MGMT-520 Lgl, Poli, Ethcl Dimns of Busn - Week 8 Final - Devry

TCO D Short Answer Question and Facts for Page 1 Questions:

A well known pharmaceutical company, Robins & Robins, is working through a public scandal. Three popular medications that they sell over the counter have been determined to be tainted with small particles of plastic explosive. The plastic explosives came from a Robins & Robins supplier named Casings, Inc., that supplies the capsule casings for the medication pills. Casings, Inc., also sells shell casings for ammunition. Over $8 million in inventory is impacted. The inventory is located throughout the Western United States, and it is possible that it has also made its way into parts of Canada.

Last fall, the FDA had promulgated an administrative proposed rule that would have required all pharmaceutical companies that sold over-the-counter medications to incorporate a special tracking bar code (i.e., UPC bars) on their packaging to ensure that recalls could be done with very little trouble. The bar codes cost about 35 cents per package.

Robins & Robins lobbied hard against this rule and managed to get it stopped in the public comments period. They utilized multiple arguments, including the cost (which would be passed on to consumers). They also raised “privacy” concerns, which they discussed simply to get public interest groups upset. (One of the drugs impacted is used for assisting with alcoholism treatment – specifically for withdrawal symptoms – and many alcoholics were afraid their use of the drug could be tracked back to them.) Robins & Robins argued that people would be concerned about purchasing the medication with a tracking mechanism included with the packaging and managed to get enough public interest groups against the rule. The FDA decided not to impose the rule.

Robins & Robins' contract with Casings, Inc., states, in section 14 B.2.a., "The remedy for defects in supplies shall be limited to the cost of the parts supplied." Casings, Inc., had negotiated that clause into the contract after a lawsuit from a person who was shot by a gun resulted in a partial judgment against Casings for contributory negligence.

Robins & Robins sues Casings, Inc., for indemnification from suits by injured victims from the medication, for the cost of the capsule shells, for attorney's fees, and for punitive damages. List any defenses Casings, Inc., would have under contract theory ONLY. (short answer question)

2. TCO B. The FDA decides to require all pharmaceutical companies to immediately implement the tracking bars (UPC) as a result of the disaster with Robins & Robins. Robins & Robins decides not to challenge this and begins the process of adding them to all of their products. However, McFadden, Inc., a New York pharmaceutical company, realizes that this new requirement is going to bankrupt them immediately. McFadden did not participate in the original public comment period. However, this rule is different from the rule that went through that public comment period in that it specifically names four companies as being impacted: Robins & Robins, McFadden, Inc., Bayer, and Johnson & Johnson. On what bases can McFadden challenge this requirement imposed by the FDA, and can they be successful? Provide at least two bases under the Administrative Procedures Act and justify your answer. (Points: 30)

3. TCO C. Robins & Robins immediately issued a massive recall for the tainted medication upon learning of the situation. Despite the recall, 1,400 children and 350 adults have been hospitalized after becoming very ill upon taking the tainted medication. Each of them had failed to note the recall after having already purchased the medication. It is quickly determined that they will need liver transplants and many of them are on a waiting list. During the wait, to date, 12 children have died. Their families are considering suing for both 402A and negligence. The attorneys stated that but for the lobbying efforts, the recall process would have been automated and the people would not have gotten sick or died.

You are the attorney for one of the dead children’s family. List the causes of action (if any) you would file against Robins & Robins, the FDA, and the bribed FDA member. List the elements of the causes of action, and set forth the facts that you have that would support a lawsuit against each of the three named defendants. State any defenses any of the three would have. Analyze the success of the defenses.

TCO A. It is discovered that Robins & Robins knew about the tainted medication 2 months earlier than they announced the recall. They hid it and, in fact, sent out contract buyers to try to buy up all of the medication off the shelves. Their “fake” recall failed. Using the Laura Nash method of analyzing ethical dilemmas, analyze the ethical dilemma faced by the CEO of Robins & Robins for the fact that they saved 35 cents/package and are now in the middle of a major, life-threatening recall. Analyze their “fake” recall as well. Show all of the steps of the model and give a recommendation to the CEO of what to do now that the deaths are escalating. What is the “right” thing for the CEO to do in this case? Did the model help you come to this conclusion, or did you use some other method? Explain.

