Solution Manual for Business Law, 10th Edition

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Chapter 1Legal Heritage and the DigitalAgeAnswer to Critical Legal Thinking Case1.1Fairness of the LawMany students will react that the statute is unfair as it does not afford women equal status in theworkplace. In light of today’s standards, that position is well founded. However, it is a usefulexercise to consider arguments for the opposite position inthe context of the time period. Inenacting such a statute, the legislature presumably entertained the view that women had specialneeds, were subject to certain weaknesses, and therefore the demands made on them had to beaccommodated in the workplace. That these premises, i.e., special needs and presumedweaknesses, might be false does not necessarily preclude one from acting morally. Moralistsmight label this ignorance as excusable in that it is “invincible,” i.e., an ignorance that cannot bedestroyedor offers no moral reason for doing so. Of course, modern experience and knowledgerequire that we question these premises. It almost certainly would not be lawful today. Not onlyhave the items relevant to the test of equal protection broadened under present constitutionalinterpretations, but also Title VII of the Civil Rights Act of 1964 prohibits any discrimination onthe basis of sex in the “terms, conditions and benefits of employment.”W. C. Ritchie & Co. v.Wayman, Attorney for Cook Country, Illinois, 91 N.E. 695, 1910 Ill. Lexis 1958 (Supreme Courtof Illinois)Answers to Ethics Cases1.2Ethics CaseYes, the hunting, fishing, and gathering rights granted to the Mille Lacs Band of the OjibweIndians by the federal government in the 1837 treaty are valid and enforceable. The U.S.Supreme Court held that these rights were not extinguished when the stateof Minnesota was

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admitted as a state in 1858. The state of Minnesota argued that the Ojibwe’s rights under thetreaty were extinguished when Minnesota was admitted to the Union. There is no clear evidenceof federal congressional intent to extinguish the treaty rights of the Ojibwe Indians whenMinnesota was admitted as a state in 1858. The language admitting Minnesota as a state made nomention of Indian treaty rights. It was illegal for the state of Minnesota to try to extinguishclearly delineated legal rights granted tothe Ojibwe Native Americans more than 150 yearsbefore. The hunting, fishing, and gathering rights guaranteed to the Ojibwe Indians in the 1837treaty are still valid and enforceable.The state of Minnesota did not ethically when it tried to abolish the hunting, fishing, andgathering rights guaranteed to the Ojibwe Indians by treaty. The Ojibwe relied on the promisesof the treaty, which must be kept by the government.Minnesota v. Mille Lacs Band of ChippewaIndians, 526 U.S. 172, 119 S.Ct. 1187, 1999 U.S. Lexis 2190 (Supreme Court of the UnitedStates)1.3Ethics CaseThe better case is made by the dissent. The law has not been progressive in this instance. It islikely that legislators entertained an unconscious premise that women should not be required tofight a war. This speculation might be supported by the fact that the majority of the SupremeCourt summoned a technical legal point to justify their ruling. The Court held that Congress wasthe proper party to articulate the public policy that women should not fight at the front, therebyremoving themselves from anyfurther consideration of the substantive issue, i.e., whetherequality was being served as a matter of fairness.Rostker, Director of the Selective Service v.Goldberg, 453 U.S. 57, 101 S.Ct. 2646, 1981 U.S. Lexis 126(Supreme Court of the UnitedStates)

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Chapter 2Courts and JurisdictionAnswers to Critical Legal Thinking Cases2.1Personal JurisdictionNo, defendants Live Siri Art, Inc. and Siri Galliano are not subject to lawsuit in New Yorkpursuant to New York’s long-arm statute. This is because defendant Live Siri Art, Inc, aCalifornia corporation, and defendant Siri Galliano, a California resident,did not have therequisite minimum contacts with the state of New York to make them subject to a lawsuitbrought by plaintiff Richtone Design Group LLC (Richtone), a New York LLC, in a New Yorkcourt pursuant to the New York long-arm statute. Assuming that the defendants did violate theplaintiff’s copyright by selling Richtone’s pilates manuals in New York using a website andmade $1,000 in more than a decade doing so, this is but de minimis contact that does not arise tothe minimum contact required by due process to subject them to a lawsuit in New York. TheU.S. district court dismissed plaintiff Richtone’s New York lawsuit against the Californiadefendants for lack of personal jurisdiction.Richtone Design Group, LLC v. Live Art,Inc.,2013U.S. Dist.Lexis 157781 (United States District Court for the Southern District of New York,2013)2.2Service of ProcessYes,May Facebook, Inc. may use alternative service of process by sending email notices to thedefendants’ websites. Facebook sued the defendants for trademark infringement, cybersquatting,

