Question

Rush Inuit is an impulsive, fly-by-the-seat-of-his-pants kind of guy. His best friend, Stu Earley, is the exact opposite – cautious and reluctant. The two are recent UNCG graduates who roomed together all … ahem … eight years. You know who they are even though they graduated last year because everyone on campus knows Rush and Stu – they’re legends on the social scene.

To make ends meet during college, Rush and Stu organized fun trips to exciting destinations and charged other college students a flat fee to go. They charged the students more than the trips cost to organize, so they always turned a profit. Rush supplied the ideas about where to go and what to do, and he served as the emcee for all the events. Stu, meanwhile, handled all the more mundane things, like reservations and logistics.

Now out of college (finally!) and unwilling to take a “boring job” like their friends, Rush and Stu are aiming to hit it big as entrepreneurs. Rush has his mind set on starting a party bus business that operates like Lyft and Uber. Just click a few buttons on an app and a party bus arrives, fully stocked with adult beverages, cool couches, and ad-free Spotify music. What’s not to like? Stu thinks the idea is brilliant, but feels strongly that they need to find someone with money to help them get the drivers, buses and marketing together before they get started.

Frustrated with one another after their last meeting, Rush and Stu both jumped into action. Rush decided that he needed to show Stu how easy this would be so that Stu would quit dragging his feet. Stu, on the other hand, decided he needed to show Rush he could pull in some additional capital so that Rush would be more patient.

The two now sit in your conference room arguing at the top of their lungs. The only thing that breaks up the cacophony is their periodic pleading for your guidance. Realizing there’s no way you can get anywhere with them arguing, you put them in separate rooms and talk with each separately to ascertain what’s going on. Here’s what you’ve learned.

:: From Stu ::

After taking MGT 330 a bunch of years ago, Stu realized he and Rush needed to put some structure to their for-profit trip business. So, Stu got together some paperwork that he and Rush signed. That was a long time ago, though, so he doesn’t remember what the paperwork was. He is sure, however, that he did not set up a corporation.

Around that same time, Stu set up a bank account for the business. It was just a regular checking account with both their names on it. Stu thought it would make it easier for them to pay for trip expenses and bank their profits. Over time, however, each had also used the account to pay for a variety of individual personal expenses such as tuition, rent and groceries. As of their last trip (a graduation blowout to the Bahamas), there was about $2,500 in the account.

After the frustrating meeting with Rush yesterday, Stu called a business person he knew named Illgotten Gaines. Stu knew Illgotten had made his money selling some shady products that Stu wasn’t sure were totally legal, but Stu just needed Illgotten’s money, not his character or products, so he was willing to overlook it. Illgotten, however, was so interested in the party bus idea that he demanded to be fully involved in the business. He didn’t want to just give money, he wanted to help make decisions. And, since he was putting up the lion’s share of the actual dollars, he wanted half of the profits. Moreover, he wanted to sell some of his shady products on the party bus.

Stu didn’t like the sound of that, but with Illgotten’s money, they could start with several buses and a real marketing plan. So, he agreed to let Illgotten in on the business with a 50% say in decisions (Rush and Stu would each have a 25% say) and a 50% interest in the profits (Rush and Stu would each have a 25% interest). In exchange, Illgotten handed Stu a cashier’s check for $500,000. Elated, Stu got back in his car, drove straight to the bank where he deposited the check into the shared bank account, and began to drive home. As he pulled away from the bank, he noticed it was 11:30am.

:: From Rush ::

Rush’s day was a touch more exciting than Stu’s.

The party bus idea spawned from a refurbished school bus Rush and Stu saw a few days ago in a used car lot in nearby Thomasville, NC. Eager to act, Rush withdrew $2,100 from the business bank account in what turned out to be only a few minutes after Stu’s deposit. Rush never noticed that the balance in the account had soared.

He then hurried over to that lot in Thomasville, arriving at noon and buying the bus about 45 minutes later. He paid $2,000 in cash from the bank account and financed the remaining $4,000 through a car loan. The bus was not in the best shape, but it was serviceable. Plus, they were going to make so much money that they would quickly be able to pay off the loan and upgrade the bus. You have to start somewhere!

After picking up a styrofoam cooler, some beer, and a couple bags of ice with the remaining $100 he withdrew from the business account, Rush called a friend, Minnie Vandriver. Minnie often drove rental vans for him on their for-profit college trips and Rush asked her to drive the party bus. Minnie, however, was reluctant to drive for Rush again. The last time she drove for Rush, she had to be held back from punching a student who complained about her driving. She didn’t trust her temper, but Rush promised her that this was the last time and that these students wouldn’t be as irritating as that last group. Hurting for cash, Minnie agreed, and then reminded Rush that, though she could drive a bus, she lacked the commercial driver’s license required to do so. “That’s just a technicality. Don’t worry about it,” Rush replied.

