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Case Study 1

Case Study 1
Anthony Allen
Southern New Hampshire University

Case Study 1
In the case of Novelty Now Inc. (manufacturer, FL), Funny Face (Internet company, CA),
and Mr. Donald Margolin (victim, NYC) we have an issue of jurisdiction in the case. Novelty
Now Inc. manufactured a product that created and sold by Funny Face, the product turned the
victim Donald Margolin face blue. Mr. Margolin is suing the manufacturer for damages, but a
non FDA approved ingredient, PYR was added to the product under the approval of Funny Face
company.
There are considerations in this case to including, personal jurisdiction, subject matter
jurisdiction, and minimum contacts. Personal jurisdiction is courts power to render a decision
affecting the rights of the specific persons before the court. (Kubasek, 2012, pp. 42). Personam
jurisdiction is also any lawsuit where a case is against an individual person, a summons must be
served and a complaint is given to the court jurisdiction to try the case. Personal jurisdiction
gives a court the authority to make decisions binding on the people involved in a civil case.
Subject matter jurisdiction is the nature of the claim and is the courts power to hear these
types of cases. Federal courts take on cases such as bankruptcy, state against state disputes, U.S
disputes against anyone, and any issues of federal law. In this case, this area doesnt apply to this
case. In a case of diversity of citizenship, this could apply due to the fact that each party are in
different states, but the damages limit may not surpass $70k (this case could lead to millions in
damages).
Minimum contacts are contacts between a party and a state in order for the courts of that
state to assert power of a party within specific boundary. In this case, this would apply because
Funny Face sells their product through a website where the boundaries are limitless (Kubasek, p.
42).
Alternative Dispute Resolution, or ADR could be used in this case to resolve the dispute
between the parties. If in this case Funny Face wants to settle out of court they could hire a

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mediator to hear all arguments and assist both parties in coming up with a settlement. This could
work if Funny Face want to preserve their reputation, but mediation works well between
business partners such as Novelty Now and Funny Face, not vs Mr. Margolin. An arbitrator
could also be hired to settle arguments by listening to all parties involved and a make a decision
based off the evidence. This type of ADR could be binding or nonbinding where the arbitrators
decision is final; no trail will be set, or nonbinding where the trail will be set to let a judge decide
the case. This ADR could work if the all parties want a binding arbitrator because it keeps
Novelty Now and Funny Faces misconduct (use of PYR) as a notation in the case and not made
public, but if one party feels they are not compensated equally, a trail will suffice. Funny Face
and Novelty Now should consider settlement conferences, where the sole purpose of the
meetings is to agree on an amount for the damages. There will be no court proceedings, all
parties evidence and issues stays private and the amount is keeps secret and a gag order could be
set not to disclose any information about the case . (Judicial Branch of California, 2016)
What Funny Face and Novelty Now are doing is illegal and putting the public at risk for
extra dollars is criminal. What I think these companies are doing is fraud, and the fact that only
one person was effected by the illegal ingredient is truly amazing. The next person to come forth
could be the family of the person that used the product and died because the allergic reaction.
The companies will now have to deal with a wrongful death suit with punitive damages, and a
potential investigation by the FDC that could shut their company down. Funny Face committed
fraud for the intentional deception for financial or personal gain. The company intentionally and
deliberately changed the recipe for their product with a non-FDA approved product. Novelty
Now Inc. is as guilty as Funny Face by agreeing to produce a product that may or may not harm

Case Study 1
its users. Both companies should be held accountable for their actions. A crime is an act done by
someone who knowingly does this to harm or make a profit off someone.
The Who, Purpose, How framework assist in making ethical business decisions, in cases
where consumers are to be potentially affected by the same issue. Making the decision since to
lower manufacturing cost applies to the Purpose element, but it backfired. In this scenario the
parties at fault failed to make ethical decisions and in the end, trying to save money resulted in a
more expensive problem. The manufacturer to also make the conscience decision to go along, is
also unethical. Consumers will pay for a quality product, but when greed comes into play, when
have actions been taken too far? What if the public had knowledge to the fact that the shaving
cream turned someones fact blue? The public would know this because it was printed in
newspapers nationwide. Would the decision to continue to use a non-approved FDA ingredient
still be used in the formula? The companies reputation is more important than a couple extra
dollars.

References
Judicial Branch of California. (2016, June 30). ADR Types & Benefits.
Retrieved from http://www.courts.ca.gov/3074.htm

Case Study 1
Kubasek. Dynamic Business Law. (2nd ed., p. 66). New York, NY: McGraw-Hill
Education.