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MGMT 520 Final Exam Set 1

1. Farmer Joe Andrews, who owned 350 acres of farm land, was approached by Ajax Oil Company that offered to buy the front 30 acres of his land, which bordered on a four-lane highway, so they could build a gasoline station. Ajax Oil asked Mr. Andrews if he had complete ownership of the land, and he assured them he did. The two parties negotiated on the price and terms of the land sale for several days and finally agreed on a price of $60,000 for the 30 acres and Mr. Andrews signed a Quit Claim Deed transferring ownership to Ajax Oil. Ajax Oil developed the land and built the gasoline station with a typical small grocery store, and a car wash. The gasoline station functioned well for the next eight years, and was very profitable. The State Highway Department contacted Ajax Oil, and told them the state had acquired the right to take the land 30 years ago for expansion of the highway through a Special Warranty Deed from farmer James Barnes, who had owned and operated the farm before Joe Andrews. The issue quickly goes to court with the State Highway Department, Ajax Oil, farmer Joe Andrews, and farmer Barnes’ Heirs, all parties to the legal activity. What issues are involved here in regard transfer of right to land? Who do you think will prevail? (Points : 30) 2.ABC Computers is a manufacturer and seller of personal computers and tablets. ABC entered into agreements with suppliers requiring that such suppliers not sell ABC’s computers below ABC’s suggested minimum retail price and in return, ABC would not sell its products at retail prices in the store owners' territories. ABC decided not to sell any more computers unless an additional software package was purchased. A competitor informed the Office of the Attorney General of this policy, asserting it was illegal. Additionally, the new model of ABC’s computer has caught on fire, causing injuries to consumers. Explain what ABC should do to protect consumers. Also consider whether there have been any violations under the antitrust and related laws and the governmental agencies involved in these types of cases. (Points : 30) 3.Prior to the 1935 Case of “McPhearson v. Buick Motors”, manufacturers had little or no liability exposure for malfunctions of their products that lead to injuries or death


to individuals from said product failure. What was the specific problem associated with this new Buick Automobile, and what two alternative legal claims did Buick Motors direct Mr. MacPhearson to pursue as opposed to his claim against them? What specific legal liability regarding manufactured products developed from this case, and what is its lasting effect in today’s world of consumer products? (Points : 30)

4.A large old brick building is being torn-down by a large well known contractor, and the bricks are just being thrown in a ditch by the road, apparently for disposal. A builder of small brick buildings on the outskirts of town notices two teenagers sitting in a large pickup truck, eating lunch, and watching the bricks being thrown into the ditch. The builder walks up to the teenagers and says, “if you guys will gather up those bricks being thrown in the ditch, put them in your truck, and deliver to my construction site at 1240 Oak Street, I will give you 6 cents a piece for the bricks”. The teenagers just smile and keep on eating their lunch. The builder leaves and goes back to 1240 Oak Street, where his crew is assembling a small brick building. At 4:00 PM that afternoon, the two teenagers drive up to 1240 Oak Street with their pickup truck loaded with bricks. They go up to the builder and say, “okay we are delivering 8,000 bricks, so at 6 cents per brick, you owe us $480”. The builder laughs and says, “I don’t really need them, you should just take them back and dump them in the ditch”. Do you think the teenagers have a contractual claim against the builder that they can recover on in court? How should they proceed? (Points : 30)

5. Johnson Manufacturing is a publicly held corporation that burns coal to power its plant. Johnson’s received notice today of an immediate rule change by the EPA requiring all coal burning plants to reduce their emissions by 10%. Implementing the technology to comply with this regulation would cost Johnson’s millions of dollars and could put them out of business. The CEO knows that the current emissions standards have been proven safe and acceptable but cannot find any research supporting the new standard. 1. Identify and apply an ethical theory from chapter 8 of our text that you think is appropriate and explain how you would advise the CEO regarding whether or not he should comply with the new standard. (15 points) 2. The CEO is upset that no prior notice was given concerning this rule change. As legal counsel for the company, the CEO has asked you to determine if it is legal for the EPA (or any administrative agency) to issue an immediate rule change. Explain why or why not. (15 points) 3. The CEO wants to approach the EPA with an alternative way of reducing pollution. He asks you if emission charges and/or marketable discharge permits would be viable options. Explain how these could potentially reduce emissions and evaluate


