mcgraw-hill january 2013 business law...

Proceedings A monthly newsletter from McGraw-Hill January 2013 Volume 4, Issue 6

Business Law and Legal Environment of Business Newsletter1

Dear Professor, Spring Semester 2013 has arrived! Welcome to McGraw-Hill’s January 2013 issue of Proceedings, a newsletter designed specifically with you, the Business Law educator, in mind. Volume 4, Issue 6 of Proceedings incorporates “hot topics” in business law, video suggestions, an ethical dilemma, teaching tips, and a “chapter key” cross-referencing the January 2013 newsletter topics with the various McGraw-Hill business law textbooks. You will find a wide range of topics/issues in this publication, including: 1. A mistaken price term in a contract for the sale of an automobile, and the effect of such a mistake on the enforceability of the contract; 2. The newly-created Consumer Financial Protection Bureau (CFPB) and its impact on debt collection in the United States; 3. The privatization of probationary services in the criminal justice system; 4. Videos related to a) the resignation of a Goldman-Sachs executive based on alleged unethical practices of the financial services firm and b) the alleged use of excessive force in exercise of the “shopkeeper’s privilege” at a convenience store in Brooklyn, New York; 5. An “Ethical Dilemma” related to whether a public college has the legal and/or ethical right to restrict the practices of a religiously-themed student group; and 6. “Teaching tips” related to Article 2 (“CFPB to Oversee Debt Collectors Starting January 2”) and Video 1 (“Goldman Sachs VP Explains Why He Quit”). I wish all of you a safe and prosperous new year! Jeffrey D. Penley, J.D. Catawba Valley Community College Hickory, North Carolina

Contents

Hot Topics 2

Video Suggestions 13

Ethical Dilemma 16

Teaching Tips 20

Chapter Key 28



Hot Topics in Business Law

Article 1: “Chevy Dealer Errs in Sale Price, Has Customer Danny Sawyer Arrested for Theft”

http://abcnews.go.com/blogs/headlines/2012/10/chevy-dealer-errs-in-sale-

price-has-customer-danny-sawyer-arrested-for-theft/ According to the article, when Priority Chevrolet of Chesapeake, Virginia, mistakenly sold Danny Sawyer a new Chevrolet Traverse for less than it had intended, the dealership tried to get Sawyer to sign a new, more expensive contract. When Sawyer refused, the dealership’s staffers reportedly called police and had him arrested, accusing him of stealing the vehicle. The charges were ultimately dropped, but Sawyer, a 40-year-old registered nurse from Chesapeake, Virginia, has filed a $2.2 million lawsuit. Dennis Ellmer, the president of the dealership, recently acknowledged his staffers erred, first when they undersold the car and then when they reported Sawyer to the authorities. “I owe Mr. Sawyer a big apology,” Ellmer said. According to the lawsuit, Sawyer went to the dealership on May 7, 2012 and traded in his 2008 Saturn Vue for a black 2012 Chevrolet Traverse, though he came back to the dealer the next morning to exchange the black Traverse for a blue one instead. Sales manager Wib Davenport agreed to cancel the sale on the black SUV and sell Sawyer the blue Traverse, the suit said, adding that the contract price on the blue 2012 SUV was $33,957.55. Sawyer took the car home later that day and left for a cruise the following day. When he returned from vacation on May 15, he had numerous voicemail messages from the dealer’s staffers on his home and work phones, as well as a letter in his mailbox from Davenport, the suit claimed. When he spoke with Davenport, the manager told him that the staff had made a mistake in the contract and the blue Traverse was worth more, the suit said. The blue Traverse should have sold for about $39,000.

Of Special Interest

This section of the newsletter covers three (3) topics: 1) A mistaken price term in a contract for the sale of an automobile, and the effect of such a mistake on the enforceability of the contract; 2) The newly-created Consumer Financial Protection Bureau (CFPB) and its impact on debt collection in the United States; and 3) The privatization of probationary services in the criminal justice system.



The lawsuit claims Davenport asked Sawyer to come in and sign a new contract reflecting the corrected price. Sawyer declined, saying he had already paid in full. According to the lawsuit, the dealer’s staff continued to call Sawyer’s home and job for several weeks after, and on June 15, police came to Sawyer’s home and arrested him. He was held for four hours before being released on bond. Having no car, Sawyer had to walk the five miles to his home. The suit also claimed that Davenport continued to ask Sawyer to sign a new contract even after the charges were dropped. Among other things, Sawyer’s lawsuit alleged malicious prosecution, slander, defamation, abuse of process, negligence and fraud. As a result of his experience, Sawyer has suffered emotional distress, shame, loss of reputation, sleeplessness, nightmares, fear of arrest and other consequences, the court papers added.

Discussion Questions 1. Assume that Priority Chevrolet made an innocent mistake regarding the price of the blue Chevrolet Traverse. What effect, if any, would the dealership’s innocent mistake have on the binding and enforceable nature of its contract with Danny Sawyer? As a general rule of contract law, a unilateral mistake (i.e., a mistake made by one of the contracting parties) does not have any effect on the enforceability of the subject contract; in other words, the contract is still fully enforceable, with the party who made the mistake still obligated to perform the contract based on its indicated terms. In your author’s opinion, if Priority Chevrolet made a mistake regarding the price of the automobile, the dealership is still obligated to honor the indicated price in its contract with Danny Sawyer. 2. Was Sawyer legally obligated to sign a new contract for the blue Chevrolet Traverse for the increased price (approximately $39,000)? Why or why not? No, Sawyer is not legally obligated to sign a new contract for the increased price of approximately $39,000. As indicated in response to Discussion Question 1 above, as a general rule of contract law, a unilateral mistake (i.e., a mistake made by one of the contracting parties) does not have any effect on the enforceability of the subject contract; in other words, the contract is still fully enforceable, with the party who made the mistake still obligated to perform the contract based on its indicated terms. 3. Discuss the legal theories included in Sawyer’s lawsuit, including malicious prosecution, slander, defamation, abuse of process, negligence and fraud. The legal theories included in Sawyer’s lawsuit are described below:



