Business Associations & Relationships on the Future Bar Exam: A Virtual Symposium (Part II)

Thanks to Joan Heminway for kicking off our virtual symposium, here, where some of us will take a look at the recently released National Conference of Bar Examiners (NCBE) content summaries of the material planned for future bar exams in the Content Scope Outlines .  These comments relate to the "Business Associations & Relationships” portion. 

As a general matter, I have been growing increasingly skeptical of the bar exam and its role and purpose for the profession.  I very much believe we need to facilitate a process to help ensure clients are served by competent lawyers who have the skills necessary to serve clients.  However, I am more and more convinced that bar exam does an incomplete job of testing readiness for practice, potentially ingrains some bad practices, and continues to inappropriately limit access to the profession for women and minorities. Those issues, though, are for another time.   

Following are my initial thoughts on the Business Associations and Relationships portion of the Outlines:

In the area of “Partnerships,” under “Nature of general partnerships” and “Formation, the outline states: “This topic includes the de facto treatment of improperly created incorporated entities as general partnerships.”  Here, in place of “incorporated entities” I would recommend replacing it with “corporations” or “limited liability entities.”  If they intend to limit the review to corporations, which would not be surprising given the way the “de facto corporation doctrine” is often taught, then say that. If it means improperly formed limited liability entities (intending to include LLCs, LPs or LLPs) then say that.  An “incorporated entity” is necessarily a corporation.

For the section on “Corporations and Limited Liability Companies,” I agree with Joan that the corporation concept of “articles of incorporation” is too narrow, unless they intend to pick a state or model law that uses that phrase (and if so, please tell us!).  Adding “formation document” or “creation document” could work, though most casebooks include something “charter or articles or certificate of incorporation.” 

For LLCs, I think it should say “Operating or member agreements” (not members, though maybe “members’ agreements”). 

Items “IX. Piercing the Corporate Veil” should say, “Piercing the Entity Veil” given that this section does not say whether it’s just corporations (the general section is corporations and LLCs).  A literal reading of this would suggest they only intend to test it as to corporations, but given the way courts and other commentators treat this concept, such an assumption would be (unfortunately) flawed. There is an “asterisk” by this area, which means exam takers will be expected” to know the details of the relevant doctrine without consulting legal resources.”  Here, too, it would be important to know the jurisdiction because veil piercing law is not uniform state to state, and this is even more true of LLCs than it is of corporations. The basics are similar, but states vary.  Texas, for example, requires “actual fraud” for contract-type veil piecing claims.  And veil piercing is different for LLCs, too. Compare, for example, Minnesota law and the ULLCA. 

Under “management and control” of corporations, I don’t love that they test quorum, because it’s my understanding that, in years past, they have tested on some default rules of quorum (though I have not been able to verify that). Quorum should always be checked by looking at the articles/certificate/charter and bylaws AND buy checking the state statute to make sure that the chosen path is permissible under the statute.  There is no “asterisk” by this area, which means exam takers should “have generality familiarity with the topics.” So, it’s possible the bar examiners are approaching this by testing quorum where they would provide the relevant statute and or corporate documents (or specifics would not matter for the call of the question).  If so, great, but I think it’s worth raising to ensure that’s the case.

Finally, fiduciary duties may be tested for corporations and LLC.  These, too, are general, so hopefully exam takers will be able to respond with general knowledge and supplemental information in the exam. Given the divergent nature of Delaware LLC law in this area, it would seem worthwhile to give some guidance as to the source of law, exam takers should be using in their responses.  I will, again, second Joan’s point: “I favor letting examinees know which sets of rules and norms apply to their exam responses.”