MGMT 520 FINAL Week 8 Legal, Political, Ethical Dimensions of Business - Q

MGMT 520 FINAL EXAM Week 8

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(TCOs G and I) In the 1930s, after immigrating to the U.S. from a region in central Europe
threatened by the onset of World War II, Luigi and Maria Spongee opened a bakery in Chicago.
They specialized in snack cakes. Spongee Cup Cakes became so popular in the area that the
family stopped being actual bakers and became manufacturers/ food processors of the snack
cakes on a regional basis. After returning from the war, their son Steve completed college and
began working in television advertising in the early 1950s. Steve approached his parents and his
older brother Tom, who was now running the business, about the possibilities of advertising and
“going national.” The family liked the idea and began advertising and expanding. In addition, to
fuel the expansion, they offered retailers price discounts and other incentives if they prominently
positioned the displays set-up by Spongee rack jobbers. By the 1960s, they were a national
brand, controlling over 80 percent of the snack food industry.
In the 1970s, with the advent of the hippie counter-culture and the back-to-Earth movement, a
new competitor made an impact on the Spongee business. The company, Herbal Snacks, began
advertising that their products only used natural ingredients. They even began running a
commercial in which a mother and child compared their Herbal Snacks with a lampooned
product named “Cup Cake Spungies,” stating that it tasted like poison and dog food! Very-LargeTom, a counter-culture pop star with a late night UHF and cable show, joined in on the
controversy created by the commercial and stated that he did not understand how people, “could
buy such poisonous dog food and serve it to their children as snacks!” Market studies showed
that Spongee Cup Cakes sales suffered. As a result, Spongee began a more aggressive shelf space
and display marketing campaign to combat Herbal Snacks’s television advertising. Spongee’s
marketing efforts were successful. By also offering volume discount incentives, they had
prevailed upon retailers in their traditional East Coast and Midwest markets to prominently
display their products. To counter this strategy, Herbal Snacks offered a deep discount to
TargetMart, a Southwest and West Coast discount chain, in exchange for an agreement to
exclusively sell only their snack foods.
In reality, Spongee Cup Cakes used only FDA approved ingredients and preservatives and were
made in American plants that always passed inspections. In contrast, although Herbal Snacks’s
pilot plant was in Montana, it had subcontracted the bulk of its production to a plant in Canada.

As a result, to maintain a level of quality, Herbal Snacks used the maximum amount of
preservatives allowed under Canadian law for the imported product. The level was so high,
reactions to the food were often reported. The levels were higher than those allowed by FDA
regulations, but allowed per an agricultural import/export treaty between the United States and
Canada. Several people who ate these Herbal Snacks required emergency room visits. A child in
Idaho, with food allergy problems, even died. Her parents served her the snack, relying on the
advertising, not knowing that some of the natural ingredients used in the Canadian-made product
were dangerous to her.
The Spongee family seeks your advice and opinion regarding:
(1) Herbal Snacks’s advertising campaign.
(2) The marketing and distribution campaigns both companies have engaged in.
(3) The liability issues Herbal Snacks faces regarding their use of food manufactured outside of
the United States. (Points : 30)

1. (TCOs A, E, F) John and Janet Fonda, siblings and actors, decide to retire after years on
the road. They remember a town in New Jersey they were familiar with from their travels.
From the internet, they learn of a farm a few miles outside of town that seems ideal.
There is a great house and lots of land. The Fondas wish to convert the farm to a
restaurant-hotel with a dinner theater. They contact the realtor by phone, and make
arrangements to buy the parcel. The Fondas plan on travelling to New Jersey prior to the
closing to look things over, but are unable to do so due to their touring schedule. The
realtor, whose commission is technically paid by the proceeds to the seller, and who has a
listing contract with the seller, advises the Fondas that she will handle everything. New
Jersey custom, law, and practice does not require a purchaser of land to have an attorney.
The realtor does only the bare minimum needed for title to transfer to the Fondas. On
their behalf, she only has a minimal title search and minimal inspections done, and she
obtains a minimal coverage title insurance policy. As the area near the farm was once
occupied by a large chemical plant, when the realtor represents local purchasers, as a
precaution, she advises the buyers to get the maximum possible title search and title
insurance, and to get all possible inspections done. It is her regular practice to caution
local purchasers who she represents about the former chemical plant.
After closing on the property, the Fondas learn of the old chemical plant. They seek your
advice as to their liability and the liability of any other parties. (Points : 30)


