MGMT 520 Week 8 Final Set 1

1. 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.

List any bases Robins & Robins could sue Casings, Inc., under contract theory ONLY for the damages caused by the explosives in their drugs, over and above the cost of the capsule shells. (short answer question) (Points: 15)

2. TCO B. The FDA discovers that, during the public comment process, Robins & Robins bribed one of the members of the administrative panel that decided to pull the rule from consideration. The member of the panel was removed and is being charged criminally. As a result, the FDA immediately implements an emergency order that puts into effect the “tracking bar” requirement and makes the rule retroactive, but only to Robins & Robins. Provide two arguments Robins & Robins can make to have the rule determined to be invalid under the Administrative Procedures Act. Explain 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 an employee with the FDA. You are drafting a memo to your boss analyzing the FDA’s liability and explaining why the FDA did the right thing in deciding not to pass the original tracking bar (UPC) rule. You are specifically being told to respond to the issue of the deaths and illnesses. What would you write? Include (and fully explain) any defenses you feel that the FDA could use against any negligence or public relation cases. Explain what liability (if any) the FDA could have to the victims and their families. (Points: 30)

4. 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 Blanchard and Peale 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? (Points: 30)

5. TCO I. A Canadian citizen whose child died from the medication sues the FDA for allowing the sale of dangerous medication in Canada. The lawsuit is filed in the International Court of Justice (ICJ). Is this the proper court to hear this case? Why or why not? (short answer question) (Points: 15)

Question 2 – 2 essays, 30 points each.

1. 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 defenses available to the school and Pastor Forester. (Points: 30)

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, a parolee with convictions for child molestation. His parole agreement prohibits him being closer than 1,000 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.” It knows you took a law and ethics course recently and asks 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) –

Exact – XX

Page 3 – Two essays at 30 points each.

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’s and JOSB’s countersuits? Do you think any of the three will win their cases? Why or why not? (Points: 30)

2. 2. TCO G. It is discovered that 2 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 because she typically trades their stock? (Points: 30)