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Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 01: Law and Legal Reasoning

Solution and Answer Guide

Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 01: Law and Legal Reasoning

TABLE OF CONTENTS Critical Thinking Questions in Features .............................................................................1 Managerial Strategy—Business Questions............................................................................ 1 Landmark in the Law............................................................................................................... 2 Chapter Review ................................................................................................................... 2 Practice and Review................................................................................................................. 2 Practice and Review: Debate This ......................................................................................... 3 Issue Spotters ........................................................................................................................... 3 Business Scenarios and Case Problems .............................................................................. 4 A Question of Ethics ................................................................................................................ 6 Time-Limited Team Assignment ........................................................................................... 8

CRITICAL THINKING QUESTIONS IN FEATURES MANAGERIAL STRATEGY—BUSINESS QUESTIONS 1.

“When faced with a clearly erroneous precedent, my rule is simple,” writes Supreme Court Justice Clarence Thomas. “We should not follow it.” How do these words offer a cautionary tale for managers relying on stare decisis to make business decisions? Solution: Simply put, the doctrine of stare decisis applies in all instances, except when it does not. As noted in the text, a court is able to depart from precedent if it feels that legal, social, or technological changes have rendered the previous decision untenable. In this case, just because the United States Supreme Court believes, at present, that automobile salespeople are exempt from the overtime rules of the FLSA, there is a possibility that the Court could reverse itself in the future. In this context, managers need to be aware that (1) any decision they make based on a court decision is subject to change, and (2) if they believe that a previous business law-related court decision is flawed, they can challenge it in court.

2. Should Roberta consider paying her salespeople overtime even though it is not required by federal law? Why or why not? Solution: Just because Roberta is legally able to avoid paying the salespeople at her new used car dealership overtime, should she? As with so many managerial decisions,

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 01: Law and Legal Reasoning

the answer to this question involves the tricky determination of costs and benefits. On the one hand, Roberta’s costs will be lower if she does not have to pay overtime to the salespeople. On the other hand, the salespeople may be more motivated if they feel they are being properly compensated for the extra hours they spend on the lot. The extra motivation will likely lead to additional sales, which very well may offset the overtime costs.

LANDMARK IN THE LAW 1.

The equitable maxims listed here underlie many of the legal rules and principles that are commonly applied by the courts today—and that you will read about in this book. For instance, in the contracts materials, you will read about the doctrine of promissory estoppel. Under this doctrine, a person who has reasonably and substantially relied on the promise of another may be able to obtain some measure of recovery, even though no enforceable contract exists. The court will estop (bar) the one making the promise from asserting the lack of a valid contract as a defense. The rationale underlying the doctrine of promissory estoppel is similar to that expressed in which of the maxims just listed? Solution: The rationale underlying the doctrine of promissory estoppel is similar to that expressed in the fourth and fifth equitable maxims listed in the feature. The fourth maxim supports the notion that the law should not be applied unfairly just because the law does not provide a solution to a particular problem. The fifth maxim holds that those administering the law should not get bogged down in technicalities when doing so leads to unfairness or injustice. In a perfect legal world, then, a lack of a valid contract should not punish a party who has justice and fairness on their side.

CHAPTER REVIEW PRACTICE AND REVIEW Suppose that the California legislature passes a law that severely restricts carbon dioxide emissions from automobiles in that state. A group of automobile manufacturers files a suit against the state of California to prevent enforcement of the law. The automakers claim that a federal law already sets fuel economy standards nationwide and that these standards are essentially the same as carbon dioxide emission standards. According to the automobile manufacturers, it is unfair to allow California to impose more stringent regulations than those set by the federal law. Using the information presented in the chapter, answer the following questions. 1.

Who are the parties (the plaintiffs and the defendant) in this lawsuit? Solution: In this situation, the automobile manufacturers are the plaintiffs, and the state of California is the defendant.

2. Are the plaintiffs seeking a legal remedy or an equitable remedy? Why? Solution: The plaintiffs are seeking an injunction, which is an equitable remedy, to prevent the state of California from enforcing its statute restricting carbon dioxide emissions.

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 01: Law and Legal Reasoning

3. What is the primary source of the law that is at issue here? Solution: This case involves a law passed by the California legislature and a federal statute; thus, the primary source of the law is statutory law. 4. Read through the appendix that follows this chapter, and then answer the following question: Where would you look to find the relevant California and federal laws? Solution: Federal statutes are found in the United States Code, and California statutes are published in the California Code. You would look in both of these sources to find the relevant state and federal statutes.

PRACTICE AND REVIEW: DEBATE THIS 1.

Under the doctrine of stare decisis, courts are obligated to follow the precedents established in their jurisdiction unless there is a compelling reason not to do so. Should U.S. courts continue to adhere to this common law principle, given that our government now regulates so many areas by statute? Solution: Both England and the U.S. legal systems were constructed on the common law system. The doctrine of stare decisis has always been a major part of this system—courts should follow precedents when they are clearly established, except when compelling reasons dictate otherwise. Even though more common law is being turned into statutory law, the doctrine of stare decisis is still valid. After all, statutes often must be interpreted by courts. What better basis for judges to render their decisions than by basing them on precedents related to the subject at hand? In contrast, some students may argue that the doctrine of stare decisis is passé. There is certainly less common law governing, say, environmental law than there was 100 years ago. Given that federal and state governments increasingly are regulating more aspects of commercial transactions between merchants and consumers, perhaps the courts should simply stick to statutory language when disputes arise.

ISSUE SPOTTERS 1.

The First Amendment to the U.S. Constitution provides protection for the free exercise of religion. A state legislature enacts a law that outlaws all religions that do not derive from the Judeo-Christian tradition. Is this law valid within that state? Why or why not? (See Sources of American Law.) Solution: No. The U.S. Constitution is the supreme law of the land and applies to all jurisdictions. A law in violation of the Constitution (in this question, the First Amendment to the Constitution) will be declared unconstitutional.

2. Apex Corporation learns that a federal administrative agency is considering a rule that will have a negative impact on the firm’s ability to do business. Does the firm have any opportunity to express its opinion about the pending rule? Explain. (See Sources of American Law.) Solution: Yes. Administrative rulemaking starts with the publication of a notice of the rulemaking in the Federal Register. Among other details, this notice states where and

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 01: Law and Legal Reasoning

when the proceedings, such as a public hearing, will be held. Proponents and opponents can offer their comments and concerns regarding the pending rule. After reviewing all the comments from the proceedings, the agency’s decision makers consider what was presented and draft the final rule.

BUSINESS SCENARIOS AND CASE PROBLEMS 1–1. Binding versus Persuasive Authority. A county court in Illinois is deciding a case involving an issue that has never been addressed before in that state’s courts. The Iowa Supreme Court, however, recently decided a case involving a very similar fact pattern. Is the Illinois court obligated to follow the Iowa Supreme Court’s decision on the issue? If the United States Supreme Court had decided a similar case, would that decision be binding on the Illinois court? Explain. (See The Common Law.) Solution: A decision of a court is binding on all inferior courts. Because no state’s court is inferior to any other state’s court, no state’s court is obligated to follow the decision of another state’s court on an issue. The decision may be persuasive, however, depending on the nature of the case and the particular judge hearing it. A decision of the United States Supreme Court on an issue is binding, like the decision of any higher court, on all inferior courts. The United States Supreme Court is the nation’s highest court, however, and thus, its decisions are binding on all courts, including state courts. 1–2. Sources of Law. This chapter discussed a number of sources of American law. Which source of law takes priority in the following situations, and why? (See Sources of American Law.) 1.

A federal statute conflicts with the U.S. Constitution. Solution: The U.S. Constitution—The U.S. Constitution is the supreme law of the land. A law in violation of the Constitution, no matter what its source, will be declared unconstitutional and will not be enforced.

2. A federal statute conflicts with a state constitutional provision. Solution: The federal statute—Under the U.S. Constitution, when there is a conflict between a federal law and a state law, the state law is rendered invalid.

3. A state statute conflicts with the common law of that state. Solution: The state statute—State statutes are enacted by state legislatures. Areas not covered by state statutory law are governed by state case law. 4. A state constitutional amendment conflicts with the U.S. Constitution. Solution: The U.S. Constitution—State constitutions are supreme within their respective borders unless they conflict with the U.S. Constitution, which is the supreme law of the land.

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 01: Law and Legal Reasoning

1–3. Remedies. Arthur Rabe is suing Xavier Sanchez for breaching a contract in which Sanchez promised to sell Rabe a Van Gogh painting for $150,000. (See The Common Law.) 1.

In this lawsuit, who is the plaintiff, and who is the defendant? Solution: In a suit by Arthur Rabe against Xavier Sanchez, Rabe is the plaintiff and Sanchez is the defendant.

2. If Rabe wants Sanchez to perform the contract as promised, what remedy should Rabe seek? Solution: Specific performance is the remedy that includes an order to a party to perform a contract as promised. 3. Suppose that Rabe wants to cancel the contract because Sanchez fraudulently misrepresented the painting as an original Van Gogh when in fact it is a copy. In this situation, what remedy should Rabe seek? Solution: Rescission is a remedy that includes an order to cancel a contract. 4. Will the remedy Rabe seeks in either situation be a remedy at law or a remedy in equity? Solution: In both cases, these remedies are remedies in equity. 1–4. Philosophy of Law. After World War II ended in 1945, an international tribunal of judges convened at Nuremberg, Germany. The judges convicted several Nazi war criminals of “crimes against humanity.” Assuming that the Nazis who were convicted had not disobeyed any law of their country and had merely been following their government’s (Hitler’s) orders, what law had they violated? Explain. (See The Common Law.) Solution: Crimes against humanity constituted, at the time of the Nuremberg trials, a new international crime, consisting of “murder, extermination, enslavement, deportation, and other inhumane acts committed against any civilian population, before or during the war, or persecutions on political, racial, or religious grounds.” In response to the defendants’ assertion that they had only been following orders, the Nuremberg judges explained in part that these were familiar crimes within domestic jurisdictions and thus the accused must have known, when they committed their acts, that they would be considered criminal. In terms of a philosophy of law, it might be said that these criminals violated “natural law.” The oldest and one of the most significant schools of jurisprudence is the natural law school. Those who adhere to the natural law school of thought believe that government and the legal system should reflect universal moral and ethical principles that are inherent in human nature. Because natural law is universal, it takes on a higher order than positive, or conventional, law. The natural law tradition presupposes that the legitimacy of conventional, or positive, law derives from natural law. Whenever it conflicts with natural law, conventional law loses its legitimacy. For example, a precept of natural law may be that murder is wrong, which is a value reflected by specific laws prohibiting murder. If a specific, written law requires murder, it conflicts

