Business Torts Discussion Problem by Prof.

Jay Feinman Problem: MC A relatively new environmental problem is “e-waste”—the disposal in environmentally unsound ways of personal computers and consumer electronics containing toxic substances such as lead, mercury, cadmium, and tortium. Campaigns are underway to have consumers and businesses submit such products for appropriate disposal, rather than disposing of them in the trash, which leads to toxic substances leaching into the environment when the disposed products are landfilled. Products which are collected are then subjected to various processes to extract the toxic substances and either dispose of them safely or recycle them. Metals Corp. (“MC”) is a company that engages in treatment and recycling of computers. One of its principal activities is to process certain computer parts to extract tortium, which is then sold for reuse. This can be accomplished through various chemical processes, such as heating the parts in certain ways and subjecting them to chemical processes. MC purchased a special furnace from Thermo, Inc. for use in tortium recycling. The furnace was not sufficiently effective at separating out the tortium until MC made a number of modifications in the design and operation of the furnace, particularly in what is known as the process of high-heat extraction. Both the scientific principles underlying high-heat extraction and the way in which the principles are implemented in furnace operation are well-known in the trade, but MC’s modifications to the process were novel. With the modifications, MC was able to use the furnace to extract a purer grade of tortium than many of its competitors. This result became a major promotional point for MC, which it touted to prospective purchasers of the tortium it extracted, and which was noted in a trade publication. Because of its success with the modified furnace, MC desired to expand its operation. Instead of buying a standard furnace and modifying it after the furnace was delivered, MC decided to have the furnace manufacturer incorporate a number of the modifications at the time of manufacture. Thermo’s furnace was relatively expensive, so MC approached Conco, another furnace manufacturer. MC explained the modifications it needed, but Conco was unwilling to make the modified furnace because it did not think it could do so at a competitive price. Therefore, MC went back to Thermo, explained the modifications it needed, and purchased a second furnace from Thermo, this time with the modifications incorporated. MC also entered into an agreement with Metall AG, a German firm, under which MC provided its modifications to Metall for use by Metall in its recycling operations in Europe. About a year later, for reasons unrelated to this problem, Thermo went bankrupt. Tom, Dick, and Harry, three of Thermo’s key employees, formed a new furnace manufacturing

company, TDH Incorporated. TDH began manufacturing furnaces. Recently, it made and sold to Ray, Inc., a furnace that incorporated a number of the modifications to high-heat extraction originally designed by MC. After Ray purchased and used the furnace to process tortium for a while, Ray’s engineers made further modifications to make it more effective in extracting contractium, and Ray has since used the furnace primarily for that purpose. MC comes to you and relates these facts. Advise MC. If you need additional facts, state what those facts are and why they may be significant.

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