Minnie regretted her decision the moment she saw the bus. “This is a piece of @?#!, Rush! What are you thinking?” Too busy to respond, Rush just said, “It’s going to be fine. Just keep your phone on and answer all my calls.” Then he raced off, leaving Minnie with the keys.

Minnie boarded the bus and walked up and down the aisle to get a feel for it. She was again disappointed. There were couches along the sides and a few poles along the aisle that you could hold onto while you stood, but other than that, it was just an old school bus with a pungent mildew smell. While walking back towards the front of the bus, Minnie felt the floor sag beneath her. Looking down, she noticed a quarter-sized hole in the floor. It had rusty edges and, if you kneeled down and got your eye near it, you could see the pavement beneath the bus. “Gee whiz,” grumbled Minnie, “I sure hope this floor holds up.” She noticed some duct tape in the open glove compartment and taped over the hole.

About that time, her phone rang. It was Rush with her first two jobs – pick up 15 students just outside of campus and take them to a party a couple of miles away; then pick up 12 recent graduates at one bar and take them to another. She had no idea how Rush got those jobs lined up so quickly.

The first group of students were not impressed, to say the least. But they were eager to get to the party and appreciated the onboard beer. Minnie was certain that at least one student was too young to drink legally, but that wasn’t her problem. Her hands were full enough just trying to steer the giant bus in and out of small streets lined with parked cars.

She was not entirely successful. About halfway to the party, she scraped the side of a car. The owner was in the yard and screamed at her. Minnie stopped the bus and apologized to the owner, giving him Rush’s cell phone number to contact about the incident.

After dropping off the students, Minnie noticed that the bus had almost no gas left. Irritated, she realized that she and Rush had not talked about who would pay for the gas. She could tell Rush was intentionally declining her calls and reading but not responding to her texts, so she decided to get the gas and argue with Rush about it later. There was a gas station directly on her route to pick up the recent grads, but she really wanted to pick up some of her favorite craft beer, which is only sold at a gas station in the opposite direction. She had plenty of time, so she drove to the station that sold the craft beer.

Along the way, she noticed some friends walking out of a house party. She stopped to talk and learned they were heading to the craft beer gas station as well. Minnie said she'd drive them for $15, so they hopped on for the ride. They paid her $15 in cash, which Minnie happily put in her wallet with her personal money.

Unfortunately, she scraped another car as she pulled into the cramped parking lot of the craft brew gas station. Again, she apologized to the owner and gave her Rush’s cell phone number. She then pumped some gas, picked up her favorite craft brew, and headed back out to pick up the recent grads. Along the way, she guzzled down two of the craft beers. No one would notice she was driving while drinking since all of the bus windows had been tinted and there were already beer cans in the onboard trash cans.

Minnie arrived a minute or so early, so she checked her phone. She had several missed calls and texts from Rush. He had heard from the owner of the first car she scraped and was livid. Each of the messages said the same thing: she was fired and should immediately park the bus and leave the keys in the glove compartment. “Screw that,” she thought. “I’ll make this last run, keep the money, and then park the bus.” Rush must not have bothered to tell the recent grads that Minnie was no longer supposed to be driving, because they were clearly expecting her.

The recent graduates had started their party much earlier in the day. By the time they came out to the bus, they were loud and stumbling. One, in particular, was exceptionally rude and obnoxious to Minnie. Minnie told him to leave her alone if he knew what was good for him and, before it could go further, someone pulled the recent graduate to the back of the bus.

Fifteen minutes later, as Minnie pulled to a stop at their destination, she noticed the obnoxious student jumping up and down in the middle of the bus. Suddenly, there was a loud crunch and a scream. The obnoxious student’s foot had gone through the weak place in the floor where the quarter-sized hole was! Angry, the student jerked free from the clutches of his friends and, his leg bleeding, hobbled towards Minnie. Minnie had had enough of this guy and this stupid bus. She took two steps towards the student and knocked him out cold with one punch to his chin. To everyone’s amazement, she then calmly wrote out Rush’s cell phone number on a napkin, laid it on the knocked out student’s chest, tossed the bus keys onto the driver’s seat, and walked away.

By this time, the student Minnie punched had woken up. The recent grads all looked at one another, shrugged their shoulders, and filed out of the bus and into the bar. Just as the last student entered the bar, the bus burst into flames. By the time the Greensboro Fire Department got there, the fire had spread to three nearby cars, one of which was a $2 million Bugatti. It turns out that Minnie had parked right next to an outdoor smoking area and, back at the craft brew station, forgotten to put the gas cap back on. The fumes escaping from the open gas tank were lit by a smoldering cigarette butt left in an ashtray.

