Legal Environment Quiz 3

Tort

• From the french word for wrong, can civil wrong or wrongful act

  • Whether intentional or accidental

  • From which injury occurs to another

• If a person is injured or suffers a monetary loss from being the victim of a tort, then they may be entitled 

• Three tort categories

  • Intential torts

  • Negligent torts

  • Strict liability 

• Intentional torts: what makes a tort intentional - INTENT

  • Desire to bring about a certain result

  • Can also mean results that are substantially likely to result from an action

    • Employer that knowingly exposes employee to toxic subvstance, but does not desire the employee to become injured, is liabale for intentional tort (injurieis were likely from the exposure)

  • Top 11 intentional torts: 

    • Assault: different meaning in criminal court, in civil law it is placing anohter in immediate apprehension of his or her physical safety

      • Expectation that one is to be physuically injured

      • One who intentionally created the fear is guilty

    • Battery: illegal touching of another (harmfuo or offensive contact)

      • Many times follows an assault

      • Touching is done without justification and without consent of the person touched

    • Intentional infliction of mental distress: outrageous, intentional conduct that carries a strong probability of causing mental distress to the person at whom it is directed

      • Not only mental distress must be proved, but physical symptoms such as headaches or not being able to sleep: hard to prove and quantify damages (all have different stress levels).

      • Example: repeated threatening calls from creditor

    • Invasion of privacy: 3 areas where privacy can be invaded

      • Misappropriate the plaintiffs name and likeness for own use

        • Use one’s photo without permission in an advertisement

          • EA sports and college football players

      • Intrusion on one’s physical solitude

        • Illegal searches and seizures / wiretaps

        • Unwelcomed intrusion into home

      • Public disclosure of highly objectionable, private info

        • Medical condition in a public forum

    • False imprisonment: intentional unjustified condifnement of a nonconsenting person

      • Example: detaining a customer for suspected shoplifting 

      • Can turn into justified detention to claim for false imprisonment l how?

        • Lack of reasonable suspicion

        • Reasonable length of detainment

    • Malicious prosecution

      • False arrest - casugig someone to be arrested without proper grounds

        • Business rival filing lawsuit for fraud to ruin a company’s reputation

    • Trespass 

      • To land (enter land without consent, remain on land after being asked to leave) 

        • Pollution can also be one

        • Civil damages: injunction (prevent trespasser from entering land) or monetary damages

      • To personal property

        • When someone uses it without permission or interferes with it 

          • friuend borrows car without permission and drives to Chicago 

    • Conversion

      • Wrongful exceriew of dominion and control over the  personal property of another (theft - criminal)

        • Deprives owner of right to exclude others from their property (serious invasion)

          • Instead of friend driving to Chicago with car, he keeps it

    • Defamation

      • Publication of untrue statements about another that hold up that character or reputation to contempt or ridicule

        • Publication means the untruth must be made to third parties

          • Slander - defamation that is oral

          • Libel - written defamation (can be published over radio and tv)

        • Defamation suits by former employees against employer

          • Job references or reasons for termination

          • Reason why employers will do no more than tell when an employee worked for them

        • DEFENSE: 

          • Truth - absolute defense

    • Fraud

      • Intentional misrepresentation of a material fact - justifiabliy relied upon by someone. To his or her injury - a lie about an improtant fact

        • Lying about assets or debts to get a loan

        • Failing to disclose a leaking basement when the property owner knows it leaks

        • Company continues to sell a product that it knows is defective

    • Interference with business relations

      • Interfere with exisitnig or potential business relations

        • Product/trade disparagement

          • Publication of untrue statements that disparage the business owner’s product or its quality

            • Akin to defamation of character

            • Plantiff must show falsity of the statements and prove damages

      • Intentional interference with contractual relations

        • One company tries to hire employees from another

Negligence

• More lawsuits allege negligence than any other single caus eof action

• Essential elements:

  • Duty, breach, causation, damages

• Duty of care: One has a duty to use reasonable care and skill around others to avoid injuring them

  • Usuuallty a person has no duty to avoid injuring others through non conduct

    • Beach goer has no duty to warn surfer of shark (no relationship)

    • However a surf board rental may have to warn based on relationship

  • Ianelli v Burger King

    • Was the risk of injury by rowdy youths forseeable, if so then a duty existed

    • Reversed the trial court

      • What if not rowdy and asked teen group for some mustard then a teen punches plantiff?