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and false designation of origin by their use of typosquatting schemes whereby the defendantsregister internet domain names that are confusingly similar to facebook.com (e.g., facebock.com)so that potential users of Facebook’s website who enter a typographical error are diverted to thetypesquatter’s website, which is designed to look strikingly similar in appearance to Facebook’swebsite, to trick users into thinking that they are using Facebook’s website. Facebook hasintroduced evidence that it has notbeen able to serve the defendants personally, by mail, or bytelephone. The U.S. district court granted Facebook’s motion to be permitted to serve thesedefendants by sending an email notice to the defendants’ websites. The U.S. district court stated“Here, service by email is reasonably calculated to provide actual notice.” The U.S. district courtissued an order permitting Facebook to serve the defendants by email.Facebook, Inc. v. BananaAds LLC.2012 U.S. Dist. Lexis 65834(United States District Courtfor the Northern District ofCalifornia, 2012)2.3Standing to SueMichigan law, and not Ohio law, applies in this case. The court noted that because the accidenttook place in Michigan, there is a presumption that Michigan law applies absent any otherjurisdiction having more substantial contacts. Plaintiff Bertram, however, contended that Ohiolaw should apply, because all of the parties were residents of Ohio at the time of the accident andall consequences flowing from his injury occurred in Ohio. The court disagreed. The courtstated, ”Because the snowmobiling accident took place in Michigan, the place where the conductcausing Bertram’s injury occurred in Michigan and Michigan has enacted specific legislationinvolving the risks of snowmobiling, we find that Michigan law clearly controls in this case.While all parties are residents of and have their relationships in the State of Ohio, we are not

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persuaded by Bertram’s argument that this issue should control.” The Court of Appeals of Ohioheld that the law of the state of Michigan, where the accident occurred, and not the law of thestate of Ohio, the state of the residence of the parties, applied.The court applied the Michiganassumption of the risk statute and granted summary judgment to the three defendant friends ofplaintiff Bertram.Bertram v. Norden, et al.,823 N.E.2d 478, 2004 Ohio App. Lexis 550 (Courtof Appeals of Ohio, 2004)2.4Long-Arm StatuteYes, the Missouri court has personal jurisdiction over the Illinois casino based on Missouri’slong-arm statute. Although the Casino Queen casino is located in Illinois, it could reasonablyforesee its pervasive advertising directed at Missouri residents would entice those residents, sucha Mark Myers, to cross the state line into Illinois to participate in gambling at the Illinois casino.If an Illinois defendant can reasonably foresee that his or her negligent actions haveconsequences felt in Missouri, personal jurisdiction is authorized under the Missouri long-armstatute. The U.S. court of appeals held that Casino Queen, which operated a casino in Illinois, issubject to personal jurisdiction in courts in Missouri under Missouri’s long-arm statute. Thecourt of appeals stated, “While Myers’s injuries did not arise out of Casino Queen’s advertisingin a strict proximate cause sense, his injuries are nonetheless related to Casino Queen’sadvertising activities because he was injured after responding to thesolicitation.” The court ofappeals ruled that Casino Queen must stand trial in a Missouri court and defend the chargesbrought against it by Myers.Myers v. Casino Queen, Inc.,689 F.3d 904, (United States Court ofAppeals for the Eighth Circuit, 2012)