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 01: Law and Legal Reasoning

with the natural law precept, in which case individuals should disobey the written law and obey the natural law. 1–5. Business Case Problem with Sample Answer—Reading Citations. Assume that you want to read the entire court opinion in the case of Friends of Buckingham v. State Air Pollution Control Board, 947 F.3d 68 (4th Cir. 2020). Refer to the appendix to this chapter, and then explain specifically where you would find the court’s opinion. (See Finding Case Law.) Solution: The court’s opinion in the case Friends of Buckingham v. State Air Pollution Control Board can be found in volume 947 of the Federal Reporter, third series, on page 68. The Federal Reporter contains the decisions of all the United States Courts of Appeals, including, as is the case here, the Fourth Circuit Court of Appeals. Also, this case was decided (though not necessarily filed) in 2020. 1–6. Spotlight on Gateway Hotels—Stare Decisis. Orlando Garcia filed a lawsuit against Gateway Hotels, contending that, in violation of the Americans with Disabilities Act (ADA), the company’s website failed to indicate whether any of its rooms would accommodate his disability. After a court ruled that Gateway’s website did comply with the ADA, the company sought an award of attorney’s fees, as allowed by federal law. Garcia countered that his case was not “frivolous” and therefore he should not be forced to cover the hotel chain’s legal costs. Gateway pointed out that, according to a previous United States Supreme Court ruling, attorney’s fees could be awarded in such cases even if the original lawsuit was not frivolous. Applying the doctrine of stare decisis, will the court side with Gateway? Explain. [Garcia v. Gateway Hotel, LP, 82 F.4th 750 (9th Cir. 2023] (See The Common Law.) Solution: In Brown v. Lucky Stores (2001), the U.S. Court of Appeals for the Ninth Circuit (the authority deciding this case) ruled that ADA defendants could not recoup the legal costs of a failed discrimination lawsuit unless the action was “frivolous, unreasonable, or groundless.” Twelve years later, with its Marx v. General Revenue Corp. decision, the United States Supreme Court held that a district court has the discretion to award legal fees to a defendant regardless of whether the plaintiff’s legal action was in bad faith. Applying the doctrine of stare decisis, the U.S. Court of Appeals for the Ninth Circuit concluded that “our decision in Brown cannot be reconciled with the Court's decision in Marx, and therefore it has been effectively overruled.” Therefore, in this case, at the district court’s discretion, Garcia could be found liable for those costs that Gateway incurred in defending itself against Garcia’s failed ADA lawsuit.

A QUESTION OF ETHICS 1–7. The Doctrine of Precedent. Sandra White operated a travel agency. To obtain lower airline fares for her nonmilitary clients, she booked military-rate travel by forwarding fake military identification cards to the airlines. The government charged White with identity theft, which requires the “use” of another’s identification. The trial court had two cases that represented precedents. In the first case, David Miller obtained a loan to buy land by representing that certain investors had approved the loan when, in fact, they had not. Miller’s conviction for identity

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 01: Law and Legal Reasoning

theft was overturned because he had merely said that the investors had done something when they had not. According to the court, this was not the “use” of another’s identification. In the second case, Kathy Medlock, an ambulance service operator, had transported patients for whom ambulance transport was not medically necessary. To obtain payment, Medlock had forged a physician’s signature. The court concluded that this was “use” of another person’s identity. [United States v. White, 846 F.3d 170 (6th Cir. 2017)] (See Sources of American Law.) 1.

Which precedent—the Miller case or the Medlock case—is similar to White’s situation, and why? Solution: In this problem, White operated a travel agency. To obtain low fares for her clients, she submitted fake military identification cards to the airlines. She was charged with the crime of identity theft, which requires the “use” of another’s identification. In a previous case, David Miller, to obtain a loan, represented that certain investors approved of the loan when they did not. Miller’s conviction for identity theft was overturned on the ground that he had not “used” the investors’ identities—he had only said that they had done something when they had not. In a second case, Kathy Medlock, the operator of an ambulance service, obtained payment for transporting patients for whom there was no medical necessity to do so by forging a physician’s signature. White’s actions most closely resemble Medlock’s forgery. White not only told the airlines that her clients were members of the military—she created false identification cards and sent them to the airlines. In all of these cases, the defendants lied about their actions. Whether or not their conduct fell within the meaning of a word within a statute, or matched the actions of a perpetrator in another case, none of these parties can claim to have acted ethically. Honesty is a part of ethical behavior in any set of circumstances, and none of these defendants were truthful about their actions. In the actual case on which this problem is based, the court concluded that White’s actions were most similar to Medlock’s. White was convicted of identity theft. On appeal, the U.S. Court of Appeals for the Sixth Circuit affirmed the conviction.

2. In the two cases cited by the court, were there any ethical differences in the actions of the parties? Explain your answer. Solution: No, in the two cases cited by the White court—and in the White case—there were no ethical differences in the actions of the parties. Almost any definition of ethics, and any set of ethical standards, includes honesty as a component. In the White case, Sandra White lied to the airlines that her clients were members of the military, and created false identification cards to obtain cheaper fares. In the first case cited by the White court, David Miller, to obtain a loan, represented that certain investors approved of the loan when they did not. In the second case cited by the White court, Kathy Medlock, the operator of an ambulance service, obtained payment for transporting

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 01: Law and Legal Reasoning

patients for whom there was no medical necessity to do so by forging a physician’s signature. In all of these cases, the defendants lied. Whether or not their conduct fell within the meaning of a word within a statute, or matched the unlawful actions of each other, none of these parties can claim to have acted ethically. Honesty is a part of ethical behavior in any set of circumstances, and none of these defendants were truthful.

TIME-LIMITED TEAM ASSIGNMENT 1–8. Court Opinions. Go to the section entitled Reading and Understanding Case Law in the appendix at the end of this chapter, and read the subsection entitled “Decisions and Opinions.” 1.

One team will explain the difference between a concurring opinion and a majority opinion. Solution: A majority opinion is a written opinion outlining the views of the majority of the judges or justices deciding a particular case. A concurring opinion is a written opinion by a judge or justice who agrees with the conclusion reached by the majority of the court but not necessarily with the legal reasoning that led the conclusion.

2. Another team will outline the difference between a concurring opinion and a dissenting opinion. Solution: A concurring opinion will voice alternative or additional reasons as to why the conclusion is warranted or clarify certain legal points concerning the issue. A dissenting opinion is a written opinion in which judges or justices who do not agree with the conclusion reached by the majority of the court expound their views on the case. 3. The third team will explain why judges and justices write concurring and

dissenting opinions, given that these opinions will not affect the outcome of the case at hand, which has already been decided by majority vote. Solution: Obviously, a concurring or dissenting opinion will not affect the case involved—because it has already been decided by majority vote. Nevertheless, such opinions often are used by another court later to support its position on a similar issue.

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 02: Courts and Alternative Dispute Resolution

Solution and Answer Guide

Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 02: Courts and Alternative Dispute Resolution

TABLE OF CONTENTS Critical Thinking Questions in Features .............................................................................1 Landmark in the Law—Application to Today’s World ........................................................ 1 Adapting the Law to the Online Environment—Critical Thinking.................................... 2 Ethical Issue—Value Judgment ............................................................................................. 2 Business Law in Context—Key Point .................................................................................... 2 Critical Thinking Questions in Cases ................................................................................. 3 Case 2.1—Critical Thinking ...................................................................................................... 3 Case 2.2—Critical Thinking ..................................................................................................... 4 Case 2.3—Critical Thinking ..................................................................................................... 4 Chapter Review ................................................................................................................... 5 Practice and Review................................................................................................................. 5 Practice and Review: Debate This ......................................................................................... 6 Issue Spotters ........................................................................................................................... 6 Business Scenarios and Case Problems .............................................................................. 7 A Question of Ethics ............................................................................................................... 11 Time-Limited Team Assignment .......................................................................................... 12

CRITICAL THINKING QUESTIONS IN FEATURES LANDMARK IN THE LAW—APPLICATION TO TODAY’S WORLD 1.

Since the Marbury v. Madison decision, the power of judicial review has remained unchallenged and today is exercised by both federal and state courts. Why is judicial review such an important check on the powers of the legislative branch of the U.S. government? Solution: If the courts did not have the power of judicial review, the constitutionality of Congress’s acts could not be challenged in court—a congressional statute would remain law unless changed by Congress. Such an arrangement is fundamentally at

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 02: Courts and Alternative Dispute Resolution

odds with the separation of powers so important to both American law and American government.

ADAPTING THE LAW TO THE ONLINE ENVIRONMENT—CRITICAL THINKING 1.

In our connected world, is there any way a defendant could avoid service of process via social media? Solution: Yes, there is one way. That defendant could have to have no social media accounts whatsoever. Increasingly, though, fewer and fewer individuals are not connected to others via social media.

ETHICAL ISSUE—VALUE JUDGMENT 1.

What steps should lawyers take to protect their clients from the ethical pitfalls of third-party litigation funding? Solution: A lawyer’s ethical obligation is to act in the best interests of the client at all times (with certain rare exceptions involving a client’s criminal behavior). In situations involving potential third-party litigation funding, this obligation would start when a client tells their lawyer that they will not be able to pay for the proposed litigation without outside help. The lawyer would then have to advise the client on the pros and cons of third-party litigation funding, as discussed in the feature. If the client decides to seek a third-party litigation partner, a lawyer would be obliged to find one with a reputation for ethical behavior. When such a litigation partner is identified, the lawyer would represent the client in negotiating the deal with the third party. If an agreement is reached, the lawyer must ensure that the third party does not improperly influence the lawyer’s independent professional judgment during the legal proceedings. Along these lines, it would be unethical for the lawyer to receive compensation from the third party without written consent from the client. If during the course of the lawsuit the client’s interests and the third party’s interests diverge, the lawyer must continue to act in the best interests of the client, even if this results in the lawyer being removed from the case. (Indeed, some third-party funding litigation contracts give the funders the ability to approve of and/or remove counsel.) It is likely that, at some point, the third-party funder will ask for confidential information about the client. The lawyer cannot share this information without the client’s written consent. Finally, if the lawsuit results in a damage award for the client, the lawyer must ensure that the pretrial contract is adhered to in proportioning these damages.

BUSINESS LAW IN CONTEXT—KEY POINT 1.

It is understandable that companies wish to avoid the high cost of going to court for every customer grievance. Binding arbitration offers businesses numerous advantages over litigation. Taking Samsung’s experience as a guide, what step should a business take to give itself a better chance of successfully compelling arbitration when faced with a class-action lawsuit brought by its customers?

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 02: Courts and Alternative Dispute Resolution

Solution: A business in Samsung’s situation must be certain that a binding arbitration requirement is part of an actual contractual agreement between the business and its customers. Inserting an arbitration clause, even in all capital letters, in a multi-page document that customers may never read is usually not sufficient.

CRITICAL THINKING QUESTIONS IN CASES CASE 2.1—CRITICAL THINKING 1.

Economic. What might be some of the implications of this decision for the nation’s businesses? Solution: Previous to this case, corporations like Norfolk Southern Railway assumed they would be subject to litigation only in the state where they were incorporated or headquartered, or in a state where the legal issue arose out of the corporation’s significant business activities there. In this case, the United States Supreme Court ruled that a company can be sued in any state that has a Pennsylvania-style consent statute, regardless of the amount of business the company does there. This is important because being sued out of state incurs a significant economic burden, requiring the company to, among other costs, hire out-of-state counsel and rent out-of-state office space. American businesses are also worried that the Supreme Court’s decision will spur other states besides Pennsylvania to pass similar consent-requirement laws. If this does happen, businesses will have to decide whether expansion into other states is worth the risk of increased exposure to lawsuits.

