The Legal Environment of Business, 14th Edition
SOLUTION MANUAL
The Legal Environment of Business, 14th Edition
by Roger E. Meiners, Verified Chapters 1 - 22, Complete
The Legal Environment of Business, 14th Edition
, The Legal Environment of Business, 14th Edition
TABLE OF CONTENTS
Chapter 1. Today’s Business Environment: Law and Ethics
Chapter 2. The Court Systems
Chapter 3. Trials and Resolving Disputes
Chapter 4. The Constitution: Focus on Application to Business
Chapter 5. Criminal Law and Business
Chapter 6. Elements of Torts
Chapter 7. Business Torts and Product Liability
Chapter 8. Real and Personal Property
Chapter 9. Intellectual Property
Chapter 10. Contracts
Chapter 11. Domestic and International Sales
Chapter 12. Business Organizations
Chapter 13. Negotiable Instruments, Credit, and Bankruptcy
Chapter 14. Agency and the Employment Relationship
Chapter 15. Employment and Labor Regulations
Chapter 16. Employment Discrimination
Chapter 17. The Regulatory Process
Chapter 18. Securities Regulation
Chapter 19. Consumer Protection
Chapter 20. Antitrust Law
Chapter 21. Environmental Law
Chapter 22. The International Legal Environment of Business
The Legal Environment of Business, 14th Edition
, The Legal Environment of Business, 14th Edition
CHAPTER 1
Table of Contents
Answer to Discussion Question ....................................................................................................................................... 1
Answers to Case Questions............................................................................................................................................... 1
Answers to Ethics and Social Questions ........................................................................................................................ 3
Answer to Discussion Question
Should the common law maxim “Ignorance of the law is no excuse” apply to an immigrant who speakslittle English and was not educated in
the United States? How about for a tourist who does not speak English? Everyone knows criminal acts are prohibited, but what about
subtler rules that differ across countries and so may be misunderstood by foreigners?
Answer: It is generally true that ignorance of the law is no excuse. Citizens are deemed to have constructive knowledge
of the law. Yet, as well known as this rule is, it is surprising how often it is proffered as an excuse. (A Westlaw
search cases finds hundreds of examples). Examples include: Deluco v. Dezi (Conn. Super) (lack of knowledge
regarding the state‘s usury laws is no excuse for the inclusion of an illegal interest rate in a sales contract); and
Plumlee v. Paddock (ignorance of thefact that the subject matter of the contract was illegal was not excuse). The
courts have provided a small exception to the rule when it comes to people in lack of English language skills.
Consider Flanery v. Kuska, (defendant did not speak English was advised by a friend that an answer to a complaint
was not required); Ramon v. Dept. of Transportation, (no English and an inability to understand the law required for
an excuse); Yurechko v. County of Allegheny, (Ignorance and with the fact that the municipality suffered no hardship
in late lawsuit filing was an excuse).
Answers to Case Questions
1. Facts from an English judge’s decision in 1884: “The crew of an English yacht ............................................... were cast away in
a storm on the high seas . . . and were compelled to put into an open boat. ................................................. They had no supply
of water and no supply of food. . . . That on the eighteenth day . . . they ............................................. suggested that one
should be sacrificed to save the rest. . . . That next day . . . they . . . went to the boy .................................................... put a knife
into his throat and killed him . . . the three men fed upon the body ......................................... of the boy for four days; [then]
the boat was picked up by a passing vessel, and [they] were rescued. . . . and committed for trial. . . .
if the men had not fed upon the body of the boy they would probably not have survived to be sopicked up and rescued, but would
............................................................................. have died of famine. The boy, being in a much weaker
condition, was likely to have died before them .................................. The real question in this case [is] whether killing
under the conditions set forth ........................ be or be not murder.” Do you consider the acts to be immoral?