• Breach of duty: 

  • Violation of the standard of care that is owed

    • What is the standard of care?

      • Car accident case? 

      • Customer inside a business: shelves stacked properly, slipping on floors, etc

    • Willful and wanton negligence

      • Extreme lack of due care, ex: drunk driving

      • Employer failing to properly train employee or provide necessary safety equipment

      • Dram shop - overserving a patron

• Causation

  • (Proximate cause) one’s failure to use reasonable care must have causes the injury

  • Also called legal cause

    • One is on;ly liable for the foreseeable risk that they cause

    • Plantiff involved in a car accident and then a week later involved in a second accident (how to apportion between accidents)

    • Multiple parties at fault

• Damages

  • Plaintiff must prove actual damages. 

    • In car accident if plantiff has not sustained any physical injury or medical bills, no claim for negligence

• Defenses to negligence

  • Comparative fault

    • Compares the fault with the defendants and reudces the damage award proportionally

      • Kentucky v Ohio application of comparative fault: Ohio says if jury finds 50% fault of you, no damages. Kentucky says if 95% fault on you, you can still get the other 5% from the other party

  • Assumption of the risk

    • Plantiff knowingly and willing undertakes an activity made dangerous by the negligence of another

      • Hockey puck example (entering arena where pucks fly into air is necessary assumption of risk)

• Strict liability in tort

  • LEgal responsibility for injury causing behavior that is neither intentional or negligent

  • Strict Products Liability

  • Commercial sale of defective products 

  • Any retail wholesale or manufacturer who sells an unreasonably dangerous defetive proiduct tht causes injury to a user of the product is strictyl liable

  • Product defects v design defects

  • Product defect is when a good is not made to the standards of the manufacturer

  • Design defects: manufacturer according to manufacturers standards, bit the product injures a user due do its unsafe design

  • Lack of adequate warnings could be considered a dangerous defect

• Response to strict liabliity

  • Tort reform: rules and statutes that limit ability to recover damages in tort/negligence

  • In Ohio, damage caps in personal injury case. No limit on economic damages but 350k limit on non economic damage (pain and suffering). No limit in Kentucky

• Damages

  • Past and future medical expenses, economic loss, pain and suffering, punitive damages

• Harper v Winston County: issue is was there sufficient proof to go forward with a claim of battery? Harper claims employer intentionally grabbed arm

  • Trial court granted summary judgement, Alabama supreme court said whther employer touched her in a harmful manner is question for jury to decide. Supreme court did not comment on nature of damage, just about whether it is harmful or offensive contact is up to jury

• Ehling v Monmouth-Ocean Hospital: issue is whether an indivudal has an expectation of privacy in posting to a social media post

  • Here no proof hospital obtained access to Facebook page, passive recipients of info from others. May have been a different result if there is an intrusion to info that is adequately protected

• McDonald’s v Louise Ogborn: issue is 18 yr old accused of stealing wallet or purse, caller was a hoax, called more than 30 times at different McDonalds

  • Corporate management made a conscious decision to not train or warn store managers or employees about the calls. 

  • 3 hours strip search, physically and sexually assaulted

  • 1.1 million in compensatory damages, 5 million punitive

DO REFLECTION ON NEW MEXICO SELLING GAS CASE

----------------------------

2-25-25

ROLE OF ETHICS IN DECISION MAKING - CHAPTER 2

Adam Sandler and Business Ethics?

• Business Ethics - Billy Madison – YouTube

Modern Standard for Corporate Responsibility

• In August 2019, the Business Roundtable released a statement about corporations

• Association of chief executive officers of leading companies in America working to promote a thriving U.S. economy and expanded opportunity for all Americans through sound public policy

• “While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. We commit to:”

Five Commitments

• Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.

• Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity, and respect.

• Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.

• Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.

• Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.

Business Ethics

• What is business ethics?

• Why are business ethics important?

• Business Ethics | The Impact of Ethics on Business

• Help control the behavior and action of a corporation and keep them in compliance with regulations and the law

• Self-regulation (policing of the actions and inactions of a business by the business)

• Help attract loyal customers, employees, and investors

• More than ever before, business ethics are of concern to the business community and to society

• Ethics officers in big businesses are becoming more and more common

• In the 1980’s, few corporations hired people as ethical officers

• Today, more than 20% of big companies have ethics officers

Facebook

• Facebook to pay $5 billion FTC fine (youtube.com)

Ethics and Society

• Changing Normative Values

  • When a business decision maker does not share common values with society, the entire business organization is affected

  • Example: Donald Sterling and the NBA

  • Owner of the Clippers and banned from the NBA and fined 2.5 million dollars for repeated racist comments

  • What may have been accepted at one time is no longer acceptable as the norms and values of society change

  • Players threatened to boycott playoff games

  • Donald Sterling banned for life by the NBA for racist comments - CBS News

• Economic Interdependence

  • Increasing economic interdependence promotes concerns about business ethics

  • We depend on business and industry for our necessities (food, clothing, shelter)

  • A company conspires to raise prices, then cost of goods goes up and affects the consumers

Ethics and Society - News Media and the Internet

• News media and internet make it difficult to hide questionable behavior of large corporations

• With more visibility, more individuals can comment on the fairness, justice, and values reflected by actions or inactions of business executives

• Helps hold companies and bad actors accountable

• Wells Fargo example – “Eight is Great”

  • Directive for employees to sell customers eight bank products

  • Hard to meet so artificially inflated quotas by opening accounts without consent of the customers (1.5 million unauthorized deposit accounts and 500,000 credit card accounts)

• Wells Fargo scandal explained (youtube.com)

• What is the Wells Fargo scandal? (youtube.com)

QUESTIONS

1. What should business leaders take away from this scandal?

2. What could Wells Fargo have done differently to avert this cultural meltdown?

3. Modeling Character and Values: What values did Stumpf model to Wells Fargo employees? What impact might that have on the culture of Wells Fargo?

4. Encouraging Ethical Conduct: What behaviors can leaders model in order to encourage ethical behavior in their organization?

5. Designing Ethical Systems: Wells Fargo did have some systems in place, like the ethics hotline, to report unethical behavior, but it didn’t work. Why do you think that is? What steps can leaders take to design systems that encourage ethical behavior rather than unethical behavior?

6. Fault: Employer, employee, or both?

Ethics and Morality

• Morality

  • Collection of values that guide our behavior

  • Morals – what is right and wrong

  • Gil Meche, injured pitcher that retired rather than showing up at training camp to receive 12 million dollar salary

• Ethics

  • Formal system for deciding what is right and wrong and for justifying decisions that involve competing or conflicting values

  • Rational method for examining our moral lives

  • Understanding why we think something is right or wrong

Ethics and the Law

• “In civilized life, law floats in a sea of ethics.” – Chief Justice Earl Warren

• Ethics and the law both:

  • Consist of rules to guide conduct and foster social cooperation

  • Deal with what is right and wrong

  • Society’s ethical values may become law through legislation or court decisions

• Differences:

  • Legal system is a product of the state (enforced by civil and criminal penalties)

  • Law only sets minimum standards of acceptable behavior

  • Ethical behavior is based on more than meeting minimum legal requirements

  • Involves a higher, moral standard

Two Systems of Ethics

• Formalism and Consequentialism

  • Formalism

    • Ethical approach that affirms an absolute morality (duty-based view of ethics)

    • Ethical focus is on worth of the individual (individuals have rights – Bill of Rights)

    • A particular act is in itself right or wrong

    • Lying is wrong and there is no justification for it

    • Cannot make an exception for your own behavior and to do so is immoral and unethical

  • Consequentialism

    • Concerns with the moral consequences of actions rather than with the morality of the action itself