2. (TCOs A, E, F) John, Lionel, and Evelyn Harrymore, siblings and actors, decide to retire
after years on the road. They remember a town in Illinois they were familiar with from
their travels. From the internet, they learn of a farm a few miles outside of town that
seems ideal. There is a great house and lots of land. The Harrymores wish to convert the
farm to a restaurant-hotel with a dinner theater. They contact the realtor by phone, and
make arrangements to buy the parcel. The Harrymores plan on travelling to Illinois prior
to the closing to look things over, but are unable to do so due to their touring schedule.
The realtor, whose commission is technically paid by the proceeds to the seller, and who
has a listing contract with the seller, advises the Harrymores that she will handle
everything. Illinois custom, law, and practice does not require a purchaser of land to have
an attorney. The realtor does only the bare minimum needed for title to transfer to the
Harrymores. On their behalf, she only has a minimal title search and minimal inspections
done, and she obtains a minimal coverage title insurance policy. As the area near the farm
was once occupied by a large chemical plant, when the realtor represents local
purchasers, as a precaution, she advises the buyers to get the maximum possible title
search and title insurance, and to get all possible inspections done. It is her regular
practice to caution local purchasers who she represents about the former chemical plant.
After closing on the property, the Harrymores learn of the old chemical plant. They seek
your advice as to their liability and the liability of any other parties. (Points: 30)


3. (TCO C) Three professors from Keller’s New Jersey campus, Robinson, Romney, and
Obama, decide to visit ABC Go-kart facility together in Pennsylvania. This decision is
made after a lengthy faculty brunch, at which unlimited alcoholic mimosas were served.
ABC Go-kart advertises at the college’s various campuses and, in fact, the professors use
their faculty discount at the facility. At the facility signs are posted everywhere in bold:
“BY PARTICIPATING IN Go-KART RACING, YOU VOLUNTARILY ASSUME THE
RISK OF ANY DEATH OR INJURY THAT MAY RESULT. “ Additionally, the
professors hurriedly sign a contract, which states: “YOU ARE GIVING UP ALL LEGAL
RIGHTS”; “ABC WILL NOT BE HELD LIABLE FOR ANY NEGLIGENCE
RESULTING IN YOUR INJURY OR DEATH”; and “THE PARTIES AGREE THAT
ANY POSSIBLE LEGAL ACTION WILL BE HEARD IN THE STATE OF
PENNSYLVANIA.”
Professor Robinson, who lives in New York City, is sick and sweating profusely after
consuming a great deal of alcohol. He decides not to race. He suspects that he is having a
minor reaction as he is diabetic and drank more than he intended. In the Waiting Area,
which is located next to the track, he takes off his helmet. There is a sign posted that says
“KEEP YOUR RACE HELMET ON WHILE IN THE WAITING AREA!"

Obama and Romney, who dislike each other for unknown reasons, are the only ones on
the track. They use go-carts manufactured by Kartmatic. As they begin the race they drive
very aggressively. Unbeknownst to either party, Fred, ABC’s mechanic, fed up with low
pay, did not do the usual morning inspection of the brakes and tires on either vehicle that
morning. ABC had been contemplating firing Fred due to his erratic work habits. ABC
instructed Fred to inspect the Kartmatics daily as they never trusted their brake
mechanism. Kartmatics are regularly marketed to amusement parks. Their instruction
manual states that they are not to be used for racing.
After two laps, Obama’s brakes fail as he tries to aggressively pass Romney. He crashes
into Romney’s kart near the waiting area. The brakes on both vehicles fail to hold. A tire
dislodges at a high-rate of speed, and hits Professor Robinson in the head, rendering him
unconscious and bleeding from head injuries. His helmet is lying on the ground nearby.
An ambulance is called. The medical technicians, seeing the head injuries, fail to notice
the medical alert bracelet on Professor Robinson’s wrist. At the hospital, Robinson dies
from insulin shock and other complications due to his diabetes while the emergency room
doctor was doing a procedure to prevent blood clots and a possible stroke from the head
injury. At autopsy, it was later learned that Professor Robinson had been rendered brain
dead by accident at the ABC Go-kart facility.