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2.5Standing to SueNo. The U.S. District Court held that Phoenix of Broward, Inc. (Phoenix), a franchisee of BurgerKing did not have standing to sue McDonald’s and dismissed the case. In deciding the case thecourt noted that the goal of standing is to determine whether theplaintiff is a proper party toinvoke judicial resolution of the dispute and the exercise of the court's remedial powers. It wasSimon Marketing, Inc. (Simon), who McDonald’s hired to operate the promotional games, whocommitted fraud by steering cash prizes of up to $1 million to its conspirators. McDonald’s mayhave been negligent in allowing this to happen. Thus, McDonald’s customers who did not have achance to win the cash prizes because of the fraud would have standing to sue Simon andMcDonald’s. However, the court held that Phoenix of Broward, Inc. (Phoenix), a franchisee ofBurger King, did not have standing to sue McDonald’s. The court stated, “In this case, the harmcaused by McDonald's allegedly false advertisements more directly affects the customers whowere denied the opportunity to compete for the high-value prizes criminally co-opted byJacobson. While these customers do not have standing to sue under the Lanham Act, they couldand did vindicate the public interest by suing McDonald's for fraud. Thus, there is no need toempower Phoenix to act as a private attorney general in this case.”Phoenix of Broward, Inc. v.McDonald’s Corporation,441 F.Supp.2d 1241, 2006 U.S. Dist. Lexis 55112 (United StatesDistrict Court for the Northern District of Georgia, 2006)2.6U.S. Supreme Court DecisionThis is a plurality decision of the U.S. Supreme Court and does not create precedent for furthercases. This is because although 5 justices upheld the Salinas’s verdict of guilty, 3 did so for onereason and 2 did so for a different reason. If the 5 justices would have agreed to the verdict of

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guilty based on the same reason as to why the evidence of the defendant’s silence at theprecustodical hearing could be admitted at trial, then it would have been a majority opinion, anda majority opinion would have become precedent. However, in this case, 5 justices upheld theguilty verdict, but 3 for one reason and 2 justices for another reason, with 4 justices dissenting,created a plurality decision that does not create precedent.Salinas v. Texas,133 S.Ct. 2174, 2012U.S. Lexis 4697 (Supreme Court of the United States, 2012)Answers to Ethics Cases2.7Ethics CaseYes, theMaryland court has personal jurisdiction over the Florida defendant Ladawn Banks.Chanel is engaged in the business of manufacturing and distributing throughout the worldvarious luxury goods, including handbags, wallets, and numerous other products underthefederally registered trademark “Chanel” and monogram marks. Chanel alleged that Banks ownedand operated the fully interactive website www.lovenamebrands.com, through which she soldhandbags and wallets bearing counterfeit trademarks identicalto the registered Chanel marks.According to Chanel, although defendant Banks is a resident of Florida, she conducted businessin Maryland via several interactive websites. TheZippocourt distinction between interactive,semi-interactive, and passive websites is particularly relevant. Defendant’s website at issue inthis case was highly interactive and provided a platform for the commercial exchange ofinformation, goods, and funds.Thus, the Maryland court, under its long-arm statute, has personaljurisdiction over the Florida defendant Banks in this matter. The court granted default judgment

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to Chanel, assessed damages of $133,712 against Banks, and issued a permanent injunctionprohibiting Banks from infringing on Chanel’s trademarks.Regarding the issue of ethics, if defendant Ladawn Banks operated the websitewww.lovenamebrands.comand sold knock-off handbags and wallets bearing counterfeittrademarks identical to the registered Chanel marks, she has acted unethically. Stealing anotherparty’s rightful trademarks and selling knock-off goods bearing those trademarks is not onlyunethical but it also constitutes illegal trademark infringement.Chanel, Inc. v. Banks,2010 U.S.Dist. Lexis 135374 (United States District Court for Maryland, 2010)2.8Ethics CaseNo, Hertz Corporation is not a citizen of California and therefore is not subject to plaintiffMelinda Friend’s—a California citizen—suit in California state court. A corporation is a citizenof the state in which it is incorporated and in which it has itsprincipal place of business. HertzCorporation is incorporated in the state of Delaware and has its headquarters office in the state ofNew Jersey. Hertz is not incorporated in California nor does it have its principal place ofbusiness in California. TheU.S. Supreme Court stated, “We conclude that the phrase ‘principalplace of business’ refers to the place where the corporation’s high level officers direct, control,and coordinate the corporation’s activities. We believe that the ‘nerve center’ will typically befound at a corporation’s headquarters. The metaphor of a corporate ‘brain,’ while not precise,suggests a single location.” Here, that location for Hertz was Hertz’s headquarters office in NewJersey. Because Hertz was not a citizen of California, and plaintiff Friend was a resident ofCalifornia, there was diversity of citizenship and Hertz can legally have Friend’s lawsuit movedfrom California state court to the U.S. district court in California.It was probably not unethical for Hertz to deny citizenship in California even though it has

