Karen Morris' Bio
Karen Morris is a Distinguished Professor of Business Law at Monroe Community College in Rochester, New York where she has taught for 31 years. She is also an elected town judge and the author of two textbooks - New York Cases in Business Law and Hotel, Restaurant and Travel Law. Karen also writes a treatise on New York Criminal Law and a column in Hotel Management Magazine. She recently published her favorite work - Law Made Fun Through Harry Potter's Adventures. Professor Morris is the recipient of numerous teaching awards and recently received the Humanitarian Award from her county Bar Association.
Marianne Jennings' Bio
Professor Marianne Jennings is a member of the Department of Management in the W.P. Carey School of Business at Arizona State University and is a professor of legal and ethical studies in business. At ASU she teaches graduate courses in the MBA program in business ethics and the legal environment of business. She served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. From 2006-2007, she served as the faculty director for the MBA Executive Program.
A Florida judge has ruled that the tactics of West Asset Management, a collection firm working for Bank of America, engaged in debt collection tactics that amounted to harassment. Because of the ruling, Mrs. Linda Long, a widow who was continually contacted by West Asset to pay her deceased husband’s $16,651.52 balance on his Bank of America credit card.
Employees of West Asset called Mrs. Long 15 times despite recorded conversations indicating her disclosing the following:
1. She was not a joint signer on the credit card account. It was her husband’s credit card.
2. The only money in the estate was a $2,000 life insurance policy that would be used to pay for her husband’s funeral. Mrs. DeLong indicated that all of their assets had been exhausted because of all the medical bills she had paid during her husband’s long battle with cancer.
All of the phone calls included the following statement that is required under Florida law:
"Be advised as a family member you are not personally responsible to pay this debt. "In spite of this disclosure, the West Asset employees went on to try and collect the credit card debt from Mrs. DeLong. One collector told Mrs. DeLong what she could do to "get this off your plate." You can listen to the tapes here.
When Mrs. DeLong was unable to stop the calls, she retained an attorney and filed suit against Bank of America and West Asset Management. As part of the discovery in the case, Bank of America was required to release the tapes of the recorded conversations. You can read excerpts of the taped phone calls here. You can watch a video of the DeLongs' story here
Under Florida law, family members of decedents are not responsible for the debts of their relatives unless they co-signed on the credit arrangement. The collector in this case made the mistake of trying convince Mrs. DeLong that she was liable for the debt, something that crosses the line in permissible debt collection tactics. In addition, the debto collectors tried to make it seems as if they could attach assets to satisfy the debt. Iin addition, many collectors tell surviving relatives that they have a moral obligation to pay the debts of the decedent. The moral obligation appeal is generally also made along with the promise to get the total amount due rediced. For example, one portion of the phone stapes of the DeLong conversations with colectors includes the following:
“I just want to ask to see if there is anything that can be done since, you know, it is a large bill. Just a couple thousand dollars. It would be writing off over $14,000… You don’t think the family is in a position to help you out with that?”
“I just want to ask to see if there is anything that can be done since, you know, it is a large bill. Just a couple thousand dollars. It would be writing off over $14,000… You don’t think the family is in a position to help you out with that?”
For some tips on how to handle collectors who are seeking to recover debts of deceased family members from surviving relatives, go here.
The Fair Debt Collection Practices Act (FDCPA) applies to third-party collectors and includes the following protections:
1. Limitations on hours for contacting a debtor.
2. Privacy protections for the debtor on contact with other parties about the debt.
3. Requirements that the collector stop making contact if the debtor requests no more contact or retains an attorney,
The judge’s ruling allows Mrs. DeLong to go forward with her suit and request punitive damages. Under Florida law, the amount of punitive damages can be up to 10 times the amount of the debt.
1. What did the collector do that violated Florida law?
2. What are the damages for harassment under Florida law?
Attorney Michael Greco filed a joint lititgation action on behalf of 12 workers for the Cook County (Illinois) prison system who claimed to have been passed over for promotion because of their race.
The federal district court dismissed the complaint, finding that the situations of the 12 plaintiffs were too dissimilar to allow a class action; each would have to file an individual complaint and the judge gave Attorney Greco 40 days to refile the individual cases. Greco failed to file some of the new complaints until nine months had passed, causing different judges to all dismiss the complaints for not having been filed properly.
Greco then appealed the dismissals to the 7th Circuit Court of Appeals. The court was not pleased, especially because the appeals were filed after the deadline for filing appeals.
To make sure Greco’s clients understood that their attorney blew their chances for a day in court, multiple times, the court ordered him to inform them:
“We direct attorney Michael J. Greco to furnish his client with a copy of this order so that the client can consider the possibility of malpractice litigation. Greco’s failure to file a timely complaint, followed by his failure to file a timely appeal….
“In addition to paying [a] fine … Greco must furnish the court with proof that he has complied with our direction to send copies of Lee and this order to his clients.”
The court wished to be very clear: “Greco is a menace to his clients and a scofflaw with respect to appellate procedure.”
Why are court rules so strict about filing deadlines?
Why would the court order the attorney to give his clients a copy of their opinion?
Ivanka Trump recently received a cease and desist letter from Derek Lam, a shoe designer, directing her to stop the sale of her “Cadie wedge sandal.” Lam claims the shoe’s design is identical to his “Ayami wedge sandal.” Lam’s shoe sells for $780; Trump’s has a price tag of $150. Pictures comparing the two reveal virtually identical footwear.
Ivanka Trump is the daughter of Donald Trump the real estate magnate, TV star, and vacillating presidential candidate. In her own right, Ivanka is a business school graduate, a wife and recent mother, a businesswoman, and the creator of a shoe line called Ivanka Trump Footwear.
