Question

Business Law I (Hypothetical #1) Narrative On the Start-Up Company "T87 Organ Synergies Inc Formation of the Company: 4 individuals (Roberto, Luisa, Huang Fu and working for different companies involved in the healthcare and/or biomedical fields. Tung transplant surgeon for a local hospital in Philadelphia: Luisa is a biomedical resca science lab in Maryland that employs 75 people: Huang Fu is a top salesman for Tirm in New Jersey; and Darlene is a health care administrator for a chain of local nospa York. to, Luisa, Huang Fu and Darlene) are currently and/or biomedical fields. Roberto is a heart & Luisa is a biomedical researcher working for a is a top salesman for the largest pharmaceutical chain of local hospitals in upstate New Roberto, Luisa, Huang Fu and Darlene casually know each other through vari networks and conferences they have attended over the years. At one such conterende ly know each other through various professional Newark, NJ, they discovered that they each have a desire to form a start-up company. ears. At one such conference held this year in industry. Since their individual skills and experience complemented each other, they decided are to form a start-up company in the healthcare next few months they would brainstorm and come up with an idea for a possible new ented each other, they decided that over the me up with an idea for a possible new business venture. Over the next few months they ver te next few months they met once in person and via Skvne several times. They eveniamy arrived at the idea for their venture: A new prescription drug which has the potential to lengua of patients who have undergone heart transplants. Based on their research and expertise, weyem their new product could lengthen lives by at least 3 years. The next step was to form a company new venture. They called it TS7 Organ Synergies Inc. ("TS7"' for short). They had a lawyer arant a contract that would govern their relationship with each other. To save cash, they decided that we come would be simple for now, and that they would add in more details at a later time. Now the company was ready to begin the research. design and clinical testing of the potential new drug so that they can apply for something called a "patent". Patents are issued by the US government and provide legal protection to inventors from other people who might try to copy (or steal) an original idea from an inventor. If someone steals the idea, that person might be able to get the product to the marketplace before the original inventors do. In order to begin the research, design and testing phase, they estimated that it would cost an initial amount of $200,000. They agreed to each invest $50,000 dollars, which would cover the $200,000 in starting cash. Other than for Roberto (the lung & heart transplant surgeon, who is wealthy), the investment of $50,000 nearly depleted the savings of all the other partners, but they felt the high risk might lead to high reward, so they moved forward with the project. They would be equal partners/shareholders in this new company, and have equal authority. The Beginning of Conflict: After working together for nearly I year in the design and testing phase for their new product, the partners were confident that their product was going to deliver the desired resulte and that they were well on their way to securing a patent for their new product. However, a potential conflict began to emerge Unknown to the other partners, about monus arter they formed the company Luise (b with someone else and began developing a drug with biomedical researcher) started a separate company with someone else and began devel that she and her partners in TS7 were developing. One of the other similar life saving prospects to the drug that she and her partners in TS7 were devel his professional network that Luisa was doing this and at the partners in TS7 (Huang Fu) heard a rumor via his professional network that Luisa wa to secure her own patent and negotiate a contract to soon market the drug to the same time she was trying to secure her own patent and negotiate a contract to so public. When the other partners learned this and confronted her, Luisa stated that the than the drug that 787 is developing", and that anyway, her from competing by creating a similar product, and "their agreement with each other does not prevent her from competing by creat that freedom of contract' gives her the right”. Theo ting" with TS7 with her new product. They alleged that ners of TS7 are not happy about this state of affairs, and made a demand that Luisa stop "competing" with TS7 with her n that she has a moral obligation, and duty of loyalty to TS7 even if the contract did not address this situation, that she has a moral bli based on their relationship as partners in building 787 and the effort, knowled all contributed to the venture. TS and the effort, knowledge and expense that they have

Answer 1

Q.1 Briefly what happened here ? what do you see as the main issue ?

Response :

4 different person working as an employee in health care sector having desire to start their own venture comes together. They know each other through professional network and other social gatherings. Their skills were complementing and hence after number of discussion they have come up with business idea and formed the firms TS7. The initial investment being significant of $50,000 for each partner. They have made simple agreement without help of lawyer and started to work.

One of the partner (Luisa) have been working in another startup where they are also developing similar product to TS7. When Luisa was questioned on this aspect by other partners he submitted that the formula of their idea is different than product developed under TS7 and as per freedom of contract he can do so.

The main issue appears here is the casual approach toward legal agreement to save the cost. They should have consulted lawyer to draft proper agreement which would incorporate the expected conduct of partners and what activities are permissible and not permissible. Even one of the partner would have taken legal advise on this incident matter would be resolved at the earliest.

Q.2 Whether Luisa is doing right

Luisa is not right in her actions.

The Uniform Partnership code and partnership law enacted by number of states invariably provides fiduciary duties on partner. Fiduciary duties can not be waived by agreement as well.

e.g.

California law recognizes four (4) fiduciary duties: duty of care; duty of loyalty; duty of obedience; and, duty of good faith and fair dealing.

A partner’s duty of loyalty includes all of the following: (1) to account to the partnership and hold as trustee for it any property, profit, or benefit derived from the partnership business; (2) to refrain from dealing with the partnership as or on behalf of a party having an adverse interest to that of the partnership; and, (3) to refrain from competing with the partnership in the conduct of the partnership business

In view of above Luisa's action is not correct in eyes of law