MGMT 520 Legal, Political and Ethical Dimensions of Business
Final Exam Set 3
TCO D. 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………
…….Robins & Robins sues Casings, Inc., for indemnification from suits by injured victims from the medication, for the cost of the capsule shells, for attorneys fees, and for punitive damages. List any defences Casings, Inc., would have under contract theory ONLY for the damages caused by the explosives in their drugs, over and above the cost of the capsule shells. (Points:15). (Short answer question)
List any bases Robins & Robins could sue Casings, Inc., under contract theory ONLY for the damages caused by the explosives in their drugs, overand above the cost of the capsule shells. (short answer question) (Points:15)
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 NewYork 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 and350 adults have been hospitalized after becoming very ill upon taking the taintedmedication. Each of them had failed to note the recall after having already purchased the medication……………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 defences any of the three would have. Analyze the success of the defences.
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.
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:
”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 defences available to the school.
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…………..He claims her knowledge should be imputed to the entire board of directors. He then sues the school for firing him for being convicted felon. He claims that is illegal, and he publicly attacks the church for their “less than Christian” behaviour 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……………
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:
Ellen DeGeneres sues Clean Clothes for the use of a look-alike model forth 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 JOSBs countersuits? Do you think any of the 3 will win their cases? (Why or why not.) Analyze the case for all three parties – who will win and why; what elements will they need to prove, and what defenses can they show?
2. TCO G.
It is discovered that two weeks before the Ellen show, she had sold $2million 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…………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 defence? Should Ellen have avoided discussing JOSB publicly on her show since she typically trades their stock? (Points: 30)
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