2. Ethical. Norfolk Southern argued that the “primary concern” of jurisdiction law is to treat parties to a lawsuit “fairly.” Does the Supreme Court’s decision in this case seem fair to Norfolk Southern? Explain your answer. Solution: At first glance, many aspects of this decision do not seem fair to Norfolk Southern. The company was incorporated in Virginia and has its headquarters there, as well. Mallory lived in Virginia and claimed that he was exposed to carcinogens while working for the railway in Ohio and Virginia. Indeed, Mallory most likely was seeking a “plaintiff-friendly” venue over other, more suitable locales for the trial. Norfolk Southern also contended that Pennsylvania unfairly coerced out-of-state companies to agree to its consent statute by denying them the opportunity to do business in the state otherwise. The facts of the Mallory case suggest, however, that the Supreme Court relied on equitable principles in coming to its decision. At the time of Mallory’s lawsuit, the company employed nearly 5,000 people in Pennsylvania and maintained more than 2,400 miles of railroad tracks in the state. It also operated a 70-acre locomotive shop in Altoona, Pennsylvania. So, Norfolk Southern had significantly more than “minimal contacts” with Pennsylvania, even if none of these contacts directly related to the company’s legal dispute with Mallory. Such facts suggest that, in future cases involving consent-requirement statutes, courts will continue to consider the totality of circumstances when deciding jurisdictional fairness.

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 02: Courts and Alternative Dispute Resolution

CASE 2.2—CRITICAL THINKING 1.

What If the Facts Were Different? Suppose that Gucci had not presented evidence that Huoqing made one actual sale through his website to a resident of the court’s district (the private investigator). Would the court still have found that it had personal jurisdiction over Huoqing? Why or why not? Solution: The single sale to a resident of the district, Gucci’s private investigator, helped the plaintiff establish that the defendant’s website was interactive and that the defendant used the website to sell goods to residents in the court’s district. It is possible that without proof of such a sale, the court would not have found that it had personal jurisdiction over the foreign defendant. The reason is that courts cannot exercise jurisdiction over foreign defendants unless they can show the defendants had minimum contacts with the forum, such as by selling goods within the forum.

CASE 2.3—CRITICAL THINKING 1.

Economic. Should an appellate court’s review of the amount of damages awarded at trial be subject to the principle that limits appellate review of other evidence? Why or why not? Solution: Yes, an appellate court’s review of the amount of damages awarded at trial should be—and is—subject to the same rule that limits the court’s review of other evidence. An appellate court determines whether the factual findings of a trial court are supported by competent evidence. Only if the findings of fact are not supported by competent evidence in the record will there be a reversal. This principle applies to an assessment of damages. Unless it clearly appears that the amount awarded resulted from partiality, caprice, prejudice, corruption, or some other improper influence, an appellate court should not interfere with it. In other words, as long as there is a reasonable relationship between the amount of an award and its proof, it is not the function of a court to substitute its judgment for that of a fact-finder. In the Oxford case, Christophe and Frenchie’s provided documentation in support of their counterclaim at the trial that, in the view of the appellate court, supported the fact-finder’s determination of the amount awarded. Of course, constructive eviction caused by the sewage and water erupting from the pipe, and the landlord’s failure to remedy the problem, was the legal basis for the award.

2. Legal. A judge or a jury can decide a question of fact, but only a judge can rule on a question of law. Why? Solution: A question of fact is decided by a trier of fact. In a jury trial, this is the jury. In a nonjury trial, this is the judge. A ruling on a question of law is made only by a judge, not a jury, which generally consists of laypersons. A question of fact concerns what really happened with respect to a dispute being tried—such as, in the Oxford case, whether a certain act violated a contract. A

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 02: Courts and Alternative Dispute Resolution

question of law concerns the application or interpretation of the law—such as, again in the Oxford case, whether an act that violated a contract also violated the law. One of the reasons for the distinction between those who can decide questions of fact and those who can decide questions of law is that judges have special training and expertise to make decisions on questions of law that the typical lay member of a jury lacks.

CHAPTER REVIEW PRACTICE AND REVIEW Stan Garner resides in Illinois and promotes boxing matches for SuperSports, Inc., an Illinois corporation. Garner created the promotional concept of the “Ages” fights—a series of three boxing matches pitting an older fighter (George Foreman) against a younger fighter, such as John Ruiz or Riddick Bowe. The concept included titles for each of the three fights (“Challenge of the Ages,” “Battle of the Ages,” and “Fight of the Ages”), as well as promotional epithets to characterize the two fighters (“the Foreman Factor”). Garner contacted George Foreman and his manager, who both reside in Texas, to sell the idea, and they arranged a meeting at Caesar’s Palace in Las Vegas, Nevada. At some point in the negotiations, Foreman’s manager signed a nondisclosure agreement prohibiting him from disclosing Garner’s promotional concepts unless they signed a contract. Nevertheless, after negotiations between Garner and Foreman fell through, Foreman used Garner’s “Battle of the Ages” concept to promote a subsequent fight. Garner filed a lawsuit against Foreman and his manager in a federal district court in Illinois, alleging breach of contract. Using the information presented in the chapter, answer the following questions. 1.

On what basis might the federal district court in Illinois exercise jurisdiction in this case? Solution: The federal district court can exercise jurisdiction in this case because the case involves diversity of citizenship. Diversity jurisdiction requires that the plaintiff and defendant be from different states and that the dollar amount of the controversy exceed $75,000. Here, Garner resides in Illinois, and Foreman and his manager live in Texas. Because the dispute involved the promotion of a series of boxing matches with George Foreman, the amount in controversy likely exceeded the required threshold amount.

2. Does the federal district court have original or appellate jurisdiction? Solution: Original jurisdiction, because the case was initiated in that court and that is where the trial will take place. Courts having original jurisdiction are courts of the first instance, or trial courts—that is, courts in which lawsuits begin, trials take place, and evidence is presented. In the federal court system, the district courts are the trial courts, so the federal district court has original jurisdiction. 3. Suppose that Garner had filed his action in an Illinois state court. Could an Illinois state court have exercised personal jurisdiction over Foreman or his manager? Why or why not? © 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 02: Courts and Alternative Dispute Resolution

Solution: No, because the defendants lacked minimum contacts with the state of Illinois. Because the defendants were located out of the state, the court would have to determine whether they had sufficient contacts with the state for Illinois to exercise jurisdiction based on a long arm statute. Here, the defendants never came to Illinois, and the contract that they are alleged to have breached was not formed in Illinois. Thus, it is unlikely that an Illinois state court would find that sufficient minimum contacts existed to exercise jurisdiction. 4. What if Garner had filed his action in a Nevada state court? Would that court have had personal jurisdiction over Foreman or his manager? Explain. Solution: Yes, because the defendants met with Garner and formed a contract in the state of Nevada. A state can exercise jurisdiction over out-of-state defendants under a long arm statute if the defendants had sufficient contacts with the state. Here, the parties met and negotiated their contract in Nevada, and a court would likely hold that these activities were sufficient to justify a Nevada court’s exercising personal jurisdiction.

PRACTICE AND REVIEW: DEBATE THIS 1.

In this age of the internet, when people communicate via e-mail, tweets, social media, and Skype, is the concept of jurisdiction losing its meaning? Solution: Many believe that yes, the idea of determining jurisdiction based on individuals’ and companies’ physical locations no longer has much meaning. Increasingly, contracts are formed via online communications. Does it matter where one of the parties has a physical presence? Does it matter where the e-mail server or webpage server is located? Probably not. In contrast, in one sense, jurisdiction still has to be decided when conflicts arise. Slowly, but ever so surely, courts are developing rules to determine where jurisdiction lies when one or both parties used online systems to sell or buy goods or services. In the final analysis, a specific court in a specific physical location has to try each case.

ISSUE SPOTTERS 1.

At the trial, after Sue calls witnesses, offers evidence, and so forth, Tom has at least two choices between courses of action. Tom can start by calling witnesses. What might Tom do instead? (See Following a State Court Case.) Solution: Tom could file a motion for a directed verdict. This motion asks the judge to direct a verdict for Tom on the ground that Sue presented no evidence that would justify granting her relief. The judge grants the motion if there is insufficient evidence to raise an issue of fact.

2. Lexi contracts with Theo to deliver a quantity of computers to Lexi’s Computer Store. They disagree over the amount, the delivery date, the price, and the quality. Lexi files a suit against Theo in a state court. Their state requires that their dispute be submitted to mediation or nonbinding arbitration. If the dispute is not resolved, or if either party disagrees with the decision of the mediator or arbitrator, will a court hear the case? Explain. (See Alternative Dispute Resolution.)

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 02: Courts and Alternative Dispute Resolution

Solution: Yes. Submission of the dispute to mediation or nonbinding arbitration is mandatory, but compliance with the decision of the mediator or arbitrator is voluntary.

BUSINESS SCENARIOS AND CASE PROBLEMS 2–1. Standing to Sue. Jack and Maggie Turton bought a house in Jefferson County, Idaho, located directly across the street from a gravel pit. A few years later, the county converted the pit to a landfill. The landfill accepted many kinds of trash that cause harm to the environment, including major appliances, animal carcasses, containers with hazardous content warnings, leaking car batteries, and waste oil. The Turtons complained to the county, but the county did nothing. The Turtons then filed a lawsuit against the county alleging violations of federal environmental laws pertaining to groundwater contamination and other pollution. Do the Turtons have standing to sue? Why or why not? (See Basic Judicial Requirements.) Solution: This problem concerns standing to sue. As you read in the chapter, to have standing to sue, a party must have a legally protected, tangible interest at stake. Parties must show that they have been injured, or are likely to be injured, by the actions of the parties that they seek to sue. In this problem, the issue is whether the Turtons had been injured, or were likely to be injured, by the county’s landfill operations. Clearly, one could argue that the injuries that the Turtons complained of directly resulted from the county’s violations of environmental laws while operating the landfill. The Turtons lived directly across from the landfill, and they were experiencing the specific types of harms (fires, scavenger problems, groundwater contamination) that those laws were enacted to address. Thus, the Turtons would have standing to bring their suit. 2–2. Discovery. Advance Technology Consultants, Inc. (ATC) contracted with RoadTrac, LLC, to provide software and client software systems for products using global positioning satellite (GPS) technology being developed by RoadTrac. RoadTrac agreed to provide ATC with hardware with which ATC’s software would interface. Problems soon arose, however, and RoadTrac filed a lawsuit against ATC alleging breach of contract. During discovery, RoadTrac requested ATC’s customer lists and marketing procedures. ATC objected to providing this information because RoadTrac and ATC had become competitors in the GPS industry. Should a party to a lawsuit have to hand over its confidential business secrets as part of a discovery request? Why or why not? What limitations might a court consider imposing before requiring ATC to produce this material? (See Following a State Court Case.) Solution: Under the work-product rule, attorneys are allowed to protect information that they have gathered as a result of their own skill and diligence. For example, an attorney for a party involved in an auto accident can go out to the scene of the accident and observe the fact that there is a stop sign missing without being under any obligation to divulge such information to his opponent in the lawsuit. Similarly, attorneys who discover recently decided case decisions supporting their theories are under no obligation to share these discoveries with opposing attorneys. If attorneys had to share everything, they would be less inclined to expend efforts on behalf of their clients because, in essence, they would be working for both sides at once. 2–3. Discovery. Jessica Lester died from injuries suffered in an auto accident caused by the driver of a truck owned by Allied Concrete Co. Jessica’s widower, Isaiah, filed a suit against Allied for damages. The defendant requested copies of all of Isaiah’s Facebook photos and other postings. Before responding, Isaiah “cleaned up” the Facebook page. Allied suspected