whether or not one or both could be used instead of the regulation the EPA passed. (15 points) 4. Several years ago, the Board of Directors at the request of management voted against complying with a previous EPA rule change. This decision ended up costing the company $2 million in fines and penalties. Both management and the board are considering not complying with today’s rule change. Apply the business judgment rule as it relates to the board of directors and management. Include their legal and ethical responsibilities in the assessment. (15 points) 6. The Federal Government’s prosecution and eventual dissolution of the Standard Oil Trust under the 1890 Sherman Act before the Supreme Court in 1911 was the dominate example of antirust litigation in this country for almost 100 years. The only other Federal attack on a business as a dominate Monopoly to approach the importance of the Standard Oil Trust case was the United States v. Microsoft Corporation case, which was originally filed in 1999 by President Bill Clinton and his Attorney General Janet Reno. The Microsoft Case was resolved at the U.S. Circuit Court of Appeals in 2001 by President George W. Bush and Attorney General John Ashcroft. What was the basis, Federal Statute, for the original complaint against Microsoft? What was the basis of the specific complaint the Federal Government filed against Microsoft? What was the final result of the case, and the lasting impact on the software/computer industry? (Points : 30)

7. Given that only 12 percent of the Business Organizations functioning in the United States are Corporations, what factors of business characteristics and operations result in Corporations generating 89 percent of business revenue? (Points : 30) 8. After Justin graduated from college, he was hired by one of the largest ad agencies in the city. His first assignment involves working on the Budget Burger account. Budget Burger is owned by the daughter of the president of the ad agency (Mr. Johnson) and has three locations throughout the city. Justin’s assignment was to design T-shirts with a catchy slogan to be handed out for free at all Budget Burger locations to celebrate the grand opening of Budget Burger’s fourth location. The Tshirts said “Done your way!” Due to a lack of time, the normal approval process was skipped and the T-shirts were printed and rushed to the Budget Burger locations. Over two thousand T-shirts were handed out the day of the grand opening. The president of the ad agency doesn’t have a chance to see the T-shirts until the end of the day when he notices the customers wearing them. He is furious because their largest account is Burger King and fires Justin on the spot, and calls the head of the legal department to set up an emergency meeting. (Part 1) (10 points) Identify and apply an ethical theory from chapter 8 of our text that you think the ad agency should have applied to this situation with Justin. What should the ad agency do next based upon your analysis? (Part 2) (10 points) Identify and apply a theory of employment law the ad agency could use to justify firing Justin. Do you think it would be successful? Why or why not? (Part 3) (10 points) Identify and apply an intellectual property law theory Burger


King could use if it decided to sue the ad agency. Would the theory you chose be successful? Why or why not? (Points : 40) MGMT 520 Final Exam Set 2

