The Legal Environment of Business

THE CASE OF BLUE MOOD CLOTHING INC.

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Blue Mood Clothing Incorporation is an apparel producing company

It is a wholly owned subsidiary of Colosal Corporation

Its number one product is the breezer

Lately, about a month ago, there has been an incident of theft involving 5000 breezers

The company’s investigator Bill has Alex as his main suspect; he was seen packing a number of breezers at the back of his van

Introduction

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There is a need for ultimate discretion in this case given that all the culprits have not been confirmed. Alex Ridgefield is so far implicated because he was caught on film. Another reason that implicates Alex is that despite being a night security guard at Blue Mood Clothing Incorporation, he masquerades himself as a sales agent of the company. Bill, the company’s investigator, is looking for more proof because Alex may be working with other personnel in the company. This presentation will give invaluable insights with respect to the case of pilferage at Blue Mood Incorporation.

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Colossal Corporation can terminate Alex without any hearing or notice

This is because Alex is an at-will employee of Blue Mood Incorporation

Besides, there is a morally reprehensible reason (theft) as to why Alex should be terminated.

Termination of Alex

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Employment at will is a code of common law that permits either a member of staff or a boss to end a working relationship at any time, for any particular reason, with or minus prior notice, and even for a reason that can be regarded as morally reprehensible, provided that the termination of the working relationship never falls into an exception to the employment-at-will principle.

3

Alex Ridgefield is responsible for several crimes committed against Blue Mood Clothing Inc. They include:

Stealing 5000 breezers from the company

Identity theft; Alex Ridgefield posed as a sales person of Blue Mood while he was not

Breach of contract; Alex was supposed to guard the property of the company from theft but instead he did the opposite; he stole it.

Did Alex Commit Any Crime?

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The past two decades have witnessed an increase in the criminalization of business law. In the Blue Mood case, Alex stole from the company and he was caught on camera. As such, Alex Ridgefield is more likely to go to prison for defying the terms of a contract (choosing to be a thief while he was supposed to be a guard). In addition to that, his actions come across as a corporate offense (Twomey, Jennings & Greene, 2016).

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Nick’s crime is receiving stolen property

Given that the investigation by Bill is still ongoing and Nick is completely not off the hook, there is a possibility that he had intent.

If Nick is found guilty it is worth mentioning that his crime will attract a prison term and fines for the damage caused to Blue Mood

If Nick had no intent to receive stolen property, he will still be charged for negligently buying stolen property

Did Nick Commit Any Crime?

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Nick was quick to purchase breezers from Juanita Winfrey without any form of contracting. Perhaps if he had used an attorney he would not be in risk of being labeled a receiver of stolen property; he would have every right to pin the blame on Juanita. At the moment there is no knowledge as to whether Nick is guilty or not i.e. whether he intentionally bought stolen property or not. If he had no intent, perhaps the courts will be merciful and charge him a fine for his negligence.

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Bill has a confidentiality agreement and swore an oath of secrecy to Vice President Dodger

His crime, if any, is that of defamation

He defamed both Nick and Blue Mood

Defamation is a civil wrong and a crime in all of America’s states

Did Bill Commit Any Crime?

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Bill’s crime is that of defamation. In as much as he did not send the email intentionally, he still wronged the company and Nick. Nick Johnson has a right to sue Bill for defamation given that there is no concrete evidence or legal proceeding that can indict him yet. Bill defamed the company because when news of theft and disorganization in company protocol reach some existing and potential buyers, they may not want to be associated with Blue Mood anymore; that will result into a lot of losses.

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Juanita’s crimes, if any, revolve around:

Receiving stolen property

Retaining stolen property

Disposing of stolen property

Did Juanita Commit Any Crime?

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All states in the US are against the receipt of stolen property to stop theft and to dismantle organized crime businesses that gain from theft. The Model Penal Code, a model law embraced by many jurisdictions, factors in the receipt of stolen goods within its consolidated theft offense (Model Penal Code §§ 223.1, 223.6).

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Alex could defend himself or use an attorney for his defense

He could allege that he was coerced to steal a part of the company’s consignment from the warehouse

Alex could also allege that someone from the inside threatened to fire him if he did not get the shirts to Juanita for him or her i.e. he could claim that instructions came from up top (from one of his bosses who was working with Juanita)

In fact , Alex could say that he was officially instructed by the company VP Kenneth Dodger to load his personal van with the shirts and take them to Juanita

Alex’s Defenses

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Alex needs a good well paid attorney to defend him because the evidence against him is solid, particularly the tape. His only way out is to tell the jury that his action was part of protocol; that he occasionally handled assignments that constituted ferrying consignments from the warehouse to other storage places and bulk buyers.