[Regina v. Dudley and Stephens, 14 Queens Bench Division 273 (1884)]
Answer: This points out that the legal system has limits. Its acceptability is dictated by legal culture--whichdetermines
whether law will be enforced, obeyed, avoided, or abused. It is limited by the informal rules of the society--its
customs and values. One limit is the extent to which society will allow the formal rules to be imposed when a
crime is committed in odd circumstances. Here there was an intentional murder. Does the motive for the murder,
the effort to save several lives by sacrificing one
The Legal Environment of Business, 14th Edition
, The Legal Environment of Business, 14th Edition
life, make it a crime that should be punished? Not all crimes are treated the same. It also raisesquestions about the
desirability of not giving judges flexibility in sentencing.
There was a precedent for a light sentence in this case in U.S. law: U.S. v. Holmes, 20 F. Cas. 360 (No. 15383)
(C.C.E.D. Pa. 1842). The case involved a sinking ocean liner. Several passengers madeit to the only lifeboat, which
was far too overcrowded. The captain decided to save the women and children and threw several men overboard.
The lifeboat was rescued. The grand jury refused to indict the captain from murder, only for manslaughter. He got
a six month sentence.
The British judge in the case here imposed the death penalty upon the person who survived. The judge found
it difficult to rule that every man on board had the right to make law by his own hand. The Crown reduced the
sentence to six months.
2. Smoking is a serious health hazard. Cigarettes are legal. Should cigarette manufacturers be liable for the serious illnesses and untimely
deaths caused by their unavoidably dangerous products, eventhough they post a warning on the package and consumers voluntarily
assume the health risks by smoking? [Cipollone v. Liggett Group, Inc., 505 U.S. 504 (1992)]
Answer: The general rule that exists now is that since the government has ordered the posting of warninglabels on
cigarettes, and since the dangers of smoking are well known, consumers have been warned and are not due
compensation if they kill themselves by smoking. The Cippoline case, since reviewed by the Supreme Court,
appears to be of limited impact since the victim was adjudged to have become addicted to cigarettes before the
warning label was ordered in 1964. If cigarette makers were held responsible for all health problems associated
with cigarettes, then, like alcohol and other dangerous products, the damages would likely be so high it would
effectively ban the products. Presumably, in a free society if adults are clearly informed of the risks of products
that cannot be made safe, they accept the risk. Tobacco and alcohol producers cannot take the dangers out of the
products except at the margin by encouraging responsible drinking and the like. Are drugs like cocaine different?
3. Two eight-year-old boys were seriously injured when riding Honda mini-trail bikes. The boys were riding on public streets, ran a stop
sign, and were hit by a truck. The bikes had clear warning labels on the front stating they were only for off-road use. The manual
stated the bikes were not to be used on public streets. The parents sued Honda. The supreme court of Washington said one basic issue
existed: “Is a manufacturer liable when children are injured while riding one of its mini-trail bikes on apublic road in violation of
manufacturer and parental warnings?” Is it unethical to make products like mini-trail bikes children will use when we know accidents
like this will happen? [Baughn v. Honda Motor Co., 727 P.2d 655 Sup. Ct, Wash., (1986)]
Answer: The court found no liability for the manufacturers. There was no defect; the product was safe for intended
use. Safety instructions were clear; the parents let the boys ride the bikes. Anything can be dangerous--baseballs are
dangerous when they hit the head, swings are dangerous when kids jumpout of them; there is only so much that
can be done to make the government the ―national nanny‖ asthe Washington Post once said about excessive
consumer protection. Parents must accept a high degree of responsible for their own children.
4. Johnson Controls adopted a “fetal protection policy” that women of childbearing age could not work in the battery-making division of
the company. Exposure to lead in the battery operation could cause harm to unborn babies. The company was concerned about possible
legal liability for injury sufferedby babies of mothers who had worked in the battery division. The Supreme Court held the company
policy was illegal. It was an “excuse for denying women equal employment opportunities.” Is the Court forcing the company to be
unethical by allowing pregnant women who ignore the warnings to expose their babies to the lead? [United Auto Workers v.