(a) What claims may Professor Robinson’s widow bring against the various parties?
(b) What defenses might each party bring against the possible claims asserted by
Professor Robinson’s widow?
(c) In what state should the case be brought? (Points: 30)

(
4. PART A
Paul and Thomas Hamilton, brothers, are college students and web designers. While at the
University of Megalopolis, a private, for-profit college in the “Quad State” area, they started
an online chat service called LinkTime. Paul attended and resided at the college’s campus in
the State of Quadrahenria. Thomas, who was on probation during college for a low level
felony drug conviction, could not be a resident student and took classes at the campus in the
Commonwealth of New Guernsey campus. The chat service began by putting information
from the school’s student directory online, and offering blog, chat and message board
features. LinkTime was such a hit that within a year, the school advised the brothers that they
had to remove LinkTime from the university’s server as it was utilizing too many resources.
This was not a problem as the Hamilton found advertisers, so they were able to move
LinkTime to a private server without charging user fees. In fact, LinkTime was earning so

much revenue that the Hamilton brothers were able to pay themselves and the six friends
who helped them operate it salaries. The Hamilton brothers are graduating from the
University of Megalopolis and will be attending separate graduate programs. Paul will attend
Quadrahenria State University, and Thomas the College of New Guernsey. As LinkTime is so
successful, the brothers not only plan to expand it to the two new colleges that they are
attending, but to as many other colleges within the four states comprising the “Quad State”
area as possible. They even have hopes of “going national.” As part of their plan to expand to
other campuses, they expect to recruit a student from each of the new schools “to get them
in.” They wish to formalize LinkTime by organizing it as a proper business. The brothers
would like to maintain a majority interest in the business, give about 20 percent to the six
friends from their undergraduate days who helped them run the service, and use the
remaining interest in the business to attract other investors and use employee incentives.
They seek your advice on (a) the form of business they should use, (b) who might have a
claim on the business, and (c) how they might protect themselves from claims regarding a
computerized internet platform?

PART B
LinkTime has been a phenomenal success for over ten years. They are now a worldwide social
networking phenomenon. Over the years and the various incarnations of the business enterprise,
they are now a corporation with just under 100 shareholders. In anticipation of a public offering,
they have just completed a private stock offering and allowed several of the initial equity owners
to exercise stock options. The Hamilton brothers each exercised options to purchase 10,000
shares for $5 a share. Also in anticipation of the public offering, pursuant to the early
intervention drug plea he made while in college, Thomas Hamilton had his conviction expunged.
In addition, LinkTime sold $10 million in two year advertising contracts, which would allow the
clients to back out for a 90 percent refund. These unusual contracts increased their current
revenue by 15%. As LinkTime is such a phenomenon, the hype regarding the public offering has
been enormous. Even college students are attempting to buy the stock. Days before the public
offering, the following occurred: (a) a broker at their underwriter, Silversmith &Baggs, showed a
pension fund director a draft version of the prospectus; (b) Paul sold 1000 shares of the stock that
he purchased through the stock option plan for $45 a share, telling the private investor that the
issue price for the public offering would be at least $60 a share; and (c) several of the people who
bought stock in the private offering sold it at a nice profit. The initial public stock offering had
many problems. The NASDAQ computer system, which was implemented pursuant to a recent
regulation change by the Securities And Exchange Commission (SEC), could not keep up with
the demand. The system could not accurately report the price, and many day traders, including
Big Profit Hedge Fund, lost money. Big Profit had formally filed its opposition to the SEC’s

regulation when it was proposed. After the public offering was completed, LinkTime stock
stabilized at $40 a share, well below the initial offering price of $70 a share. In light of the fiasco
of the public offering and the bad press that it generated, users began to drop LinkTime in favor
of a new, upstart rival service offered by TronCom. Fearful that the new advertisers would back
out of their contracts, the Hamilton brothers sold a great deal of their stock.
What issues doesLinkTime, its officers, and stockholders face under (a) state securities law, (b)
the Securities Act of 1933, and (b) the Securities and Exchange Act of 1934? (Points: 60)