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Nick could say that he does not know anything about the shirts. He was simply a buyer looking for a seller in the internet and in the process he found Juanita

He could answer or deflect any incriminating question by asking the prosecution to ask Juanita why she lied to him

Nick could say the legal preceding is a conspiracy to sabotage his business because he did not know the truth regarding where the shirts came from.

Nick’s Defenses

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Nick’s case is a bit lighter because he was not directly involved in taking the shirts from the warehouse. There is no solid evidence against him and he could play the victim of a fraud.

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Bill could say that he truly sent the email by mistake and he did not want to blow his cover intentionally

He could come up with an excuse that lately he has been staying up on many nights in an attempt to figure out the case and that must have made him a bit clumsy

Finally bill could say that given his clean record in taking up and successfully handling the company’s investigations in the past, he should be given some credit.

Bill’s Defenses

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Bill’s case is lighter too because he was not directly involved in taking the shirts from the warehouse. His role was that of investigation and his only mistake was leaking information and defaming the company. He has a good history of never exposing company information and such may ward off any suspicion of malice on his part from his superiors.

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Juanita could peg all the blame on Alex

She could say that Alex came to her lying that he was Blue Mood Incorporation’s sales representative

If asked about receipts, itineraries, and invoices among other purchase documents, she could say that she was in a hurry to make quick money and did not doubt Alex since he was affiliated to a reputable company such as Blue Mood Inc.

Juanita’s Defenses

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So far there is no evidence against Juanita proving that she stole or aided the stealing of shirts from the company. This makes it very easy for her to blame the individual that was actually seen on camera taking the breezers i.e. Alex.

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A tort is a type of wrongful activity that brings about harm to another party

A tort can be said to be intentional or not depending on the state of the individual that does the wrongdoing

When an individual that makes a mistake willingly intended to commit it, then it is an intentional tort

Negligent torts are the ones committed when someone is not aware of the law

Intentional Torts

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Given the facts available for the case of Blue Mood Inc., only the prosecution can decide who is guilty of committing an intentional tort or a negligence tort. So far only Alex is answerable to the courts on grounds of committing an intentional tort. Juanita and Nick can plead negligence to the jury.

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As a tort, conversion consists of:

Taking the property of another person

Illegally converting that property’s ownership

Presenting said property as your own either through sales or marketing

Intentional Torts of Conversion

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In the world of criminal law, conversion can be regarded as theft. Alex, Nick, and Juanita all handled stolen property; for that matter, it is the responsibility of the jury to judge whether negligence or intent was the case.

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Defamation, as a tort, constitutes:

Saying something that is not true about another person

Such untruthful statements usually bring about harm

It revolves around written and spoken words

Intentional Tort of Defamation

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For the Blue Mood Case, it is worth mentioning that Bill committed libel against Nick, who may be innocent. In the event that the court finds Nick innocent, he could go ahead and sue Bill for damages.

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According to the investigation conducted so far by Bill, there is a thin line between the innocence and guilt of Nick

Nick innocently bought apparel from Juanita without prior knowledge that the whole consignment was stolen

If found guilty, Nick’s intentional tort would revolve around being an accomplice to Alex in stealing Blue Mood’s clothing.

Did Nick Commit an Intentional Tort?

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Given that Nick did not do anything intentional to harm Blue Mood Inc., he may be charged for negligence when it comes to tort law. Nick was negligent because in he just bought 5000 breezers without asking for any form of documentation from the seller. He had no receipt, purchase order, itinerary, or invoice among other possible documentation that characterizes a normal transaction.

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The intentional torts committed by Alex are rather obvious and revolve around:

Being an identity thief

Breach of an employment contract

Stealing and selling property that did not belong to him

Did Alex Commit an Intentional Tort?

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It is more likely that the torts committed by Alex are intentional. First in line is trespass to chattels and conversion; these are both intentional torts that center on wrongful and intentional interference with the possession of another individual or company’s property. Alex is the one who facilitated the movement of the clothes from the company’s warehouse. He was aware too that what he was doing was wrong.

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Given that every permanent or contracted employee of Blue Mood Incorporation signs a confidentiality agreement, Bill committed a tort but it is most likely that it was not intentional.