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 02: Courts and Alternative Dispute Resolution

that some of the items had been deleted, including a photo of Isaiah holding a beer can while wearing a T-shirt that declared “I [heart] hotmoms.” Can this material be recovered? If so, how? What effect might Isaiah’s “misconduct” have on the result in this case? Discuss. [Allied Concrete Co. v. Lester, 736 S.E.2d 699 (Va. 2013)] (See Following a State Court Case.) Solution: Yes, the items that were deleted from a Facebook page can be recovered. Normally, a party must hire an expert to recover material in an electronic format, and this can be time consuming and expensive. Electronic evidence, or e-evidence, consists of all computer-generated or electronically recorded information, such as posts on Facebook and other social media sites. The effect that e-evidence can have in a case depends on its relevance and what it reveals. In the facts presented in this problem, Isaiah should be sanctioned—he should be required to cover Allied’s cost to hire the recovery expert and attorney’s fees to confront the misconduct. In a jury trial, the court might also instruct the jury to presume that any missing items are harmful to Isaiah’s case. If all of the material is retrieved and presented at the trial, any prejudice to Allied’s case might thereby be mitigated. If not, of course, the court might go so far as to order a new trial. In the actual case on which this problem is based, Allied hired an expert, who determined that Isaiah had in fact removed some photos and other items from his Facebook page. After the expert testified about the missing material, Isaiah provided Allied with all of it, including the photos that he had deleted. Allied sought a retrial, but the court instead reduced the amount of Isaiah’s damages by the amount that it cost Allied to address his “misconduct.” 2–4. Electronic Filing. Betsy Faden worked for the U.S. Department of Veterans Affairs. Faden was removed from her position in April 2012 and was given until May 29 to appeal the removal decision. She submitted an appeal through the Merit Systems Protection Board’s e-filing system seven days after the deadline. Ordered to show good cause for the delay, Faden testified that she had attempted to e-file the appeal while the board’s system was down. The board acknowledged that its system had not been functioning on May 27, 28, and 29. Was Faden sufficiently diligent in ensuring a timely filing? Discuss. [Faden v. Merit Systems Protection Board, 553 Fed.Appx. 991 (Fed. Cir. 2014)] (See Courts Online.) Solution: No, Faden was not sufficiently diligent in ensuring a timely filing. Diligence in this context requires carefulness and persistence. Excusable delay might be evidenced by proof of circumstances beyond a party’s control that prevent a timely filing. From the facts as stated, it appears that Faden attempted to file her appeal only at the end of the relevant period when the Board’s e-filing system was down. But there is no indication that anything prevented her from e-filing at a time when the Board’s system was not down, or from mailing or faxing her appeal at any time, before the deadline. Thus, Faden appears to have been neither timely nor diligent in filing her appeal before the deadline. In the actual case on which this problem is based, the Merit Systems Protection Board dismissed Faden’s appeal. The Board found that she was not reasonably diligent in ensuring timely filing. On her further appeal, the U.S. Court of Appeals for the Federal Circuit affirmed.

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 02: Courts and Alternative Dispute Resolution

2–5. Business Case Problem with Sample Answer—Corporate Contacts. LG Electronics, Inc., a South Korean company, and nineteen other foreign companies participated in the global market for cathode ray tube (CRT) products. CRTs were components in consumer goods, including television sets, and sold for many years in high volume in the United States, including the state of Washington. The state filed a suit against LG and the others, alleging a conspiracy to raise prices and set production levels in the market for CRTs in violation of a state consumer protection statute. The defendants filed a motion to dismiss the suit for lack of personal jurisdiction. Should this motion be granted? Explain your answer. [State of Washington v. LG Electronics, Inc., 185 Wash.App. 394, 341 P.3d 346 (2015)] (See Basic Judicial Requirements.) Solution: No, the defendants’ motion to dismiss the suit for lack of personal jurisdiction should not be granted. A corporation normally is subject to jurisdiction in a state in which it is doing business. A court applies the minimum-contacts test to determine whether it can exercise jurisdiction over an out-of-state corporation. This requirement is met if the corporation sells its products within the state or places its goods in the “stream of commerce” with the intent that the goods be sold in the state. In this problem, the state of Washington filed a suit in a Washington state court against LG Electronics, Inc., and nineteen other foreign companies that participated in the global market for cathode ray tube (CRT) products. The state alleged a conspiracy to raise prices and set production levels in the market for CRTs in violation of a state consumer protection statute. The defendants filed a motion to dismiss the suit for lack of personal jurisdiction. These goods were sold for many years in high volume in the United States, including the state of Washington. In other words, the corporations purposefully established minimum contacts in the state of Washington. This is a sufficient basis for a Washington state court to assert personal jurisdiction over the defendants. In the actual case on which this problem is based, the court dismissed the suit for lack of personal jurisdiction. On appeal, a state intermediate appellate court reversed on the reasoning stated above. 2–6. Appellate, or Reviewing, Courts. Angelica Westbrook was employed as a collector for Franklin Collection Service, Inc. During a collection call, Westbrook told a debtor that a $15 processing fee was an “interest” charge. This violated company policy, and Westbrook was fired. She filed a claim for unemployment benefits, which the Mississippi Department of Employment Security (MDES) approved. Franklin objected. At an MDES hearing, a Franklin supervisor testified that she had heard Westbrook make the false statement, although she admitted that there had been no similar incidents with Westbrook. Westbrook denied making the statement but added that, if she had said it, she did not remember it. The agency found that Franklin’s reason for terminating Westbrook did not amount to the misconduct required to disqualify her for benefits and upheld the approval. Franklin appealed to a state intermediate appellate court. Is the court likely to uphold the agency’s findings of fact? Explain. [Franklin Collection Service, Inc. v. Mississippi Department of Employment Security, 184 So.3d 330 (Miss.App. 2016)] (See The State and Federal Court Systems.) Solution: Yes, the state intermediate appellate court is likely to uphold the agency’s findings of fact. Appellate courts normally defer to lower tribunals’ findings on questions of fact because those forums’ decision makers are in a better position to evaluate testimony. A trial court judge or jury, for example, can directly observe

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 02: Courts and Alternative Dispute Resolution

witnesses’ gestures, demeanor, and other nonverbal conduct during a trial. A judge or justice sitting on an appellate court cannot. In this problem, Angelica Westbrook, an employee of Franklin Collection Service, Inc., allegedly made a statement during a call to a debtor that violated company policy. Westbrook was fired and applied for unemployment benefits. Benefits were approved, but Franklin objected. Witnesses at an administrative hearing on the dispute included a Franklin supervisor who testified that she heard Westbrook make the false statement, although she admitted that Westbrook had not been involved in any similar incidents. Westbrook denied making the statement but added that if she had said it, she did not remember it. The agency found that Franklin’s reason for terminating Westbrook did not amount to the misconduct required to disqualify her for benefits and upheld the approval. Franklin appealed. Under the standard for appellate review of findings of fact, the appellate court will likely affirm the agency’s findings. In the actual case on which this problem is based, the state intermediate appellate court to which Franklin appealed the MDES’s approval of Johnson’s claim upheld the agency’s decision. 2–7. Standing to Sue. Debra Laufer is disabled within the meaning of the Americans with Disabilities Act (ADA). Laufer is an advocate for disabled people’s rights and a self-proclaimed “tester” who monitors whether places of public accommodation and their websites comply with the ADA. In a lawsuit against a hotel, Laufer claimed to have suffered a “concrete” injury because the hotel’s website did not include accessibility-related information required by federal regulations. The inability to obtain the information on the website caused Laufer to experience “frustration and humiliation.” The defendant owner of the hotel, Arpan LLC, argued that Laufer lacked standing to sue. The district court agreed, holding that Laufer had not suffered a “concrete” injury. On appeal, should the reviewing court accept the trial court’s ruling? Why or why not? [Laufer v. Arpan, LLC, 29 F.4th 1268 (11th Cir. 2022)] (See Basic Judicial Requirements.) Solution: The United States Court of Appeals for the 11th Circuit decided that precedent compelled it to vacate the district court’s decision and remand the case for further proceedings. “The plaintiff has Article 3 standing if she can establish (1) an injury in fact, (2) that is fairly traceable to the defendant’s conduct, and (3) that is redressable by a favorable decision.” The court looked at whether Laufer had suffered a concrete “intangible” injury that suffices for her to have standing to sue. The plaintiff’s allegations of frustration and humiliation are facially sufficient to demonstrate stigmatic injury standing. 2–8. Service of Process. Cincinnati Insurance Company (CIC) was involved in a lawsuit with Eric Hall. CIC twice requested certified-mail service on Hall at a residential address. On both occasions, electronic return receipts indicated that the summons and complaint were successfully “delivered” on specified dates and “left with individual.” Someone signed for service of process. CIC moved for default judgment against Hall, citing Hall’s failure to appear or otherwise defend. A trial court dismissed the lawsuit against Hall for lack of service of process. Should the Court of Appeals of Ohio affirm the trial court’s order? Why or why not? [Cincinnati Insurance Co. v. Eric Hall, et al., 2022-Ohio-1112, 2022 WL 985977 (Ct. App. Ohio, 2nd Dist. 2022)] (See The State and Federal Court Systems.) Solution: No. The Court of Appeals of Ohio, 2nd District, Montgomery County, concluded that the trial court erred in finding invalid service of process. The appeals

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 02: Courts and Alternative Dispute Resolution

court found both a rebuttable presumption of valid service and no evidence to rebut the presumption. The trial court’s judgment was reversed, and the case was remanded for further proceedings. The laws of civil procedure in the state of Ohio authorize certified-mail service with a return receipt “signed by any person.” Because the certified-mail return receipt was signed by “someone,” there was a rebuttable presumption of proper service.

A QUESTION OF ETHICS 2–9. Jury Trials. Adam Orduna accepted a position at Kansas City, Missouri, news station KCTV5 as a sports journalist. The employment contract Orduna signed contained a provision that both parties “voluntarily waive their right to a jury trial and agree to submit any claims to a court for a bench trial.” (A bench trial is one in which a judge rather than a jury decides the outcome.) Three years later, Gray Media Group, Inc., which owned KCTV5, terminated Orduna’s employment. Orduna, who is African American, filed a lawsuit alleging racial discrimination under the Civil Rights Act of 1964. The plaintiff demanded a jury trial, arguing that the contract waiver was ineffectual because he did not make it knowingly and voluntarily. [Orduna v. Gray Media Group, Inc., 2024 WL 21506 (D. Kan. 2024)] (See Following a State Court Case.) 1.