5. TCO I. A Canadian citizen whose son (resident of Ontario) died from the medication sues Robins & Robins in a California court. The court there is well known for being victim friendly and providing huge payouts to victim families. In Canada, the cap on nonpecuniary damages is around $300,000. Punitive damages in Canada are rarely allowed.  Robins & Robins moves to dismiss the case under the theory of sovereign immunity. Will Robins & Robins win this motion using this theory? Why or why not? (short answer question) (Points: 15)

Page 2

Question 2 - 2 essays, 30 points each.

TCO E and H. A private high school hires a new Superintendent, George Forester. The school is owned by a local Lutheran Church and is run by a board of directors chosen by church members. Supt. Forester shows up for his first day of work, and sends a memo via intercompany mail to all teachers:

Dear Staff: 

There is a new Sheriff in town – and it is me. As your new leader, I am implementing  a dress code that includes no slacks or shorts for women and no earrings for male teachers.  Men shall all be clean shaven.  Violators will be docked one week’s pay; 2nd offenses will result in a one week suspension without pay and 3rd offenses,  dismissal. All teachers will address me as “Pastor Forester” or “Amen, Pastor Forester.”  Teachers who fail to abide by these dictates will be docked two points on their annual evaluations.  Amen, Pastor Forester.”

That day, one teacher, Anna Seenandfeld  had a birthday party at the school, having just turned 40. Her frown at the party showed everyone she was not happy about her party. Pastor Forestor had bought black balloons for her and joked with the other teachers about the "over the hill" teacher. The next day, Pastor Forester goes into the teacher’s lounge and calls all non-tenured teachers into his office.  He tells them that he has assigned himself to be their mentoring teacher and that effectively immediately they will be evaluated weekly.   One teacher, Anna Seenandfelt, begins to cry.  Another teacher, Andy DuFrane, rolls his eyes and says, "God! These menopausal women should not be allowed around our students."  Pastor Forester goes to Anna and hugs her, offering her a tissue. He pats her gently on the behind and whispers, "Act your age, please."  When she pulls forcefully away from him, Pastor Forester assigns her to work Saturday detention for the next three weeks to “toughen her up.” 

A pregnant P.E. teacher, Lisa Ready,  is reassigned by Pastor Forester to a math position (even though she has only three credits in math) because Pastor Forester says this position is “less strenuous for a pregnant lady.” 

On the 3rd week of detention duty, a student stabs Anna, wounding her severely.  Although she survives and recovers, she loses one kidney as a result of the injury.  The school doesn't offer health insurance, and Anna incurs over $55,000 for her hospital bills; the student (and his family) is insolvent.   

One month later, a parent complains about his student being unable to succeed in his math course due to the teacher’s (Lisa’s)  incompetence, Pastor Forester fires Lisa Ready for her inability to perform her job.  Pastor Forester tells Lisa in front of her class of students, and then walks her out of the building; 2 hours later, Lisa goes into premature labor and delivers her first son, who has severe health issues as a result of being premature. The baby’s doctor states the cause of early labor as being from “intense duress and undue stress.” Lisa's husband's health insurance covers all of the costs of the birth and the baby's care.

Pastor Forester is really not a Pastor. His real name is Jerry Birches, who is a parolee with convictions for child molestation. His parole agreement prohibits him being  closer than 1000 feet to any school.  In order to cut costs, the school had stopped doing background checks on new employees, and this slipped through the cracks. This comes to the attention of the school board, and the President of the Board of Directors immediately fires Pastor “Jerry Birches” Forester and notifies his parole officer of the violations.  Pastor Forester claims the board knew about his background, because one member of the board (his aunt Theresa) knew the truth. 

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1. TCO E. Anna and Lisa both sue the school and Pastor Forester for discrimination and further, for liability for their injuries (the stabbing damages and the damages to Lisa’s son’s health.) You are one of the board of directors and need to analyze the liability of the school. Limit your answer to the SCHOOL'S liability only.  

Write a brief memo as to whether Pastor Forester committed  illegal or discriminatory practices in his brief tenure described in this situation. Then, analyze the potential liability of the school. Discuss agency liability, as well as any employment law aspects.  Explain whether you feel that the two injured teachers have cases for recovery against the school.   Discuss whether the school being a religious, private school has any bearing on or protection from liability. Include all defenses available to the school.

