Blue Mood Clothing, Inc., a company devoted to producing positive, mood-altering apparel and variousother clothing items, is a wholly owned subsidiary of Colossal Corporation. Blue Mood Clothing’s most
famous and best-selling product is the Breezer—a skin-tight shirt with an air ventilation system that
allows the breeze to pass through the shirt. Colossal Corporation has uncovered an incident of theft at
Blue Mood Clothing: approximately one month ago, over five thousand Breezers were stolen from Blue
Mood Clothing’s Atlantic City, New Jersey, warehouse.
Shortly after the theft was discovered, Colossal Corporation’s internal investigator, Bill, found an online
advertisement for the sale of exactly five thousand Breezers, described as shirts with an “air ventilation
system that allows a cooling breeze to pass through the shirt.” Bill called the contact on the website and
set up a meeting with the seller, Nick Johnson. When Bill, under the guise of being an interested
purchaser of the Breezers, inquired about Nick’s distributor, Nick did not hesitate to reveal that he
purchased the Breezers from Juanita Winfrey, his long-time business associate. Bill inspected the five
thousand Breezers, and confirmed they were indeed the same Breezer products that were stolen from
the warehouse. He then requested a price quote from Nick and asked Nick to hold the products for him
for seven days. Nick agreed.
That same afternoon, before additional investigation, Bill sent an email intended solely to be sent to the
vice president of Blue Mood Clothing, Inc., but he accidentally hit “reply all” to a previous message, and
sent the email to every employee at Blue Mood Clothing, Inc., over two hundred people. The email
stated, among other things, that “Nick Johnson was a thief and had an extensive criminal record in New
Jersey. He stole the five thousand Breezers. I will continue my investigation tomorrow.” This statement
was not true. Nick’s old friend from high school, who worked at Blue Mood Clothing, Inc., forwarded this
message to Nick, who became worried about his business and reputation.
Bill arranged a meeting with Juanita the very next day, during which he posed as an interested clothing
buyer. He asked Juanita if she had any Breezer distributors she could recommend. Juanita said that she
works directly with a Blue Mood Clothing sales agent named Alex Ridgefield, and that she recently
purchased five thousand Breezers from him at a fair price. Juanita also said that Alex is quite interested
in expanding his business with her, and would provide Bill with a great deal.
After his meeting with Juanita, Bill checked the personnel records at Blue Mood Clothing and identified
Alex Ridgefield as a low-level warehouse employee who has been with the company for over 20 years.
Alex’s personnel record is spotless, with no prior personnel issues and no complaints. Alex is an at-will
employee who is in charge of night security at the Atlantic City warehouse and has no history in sales. As
a night security guard, Alex is responsible for protecting the warehouse from theft and is not permitted
to sell products. After further investigation, Bill found company emails between Juanita and Alex in
which Alex posed as a sales agent. Reading the emails, it became obvious that neither Juanita nor Nick
knew that the five thousand Breezers were stolen, and that both bought the Breezers for fair-market
value. Bill then collected video from all of Alex’s shifts and was able to locate a film of Alex packing the
Breezers into his personal minivan and driving them out of the warehouse parking lot.
Your task is to research the legal issues surrounding the stolen property. It is up to you to decipher
which laws have been broken and deduce any potential remedies. Vice President Dodger wants you to
prepare a narrated PowerPoint to present this information to the senior leadership team. Because of
the sensitive nature of this case, the vice president has asked you to operate with total confidentiality
and without involving the legal department.
Introduction to the Legal Environment of Business
The Legal Environment: Courts, Alternative Dispute Resolution, and Agency
by Rosemary Hartigan and Paula O’Callaghan, Professors, UMUC
Why Should I Care about the Law?
Why do businesspeople need to know anything about the law? Some people think of lawyers in business
as a necessary evil. There is some truth to the “necessary” part: if everyone were scrupulously honest
and had photographic memories regarding all statements uttered that could constitute promises,
perhaps lawyers wouldn’t be needed. But, alas, we are mere mortals with failing memories and
sometimes failing ethics.
A Systems View of the Roles of the Lawyer and the Manager
One view of the respective roles of the lawyer and the manager in a business is that the lawyer should
guide the manager in analyzing risk—this is in the lawyer’s training, and it’s the lawyer’s responsibility to
accurately convey the nature of legal risks to the client; however, it is up to the manager to make the
final business call.
Generally speaking, lawyers are inherently conservative when it comes to risk. Managers can’t abdicate
responsibility for making the business call. This is one of the main reasons for managers to have legal
literacy. You need to know when you need legal advice, and then what to do with it. Sometimes, basic
legal knowledge is necessary on the front lines of dealing with customers and coworkers.
Knowing something about the law can assist you in prevention. Legal analysis skills help you to avert
lawsuits and other unpleasantness so that you can stay focused on running your business. However,
there will be instances in which you have to bring a legal-related matter to closure. Perhaps you’ve
taken over from an executive who has left the department or company and left behind a problem that
requires a legal solution. Or, you did something that triggered a legal response from a customer or
vendor. If you know the relevant legal rules for your area of business, you’ll know when it’s appropriate
to involve legal counsel.
Let’s begin with a basic overview of the two types of law.
Differences between Civil and Criminal Law
American society highly values ingenuity and entrepreneurship, but there are legal limits on the conduct
of commerce. Some of these limits are statutory, which means that a law-making body has enacted a
specific law to regulate a specific activity (e.g., the Sherman Act statute regulating antitrust). Some of
these legal limits are found in the common law (e.g., tort law imposing liability on an infinite variety of
behaviors). Most of the legal limits on business fall into the category of civil law.