As Minnie strolled down the sidewalk, clueless about the fire, she ordered an Uber. On the way home, the driver was playing an NPR article about how Russia and Japan are still technically at war, never having signed a peace treaty after World War II (this is true, but don't Google it right now!). Minnie, a Japanese immigrant and still a citizen of that country, was intrigued, particularly since Rush is a Russian immigrant who is also still a citizen of that country. They were at war over more than just the bus!

:: Their Questions ::

Here are the questions on which Rush and Stu want your advice. They know it's a tangled web, so they're keen to have you explain and apply all the possible law that is relevant.

1. What kind of small business organization might Stu have set up and what are the differences between the possible types?
2. Is Illgotten a part of the business? In the event that he is, can he really have 50% of the decision making power and 50% of the profits? Who owns what’s left of the bus and who’s responsible for paying back the car loan?
3. What is Minnie’s relationship with the business and what authority did that relationship give Minnie? Did the nature of that authority change at all over the course of the evening? What duties did Minnie’s relationship with the business create between her and Rush? Did she or Rush fail to live up to any of these duties?
4. Who is responsible for the things that happened before Rush messaged Minnie that she was fired: Minnie’s driving the bus without a proper license, the underage drinking on the bus, the car Minnie scraped during the first trip, the car she scraped when she got gas and beer, and Minnie’s drinking while driving?
5. Who is responsible for the things that happened after Rush messaged Minnie that she was fired: the obnoxious person’s leg injuries, Minnie’s subsequent punching of that person, and the burned up Bugatti?

Answer 1

Part 1 Answer:

Stu and Rush both have a very good idea of becoming entrepreneurs by doing Party bus Business and earn big profits in short span of time. But the business was a flop because there was not planned approach to it and most importantly the business partners had different opinions on how to start the business.

Both of them could have set up a small successful business in many different ways:

1) A proper step by step planning before starting the business could have helped them in a great way.

2) Finding out every aspect of the business in terms of financial, marketing, production and organizing them in an effective manner.

3) To decide who will lead which part of the business. E.g. Stu can handle the financial part where as Rush can lead the way through the real business part.

4) To control the business considering every aspect of it starting from investing the money wisely, satisfying the customers, obey every laws and rules to run the business smoothly, respect feelings of all the business partners and listen to their opinions etc.

Part 2 answer:

No Illgotten is not a part of the Party Bus business that Rush and Stu were planning to start. Even though Illgotten was very much interested to invest a huge share of money to the Party bus idea that Stu has explained to them and handed a check of $500,000 to him, but he could not be a part of the business because Rush has bought a old school bus without discussing anything with Stu.

As we know that Rush and Stu had only $2500 left on their joint account to start the business up, they had to rely completely on Illgotten’s money to have a good start with several buses and a real marketing plan, hence Illgotten could have a 50% decision making power and Profit provided it was agreed by all three of them.

As the business is jointly started by Stu and Rush, hence both of them will be responsible for paying back the car loan even though Stu was completely unaware that Rush has bought the old school bus and started the business with Minnie without his consent.

Part 3 Answer:

Minnie has appointed as the bus driver in the Rush and Stu’s party bus business which gives her the authority to have power over all the passengers (in this case the students who needs to attend different parties) and enforce all the rules and regulations that will ensure passengers orderly and safety.

As Owner and Driver of the bus, both Rush and Minnie had responsibilities to be transparent towards each other which they could not meet. The way it was Rushes duty to inform Minnie about the bus’s poor condition, low gas, and also not to allow her to drive the bus without a commercial license, the same way it was Minnie’s duty to obey the laws while driving, not to drink and drive, not to use the bus for any personal gain, not to hit other vehicles while driving and take utmost care of the passengers and careful not to do any harm to them either physically or mentally.

But Minnie and Rush both were failed to live up to the norms of the bus Driver and Owner respectively. They failed to do so in many ways. Some of them are explained below:

a) Minnie allowed the students to have on board beer one of whom was below the legal age to drink but she ignored the same.

b) Minnie was driving the bus without having the commercial driver license and Rush was very casual about it and did not bother. In this case both were violating the rules of law.

c) Minnie was drinking and driving and Rush was too eager to earn quick profit which is why he did not care what Minnie does while driving the bus.

d) As the owner it was Rush’s duty to hand over a full tank Bus to Minnie. But he did not do that and when Minnie called him to inform about the situation, he avoided her calls and messages.

e) Out of anger Minnie parked the Bus right next to an outdoor smoking area and did not notice that the forgotten to put the gas cap back on after filling up the tank at the station which led to bus burst into flames.