1. (TCO A & F) George G. Harris retired in 1978 after spending 30 years in the U.S. Army, having served in both Korea and Vietnam. In 1980, Mr. Harris wrote a lengthy book describing his military service in great detail. When his sons, David and Greg, and family friends read the book, they told Mr. Harris it was super interesting and needed to be published and put on the market. Mr. Harris did not refer the book to a formal publishing company, but did have a local private printing company produce 500 copies of the book. The books sold immediately, and over the next 20 years Mr. Harris had an additional 8,000 copies of the book printed and sold. Mr. Harris died in 2002, and almost immediately the ABC Publishing Company grabbed a copy of the book and began mass production and marketing. The sons David and Greg Harris filed a law suit against ABC Publishing for Copyright Violation. ABC Publishing’s defense was that the Copyright had never been registered, and the original author was now dead. What actions must David and Greg take to advance their claim? What dollar damages can they claim? Will ABC Publishing’s contention that the Copyright is unfounded since the author is dead prevail in court? What legal issues, federal statutes, and other items will decide this case? (Points : 30) 2. (TCO I) A group of Oil Traders from Switzerland who partnered with their American counterparts, sought to gain control of Russian Oil Exports from the highly productive areas in West Siberia. Rather than having to bid on a dollar per barrel of oil basis every day for the 2 million barrels per day of oil that was exported from this highly productive area, the traders invited the regional executives of the Russian oil production districts to meet with them in Davos, Switzerland. The oil traders sent a chartered airliner to Moscow to transport the Russian oil executives to Geneva, and then provided rail transport to Davos, for a five-day series of business meetings. Each day involved a skiing trip on the slopes of Davos for the oil executives accompanied by a trained skiing instructor. The business meetings were limited to about 1 hour per night, following an elegant evening dinner. The Swiss Oil Traders’ and their U.S. Partners’ defense of this entertainment was that there was no direct payment to the Russia oil executives, and therefore not a violation of the Foreign Corrupt Practices Act. Do you think this is a violation of the FCPA? There is no exchange of payments, but is such elaborate entertainment acceptable under the FCPA? 3. (TCO C) John Hunter died from carbon monoxide poisoning from a gas heater that he had installed in his hunting cabin. His wife wanted to sue the manufacturer under a theory of product liability. The manufacturer claimed that the heater had been improperly installed because the vent pipe was not extended far enough above the roofline. They pointed out that the instruction manual stated that the pipe had to be vented outside but acknowledged that it did not specify how far outside the vent pipe should extend, however the manual did have a drawing that showed it extending beyond the roofline.


They also pointed out that the instruction manual had the statement: “WARNING; To ensure compliance with local codes, have installed by a gas or utility inspector”. 1. Does the wife have a valid product liability lawsuit? In your answer explain the legal elements she would have to prove and show whether or not the facts support those elements. 2. Does the manufacturer have valid defenses? 3. What ethical principles/tests should the company consider in deciding whether to fight or settle this lawsuit? 5. (TCO E) Johnson Manufacturing is a publicly held corporation that burns coal to power its plant. Johnson’s received notice today of an immediate rule change by the EPA requiring all coal burning plants to reduce their emissions by 10%. Implementing the technology to comply with this regulation would cost Johnson’s millions of dollars and could put them out of business. The CEO knows that the current emissions standards have been proven safe and acceptable but cannot find any research supporting the new standard. 1. TCO A. Identify and apply an ethical theory from chapter 8 of our text that you think is appropriate and explain how you would advise the CEO regarding whether or not he should comply with the new standard. (15 points) 2. TCO B. The CEO is upset that no prior notice was given concerning this rule change. As legal counsel for the company, the CEO has asked you to determine if it is legal for the EPA (or any administrative agency) to issue an immediate rule change. Explain why or why not. (15 points) 3. TCO F. The CEO wants to approach the EPA with an alternative way of reducing pollution. He asks you if emission charges and/or marketable discharge permits would be viable options. Explain how these could potentially reduce emissions and evaluate whether or not one or both could be used instead of the regulation the EPA passed. (15 points) 4. TCO H. Several years ago, the Board of Directors at the request of management voted against complying with a previous EPA rule change. This decision ended up costing the company $2 million in fines and penalties. Both management and the board are considering not complying with today’s rule change. Apply the business judgment rule as it relates to the board of directors and management. Include their legal and ethical responsibilities in the assessment. (15 points) 6. (TCO G) The Sherman Act of 1890 provided the basic Federal Statute for prosecution and ultimate dissolution of the Standard Oil Trust in 1911, which had functioned as a monopoly controlling 92% of the oil and natural gas business in the United States; Also known as the great clash between President Theodore Roosevelt and Exxon Founder John D. Rockefeller. This famous Supreme Court Case was followed by the Clayton Act of 1914, which sought to prevent formation of future monopolies, and outlined a number of prohibited business activities. A century later lawyers, economists, and other business people continue to debate the goals and/or benefits of antitrust legislation, and resulting court decisions. List and discuss the four