The right to a jury trial in a civil lawsuit is a fundamental right for defendants. Should corporations be allowed to waive this right in employment contracts? Explain. Solution: The requirement is that both parties to the contract must waive the right to a jury trial. If one of the parties does not want to give up this right, they do not have to. Of course, Orduna claimed that he did not realize he had waived his right to a jury trial, which was the crux of his lawsuit against Gray Media. It is not a given, however, that a jury trial is always “better” than a bench trial for defendants. In some respects, bench trials might be preferable. With no need for jury selection or jury instructions, bench trials are often shorter and less expensive than jury trials. A judge is—one would hope—more knowledgeable concerning the law than is the average juror, which might benefit the defendant. At the same time, there is definitely a widespread belief in the business community that jurors, many of whom are employees themselves, are more sympathetic to defendants such as Orduna than are judges. This belief explains why many companies include jury waiver clauses in their employment contracts.

2. Did the employment contract in this case unethically obscure the waiver of a jury trial provision so as to deceive an employee like Orduna? Solution: The ethical aspect of this case is not straightforward. Generally speaking, contractual agreements waiving the right to trial by jury are neither contrary to public policy nor unlawful. Of course, the waiver of this right must be “knowing and voluntary.” In claiming that his waiver was unknowing and involuntary, Orduna relied more on ethical arguments than legal ones—always a risky courtroom strategy. The ethical issue in the Orduna case was whether Meredith (the company with which Orduna negotiated his contract before it was purchased by Gray Media)

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 02: Courts and Alternative Dispute Resolution

had such a significant negotiating advantage over Orduna as to make the jury trial waiver unfair. Orduna argued that he was merely an individual while Meredith was a large corporation, implying an inherent inequality in bargaining power. He also noted that he was afraid that Meredith would pull its offer for employment if he attempted to negotiate the terms of a standard contract. The applicable ethical concepts here encompass basic fairness in the bargaining process, positing that the process cannot be fair if one side holds so much power over the other side that the agreement is the result of coercion rather than free will. Was Meredith’s contract designed to take advantage of individuals such as Orduna by “tricking” them into waiving their right to a jury trial? The district court presiding over this case did not think so. First, the court pointed out that the waiver clause was “conspicuous” because it (1) was clearly labeled, boldfaced, and underlined; (2) used font the same size as was used in the rest of the contract; and (3) was clearly separated from the rest of the text. In addition, the waiver provision explicitly suggested that the potential employee consult a lawyer before agreeing to the contract’s terms, and the contract’s signature page contained a warning that, before signing, the employee should “CONSULT AN ATTORNEY OF HIS/HER OWN CHOOSING AT HIS/HER OWN EXPENSE TO REVIEW THIS AGREEMENT.” Using the court’s reasoning, it does not seem like Meredith’s standard contract was designed to fool employees into waiving the right to a jury trial without their knowledge. This conclusion is backed up by additional information about Orduna provided by the court (with the help of Meredith’s lawyers, no doubt). At the time he signed the contract, Orduna was thirty-one years old, had a college degree, and had been working in the television broadcast industry for more than five years. The contract with KCTV5 was his second. Even though Orduna was not, as he pointed out, trained in the legalities of contracts, the court found that his experience was sufficient to understand the basics of Meredith’s standard contract. As the court put it, “there is inevitably disparity in bargaining power between an employer and an employee.” Businesses are ethically obligated to lessen this imbalance by creating standard employment contracts that a reasonable potential employee will understand. In this case, the court felt that Meredith had done so, and therefore it dismissed Orduna’s claim that his waiver of jury trial was not made “knowingly and voluntarily.” In the end, this does not mean that Gray Media did not discriminate against Orduna. It means that the question will be decided by a judge rather than a jury of the plaintiff’s peers.

TIME-LIMITED TEAM ASSIGNMENT 2–10. Access to Courts. Assume that a statute in your state requires that all civil lawsuits involving damages of less than $50,000 be arbitrated. Such a case can be tried in court only if a party is dissatisfied with the arbitrator’s decision. The statute also provides that if a trial does not result in an improvement of more than 10 percent in the position of the party who demanded the trial, that party must pay the entire cost of the arbitration proceeding. (See Alternative Dispute Resolution.)

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 02: Courts and Alternative Dispute Resolution

One team will argue that the state statute violates litigants’ rights of access to the courts and trial by jury. Solution: The statute violates litigants’ rights of access to the courts and to a jury trial because the imposition of arbitration costs on those who improve their positions by less than 10 percent on an appeal is an unreasonable burden. And the statute forces parties to arbitrate before they litigate—an added step in the process of dispute resolution. The limits on the rights of the parties to appeal the results of their arbitration to a court further impede their rights of access. The arbitration procedures mandated by the statute are not reasonably related to the legitimate governmental interest of attaining less costly resolutions of disputes.

2. Another team will argue that the statute does not violate litigants’ right of access to the courts. Solution: The statute does not violate litigants’ constitutional right of access to the courts because it provides the parties with an opportunity for a court trial in the event either party is dissatisfied with an arbitrator’s decision. The burdens on a person’s access to the courts are reasonable. The state judicial system can avoid the expense of a trial in many cases. And parties who cannot improve their positions by more than 10 percent on appeal are arguably wasting everyone’s time. The assessment of the costs of the arbitration on such parties may discourage appeals in some cases, which allows the courts to further avoid the expense of a trial. The arbitration procedures mandated by the statute are reasonably related to the legitimate governmental interest of attaining speedier and less costly resolution of disputes. 3. A third team will evaluate how the determination on right of access would be changed if the statute was part of a pilot program that affected only a few judicial districts in the state. Solution: The determination on rights of access could be different if the statute was part of a pilot program and affected only a few judicial districts in the state because only parties who fell under the jurisdiction of those districts would be subject to the limits. Opponents might argue that the program violates the due process of the Fifth Amendment because it is not applied fairly throughout the state. Proponents might counter that parties who object to an arbitrator’s decision have an opportunity to appeal it to a court. Opponents might argue that the program exceeds what the state legislature can impose because it does not reasonably relate to a legitimate governmental objective—it arbitrarily requires only litigants who reside in a few jurisdictions to submit to arbitration. Proponents might counter that this is aimed at the reduction of court costs—that the statute rationally relates to a legitimate governmental end. An equal protection challenge would most likely be subject to a similar rational basis test. Under these and other arguments, the reduction of court costs would be a difficult objective to successfully argue against.

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 03: Ethics in Business

Solution and Answer Guide

Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 03: Ethics in Business

TABLE OF CONTENTS Critical Thinking Questions in Features .............................................................................1 Business Law in Context—Key Point ..................................................................................... 1 Adapting the Law to the Online Environment—Critical Thinking.................................... 2 Managerial Strategy—Business Questions........................................................................... 2 Building Analytical Skills—Result and Reasoning .............................................................. 3 Critical Thinking Questions in Cases ................................................................................. 3 Case 3.1—Critical Thinking ...................................................................................................... 3 Case 3.2—Critical Thinking ..................................................................................................... 3 Chapter Review ................................................................................................................... 4 Practice and Review................................................................................................................. 4 Practice and Review: Debate This ......................................................................................... 6 Issue Spotters ........................................................................................................................... 6 Business Scenarios and Case Problems .............................................................................. 7 A Question of Ethics ............................................................................................................... 13 Time-Limited Team Assignment .......................................................................................... 15

CRITICAL THINKING QUESTIONS IN FEATURES BUSINESS LAW IN CONTEXT—KEY POINT 1. Unlike traditional forms of wealth, digital currency is not regulated by a central authority or backed by the world’s governments. How does the example of Bankman-Fried’s unethical behavior highlight the pitfalls of investing in cryptocurrency? Solution: Most obviously, Sam Bankman-Fried’s wrongdoing shows that when a cryptocurrency exchange such as FTX fails due to unethical business practices, investors have little or no recourse. This would not be true if they had placed their funds in a traditional bank account, which is insured by the FDIC, or, arguably, if they had invested in the New York Stock Exchange, which is regulated by the Securities and Exchange Commission (SEC).

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 03: Ethics in Business

Despite this lack of protection, the growing popularity of cryptocurrency is undeniable. By some measures, about 17 percent of American adults have invested in, used, or traded digital currency. If such levels continue to grow, the federal government will feel pressured to create some sort of regulatory framework for cryptocurrency. Indeed, in 2024, the SEC permitted eleven investment firms to offer cryptocurrency-based funds to their clients for the first time. This move gave investors the ability to participate in the digital currency market without actually purchasing digital currency.

ADAPTING THE LAW TO THE ONLINE ENVIRONMENT—CRITICAL THINKING 1. Should U.S. lawmakers consider providing employees with a “right” to disconnect? What might be some practical and ethical issues with doing so? Solution: About 44 percent of the companies in this country allow remote work, and only about 16 percent of American companies hire remote workers. That being said, employment from home became the norm for millions of employees during the COVID19 pandemic, further blurring the “nine to five, five days a week” standards of the traditional work week. Consequently, the “right to disconnect” when out of the office is a more pressing concern than it has been in the past. What would right-to-disconnect legislation look like? At a minimum, it would include the right not to respond to email, phone, or instant messages outside the agreed-upon work hours, as well as assurances that an employee could not be punished for being unavailable during these disconnected hours. In addition, no meetings could take place outside the confines of the workday. Several potential ethical problems with any such legislation are evident. The right to disconnect is not the same as the duty to disconnect. That is, workers could still “choose” to stay connected, and this “choice” might be unfairly influenced by management. Furthermore, many employees appreciate the flexibility of being able to work at home and during weekends rather than face the pressure and stress of finishing tasks during authorized working hours. Any right to disconnect legislation might reduce this flexibility. On a practical level, the global nature of companies with international partners further confuses the subject. How would a right-to-disconnect law address different time zones and business cultures? Furthermore, many of the same industries that can accommodate a hybrid work schedule also serve clients that expect to be able to get in touch with employees outside normal office hours. In these situations, the right to disconnect might be impossible.

MANAGERIAL STRATEGY—BUSINESS QUESTIONS 1.

After a school shooting, Dick’s Sporting Goods stopped selling certain firearms at its stores. What are the potential benefits and drawbacks of this form of corporate social responsibility? Solution: Anytime a company takes a stance on a political or social issue, it can assume that it will receive support from some customers and criticism from others. In this instance, given the fervor of the gun control debate in the United States today, Dick’s certainly expected to lose customers who are passionate about the right to bear

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 03: Ethics in Business

arms. In fact, the company experienced a 3.1 percent decline in sales for the fiscal year following its policy change. Afterwards, however, sales rose at a commensurate rate, showing that the public may have a short attention span even when it comes to the most highly charged political issues. 2. Why might a state law require corporate managers to maximize company profits? Solution: Laws that require corporate managers and directors to focus on maximizing profits are designed to ensure accountability. Without these controls, the theory goes, managers would be tempted to use factors other than profitability in the decisionmaking process. These factors could be ethical, such as a sincere desire to protect the environment, or unethical, such as economic self-interest. By forcing managers to make business judgments, rather than moral or personal ones, such laws provide a measure of stability for shareholders and stakeholders alike. Furthermore, if companies are less profitable and less efficient, not only will investors suffer, but employees and customers will also be worse off.