Johnson Controls, 499 U.S. 187 (1991)]
Answer: The Court held it a form of sex discrimination to prevent women of child-bearing age from holding the more
dangerous jobs. The company argued that it did this to protect itself from possibleliability in case of damage to
babies and that the decision was ethical. The replacements for these workers were often men or more senior
women, who tended to be higher income workers, so this
The Legal Environment of Business, 14th Edition
, The Legal Environment of Business, 14th Edition
was not a current cost-saving move. Note that a 2002 ruling related to the ADA significantlyrestricted
this earlier case.
5. McGrory worked for Applied Signal Technology in a supervisory position. He was accused of violating the company’s policies on
sexual harassment. An internal investigation determined he did not violate the policy but that he was evasive and violated the
company’s personal ethics code. He was fired and sued for wrongful termination, contending that if he did not violate sexual
harassment rules he should not have been subject to termination. Do standards of law and ethics need to be thesame for an employer?
[McGrory v. Applied Signal Technology, 152 Cal.Rptr.3d 154 (2013)]
Answer: The appeals court affirmed that the employer had the right to terminate the employee for failure to be fully
cooperative in the investigation of the complaint of sexual harassment that had been filed against him. While he
was not found to have violated the harassment policy, he was evasive and uncooperative, which violated the
company‘s code of ethics, which was a justification for termination.
6. Baker works as a document clerk for the Minnesota Supreme Court. After she had worked there for13 years the Minnesota judicial
branch adopted a policy concerning proper Internet use and stated that employees must adhere to the highest ethical standards when
using the Internet. Eleven yearslater, she was fired for excessive surfing on the Internet during working hours. She contended she did
not know about the policy. Is that an adequate defense for her? [Baker v. Minnesota Supreme Court, 2016 WL 102513
(2016)]
Answer: The Minnesota high court held that Baker‘s termination was proper. She violated standards expected of
employees. She had been warned about excessive personal Internet use during work time, including buying and
selling goods for a little business she ran. The claim that she did not know about the ethics of Internet use was not
credible as the policy was posted for all employees who received e-mails about any changes to the policy. The fact
that the term ―ethical‖ was used in the policy does not likely impact this decision.
Answers to Ethics and Social Questions
1. The federal tax code is riddled with special-interest loopholes. Most of these exist because firms andtrade associations lobby Congress
and provide campaign support to members of Congress to gain special favors to individual firms or industries. Is it ethical for firms to
seek special privilege?
Answer: The nature of our political system forces firms to participate in the political process. Those that fail to do so,
if they are of any size, are more likely to be subject to political attack. In a sense, firms
―buy‖ protection by keeping a flow of contributions going, especially to incumbent members of Congress.
Competition also means that if a firm does not lobby for special privilege, then it may suffer if competitors achieve
such status in the tax code or some area of regulation. Many business leaders do not much care for the
Washington, D.C. operations their firms support but know that it is apart of the modern legal environment of
business.
2. “Fair trade” goods have become popular, as some people are willing to pay more to know the goods come from workers paid a decent
price for their efforts. However, some retailers who sell fair trade goods mark them up substantially more than nonfair trade goods. One
study showed that coffee growers got an average of 44 cents a pound more for fair trade coffee, but the coffee at retail was marked up an
additional $3.46 per pound. At one supermarket chain, fair trade bananas that cost anextra 3.6 cents per pound were marked up
four times the price of non-fair trade bananas. Fair trade goods are claimed to be a form of social responsibility. Is that true if it just
means higher profit margins?
Answer: The high mark up suppresses the demand for fair trade goods, thereby reducing the market for fair trade
goods. If the retail prices reflected the actual additional cost, not the profit maximizing price to the retailer that
exploits the goodwill from ―fair trade,‖ then it is hard to argue that the company is being particularly socially
responsible.
The Legal Environment of Business, 14th Edition
, The Legal Environment of Business, 14th Edition
3. A chemical company located a new plant in a depressed area with high unemployment in West Virginia. It built a state-of-the-art
plant that had the latest pollution control technology meeting all EPA requirements. It created 2,500 jobs. The company was
attacked for polluting a previously pristine area. Had the plant been built in an industrial area, such as the coast near Houston, no
onewould have been likely to complain. Was the company socially irresponsible for building the plant insuch an area?