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such a large presence in California with its 270 rental car locations and more than 2,000employees in California. Finding diversity in this case does not mean that Friend cannot sueHertz in California. Friend will get her day in court against Hertz, butit will be in a U.S. districtcourt in California and not in a California state court.Hertz Corporation v. Friend,130 S.Ct.1181, 2010 U.S. Lexis 1897 (Supreme Court of the United States, 2010)

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Chapter 3Judicial, Alternative, and E-Dispute ResolutionAnswers to Critical Legal Thinking Cases4.1Summary JudgmentNo, the defendants’ motions for summary judgment should not be granted. The U.S. districtcourt found that substantial issues of fact needed to be decided at trial, which included whetherthe butter popcorn flavoring made by the defendants was dangerous, and if so the extent of thedanger caused to someone who smelled and ate microwave popcorn, the amount of popcornflavorings eaten by Deborah that was produced by each of the three defendants—Chr. Hansen,Inc., Symrise, Inc., and Firmenich, Inc.—and, if liability was found, what damages should beawarded and to what degree would each defendant be responsible. The court stated, “I find thatthe information and circumstances generate genuine issues of material fact as to whetherdefendants knew or had reason to know that their butter flavorings posed a potential risk, at somelevel, to consumers, thus triggering the necessity for a warning.” The U.S. district court deniedthe defendants’ motion for summary judgment based on failure to warn claims, thus permittingthe case to go to trial.Daughetee v. Chr. Hansen, Inc., 2013 U.S. Dist. Lexis 50804(UnitedStates District Court for the Northern District of Iowa, 2013)4.2Service of ProcessNo, plaintiff Jon Summervold did not properly serve defendant Wal-Mart, Inc. South Dakota lawrequires that service of process on a corporate defendant be made on president, officer, director,or registered agent of a defendant corporation. Here, plaintiffserved a nonofficer employee ofWalmart, the assistant manager of the apparel department of the Walmart store in Aberdeen,South Dakota. Based on the fact that the president, directors, or officers of Wal-Mart, Inc. werenot located in South Dakota at thetime of the plaintiff’s lawsuit, the plaintiff should have had theprocess server serve the registered agent the service of process. Because the plaintiff had failedto comply with South Dakota’s applicable service of process statute, the court held thatthe

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service of process was invalid. Because the three year statute of limitations had run on theplaintiff’s claim, the court dismissed the plaintiff’s lawsuit against Walmart. The judge stated “Itis a most unpleasant task for any judge to dismiss a case at this stage.”Sommervold v. Wal-Mart, Inc., 709 F.3d 1234, 2013 U.S. App. Lexis 4972 (United StatesCourtof Appeals for theEighth Circuit, 2013)4.3Summary JudgmentYes, Wal-Mart Stores, Inc. should be granted summary judgment. Summary judgment can begranted by a court where there is no dispute as to the material facts of the case. Here, the court ofappeals held that there were no issues of material fact that neededto be heard by a jury and thatthe judge could therefore make a decision in this case. The court held that Wal-Mart did notprovide a dangerous display and that the four corners of the display were clearing marked with“Watch Step” warning signs. The court stated that Walmart did not instruct the plaintiff to pickup her watermelon and take several steps around the display with it. The court noted that thesafer option was for her to have pushed her shopping cart close to the display and then to havescooped the watermelon into her cart. This option would not have required her to take any steps,thus avoiding the unfortunate incident. The court rejected the contention that Walmart “created atrap” for the plaintiff. Based on the undisputed facts of the case, the court granted summaryjudgment to Walmart.Primrose v. Wal-Mart Stores, Inc.,127 So.3d 13, 2013 La. App. Lexis1985(Court of Appeals of Louisiana, 2013)4.4Class CertificationYes, the class should be certified. The homeowners who have installed the Pex home plumbingsystem manufactured by ZurnPex, Inc. and Zurn Industries, Inc. (Zurn) allege that the systemhas a crucial defect in that the brass fitting and crimp that joins the Pex tubing together isdefective because it corrodes over time. Many homeowners have experienced water damagebecauseof the corrosion; other homeowners who have installed the Pex system have not yetexperienced water leakage but are still covered by the25-year warranty on the Pex plumbingsystem. Homeowners in Minnesota who have installed Zurn Pex plumbing, whether they haveexperienced water damage or not, seek class certification to bring a class action against Zurn tohave Zurn repair or replace Pexplumbing systems according to the warranty. The U.S. district