BUILDING ANALYTICAL SKILLS—RESULT AND REASONING 1.

It seems unlikely that a proposed Trovan test on children, based on the facts described here, would have survived an IDDR analysis under either a duty-based or an outcomebased ethical standard. What factors might have motivated Pfizer to behave in such an unethical manner? Solution: It would appear that Pfizer was rushing to test and market Trovan as soon as possible. This focus on short-run profit maximization took precedence over any ethical considerations. It is often easier to see ethical lapses in retrospect than it is to identify potential ethical problems in advance, however.

CRITICAL THINKING QUESTIONS IN CASES CASE 3.1—CRITICAL THINKING 1.

What If the Facts Were Different? Suppose that Greif had been a young real estate investor who bought and sold commercial property on a regular basis. Would this lawsuit have dragged on for over ten years, as happened here? Why or why not? Solution: Probably not. Typically, even relatively young professionals in the business of buying and selling real estate properties would have a difficult time claiming that they did not understand what the purchase price in the purchase agreement was or that it was less than fair market value. Probably such investors would not have even bothered to sue to rescind a purchase agreement. If, nonetheless, a professional engaged in selling the vacant land had nonetheless sued to rescind the purchase agreement, the trial court would have probably agreed to a motion to dismiss by the buyer.

CASE 3.2—CRITICAL THINKING 1.

Economic. What marketing tool did Watson gain by inflating its AWPs?

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 03: Ethics in Business

Solution: The marketing tool that Watson gained by inflating the AWPs of its drugs was “the spread”—the difference between the fabricated numbers and the prices that pharmacies actually paid. Watson knew that Mississippi Medicaid would reimburse the pharmacies at rates based on Watson’s published AWPs. The higher these numbers were, the more the pharmacies would be paid, regardless of the actual costs. Watson could use this fact to make the purchase of their products more profitably attractive to the pharmacies. Of course, the higher the published AWPs were, the higher could be the prices that Watson charged the pharmacies. But Watson could negotiate “discounts” with their customers to further convince the pharmacies they were making a “profitable” deal. 2. What If the Facts Were Different? Watson argued that AWP was a “term of art” in the pharmaceutical industry that meant “suggested price.” Suppose that the court had accepted this argument. What might have been the effect of this decision? Solution: If the court had accepted Watson’s contention that AWP was a “term of art” in the pharmaceutical industry meaning merely “suggested price,” there are a number of possible effects. Any of these results would have had negative reverberations throughout—and beyond—the industry. The court’s acceptance of the argument would have condoned Watson’s pricing policy. This would likely have led to a judgment in the drug maker’s favor in this case, which would have meant a forfeit by Mississippi Medicaid, the state, and the taxpayers of the amounts previously overpaid. As a precedent, this would have allowed Watson to publish any number whatsoever as an AWP. This number could be as inflated as the market would bear, serving as the basis for prices charged to Watson’s customers as well as for reimbursements by the state to those customers. And the numbers could be fabricated with no relation to actual prices or costs. The possibility of this sort of extraordinary fraud would not likely be lost on Watson’s competitors, who could begin to engage in the same conduct. This deceit might maximize each company’s profits, but it would be to the burden of the taxpayers and the public’s trust.

CHAPTER REVIEW PRACTICE AND REVIEW James Stilton is the chief executive officer (CEO) of RightLiving, Inc., a company that buys life insurance policies at a discount from terminally ill persons and sells the policies to investors. RightLiving pays the terminally ill patients a percentage of the future death benefit (usually 65 percent) and then sells the policies to investors for 85 percent of the value of the future benefit. The patients receive the cash to use for medical and other expenses, and the investors are “guaranteed” a positive return on their investment. The difference between the purchase and sale prices is RightLiving’s profit. Stilton is aware that some sick patients may obtain insurance policies through fraud (by not revealing their illness on the insurance application). An insurance company that discovers such fraud will cancel the policy and refuse to pay. Stilton believes that most of the policies he has purchased are legitimate, but

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 03: Ethics in Business

he knows that some probably are not. Using the information presented in this chapter, answer the following questions. 1.

Would a person who adheres to the principle of rights consider it ethical for Stilton not to disclose the potential risk of cancellation to investors? Why or why not? Solution: If one of the fundamental rights is the right to be treated fairly and to be able to invest one’s money with full understanding of the risks, then it would be unethical for Stilton to sell these viaticals without full disclosure that some may be subject to cancellation.

2. Using Immanuel Kant’s categorical imperative, are the actions of RightLiving ethical? Why or why not? Solution: The categorical imperative asks the decision maker to assess the results of the action as if everyone in a similar situation made the same decision. If all insurance companies participated in the viatical industry and did not disclose the risk of cancellation, then investors would become leery of investing in the products, and the market would disappear. The people for whom the sale of these policies is necessary to sustain a respectable life as it ends would not be able to get the cash to help them die with dignity. This would make the world a worse place and therefore the actions are not ethical. 3. Under utilitarianism, are Stilton’s actions ethical? Why or why not? If most of the policies are, in fact, legitimate, does this make a difference in your analysis? Solution: Utilitarianism asks the decision maker to perform a cost/benefit analysis of the alternatives. Stilton should evaluate the risks or chances of an investor buying a void policy compared to the benefits gained from purchasing legitimate policies. The cost/benefit analysis also should include whether he sells individual policies to individual investors or whether he sells a share of a bundle of policies. If he does the former, the risks to the individual investor are greater than if the latter. If the latter, the benefit of the legitimate policies may offset any loss from cancelled policies. 4. Using the IDDR approach, discuss the decision process Stilton should use in deciding whether to disclose the risk of fraudulent policies to potential investors. Solution: The steps in the IDDR approach begin with an Inquiry that identifies the ethical issue, the stakeholders, and relevant ethical theories. Here, then, Stilton must recognize the issue—whether to disclose the potential fraud by those whose policies he buys. He should identify the stakeholders, including his company’s investors and employees, those insured by the policies, the insurance companies that are at risk of being defrauded, and the larger insurance market and investment communities. To fully weigh the consequences, Stilton should be familiar with the laws related to insurance, his personal ethical standards, and his company’s policies. The second step in the IDDR approach Discusses possible actions. Factors include the strengths and weaknesses of each, considering the consequences and the impacts on stakeholders. As part of this step, Stilton should list the alternatives and the likely results of each. This is also when Stilton should apply the mission and goals of his company.

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 03: Ethics in Business

The IDDR approach’s third step is to make a Decision and provide reasons for it. At this point, using the analysis produced in the previous steps, Stilton must decide what to do and why. The last step is to Review the chosen action to determine its success or failure in terms of the issue and the stakeholders.

PRACTICE AND REVIEW: DEBATE THIS 1.

Executives in large corporations are ultimately rewarded if their companies do well, particularly as evidenced by rising stock prices. Consequently, shouldn’t those who run corporations be able to decide what level of negative side effects is “acceptable” for their companies’ products? Solution: The first problem with this attitude is that executives and managers (and even directors) may be looking at only short-run profits. They therefore might ignore the long-run profitability to their company. If a drug that works well against a potential pandemic causes severe side effects in some people, in the short run, this same drug may save many lives and reduce human suffering. Thus, profits could be great initially, with a consequent rise in the stock price. In the longer run, though, when the news gets around that some of those who took the drug suffered severe side effects, future sales of the drug might fall, thus reducing profits and causing the stock price to drop. One now has to ask the question about who is in the best situation to decide the optimum level of side effects of any drug or good or service sold. (It’s impossible to create drugs with zero negative side effects.) Any government regulator will want to make sure that there are few, if any, people who suffer from negative side effects. After all, the government regulator will look bad if the press reports about those who reacted badly to a drug. Therefore, there is a bias within any government regulatory apparatus against any good or service that has bad side effects. More limits on drugs, though, that help millions just because few suffer side effects will cost those who don’t obtain the drug—perhaps with their lives.

ISSUE SPOTTERS 1.

Acme Corporation decides to respond to what it sees as a moral obligation to correct for past discrimination by adjusting pay differences among its employees. Does this raise an ethical conflict between Acme and its employees? Between Acme and its shareholders? Explain your answers. (See Ethical Principles and Philosophies.) Solution: When a corporation decides to respond to what it sees as a moral obligation to correct for past discrimination by adjusting pay differences among its employees, an ethical conflict is raised between the firm and its employees and between the firm and its shareholders. This dilemma arises directly out of the effect such a decision has on the firm’s profits. If satisfying this obligation increases profitability, then the dilemma is easily resolved in favor of “doing the right thing.”

2. Delta Tools, Inc., markets a product that under some circumstances is capable of seriously injuring consumers. Does Delta have an ethical duty to remove this product from the market, even if the injuries result only from misuse? Why or why not? (See Making Ethical Business Decisions.)

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 03: Ethics in Business

Solution: Maybe. On the one hand, it is not the company’s “fault” when a product is misused. Also, keeping the product on the market is not a violation of the law, and stopping sales would hurt profits. On the other hand, suspending sales could reduce suffering and could stop potential negative publicity if sales continued.

BUSINESS SCENARIOS AND CASE PROBLEMS 3–1. Business Ethics. Jason Trevor owns a commercial bakery in Blakely, Georgia, that produces a variety of goods sold in grocery stores. Trevor is required by law to perform internal tests on food produced at his plant to check for contamination. On three occasions, tests of food products containing peanut butter were positive for salmonella contamination. Trevor was not required to report the results to U.S. Food and Drug Administration officials, however, so he did not. Instead, Trevor instructed his employees to simply repeat the tests until the results were negative. Meanwhile, the products that had originally tested positive for salmonella were eventually shipped out to retailers. Five people who ate Trevor’s baked goods that year became seriously ill, and one person died from a salmonella infection. Even though Trevor’s conduct was legal, was it unethical for him to sell goods that had once tested positive for salmonella? Why or why not? (See Ethics and the Role of Business.) Solution: Of course, it was unethical to sell goods that their maker knew were defective and could cause harm. This is the most reasonable and likely conclusion under any set of standards, even if it were possible to eventually obtain a negative result with respect to a defect from testing that repeatedly yielded a positive result. The decision maker must identify the parties involved (the bakery, its employees, and the general public) and collect the relevant facts to understand the problem. Ingesting food tainted with salmonella can cause serious illness and death. Because selling food contaminated with salmonella is a public health risk, the general public is a stakeholder in this problem. The owner of the bakery (Trevor) and its employees are also stakeholders, and although they are interested in making a profit, they also will suffer a loss if the bakery’s conduct results in contamination and customers stop buying the bakery’s products. The bakery may not be legally required to report the initial test results to the Food and Drug Administration (FDA), but it is clearly unethical not to do anything to address the salmonella contamination found in food that will be sold to the public. Instructing employees to retest the food until the results come out differently does not remedy the problem or avoid potentially fatal consequences. Liability can attach through tort and contract law principles to the sale of goods that the seller knows or should know are defective. Thus, the baker’s action in this problem can lead to legal liability if someone is injured by salmonella. The bakery could report the initial results to the FDA, even though it is not required, and ask for the agency’s advice on how to handle the salmonella contamination. The bakery should establish procedures for testing (and retesting) food and discover the source of the contamination. This will show employees that the company is concerned with doing the right thing. The bakery might also refuse to sell and voluntarily dispose of the tainted goods. Clearly, the bakery’s decision should not be to simply retest the food until the results are negative and ship it to retailers because this shows a lack of concern for the buyers and indirectly the company’s other stakeholders. The decision might be to report to the FDA and follow its instructions for retesting or disposing of the food. Or it might be to