5. (TCOs A, D, E) Marvin worked at the local country club pool as a lifeguard, not a swim
teacher, for the summer of 2013. Marvin was a public school physical education teacher.
The country club did not do a background check or confirm any references when they
hired him. They relied on the “say-so” of Marvin’s brother, a member of the country club
board of directors. The country club only did a cursory internet search of the state’s
Department of Education website to verify that he had a valid teaching certificate. When
one of the swim instructors unexpectedly quit one day, he took over the class. Initially,
the class went well. Eventually, Marvin also took over coaching the club’s competitive
swim team. When he became the swimming coach, Marvin effectively stopped
“teaching” the swim classes. Instead, he had all the swimmers in the classes do races and
train for competitive meets during the 30 minute lessons. Marvin had done this many
times during the summer. His boss, the country club director, knew this and, as the swim
team was winning, ignored complaints from parents and students. Marvin raced with the
swimmers and pushed the winners out of the way when they tried to touch the side of the
pool so that Marvin’s team would win each time. This was not the first time that Marvin
had injured swimmers. Last year, he was arrested for physically abusing a child he
coached at his school. Although the criminal charges were dropped, Marvin is on
administrative leave from his public school job until an administrative hearing with the
state Department of Education can be held in the fall. The incident was reported in
several local papers, and his administrative suspension is listed on the state’s database.
Several of the children, ages 6-8, reported to their parents that they had been physically
assaulted by Marvin while in swim class for not “working hard enough!” The children had
bruises on their shoulders. Marvin began "kidding" an 18-year-old college student who
worked as a lifeguard and assisted Marvin with the coaching. Over time, Marvin's "jokes"
that were directed at the young man became very aggressive. Marvin continued, even though
the young man asked him to stop. In fact, after the young man told Marvin to stop, as he felt
harassed, Marvin hired another lifeguard to assist him with the coaching. The country club
director was aware of this situation, but as the swim team was winning, he took the position
that it was an interpersonal issue that the two should work out among themselves.

Several parents brought suit against the local country club, Marvin, and the country club
director. The young lifeguard has also brought suit. The local country club pool alleges that
they are not liable. Discuss the ethical, liability, and agency issues presented by this matter,
and all defenses available to the local country club pool. (Points: 30)
(TCOs A, E, F) John and Edwin Booth, brothers and actors, decide to retire after years on the
road. They remember a town in Louisiana they were familiar with from their travels. From the
internet, they learn of a farm a few miles outside of town that seems ideal. There is a great house
and lots of land. The brothers wish to convert the farm to a restaurant-hotel with a dinner theater.
They contact the realtor by phone, and make arrangements to buy the parcel. The Booth brothers
plan on traveling to Louisiana prior to the closing to look things over, but are unable to do so due
to their touring schedule. The realtor, whose commission is technically paid by the proceeds to
the seller, and who has a listing contract with the seller, advises the Booths that she will handle
everything. Louisiana custom, law, and practice does not require a purchaser of land to have an
attorney. The realtor does only the bare minimum needed for title to transfer to the Booths. On
their behalf, she only has a minimal title search and minimal inspections are done, and she
obtains a minimal coverage title insurance policy. As the area near the farm was once occupied
by a large chemical plant, when the realtor represents local purchasers, as a precaution, she
advises the buyers to get the maximum possible title search and title insurance, and to get all
possible inspections done. It is her regular practice to caution local purchasers who she
represents about the former chemical plant.
After closing on the property, the Booths learn of the old chemical plant. They seek your advice
as to their liability and the liability of any other parties. (Points: 30)
(TCOs G and I) In the 1930s, after immigrating to the U.S. from a region in central Europe
threatened by the onset of World War II, Bruno and Helga Kreamie opened a bakery in Brooklyn.
They specialized in snack cakes. Kreamie Cup Cakes became so popular in the area that the
family stopped being actual bakers and became manufacturers/ food processors of the snack
cakes on a regional basis. After returning from the war, their son Steve completed college and
began working in television advertising in the early 1950s. Steve approached his parents and his
older brother Tom, who was now running the business, about the possibilities of advertising and
“going national.” The family liked the idea and began advertising and expanding. In addition, to
fuel the expansion, they offered retailers price discounts and other incentives if they prominently
positioned the store displays set-up by Kreamie rack jobbers. By the 1960s, they were a national
brand, controlling over 80 percent of the snack food industry.
In the 1970s, with the advent of the hippie counter-culture and the back-to-Earth movement, a
new competitor made an impact on the Kreamie business. The company, Granola Snacks, began
advertising that their products only used natural ingredients. They even began running a
commercial in which a mother and child compared their Granola Snacks with a lampooned
product named “Cup Cake Creamies,” stating that it tasted like poison and dog food! Not-SoTiny-Tim, a counter-culture pop star with a late night UHF and cable show, joined in on the

