Monthly Archives: November 2015

General Motors May Face Punitive Damages Over Ignition Switches “Ignition (Remix)”

Posted by Sheyenne Hurt-Lewis.

General Motors created millions of vehicles with defective ignition switches. This defect is linked to more than 100 deaths and 200 reported injuries. Many lawsuits have arisen from these defective switches which makes General Motors likely to face a large sum of punitive damages which, “could amount to millions, if not billions of dollars,” as stated by Judge Gerber. Punitive damages are those intended to punish the wrongdoer and deter others from similar wrongdoing. “GM had sought to block plaintiffs, including those suing for personal injury or wrongful death, from making punitive damages claims.” The recent defects ignited numerous other complaints of other GM cars recalled in 2014 that were “equipped with a faulty ignition switch that can slip out of the run position and disable safety features including air bags.” The effects of these defects have resulted in numerous injuries and lost lives.

Robert Hillard is representing nearly 1,500 plaintiffs suing GM for the injuries and deaths that are tied to the defective ignition switch. Hillard is confident that his clients are capable of being awarded the punitive damages they are seeking. GM has already spent $575 million to settle Hillard’s cases but there are still a large number of cases that remain unsettled. In September, GM agreed to pay nearly $900 million to settle a case similar to this. In addition to this payment, they were also forced to pay a $35 million fine for failing to report the defect themselves when they were first made aware of it. The company created a compensation fund of $625 million for victims.

GM attempted to restructure, and split into “New GM” and “Old GM.” Old GM kept all liabilities but agreed to be held responsible for “future product-liability cases involving other vehicles.” Judge Gerber wrote, “New GM may be held responsible, on claims for both compensatory and punitive damages, for its own knowledge and conduct” on the basis that workers were aware of the defective switch and related accident claims. However, it was made clear by Judge Gerber that punitive damages can only be sought against New GM if and only if it’s solely on the basis of the conduct or knowledge of New GM.

Sheyenne is a management major at the Stillman School of Business, Seton Hall University, Class of 2018.

Managing Online Reputation: “Becoming Reputable”

Posted by Sheyenne Hurt-Lewis.

Customer reviews are extremely important to the reputation of a business. In today’s technological era, it is becoming imperative for businesses to manage their online reputation though social media and other outlets. Reviewing sites such as Yelp, Twitter, and Facebook can be used as means of reforming and promoting businesses. Dan Simons, a restauranteur in the Washington area expressed the importance of customer feedback by saying, “You could open a business and do everything right, but if you’re unaware of these social media you well perish. Social media can take a business and put a bullet in it.” Positive reviews generate business but the impact of negative reviews has a greater impact on businesses than one may think. The best way to keep a healthy reputation for your business is to continue providing satisfactory goods and services to consumers, and ensure that negative experiences are at a minimum, and addressed promptly if they must occur.

Monitoring what is being said about your business is the first step in ensuring that your businesses name rings satisfaction. One may do this by simply using one of the many available online resources to search yourself and tune into the varying customer opinions. Technology even goes as far as alerting a business person when the name of their business is mentioned on a social media network. Managing reviews is the next step in guaranteeing a good name for your business. Thanking customers who left good feedback and inviting them to come again is a good way to keep the customers satisfied and returning. Addressing negative reviews in a professional manner with intentions to “win back the customer” is another way to improve the business environment. It is more than likely that new customers will look at these pages before deciding whether to visit or purchase a product. Businesspeople should “try to put yourself in the customer’s place” and make certain that they are doing their very best to make sure every customer leaves pleased and willing to return.

Sheyenne is a management major at the Stillman School of Business, Seton Hall University, Class of 2018.

Abercrombie and Religious Accommodation

Posted by Shakil Rahman.

Americans pride themselves on the idea that their country is the land of the free, where people of different parts of the world could have the equal opportunity to live as they wish, pray freely, and be free to live without being persecuted for their beliefs. It is stated in the constitution and laws are created to make sure people’s rights are not infringed upon or people are discrimination for their beliefs. But there are times when the people seem to be discriminated against because of their beliefs and it spills into the national spotlight.