An interesting question is – On what legal basis is Lam complaining? Copyright law extends very limited protection to clothing designs, although legislation is pending that would increase it.
The limited protection comes from a subset of trademark law. A trademark is a name or symbol used to identify the source of a good, such as the yellow arches for McDonald’s or the Nike swoosh. Related protection comes from trade dress which refers to the overall look of an item. Trade dress applies only if the look is iconic, meaning it is strongly and exclusively associated with the company that produces the item. For example, the shape of a coca cola bottle is protected by trade dress, as is the distinctive green box in which make-up manufacturer Clinique packages its products. Elements of trade dress can include colors, package design, fonts, smell, three-dimensional shapes, or other nonfunctional features that identify the source of a product.
The public policy basis for trade dress rights is protection of consumers. The law seeks to prevent buyers from purchasing inferior goods because of a confusingly similar appearance of an identifying feature.
In the Lam v. Trump situation, Lam claims that the shoe design is iconic and therefore protected. Ivanka cries foul, claiming there is nothing unique or identifying about the style in question. Instead, she claims the design has been utilized by many a manufacturer for decades.
Looking at the pictures, and being a long-time wearer of sandals, I think Derek Lam has an uphill battle. However, there are certain attractive features of Lam's shoe that may not be the norm - the interesting shape of the wedge, the layered look of the wedge, the two-colors of the wedge, and the multi-strand ankle strap. What’s your view?
Note: There is proposed legislation in Congress to expand copyright protection to cover clothing designs. The bill is called the Innovative Design Protection and Piracy Prevention Act which would extend three years of copyright protection to the “appearance as a whole of an article of apparel, including its ornamentation.” The bill is directed in part at the large number of designer knockoffs made in this country and in Asia, which hurt the domestic fashion industry.
Noah Kravitz worked for Phonedog.com for four years. During that time he began tweeting on Twitter under the name Phonedog_Noah. Mr. Kravtiz tweeted quit successfully, amassing 17,000 followers. Below is a sample of Mr. Kravitz's work.
However, in 2010, Mr. Kravitz decided to leave Phonedog.com. Phonedog.com agreed that Mr. Kravitz could keep his Twitter account as long as he agreed to post occasionally something on behalf of Phonedog.com. Mr. Kravitz believed that his departure from Phonedog.com was an amiable one.
Mr. Kravitz then began posting under NoahKravitz, keeping all of his 17,000 followers under his new Twitter name. When Phonedog.com discovered the new account and the 17,000 followers it filed suit against Mr. Kravitz for taking a customer list, something that was proprietary. Phonedog.com says that it inested time and resources in developing the list and that social media awareness of its company is important to its marketing and sales.
Phonedog.com’s suit asks for damages of $2.50 per month for the 8 months that Mr. Kravitz has been gone. For those of you sans calculator, the total damages are $340,000, an amount Mr. Kravitz does not have. However, Phonedog.com is an LLC and Mr. Kravitz claims that he is entitled to 15% of Phonedog.com’s site’s gross advertising revenue because he was a vested “partner” in the LLC. Mr. Kravitz also says that he is entitled to back pay for his video reviews as well as for his blogging posts.
The case is going to trial and experts are awaiting the outcome because the facts raise so many questions. Is taking your Twitter followers like taking your Rolodex card file that you developed while working at the company? How much of a Twitter account’s success is due to the company name and how much is due to the author who tweets? What are the lines of ownership when companies often hire popular bloggers to use their personal Twitter accounts to tout their products? For example, Samsung hired Philip Berne to use his personal Twitter account to evaluate Samsung phones. How are ownership rights handled in this situations? Does it make a difference that Mr. Berne is an independent contractor and Mr. Kravitz was an employee? And how much is a Twitter follower actually worth to a company.
Some experts feel that companies should simply be grateful to benefit from Twitter accounts, however they blossom and by whom. Other experts see the accounts as drawing on the company’s name and products and should entitle the company to some control, rights, and compensation. The issue is much more graphically illustrated by the departure of reporter Rick Sanchez from CNN; he took 150,000 Twitter followers with him on his personal account.
All of these questions and legal issues are examples of how the law often has to catch up with technology in determining parties’ rights. Just as the law had to catch up with intellectual property rights in video tapes, downloading music and movies from the Internet, and search rights on e-mail accounts, the law now also has to catch up with tweets.
Take at look at this Forbes article on "Who Owns Your LinkedIn Contacts?"
1. What does Phonedog.com say the Twitter followers of Mr. Kravitz are and why does it believe it has rights in those followers?
2. What is different about Mr. Berne’s tweets and Mr. Kravitz’s tweets?
Mr. Kravitz has asked that the suit be dismissed from federal district court because Phonedog.com cannot establish that its damages are over $75,000. Why is that number important?
Mr. Kravitz has asked that the suit be dismissed from federal district court because Phonedog.com cannot establish that its damages are over $75,000. Why is that number important?
The Supreme Court of the State of Montana asked: “Can an employer enforce a covenant not to compete when the employer ends the employment relationship?”
Dawn Wrigg, a CPA, worked for Junkermier, Clark, Campanella, Stevens, P.C. (JCCS), an accounting firm, as a staff accountant at the company’s Helana, Montana, office, for more than 20 years. Six years before her relationship with JCCS ended, she was promoted to “shareholder” in the firm.
She signed a contract with JCCS that included a covenant not to compete. The covenant at issue stated:
“If this Agreement is terminated for any reason and Shareholder provides professional services in a business ... in competition with JCCS the Shareholder agrees as follows:
To pay to JCCS an amount equal to one hundred (100%) of the gross fees billed by JCCS to a particular client over the twelve month period immediately preceding such termination, if the client was a client of JCCS within the twelve month period prior to Shareholder’s leaving JCCS’ employment ... and the particular client is thereafter within one year of date of termination served by Shareholder’s partners, or any professional services organization employing the Shareholder.”