a. “Malicious prosecution” is an action for damages brought by one against whom a civil suit or criminal proceeding has been unsuccessfully commenced without probable cause and for a purpose other than that of bringing the alleged offender to justice; b. “Slander” is a false oral statement made about another individual that damages that person’s reputation; c. “Defamation” is a false statement made about another individual that damages that persons’ reputation. There are two (2) types of defamation actions: 1) slander, a false oral statement; and 2) libel, a false written statement. d. “Abuse of process” refers to the improper use of a civil or criminal legal procedure for a malicious reason. One example of abuse of process involves filing a lawsuit without a genuine legal basis in order to force payment through fear of litigation. e. “Negligence” is the failure to do what a reasonable person would do under the same or similar circumstances. Negligence is based on a duty of care owed by the defendant to the plaintiff, breach of the duty of care, causation of harm to the plaintiff, and the plaintiff’s proof of damages (economic and/or physical). f. “Fraud” is the making of a false statement of fact, based on knowledge of its falsity or reckless indifference as to its truth, made with the intent that the listener rely on the false statement, the listener in fact relies on the false statement, and the listener is harmed (economically and/or physically) as a result.

Article 2: “CFPB to Oversee Debt Collectors Starting January 2” http://www.huffingtonpost.com/2012/10/24/cfpb-debt-ollectors_n_2006694.html#slide=1010185 According to the article, for the first time, a single federal government agency will oversee the debt collection industry starting next year, marking a monumental victory for the year-old Consumer Financial Protection Bureau. The agency said recently that starting January 2, 2013, it will begin oversight of the largest debt collectors, making sure they are following the law collecting overdue bills. Most of the nation's debt collectors, though, are small enough to duck the regulator's oversight. Once the CFPB begins regulating large debt collectors, consumers like Cebilla DeCastro, 48, of Bronx, New York, will have the aid of the federal government to help fight illegal debt collection practices. DeCastro was forced to turn her phone off at night to stop the calls from debt collectors, even though she filed for bankruptcy protection months earlier. Though she did not owe



any more money, these kinds of calls are not unusual. The debt collection industry is notorious for breaking the law and harassing consumers who owe or have owed money. “We want all companies to realize that the better business choice is to follow the law -- not break it," CFPB Director Richard Cordray said in a statement. Under the new rules, the CFPB will oversee any company with more than $10 million in annual receipts from collections, which make up around 60 percent of the industry's $12.2 billion in revenue. At least 30 million Americans are currently in debt collection, with an average outstanding bill of around $1,500, the bureau said. The CFPB said it intends to make sure debt collectors properly disclose the amount owed and use the most accurate data to pursue debts. The bureau will also look at how collection agencies handle disputes. Lastly, the CFPB wants to make sure collection agencies communicate in civil ways with consumers, rather than threatening and harassing them. But for consumers, the victory is only partial. Of the 4,500 collection firms in the U.S., only 175 are big enough to be supervised under the new rules. That means smaller firms -- along with collections agencies overseas -- will not be under the same scrutiny by the CFPB. The Federal Trade Commission is also cracking down on debt collectors, with recent actions on overseas debt collectors and fraudulent firms scamming people out of money. This spring, the FTC shuttered at least one company that operated from a call center overseas. The FTC has also taken steps to close fake debt collection firms. The CFPB and the FTC will share enforcement duties for firms of all sizes. An FTC spokesman said the agency receives more complaints about debt collectors than any other single industry -- 180,000 complaints in 2011. The debt collection industry expands the CFPB's regulatory portfolio of financial companies. In September, the CFPB began oversight of the credit reporting industry. It also keeps tabs on mortgage originators, mortgage servicers and payday lenders. Under the Fair Debt Collection Practices Act, a collector must send a written statement indicating how much money is owed within five days of first contacting a customer. By law, collection agencies cannot contact a person before 8 a.m. or after 9 p.m. Collectors cannot threaten arrest or harm or pretend to be some kind of legal enforcement officer or agency.

Discussion Questions

1. Research and describe the Fair Debt Collection Practices Act (FDCPA).



The Fair Debt Collection Practices Act, often referred to as the "FDCPA", was enacted by Congress in 1978 in response to abusive conduct by collection agencies and concern that the abuses were causing an increase in the filings of personal bankruptcies. The purpose of the Act is to provide guidelines for collection agencies which are seeking to collect legitimate debts, while providing protections and remedies for debtors.

