Author Question: Carla agrees to try to sell Frank's prize dog Spike for him. Carla does this as a favor to Frank ... (Read 79 times)

leo leo · **on:** Jun 24, 2018

Carla agrees to try to sell Frank's prize dog Spike for him. Carla does this as a favor to Frank because she knows many professional dog breeders. Carla may be best described as:
a. a universal agent b. a subagent
c. an agent who has an agency coupled with an interest d. a special agent
e. none of the other choices

Question 2

Ethical Conduct. Unable to pay more than 1.2 billion in debt, Big Rivers Electric Corp filed a petition to declare bankruptcy in a federal bankruptcy court in September 1996. Big Rivers' creditors included Bank of New York (BONY), Chase Manhattan Bank, Mapco Equities, and others. The court appointed J. Baxter Schilling to work as a disinterested (neutral) party with Big Rivers and the creditors to resolve their disputes and set an hourly fee as Schilling's compensation. Schilling told Chase, BONY, and Mapco that he wanted them to pay him an additional percentage fee based on the success he attained in finding new value to pay Big Rivers' debts. Without such a deal, he told them, he would not perform his mediation duties. Chase agreed; the others disputed the deal, but no one told the court. In October 1998, Schilling asked the court for nearly 4.5 million in compensation, including the hourly fees, which totaled about 531,000, and the percentage fees. Big Rivers and others asked the court to deny Schilling any fees on the basis that he had improperly negotiated secret side agreements. How did Schilling violate his duties as a disinterested party? Should he be denied compensation? Why or why not?

mmj22343 · **Reply #1 on:** Jun 24, 2018

Answer to Question 1

e

Answer to Question 2

Ethical conduct
The bankruptcy court held that Schilling was not entitled to any fees because he was not a disinterested party: The moment that Schilling approached three of Big Rivers' largest creditors and broached the subject of his compensation he was no longer a disinterested party. The court also found that Schilling's failure to disclose the fee negotiations was a violation of the law, and ordered him to remit to Big Rivers the amount that he had already been paid. Schilling appealed to the U.S. Court of Appeals for the Sixth Circuit, which affirmed the bankruptcy court's order. The appellate court held that to be disinterested means a person in Schilling's position may not have a material adverse interest to any party to the bankruptcy for any reason. An agreement with a single creditor that links compensation to the creditor's recovery qualifies as such an interest because it creates the risk that a person in Schilling's position will favor one creditor at the expense of other creditors. Opportunities abound, moreover, for persons paid in this manner to benefit selected creditor ~~at the expense of others. That Schilling reached the agreement in secret only makes matters worse.~~