JCCS's CEO told Wrigg in May 2009 that her contract would not be renewed when it expired at the end of June; she was to depart immediately but would be paid until the end of June. The letter reminded her of the covenant not to compete.
Wrigg had difficulty finding work at another accounting firm because of the covenant. Eventually, she found employment with Rudd and Company (Rudd), but to do so she had to accept a significant cut in salary from $154,000 at JCCS to $87,000 due to Rudd's concerns about the covenant.
Wrigg sought a declaration regarding the enforceability of the covenant. The trial court ruled that the covenant was enforceable because it was reasonable as to time and place. It was based on good consideration and afforded reasonable protection without imposing an unreasonable burden on the employer, the employee, or the public.
The key issue for the Montana Supreme Court, not addressed by the District Court, was whether the covenant protected a legitimate business interest in a case such as this. Montana generally disfavors covenants not to compete, and the Supreme Court noted that is especially so when the employer chooses to end the relationship. Surveying law from other jurisdictions, the court ruled that “an employer normally lacks a legitimate business interest in a covenant when it chooses to end the employment relationship.”
The court found that it did not matter that Ms. Wrigg’s departure was triggered by a termination or simply the expiration of her contract. Either way, she did not leave on the terms usually contemplated in such covenants. That is, she did not voluntarily leave employment so that she could compete against JCCS.
Why do some employers use covenants not to compete? What benefit could JCCS get from that arrangement?
How does an employee avoid the situation that arose in this case?
Currently nine states have adopted statutes banning the use of hand-held phones, and 35 states bar texting by drivers.
The National Transportation Safety Board (NTSB), an independent federal agency responsible for promoting traffic safety and investigating accidents, has recently spoken out. It keeps statistics concerning causes of accidents that are used to identify safety issues that need addressing. The agency has proposed a ban on all mobilel phone use by drivers, including hands-free. The recommendation results from the agency's investigations of numerous crashes caused by cell phone distraction. The NTSB claims that the risks are created not just by removing a hand from the wheel but also by focusing on a conversation which reduces the driver’s attention to the road.
The agency's recommendations are nonbinding on state legislatures. This is because cell phone use and car safety are not within the powers delegated to the federal government by the Constitution. Instead, they are the domain of the states. This explains the patchwork of laws currently in effect.
Given the obvious risks associated with distracted driving, you might ask why more states do not have similar laws. Turns out resistance to them is significant. It comes in part from motorists who want the time-saving and convenience benefits that accompany in-route use of a phone. Likewise, the phone industry has lobbied strongly against hands-free laws. However, more recently they have come to appreciate the attendant dangers (and no doubt have seen sales increase even in states where in-car use is restricted) and are more willing to support restrictions, particularly bans on texting while driving.
New York's experience provides an interesting study of the progression of attitudes toward cell phone laws. Several years ago the state adopted a hands-free requirement Violation carried no points. Additionally, violation was not grounds to stop a vehicle. Officers could only ticket for the cell phone violation if they observed additional illegal driving practices, such as speeding, failing to yield the right of way, etc. In effect, only if the use of the hand-held phone caused the driver to violate other traffic laws could law enforcement stop the vehicle. A year or so later the state elevated the violation, allocating two points and rendering it sufficient grounds for an officer to pull over a vehicle.
The issue knows no geographical boundaries. Last year the Secretary General of the United Nations advocated an end to the "culture of multitasking when driving.” Thirty countries have adopted some limitations on phone use by motorists. Germany and Portugal have adopted a total ban, as advocated by the NTSB.
1) What are the risks associated with cell phone use in a car?
2) Recognizing the risks, what weight should a legislator have given to the cell phone industry's earlier attempts to forestall limitations on in-car phone use?
3) In your opinion, is a hands-free mandate sufficient precaution against distracted drivers or should an outright ban as promoted by the NTSB be adopted?
In the noteworthy case, Citizens United v. Federal Election Commission (January, 2010; discussed in the YouTube clip) the Supreme Court held that political spending is a form of protected speech under the First Amendment. The government may not stop businesses or unions from spending money to support or oppose candidates for office. While direct giving to candidates may be limited, private parties, such as corporations, may seek to persuade voters through other means, such as sponsoring ads that take positions on issues and candidates. The opinion struck down portions of a statute, generally called McCain-Feingold, that imposed the restrictions.
As often happens when the Court has ruled on an issue, more litigation follows as the boundaries of the law are tested. In the most recent installment, the 7th Circuit Court of Appeals applied the Citizens United holding to a Wisconsin statute that restricted spending in campaigns in the state. Various groups, including lead plaintiff Right to Life PAC, requested, and received, an injunction against enforcement of the statute pending full resolution of the matter.
The court noted: “Over time, various … justifications for restricting political speech have been offered—equalization of viewpoints, combating distortion, leveling electoral opportunity, encouraging the use of public financing, and reducing the appearance of favoritism and undue political access or influence—but the [Supreme] Court has repudiated them all.”
The Wisconsin law, which imposed a $10,000 contribution limit, is unconstitutional as applied to organizations which engage in independent expenditure for political growth. While the Right to Life PAC brought the suit, its position was shared by unions and other groups that have been involved in political fights in Wisconsin. Other federal Courts of Appeals have had similar rulings since Citizens United, so political action committees can be expected to continue to flourish in the coming election season.
Does raising the cap on contributions mean that corporations and unions will dominate elections?
Why did opponents of McCain-Feingold say that it was a bill to protect incumbent members of Congress?