The FDCPA restricts debt collectors from engaging in conduct including the following:

a. Contacting a third party who does not owe the debt, such as a relative, neighbor, or your employer. Co-signers to the debt, however, may be contacted by the debt collector;

b. Threatening to refer your account to an attorney, harm your credit rating, repossession or garnishment, without actual intention of action on the threat (Please note that a debt collector may warn you of an actual impending intention to refer your case to an attorney or to report your debt to a credit agency. What they cannot do is use a false threat to try to intimidate you into paying.);

c. Making repeated telephone calls or telephone calls at unreasonable times. The act defines unreasonable times as contact before 8:00 a.m. or after 9:00 p.m., unless you have given the debt collector permission to contact you during those hours;

d. Placing telephone calls to an inconvenient place. For example, contacting you at work in violation of a policy by your employer that is known to the debt collector or following a request by you that they not contact you at work;

e. When placing a telephone call to you at work, informing your employer of the purpose of the call, unless first asked by the employer;

f. Using obscenity, racial slurs or insults;

g. Sending letters which appear to have come from a court;

h. Seeking collection fees or interest charges not permitted by your contract or by state law;

i. Requesting post-dated checks with the intention to prosecute if they bounce;

j. Suing in courts far removed from your place of residence;

k. Making certain false representations in association with efforts to collect the debt, including the false claim that the person contacting you in relation to the debt is an attorney, falsely claiming to have started a lawsuit, using a false name, or using stationery that is designed to look like an official court or government communication;



l. Using false claims to collect information about the debtor, such as pretending to be conducting a survey; and

m. Threatening you with arrest if you do not pay the debt.

2. In light of the legal protection afforded debtors under the FDCPA, was it really necessary for the federal government to create the Consumer Financial Protection Bureau (CFPB)? Explain your response. This is an opinion question, so student responses will likely vary. The argument for the CFPB’s creation is that as a federal administrative agency, it can actually police and enforce the provisions of the FDCPA, serving as a consumer (borrower) advocate in borrower-lender negotiations regarding past-due debts, where the lender almost always has the “upper hand.” The argument against the CFPB’s creation is that the consumer (borrower) already has individual remedies pursuant to the FDCPA in terms of lenders’ overzealous debt collection practices; therefore, the CFPB represents overregulation. 3. In your reasoned opinion, is the CFPB an example of “smart” government regulation or unnecessary, overregulation? Explain your response. This is an opinion question, so student responses will likely vary.

Article 3: “‘Cash Register Justice’: Private Probation Services Face Legal Counterattack”

http://openchannel.nbcnews.com/_news/2012/10/24/14653300-cash-register-justice-private-probation-services-face-legal-counterattack?lite

According to the article, Kathleen Hucks was walking her dogs down the dirt road that leads out of Mim’s Rentals, a small trailer park in rural Augusta, Georgia, when a police officer in a cruiser stopped her on Labor Day weekend. The officer asked the slight 57-year-old for identification and ran her name through the system. Nothing came up for Richmond County, where she lives. Then the officer ran one more search. “He says, ‘Ma'am I have to place you under arrest -- Columbia County’s got a hold on you for violation of probation,’” Hucks remembered. When her husband, 64-year-old James Hucks, saw his wife getting arrested even though she was no longer on probation, he thought there had been an error. “I said, ‘Look here, don’t y’all realize this case is dead?’”



It was no mistake. A warrant for Hucks’ arrest had been issued in 2010, long after she completed a 24-month probation term arising from a 2006 conviction for drunken driving, possession of marijuana and driving with a suspended license. The reason: She hadn’t paid all the fees she owed to the for-profit company that supervised her probation. Even though the company’s ability to collect the debt had expired when her probation did, she was arrested. Hucks spent 20 days in jail before a judge freed her. Recently, Hucks filed suit against Sentinel Offender Services alleging that the Irvine, California-based company violated her civil rights. The outcome has implications beyond the case of one woman in Augusta because it claims that the Georgia law that allows for a for-profit company to act in a judicial capacity violates the due process clause of the state Constitution. Hucks’ case is the latest of several lawsuits filed in Georgia and elsewhere challenging private probation companies, which operate in about 20 states. Supporters of the industry say the system saves counties money by providing a service: collecting court fines without burdening taxpayers. But critics allege the private probation companies routinely violate the civil rights of the probationers under their watch and have, in essence, created a modern-day debtor’s prison. “They say private industry can do things cheaper than government,” said John “Jack” Long, an attorney representing Hucks. “Maybe that’s true with some things. But the judicial system is not supposed to be cash-register justice." In 2000, Georgia passed a law transferring state probation services to the counties and opening the door for local courts to contract with private companies for misdemeanor probation services. Bobby Whitworth, the former head of the state Board of Pardons and Paroles, was imprisoned on public corruption charges for taking payments to help pass to the legislation. Nevertheless, the practice of privatizing probation services spread across the state. Thirty-five companies are now registered to provide misdemeanor probation services to local Georgia courts. The counties contract for the services but pay nothing-- costs are covered by the monthly supervision fees paid by the probationers. In most cases, the system works like this: A person is issued a summons for a relatively minor crime, such as speeding, driving with a suspended license or public intoxication. Upon conviction, those who can pay the fine at once usually are done with the Georgia justice system. But in Richmond County, where Census data show nearly a quarter of its population of about 200,000 live in poverty, and others, many cannot pay in full. Those who can’t are put on private probation. For an additional monthly fee of between $25 and $45, they can pay the fine over the duration of their probation term.