controversy created by the commercial and stated that he did not understand how people, “could
buy such poisonous dog food and serve it to their children as snacks!” Market studies showed
that Kreamie Cup Cakes sales suffered. As a result, Kreamie began a more aggressive shelf space
and display marketing campaign to combat Granola Snacks’s television advertising. Kreamie’s
marketing efforts were successful. By also offering volume discount incentives, they had
prevailed upon retailers in their traditional East Coast and Midwest markets to prominently
display their products. To counter this strategy, Granola Snacks offered a deep discount to
WackoMart, a Southwest and West Coast discount chain, in exchange for an agreement to
exclusively sell only their snack foods.
In reality, Kreamie Cup Cakes used only FDA approved ingredients and preservatives and were
made in American plants that always passed inspections. In contrast, although Granola Snacks’s
pilot plant was in Arizona, it had subcontracted the bulk of its production to a plant in Mexico.
As a result, to maintain a level of quality, Granola Snacks used the maximum amount of
preservatives allowed under Mexican law for the imported product. The level was so high,
reactions to the food were often reported. The levels were higher than those allowed by FDA
regulations, but allowed per an agricultural import/export treaty between the United States and
Mexico. Several people who ate these Granola Snacks required emergency room visits. A child
in Oregon, with food allergy problems, even died. Her parents served her the snack, relying on
the advertising, not knowing that some of the natural ingredients used in the Mexican-made
product were dangerous to her.
The Kreamie family seeks your advice and opinion regarding:
(1) Granola Snacks’s advertising campaign.
(2) The marketing and distribution campaigns both companies have engaged in.
(3) The liability issues Granola Snacks faces regarding their use of food
manufactured outside of the United States. (Points : 30)


(TCOs D, E, F) Frank Jones is a college student who had a plow attached to his jeep so he could earn
extra money plowing during the winter. Jones was under contract to plow the driveways of Mr.
Washington and Ms. Adams, two neighbors down the street. John Smith lives between Washington and
Adams. Jones took it upon himself to plow Smith’s lot the seven times this past winter when there were
storms and when he plowed the other two lots. Jones had never spoken to Smith about it, and Smith
never objected. In the spring, Jones personally appeared at Smith’s house and presented him with a bill.
Smith refused to pay Jones, stating that, “he never agreed to any contract.” That statement was made
after Jones presented him with a bill of $600, which he calculated as the reasonable value of his services.
After Smith’s obnoxious response, Jones yelled: “I will see you in court!”
What legal arguments could Jones make to enforce his $600 bill? What legal arguments could Smith
make to avoid liability? (Points : 15)