Daniel Ruettiger, who is widely known for having inspired the 1993 motion picture "Rudy" and a resultant motivational speaker, settled charges with the SEC that he engaged in a pump-and-dump scheme related to his sports drink company,Rudy Nutrition.
The SEC complaint alleges (Mr. Ruettiger did not admit the charges as part of the settlement) that Rudy Nutrition produced and sold modest amounts of a sports drink called “Rudy” with the tagline “Dream Big! Never Quit!” However, the SEC also alleges that the company and the product were merely a front for Mr. Ruettiger and 11 others to pump up the value of the stock and then sell their shares in order to profit. For example, a Rudy promotional mailer sent to potential investors claimed that in “a major southwest test, Rudy outsold Gatorade 2 to 1!” There were no taste tests. A Rudy promotional e-mail claimed that “several blind taste tests, Rudy outperformed Gatorade and Powerade by 2:1.”
According to the SEC’s complaint, Mr. Ruettiger was founder of a company called Rudy Beverage Inc. that he and a college friend ran out of South Bend, Indiana until October 2007. At that point, Rocky Brandonisio became the company’s president and day-to-day business manager. Mr. Brandisio moved the company’s operations to Las Vegas, where he and Mr. Ruettiger live. Mr. Ruettiger remained CEO of the company. During this time, the company struggled financially with few customers, few assets, and no profits.
Mr. Ruettiger and Mr. Brandonisio brought in Stephen DeCesare, an experienced penny stock promoter to take the company stock public in late 2007. Mr. DeCesare and Mr. Ruettiger were neighbors in Las Vegas.
At this point, the structure of Rudy Nutrition became complicated. Mr. DeCesare identified a shell corporation for a reverse merger, which occurs when a private company acquires a public company (typically a shell company) in order to become publicly-traded. In February, 2008, Mr. DeCesare acquired the shell company in a reverse merger and changed its name to “Rudy Nutrition.” Mr. Ruettiger signed the necessary paperwork for the reverse merger and Rudy Nutrition shares began to be sold under the ticker symbol RUNU. There were 3 billion shares of Rudy Nutrition issued, one billion of which were sold to members of the public.
The false and misleading statements about the company and its drink attracted share buyers to RUNU stock. In less than a month, RUNU went from trading 720 shares to more than 3 million shares, and within two weeks the price of RUNU stock climbed from 25 cents to $1.05 per share. The SEC complaint explains, “After March 12, 2008, RUNU stock began a roller coaster ride as the scheme’s participants sold millions of RUNU shares to the market amid their simultaneous efforts to pump the stock.”
The SEC suspended trading and later revoked registration of the stock in late 2008. Rudy Nutrition is no longer in business.
The SEC complaint alleges that Mr. Ruettiger and the other officers and those who helped with the sale of the stock, including brokers and dealers, netted $11 million from their trades in RUNU. Mr. Ruettiger settled the SEC complaint by agreeing to pay $382,866 and accept a ban on participating in any penny-stock offering or serving as a director or executive of a public company.
1. What is a pump-and-dump scheme?
2. What does the settlement mean for Mr. Ruettiger’s future business activities?
You can read about Rudy's story here.
Florida A & M’s marching band is known internationally and has performed at everything from football games to presidential inaugurations. Since 1945 the band has been known for its precision and inspiring routines. Some call the band the best in the country. However, for the past 20 years, the band often percolates into the news because of injuries that result from hazing – something that appears to be a part of the band’s culture. The hazing consists of paddling, kicking, and beating those who want to be part of the “Marching 100.” Several years ago, one target of the hazing experienced kidney failure. The university settled with the student who experienced the kidney failure and he recovered $1.8 million from other defendants who were named in his suit.
The hazing appears to a ritual that band members go through in order to earn the right to ride in the charter or “C” bus. The band member walks up and down the aisle of the “C” bus as the band members hit and attack them.
On October 31 and November 1, 2011, Bria Shante Hunter and Robert Champion were beaten on the “C” bus. Ms. Hunter’s thigh was broken during the hazing ritual and Robert Champion died. An autopsy report released on December 16, 2011 indicates that Mr. Champion’s death was a homicide. The autopsy concludes that Mr. Champion died of internal bleeding that was caused by blunt-force trauma. Mr. Champion had bruises on his chest, back, shoulders, and arms. You can read the autopsy report here. Mr. Champion was a healthy 26-year old who died within one hour of the hazing incident after complaining of being tired and thirsty and then losing his vision.
The university has canceled all band appearances, and its leader has been suspended by the university. Four students who were believed to have been involved in the Champion hazing were suspended but have since been reinstated. Another 30 students were removed from the band.
The sheriff’s department is continuing its investigation into the death. Possible charges include a third degree felony charge for death during hazing. No suspects have been named as yet. A university investigation is ongoing.
The culture of hazing in marching bands has been a problem that has been documented in books and discussed by university presidents. In the 1990s, pledging at sororities and fraternites was banned by the presidents of black colleges with the hope that eliminating the pledge process would eliminate the hazing. However, the hazing culture in marching bands continued.
Mr. Champion's parents said that they were pleased to have the autopsy results so that they could use the conclusions to work to eliminate the hazing cultures at Florida A & M was well as on other campuses. The possibility of litigation by the Champions for the wrongful death of their son remains. That litigation would be based on a theory of negligence because of the widespread knowledge of the hazing practices as well as the documentation on their risk. Some experts believe that the onyl way to eliminate the hazing culture is to eliminate the bands for several years in order to start with a new group of students who have no knowledge or history of the hazing process.
1. Who was aware of the hazing in marching bands?
2. What information was available on the dangers of hazing and why is this important if the Champions bring suit for the wrongful death of their son?
