Trevor Manrgam

02/27/2016
BUS 206

BUS 206 Milestone One

FACTUAL SUMMARY OF THE CASE

The following report reflects my review of the legal action between Plaintiffs, Donald

Margolin, an individual presumably living in New York and his company Donald Margolin

Empire Inc., a New York corporation (“DME”); and Defendants: Novelty Now Inc., a Florida

corporation, (“NN”); and Chris, Matt, and Ian, who are the “Founders” of Funny Face. The facts

of the case do not specificy the type of business entity for Funny Face (which is also the name of

the product), but preliminarily it can be assumed from the case description that it is likely a

California Partnership between Chris, Matt, and Ian. The facts of the case do indicate that Funny

Face contracted with NN to manufacture and distribute their “Funny Face After Shave Lotion.”

Chris, on behalf of the Partnership directed NN to substitute PYR (a lower-cost chemical

emulsifier) for a key ingredient in NN’s original formula. Mr. Margolin purchased the product

which resulted in serious discoloration. He alleges that this has resulted in personal

damages/injury and damages to his company, DME. The Plaintiffs are now suing NN and the

Partners for an unspecified amount of damages.

JURISDICTION

In order to determine the appropriate court for this lawsuit, I will examine several areas

related to jurisdiction. The first consideration is personal jurisdiction which is the courts power

to render a decision affecting the rights of a person and is usually limited within a state’s borders.

Here, it looks like all three of the partners of Funny Face could be subject to personal jurisdiction

since it appears as though they are a partnership. In regard to subject matter jurisdiction, it looks

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as though NN might be subject to New York state jurisdiction because the Funny Face product

was solid nationally, including New York. As far as Funny Face goes, it does look like it would

be subject to subject matter jurisdiction since Funny Face was not involved in marketing or

distributing the product across state lines into New York. Minimum contacts is a term used to

determine when a court in one state has authority to assert jurisdiction over a party from another

state and that party could reasonably expect an action to be brought against them in that state.

ALTERNATIVE DISPUTE RESOLUTION

Alternative dispute resolution (“ADR”) is defined as “the resolution of legal disputes

through methods other than litigation, such as negotiation, mediation, arbitration, summary jury

trials, minitrials, neutral case evalua- tions, and private trials.” (Kubasek et al., p. 68, 2012). and

Mediation and arbitration are the two most likely forms of ADR to apply in this case. Mediation

involves the disputing parties’ voluntarily selecting a neutral party who suggests ways for them

to resolve their dispute. If this is not successful, the parties can pursue arbitration, which is a type

of ADR that is decided by a neutral third party. Due to the complicated nature of this case I

believe that arbitration is likely to be the most effective ADR for all parties. It would be the most

advantageous course of action because they would not have to incur all of the legal fees, court

costs, and other costs, to defend the matter in court. Also, it would be a much quicker conflict

resolution.

CRIMINAL LIABILITY

For a criminal act there must be wrongful behavior and a guilty mind (they meant to do

it). (Kubasek et al., 2012). Based on the fact of the case and my assumptions, it appears as

though the only person or party that would be subject to criminal liability is Chris. He might be

liable for criminal fraud since it appears like he intentionally misrepresented that the use of the

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substitute emulsifier PYR (which was not FDA approved) was the same as the original

emulsifier (which appears to be FDA approved). It does appear that the other Funny Face

partners would be criminally liable since they were not directly involved in the wrongful

behavior or had any criminal intent. Likewise, Novelty Now would likely not be liable since they

were simply acting at the direction of Chris. The only other possible criminal acts that could

possibly apply here would be criminal negligence.

ETHICAL DECISION MAKING

This case involves one major ethical issue—Chris’ decision to use a lower-cost substitute

over the safety of the consumers of Funny Face. In order to evaluate this, I am applying the

three elements of the WPH Process. Using the WPH Process I would evaluate this case by first

establishing who was the victim and the criminal in this case. We can see that Chris was the

instigator in this case, how NN is partially to blame for implementing his poor decision to

include the damaging substitute, and how Mr. Margolin is the innocent victim. The purpose in

the WPH process would be to determine a proper justice and jurisdiction for Chris and his

partners, as well as NN. At stake here is the simple issue of profit (value) over safety (value).

Finally, Chris violated a central principle of business ethics by violating The Golden Rule—

mainly he did not act in a manner consistent with the way business typically is supposed to

interact between product producers and consumers (Kubasek et al., 2012).

References

Kubasek, N., Browne, M., Herron, D., Giampetro-Meyer., A., Barkacs, L., Dhooge, L., &
Williamson, C., (2012). Dynamic business law, New York: McGraw-Hill/Irwin.