Probationers may also find themselves responsible for additional costs, such as a one-time “start-up” fee of $15, a daily fee of $7 to $12 for electronic monitoring, a $25 photo fee required for DUI convictions, among others. Adding to the cost, defendants in Georgia must pay $50 to the court to apply for a public defender, though the judge can waive the fee if a defendant is unable to pay. Under Georgia law, an indigent person cannot be jailed for inability to pay a fine, unless the refusal is willful. But critics say neither courts nor probation companies make an effort to determine ability to pay. Instead, they say, companies routinely use the threat of jail against probationers for failing to pay not only court fines, but the private fees generated by what is known as “offender-funded supervision.” The probation industry’s practices are increasingly landing it in court. Acting on a class-action suit filed in 2010, a judge recently took control of the municipal court of Harpersville, Alabama, after finding the probation company and the court operated what he called “a judicially-sanctioned extortion racket.” Long and fellow Augusta attorney John Bell also have a lawsuit pending against Sentinel pending in federal appeals court in the case of Hills McGee, a 53-year-old disabled veteran who lives off benefits of $271 a month. In October 2008, McGee, who lives in Richmond County, pleaded no contest to public intoxication and obstruction of a police officer. He was fined $270 in addition to the monthly supervision fees charged by Sentinel. In January 2009, McGee’s court fines were converted to 41 hours of community service because he could not afford to pay. McGee says he completed his community service. But weeks later his probation was revoked for not paying an additional $186 in fees to the probation company. He spent two weeks in jail. Founded in 1993, Sentinel Offender Services provides not only supervision, but also electronic monitoring, drug testing and other public safety functions across the country. The company claims to be the largest offender management service in the state of Georgia, collecting more than $30 million the more than 100 courts it served in 2009, according to company documents obtained through a public records request. Its operations in Georgia account for approximately 65 percent of its overall business, it said. Sentinel did not respond to repeated requests for comment from the media. In 2009 Sentinel officials said that ‘mistakes happen’ but that the company does not threaten those who cannot afford to pay their fines. They also said that they regularly convert fees to community service.



Georgia’s County and Municipal Probation Advisory Council, which oversees both public and private probation in the state, did not respond to requests for comment. Facing budget crunches, local courts have been under increased pressure to produce revenue. But since 2000, revenues from Richmond County State Court fines have dropped by more than a third, to about $4.6 million in 2011 from just under $7.2 million in 2000, according to State Court numbers. While misdemeanor crime has remained steady, the revenue decline may partly be the result of more fines being converted to community service, according to the court clerk. But court officials could not provide data to support that assertion. Sentinel’s contract with the county specifies that all payments made by probationers be split 50-50 between the company and the court. However, because the private probation companies are exempt from the Georgia public records law, it is impossible to know how much profit Sentinel has made while collecting those fines. On a recent Friday afternoon in Richmond County’s State Court, retired Superior Court Senior Judge Albert M. Pickett presided over about two dozen misdemeanor cases. (Richmond County pays retired judges to sit in when state court judges are away or unavailable). Cases before him included minor shoplifting, traffic violations and drug possession and DUI. At about 3 p.m., nearly 30 people sat with their hands and feet shackled, waiting for their cases to be called. All but two were black. Many were brought to the judge for a revocation hearing, held to determine whether or not they would have to go to jail for violating probation conditions. Others were new cases. The revocation hearings turn the courtroom into a kind of market, where the judge and defendants haggle for freedom. One after the other, Judge Pickett asked each probationer how much money they could pay to avoid jail. “You got six hundred and eighty dollars looking at you right here,” Judge Pickett told one defendant who, like most others in court that day, had been arrested for not reporting to a probation officer or paying fines. “Or you got a year, three months and 26 days” in jail, he said. One after the other, defendants stood at the podium and figured how much money they could scrounge up. “I could pay a little something,” one man said. “Two, three hundred dollars.” “Two or three hundred?” the judge asked. “How about $500?” Judge Pickett asked a man who had been charged in October with possession of marijuana why he didn’t work out a payment plan with the probation company. “Why didn’t he say at that time, ‘I can’t afford this, I can’t pay these fines. Isn’t there some way I can work it out?’ They would have said, ‘You bet.’ But instead he just vanished.” The judge gestured with his hand, mimicking a bird in flight. “Just gone.”



Those unfamiliar with Georgia law may find it surprising that defendants face probation or are jailed for traffic violations that would, in other states, simply require the payment of fines. It’s the only state in the country where traffic infractions are considered criminal charges, though legislators are now considering changing the law for low-level offenses. “If you or I go to court and we have a speeding ticket, if we have any sense we’ll show up at court with a pocket full of cash,” said John Bell, who with Long represents Kathleen Hucks. “We’ll pay it and we’ll never have to be on probation.” “They aren’t putting you on probation because they’re checking to make sure you’re working or staying home at night so you’re not gonna get in trouble,” he added. “They’re just trying to get money out of you.” For her part, Kathleen Hucks and her family said that her initial sentence and probation term for driving under the influence was fair. “I believe I was treated right on that,” Hucks said. “I shouldn’t have been drinking and driving.” They said they did their best to comply with the terms, when they could -- paying fines and reporting to her probation officer when they had money for gas. But Hucks had outstanding fines when her probation ended. According to the law, the court and company’s ability to pursue the fees should have run out too. But years after her term ended, Sentinel continued to demand payments. Hucks has paid more than $2,000 in fees and fines since 2010. Moreover, a recent public records request filed by Huck’s attorney indicates the Columbia County Board of Commissioners has not approved a contract with Sentinel since before April 2006, in violation of state laws governing private probation that require government contracts to be renewed annually. Yet the company continued to enforce probation sentences, like the one that for years followed Kathleen Hucks. “I feel like sometimes they make their own rules instead of really abiding by the law itself,” her husband, James, said. “And they figure, ‘These people are nobody. We can treat them the way we want to. What can they do? They don’t have any money.’”


