Case scenario:
Dracca, Inc. ("Dracca") is a publicly-traded U.S. corporation that manufactures and distributes baby equipment in seven countries. It is based in St. Louis, MO, but has manufacturing facilities in Philadelphia, Sacramento, and Indonesia. Key products include:
- Strollers
- High Chairs
- Cribs
- Pack-n-Play Playpens
- Toys
- Baby/toddler feeding equipment (bottles, cups, utensils)
Dracca employs nine hundred employees and has projected earnings of $50 million U.S. dollars for the coming year.
Dracca uses a standard-form contract to sell directly to consumers in the United States. About one-third of direct sales occur in Spanish-speaking communities within the United States. The contract is in English and is 16 pages in length. A binding arbitration clause on page 5 requires all disputes arising from the contract to be settled by arbitration.
Recently, two consumers from the Spanish-speaking community sued Dracca in state court. The state court dismissed the claims pursuant to the arbitration clause. The consumers then brought a claim challenging the validity of the arbitration clause, claiming they were not properly informed that they were waiving a right to trial when entering the contract.
Over the past three years, Dracca has had 23 additional claims brought to the arbitration process because of this form contract. Twenty of the 23 claims were arbitrated by the same dispute resolution agency, as selected by Dracca.
Recently, a new dispute arose regarding product safety of the Dracca Pack-n-Play Beach Model. Because retailers made the claims, they were not subject to the binding arbitration clause contained in consumer contracts. The court claim involved faulty clasps that did not lock the pack-n-play in place As a result of the faulty clasps, four infants in three countries suffered life-threatening injuries. One of those infants was from the U.S. and had to be placed on life support for two weeks before recovering from a respiratory injury sustained after being trapped in the pack-n-play for nearly a half hour.
During the discovery process, Dracca sent 600 boxes of documents to the attorneys for the retailer in an attempt to hide relevant information. Within the boxes were several documents properly labeled in response to the attorneys' request for production. After combing through the documents and conducting other discovery, parties surmised that an employee of Dracca, Sue Hennings, tampered with the faulty clasps. Hennings worked in accounting, but she was overlooked for a promotion to oversee the new pack-n-play line. Hennings deliberately tampered with the safety of the clasps in retaliation, an action that could carry criminal charges.
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In light of these facts, please respond to the following questions using course material and credible outside research to support your findings. Please submit findings in a three- to five-page paper using APA format.
1) What is the legal effect of the arbitration clause on consumers? Must consumers abide by the decision of the arbitrator? Use caselaw to support your position.
2) Will the two Spanish-speaking consumers prevail in invalidating the arbitration clause? Why or why not? Discuss the legal considerations the court will entertain in reaching its decision.
3) Identify the ethical concerns regarding the implementation of the arbitration clause and the arbitration process. Recommend actions Dracca could take to remedy these ethical concerns. (The Ethical Business Leader's Decision Tree in chapter 2 of the text may be a useful tool for your analysis).
4) Identify the ethical concerns regarding Dracca's approach to the litigation process. Recommend actions Dracca could take to remedy these ethical concerns. (The Ethical Business Leader's Decision Tree in chapter 2 of the text may be a useful tool for your analysis).
5) Is Dracca responsible for the actions of Hennings? Why or why not? Use legal principles discussed in the readings to support your conclusion.
6) What actions (internal and external) do you recommend to Dracca to resolve the dispute regarding the Pack-n-Play clasps? Be specific and detailed, and be sure to base recommendations on relevant legal and ethical principles.