Abercrombie & Fitch are multimillion dollars clothing store and in one of their stores a Muslim woman named Samantha Elauf applied for a job but she was rejected. When inquired about why she was being rejected, the company replied that the company’s dress code is “classic East Coast collegiate style” and since she wore head scarf, a headwear named Hijab that Muslim women wear, which went against the dress code, she was not hired. Ms.Elauf filed a discrimination lawsuit against Abercrombie & Fitch and the case went to the Supreme Court after being going through trial court and appeals court. The defendant claimed that since the plaintiff did not specifically state that the head scarf was worn for religious reasons they did not discriminate the plaintiff. The Supreme Court justices voted 8-1 for the plaintiff stating that the company should have understood that the head scarf had a religious significance, since it is of common knowledge and therefore the plaintiff was being discriminated and that is prohibited by the Title VII of the Civil Rights Act of 1964.

The lawsuit against the company is based around the claim that the company rejected the applicant’s application for a job due to dress code violations knowing that it had religious significance. The reasoning given by the company was that the applicant did not specifically ask for religious accommodation, therefore there was no discrimination. While it is true that the applicant did not request religious accommodation, head scarves are commonly used for religious reasons in various religions and being ignorant of the fact is not valid argument. Therefore, when the company rejected Ms.Elauf’s application due to her wearing a head scarf, they were discriminating her based on her religious practices. Being ignorant of law is not sufficient excuse either, since the company is supposed to know the laws of the land it is conducting its business in.

In the modern world where globalization has brought the world, and the business world, laws are created to make sure that people are not discriminated for their personal life choices. But sometimes the laws are not interpreted in the same manner by people. For instance, for this lawsuit, the trial court granted the Plaintiff $20000 for the lawsuit, but the appeals court saw the same case and decided that there were no signs of discrimination and overturned the ruling, only for the ruling to be overturned by the Supreme Court. Interpretation of the law is an important part of the business world that must be done in a prudent manner by the courts but also by companies and individuals in order to avoid situations where a wrongdoing does not occur due to ignorance.

Shakil is a student at the Stillman School of Business, Seton Hall University.

General Motors and Punitive Damages

Posted by Kristen Czerepusko.

Recently, General Motors has been facing some lawsuits stemming from defective ignition switches in millions of their vehicles. This defect has led to over 100 deaths and 200 injuries. General Motors has decided to block those who are suing for personal injury and those making punitive damage claims. The defective car models were recalled in 2014 and were further proven to have been equipped with faulty ignition switches. With this defect, the switch can disable safety features including air bags which are vital to safety when operating a vehicle.

To make matters worse, not only did General Motors know they had a defective product, they acknowledged the fact that they mislead regulators about the defect altogether. To cope with this, General Motors invoked upon a “bankruptcy shield” to limit legal exposure on account of their defective switch. Today, there are over 1,385 individuals with death or injury claims who didn’t receive anything from General Motors. The company still faces hundreds of cases that have yet to be settled.

Punitive damages are something that should never be limited when dealing with defective products. There should never be a cap on the amount of money somebody should be allowed to receive from the careless act of a company manufacturing and selling a defective product. What makes it even worse is the fact that General Motors knew their products were defective and did not care enough to try and prevent further injuries. They acted very unethically and inhumanely with how they handled their cases by using a so-called “bankruptcy shield.” If punitive damages were ever to have a limit, companies would not care to try and make their products better but would instead continue to make harmful products. It is not yet clear how much will be awarded to the individuals who have had serious damages or to the loved ones to those who lost their lives but I hope justice is served to all who deserve it in this case.

Kristen is a marketing major at the Stillman School of Business, Seton Hall University, Class of 2018.

The GM Faulty Switch Scandal

Posted by Shakil Rahman.

For a car to be eligible for sale, it has to pass various tests which are placed in order to make sure that the cars for safe for use by the customers. Certain improvements are made to cars to also make sure that during an accident, there are some protections for the customer inside the car. GM motors ignition switch for the some small cars in the late 1990s and early 2000s were defective and it would shut of the engine during driving and this also prevented from the airbags from deploying during a crash. While GM executives and engineers became aware of the defective ignition switch, they did not attempt to fix the problem as it was assessed to be too costly. But by 2012, it was discovered that the defective switch also prevented the air bags from deploying. GM did not disclose the safety hazard to its customers, which led to over 120 deaths and multiple injuries. In 2014, GM started recalling cars with faulty ignition switch in order to fix it, and after the recall, multiple customers filed lawsuits against GM for the injuries caused due to the defective ignition switch. Lawsuits were filed against GM for false advertising due to not disclosing the defect to customer before buying the product. GM came to a settlement with the customers and agreed to pay $575 Million as compensation and also paid $900 million pay to US.