(TCOs B, C, G, I) Lonestar Trucking, a large freight carrier servicing the Southwest, learns from reading in
the industry trade magazine that the Federal Motor Carrier Safety Administration (FMCSA) has proposed
a regulation change. The regulation, proposed pursuant to a statute that restricts drivers from
operating/driving a truck for more than twelve (12) hours a day, will now require drug testing of any driver
involved in an accident. The regulation was proposed due to political pressure from Mothers Against
Impaired Driving (MAID), a group dedicated to eliminating deaths due to people driving while impaired.
Lonestar Trucking is concerned, not just about the costs of implementing such a regulation, but how it will
comply with its requirements since accidents often occur far from their base of operations. Lonestar
Trucking’s employees and their union are also very upset with the proposal. They are concerned that the
field drug tests used by police officers are notorious for giving “false positive” results, and that the
proposed regulation will require that a test be given even when “the other diver” is clearly at fault.
What should Lonestar Trucking do regarding the proposed change? (Points : 15)

(TCO C) Three professors from Keller’s Illinois campus, Favre, Bush, and Clinton, decide to
visit XYZ Go-kart facility together in Minnesota. This decision is made after a lengthy faculty
brunch, at which unlimited alcoholic mimosas were served. XYZ Go-kart advertises at the
college’s various campuses and, in fact, the professors use their faculty discount at the facility. At
the facility signs are posted everywhere in bold: “BY PARTICIPATING IN Go-KART RACING,
YOU VOLUNTARILY ASSUME THE RISK OF ANY DEATH OR INJURY THAT MAY
RESULT. “ Additionally, the professors hurriedly sign a contract, which states: “YOU ARE
GIVING UP ALL LEGAL RIGHTS”; “XYZ WILL NOT BE HELD LIABLE FOR ANY
NEGLIGENCE RESULTING IN YOUR INJURY OR DEATH”; and “THE PARTIES AGREE
THAT ANY POSSIBLE LEGAL ACTION WILL BE HEARD IN THE STATE OF
MINNESOTA.”
(a) What claims may Professor Favre’s widow bring against the various parties?

(b) What defenses might each party bring against the possible claims asserted by Professor
Favre’s widow?

(c) In what state should the case be brought? (Points : 30)

(TCOs A, D, E) Judy Collinsworth, a then-unknown folk singer, signed a three album recording
contract with Mercury Apollo Music, Inc. Mercury Apollo Music was a boutique label
specializing in folk artists. Collinsworth’s first album for Mercury Apollo was moderately
successful. The second album, unfortunately, was panned by the critics and did not sell. Mercury
Apollo Music was acquired by NastiCondiMedia, Inc. NastiCondiMedia, in an effort to revitalize Collinsworth’s career, encouraged her to leave the folk style she was committed to and
do more commercially viable pop material. Collinsworth rejected this request. Furious with
NastiCondiMedia, Collinsworth wanted to end the contract. On her own, with what remaining
personal funds she had left, she immediately went to an independent recording studio and did
sessions toward a third album without approval or consent by NastiCondiMedia. Using her
concert band, she recorded tracks for over 30 songs. Due to the financial failure of
Collinsworth’s second album and her recent unsuccessful concert tour, NastiCondiMedia did not
do the final production work on Collinsworth’s third album.
Collinsworth then entered into a contract with EasyListening Communications, Inc. She began
recording a new folk album with EasyListening in conjunction with a concert tour that they
financed and produced. At her concerts, Collinsworth would regularly introduce the new material
that would be on her new album.
Shortly after the concert tour began, NastiCondiMedia brings suit against Judy Collinsworth and
EasyListening Communications, Inc.
(a) What causes of action might NastiCondiMedia bring against Collinsworth and
EasyListening?