1. Discuss the advantages of “privatizing” probationary services. Those in favor of privatizing probationary services claim that cost-savings would result, based on the assumption that a private firm could perform such services more cost effectively than the government. Usually, those favoring the privatization of government services believe that the



government is inherently inefficient and not a good “steward” of taxpayer dollars, while businesses are inherently efficient. 2. Discuss the disadvantages of “privatizing” probationary services. Those opposed to privatizing probationary services claim that cost-savings would not likely result, since: a) businesses are organized to generate a profit (an additional expense for the party paying for such services), while the government is not; and b) there is no demonstrative proof that businesses are more efficient than government. Also, those opposed to privatizing probationary services would argue that since our criminal justice system is a “public” system (based on the foundational assumption that crimes constitute wrongs against society as a whole), the probationary component of criminal justice should be public as well. 3. In your reasoned opinion, is it wise to privatize probationary services? Why or why not? This is an opinion question, so student responses will likely vary from those who believe that businesses are inherently efficient and always more cost-effective than government, to those who believe otherwise. Opinions will also vary depending on whether students believe that some services (such as the administration of criminal justice) are uniquely and appropriately public in nature, and should therefore not be privatized for that reason.



Video Suggestions

Video 1: “Goldman Sachs VP Explains Why He Quit”

http://www.cbsnews.com/video/watch/?id=50133578n


1. In the context of reporting corporate legal and ethical violations, what are the advantages of “whistleblowing?” The clear advantage to “whistleblowing” is that corporate legal and ethical violations can be made evident in situations where the public might not otherwise be made aware of the violations, or that such violations can be made evident more quickly. 2. In the context of reporting corporate legal and ethical violations, what are the disadvantages of “whistleblowing?” The clear disadvantage to “whistleblowing” is that the person reporting the legal and ethical violations might have his or her life irrevocably and negatively transformed due to the reporting. Even though there are state and federal laws designed to protect whistleblowers from retaliation, one must question whether those laws fully protect such persons. For example, in Greg Smith’s situation, what financial services firm would ever hire him now that he has “outed” his former employer, Goldman Sachs? 3. As the video indicates, Greg Smith is publishing a book about his experiences at Goldman Sachs. Does this affect your opinion of Greg Smith and his narrative about his former employer? Why or why not? This is an opinion question, so student responses will likely vary. Given the fact that he resigned his position at Goldman Sachs, Mr. Smith’s financial standing has certainly been impacted (in terms of lost income) by his decision to “blow the whistle” on his former employer. Like anyone else, Mr. Smith needs income to survive, and as mentioned in response to Discussion Question Number 2 above, he may experience difficulty in obtaining a financial services position at another company.



Video 2: Alleged Shoplifter Stripped by Employees”

http://abcnews.go.com/blogs/headlines/2012/10/alleged-shoplifter-stripped-by-employees/

Note: In addition to the above-referenced video, please see the following article at the same web address:

“Alleged Shoplifter Stripped by Employees”

According to the article, a man accused of stealing candy bars from a 7-Eleven store was thwarted by three store clerks who were captured on video grabbing him and stripping him down to his underwear. “I got nothing man! Why you biting me?” David Golson, 29, screamed on the video, taken by a bystander in the Brooklyn, New York store. During the skirmish, some patrons can be heard laughing on the video, while others yelled, “You are attacking him!” A 7-Eleven spokesperson called the video “disturbing” and said one employee had been fired, while two others were being retrained. “7-Eleven, Inc. does not condone restraining any guest/customer or a suspect. As a matter of fact, this is an important precept of 7-Eleven’s safety and security training we give franchisees and provide for them to give their employees,” the company said in a statement. Golson was arrested and faces charges of robbery and assault.


1. Describe the “shopkeeper’s privilege” in terms of questioning and detaining individuals suspected of shoplifting. The “shopkeeper’s privilege” gives store owners and employees the right to reasonably detain and question someone who is reasonably suspected of shoplifting. The shopkeeper’s privilege is not an unlimited right; instead, it is restrained by: a) reasonable detention and questioning of a suspect; and b) reasonable suspicion of shoplifting. If a store representative’s actions exceed the scope of the privilege (i.e., if the store representative’s actions were, as determined by a jury, unreasonable), the employee, owner and/or store can be held liable for assault and battery, false imprisonment, and perhaps other related torts and crimes. 2. In your reasoned opinion, did the 7-Eleven employees in the video and accompanying article correctly exercise the shopkeeper’s privilege? Why or why not?



Based on your author’s opinion, it does not appear that the 7-Eleven employees correctly exercised the shopkeeper’s privilege. Although the employees perhaps had reasonable suspicion of theft, the detention is unreasonable, since they stripped the suspect down to his underwear. The fact that the employees acted unreasonably is perhaps best demonstrated by 7-Eleven’s “post-event” statement, as well as the fact that the company fired one employee and “retrained” two others. 3. If a jury should determine that the 7-Eleven employees did not properly exercise the shopkeeper’s privilege, what monetary damages would be recoverable by the plaintiff David Golson? Typically, the trial jury is given the discretion to decide what amount of money damages is appropriate in a tort case, based on the unique facts and circumstances surrounding the case. Even without evidence of physical injury, a plaintiff can recover for the emotional pain and suffering associated with the trauma of an event (in the subject case, the alleged shoplifter being stripped down to his underwear in public). Although it may sound unusual to permit a suspected shoplifter to recover, keep in mind that a trial jury would be charged with the specific responsibility of determining whether 7-Eleven and its employees wrongfully exceeded the scope of the shopkeeper’s privilege.