    • Lying in itself is not unethical – it is the consequences or end results that must be evaluated for their ethical implications

    • Focus on the common good – if actions increase the common good, then they are ethical

• Business ethics reflects elements of both formalism and consequentialism

  • However, focus is more on consequentialism

  • Business leaders feel a need to justify what they do in terms of whether or not it produces profits for their shareholders

  • Way business managers evaluate alternate courses of action through cost-benefit analysis is a form of consequentialism

  • Ford Pinto case

    • Comparing the two ethical systems

    • Example of business deciding to secretly monitor the email of its employees

      • Formalists – unethical because it does not respect the privacy and dignity of its employees

      • Consequentialists: judging of whether this behavior improves productivity v. possibility of productivity decreasing when employees find out about email being read

Examples of Ethical Formalism

• “We hold these truths to be self-evident.” - Declaration of Independence

• “Thou shalt not steal.” - The Ten Commandments

• “A sale made because of deception is wrong....” - Caterpillar Code of Ethics

• “The end doesn’t justify the means.” - Thomas Donaldson, business ethics scholar

• “Openness in communications is deemed fundamental.” - Business Roundtable

Examples of Ethical Consequentialism

• “There is no doubt that ethics pays off at the bottom line.” - CEO, Procter & Gamble

• “Loss of confidence in an organization is the single greatest cost of unethical behavior.” - CEO, KPMG

• “The strongest argument for raising the ethics bar boils down to self-interest.” - CEO, KPMG

• “Cost-benefit analysis (used by various governmental agencies and in business and finance).” - Economic theory, finance theory, and policy studies

• “The greatest happiness of the greatest number is the foundation of morals and legislation.” - Jeremy Bentham (1748–1832), English social philosopher

Sidebar 2.4 – Tobacco Facts

• Consider the ethical significance of the following facts [promotion and sale of tobacco products]:

  • Tobacco products have been consumed in the U.S. since at least the early 1600s.

  • Hundreds of thousands of people are involved in the growing, manufacturing, distributing, and selling of tobacco products.

  • In the first 20 years of tobacco litigation, juries did not award plaintiffs a single penny against tobacco companies.

  • Scientists and doctors accept that tobacco consumption is an important contributing factor in cancer and heart disease. Excess consumption of fatty foods and lack of exercise are also contributing factors to these diseases.

  • Some 435,000 people in the U.S., or 1% of all cigarette smokers, die prematurely every year due to tobacco consumption.

  • Health-related tobacco disease costs more than $75 billion annually in spending for medical care.

  • The average age of beginning tobacco consumption is around 16.

  • Almost no one begins tobacco consumption past age 21. Three thousand new teenagers begin tobacco consumption every day.

  • Tobacco companies spend billions of dollars annually in advertising and marketing tobacco sales. A main strategy of tobacco promotion is to associate glamour, excitement, sex, and desirable life images with tobacco consumption. Another strategy is to get young people to sample cigarettes and other tobacco products

Legal and Ethical Perspectives on Tobacco Use

• Corporate Responsibility

  • Tobacco companies claim they are acting responsibly by warning consumers about the risks of smoking and not forcing anyone to buy their products.

  • Opponents argue that the tobacco companies should be held accountable for marketing products that cause health problems, especially when they target young people.

  • Tobacco companies have been found to intentionally mislead the public about the dangers of smoking, which raises questions about their ethical responsibility to society.

• Health Costs

  • Tobacco consumption causes significant health issues, including cancer, respiratory diseases, and heart disease, resulting in high costs for the healthcare system.

  • In light of these health risks, many argue that tobacco companies should be held financially responsible for the public health costs related to their products.

• Advertising to Youth

  • Tobacco companies have historically targeted young people through advertising, which many believe is unethical because it promotes an addictive, harmful habit at a young age.

  • Ethical concerns arise from the fact that tobacco use often starts in adolescence, a time when individuals are more susceptible to persuasive advertising and may not fully understand the long-term consequences of their actions.

Ethical Decision-Making Frameworks

• The Utilitarian Approach

  • A decision is considered ethical if it produces the greatest good for the greatest number of people.