goals of antitrust statutes, and then identify the specific elements of business activities targeted as “restraint of trade”. 7. (TCO H) Although corporations are very attractive forms of business in the United States due to their ability to raise funding, and the normal protection from personal liability afforded the stockholders; however, in certain instances the stockholders can be held liable for the corporate debt. This legal action by a Court of sufficient jurisdiction is referred to as “Piercing The Corporate Veil”, wherein the stockholders can be held liable for the corporate debts. What activities by a corporation, its executives, or shareholders, can lead to a court holding the shareholders responsible for the corporate liabilities? 8. (TCO B) The San Diego Parachute Club practiced their parachute exercises every weekend, and usually they did so in the air space approaching the San Diego, California, international airport. The airport management never objected to the parachute club, but asked the Federal Aviation Agency (FAA) to block the parachuting in the airport air space. The FAA issued an Administrative Rule that did not require publication that prohibited the parachuting in the air space. The San Diego Parachute Club immediately challenged the rule saying it should have been a Substantive Rule that had to be published, and giving them the opportunity to protest the rule. The FAA agreed and published the Substantive Rule in the Federal Register; The San Diego Parachute Club filed a written objection. Consider the rights the San Diego Parachute Club have going forward. What are their initial rights in protesting the FAA Substantive Rule forbidding their parachuting at the San Diego Airport? What additional rights can they pursue if the FAA continues to move forward on the restriction? Include the details of the parachute club’s rights to protest all the way into the Federal Court System?

MGMT 520 Final Exam Set 3 (50 TCO's)

(TCOs D, E, F) Frank Jones is a college student who had a plow attached to his jeep so he could earn extra money plowing during the winter. Jones was under contract to plow the driveways of Mr. Washington and Ms. Adams, two neighbors down the street. John Smith lives between Washington and Adams. Jones took it upon himself to plow Smith’s lot the seven times this past winter when there were storms and when he plowed the other two lots. Jones had never spoken to Smith about it, and Smith never objected. In the spring, Jones personally appeared at Smith’s house and presented him with a bill. Smith refused to pay Jones, stating that, “he never agreed to any contract.” That statement was made after Jones presented him with a bill of $600, which he calculated as the reasonable value of his services. After Smith’s obnoxious response, Jones yelled: “I will see you in court!”


