1. Is the United States correct in its assertion? Why or
ASSIGNMENT1.An Arkansas statute provides that if any foreign corporation authorized to
do business in the State should remove to the Federal court any suit brought against it by an
Arkansas citizen or initiate any suit in the Federal court against a local citizen, without the
consent of the other party, Arkansas’s Secretary of State should revoke all authority of the
corporation to do business in the State. The Burke Construction Company, a Missouri
corporation authorized to do business in Arkansas, has brought a suit in Federal court and
has removed to a Federal court a State suit brought against it. Burke now seeks to enjoin the
Secretary of State from revoking its authority to do business in Arkansas. Should the
injunction be issued? Explain.2. Little Switzerland Brewing Company was incorporated on
January 28. On February 18, Ellison and Oxley were made directors of the company after
they purchased some stock. Then on September 25, Ellison and Oxley signed stock
subscription agreements to purchase five thousand shares each. Under the agreement, they
both issued a note that indicated that they would pay for the stock “at their discretion.” Two
years later in March, the board of directors passed a resolution canceling the stock
subscription agreements of Ellison and Oxley. The creditors of Little Switzerland brought
suit against Ellison and Oxley to recover the money owed under the subscription
agreements. Are Ellison and Oxley liable? Why or why not?3. Oahe Enterprises was formed
by the efforts of Emmick, who acted as a promoter and contributed shares of Colonial
Manors, Inc. (CM), stock in exchange for stock in Oahe. The CM stock had been valued by
CM’s directors for internal stock option purposes at $19 per share. One month prior to
Emmick’s incorporation of Oahe Enterprises, however, CM’s board reduced the stock value
to $9.50 per share. Although Emmick knew of this reduction before the meeting to form
Oahe Enterprises, he did not disclose this information to the Morrises, the other
shareholders of the new corporation. Can Oahe Enterprises recover the shortfall? Explain.4.
Healthwin-Midtown Convalescent Hospital, Inc. (Health-win), was incorporated in
California for the purpose of operating a health-care facility. For three years thereafter, it
participated as a provider of services under the Federal Medicare Act and received periodic
payments from the U.S. Department of Health, Education and Welfare. Undisputed audits
revealed that a series of overpayments had been made to Healthwin. The United States
brought an action to recover this sum from the defendants, Healthwin and Israel Zide. Zide
was a member of the board of directors of Healthwin, the administrator of its health-care
facility, its president, and owner of 50 percent of its stock. Only Zide could sign the
corporation’s checks without prior approval of another corporate officer. Board meetings

2. were not regularly held. In addition, Zide had a 50 percent interest in a partnership that
owned both the realty in which Healthwin’s health-care facility was located and the
furnishings used at that facility. Healthwin consistently had outstanding liabilities in excess
of $150,000, and its initial capitalization was only $10,000. Zide exercised control over
Healthwin, causing its finances to become inextricably intertwined with both his personal
finances and his other business holdings. The United States contends that the corporate veil
should be pierced and that Zide should be held personally liable for the Medicare
overpayments made to Healthwin. Is the United States correct in its assertion? Why or why
not?5. MPL Leasing Corporation is a California corporation that provides financing plans to
dealers of Saxon Business Products. MPL invited Jay Johnson, a Saxon dealer in Alabama, to
attend a sales seminar in Atlanta. MPL and Johnson entered into an agreement under which
Johnson was to lease Saxon copiers with an option to buy. MPL shipped the equipment into
Alabama and filed a financing statement with the Secretary of State. When Johnson became
delinquent with his payments to MPL, MPL brought an action against Johnson in an
Alabama court. Johnson moved to dismiss the action, claiming that MPL was not qualified to
conduct business in Alabama and was thus barred from enforcing its con- tract with
Johnson in an Alabama court. Alabama law prevents foreign corporations not qualified to do
business in Alabama from enforcing their intrastate contracts in the Alabama court system.
Is Johnson correct? Explain.