He is at the mercy of the company’s vice president because he could charge him for negligence or fire him

Bill’s negligence partly or fully compromised an important investigation that the company was conducting regarding theft

Did Bill Commit an Intentional Tort?

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In the event that the company makes a decision to sue for damages, Bill could be fined. His offence was not a criminal one but it could also cost him a great deal of time and money.

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Bill is yet to figure out if the torts committed by Juanita were intentional or whether they were due to negligence.

It is even unclear whether Juanita was deceived by Alex or whether she is party to the crime

In case Blue Mood Inc decides to sue Juanita, it may sue her for damages and negligence (Ferrera et al., 2018).

Did Juanita Commit an Intentional Tort?

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Juanita could have to go to court because of negligence. She bought not one, not two, not three; but 5000 shirts without any form of legal documentation. Wasn’t she curious that it was a bit odd Alex brought her franchise in a private minivan as opposed to a company truck. Why wasn’t she given receipts.

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There are several things Alex could say to defend himself. They include:

Juanita was a con and she threatened him with his family if he did not steal the shirts for her

The company’s vice president had a competing apparel business and he coerced him to steal the shirts from the warehouse.

Alex and Nick were the vice president’s aides and the VP was only reacting because they had been caught.

Alex’s Defense on Torts Committed

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Alex will have to be indicted and can only be successful if he puts up a really good defense. He was caught on tape; something that is not easy to erase.

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Bill’s torts, if anything, are out of negligence

He should stick to his statement and emphasize on the fact that he sent the email to his entire inbox by mistake

Bill could use his longstanding history with the company to claim that he could not possibly betray Blue Mood

Bill’s Defense on Torts Committed

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Bill should defend himself on the grounds that his is a tort of negligence and not a tort of intention. Given that there is no proof he sent the emails on purpose, his sentence will be lighter. He should also argue that he has worked for the company many years as an investigator without leaking any information.

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Juanita’s crime centers on negligence and her defense should center on a few possibilities. They include:

She should deny dealing with Alex previously and that he is someone she met online (Singer, 2018)

She should insist on the fact that Alex posed as Blue Mood’s sales executive

In her defense she should challenge the prosecution to produce solid evidence against her.

Juanita’s Defense on Torts Committed

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Given that trespass to chattels and conversion are general intent torts that could land Juanita into trouble simply because she was found in possession of stolen shirts, she should pin all the blame to Alex. Juanita should say that she has never met Alex in her life and had only dealt with him for the first time.

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Nick’s defense will pretty much be the same as that of Juanita.

Nick should argue that if he was involved he would not share information so freely with Bill regarding Juanita

Nick’s defense should also posit that if he was guilty and aware of the nature of the merchandise, he would not be so quick to buy it and post an advert online (Beatty, Samuelson, & Abril, 2018).

Finally Nick should argue that online sales do not involve a lot of paper work and for that reason he did not ask documentation from Juanita

Nick’s Defense on Torts Committed

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Nick’s defense should be much like Juanita’s. He should thus put the blame on Jenny for linking him with stolen property. Failure to do so could lead to a serious case that is based solely on possession of stolen property.

22

Depending on the crime, either the government or Blue Mood clothing, or both will collect damages.

The intentional torts caused financial loss to the company and in the event that anyone is found culpable damages will be paid

To discourage rogue behavior in the corporate world, the state where Blue Mood Inc. is located will most likely punish the offenders through fines and jail time.

It is worth mentioning that any defendants found not guilty can sue Blue Mood for defamation and get compensatory damages

Who Will Collect Damages?

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The main aim of tort law is to offer remedies, normally in terms of damages (money awards), to parties negatively affected by the civil wrongs of other people. The damages offered for tort violations revolve around punitive and compensatory damages.

Two parties that can collect damages in this case include Blue Mood Inc. and the state government. Collection of Damages by Blue Mood Inc. will be facilitated by the courts where the legal proceedings concerning the theft will occur. What’s more, in the event that the defendants in the case are able to prove their innocence; they will collect damages on grounds of defamation.

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The primary aim of compensatory damages is to put the injured party in the same position that party would have been had the tort never been committed

In this case Blue Mood Inc. is the main injured party

There is a need to restore the financial position the company was in prior to losing its consignment of 5000 breezers

Upon indictment of those found culpable, the courts will fine the guilty an amount that is equivalent to the selling price of the 5000 breezers; these are known as special damages because they are quantifiable

Compensatory Damages and Who Will Collect Them

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Compensatory damages awarded to Blue Mood Inc. may even be more than the selling price of the shirts because the company would have sold the stolen shirts for a profit and produced another batch of shirts. In summary, the tortfeasors wasted the time and money of the company.