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2. TCO H and E. In the discovery portion of the case, it is determined that Pastor Forester is really not a Pastor. His real name is Jerry Birches, who is a parolee with convictions for child molestation. His parole agreement prohibits him being  closer than 1000 feet to any school.  In order to cut costs, the school had stopped doing background checks on new employees, and this slipped through the cracks.  The President of the Board of Directors immediately fires Pastor “Jerry Birches” Forester and notifies his parole officer of the violations.  Pastor Forester claims the board knew about his background, because one member of the board (his aunt Theresa) knew the truth.  He claims her knowledge should be imputed to the entire board of directors. He then sues the school for firing him for being a convicted felon. He claims that is illegal, and he publicly attacks the church for their "less than Christian" behavior in firing him.

The board immediately convenes to discuss “damage control.”  They know you took a Law and Ethics course recently and ask you to write a news release to the local newspaper, explaining the situation.  Using ethical and legal considerations (including the fact you are in the middle of multiple lawsuits), write the brief news release. Then, explain why you wrote it the way you did. (Points: 30)

Page 3

Page 3 - Two essays at 30 points each.

TCOs F & G.   Laura Etheridge and Rita O’Donnell, the CEO and Creative Director of Clean Clothes (a Texas based lesbian women’s clothing line) brainstormed together  and came up with a tagline for their new slacks line:  “Masculine Attitude, Feminine Fit.”  They market the product on YouTube, Twitter, and Face Book showcasing their “Funky Femme”  slacks collection, made from a material which resembles alpaca wool, but is actually organic cotton.  To further the advertising impact, the team uses an Ellen DeGeneres look-alike in the YouTube video, where the model does the “Ellen dance” – and mouths “love the pants” as she points to her legs and then walks off leading an Alpaca by a halter.  Within months, the slacks are a huge hit in the lesbian community.  Clean Clothes sends a letter to their attorney asking him to trademark their tagline, and move forward without another thought about it.

Meanwhile, Men2Wimmin, a  French company with a branch in New York,  has established a huge following in the gay and cross-dressing community.  It has used the tagline “Feminine Attitude, Masculine Fit” for many years to advertise their drag queen dress collection for men on billboards, the internet and television. 

Ellen DeGeneres learns that her likeness is being used to advertise for  Clean Clothes.  She watches the ad and is incensed.  She spends the next week on her show bashing the Clean Clothes company, and states that  she would never endorse the use of Alpaca wool for clothing, as she feels shearing them is cruel. (She doesn’t catch that the pants are really made from cotton.) Further, she says she feels that lesbian women should not need to shop at special stores, although she admits she often shops in the men’s department at Joseph A. Bank (JOSB).  Her comments cause a precipitous drop in sales at both Joseph A. Bank (JOSB) and Clean Clothes. Using the above fact pattern, analyze fully, the following questions:

1.  TCO F. Ellen DeGeneres sues Clean Clothes for the use of a look-alike model for the slacks advertisement. She includes  Lanham Act, misappropriation, and "Right of Publicity" claims in her complaint.  Clean Clothes countersues for product disparagement.  Joseph A. Bank (JOSB) sues Ellen for impacting their men’s clothing sales with her unsolicited comment. What facts will Ellen use to support her cases and why will those support her cases? What defenses will Ellen have against Clean Clothes  and JOSB's countersuits? Do you think any of the 3 will win their cases? (Why or why not.)

2. TCO G. It is discovered that two weeks before the Ellen show, she had sold $2 million in JOSB stock (at a gain of about $2,200).  The morning after her show, Ellen sold JOSB short (which means she was betting the stock price would go down), and she made another $210,000 in the next week on that trade.  The swing in the price was not directly tied to her comments, but was suspected to be a result of a recall JOSB made on their entire line of men's black and brown dress slacks when it was discovered that they had been sewn together with white thread.  Ellen's previous trading activity shows that she made it a normal practice to “vigorously trade” the stock of any company with which she did business. A review of her trading activity for the past year showed that she had bought and sold JOSB stock 25 different times, including short sales like this one.  Her overall trading for JOSB stock for the last 12 months was a net loss of $82,000.00.   Do you think the SEC will file anything against Ellen for her sales of JOSB? Is there any cause to do so? Analyze her transactions with respect to insider trading activity (based on what you know) – and whether she should be concerned. Is her prior trading activity a defense? Should Ellen have avoided discussing JOSB publicly on her show since she typically trades their stock? (Points: 30)