Ethical Dilemma

Ethical Dilemma: “College Bans Religious Homecoming Art”

http://radio.foxnews.com/toddstarnes/top-stories/college-bans-religious-homecoming-art.html

According to the article, Christian students at a Utah college said they were told by administrators that their homecoming decorations were “in poor taste” because they included religious messages and symbols, according to a complaint filed in United States District Court. The Solid Rock Christian Club has also accused Snow College of infringing on free speech rights by reducing the group to a “second tier” status on campus. That means the group would no longer be able to reserve campus rooms, advertise events on campus or receive funding from student fees. The lawsuit was filed on behalf of the club by the Alliance Defending Freedom. “Colleges are supposed to be the marketplace of ideas, not centers of censorship,” said Travis Barham, of the Alliance Defending Freedom. “America’s colleges and universities should recognize that the First Amendment protects the freedom of all students to gather with those of like mind and to express their ideas, including religious students and religious ideas. “By refusing to treat faith-based student organizations the same as other student groups and by excluding religious speech from homecoming events, Snow College officials have ignored this basic principle,” Barham added. “But we hope they will quickly do the right thing, respect our clients’ freedoms, and eliminate the need for continuing to pursue this lawsuit.” Alliance Defending Freedom said campus clubs were invited to “Paint the Town,” — decorating the windows of local businesses with the theme: “Then, Now and Forever.” The Solid Rock club had received permission to paint two windows — one of a privately owned business and the other was a business selected by the school.

Of Special Interest

This section addresses the question of whether a public college has the legal and/or ethical right to restrict the practices of a religiously-themed student group.



The group had already painted one window with a cross and the words: “The cross covers sin then, now and forever.” They were working on a second window when a college official ordered them to stop. Barham said the students were scolded, threatened and then forced to wash away their display. Later, college officials removed their first painting, telling students in an e-mail that their Christian message “is in poor taste,” Barham alleged. After the ADF sent a letter to the college, they received a reply from a Utah state assistant attorney general. The state official said religious views would continue to be prohibited from the homecoming event.” Among those named in the lawsuit is Scott Wyatt, president of Snow College. He said that the lawsuit may be the result of a “simple misunderstanding.” “This is a very small disagreement that we are working through. I’m very optimistic we will come to a positive solution.” Wyatt said the college was originally founded by a Christian organization before becoming a state institution. He said 90 percent of the students are Christians. “Religious clubs are very important on our campus,” he said. “This is not something we are hostile to.” Wyatt said the Solid Rock Christian Club has a good reputation on campus. “We value the club,” he said. “They provide a very good service to our students and the students connect with them.” If that’s the case, why was the club demoted to a second tier status? According to the college handbook, clubs are not allowed to be affiliated with any commercial or for-profit organization or religious institution, the newspaper reported. Wyatt said he believed the issue came up during a university audit. The auditor feared the university was violating Utah’s constitution by providing funding to religious groups on campus. But Wyatt said it was eventually determined that providing space and money to campus religious groups was not a violation. The college president said he suspects that was not communicated to all of the clubs.




1. Discuss the “Establishment” and “Free Exercise” Clauses of the First Amendment to the United States Constitution. The First Amendment to the United States Constitution declares that “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof...” Over the years, the judiciary has interpreted the “Establishment” and “Free Exercise” Clauses to proscribe government favoritism for one particular form of religion over another, and to encourage individuals to worship as they see fit. Perhaps more than any other causative factors, the Establishment and Free Exercise Clauses have resulted in the United States being the most religiously diverse country in the world. 2. In your reasoned opinion, did Snow College violate members of the Solid Rock Christian Club’s “free exercise” right? Why or why not? Did the college violate members of the Solid Rock Christian Club’s free speech rights (Free speech is also protected pursuant to the First Amendment to the United States Constitution)? This is an opinion question, so student responses will likely vary. There are two (2) issues involved in this case that raise First Amendment question: 1) Snow College’s alleged refusal to allow campus meeting space and club funding to Solid Rock Christian club; and 2) Snow College’s refusal to allow Solid Rock Christian Club to paint, with the permission of the owners, two windows of businesses located in town as part of the college’s “Paint the Town” homecoming event. On the first issue, it is well-established law that simply allowing religiously-affiliated clubs to meet on campus and/or receive club funding does not violate the First Amendment “Establishment” Clause, provided that the college takes a non-discriminatory approach to all religiously-affiliated groups (for example, allowing students of the Muslim faith to be similarly active on campus). On the second issue, it is interesting (and in your author’s opinion, significant) to note that: a) the “Paint the Town” event occurred off-campus; and b) Solid Rock Christian Club purportedly had permission from both business owners to paint the windows. Those who contend that painting the windows with a religious message violates the Establishment Clause would likely argue that the “Paint the Town” event, even if it occurred off-campus, was still an event inextricably linked with the college, and that viewers of the message already painted on one window, “The cross covers sin then, now and forever,” might interpret the message as being endorsed and embraced by Snow College. It is also interesting and important to consider the Solid Rock Christian Club’s First Amendment “free speech” argument. The club is arguing that religious speech is protected by the First Amendment “free speech” provision, and that combined with its “Free Exercise” protection, its interest in worship and promoting the Christian message outweighs any countervailing Establishment Clause concern. 3. The article indicates that Snow College was originally founded by a Christian organization before becoming a state institution and that 90 percent of its students are Christians. Are these facts relevant



in terms of deciding whether the college violated members of the Solid Rock Christian Club’s First Amendment rights? Why or why not? In your author’s opinion, both the history and the present are relevant in terms of evaluating the constitutionality of Snow College’s and the Solid Rock Christian Club’s actions. The history (specifically, the fact that Snow College was originally founded by a Christian organization) is relevant in terms of appreciating the Christian heritage of the institution, while the present (specifically, the fact that Snow College is now a state institution receiving government funding and support) is relevant in terms of understanding that constitutionally, the government (financially or otherwise) must not endorse a particular religion. In terms of the purported fact that 90 percent of Snow College’s students are Christians, it is important to appreciate the rights of the majority; from a constitutional, legal standpoint, however, it is arguably just as important to appreciate and protect the rights of the minority.



