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Corporations/Professional Responsibility

Alice is a director and Bob is a director and the President of Sportco, Inc. (SI), a sporting goods company. SI owns several retail stores. Larry, an attorney, has performed legal work for SI for 10 years. Recently, Larry and Carole were made directors of SI. SI has a seven-person board of directors. Prior to becoming a SI director, Carole had entered into a valid written contract with SI to sell a parcel of land to SI for $500,000. SI planned to build a retail store on the parcel. After becoming a director, Carole learned confidentially that her parcel of land would appreciate in value if she held it for a few years because it was located next to a planned mall development. At dinner at Larry’s home, Carole told Larry about the planned mall development. Carole asked for, and obtained, Larry’s legal opinion about getting out of her contract with SI. Later, based on Larry’s suggestions, Carole asked Bob to have SI release her from the contract. She did not explain, nor did Bob inquire about, the reason for her request. Bob then orally released Carole from her contract with SI. The next regular SI board meeting was attended only by Bob, Alice, and Larry. They passed a resolution to ratify Bob’s oral release of Carole from her contract with SI. Larry never disclosed what Carole had told him about the proposed mall development. Three years later, Carole sold her parcel of land for $850,000 to DevelopCo, which then resold it for $1 million to SI.

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