It is also worth mentioning that the damages awarded to Blue Mood Inc. may be more in case the courts decide to award the company with general damages. The general damages is something that the company can collect because they lost reputation and consortium respectively (there is a likelihood that some companies may dissociate themselves with Blue Mood because of the case; there may be a perception that the company’s system is not safe).

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Punitive damages are meant to punish a tortfeasor

The person or persons who the courts may punish because they want to award Blue Mood is Alex

His was an egregious case and intent was clearly involved

Other defendants such as Juanita and Nick may be punished as well

Punitive Damages and Who Will Collect them.

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Traditionally, punitive damages are damages that exceed basic compensation and they are awarded to punish defendants. For the defendants involved, punitive damages will be applied if the courts feel they engaged in particularly reckless or wanton conduct that shows ignorance to the interests of other people.

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The defendants may collect damages if and only if:

they are found innocent of the crimes and torts they were accused of

If they sue Blue Mood Inc. immediately on grounds of defamation the moment their case

Damages that Could Be Collected by the Defendants

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Any of the defendants (Alex, Juanita, Bill, and Nick) can sue the company and collected damages provided that they are innocent.

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The legal environment of a business is subject to many challenges

As such the managers of a business should be well versed with matters pertaining keeping the law and breaking the law

With the support of attorneys and the criminal justice system at large, it becomes easy to

Conclusion

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For both the plaintiffs and the defendants, it is best that they are well versed with matters of business law. This way they will be able to make sensible complaints and pleas respectively in front of the jury. All the same it is worth mentioning that the outcome of the case is something that will be very hard to predict.

27

Beatty, J. F., Samuelson, S. S., & Abril, P. S. (2018). Business law and the legal environment. Cengage Learning.

Ferrera, G. R., Alexander, M. M., Wiggins, W. P., Kirschner, C., & Darrow, J. J. (2018). The Legal and Ethical Environment of Business. Wolters Kluwer Law & Business.

Singer, L. (2018). Settling disputes: Conflict resolution in business, families, and the legal system. Routledge.

Twomey, D. P., Jennings, M. M., & Greene, S. M. (2016). Anderson’s Business Law and the Legal Environment, Comprehensive Volume. Nelson Education.

References



Students evaluation criteria:

1- Grade of the Valuation Exercise report submitted via Turnitin

2- Reservation prices submitted

3- Negotiation score: depends on how good the deal is, which the student makes.

Students do not lose grade, if they do not make a deal because market conditions

were not suitable to make a deal. Whether students make a deal or not, they leave

private notes about their deal-making strategy on the screen which would

contribute to their grade.

NOTE: make sure to read this document thoroughly and pay attention to the

important details. Please also read Harvard simulation guides and watch their

videos.

Step 1: Pre-Work

 Download the Foreground Reading to learn more about the U.S. wine industry and the

simulation context. Read and use the information.

 Download the Terminology Primer to review key terms before beginning the simulation.

Carefully pay attention to the details

 Complete the Valuation Exercise (if required by your instructor) report and submit

by the deadline set in the syllabus’s course schedule via Turnitin:

o Important: Do not click on “I have submitted evaluation report”, unless you have

finalized your report on Turnitin. As soon as you click on “I have submitted

evaluation report” after you finalize your report on Turnitin, your report is

considered to be submitted on Turnitin and you cannot change it.

o You have access to the excel files for only 2 companies and some foreground

reading. You are not required to analyze IB Company, if you do not have its

financial information. You can write your report based on available information

and any research that you do using online resources (industry and economic

analyses for example).

o You submit your individual report before the deadline which is set in the syllabus.

It means the first 5 pages of your report should only and only reflect your own

work: your analysis, your findings and your recommendations in your own words.

You are allowed to work with your team on the case. For example, a group of four

students should submit 4 individual reports. While individuals can use their group’s

findings in their report, the main part (maximum 5 pages) of the report must be

organized and written individually to reflect the individual’s opinion on the case.

