Legal & Ethical Issues In Business Organizations

1.   Barry Engel was president of Gel Spice Company, which imported, processed, and packaged spices. As president, he was responsible for the purchasing and storing of spices in the company’s warehouse in Brooklyn, New York. In June 1972, the Food and Drug Administration (FDA) inspected the Gel Spice warehouse and found widespread  rodent infestation. Upon reinspection in August 1972, the FDA found evidence of continuing infestation. Following the two 1972 inspections, the FDA considered a criminal prosecution against Gel Spice. Before referring the case to the Department of Justice, however, the FDA conducted an additional inspection. At that July 1973 inspection, no evidence of rodent infestation was found, and the criminal prosecution was dropped. Three years later, in July 1976, the FDA inspected Gel Spice and again found active rodent infestation. Four additional inspections were performed from 1977 to 1979, each of which revealed continuing infestation. Thereafter, the government instituted criminal proceedings against Gel Spice and its president, Barry Engel. Under what theory of criminal liability could Engel be held liable for violating the Food, Drug and Cosmetic Act? Can Engel successfully assert any defense? [United States v. Gel Spice Co., 773 F.2d 427 (2d Cir. 1985).]

2.  Read “The Responsible Manager” on Pages 1026-1027of the Bagley Text (International Law and Transactions).  Read “A Manager’s Dilemma” on page 1028 and answer the following questions:


1.  Is the conduct of these international drug companies ethical?
2.  Should it matter whether consumers in a developing country cannot afford the products being tested?


3.  Darleen Johnson was driving her Ford car under rainy conditions on a two-lane highway through Missouri. The car’s front tires had a reasonable amount of tread remaining on them, but the back tires were nearly bald. For an undetermined reason, Johnson lost control of the car, spun into the other lane, and collided with a pickup truck driven by Kathyleen Sammons. Johnson was killed instantly  Johnson’s father claimed that the inboard C.V. joint boot on the front axle was torn, which allowed debris to contaminate the joint. (The boot is a covering that contains the grease that lubricates the joint.) This contamination allegedly made the joint act like a brake on the left front wheel and caused Johnson’s car to pivot around that wheel and into the path of the oncoming pickup truck. Ford admits that the joint boot can become torn, which will allow contamination of the joint. In its manuals, Ford recommends periodic inspection of the boots. However, Ford contends that the joint on Johnson’s car was contaminated during or after the accident. Ford also contends that contamination of the joint could not result in the joint seizing and creating a loss of steering control, and that the worst that could result from contamination would be some vibration and noise. According to Ford, Johnson’s accident was caused by road conditions and driving error. The case is submitted to the jury on theories of strict liability and negligent design and manufacture.

Was Ford liable for Johnson’s death?

Was it ethical for Ford to not disclose the defect?

What do you think would have been the best way for Ford to disclose the defect, if you think it should have?

What is the best one additional argument that Ford could have raised in its defense.  Thoroughly explain the rationale for your answers.

4.  Hewlett-Packard (HP) launched a workplace diversity campaign that consisted of hanging posters entitled “Diversity Is Our Strength.” Each poster depicted an HP employee above the caption “Black,” “Blonde,” “Old,” “Gay,” or “Hispanic.” In response to the “Gay” posters, employee Richard Peterson, a self-described “devout Christian” who believes homosexual activities violate the commandments in the Bible, posted two biblical passages  on an overhead bin in his work cubicle. One stated: “If a man also lie with mankind, as he lieth with a woman, both of them have committed an abomination; they shall surely be put to death; their blood shall be put upon them.’ Leviticus 20:13.” Peterson’s direct supervisor removed the postings after she determined that they violated HP’s policy prohibiting harassment, which stated: “Any comments or conduct relating to a person’s race, gender, religion, disability, age, sexual orientation, or ethnic background that fail to respect the dignity and feeling [sic] of the individual are unacceptable.” Peterson informed management that HP’s diversity campaign was an initiative to “target” heterosexual and fundamentalist Christian employees by condoning homosexuality. Peterson once again posted the verses in his cubicle and stated that he would not remove them unless HP removed the “Gay” posters. Peterson was subsequently terminated for insubordination.

Does Peterson have a valid claim of religious discrimination against HP?

Do Peterson’s gay coworkers have a claim against HP for Peterson’s postings?




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