BUS 206 MILESTONE ONE 1

BUS 206 Milestone One

Kimberly J Valladares

Southern New Hampshire University

September 9, 2016
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The appropriate court for this lawsuit depends upon several factors. Three important

considerations include the following:

Personal jurisdiction is whether a court has power over the person being sued. In this

case, Donald Margolin is filing suit in New York against Novelty Now and against Chris, Matt

and Ian of Funny Face. In this situation, the personal jurisdiction would not apply. Chris, Matt

and Ian live in California and work with Novelty Now in the State of Florida. Even while

traveling through other states to get to Florida and do their business, they would not pass through

or come close to the State of New York. However, because Chris, Matt and Ian sell their product

on the internet and using social media websites, there very well could be personal jurisdiction in

New York, if someone living there has ever bought their product online.

A minimum contact is a term used to determine whether or not a court in one state can

declare personal jurisdiction over a defendant from another state. In this situation the court

would need to determine if Chris, Matt and Ian live in New York, have visited or have ever done

business there and if so, personal jurisdiction would apply.

Subject matter jurisdiction determines which courts, state or federal, can hear specific

types of cases or those relating to a specific subject matter. For instance, federal jurisdiction or

those cases heard in federal courts that pertain to things like bankruptcy, trademark or copyright

claims, Federal criminal prosecutions or admiralty cases. Concurrent federal jurisdiction hears

cases that are federal-question and those that are diversity-of-citizenship cases. These can be

heard in either state or federal courts. State jurisdiction is all those other cases that do not meet

the requirements of a federal or concurrent-federal jurisdiction.

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In Margolin’s lawsuit against Funny Face, Chris, Matt and Ian, and Novelty Now, the

courts would need to refer to the term minimum contacts to determine if Chris, Matt and Ian

have ever done business, visited or have lived in New York and if so personal jurisdiction would

apply and the defendants may need to defend their case in New York. Subject matter jurisdiction

would need to be determined as well, and in this case, where this is not a matter of bankruptcy,

trademark or copyright claims or an admiralty case, nor does it involve a federal-question or

diversity-of-citizenship issues, it is not necessary for the case to be heard in a federal or

concurrent federal jurisdiction. The case can be held in the state jurisdiction.

Alternative dispute resolution (ADR) may be an option to resolve this dispute.

Alternative dispute resolution (ADR) is another way to solve a dispute using other means, rather

than litigation. Some ways to do this are by using negotiation, mediation or arbitration. Trying to

resolve disputes this way is faster and cheaper than using litigation. According to Kubasek

(2012), “organizations often use ADR to resolve disputes involving contracts, insurance, labor,

the environment, securities technology, and international trade.” Using ADR is a way to keep the

cases confidential while also trying to maintain friendly terms in order to continue doing

business.

There are many methods of ADR and in this specific case; the parties may want to choose

mediation or arbitration. Both mediation and arbitration have its advantages. Mediation allows

parties to be involved in the process of resolving the dispute in ways that both parties will

benefit. This allows the parties to maintain their personal and working relationships. One

disadvantage of mediation as that it creates the notion that there is no equality between parties,

that if one party has more power than the other, they may be able to sway the other to agree and

in turn this is not an equal resolution.

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Just like mediation, arbitration allows the parties to be involved in the process and also

decides how the process will go. They can choose who they would like the arbitrator to be and it

can be someone that has experience in their specific case. It is up to the arbitrator to make the

decision for both parties and they do not have to offer up reasons for their decisions like a judge

would have to in litigation. There are some disadvantages of arbitration though; it can be costly

depending on whether one arbitrator is used or if a panel of arbitrators is used. Some people feel

that eventually it will be mandatory for businesses to use arbitration and this will eventually

become more like litigation. There is also the concern of privacy and that using arbitration allows

companies to keep their disputes confidential. In some situations this could be damaging to the

company and to its customers.