Answer: The company was in a no-win situation. It was attacked by environmentalists and some locals for
―destroying‖ the environment, even though the pollution was acceptable. When the company later stated it
would close the plant, which as not profitable, it came under fire for destroying jobs. It eventually upgraded
the plant and kept it open, but it was never a profitable operation. The plant should probably not have been
built in such a remote location, as that made it a target. Built in a higher-density area and there would have
been fewer issues as the environmental impact on an existing industrial area would have been small. Corporate
social responsibility can involve difficulttradeoffs that do not always allow a win-win result.
4. Discussion of ethics issues focuses on company examples. What personal ethics matter? Surveys indicate that many students have
cheated in classes one way or another, pad their resumes when seeking jobs, and have improperly downloaded copyrighted music. Does
ethics “begin at home”?
Answer: If ethics is to be theoretical or applied only in formal situations, then it means little in practice.
Solution and Answer Guide
Meiners, The Legal Environment of Business, 14e, 9780357451724; Chapter 2: The Court System
Table of Contents
Answer to Discussion Question ....................................................................................................................................... 4
Answers to Case Questions............................................................................................................................................... 5
Answer to Ethics and Social Question............................................................................................................................ 7
Answer to Discussion Question
Judges in many nations are trained for their offices in law school. They are hired into the judicial system and work their way up through that
system. In the United States, there is no special training to be a judge;it is an honor bestowed, usually on senior attorneys, or it is an office one
runs for in some states. What advantages might the other system have over the U.S. method?
Answer: Judges in Europe and Japan play a quasi-prosecutor role, so they are quite different than U.S. judges. The
instruct attorneys on what evidence they want to see. So in that sense, their roles are quite different. Further,
judges in most countries do not have as much independence as do U.S. judges. Not relying on the legislature or
executive to retain a job, and having the power to strike down statutes for violating constitutional rights, is
important in the integrity of the U.S. system and itsstructure. That does not address the issue of competence, but I
have never seen a study that tries toaddress that issue.
The Legal Environment of Business, 14th Edition
, The Legal Environment of Business, 14th Edition
Answers to Case Questions
5. The Zamora family from Illinois rented a house in Maine via Airbnb. When in the house, one of theZamora children played with
matches and set a fire that killed two members of the family. Zamora sued the homeowners and the maker of smoke detectors in
state court in Illinois. They contendedthat the detectors were inadequate to protect the Zamoras. Would Illinois courts have
jurisdiction over defendants? [Zamora v. Lewis, 146 N.E.3d 231, App. Ct. IL (2019)]
Answer: Illinois trial court and appeals court held they had no jurisdiction over defendants. A temporary renter has only
a ―fleeting arrangement‖ with the homeowner. The homeowner was not attempting todo business in Illinois; the
home was available to anyone on Airbnb. The smoke detector makers did business in Illinois, but the detectors
were not purchased in Illinois or installed in Illinois and the alleged defect did not occur in Illinois. Illinois courts
did not claim jurisdiction.)
6. Charlotte Chambers and other South Dakota residents chartered a bus in South Dakota from Dakotah Charter, a South
Dakota corporation, to attend a Tae Kwon Do tournament in Arkansas. While en route from South Dakota to Arkansas, the
bus stopped in Missouri. Chambers fell on thesteps in the bus and broke her ankle. She sued, claiming that Dakotah failed to
maintain the bus in a safe condition. Dakotah contended that the plaintiff ’s carelessness caused her injury.
Which law should apply to the case—the law of South Dakota, where the contract was made; Missouri, where the injury occurred; or
Arkansas, where the contract was ultimately to be performed?[Charlotte Chambers v. Dakotah Charter, 488 NW.2d 63, Sup.
Ct., S.D. (1992)]
Answer: The traditional rule—apply the law where the injury occurred—would call for the application of Missouri law.
Here, the court, like many jurisdictions, rejected the traditional rule and adopted the significant interests test. ―The
rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which,
with respect to that issue, has the most significant relationship to the occurrence and the parties under the principles
stated in [the Restatement (2d)].‖
―South Dakota has all of the important contacts. First, the principal conduct which allegedly causedthe injury was
the distribution of the candy in the bus on the first leg of the trip. Missouri had no contact with that conduct.