  • In the case of tobacco companies, the consequences of smoking (such as public health costs) must be weighed against the economic benefits generated by the tobacco industry.

• The Rights-Based Approach

  • A decision is ethical if it respects the rights of all individuals involved.

  • In this case, individuals have a right to make informed decisions about their health, and tobacco companies should be transparent about the risks of their products.

• The Fairness or Justice Approach

  • A decision is ethical if it treats all individuals fairly and equitably.

  • Tobacco companies have been criticized for disproportionately targeting vulnerable populations, such as low-income groups and young people, through their marketing strategies.

Tobacco Industry Ethics: Key Considerations

• Transparency and Disclosure

  • Tobacco companies have a moral responsibility to provide clear and honest information about the risks associated with their products.

  • Full disclosure of the dangers of smoking would allow consumers to make more informed choices.

• Minimizing Harm

  • Tobacco companies should take steps to minimize the harm caused by their products, such as creating safer alternatives to traditional cigarettes or advocating for public health initiatives to reduce smoking rates.

• Social Responsibility

  • Given the harm caused by tobacco use, companies should consider their broader social responsibility to protect public health, especially when their products have been proven to cause significant health risks.

  • This involves aligning business practices with the greater good, rather than just focusing on profits.

Corporate Ethical Guidelines and Compliance

• Ethics Policies

  • Many companies adopt formal ethics policies to guide the behavior of their employees and executives. These policies typically include guidelines on avoiding conflicts of interest, complying with the law, and promoting transparency.

  • Ethics policies can help companies build trust with their stakeholders, including employees, customers, and investors.

• Ethics Training and Reporting

  • Businesses often provide ethics training programs to ensure that employees understand the company's ethical guidelines and the importance of acting with integrity.

  • Reporting mechanisms, such as hotlines, allow employees and stakeholders to report unethical behavior without fear of retaliation.

• Corporate Governance

  • Ethical leadership plays a key role in ensuring that companies are held accountable for their actions. Corporate governance structures should be in place to monitor and enforce ethical conduct across all levels of the organization.

Corporate Social Responsibility (CSR)

• CSR refers to a company's efforts to operate in a socially responsible manner, taking into account the environmental, social, and economic impacts of its actions.

• Many companies are adopting CSR initiatives that aim to address issues such as environmental sustainability, social inequality, and ethical business practices.

• CSR can also involve giving back to communities through charitable donations, volunteer work, and sustainable business practices.

Summary of Key Ethical Issues in Business

• Ethical decision-making is a crucial aspect of business leadership, particularly when dealing with issues that affect public health, the environment, or social justice.

• Business leaders must be able to weigh the consequences of their actions and consider the impact of their decisions on various stakeholders, including employees, customers, investors, and the wider community.

• Companies should strive to act ethically not only because it is the right thing to do but also because ethical behavior can lead to long-term success and sustainability.

Cigarette Advertising

• 1968 Marlboro Cigarette Commercial

  • A famous advertisement showcasing the Marlboro brand. This type of marketing was central to the promotion of tobacco products during a time when there were fewer regulations on advertising.

  • Advertising targeting masculinity and independence was key to Marlboro’s success.

• JUUL

  • Lawsuit accuses JUUL of targeting kids with ads: JUUL, an e-cigarette brand, has faced legal scrutiny over claims that its advertising was aimed at a young audience, potentially contributing to an increase in youth vaping.

  • The ethical debate centers around whether JUUL is responsible for promoting a product that is potentially addictive and harmful to younger users.

Sources of Values for Business Ethics

1. Legal Regulation

   • Ethical values often become law to regulate business conduct.

   • Example: The 1964 Civil Rights Act prohibited employment discrimination based on race, sex, color, religion, and national origin.

   • Five Major Ethical Rules from Law:

     • Liberty and Rights: Respecting the liberty and rights of others (e.g., privacy, equal employment opportunities).

     • Good Faith: Ensuring transactions are carried out honestly.

     • Due Care: Following tort principles to avoid harm.