In this particular case study, Funny Face, Chris, Matt and Ian, and Novelty Now, may

choose to use mediation or arbitration. They will have the opportunity to keep the dispute

confidential so as not to let on to the public and future potential customers that there is an issue

with their product. The dispute could be dissolved quickly allowing all parties to play a part in

the decision as well as keeping the cost down. Where this is a new business and Chris, Matt and

Ian have just started, this may be the better option for them and more within their budget. Mr.

Mangolin may agree with this option as long as he is compensated for damages, has his medical

bills paid and there is an agreement that the company will stop using PYR in their products.

If the parties decide to go with arbitration, Funny Face will be able to keep the public

from knowing about the dispute. If people knew about the dispute and the situation, it might

harm the company’s future sales. Mr. Mangolin would be able to have an outside party

determine the outcome of this case and not get into direct disputes with the defendant. A

downside to going with arbitration for both parties, Funny Face and for Mr. Mangolin, is that
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once the decision is made, there is not appealing it. So, if either party is unhappy with the

outcome, they wouldn’t be able to appeal it and have the ruling overturned.

The only benefit that mediation might have in this case is to keep it out of the public eye.

In this situation, due to the fact that Mr. Mangolin was harmed physically by using the product of

Funny Face, he may not be in the best frame of mind to try to discuss the situation or come to a

resolution working together with Funny Face and its owners.

Under common law, a corporation cannot be considered a criminal because it is not an

actual person with a “mind”. Therefore, it cannot meet the mens rea (guilty-mind) requirement

for a crime (Kubasek, 2012). However, over time courts have started to impose liability on

corporations as corporate officers are responsible for their employees and their actions and

especially if the company is benefiting from the result of a criminal act of its employees (Egan &

Alaily, 2012).

A potential criminal act in this case is fraud. Fraud is considered a white-collared crime

and is defined as someone who intentionally misrepresents to gain an advantage over someone

else. In order to be identified as fraud, there needs to be the following three elements: 1) a

material false representation made with the intent to deceive, 2) a victim’s reliance on the false

representation and 3) damages (Kubasek, 2012). In this situation, Chris is the one that met with

the company Novelty Now, Inc which was responsible for the marketing and distribution

strategies. He directed Novelty Now, Inc. to use PYR, a low cost chemical emulsifier in their

aftershave lotion that was not approved by the FDA. In doing so, he lied to his customers about

what was in the aftershave, and used a product that was cheaper and not approved by the FDA so

Funny Face could save money. Not only that, but because his customer, Mr. Mangolin, relied on

his false representation he was harmed physically when using the aftershave. Due to this, Mr.
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Mangolin has incurred hospital bills. Not only that, but due to the PYR in the aftershave lotion,

Mr. Mangolin’s face turned a permanent shade of blue. As a public speaker, this has caused

significant damage to Mr. Mangolin’s business as well as a loss of wages. Due to Matt, Chris and

Ian all being owners of the Funny Face company, they could all be held responsible for the fraud

charge.

Novelty Now could also be held accountable in the fraud claim. They are entered

into a contract with Funny Face, Matt, Chris and Ian and they were told to use a cheaper

chemical emulsifier in the aftershave lotion, then marketed and distributed the product knowing

that it was not approved by the FDA. They should be charged with fraud as well. Even though

they are a separate business, they worked for Funny Face and benefited financially when they

sold their products. This should make all three, Funny Face, Chris, Matt and Ian and Novelty

Now all criminally liable for their actions.

The ethical process of decision-making involves consideration of three key elements.

Businesses use the WPH process of ethical decision-making. WPH stands for Who

(stakeholders), Purpose (values), and How (guidelines). The stakeholders in this particular case

would be the customers. The purpose was to gain a sense of security. Chris may have felt that

using a cheaper emulsifier would save money, providing the business with a sense of security

knowing they had a cushion of funds to fall back on.

1. Identify the elements and discuss how they apply to some of the facts of this case.

(Chapter 2)
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References:

Kubasek, N., (2012). Dynamic Business Law. McGraw-Hill Irwin. New York, N.Y.

Egan & Alailey. (2012). Corporate Criminal Liability. Retrieved from http://www.ea-atty.com/business
newsletters/business-law/corporate-criminal-liability/