Teaching Tips Teaching Tip 1 (Related to Article 2—“CFPB to Oversee Debt Collectors Starting January 2”): Review and discuss with students the following article from the Federal Trade Commission (FTC) website regarding debtor rights under the Fair Debt Collection Practices Act (This material is from http://www.consumer.ftc.gov/articles/0149-debt-collection):

“Consumer Information: Debt Collection”

If you’re behind in paying your bills, or a creditor’s records mistakenly make it appear that you are, a debt collector may be contacting you.

The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices to collect from you.

Under the FDCPA, a debt collector is someone who regularly collects debts owed to others. This includes collection agencies, lawyers who collect debts on a regular basis, and companies that buy delinquent debts and then try to collect them.

Here are some questions and answers about your rights under the Act.

What types of debts are covered?

The Act covers personal, family, and household debts, including money you owe on a personal credit card account, an auto loan, a medical bill, and your mortgage. The FDCPA doesn’t cover debts you incurred to run a business.

Can a debt collector contact me any time or any place?

No. A debt collector may not contact you at inconvenient times or places, such as before 8 in the morning or after 9 at night, unless you agree to it. And collectors may not contact you at work if they’re told (orally or in writing) that you’re not allowed to get calls there.

For more information, please contact your sales rep!

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Of Special Interest

This section of the newsletter will assist you in covering Article 2 (“CFPB to Oversee Debt Collectors Starting January 2”) and Video 1 (“Goldman Sachs VP Explains Why He Quit”) of the newsletter.



How can I stop a debt collector from contacting me?

If a collector contacts you about a debt, you may want to talk to them at least once to see if you can resolve the matter – even if you don’t think you owe the debt, can’t repay it immediately, or think that the collector is contacting you by mistake. If you decide after contacting the debt collector that you don’t want the collector to contact you again, tell the collector – in writing – to stop contacting you. Here’s how to do that: Make a copy of your letter. Send the original by certified mail, and pay for a “return receipt” so you’ll be able to document what the collector received. Once the collector receives your letter, they may not contact you again, with two exceptions: a collector can contact you to tell you there will be no further contact or to let you know that they or the creditor intend to take a specific action, like filing a lawsuit. Sending such a letter to a debt collector you owe money to does not get rid of the debt, but it should stop the contact. The creditor or the debt collector still can sue you to collect the debt. Can a debt collector contact anyone else about my debt? If an attorney is representing you about the debt, the debt collector must contact the attorney, rather than you. If you don’t have an attorney, a collector may contact other people – but only to find out your address, your home phone number, and where you work. Collectors usually are prohibited from contacting third parties more than once. Other than to obtain this location information about you, a debt collector generally is not permitted to discuss your debt with anyone other than you, your spouse, or your attorney. What does the debt collector have to tell me about the debt? Every collector must send you a written “validation notice” telling you how much money you owe within five days after they first contact you. This notice also must include the name of the creditor to whom you owe the money, and how to proceed if you don’t think you owe the money. Can a debt collector keep contacting me if I don’t think I owe any money? If you send the debt collector a letter stating that you don’t owe any or all of the money, or asking for verification of the debt, that collector must stop contacting you. You have to send that letter within 30 days after you receive the validation notice. But a collector can begin contacting you again if it sends you written verification of the debt, like a copy of a bill for the amount you owe.



What practices are off limits for debt collectors? Harassment. Debt collectors may not harass, oppress, or abuse you or any third parties they contact. For example, they may not: use threats of violence or harm; publish a list of names of people who refuse to pay their debts (but they can give this

information to the credit reporting companies); use obscene or profane language; or repeatedly use the phone to annoy someone.

False statements. Debt collectors may not lie when they are trying to collect a debt. For example, they may not: falsely claim that they are attorneys or government representatives; falsely claim that you have committed a crime; falsely represent that they operate or work for a credit reporting company; misrepresent the amount you owe; indicate that papers they send you are legal forms if they aren’t; or indicate that papers they send to you aren’t legal forms if they are.

Debt collectors also are prohibited from saying that: you will be arrested if you don’t pay your debt; they’ll seize, garnish, attach, or sell your property or wages unless they are permitted by law to

take the action and intend to do so; or legal action will be taken against you, if doing so would be illegal or if they don’t intend to take

the action. Debt collectors may not: give false credit information about you to anyone, including a credit reporting company; send you anything that looks like an official document from a court or government agency if it is

not; or use a false company name. Unfair practices. Debt collectors may not engage in unfair practices when they try to collect a debt. For example, they may not: try to collect any interest, fee, or other charge on top of the amount you owe unless the contract

that created your debt – or your state law – allows the charge; deposit a post-dated check early;



take or threaten to take your property unless it can be done legally; or contact you by postcard. Can I control which debts my payments apply to? Yes. If a debt collector is trying to collect more than one debt from you, the collector must apply any payment you make to the debt you select. Equally important, a debt collector may not apply a payment to a debt you don’t think you owe. Can a debt collector garnish my bank account or my wages? If you don’t pay a debt, a creditor or its debt collector generally can sue you to collect. If they win, the court will enter a judgment against you. The judgment states the amount of money you owe, and allows the creditor or collector to get a garnishment order against you, directing a third party, like your bank, to turn over funds from your account to pay the debt. Wage garnishment happens when your employer withholds part of your compensation to pay your debts. Your wages usually can be garnished only as the result of a court order. Don’t ignore a lawsuit summons. If you do, you lose the opportunity to fight a wage garnishment. Can federal benefits be garnished? Many federal benefits are exempt from garnishment, including: Social Security Benefits Supplemental Security Income (SSI) Benefits Veterans’ Benefits Civil Service and Federal Retirement and Disability Benefits Service Members’ Pay Military Annuities and Survivors’ Benefits Student Assistance Railroad Retirement Benefits Merchant Seamen Wages Longshoremen’s and Harbor Workers’ Death and Disability Benefits Foreign Service Retirement and Disability Benefits Compensation for Injury, Death, or Detention of Employees of U.S. Contractors Outside the U.S. Federal Emergency Management Agency Federal Disaster Assistance But federal benefits may be garnished under certain circumstances, including to pay delinquent taxes, alimony, child support, or student loans.