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 03: Ethics in Business

voluntarily pull the tainted food off the shelves so as not to put public health at risk. In either situation, the bakery needs to decide how to avoid potential salmonella contamination in the future. The decision makers need to document the reasons underlying their decision and course of action. If the decision was to report the results to the FDA and follow its advice on how to handle the contamination, the bakery could justify its actions by articulating that it is concerned with public safety. The same justification applies to a decision to destroy the tainted food. The bakery is justified in taking a course of action showing it is better to be safe (and take a monetary loss) than sorry (when a buyer ingests salmonella and dies). Either of these courses of action avoids potentially costly litigation that could result from injured persons suing the company over defective goods and avoids negative publicity and loss of goodwill from a salmonella outbreak. In addition, taking such preventive measures allows the bakery to avoid having the FDA investigate the salmonella problem and possibly issue regulations that would hamper its operation and profits. Whether the bakery decided to report the results to the FDA or just destroy the contaminated food, it should evaluate the effectiveness of its decision and how to avoid potential salmonella contamination in the future. It should establish internal procedures for testing and retesting for salmonella, and should instruct employees on safe handling of food to avoid contamination. 3–2. Ethical Conduct. Internet giant Zoidle, a U.S. company, generated sales of £2.5 billion in the United Kingdom (UK) in 2013 (roughly $4 billion in U.S. dollars). The U.K. corporate tax rate is usually between 20 percent and 24 percent, but Zoidle paid only 3 percent (£6 million). At a press conference, company officials touted how the company took advantage of tax loopholes and sheltered profits to avoid paying the full corporate income tax. They justified their practices as ethical, declaring that it would be verging on illegal to tell shareholders that the company paid more taxes than it should. Zoidle receives significant benefits for doing business in the UK, including large sales tax exemptions and some property tax breaks. The UK relies on the corporate income tax to provide services to the poor and to help run the agency that regulates corporations. Is it ethical for Zoidle to avoid paying taxes? Why or why not? (See Ethics and the Role of Business.) Solution: Minimizing taxes can increase profits. Some people argue that a corporation’s only goal should be profit maximization, which will be reflected in a higher market value. From an economist’s perspective, when all firms strictly adhere to the goal of profit maximization, resources tend to flow to where they are most highly valued by society. Ultimately, profit maximization, in theory, leads to the most efficient allocation of scarce resources. But a business’s focus on profits in the short run can lead to unethical conduct in the long run. In the short run, a company may increase its profits by taking full advantage of tax laws, even though it knows that the public may perceive this conduct as less than ethical. In the long run, because of bad publicity—exemplified by the executive’s statements in this problem—as well as government audits or investigations and public or private lawsuits, such perception may compound and cause profits to suffer.

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 03: Ethics in Business

Those who run corporations can and should act ethically. Some business leaders and others believe further that corporations should be accountable to society for their actions. One view of corporate social responsibility stresses that corporations have a duty not just to shareholders, but also to other groups affected by corporate decisions. Under this approach, a corporation would consider the impact of its decision on the firm’s employees, customers, creditors, suppliers, and the community in which the corporation operates. Another theory of social responsibility argues that corporations should behave as good citizens by promoting goals that society deems worthwhile and taking positive steps toward solving social problems—employment discrimination, human rights, environmental concerns, and similar issues. Under either of these views, in this problem, the corporation would consider the government and the poor in determining and executing fiscal and tax policies. Aside from the public’s perception and a corporation’s social responsibility, an overemphasis on short-term profit maximization is the most common reason that ethical problems occur in business. Thus, the conduct of the corporation in this problem—taking full advantage of the letter of the tax laws and touting that choice publicly—may lead to unintended unethical consequences. 3–3. Consumer Rights. Best Buy, a national electronics retailer, offered a credit card that allowed users to earn “reward points” that could be redeemed for discounts on Best Buy goods. After reading a newspaper advertisement for the card, Gary Davis applied for, and was given, a credit card. As part of the application process, he visited a web page containing Frequently Asked Questions as well as terms and conditions for the card. He clicked on a button affirming that he understood the terms and conditions. When Davis received his card, it came with seven brochures about the card and the reward point program. As he read the brochures, he discovered that a $59 annual fee would be charged for the card. Davis went back to the web page he had visited and found a statement that the card “may” have an annual fee. Davis sued, claiming that the company did not adequately disclose the fee. Is it unethical for companies to put terms and conditions, especially terms that may cost the consumer money, in an electronic document that is too long to read on one screen? Why or why not? Assuming that the Best Buy credit-card materials were legally sufficient, discuss the ethical aspects of businesses strictly following the language of the law as opposed to following the intent of the law. [Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152 (9th Cir. 2012)] (See Ethics and the Role of Business.) Solution: In this case, the court found that the company did not violate any laws and that the disclosures were adequate. From an ethical perspective, the question becomes whether the word “may” on the website gave adequate notice to the potential user or borrower that a charge would occur. It is settled legally that it is up to a contract signer to read all the components of a contract. In the online environment, it is hard to ever prove that a web page was not edited or changed from one day to the next. A consumer may read the terms and conditions just before a round of edits and then agree and seem bound by changes that did not exist at the time they read them. From a fairness perspective, that would be unethical. At the same time, presumably the reader could print off a copy of the agreement and keep it filed. Underlying societal questions exist as to whether it is fair to assume that a purchaser in an online environment would print off that form contract language in the same way that a signer of a contract keeps a copy of the written contract. © 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 03: Ethics in Business

The law often is considered the minimum ethical standard that society will allow. If a company follows the law, there will be no formal, societally imposed consequences. There are many instances, and this is one, where following the law strictly may not be the most ethical action. If the purpose of the Truth-in-Lending Act is to ensure that consumers have full information before making a decision, there may be more ethical ways (warnings, bigger text announcing continuation of terms, more specific language than “may” in the terms) that a company can help consumers be fully informed. 3–4. Business Ethics. Mark Ramun worked as a manager for Allied Erecting and Dismantling Co., where he had a tense relationship with his father, who was Allied’s president. After more than ten years, Mark left Allied, taking DVDs and CDs containing 15,000 pages of Allied documents that constituted trade secrets. Later, he joined Allied’s competitor, Genesis Equipment & Manufacturing, Inc. Genesis soon developed a piece of equipment that incorporated elements of Allied equipment. How might business ethics have been violated in these circumstances? Discuss. [Allied Erecting and Dismantling Co. v. Genesis Equipment & Manufacturing, Inc., 511 Fed.Appx. 398 (6th Cir. 2013)] (See Making Ethical Business Decisions.) Solution: Business ethics might have been violated in these circumstances by Mark Ramun, Mark’s father, and the employees and managers of Genesis. The “tense relationship” between Mark and his father at Allied may have been caused or exacerbated by either or both of them. And instead of confronting whatever it was that made their relationship “tense,” they may have exacted revenge—the father, by forcing Mark out of the firm, or Mark, by leaving it, after ten years. Of course, this is speculation. What is not speculation, however, is that Mark took 15,000 pages of Allied’s documents on DVDs and CDs (trade secrets) when he left the firm. This act was likely a violation of the law (theft or misappropriation) and clearly a violation of business ethics. Later, Mark joined Allied’s competitor, Genesis Equipment & Manufacturing, Inc. Genesis soon developed a piece of equipment that incorporated elements of Allied equipment. This points to a second violation of the law and ethics (use of stolen property) by both Mark and Genesis. Mark appears to have been competing against his family in the marketplace and trying to sell his products through another company. Assuming that Genesis profited from its sale of the equipment, this would have caused losses to Allied and unjustly enriched Genesis. If Mark was paid a bonus or given a promotion, he too would have gained undeservedly. In the actual case on which this problem is based, Allied filed a suit in a federal district court against Genesis and Mark for misappropriation of trade secrets. A jury awarded Allied more than $3 million in damages, but the court issued a judgment as a matter of law in favor of the defendants. On appeal, the U.S. Court of Appeals for the Sixth Circuit reversed. “It is neither speculative nor conjectural that Genesis unjustly benefitted from its use of Allied's trade secrets.” 3–5. Spotlight on Bed, Bath & Beyond—Ethics and the Role of Business. Bed Bath & Beyond, Inc., sold a ceramic pot, called the “FireBurners” Pot, with a stainless steel fuel reservoir at its center and a bottle of gelled fuel called “FireGel” for use with the fire pot. A red sticker on the fire pot warned, “DON’T REFILL UNTIL FLAME IS OUT & CUP IS COOL.” “CARE AND USE INSTRUCTIONS” with the product cautioned, in a “WARNINGS” section, “Do not add fuel when lit and never pour gel on an open fire or hot surface.” The label on the back of the fuel gel bottle instructed, “NEVER add fuel to a burning fire,” and under a bold “WARNING” stated,

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 03: Ethics in Business

“DANGER, FLAMMABLE LIQUID & VAPOR.” M.H., a minor, was injured when a fire pot in one of the products—bought from Bed Bath & Beyond—was refueled with the gel and an explosion occurred. Safer alternatives for the design of the fire pot existed, but its manufacturer chose not to use them. In these circumstances, is Bed, Bath & Beyond ethically responsible for the injury to M.H.? Discuss. [M.H. v. Bed, Bath & Beyond, Inc., 156 A.D.3d 33, 64 N.Y.S.3d 205 (1 Dept. 2017)] (See Ethics and the Role of Business.) Solution: Yes, Bed, Bath & Beyond is ethically responsible for the injury that its “FireBurners” pot caused to M.H. In designing and making a product for consumers, its maker has a duty to make the product reasonably safe so that it does not create an unreasonable risk of harm to the user. This is the standard under the law of product liability. Liability for its breach can be assessed against any seller of the product. As the legal standard, these principles also express the minimal ethical standards. In this problem, a manufacturer made a ceramic pot, called the “FireBurners” Pot, with a stainless steel fuel reservoir at its center and a bottle of gelled fuel for use with the fire pot called “FireGel.” The design was apparently unsafe, prompting the addition of a plethora of warnings about the use of the pot. These warnings generally cautioned against adding fuel to the reservoir when it was hot. Safer alternatives for the design existed, but its maker chose not to use them. M.H., a consumer, was injured when a pot was refueled with the gel and an explosion occurred. Under the law of product liability, the seller—Bed, Bath & Beyond—could be held liable for the injury on the basis of a breach of the applicable legal duty. The sale of the pot in an unsafe condition was likewise a breach of a minimal ethical duty. It could also be contended that the retailer owed a greater ethical obligation to its customers and to anyone who might suffer harm due to the unsafe design of the pot. This obligation could be framed in the same terms as the legal responsibility—the product should be made reasonably safe. This duty could be met by retaining the pot’s decorative quality while disabling its gel burning capacity or adopting any other safer alternative. Doing so effectively could work to the satisfaction of the seller’s customers, as well as its owners, shareholders, and others. In the actual case on which this problem is based, M.H. filed a suit in a New York state court against Bed, Bath & Beyond. The court denied the plaintiff’s motion for summary judgment. A state intermediate appellate court reversed the denial and remanded the case for the entry of a summary judgment in M.H.’s favor. 3–6. Codes of Ethics. All professional organizations have their own codes of ethics. Many of them relate to the unlicensed practice of the relevant profession. Licensed veterinarians must follow the Rules of Professional Conduct for Veterinarians. Maria McElwee was a licensed chiropractor in Pennsylvania who had taken additional courses in animal chiropractic. She was not a licensed veterinarian and had never worked under the guidance of a licensed veterinarian. The Pennsylvania State Board of Veterinary Medicine filed suit against McElwee because, they contended, she was practicing veterinary medicine without having first become a licensed veterinarian. At that time, she was the owner of a practice called Critter Chiropractic, which exclusively treated animals. On her website, she offered care that “promotes healing and function within your animals’ body.”