Even if Missouri could claim some limited contact with Dakota Charter‘s alleged failure to maintain a safe
premises after the candy was distributed, Missouri‘s contact was
relatively unimportant to the issue of comparative negligence because comparative negligence law is not a rule of
the road nor does it regulate the conduct of bus companies using Missouri‘s highways…
Second, South Dakota was the domicile, residence, place of incorporation and place of business ofthe parties, as
well as the place where the relationship of the parties was centered. These contactsare important to the issue of
comparative negligence because the economic impact of the law applied will be felt where the parties reside.‖
Applying the tests from the Restatement:
(a) the needs of the interstate and international systems,
―First, neither Missouri nor South Dakota‘s laws significantly affect the needs of interstate systems because
neither interstate relations nor automobile movement would be influenced by either law.‖
(b) the relevant policies of the forum,
―This state‘s policy has been clearly expressed by the legislature in our comparative negligencestatute.‖
(c) the relevant policies of other interested states and the relative interests of those states in the
determination of the particular issue,
―Although Missouri also has a comparative negligence policy, South Dakota has the only significant
interest in a determination of the comparative negligence issue because all of the contacts are in South
Dakota, and Missouri‘s policy would not be furthered by its application toSouth Dakota domiciliaries who
have no important contact with Missouri. Where the forums interests are the ―most deeply affected‖ under
these factors, it is generally fitting that forum‘s law should be applied.‖
The Legal Environment of Business, 14th Edition
, The Legal Environment of Business, 14th Edition
(d) the protection of justified expectations,
―The protection of justified expectancy, although important in consensual relationships, has no importance
in this negligence action. Generally, people do not consider the legal consequences of their conduct or how
law may be applied prior to becoming involved in an accident.‖
(e) the basic policies underlying the particular field of law,
―The policy of ameliorating the harsh consequences of common law contributory negligence rules is
furthered by both states‘ comparative negligence laws. Although Chambers argue that Missouri‘s policy is
better, that contention is debatable. Furthermore, even if Missouri‘s policy could be considered ‗better,‘
conflicts analysis should not be used to apply the law of a state that has no interest in having its rule applied.
The proper solution in such cases is to change theforum‘s inferior law.‖
(f) certainty, predictability and uniformity of result,
―Little significance can be attached to the ease of determining and applying comparative negligence law
or to the certainty, predictability and uniformity of result. Both states‘ laws areeasy to determine and
apply. Furthermore, because the differences in the law are so minor, there will be few differences in
result.‖
(g) ease in the determination and application of the law to be applied.
―Both states‘ laws are easy to determine and apply. Furthermore, because the differences in thelaw are so
minor, there will be few differences in result.‖
7. Edwards received unsolicited faxes from Direct Access in violation of the Federal Telephone Consumer Protection Act, which makes it
illegal to send unsolicited faxes. Edwards, a Nevada resident, sued Direct, not a Nevada resident, in state court in Nevada for damages
allowed under thelaw. Direct contended that the suit could not be filed in state court because it concerned federal law, so Nevada courts
did not have jurisdiction. Is that correct? [Edwards v. Direct Access, 124 P.3d 1158, Sup. Ct, Nev. (2005)]
Answer: The Nevada Supreme Court held that state courts had jurisdiction. The courts have personal jurisdiction
because Direct did business in Nevada by intentionally sending offers to people in Nevada by their fax machines.
The Nevada court cited the U.S. Supreme Court that state courts are empowered to hear cases based on federal
law unless forbidden by Congress from doing so. Since Congress said nothing about jurisdiction in the Act, the
states are presumed to have jurisdiction overthe subject matter. The court also noted that if the Nevada legislature
instructed the courts not to accept cases based on this Act, then they would not have jurisdiction, but that had not
happened either.