T[welve former professional football players filed a class action lawsuit (a case brought by a group of people who all suffered injury from the same cause) against the National Football League (NFL). The case claims that the NFL routinely administered the painkiller Toradol to players before and during games but failed to disclose the drug’s side effects. The drug disguised pain associated with injuries such as concussions. The result was that players were able to tolerate injuries and so did not seek treatment. Further, they played in games despite serious injuries, causing them to worsen.
According to the lawsuit, shots of the drug were recommended by trainers to help eliminate pain, and were routinely administered in pregame locker rooms by team doctors with no warnings of possible side effects. The players – including Joe Horn, Matt Joyce and Jerome Pathon - now suffer from anxiety, depression, short-term memory loss, severe headaches, sleeping problems and dizziness. Said one plaintiff, “Had I known there were going to be complications, I wouldn’t have taken the shots.” The lawsuit accuses the league of negligence (carelessness), fraud (intentional misrepresentation), fraudulent concealment (failing to disclose hidden information), and conspiracy (a plan made with another person to commit an illegal act).
Plaintiffs report that the team’s medical staff was a critical part of a team’s operations. Players learned to trust them. Nate Jackson, a retired tight end for the San Francisco 49ers, explained that trainers are under pressure to get injured players back on the field. One way to do it was to mask the player’s pain with drugs. Further, Jackson reported that players rarely had input in the treatment process. Instead, the team doctors and trainers decided the course of action.
The legal doctrine of informed consent requires that a patent be fully informed of all relevant facts about a recommended course of treatment before deciding whether or not to participate. The doctrine recognizes that patients have the right to decline medical procedures. Among the facts a doctor must disclose are the nature and purpose of the treatment, the risks and benefits, available alternatives, and the risks and benefits of the alternatives. If the required disclosures are not made and medical personnel proceed with treatment, the doctor may face civil liability and charges of ethics violations.
In recent years the NFL has adopted changes to help protect players from concussions including penalties for helmet-to-helmet hits. Additionally the NFL recently expanded a study it is sponsoring on the effects of concussions. Nate Jackson recommends the league appoint a medical body unaffiliated with any specific team to oversee players’ health. Its independence would help to ensure that medical recommendations would not be “distorted” by the interests of the player’s team.
Why did opponents of McCain-Feingold say that it was a bill to protect incumbent members of Congress:
Overweight Employees Pay More for Health Insurance by getthedaily
According to a Towers Perrin survey of 335 major international companies, 19% now penalize employees who smoke, have high cholesterol levels or poor BMI (body mass index) rates. The penalty is that these employees must carry more of the health costs associated with these health screens. On the upside, four of every five companies offer employees some type of financial reward if they participate in the employers’ health management plan.
The companies indicated in the survey that the health management plans not only save on health insurance costs, but also produce the following results for the company:
· Industry-adjusted average revenues per employee that were 40% higher than low-effectiveness companies, a difference of $132,000 per employee
· Fewer lost days due to unplanned absences and disability — which, when combined with savings on health care costs, creates a $27 million annual cost advantage for a U.S. company with 20,000 employees and an average pay level of $50,000.
· About 46% of the employees at these companies participate in their companies’ health management plans. See the Towers Perrin survey results here.
The penalties for employees who fall into the higher-risk behaviors, including smoking, higher weights, and cholesterol levels, are increased payments for their health insurance costs, an average of several hundred dollars more per year. However, at some employers, that cost is much higher. For example, WalMart employees who smoke pay an additional $2,000 per year in health insurance costs. Other employees who pass on higher health insurance costs to employees who pose higher risks for insurers include Home Depot, PepsiCo, Safeway, Lowe’s, and General Mills. Legal experts say that imposing the additional costs requires that the employer sponsor programs to help employees change their behaviors and health habits.for example, WalMart offers a stop-smoking program and disclosed that 13,000 employees are enrolled in the program. Employees who stop smoking are entitled to reduce their health-care benefits costs. For more information on company practices, see Reed Abelson, “The Smoker’s Surcharge,” New York Times, November 16, 2011, p. A1.
Legal experts also indicate that employees who have no control over their BMI or cholesterol can obtain a physician’s letter that entitles them to an exemption from the penalty. Other experts worry that the penalties may result in employees opting out of any health insurance coverage.
Some benefits and HR experts argue that such penalties could be a back door to discrimination against unhealthy workers or those who suffer from nicotine addiction or are obese because of psychological or brain chemical issues. The American Cancer Society and the American Heart Association have also expressed concerns about discrimination under these penalty programs. Under the new federal health insurance laws, employers are permitted to pass along up to 30% of their costs in insuring employees who do not meet the health standards established by the employers’ health insurers.
1. Does federal law allow employers to charge more to smokers for their health insurance? Is there a limit?
2. What concerns do health and legal experts have about the increased insurance cost penalties for employees who smoke or have high BMIs or cholesterol?
The photos above are exhibits contained in the federal district court holding in a suit brought by New York City photographer Bernard Belair against MGA, the company that produces Bratz dolls, which are pictured on the right.
The dolls on the left appeared in an ad for Steve Madden shoes that appeared in Seventeen magazine in 1999. Both dolls, which were copyrighted as Angel/Devil Girl, are based on the foundation that appears in the middle, which is not exactly an anatomically correct female figure.
It was uncontested that Belair designed the dolls used in the Steve Madden ad. Carter Bryant, the creator of the Bratz dolls, saw the ad and included it in material he gave to a designer, Margaret Leahy. She admitted that she hung the ad on her wall and that it played a role in her design of the Bratz dolls, a hugely successful product that has brought in $2 billion revenue.
