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MPG Solar v Alley Electricity
MPG Solar v SolElectric, Inc.
The Scenario
Jada and Claire run competing start-up companies in California. Both companies sell solar-generated electricity to wholesale utility buyers, and each has a retail division that sells and installs solar panels for end-use residential consumers. Last year, each company reported gross revenues of more than $600,000.
Both companies rent tracts of land in the massive Death Valley National Park in California, on which they have installed their solar panels to generate the electricity they sell. Each also has retail offices and storage facilities located throughout the state, from which they sell solar panels to consumers. Both companies have entered into long-term purchasing agreements with solar panel wholesale vendors and each receives investments and credits from different private and government entities. Notably, MPG Solar is a creditor for both companies.
Jada is a sole proprietor who operates her business as “Alley Electricity.” Jada made a fictitious name filing (a “DBA” – “doing business as”) with the local authorities. She signed contracts with vendors, numerous commercial leases for her storage and distribution facilities, and promissory notes (loans) with her bank, all for the purpose of carrying on her business. Alley Electricity owes MPG Solar $120,000.
Claire incorporated her business in California as SolElectric, Inc. She is the sole shareholder, director, and officer of SolElectric, Inc. When she signs contracts with vendors, leases with landlords, and promissory notes with the bank, she does so in her capacity as president of SolElectric, Inc., and all of the documents so indicate her representative capacity. SolElectric complies with all corporate formalities required of C-Corporations and Claire maintains all corporate funds and accounts separate from her personal funds and accounts. SolElectric owes MPG Solar $160,000.
Due to the COVID-19 pandemic and the California wildfires that ravaged the west, both Alley Electricity and SolElectric have experienced astronomical hits to their revenues. Both companies have had to lay off more than a third of their sales and installation workforce and are on track to miss out on installing enough panels in the next quarter of the year to remain solvent. Both have defaulted on their payments to their creditors, namely MPG Solar, for the last six months. MPG Solar is pursuing legal action against each company to recover on these defaulted loans.
Instructions and Advice
Analyze the scenario using the FIRAC model to determine what liability, if any, Jada and/or Claire may have for their respective company’s debt.
Before you begin writing your paper, you may want to review the information in the Business Entities and Corporations modules relating to the liability of owners, as this paper requires you to essentially conduct two FIRAC analyses within one paper as you look at Jada’s potential personal liability as a sole proprietor and Claire’s potential liability for her company’s debts as the sole shareholder of her company.
Combine your analysis into a single FIRAC:
When you identify the legal ISSUE, you may have two (one for Jada and one for Claire).
Similarly, discuss the pertinent RULES together, but as you move into the APPLICATION section of your paper, make sure you apply the specific rules appropriate to Jada’s facts in discussing her potential liability and similarly, the specific rules appropriate to Claire’s facts as you analyze her potential liability.
You should then write a brief overall conclusion that in 1-2 sentences addresses the liability of both, possibly commenting on which form (if any) offers its owners greater protection from personal liability
NO OUTSIDE SOURCES/CITATIONS
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