There are various points of interest in the case that are related to corporate responsibility, advertisements and negligence. The lawsuits that were filed against General Motors were for false advertising, and for injuries caused from malfunctioning products created by General Motors. General Motors car’s ignition switch was faulty and therefore sometimes it would shut down the engine while driving and since the engine shut down, the air bags would not deploy during an accident. So the defective ignition switch would cause the car to shut down while driving and therefore causing car accidents and also the air bags would not be deployed which would lead to the injury from the crash to be amplified. Therefore, General Motors is liable for the injuries caused by the defect, because their product is directly causing the accidents and the injuries that are related to it.

The other portion of the lawsuits was about false advertisement by General Motors about their cars. General Motors did not know about their defective ignition switch before 2005 but decided to not recall the cars after a risk assessment about the expense that will needed to fix the ignition switch. Now even if they decided to stop selling cars with faulty ignition switch, they still did not make an effort to fix the ignition switch for cars that were already sold and also did not warn the customers about the product’s defect. This is not only false advertisement but also negligence because the customers were going to be harmed even after using the product as it was intended to be used. So in conclusion, General Motors was liable for the injuries that were caused by their defective products because they did not inform the customers about the hazard of using the product and also for not attempting to fix a defect that could injure the customers.

The irony of the whole situation is that General Motors decided not to recall the vehicles in 2005 to fix the defect because of the fact that they came to the conclusion that it would too expensive. And now in 2015, their insistence on not recalling the cars back for repairs back in 2005 has led to a federal fine of $900 million and settlements of $575 million for the customers who were injured due to the cars faulty switch.

In the business world, when a company is attempting to look at the direction the company is going they need to see how their actions might affect the company in the long term. While paying for the repairs in 2005 may have been expensive, right now they have paid around $2 billion dollars in fine and are predicted to pay around $2.7 billion for repairing the recalled cars. And on top of that, the break of trust between GM and the customers are surely going to affect the company’s progress and profit.

Shakil is a business student at the Stillman School of Business, Seton Hall University.

 

Are Portfolio Managers Losing Sight of What The Future Holds For Financial Planning?

Posted by Justin Ihnken.

For many years, especially those who found themselves in an area of economic success, investors who succeeded because they worked with a financial advisor. The roll of the advisor is to assist individuals in asset portfolio management. Investments in both fixed market vehicles, and those driven with equity in the market, have [for the majority of advisors] been the number one and two sources of financial security investments. Both of these categories are tied together with the strategic planning and goal orientations of specific individuals. This theory comes primarily because “your advisor” would allocate dollars in a way that would ultimately secure monies for specific reasons and even more so, provide an aspect of future practical growth.

As time continues, there are still many individuals that work with advisors and insist that they do planning and individual investments on their own. Coming changes in investments will show that there is a driving need for RIA’s (Registered Investment Advisor). Unfortunatly, the traditional fixed income and equity allocations are rather lacking for specific individuals that wish to diversify their portfolios accordingly. A recent study done by Bridget Bearden, director of retirement research at fund industry consultant, Strategic Insight, went as far as to say many folks do not understand that the effects of falling short on their diversification strategy may have a serious impact in the long run.

“The fund industry generally advocates a 10 percent to 20 percent allocation to liquid alternatives for risk mitigation. But many off-the-shelf asset allocation portfolios seem to fall short of that.”

Many RIA’s are of traditional thought, however the coming realization of alternative investments is proving itself to be a more prominent tool to properly advocate clients. An example of a small and “up and coming” firm that shows its mindset is multiple footsteps ahead of the curve would be that of Circled Squared Alternative Investments. Circled Squared was founded in 2014, by Jeffrey Sica, CEO and President of Sica Wealth Management. With the changing times and ability to allocate dollars properly will prove to be a huge outlet for this small powerhouse. In an interview with a Berkshire Hathaway associated press, Sica spoke on his outlook and thoughts on the future for both Circle Square and alternative investments.

Add to this the inescapable conclusion that investors are growing increasingly dissatisfied with the stagnant performance and unacceptable volatility they’re getting from traditional investments like stocks and bonds, and you have a situation in which advisors have fewer and fewer ways to provide value to their clients.