Belair sued MBA for copyright infringement. Judge Scheindlin dismissed the complaint, stating: “Although the Bratz dolls may indeed bring to mind the image that Belair created, Belair cannot monopolize the abstract concept of an absurdly large-headed, long limbed, attractive, fashionable woman. He has a copyright over the expressions of that idea as they are specifically articulated in the Angel/Devil image, but he may not prevent others from expressing the same idea in their different ways."
The court noted that there is no copyright protection for the theme of a “young, attractive, fashionable woman.” The Bratz dolls are not exact replicas of the Belair dolls; there are numerous changes in their features and presentation. The fact that Leahy may have been inspired by the Belair creations does not mean than he owns the entire concept. The expression of the concept differs, so there is no infringement of the copyright.
What would be the consequence of extending copyright protection to concepts and ideas rather than specific expression?
Spoiler alert! If you believe in Santa, do not read further.
A second grade teacher’s lesson started innocently enough. The topic was the North Pole, fitting for this time of the year. A student made the connection to Santa. In response, the teacher told her young pupils that Santa does not exist. She also advised them that the presents under the tree originate with Mom and Dad. Grinch if ever there was one.
When school recessed that day, moms, grannies and nannies were met with unhappy and confused children. Their youngsters’ discontent no doubt quickly spread to the parents. Their children were now deprived of a significant part of the wonderment of the season, and moms and dads would be denied the joy and fun of creating for wide-eyed believers the illusion of loved St. Nick.
The overly forthcoming teacher could be sued by parents or guardians for the tort of negligent infliction of emotional distress, a cause of action that that seeks compensation for mental anguish, disappointment and hurt. The tort recognizes a legal duty to use reasonable care to avoid causing angst to another person. If the duty is violated, the wrongdoer may be liable for money damages to the distressed victim.
Negligent infliction of emotional distress is disfavored by many states because of its vagueness. To qualify, the emotional distress must be the product of some misconduct universally recognized as causing emotional anguish. An example would be mishandling a deceased loved one’s ashes. While no precedent for Santa disclosure exists, I could make a good argument that the unveiling of the big guy’s identity should qualify.
Another tact for parents is to prove the teacher wrong. Simply refer to that venerable letter, Yes Virginia, there is a Santa.
Jon Corzine was once chairman of the board at Goldman Sachs. He was then a U.S. Senator from New Jersey, a position he left to become governor of New Jersey. Following a second-term election loss, Mr. Corzine became chairman of MF Global, an international hedge fund. Mr. Corzine’s investment strategy focused on buying government debt, and the country he chose to invest in heavily was Greece. You might say that he bet wrong, and the result was that highly leveraged MF Global collapsed under the losses from the decline of that country’s economy. MF Global declared bankruptcy, and Mr. Corzine resigned after the trustee announced that he was having difficulty finding $1.2 billion in customer accounts at the firm. The trustee has frozen all assets and customers are unable to withdraw any of the funds in their accounts until auditors can determine exactly where the money went.
Mr. Corzine was subpoenaed to testify before Congress. His testimony was that he does not know where the money went. He also testified that he did not intend to break banking rules that prohibit investment banks from using customer funds for the risky hedging that MF Global was conducting in Greek government debt. Nonetheless those rules, according to the bankruptcy trustee appear to have been broken. Uh-oh!
Mr. Corzine indicated that it was not part of his job as chairman of MF Global to be involved in that level of detail of the firm’s operations and that he was devastated by the "bets" and the losses.
However, Mr. Corzine has hired a criminal defense lawyer because since the collapses of companies such as Enron, WorldCom, and HealthSouth, courts have developed the doctrine of conscious avoidance as a means of establishing that corporate officers had the requisite mens rea for white collar crimes. The doctrine allows prosecutors to use evidence of a pattern of behavior that establishes an unwillingness to curb criminal activity by others within the company. Under this theory, executives cannot “consciously try to avoid knowledge” about the actions and activities of those within the company. For example, under the criminal portions of Sarbanes-Oxley (SOX) that apply to CEOs and CFOs for certification of a company’s financial statements, an executive cannot isolate himself from information that the financial reports were inaccurate by not attending meetings or not reading the reports that are disclosed to the public [U.S. v Ebbers, 458 F.3d 110 (2d Cir. 2006)].
1. How can prosecutors establish intent on the part of CEOs and board chairman for criminal activity at their companies?
2. What is conscious avoidance?
Gordon is a member of the Seneca Indian tribe of New York State. He owns a store and mail order business selling cigarettes and other tobacco products. As such, he is a “delivery seller” subject to the Prevent All Cigarette Trafficking Act (PACT Act) which became effective in 2010. It prohibits selling tobacco products online because it would allow minors access to cigarettes and, more importantly, allows smokers to avoid paying state cigarette taxes. Under PACT, an online dealer can sell only if state and local taxes have been paid in advance to the state of the buyer.
Gordon, who runs All of Our Butts (http://www.allofourbutts.com/), challenged the law as violating the Fifth and Tenth Amendments. He contended that the tribe is not subject to state cigarette taxes and the savings could be passed on to mail-order buyers who generated 95 percent of his business. Due to PACT, he has laid off 16 of his 22 full-time workers. Pending final resolution of the matter, Gordon requested a preliminary injunction against enforcement of PACT.
The court found that the PACT Act mail ban does not violate due process or equal protection rights of the Fifth Amendment. The mail ban is rational because it advances the legitimate government interests of reducing underage tobacco use and cigarette trafficking. “Congress has the authority to ban any material from the mails in the name of public policy.”
However, the PACT Act tax provision, subjecting Gordon to state and local taxes around the country, may violate the Due Process Clause. Gordon’s sales to residents of various states may not establish “the requisite minimum contacts with the states” so as to subject him to their taxing authority.
The court enjoined enforcement of the PACT Act pending full review of the constitutionality of the statute due to the damage done to Gordon’s business.