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court noted that the class is readily identifiable, the Pex product that is claimed to be defective isthe same product that has been installed in all of the covered homes, the defendants are easilyidentifiable, and all of the homes are covered by a similar warranty. Therefore, the U.S. districtcourt certified the following class: “All persons and entities that own a structure located withinthe State of Minnesota that contains a Zurn Pex plumbing system with Zurn brass crimp fittings.”The U.S. court ofappeals affirmed the class certification.In re Zurn Pex Plumbing ProductsLiability Litigation, 644 F.3d 604,2011 U.S. App. Lexis 13663(United States Court of Appealsfor the Eighth Circuit, 2011)4.5ArbitrationYes, the contract dispute between the parties is subject to arbitration. The U.S. Supreme Courtheld that there was a valid arbitration agreement entered into betweenNitro-Lift Technologies,L.L.C. and its former employees,Eddie Howard and Shane D. Schneider. When Howard andSchneider sued Nitro-Lift in Oklahoma state court to have the noncompetition agreementdeclared null and void, they ignored the arbitration clause contained in the same agreement. TheU.S. Supreme Court held that the dispute was subject to the arbitration clause and must besubmitted to arbitration. The U.S. Supreme Court held that the contract dispute in the case was tobe heard by the arbitrator and not by the Oklahoma state court. The U.S. Supreme Court stated“The Oklahoma Supreme Court must abide by theFederal Arbitration Act (FAA),which istheSupreme Law of the Land.”Nitro-Lift Technologies, L.L.C. v. Howard,133 S.Ct. 500, 2012 U.S.Lexis 8897(Supreme Court of the United States, 2012)Answers to Ethics Cases4.6Ethics CaseYes, the issuance of a default judgment against the defendants is warranted in the case. BMWNorth America, LLC and Rolls-Royce Motor Cars NA, LLC and their parent and affiliatecompanies (plaintiffs) filed a lawsuit in U.S. district court for trademark infringement againstthe corporate defendants, DinoDirect Corporation, DinoDirect China Ltd., and B2CForceInternational Corporation, and the individual defendant Kevin Feng, for selling counterfeit goods