8. Pueblo De Bahia Lora, S.A., is a Costa Rican corporation owned by U.S. citizens. It operates a
fishing resort in Costa Rica called “Parrot Bay Village.” Oldfield, a Florida resident, saw the Parrot Bay website, which is in
English, uses a U.S. mailing address, and provides a toll-free number for potential guests to call. Oldfield made a reservation online.
When at the resort, he went on a fishing trip on a charter boat. That arrangement was made by Parrot Bay, but the boat was owned
and operated by a Costa Rican. Oldfield suffered an injury he claims was due to the negligence of the boat operator. He sued Parrot
Bay in federal court, claiming diversity of citizenship. Parrot Bay did not respond; Oldfield was awarded a default judgment for
$750,000 as requested. Parrot Bay appealed. What argument is on Parrot Bay’s side? [Oldfield v. Pueblo de Bahia Lora, S.A.,
558 F.3d1210, 11th Cir. (2009)]
Answer: Vacated and remanded. The district court lacked jurisdiction, so the judgment is void. Parrot Bay,a foreign
corporation, is not responsible for the actions of the fishing boat operator, another foreign entity. The relationship
between Parrot Bay and the fishing boat operator did not arise out of, or relate to, Parrot Bay‘s contacts with the
United States. It was not foreseeable by Parrot Bay that Oldfield might suffer an injury on a boat that it did not
own or operate while he stayed at Parrot Bay as a result of his having visited the resort‘s website and made a
reservation for a room there.
Therefore Parrot Bay cannot be subject to U.S. court jurisdiction in this matter. Oldfield can pursuehis claim
against the fishing boat operator in court in Costa Rica.
The Legal Environment of Business, 14th Edition
, The Legal Environment of Business, 14th Edition
9. An accident in Florida killed three of the four members of a family from Alabama who were riding intheir Kia automobile bought in
Alabama. Suit was filed in Alabama state court against Kia by the survivor of the accident. Kia requested the trial be moved to
Florida on the ground of forum non conveniens because almost all of the witnesses were in Florida. Was that motion
reasonable? [Ex parte Kia Motors America, 881 So.2d 396, Sup. Ct., Ala. (2003)]
Answer: The Alabama high court ordered the case moved to Florida on that ground. There were 25 witnesses to the
accident–other drivers, ambulance personnel, hospital personnel–all in Florida. Onlythe plaintiff was from
Alabama. The court considers ease of access to sources of proof, location of evidence, compulsory process for
attendance of unwilling witnesses, the cost of obtaining attendance of willing witnesses, the possibility of a visit to
the site of the accident, and other factors relevant to the proceedings.
10. Koh, a California resident, won a judgment in California of $240,000 against Inno-Pacific Holdings,Ltd., a Singapore company,
but Inno-Pacific did not pay the judgment. Koh discovered that the company had an interest in land in Washington State, so he filed
suit in Washington to seize the property to satisfy his judgment. The trial court in Washington dismissed the suit, because it lacked
personal jurisdiction over Inno-Pacific. Koh appealed. On what basis could the Washington court have jurisdiction? [Koh v. Inno-
Pacific Holdings, Ltd., 54 P.3d 1270, Ct. App., Wash. (2002)]
Answer: Koh argued, and the appeals court agreed, that courts in Washington had quasi in rem jurisdiction. Koh had a
valid judgment from a court in another jurisdiction. Courts honor such judgments under the full faith and credit
rule. Koh‘s claim was valid, so the court had jurisdiction overthe property for that purpose.
11. An attorney was appointed by a judge to divide and sell property that had been jointly held by a couple that split up and could not agree
on how to handle the property. One of the property owners thought the attorney made mistakes in selling the property and sued him. The
attorney defended thathe was entitled to judicial immunity and could not be sued as he was acting on behalf of the court. Is that right?
[Price v. Calder, 770 S.E.2d 752, Ct. App., N.C. (2015)]
Answer: The court agreed that the attorney was entitled to judicial immunity or, more properly, quasi- judicial
immunity. Officers of the court are protected from suit for actions taken while exercising their judicial functions.
In effect, the judicial immunity enjoyed by the judge extends to those appointed to perform functions on behalf
of the judge.