One big difference between civil and criminal law is in the potential penalties. Civil law liability carries
penalties that are monetary—so-called damages. The culpable party pays damages in an amount the
court believes will make the wronged party whole. This contrasts with criminal law, where the possible
penalties are limits on personal freedom (such as incarceration or death), although monetary penalties
are also possible (such as a fine payable to the government or restitution to the victim).
There is one major exception to the rule that business contracts do not involve criminal penalties for
breach: this is in government contracting. Because so many students at UMUC have employment that
involves contracts with the US government in some manner, this is often a point of confusion.
Government contracting is a special circumstance where the contracts involve civil law, yet breach of
contract potentially involves criminal penalties. The criminal penalties can include jail time for serious
violations. Those of you who work in this area probably have attended or will attend a professional
development seminar about contract compliance in which you learn the particulars of your contractual
obligations.
Trend Developments in Business Law
The past 20 years have seen a rise in the criminalization of business law. While it’s still true that no one
goes to prison for breaking the terms of a contract (notable exception: government contracting), there
has been a marked increase in the number of business-related activities that carry possible criminal
penalties.
Business activities that are punishable by criminal penalties (in addition to fines and damages) are
known as white-collar crimes. Many of you are familiar with famous cases involving business people—
Martha Stewart (ImClone), Kenneth Lay (Enron), Dennis Kozlowski (Tyco), and, of course, Bernie Madoff.
Those businesspeople got themselves into the criminal justice system by committing fraud, lying to
federal authorities, or otherwise invoking specific laws to deter commercial crimes such as insider
trading of stock. The possible penalties for white-collar crime do include imprisonment as well as fines
and damages.
When you see a businessperson in handcuffs doing the “perp walk,” ask yourself, “What law has
allegedly been broken?” Typically, there will be a law (statute) or a regulation (e.g., Securities and
Exchange Commission [SEC] rule) that allegedly has been transgressed.
Project 1: Introduction to the Legal Environment of Business
Step 1: Review Case One: Blue Mood Clothing, Inc.
Now that you’ve finished your skills gap analysis and GAP survey, you take some time to collect your
thoughts and review the first case Vice President Dodger assigned to you. First, you need
an introduction to the legal environment of business. Next, you open the Blue Mood Clothing, Inc. case
file to assess the details of this assignment.
Upon completing your initial review of the file, you begin thinking about the legal issues contained in the
file. In the next step, you will gather the information you need to answer the questions from the VP.
Step 2: Gather and Analyze Information
As you read through the materials, try to begin answering the questions Vice President Dodger asked
you. You will likely encounter many new legal concepts, so take notes about which sections apply to this
case so that you can easily refer back to them when you begin to write your presentation. The VP’s
precise questions about the legal issues are as follows:
•
Can Colossal Corporation terminate Alex without any notice or a hearing? Why or why not? This
question relates to employment-at-will.
•
Did Alex, Nick, Bill, or Juanita commit any crimes and, if so, which crimes did each person
commit? Fully explain your answer for each person as you explore the subject of business
criminal law.
•
What defenses, if any, might the relevant persons allege in response to the crimes you
identified? Fully explain your answer for each person.
•
Did Alex, Nick, Bill, or Juanita commit any intentional torts and, if so, which intentional torts did
each person commit? Read about the law of tortsin order to make your determinations.
•
What defenses, if any, might the relevant persons allege in response to the intentional torts you
identified? Fully explain your answer for each person.
•
Can anyone collect damages for the intentional torts? Who can collect and whom would they
sue? Detail the specific damages that may be available to potential plaintiffs as you read
about tort damages.
In the next step, you will formalize your thoughts so that they are ready to put into your presentation.
Step 3: Focus on Your Rationale and Conclusions: Create Your Outline
You’ve finished your research. You’ve reflected on how the facts and the law come together in this
situation. You’ve analyzed the possible arguments and determined which seem most reasonable. Now it
is time to formulate these arguments, addressing all the issues raised by the narrative in the Blue Mood
Clothing, Inc. case file Vice President Dodger gave you.
Outline your presentation to the leadership team, either on paper or in a Word document; don’t make
the PowerPoint yet. Review your outline to make certain it covers all relevant points and progresses in a
logical order. Identify the major bullet points that you will highlight on your slides, and allocate the
appropriate supporting information to each bullet point—make sure that you have adequately covered
all the relevant arguments or reasons needed to support them. In the next step, you’ll use your outline
to create the PowerPoint presentation for the VP.
Step 4: Communicate Your Findings and Conclusions to the Vice President of Colossal Corporation:
Create Your PowerPoint
You have finished getting all of your ideas organized surrounding the Blue Mood Clothing case when you
receive an email with delivery instructions from Vice President Dodger:
INBOX (1 NEW EMAIL)
From: Kenneth Dodger, Vice President, Colossal Corporation
To: You
Just wanted to check in as you begin to communicate your findings and conclusions on the Blue Mood
Clothing case.
I’d like you to use your outline and research notes from your work on this case to prepare a narrated
PowerPoint for the senior leadership team. As you will not deliver this in person, it will need to follow
the form of an asynchronous presentation.
Further, here is a list of additional requirements I need you to follow to meet standard presentation
protocol:
•
Include a title slide, with your name on it, introducing the presentation.
•
On the presentation slides, include only the major bullet points for each issue.
•
Include no more than 20 slides.
•
Use your narration to provide the supporting rationale for each major bullet point.
•
Include a script of your narration in the notes section of the PowerPoint.
•
Title your files using this protocol: yourlastname_BlueMoodPowerPoint_date.
•
The final slide must present a clear summary of your major conclusions and any
recommendations.
You should be prepared to answer questions about your presentation after you have submitted it. That
should be all for now.
Looking forward to seeing the final product,
Ken
Submit your narrated PowerPoint to the submission dropbox located in the final step of this project. You
should try to have your Blue Mood PowerPoint complete by the end of Week 2.