As the stock market continues to be a murky water, few dare to try to understand the various inlets and outlets of the market. With the change of alternative investments slowly phasing themselves into our everyday planning as RIA’s, we must work above and beyond the curve and enable our’ clients and potential clients alike to take advantage of the various opportunities that alternative investments withhold.

**About Circled Square Alternative Investments

“Circle Squared Alternative Investments is a firm devoted to providing independent financial advisors with access to a range of innovative alternative investments previously available only to institutions and ultra-high net-worth investors. The suite of investment products will include real estate, private equity, private credit, natural resources, private placement offerings, entertainment and media.”

Justin is a student at the Stillman School of Business, Seton Hall University.

Sources:

1. D’Allegro, Joe. “A Retirement Riddle Placing $1 Trillion at Risk.” Cnbc.com. CNBC, 10 Nov. 2015. Web. 12 Nov. 2015.

2. Healy, Andrew. “Jeff Sica Launches New Alternative Investments Firm for RIAs; Unlocks Door to ‘Real Economy’.” Business Wire: A Berkshire Hathaway Company. Berkshire

Of Peanuts and Prosecutions

Posted by Jessica Page.

In 2008 and 2009, there was a huge salmonella outbreak traced to peanut butter produced by the Peanut Corporation of America. Nine people died from this incident and 700 were reported ill. The $30 million company was shut down and liquidated after the incident and the CEO, Stewart Parnell, was indicted and prosecuted. In late September, he was sentenced 28 years in prison.

What’s intriguing about this article is the comparison to the GM faulty ignition case. In this particular incident, the defect caused 124 deaths and over 200 injuries. GM has recently settled for $900 million and a three year prosecution agreement. The major difference between the two cases though – indictment of employees. Preet Bharara, one of the best federal prosecutors in Manhattan, explained, “it is unusually difficult to prosecute auto industry executives” and because of the national auto safety laws, there is a call for punishing the corporation as a whole, rather than any one individual.

The main conviction in the salmonella case is the fact that Parnell committed fraud by “knowingly introducing tainted peanut butter paste into interstate commerce.” The fact of the matter is though, there were GM executives who knew about the faulty ignition but failed to report it within the five-day span. The company itself was fined as a corporation for this matter, but there was not specific indictment of GM executives. The real issue at hand is how much harder it is to prosecute auto executives when it comes to cases of product liability. There is currently a bill that many senators are working to pass that would make this process easier and hold executives accountable, if they were knowledgeable of the faulty auto product or provided false statements to consumers, as GM did. This could change future product liability cases within the auto industry and as Senator Blumenthal stated, “one sentence like Parnell’s [within the automotive industry] would change auto safety dramatically and enduringly.”

Jessica is a finance and marketing major at the Stillman School of Business, Seton Hall University, Class of 2016.

General Motors May Face Punitive Damages Over Ignition Switches

Posted by Jessica Page.

General Motors Co. has recently been in the news for its faulty ignition switches in over 2.6 million of the company’s Chevrolet Cobolts and other models that were recalled in 2014. The faulty ignition switches were found to “slip out of the run position and disable features including air bags.” This product defect has been connected to over 100 deaths and over 200 injuries. In September, the U.S. Justice Department brought a criminal case against GM. They agreed to pay $900 million to settle and a $35 million fine for not reporting the defect.

On Monday, Judge Robert Gerber stated that it is possible GM will also face punitive damages to compensate consumers who were harmed by the defect, even though the company sought to block plaintiffs making these claims. Judge Gerber has suggested the punitive damages could amount to billions of dollars if the legal claims are settled or successful. This is partially due to the fact that GM admitted in the original settlement that they “[mislead] regulators about the defective switch and [failed] to recall millions of vehicles.”

Another interesting factor for this case is the bankruptcy restructuring GM went through. In the restructure, they assumed responsibility for “future product-liability cases involving older vehicles.” Since this is so broad, it is likely that GM could be held responsible for claims on both compensatory and punitive damage because of its knowledge of the defect and conduct, but only to the extent that the “New GM” holds. GM has agreed to spend over $500 million to settle these cases and over the next few months, the company is expected to face even more death and injury cases that have yet to be settled.

Jessica is a finance and marketing major at the Stillman School of Business, Seton Hall University, Class of 2016.

VW’s Emissions-Test Trickery May Not Be Illegal in Europe by Danny Hakim and Claire Barthelemy

Posted by Michael de Andrade.