(b) What causes of action might Collinsworth and EasyListening bring against
NastiCondiMedia?
(c) What types of relief might either party seek? (Points : 30)

(TCOs A, B, F, H)
PART A
Paul and Thomas Franklin, brothers, are college students and web designers. While at the
University of Megalopolis, a private, for-profit college in the “Quad State” area, they started
an online chat service called FaceLinked. Paul attended and resided at the college’s campus
in the State of Quadrahenria. Thomas, who was on probation during college for a low level
felony drug conviction, could not be a resident student and took classes at the campus in the
Commonwealth of New Guernsey campus. The chat service began by putting information
from the school’s student directory online, and offering blog, chat, and message board
features. FaceLinked was such a hit that within a year, the school advised the brothers that
they had to remove FaceLinked from the university’s server as it was utilizing too many
resources. This was not a problem as the Franklins found advertisers, so they were able to
move FaceLinked to a private server without charging user fees. In fact, FaceLinked was
earning so much revenue that the Franklin brothers were able to pay themselves and the six
friends who helped them start and operate it salaries. The Franklin brothers are graduating
from the University of Megalopolis and will be attending separate graduate programs. Paul
will attend Quadrahenria State University, and Thomas the College of New Guernsey. As
FaceLinked is so successful, the brothers not only plan to expand it to the two new colleges
that they are attending, but to as many other colleges within the four states comprising the
“Quad State” area as possible. They even have hopes of “going national.” As part of their
plan to expand to other campuses, they expect to recruit a student from each of the new
schools “to get them in.” They wish to formalize FaceLinked by organizing it as a proper
business. The brothers would like to maintain a majority interest in the business, give about
20 percent to the six friends from their undergraduate days who helped them run the service,
and use the remaining interest in the business to attract other investors and use employee
incentives.
They seek your advice on (a) the form of business they should use, (b) who might have a
claim on the business, and (c) how they might protect themselves from claims regarding a
computerized internet platform?

(TCOs A, B, F, H)

(TCOs A, D, E) Woody worked at the local country club pool as a lifeguard, not a swim teacher,
for the summer of 2013
(TCOs G and I) In the 1930s, after immigrating to the U.S. from Ireland at the onset of World
War II, Shamus and Mary McCream opened a bakery in Boston .

(2) The marketing and distribution campaigns both companies have engaged in.

(3) The liability issues Healthy Snacks faces regarding their use of food manufactured outside of
the United States. (Points : 30)

(TCOs A, E, F) John and Edwin Booth, brothers and actors, decide to retire after years on the
road. They remember a town in Louisiana they were familiar with from their travels. From the
internet, they learn of a farm a few miles outside of town that seems ideal. There is a great house
and lots of land. The brothers wish to convert the farm to a restaurant-hotel with a dinner theater.
They contact the realtor by phone, and make arrangements to buy the parcel. The Booth brothers
plan on traveling to Louisiana prior to the closing to look things over, but are unable to do so due
to their touring schedule. The realtor, whose commission is technically paid by the proceeds to
the seller, and who has a listing contract with the seller, advises the Booths that she will handle
everything. Louisiana custom, law, and practice does not require a purchaser of land to have an
attorney. The realtor does only the bare minimum needed for title to transfer to the Booths. On
their behalf, she only has a minimal title search and minimal inspections are done, and she
obtains a minimal coverage title insurance policy. As the area near the farm was once occupied
by a large chemical plant, when the realtor represents local purchasers, as a precaution, she
advises the buyers to get the maximum possible title search and title insurance, and to get all
possible inspections done. It is her regular practice to caution local purchasers who she
represents about the former chemical plant.
After closing on the property, the Booths learn of the old chemical plant. They seek your advice
as to their liability and the liability of any other parties. (Points : 30)

(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)

Answer - Two ways in which McFadden can contest the FDA ruling, and challenge the
requirement that is imposed by the FDA are discussed below
1. Substantial Evidence Test - Given that the rule specifically states four companies that have
been impacted, there is no evidence that the three other companies apart from Robins & Robins
have been impacted. Due to this, the FDA would need to provide more evidence and data points
to support its claim that McFadden was one of the companies impacted by not having
implemented the tracking.
2. Failure to comply with APA - The FDA should have followed the right process and ensured
that there is proper public notice, publication of the rule and period for public comment before
the rule is passed. As the FDA had not followed this procedure and wanted to immediately
implement the rule, McFadden can contest saying that the rule implementation was not in
compliance with the APA, and hence would not be able to put a law practice without it going
through the public notice and comment period.
Based on the above two points, McFadden would be able to stop the rule from being applied
immediately, and it could be decided that the FDA meet the above two points before it can
execute the ruling.