Do I have any recourse if I think a debt collector has violated the law? You have the right to sue a collector in a state or federal court within one year from the date the law was violated. If you win, the judge can require the collector to pay you for any damages you can prove you suffered because of the illegal collection practices, like lost wages and medical bills. The judge can require the debt collector to pay you up to $1,000, even if you can’t prove that you suffered actual damages. You also can be reimbursed for your attorney’s fees and court costs. A group of people also may sue a debt collector as part of a class action lawsuit and recover money for damages up to $500,000, or one percent of the collector’s net worth, whichever amount is lower. Even if a debt collector violates the FDCPA in trying to collect a debt, the debt does not go away if you owe it. What should I do if a debt collector sues me? If a debt collector files a lawsuit against you to collect a debt, respond to the lawsuit, either personally or through your lawyer, by the date specified in the court papers to preserve your rights. Where do I report a debt collector for an alleged violation? Report any problems you have with a debt collector to your state Attorney General’s office (www.naag.org) and the Federal Trade Commission (www.ftc.gov). Many states have their own debt collection laws that are different from the federal Fair Debt Collection Practices Act. Your Attorney General’s office can help you determine your rights under your state’s law. For More Information To learn more about debt collection and other credit-related issues, visit www.ftc.gov/credit and MyMoney.gov, the U.S. government’s portal to financial education.



Teaching Tip 2 (Related to Video 1—“Goldman Sachs VP Explains Why He Quit”): Use the following “opinion editorial” piece written by Greg Smith, former Goldman Sachs executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa, for further discussion regarding Video 1:

“Why I Am Leaving Goldman Sachs”

http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?pagewanted=all&_r=0

Today is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it. To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for. It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief. But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied. I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work. When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.



Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave. How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence. What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom are not — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym. Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all. It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact. It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are. These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.



When I was a first-year analyst I didn’t know where the bathroom was, or how to tie my shoelaces. I was taught to be concerned with learning the ropes, finding out what a derivative was, understanding finance, getting to know our clients and what motivated them, learning how they defined success and what we could do to help them get there. My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore. I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.



Chapter Key for McGraw-Hill/Irwin Business Law Texts:

Hot Topics Video Suggestions

Ethical Dilemma

Teaching Tips

Kubasek et al., Dynamic Business Law

Chapters 7, 8, 17 and 45

Chapters 2 and 8

Chapters 2 and 5

Chapters 2 and 45

Kubasek et al., Dynamic Business Law: Summarized

Cases


Chapters 2 and 8 Chapters 2 and 5

Chapters 2 and 45

Kubasek et al., Dynamic Business Law: The Essentials


Chapters 1 and 6

Chapters 1 and 4

Chapters 1 and 25

Mallor et al., Business Law: The Ethical, Global, and E-Commerce Environment


Chapters 4 and 6

Chapters 3 and 4

Chapters 4 and 48

Barnes et al., Law for Business Chapters 5, 6, 14 and 46

Chapters 3 and 6

Chapters 3 and 4

Chapters 3 and 46

Brown et al., Business Law with UCC Applications


Chapters 1 and 6

Chapters 1 and 2

Chapters 1 and 15

Reed et al., The Legal and Regulatory Environment of

Business


Chapters 2 and 10

Chapters 2 and 6

Chapters 2 and 18

McAdams et al., Law, Business & Society


Chapters 2 and 7

Chapters 2 and 5

Chapters 2 and 15

Melvin, The Legal Environment of Business: A Managerial

Approach


Chapters 5 and 9

Chapters 2 and 5

Chapters 5 and 21

Bennett-Alexander & Harrison, The Legal, Ethical, and

Regulatory Environment of Business in a Diverse Society


Chapters 1 and 6 Chapter 1 and Appendix A

Chapters 1 and 4



This Newsletter Supports the Following Business Law Texts:

Barnes et al., Law for Business, 11th Edition 2012© (0073377716) Bennett-Alexander et al., The Legal Environment of Business in A Diverse Society, 1st Edition 2012© (0073524921) Brown et al., Business Law with UCC Applications Student Edition, 13th Edition 2013© (0073524956) Kubasek et al., Dynamic Business Law, 2nd Edition 2012© (0073377678) Kubasek et al., Dynamic Business Law: The Essentials, 2nd Edition 2013© (0073524972) Kubasek et al., Dynamic Business Law: Summarized Cases, 1st Edition 2013© (0078023777) Mallor et al., Business Law: The Ethical, Global, and E-Commerce Environment, 15th Edition 2013© (0073377643) McAdams et al., Law, Business & Society, 10th Edition 2012© (0073525006) Reed et al., The Legal and Regulatory Environment of Business, 16th Edition 2013© (0073524999) Melvin, The Legal Environment of Business: A Managerial Approach 2011© (0073377694)

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