Should Internet-based sales from other states be subject to state sales taxes?
A criminal charge of driving while intoxicated (DWI) can be very costly, as vividly illustrated in two recent cases . Note: Some states refer to this charge as driving under the influence (DUI). The 2010 Miss USA, Rima Fakih, and the head of the Federal Aviation Administration (FAA), J. Randolph Babbitt, were both charged this past weekend with DWI. The FAA is a government agency that regulates and oversees all aspects of the airline industry in the United States. The crime of DWI consists of two elements: 1) operating a motor vehicle, and 2) intoxication. In most states a driver’s first DWI charge is a misdemeanor. In many states, the second or third charge is a felony.
The crime has several degreeing factors. These are circumstances that elevate the seriousness of the crime. The factors vary somewhat from state to state and can include the following: the amount of alcohol the driver has consumed, the presence of a minor in the car, and the occurrence of an accident.
At the time of arrest, the amount of alcohol is determined by a machine called a breathalyzer. It measures the amount of alcohol in a person’s blood. In most states, intoxication is defined in part as having a breathalyzer reading of .08 or more. Each average size alcoholic drink (a glass of wine, a shot of liquor, a bottle of beer) adds approximately .02-.03 of alcohol. So by the third drink a person may be legally intoxicated. Alcohol dissipates at the rate of approximately .015 (less than one drink) per hour. A driver can refuse to take a breathalyzer test but the consequence is suspension of the driving license, a drastic penalty for most people.
The arresting police officer does not need a breathalyzer result to charge DWI. Instead, the arrest can be based on indicia of intoxication such as an odor of alcohol emitting from the driver’s mouth, slurred speech, bloodshot eyes, flushed face, and failure on field sobriety tests. These include reciting the alphabet, counting from 1-20 and 20-1, touching the tip of one’s nose with the tip of the index finger while the driver’s head is tilted backwards, standing on one leg while counting to 30, walking a straight line heel to toe, and more.
Penalties for a DWI conviction include a fine and license suspension, and in addition may include any of the following: jail, probation, community service, an alcohol evaluation and treatment if recommended, mandatory attendance at driving school, and installation of an ignition interlock. This is a device that requires a motorist to blow into a mouthpiece prior to starting the vehicle. The device identifies the alcohol level in the motorist’s breath. If the result exceeds a permissible level, which is roughly the equivalent of one average-size alcoholic drink, the vehicle will not start.
A devious driver may try to override the interlock by asking a sober companion to blow into it. The device will outsmart the motorist. At random intervals while the car is being operated, subsequent tests must be performed. If the driver fails any of them, the car emits a piercing sound that continues until the ignition is turned off. All results are recorded and can be reviewed by the judge.
The financial cost of a DWI is approximately nine thousand dollars ($9,000). This includes fines, attorney’s fees, significant increase in insurance premiums, installation and maintenance of the ignition interlock, an alcohol evaluation plus treatment if indicated, and more. Additional costs can include life-altering injuries, job termination - as Babbitt discovered, and curtailment of endorsement gigs - as Miss USA will likely experience. If you ever find yourself in a position of having had too much to drink and needing to get home, find an alternative to driving.
In November 2009, Suzuki and Volkswagen entered into a “strategic partnership” in an effort to improve both companies. VW bought a 19.9% stake in Suzuki for $2.5 billion and Suzuki sent $1.13 billion back for a small share of Volkswagen to affirm the strength of the relationship as both could learn from the other to improve technology and efficiency.
The 81 year old chairman of Suzuki, Osamu Suzuki, has been publicly critical of VW, saying that Suzuki was not treated as a partner and learned no new technology of interest. VW leaked information to Der Spiegel that Suzuki wanted VW technology but did not reciprocate with its technology; it was a one-way street.
Suzuki alleged VW breached the agreement and demanded the company sell back its shares in Suzuki; VW refused. Suzuki claims VW promised to give Suzuki access to VW’s “core technologies” but did not and that VW “disparaged Suzuki’s honor.”
Apparently the deal was poorly designed from the start. Almost immediately after making the deal, Suzuki was letting it be known that it did not want VW to increase its ownership share. Nothing of substance happened; now the companies head to arbitration at the London Court of International Arbitration.
Do cultural differences make it less likely that parties will reach a working arrangement? If so, should the agreement between the companies have been spelled out in more detail before the original agreement was signed?
Would it be to the advantage of either company to give the other company valuable information about technology without full integration?
Peter Schweizer, a Hoover Institution (Stanford University) fellow, recently published a book, called “Throw Them All Out.” The book examined the stock trades of members of Congress, stock sales and purchases that were done in advance of congressional hearings and legislation that had an impact on the prices of the stocks in which they were trading. For example, some members of Congress met with then-Treasury Secretary Hank Paulson on the eve of the 2008 market collapse. Based on the dire information about the market, the mortgage instruments problems, and high debt levels that they heard from him and Federal Reserve Chairman, Ben Bernanke, some members of Congress positioned themselves short in the market (they profit if the prices of stocks go down) and were able to net $50,000 and more. Other members of Congress are given first rights of purchase in IPOs (initial primary offerings of company stock) in exchange for sponsoring favorable legislation. Still other members of Congress sell their shares in companies when they are aware of upcoming hearings, investigations, and legislative proposals that will negatively affect the prices of their shares in those companies. You can read about some examples of the profits and stock trades here.
As a result of the stories in the book about Congressional profits on stock as well as a “60 Minutes” exposé on CBS, there are now 127 members of Congress sponsoring STOCK – a bill drafted by Representative Slaughter that is called, “Slaughter’s Stop Trading on Congressional Knowledge.” The bill would place restrictions on stock buying and selling by members of Congress, basically the same kinds of restrictions that apply to insiders at companies. Until the information the members hold is publicly disclosed, they would not be permitted to trade in the shares affected by the knowledge they hold as legislators.