(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
(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. (Points: 30)

(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 pay-outs to victim families. In Canada, the cap on non-pecuniary 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)
(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 non-pecuniary damages is
around $300,000. Punitive damages in Canada are rarely allowed. Will this Canadian citizen be
permitted to sue Robins
(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:

TCO E. Anna and Lisa both sue Pastor Forester and the school under Title VII. Analyze their
Title VII lawsuit against the school and Pastor Forester. Explain whether you feel that the two
injured teachers have cases for recovery (describe the theories and whether you feel they will be
successful). Discuss whether the school being a religious, private school has any bearing on
liability or protection from liability. Include all defences available to the school and Pastor

(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)
10. (TCO F and 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
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.) (Points: 30)
12. (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)
(TCO B) Name one argument that Robins & Robins could have used to fight against the
imposition of a tracking bar (UPC) requirement in the event their lobbying efforts during public
comments had failed. Explain the argument and the procedural method Robins would use to fight
it. If Robins had not gotten involved in the public comments period, would your answer change?
Why?
.
(TCO F) Eagle Standard AInc. (ESI) a major engineering firm specialized in designing aircraft parts for
government contracts. ESI employees project managers and 42 engineers who are divided into project
group of 6-7 members. The majority of project team leaders have spent time in France and Britain
learning new technology. The Eagle 6 project team consisting of 6 engineers is developing new
equipment for a jet fighter. The project has been ongoing for 18 months and all 6 engineers have been
with this project group since its inception working together on all projects. Eagle 6 works well together.
However, the Eagle 6 team has the most technical project and its engineers have been working too much
overtime. The senior project manager, Bruce Chanick interviewed and hired a new engineer to help out
Richard Hue. Rich has good qualifications and seems to be knowledgeable and motivated. The work is
challenging and gives him the opportunity to showcase his computer skills and engineering knowledge.
Two weeks in he quickly became a contributing member of the team showing initiative and the willingness
to work overtime and weekends to research possible solutions to potential problems. Richard was
particularly adept with the computer system and Bruce is ecstatic about his new hire Richard is a loner on
and off the job. He is from country x a small island with a high power-distance culture all of the other
members of the team member felt Richard flouts his education and knowledge and none of them like him
in fact can't stand him.

(TCO B) Faxco Incorporated is a business with 500 employees. The CEO of the company has
recently learned based on employee surveys. That the employees are not very happy with the company
in fact the CEO is starting to believe that this may be the reason why Faxco is experiencing slower sales
and a recent budget crisis which threatens to shut down the company in 3 years if it is not fixed.

(TCOs D, E, F) State Senator Leghornne, while filibustering the opposition party’s proposed
statute on public education, accuses State Senator Gentile, the bill’s sponsor, of being an
“unabashed child lover.” It is common knowledge that State Senator Gentile, who is gay,
recently married an 18-year-old college intern who had worked in his legislative offices. The
relationship and the marriage were covered in the local papers. Although many conservative
people had “their opinions” on the matter, most dealt with the situation with decorum and
respect. State Senator Leghornne had recently and vehemently opposed the state’s same sex
marriage law. State Senator Gentile’s spouse was so distraught and upset by the comments made
during the filibuster that he attempted suicide by overdosing on sleeping pills. Fortunately, State
Senator Gentile returned home in time to call an ambulance, and all are now doing fine.
Senator Gentile’s spouse seeks your advice about possible legal actions that he could bring
against State Senator Leghornne. He points out to you that he met State Senator Gentile when he
was 18, an adult allowed to marry under state law, and that their marriage and relationship are
perfectly proper pursuant to the state’s same sex marriage law. (Points : 15)