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 03: Ethics in Business

McElwee had completed the Options for Animals College of Animal Chiropractic Program, which does not confer a degree but considers itself a “continuing education of post-graduate education program that certifies a certificate of completion.” The Pennsylvania Department of State issued an order concluding that the procedures performed by McElwee constituted the unlicensed practice of veterinary medicine. McElwee appealed. She argued that the order would deprive Pennsylvania consumers of choice in chiropractic care for their animals and would cause them economic harm. Should McElwee prevail on appeal? Why or why not? [McElwee v. Bureau of Professional and Occupational Affairs, State Board of Veterinary Medicine, 271 A.3d 40, 2022 WL 150852 (2022)] (See Ethics and the Role of Business.) Solution: The Commonwealth Court of Pennsylvania held that McElwee’s practice constituted a practice of veterinary medicine and that the Veterinarians’ Board’s order was not precluded as an impermissible enforcement of the Rules of Professional Conduct for Veterinarians imposed on a non-veterinarian. The appeals court pointed out that the Board had jurisdiction over any practitioner of animal chiropractic and that animal chiropractic was subject to then-current regulatory authority, even if this authority emanates from self-regulation (as opposed to regulation legislated by a state legislature, for example). Some might argue that the appeals court’s ruling simply bolstered the anti-competitive nature of the self-regulation that veterinarians engage in. In other words, currently practicing veterinarians benefit economically when their own professional association, supported by the courts, eliminates competitors. 3–7. Business Case Problem with Sample Answer—Business Ethics. Jason Yearick was employed as a superintendent of Kimball Construction Company, Inc., located in Rossville, Maryland. On August 10, driving a company truck, Yearick was involved in a serious car accident, leaving him with physical injuries and emotional distress. The next day, Jerry Higdon, Yearick’s supervisor, told him to work from home. Yearick did so and logged his regular hours into Kimball’s payroll system. A few days later, Rebecca Pennington, the company’s human resources director, decided that Yearick would not be paid for the hours he worked from home. Yearick called Pennington and, during a heated argument, said, “Who the [expletive] are you to decide about my pay?” or words to that effect. Later that day, Kimball terminated Yearick’s employment. Who behaved unethically in these circumstances? Why? [Yearick v. Kimball Construction Co., Inc., 2023 WL 8829243 (D. Md. 2023)] (See Making Ethical Business Decisions.) Solution: Clearly, the use of profanity in an argument with a co-employee is unacceptable for ethical reasons, among others. Furthermore, the lack of communication between Higdon and Pennington regarding Yearick’s pay created a situation in which the company’s ethics could come into question. After all, Pennington docked an employee’s wages even though that employee was acting on instructions from a supervisor. The main ethical issue here, however, regards Kimball terminating Yearick’s employment as the result of a pay dispute. Employees should not fear that such a step will result in their firing (especially when they have just been badly injured in a work-related accident). Federal law backs up the ethics on this matter. The Fair Labor Standards Act (FLSA) makes it unlawful for employers in many industries to “discharge or in any manner discriminate against any employee because such employee has filed any complaint” about pay. After being fired, Yearick did in fact bring a suit against Kimball for violating his FLSA rights. A Maryland court ruled that this legal action could move forward, holding that such

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 03: Ethics in Business

a complaint does not have to be written or formal to trigger the protection of federal law. The complaint could, as in this case, be part of an employee “letting off steam,” as long as it “can be reasonably understood as demands for unpaid wages.”

A QUESTION OF ETHICS 3–8. Applying the IDDR Framework. Priscilla Dickman worked as a medical technologist at the University of Connecticut Health Center for twenty-eight years. Early in her career at the Health Center, Dickman sustained a back injury while at work. The condition eventually worsened, causing her significant back pain and disability. Her physician ordered restrictions on her work duties for several years. Then Dickman’s supervisor received complaints that Dickman was getting personal phone calls and was frequently absent from her work area. Based on e-mails and other documents found on her work computer, it appeared that she had been running two side businesses (selling jewelry and providing travel agent services) while at work. The state investigated, and she was convicted of a civil ethics violation for engaging in “personal business for financial gain on state time utilizing state resources.” Separate investigations resulted in criminal convictions for forgery and the filing of an unrelated fraudulent insurance claim. Dickman “retired” from her job (after she obtained approval for disability retirement) and filed a claim with the state of Connecticut against the health center. She alleged that her former employer had initiated the investigations to harass her and force her to quit. She claimed that the Health Center was unlawfully retaliating against her for being disabled and being put on workplace restrictions. [Dickman v. University of Connecticut Health Center, 162 Conn.App. 441, 132 A.3d 739 (2016)] (See Making Ethical Business Decisions.) 1.

Assume that you are Dickman’s supervisor and have been informed that she is frequently away from her desk and often makes personal phone calls. The first step of using the IDDR method is inquiry, so you start asking questions. Several people tell you that Dickman has offered to sell them jewelry. Others say she has offered to make travel arrangements for them. You have not spoken to Dickman directly about the complaints and are not sure if you should. You know that the Health Center would need more evidence of wrongdoing to justify firing Dickman but are uncertain as to whether you can search her computer. Should you report your findings to management? Is there any ethical problem involved in investigating and possibly firing a long-term employee? Is it fair to terminate an employee who is under disability restrictions? How would you frame the ethical dilemma that the Health Center faced in this case, and who are the stakeholders? What ethical theories would you use to guide your decision? Solution: Yes, as Dickman’s supervisor, you should report your findings to management. A supervisor might also want to speak with Dickman before going to management, to explain that others have noticed her away from her desk, and get her side of the story. Given the complaints that the employer received, there is no ethical dilemma in investigating Dickman. The possibility of misconduct would warrant investigation and possibly termination, even in the case of a long-term employee or an employee who has a disability restriction. “Disability restrictions” do not make an otherwise fair termination unfair. The ethical dilemma that the Health Center faced in this case was whether to discharge Dickman. Besides Dickman, the stakeholders include the Health Center and its employees and also the patients served by the health center.

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 03: Ethics in Business

regulations in 2005.) The defendants might have developed alternative medications that did not contain ephedrine or pseudoephedrine. 2. The second team will formulate an argument on behalf of Pfizer that the company has not breached any of its ethical responsibilities. Solution: It could also be argued that the defendants have an ethical responsibility to their shareholders and other stakeholders in their companies to fight regulatory efforts to limit the availability of their products so they could continue making profits. The central purpose of their businesses is to make money, not to affect social change. And the effects on society of the meth epidemic are not the natural and foreseeable consequences of the sales of the defendants’ products. In other words, the company could effectively argue that it has not breached any of its ethical responsibilities. 3. The third team will assume that they work for Pfizer and that the company is trying to determine the best course of action to prevent its medications from being used to make meth. The team will apply the IDDR approach and explain the steps in the reasoning used. Solution: After applying the IDDR approach to determine the best course of action to prevent its medications from being used to make meth, the conclusion might be that the company should advise and encourage retailers at the point of sale to spot and stop buyers who appear to intend that purpose. The IDDR approach has four steps, which begin with an Inquiry to express the issue, identify the stakeholders, and indicate potential ethical standards. Here, the question is what a manufacturer might do to prevent its products from being put to illegal uses. The stakeholders include the company, its owners, officers, employees, customers, and society. Applicable standards derive from the company’s situation—it makes and markets the product, which would suggest a duty to guard against its illegal use. The second step of the IDDR approach is a Discussion that considers actions to address the issue. Factors include the strengths and weaknesses of the actions and the consequences and the effects on the stakeholders. How might the manufacturer discourage the illicit use of its product? Some answers to this question depend on the nature of the product. Could harmless additives to the product make its misuse impossible? Could some ingredients be substituted for the illegally used components? Should the company stop making the product altogether? Technically, additives or substitutes may not be possible— they may not be available, they could dilute the medicinal effects, or they might be cost prohibitive. Removing the product from the market would benefit none of the stakeholders (except, of course, those suffering the consequences of the product’s illegal use, which might impact only a relatively small part of the community). The third step of the approach is to come to a Decision and state the reasons. In the eyes of the public, the company could benefit by taking some action to

Solution and Answer Guide: Miller, The Legal Environment Today - Building Skills You Will Need Tomorrow, 11e, 9798214046105; Chapter 03: Ethics in Business

prevent its product’s misuse. This action might be to advise and encourage retailers at the point of sale to spot and stop buyers who appear to intend that misuse. This could enhance the value of the company to those who own it and work for it, as well as its image to its customers and society. And this action can actually improve the situation within the community by limiting the ability of those who would misuse the product to do so. The last step of the approach is a Review of the success or failure of the action to resolve the issue and satisfy the stakeholders. No action would be completely successful, but a failure to take any action would guarantee a failure to protect the interests of at least some of the stakeholders. This supports the company’s obligation to do something, such as the choice suggested in this answer. 4. The fourth team will adopt a utilitarian point of view and perform a cost-benefit analysis to determine what the company should do. Specifically, should the company pay compensation to the state, or should it stop using certain ingredients in its medications? Solution: In the actual case on which this problem is based, the court compared the counties’ claims to other plaintiffs’ attempts to recover from gun manufacturers the costs associated with the criminal use of guns. In terms of legal liability, the circumstances connecting the sales of the medications to the provision of government services were too weak for the counties to recoup their costs from the defendants on a theory of implied contract. Also, the sales of the medications were legal, the operations of the STLs were not, the latter were not likely consequences of the former, and thus, in terms of proximate cause for tort liability, the costs to the counties were not reasonably foreseeable. The suit was dismissed. This result indicates that applying the minimal ethical standard—compliance with the law—and a cost-benefit analysis shows the connection between the actions of the company and the consequences in the community to be too tenuous to mandate either of the steps suggested in the question. That is, it might be said that the benefits of the products outweigh the costs that might be imposed on the company.