Volkswagen, one of the European auto giants, admitted to “installing defeat device software in 11 million cars.” These “defeat device software” lets carmakers to change performance settings of the engines before a pollution test. These software would not only switch the performance settings of an engine but also detect when “they were being tested for nitrogen oxide emissions.” The installation of such defeat device rose a huge debate as to whether or not Volkswagen’s “emissions-test trickery” is a violation of European testing rules. The question at hand as described by Paul Willis, top Volkswagen official in Europe, was “whether the software officially constituted a defeat device” under European Union regulations.

The Volkswagen scandal, not only questioned whether Volkswagen is cheating or not, but questioned strongly Europe’s permissive testing practices and the compatibility of American and European auto regulations. This scandal led to Trans-Atlantic trade talks to rapidly increase so the United States and European nations can agree to a mutual auto regulation rules. In Europe “the setting of the engine and of the vehicle’s controls shall be those prescribed by the manufacturer;” making Volkswagen alteration of engine settings not a clear cut violation of European rules. But what makes the debate become such a big issue is that roughly 11 million Volkswagen vehicles carry the software, which about 500,000 are in the United States alone. This can cause Volkswagen to lose billions of dollars despite the penalty enforcements by auto regulators in Europe are very passive and rare.

Volkswagen came out by stating they are “committed [themselves] to fixing the vehicles.” Volkswagen is being comprehensible and trying to fix the issue that they commenced. As stated by Ms. Caudet, “European legislation implies that a vehicle must use the same engine setting during the regulatory emission test and in real driving,” which would make Volkswagen’s actions a violation against European auto regulations. The situations at hand continued to cause tension when the Environmental Protection Agency discovered that Volkswagen used another defeat device in some larger cars and sport utility vehicles that had not previously been implicated” making the cost to fix the issue grow substantially. In the end, the European system is known for its loopholes, for “allowing automakers to test preproduction vehicles that will never be sold” but actions need to be done so auto regulation rules in Europe and the United States, through the Trans-Atlantic agreement, can become more enforced. The “phony system of testing” as described by Gerben-Jan Gerbrandy, a Dutch member of the European Parliament, must be improved and by “simply making the road emission tests easier to pass,” is simply not the right step by the European government.

Michael is a sports management major at the Stillman School of Business, Seton Hall University, Class of 2018.

Facebook to Appeal a Belgian Court’s Ruling on Data Privacy by Mark Scott

Posted by Michael de Andrade.

A threat to European nations, Facebook is being seen as a social media giant who are stripping Europeans from their freedom. Facebook is being accused of “collecting digital information about people who are not its users,” by the Belgian Court’s. Many of the “Continent’s data watchdogs,” including the European Court of Justice, have been giving Facebook and other American technology companies a difficult time for the way they “gain access to, manage and use people’s digital information” because to these European “watchdogs,” Facebook is violating Europe’s strict data protection rules that preserves individual’s privacy to the same power as the “fundamental rights, such as freedom of expression.

The hearing was held in Brussels, Belgium on Monday, November 9th, where Facebook was denied the ability to “collect and store online information from people in Belgium who do not have an account with the social network” stating that Facebook did not have “individuals’ consent to gather the information.” With this decision, the Belgian Court took further action by stating that if Facebook fails to comply with the court’s decision, they’ll receive a “daily fine worth up to $270,000.” Facebook didn’t settle and in response they stated that they have used “cookies for more than five years without facing privacy complaints,” and that they are going to appeal the decision to the Belgian Court of Appeal. As the wait continues, Facebook is being further investigated by five European privacy regulators, which are from Belgium, France, Germany, the Netherlands and Spain, to see whether or not the “company’s new privacy conditions run afoul of their countries’ domestic data protection rules.”

In the end, Facebook is trying to combat these accusations by stating that only the Irish data protection authority has jurisdiction over its new privacy conditions because Facebook’s international headquarters are in Dublin. The position grew vastly in the last month after the European Court of Justice “gave national authorities greater powers over how companies like Facebook and Google store online data.” Facebook will continue to fight for what they believe are their rights, despite the judges’ ruling that the United States do not offer sufficient protection for Europeans if their data was misused by companies or by government agencies. The issue is still recently new and there are many situations yet to be settled.

Michael is a sports management major at the Stillman School of Business, Class of 2018.