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bearing the trademark names “BMW” and “Rolls-Royce.” The plaintiffs properly served thesedefendants with the complaint against them. The defendants replied to the court with manyemails but failed to appear in court or to file an answer to the complaintfiled against them. Aftergiving the defendants ample opportunities to appear and file an answer, the court issued a defaultjudgment against the defendants holding them liable for trademark infringement. In the defaultjudgment, the court permanently enjoined the defendants from engaging in similar trademarkinfringement in the future, issued an order for the destruction of any counterfeit goods in thepossession of the defendants, and awarded the plaintiffs $1.5 million against the defendants forwillfultrademark infringement.Selling counterfeit goods bearing valid trademarks of other companies is unethical behavior.Here, the brand names BMW and Rolls-Royce are well recognized in the United States andaround the world as being those of companies producing luxury automobiles and other products.The defendants were trying to make illegal profits by selling counterfeit goods bearing thesetrademarks. Trademark owners lose hundreds of millions of dollars each year from counterfeitersillegally selling knock-off s bearing their trademarks.BMW of North America v. DinodirectCorporation, 2012 U.S. Dist. Lexis 170667(United States District Court for the NorthernDistrict of California, 2012)4.7Ethics CaseNo, the federal court should not vacate the arbitrator’s award. The agreement signed betweenJohnson Controls, Inc. and Edman Controls, Inc. gave Edman the exclusive rights to sell Johnsonproducts in Panama. The agreement stipulated that any dispute arising from the parties’arrangement would be resolved through arbitration using Wisconsin law. The court upheld thearbitrator’s finding that Johnson breached the agreement by attempting to sell its productsdirectly to Panamanian developers, circumventing Edman. The U.S. district court upheld thearbitrator’s decision, as did the U.S. court of appeals. The court of appeals held that the partieshad entered into a binding arbitration agreement and that the dispute between the parties hadbeen properly decidedby the arbitrator. The court noted “Attempts to obtain judicial review ofan arbitrator’s decision undermine the integrity of the arbitral process.” The district court andcourt of appeals affirmed the arbitrator’s decision that Johnson had breached its contract with

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Edman and upheld the arbitrator’s award $733,341 in lost profits and damages, $252,127 inattorney’s fees, $39,958 in costs, and $23,042 in prejudgment interest against Johnson.Johnson acted unethically in two regards in this case. First, Johnson breached its agreementwith Edman by directly competing with Edman in the Panama building market, violating theexpress terms of their agreement. Concerning this, the court of appeals stated, “Johnson breachedthe agreement, circumventing Edman. There was nothing subtle about this.” The second wayJohnson acted unethically was by trying to avoid the arbitrator’s decision and award. In regardsto Johnson’s attempt to avoid the arbitrator’s award by appealing to the courts, the court ofappeals noted “Although arbitration is supposed to be a procedure through which a dispute canbe resolved privately, losers sometimes cannot resist the urge to try for a second bite at the apple.That is what has happened here.”Johnson Controls, Inc. v. Edman Controls, Inc., 712 F.3d 1021,2013 U.S. Dist. Lexis 5583(United States Court of Appeals for the Seventh Circuit, 2013)

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Chapter 4Constitutional Law for Business and E-CommerceAnswer to Critical Legal Thinking Cases4.1Supremacy ClauseYes. The U.S. Supreme Court held that the Massachusetts’ anti-Myanmar law conflicted withfederal law and was therefore preempted by the Supremacy Clause of the U.S. Constitution. TheSupreme Court stated, “Within the sphere defined by Congress, then, thefederal statute hasplaced the president in a position with as much discretion to exercise economic leverage againstBurma, with an eye toward national security, as our law will admit. It is simply implausible thatCongress would have gone to such lengthsto empower the president if it had been willing tocompromise his effectiveness by deference to every provision of state statute or local ordinancethat might, if enforced, blunt the consequences of discretionary presidential action.” The courtstated thatit was unlikely that Congress intended both to enable the president to protect nationalsecurity by giving him the flexibility to suspend or terminate federal sanctions andsimultaneously to allow Massachusetts to act at odds with the president’s judgmentof whatnational security requires. And that is just what the Massachusetts Burma law would do inimposing a different, state system of economic pressure against the Burmese political regime.The U.S. Supreme Court held that the Massachusetts anti-Myanmarlaw conflicted with federallaw and was therefore preempted by the Supremacy Clause of the Constitution. The SupremeCourt ruled in favor of the National Foreign Trade Council.Crosby, Secretary of Administrationand Finance of Massachusetts v. National Foreign Trade Council, 530 U.S. 363, 120 S.Ct. 2288,2000 U.S. Lexis 4153 (Supreme Court of the United States, 2000)4.2Establishment ClauseYes, the display of the Ten Commandments in the courthouses violates the EstablishmentClause. The First Amendment’s Establishment Clause mandates governmental neutralityregarding religion, that is, a government cannot promote religion. However, the U.S.Supreme

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