What legal arguments could Jones make to enforce his $600 bill? What legal arguments could Smith make to avoid liability? (Points : 15) (TCOs B, C, G, I) Lonestar Trucking, a large freight carrier servicing the Southwest, learns from reading in the industry trade magazine that the Federal Motor Carrier Safety Administration (FMCSA) has proposed a regulation change. The regulation, proposed pursuant to a statute that restricts drivers from operating/driving a truck for more than twelve (12) hours a day, will now require drug testing of any driver involved in an accident. The regulation was proposed due to political pressure from Mothers Against Impaired Driving (MAID), a group dedicated to eliminating deaths due to people driving while impaired. Lonestar Trucking is concerned, not just about the costs of implementing such a regulation, but how it will comply with its requirements since accidents often occur far from their base of operations. Lonestar Trucking’s employees and their union are also very upset with the proposal. They are concerned that the field drug tests used by police officers are notorious for giving “false positive” results, and that the proposed regulation will require that a test be given even when “the other diver” is clearly at fault. (TCOs A, B, F, H) PART A Paul and Thomas Franklin, brothers, are college students and web designers. While at the University of Megalopolis, a private, for-profit college in the “Quad State” area, they started an online chat service called FaceLinked. Paul attended and resided at the college’s campus in the State of Quadrahenria. Thomas, who was on probation during college for a low level felony drug conviction, could not be a resident student and took classes at the campus in the (TCOs G and I) In the 1930s, after immigrating to the U.S. from Ireland at the onset of World War II, Shamus and Mary McCream opened a bakery in Boston. They specialized in snack cakes. McCream Cup Cakes became so popular in the area that the family stopped being actual bakers and became manufacturers/ food processors of the snack cakes on a regional basis. After returning from the war, their son Steve completed college and began working in television advertising in the early 1950s. Steve approached his parents and his older brother Tom, who (TCOs A, E, F) John and Edwin Booth, brothers and actors, decide to retire after years on the road. They remember a town in Louisiana they were familiar with from their travels. From the internet, they learn of a farm a few miles outside of town that seems ideal. There is a great house and lots of land. The brothers wish to convert the farm to a restaurant-hotel with a dinner theater. They contact the realtor by phone, and make arrangements to buy the parcel. The Booth brothers plan on traveling to Louisiana prior to the closing to look things over, but are unable to do so due to their touring schedule. The realtor, whose commission is technically paid by the proceeds to the seller, and who has a listing contract with the seller, advises the Booths that she will handle everything. Louisiana custom, law, and practice does not require a purchaser of land to have an TCO D) Short Answer Question and Facts for Page 1 Questions: A well-known pharmaceutical company, Robins & Robins, is working through a public scandal. Three popular medications that they sell over the counter have been determined to be tainted with small particles of plastic explosive. The plastic


explosives came from a Robins &Robins supplier named Casings, Inc., that supplies the capsule casings for the medication pills. Casings, Inc. also sells shell casings for ammunition. Over (TCO B) The FDA decides to require all pharmaceutical companies to immediately implement the tracking bars (UPC) as a result of the disaster with Robins & Robins. Robins & Robins decides not to challenge this and begins the process of adding them to all of their products. However, McFadden, Inc., a New York pharmaceutical company, realizes that this new requirement is going to bankrupt them immediately. McFadden did not participate in the original public comment period. However, this rule is different from the rule that went through that public comment period in that it specifically names four companies as being impacted: Robins & Robins, McFadden, Inc., Bayer, and Johnson & Johnson. On what bases can McFadden challenge this requirement imposed by the FDA, and can they be successful? Provide at least two (TCO C) Robins & Robins immediately issued a massive recall for the tainted medication upon learning of the situation. Despite the recall, 1,400 children and 350 adults have been hospitalized after becoming very ill upon taking the tainted medication. Each of them had failed to note the recall after having already purchased the medication. It is quickly determined that they will need liver transplants and many of them (TCO A) It is discovered that Robins & Robins knew about the tainted medication 2 months earlier than they announced the recall. They hid it and, in fact, sent out contract buyers to try to buy up all of the medication off the shelves. Their “fake” recall failed. Using the Laura Nash method of analyzing ethical dilemmas, analyze the ethical dilemma faced by the CEO of Robins & Robins for the fact that they saved 35 cents/package and are now in the middle of a major, life-threatening recall. Analyze their “fake” recall as well. Show all of the steps of the model and give a recommendation (TCO I) A Canadian citizen whose son (resident of Ontario) died from the medication sues Robins & Robins in a California court. The court there is well known for being victim friendly and providing huge pay-outs to victim families. In Canada, the cap on non-pecuniary damages is around $300,000. Punitive damages in Canada are rarely allowed. Robins & Robins moves to dismiss the case under the theory of sovereign immunity. Will Robins & Robins win this motion using this theory? Why or why not? (short answer question) (Points: 15) TCO I) A Canadian citizen whose son (resident of Ontario) died from the medication sues Robins & Robins in a California court. The court there is well known for being victim friendly and providing huge payouts to victim families. In Canada, the cap on non-pecuniary damages is around $300,000. Punitive damages in Canada are rarely allowed. Will this Canadian citizen be permitted to sue Robins & Robins in this California court? Why or why not? (short answer question) (TCO E and H) A private high school hires a new Superintendent, George Forester. The school is owned by a local Lutheran Church and is run by a board of directors chosen by church members. Supt. Forester shows up for his first day of work, and sends a memo via intercompany mail to all teachers:


TCO E) Anna and Lisa both sue the school and Pastor Forester for discrimination and further, for liability for their injuries (the stabbing damages and the damages to Lisa’s son’s health.) You are one of the board of directors and need to analyze the liability of the school. Limit your answer to the SCHOOL'S liability only. (TCO E) Anna and Lisa both sue the school and Pastor Forester for discrimination and further, for liability for their injuries (the stabbing damages and the damages to Lisa’s son’s health.) You are one of the board of directors and need to analyze the liability of the school. Limit your answer to the SCHOOL'S liability only. (TCO H and E) In the discovery portion of the case, it is determined that Pastor Forester is really not a Pastor. His real name is Jerry Birches, who is a parolee with convictions for child molestation. His parole agreement prohibits him being closer than 1000 feet to any school. In order to cut costs, the school had stopped doing background checks on new employees, and this slipped through the cracks. The President of the Board of Directors immediately fires Pastor “Jerry Birches” Forester and notifies his parole officer of the violations. Pastor Forester claims 12. (TCO G) It is discovered that two weeks before the Ellen show, she had sold $2 million in JOSB stock (at a gain of about $2,200). The morning after her show, Ellen sold JOSB short (which means she was betting the stock price would go down), and she made another $210,000 in the next week on that trade. The swing in the price was not directly tied to her comments, but was suspected to be a result of a recall JOSB made on their entire line of men's black and brown dress slacks when it was discovered that they had been sewn together with white thread. (TCO B) Name one argument that Robins & Robins could have used to fight against the imposition of a tracking bar (UPC) requirement in the event their lobbying efforts during public comments had failed. Explain the argument and the procedural method Robins would use to fight it. If Robins had not gotten involved in the public comments period, would your answer change? Why? MGMT 520 Final Exam Set 4

TCO A: Given an organizational requirement to conform business practices to both the law and best ethical practices, apply appropriate ethical theories to shape a business decision. • TCO B: Given instances of federal regulation of business and commercial practices, determine the constitutional and regulatory bases for such regulation, and formulate a strategy by which an impacted business can influence or contest regulating outcomes. • TCO C: Given an example of corporate liability arising from the sale of defective and dangerous products, develop a business strategy that includes ethical considerations to minimize liability for claims of product liability and breach of warranty. • TCO D: Given a business requirement to form a contract for the sale of goods and services to a customer, define the elements of a contract, and determine whether a duly formed contract is enforceable under the common law or Uniform Commercial Code.


• TCO D: Given a business requirement to form a contract for the sale of goods and services to a customer, define the elements of a contract, and determine whether a duly formed contract is enforceable under the common law or Uniform Commercial Code.

TCO E: Given specified circumstances of an employment relationship, determine the circumstances under which an employer is liable to an employee for employment discrimination or wrongful discharge.Essentially TCO E is an overview of employment rights, in particular, rights granted under the Civil Rights of 1964 and its subsequent amendments. also come into play in the question (Exhibit 17.1 & 17.2 with regards to the agency principal matters)• TCO F: Given specified circumstances of business ownership of real and intellectual property, evaluate the rights of business to the protection of its property and the obligations arising out of the use of the property. o Theories to protect business intellectual property (patents, copyright, etc) o Enforcement of business property rights (product disparagement, misappropriation, etc) o Defenses to these claims • TCO G: Given examples of anticompetitive or unfair trade practices, apply applicable antitrust or other consumer protection laws, and determine appropriate business strategies to prevent trade practices liabilities. (WEEK 6 DISCUSSIONS) o Statutory protections for consumers o Bankruptcy o Horizontal restraints of trade o Vertical restraints of trade Review Ch. 25, Know what occurred in the Microsoft case and the court’s decision

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