The main part of the report will be checked for potential plagiarism by Turnitin

software and the instructor. It is student’s responsibility to ensure that all citations

are done properly in the main body of the report and there is no plagiarism in the

report. For example, team members cannot copy-paste the same analysis as part of

the main section of their report. However, the appendices can contain the results of

the group work and may share common elements with the other reports. Therefore,

it is possible that your appendices have some matching elements with your other

team members, but your main body of report (5 pages) cannot share any similarity

in the text. Again, it means that you cannot copy-paste from each other and put it

in the main body of your report.

o The sample rubric used in grading the case report is available on the last page of

the syllabus. The students are able to see the feedback on their individual report,

the rubric of their grade and instructor comments on Turnitin. You can learn how

to see the details of the feedback and your grade on Turnitin via the following link:

https://www.youtube.com/watch?v=OzXDMiciCsI.

Step 2: Role Preparation

Right after the deadline to submit your evaluation report (see the syllabus for the

deadline), you will see your role and your role preparation starts. Make sure to

bring all your material and files on a laptop or tablet to the class. If you do not

have a laptop, you can borrow a laptop from the circulation desk at library. If you

do not have a laptop, it is strongly recommended that you reserve the laptop at the

library for the class dates that involve the simulation and also inform the

instructor about your equipment requirement.

 Once assigned a role, read the Introduction screen to familiarize yourself with your

company.

 Review the Historical Stock Price screen to learn more about the companies’ financial

performances.

Step 3: Analyze & Decide

There are two rounds in the simulation:

 Round 1: starts on the session marked in the syllabus as “HB 7: Wine M & A session

1” o Instructor will discuss about some hints on the merger. Then, students start working on the

case in the class (students start to work on Round 1):

 Student work is to modify assumptions:

Read the confidential information provided about your assigned role.

o What is the objective of modifying assumptions? Set Reservation Prices

Determine reservation prices. Each role must input reservation values for both Bel

Vino and Starshine. Reservation prices are due by 10am on the date for “HB

7: Wine M & A session 2”. Important: make sure to understand the effect of your

role on determining reservation prices: If you are a buyer, the reservation price for

your target is the highest price you would be willing to pay. If you are a seller, the

reservation price for your own company is the lowest price you would be willing

to accept. For example, let’s assume you are BV. Your reservation price for BV:

you are the seller => Reservation price is the lowest that you accept to be acquired

for. Reservation price for SS: you are the buyer => Reservation price is the highest

that you accept to acquire SS.

 Round 2

o Submit Bids

Negotiate with the other users and/or submit offers before the deadline set at

3:30pm on the date for “HB 7: Wine M & A session 2”. Simulation ends when

either a deal has reached or the time is up. You have the option to withdraw your

offer only before the counterparty accepts it.

 If you are SS, your offer involves only an exchange ratio AND you also receive offers for merger from BV or cash offers from IB.

 If you are BV, your offer involves only an exchange ratio AND you also receive offers for merger from SS or cash offers from IB.

 If you are IB, your offer involves a cash offer to either BV or SS while you consider financial viability of your offer.

 The best deal happens for you when either you sell your company at the highest price possible or buy another company at the lowest price possible.

Important: make sure to first fill out both comments boxes titled as “source of

value” and “negotiation strategy”. Make sure to also keep updating the boxes. Students are expected to make a deal, only if they face favorable conditions. Based

on your analysis of each company AND your reservation prices, you should be able

to justify why you did OR did not make a deal in these boxes.

You can click on the calculator on the top corner of the page which will help you

to make a reasonable bid, based on your role.

 If you are SS or BV, the calculator helps you to decide about exchange ratio.

 If you are IB, the calculator helps you to decide about the offer and your financing strategy.

FAQ:

Q:

I tried starting on the individual case simulation by completing the Valuation Exercise, but I still can’t

seem to find my assigned role.

A:

You role will be revealed after you submit your evaluation report. At the start, you are expected to write

the evaluation report without knowing your role. Hence, your evaluation report is independent from

your role at the start. After you learn your role, you will be able to re-evaluate the firms based on your

updated information.

Q:

I received valuation spreadsheets for Starshine and Bel Vino. Does this mean I play the part of

International Beverage?

A:

No, at this stage, your role is not revealed to you. Hence, your role has no effect on the preliminary

evaluation report. However, after your role is assigned, your evaluation practice will help you to

make decisions on the case.

Q:

I received no financial information for International Beverage. How am I supposed to calculate the

value of the firm pre-merger and thus determine a value of the synergy and reservation price

without this information?

A:

You are not expected to evaluate a company for which you have not received the information yet. It

is a friendly reminder that, in M&A, you can evaluate the synergy even without knowing acquirer

financial information as we discussed in the class.