     • Confidentiality: Protecting private information (e.g., attorney-client, doctor-patient).

     • Conflicts of Interest: Ensuring no conflicts arise from serving two masters (e.g., real estate agents representing both parties).

2. Professional Code of Ethics

   • Professions like law and medicine have established codes of ethics to guide behavior.

   • Businesses in various industries adopt their own ethical codes to ensure professional conduct.

3. Organizational Codes of Ethics

   • Key topics addressed:

     • Product safety and quality.

     • Health and safety in the workplace.

     • Financial reporting and accuracy.

     • Supplier relationships, pricing, and billing.

     • Security and political activities.

     • Environmental protection and employee expectations.

   • Code of Conduct Example (Boeing):

     • Conflicts of interest: Ensuring personal and company interests do not clash.

     • Honesty: Conducting transactions fairly and transparently.

     • Legal Compliance: Abiding by all laws, rules, and regulations.

     • Reporting misconduct: Encouraging employees to report unethical behavior.

4. Individual Values

   • Ultimate source of ethics: Personal beliefs play a key role in shaping business decisions.

   • Self-reflection questions:

     • Is the action right or wrong?

     • Will I be proud to explain my actions?

     • Would I want everyone to act this way?

     • Will this cause harm to others?

     • Does the action violate any laws?

Obstacles to Ethical Corporate Behavior

• Emphasis on Profit: Sometimes profit motives conflict with ethical behavior, as seen in the Columbia/HCA Healthcare Corporation scandal.

• Effect of the Group: Individuals in groups may act unethically, feeling anonymous and shielded by the group.

• Control of Resources by Non-Owners: Top management may control vast resources without owning them, which can lead to ethical missteps if not monitored properly.

Steps to Promote Ethical Corporate Behavior

• Involvement of Top Management: Ethical behavior starts at the top. Leaders must enforce ethical codes.

• Openness in Communication: Employees must feel comfortable discussing ethical concerns.

• Consideration of Stakeholders: Ethical behavior requires managers to consider the impact of their decisions on all stakeholders—shareholders, employees, customers, suppliers, and the community.

Ford Pinto Case

• Allegations:

  • Ford faced allegations for putting the Pinto vehicle into production with a faulty fuel system. The issue involved the fuel tank rupturing during rear-end collisions, leading to fires.

  • The company opted against a recall due to financial concerns.

• Ethical Concerns:

  • Ford chose not to fix the issue immediately because doing so would increase production costs, potentially affecting sales.

  • A $1 part could have prevented the issue.

  • Questions about whether profit was prioritized over safety and human lives.

• Relevant Videos:

  • Ford Pinto Commercial: Shows how the Ford Pinto was marketed.

  • Ford Pinto Case (1980): Explores the legal implications and criminal charges against Ford.

Ethical Discussion Scenarios

1. Silicon Valley Software CEO:

   • Scenario: You are the CEO of a software company and discover your competitor is working on a revolutionary program. Should you engage in underhanded tactics, such as hiring away a secretary who may have overheard confidential information?

   • Ethical Questions:

     • Is it ethical to use information obtained from the competitor through indirect methods?

     • Would your actions cross the line between competitive strategy and unethical behavior?

2. PharmCo Drug Discovery:

   • Scenario: PharmCo has discovered a drug that can reverse baldness but has side effects that may be fatal in a small percentage of users. The company faces a dilemma about whether to disclose these concerns to the public and how to price the drug.

   • Ethical Questions:

     • Is it ethical to suppress the concerns of researchers if the drug is a potentially huge money-maker?

     • Is it ethical to put animals at risk for testing the drug’s safety?

     • Should the company maximize profits even if it means that some customers cannot afford the drug?

Ethical Questions in Business

• Corporate Social Responsibility: Businesses are encouraged to contribute to society, whether through investments in the community, environmental sustainability, or promoting fairness in employment.

• Environmental Impact: Ethical businesses must consider their environmental impact, such as reducing carbon footprints and ensuring sustainability.

• Global Labor Practices: Concerns over child labor and low wages in developing countries have raised questions about ethical sourcing practices.