Answer to Ethics and Social Question
Should judges consider the social consequences of their decisions that go beyond legal issues? What ifthe case involves an individual who has
committed a crime and the judge is asked to release the
defendant on a mere legal “technicality”?
Answer: It is hard to imagine that judges do not consider the social consequences of their decisions.
Some judges say that it is important that they take such consequences into account. Others argue that it is
important to stick to precedent even when the social consequences of a particular case are against the personal
positions held by the judge. There are cases in which judges release persons from prison who they are sure have
committed crimes, but whose legal rights were violated by policeprocedure. While this is an injustice, the courts
recognize that if procedural safeguards are ignored then procedural rights will become irrelevant—or worse, at the
mere whim of the police or of the judiciary. Such cases serve as a warning to the police and to other state officials
that procedural safeguards cannot be ignored. Mistakes will be made in the application of safeguards but the costs
of those mistakes are outweighed by the benefits derived by society members from the consistent application of
these legal rules.
Solution and Answer Guide
The Legal Environment of Business, 14th Edition
, The Legal Environment of Business, 14th Edition
Meiners, The Legal Environment of Business, 14e, 9780357451724; Chapter 3: Trials and
Resolving Disputes
Table of Contents
Answer to Discussion Question ....................................................................................................................................... 8
Answers to Case Questions............................................................................................................................................... 8
Answer to Ethics and Social Question............................................................................................................................ 9
Answer to Discussion Question
In many aspects of business, a manager can choose to include an arbitration or mediation clause to govern disputes, such as with customers
and employees, or can leave that out and use litigation. Whatare the pros and cons of such alternatives in regular business practice?
Answer: Most firms find arbitration and mediation clauses to be superior to litigation, which tends to be more costly
and take longer. Of course, the potential litigant faces the same issue, so most people think carefully before suing.
Arbitration is binding through conclusion. An agreement to mediate doesnot force binding resolution, but has a
high success rate and has the advantage of being less adversarial than arbitration, which tends to encourage
reasonable settlements with less bitterness.
Answers to Case Questions
12. Bonnie Weisgram died from smoke inhalation during a fire in her home. Her son, Chad Weisgram, sued Marley Co., the maker of a
heater, claiming it was defective and caused the fire. At trial, Weisgram offered expert witness testimony to prove the heater was
defective. Marley objected that the testimony was unreliable and, therefore, inadmissible, but the judge overruled the objections; the jury
found for Weisgram. The appeals court held that the testimony of Weisgram’s expert was not scientifically sound. The appeals court
directed a judgment for Marley, holding there were no grounds for a new trial. Weisgram appealed; does he have a good reason for a new
trial? [Weisgramv. Marley Co., 120 S. Ct. 1011 (2000)]
Answer: Affirmed. An appellate court may direct the entry of judgment as a matter of law when it determines that the
evidence was erroneously admitted at trial and that the remaining evidence, properly admitted, is insufficient to
continue a submissible case. The court rejected the argument that the plaintiffs would have provided a stronger case
had they known that their key expert testimony would be dismissed. It is not sensible to argue that a part will
present less than their best evidence attrial in the expectation of another trial.
13. The Naples paid Keystone Building $620,000 to build a new home. It had major defects that Keystone failed to correct despite a
warranty on the house. A qualified expert said repairs would cost
$120,000, the amount the Naples sued for. The trial judge recognized the defects but awarded
$60,000. The Naples appealed that award for damages should have been the amount established by the expert. Is it reasonable for a
judge to split the damages 50/50? [Naples v. Keystone Building, 295Conn. 214 (Sup. Ct., Conn., 2010)]
Answer: The Connecticut Supreme Court reversed holding that damages should ―place the party in the same position
it would have been in had the contract been properly performed.‖ Damages were established by a qualified expert;
the defendant did not contradict the estimate of the repairs, so thedecision of the trial court was ―clearly
erroneous‖ as the plaintiff was not adequately compensated. Trial judges are not to rule off the cuff or split the
difference in some vague idea of fairness.
The Legal Environment of Business, 14th Edition