The controversy continues as author, members of Congress, and the media debate the merits of the proposed legislation.
1. What information did some members of Congress have about the stock market in 2008 that resulted in their profiting from the market’s collapse?
2. What would STOCK require of members of Congress?
AT&T has proposed acquiring one of its smaller competitors, T-Mobile, for $39 billion. The result would be a merger of the second and fourth largest wireless carriers in the United States and create a company with 139 million customers. AT&T indicated (see the video above) that the merger made sense for consumers because of the following reasons:
1. The merger would help improve wireless service as AT&T could combine T-Mobile’s spectrum with its own and have immediate expansion of its system as opposed to the delayed process of building its own spectrum.
2. The merger would expand AT&T’s 4G LTE mobile broadband to an additional 55 million Americans, thus providing access to 97% of the U.S. population.
3. The merger would create an estimated 20,000 additional jobs, including those that AT&T promised the Communications Workers of America that it would bring back from overseas operations.
However, the U.S. Justice Department filed suit in August 2011 to stop the merger because its suit alleges that AT&T’s elimination of T-Mobile as an independent, low-priced competitor would remove a significant competitive force from the cellular phone market and would harm consumers through fewer choices, higher prices, and less innovation.
AT&T had also filed for FCC approval, something that seemed unlikely. On November 29, 2011, AT&T withdrew its application from the FCC, a step that allows the company to go forward with its Justice Department case in a few months and not be subject to what would be a one-year-long process with the FCC. Nonetheless, the FCC took the unprecedented step of releasing its initial findings on the merger, a 157-page report that expresses concern about the anticompetitive effect of the combination. Among other concerns, the report concludes that the merger would lose the T-Mobile price innovation strategies.
AT&T had also filed for FCC approval, something that seemed unlikely. On November 29, 2011, AT&T withdrew its application from the FCC, a step that allows the company to go forward with its Justice Department case in a few months and not be subject to what would be a one-year-long process with the FCC. Nonetheless, the FCC took the unprecedented step of releasing its initial findings on the merger, a 109-page report that expresses concern about the anticompetitive effect of the combination. The market share would take AT&T from 30% of the market to 41-49% of the market and leave Verizon at 31% of the market.
The Justice Department hearing is scheduled for next month where an administrative law judge will make a determination of the anticompetitive effects.
1. What are the market shares of the various companies?
2. Is it possible that additional jobs would help competition?
3. What would there be a withdrawal of the FTC petition by AT&T?
A famous Brooklyn pizza parlor that attracts customers worldwide is Patsy Grimaldi’s. After a lifetime in the business, Mr. Grimaldi decided to hang up his pizza flipper in 1998 and sold the company. The buyer was Frank Ciolli. Included in the sale was the valuable business name -Grimaldi’s Pizza.
Ciolli was slow paying his rent and so the landlord has refused to renew the lease which expired November 30, 2011. Ciolli was fortunate to find new space a few storefronts down the street.
Meanwhile Patsy Grimaldi, now age 80, had begun to think about re-entering the pizza business. With the buyer booted, the landlord called Patsy and offered him a new lease at his old location. Patsy accepted and plans to reopen in March, 2012. He will call the business Juliana’s, in memory of his late mother. He plans to be at the site daily, conversing with customers and preparing pies.
Patsy learned the pizza business beginning at age ten when he worked at his uncle Patsy Lancieri’s famous East Harlem Pizzeria called Patsy’s. When he opened his own place in 1990 he called it Patsy’s. However he was sued after his uncle died and his aunt sold the Patsy’s name.
Grimaldi and Ciolli will now be competitors. In the early years following the sale of a business, the buyer is typically concerned about the seller opening a competing business nearby and retaining the customer base. To avoid this circumstance a business buyer typically negotiates an agreement not to compete. In it, the seller consents not to engage in a related business within a certain geographical area for a specified period of time. Due to antitrust considerations, the area and duration need to be reasonable, that is, not unduly restrictive on the seller. The geographical area must be limited to the vicinity from where the business draws customers. For a typical pizza parlor, the area would likely be limited to a few blocks in a densely populated area like Brooklyn, elsewhere to a town or a section of a city. In the Grimaldi's circumstance, the pizza is famous and draws customers from far and wide. Therefore, the permissible restricted area will likewise be bigger.
The duration of the restriction must likewise be limited. It should be long enough to enable the buyer to attempt to win the loyalty of the customers, and not so long that the seller is prohibited unduly from pursuing a livelihood in which he has experience. Concerning Grimaldi's, 13 years have passed since the sale. Any agreement not to compete would have expired long ago.
A pizza war is now predictable on the street shared by the two businesses . A tort exists called wrongful interference with a business relationship. It consists of using predatory methods to intentionally harm an established business relationship. An example of this tort is stationing an employee at the entrance of a competitor’s place of business to divert the competitor’s customers to the interfering business. If either Grimaldi or Ciolla approaches customers who opt for the other’s restaurant and attempts to redirect them, liability for this tort may result.
Another relevant law is trademark infringement. A business cannot use a name confusingly similar to the name of a competing business. If customers will foreseeably confuse the two businesses because of the name, infringement likely has occurred. In this case, although the seller’s name is Grimaldi, that name for use in conjunction with pizza was sold to Ciolli and so Patsy cannot use it. This is true even though it is his last name. This rule explains the new name of Juliani’s. Likewise, looking back, after Patsy's aunt sold the name Patsy’s for use in the sale of pizza, Patsy Grimaldi would have infringed that buyer’s trademark by using the name.