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MGMT 520 Final Exam Set 2 (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”.
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. Does the manufacturer have valid defenses? 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. 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) 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)
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) 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?