corporate Veil.)
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
