Posted by Sydney Kpundeh.

A disgruntled New Jersey father has brought products liability design defect and failure-to-warn claims against The New Jersey Port Authority Transit Corporation to recover for injuries arising out of a take-home asbestos exposure. The case’s premise surrounds the father’s daughter, who started to exhibit signs of mesothelioma, which he claims were a result of secondary exposure to friable asbestos fibers through direct contact with her father and while washing his asbestos-laden work clothing. The father is an employee of the Port as a train operator, yard operator, and supervisor. His job duties included the repair and maintenance of asbestos-contaminated air brake systems on the Port’s multiple unit locomotives. When his daughter’s symptoms started worsening, he filed a product liability design defect and failure-to-warn case against the Port and various manufacturers of locomotives and locomotive brake shoes. He claimed that his daughter’s injuries could have been caused by her exposure to asbestos dust created when he replaced the brakes on cars he worked on after hours.

When the case was put before the court, all parties moved for summary judgment. The Port’s argument was that federal legislation and court precedent preempted state tort claims related to locomotives. The automobile defendants argued that there was no evidence that the father’s contacts with automotive brake dust were sufficiently frequent, regular, and proximate to establish causation.

The Appellate Division of the Superior Court of New Jersey ruled that the injuries were preempted by the Locomotive Inspection Act (LIA) under the doctrine of field preemption. The court ruled in such direction because they examined a number of previous decisions that had been considered in the scope of the LIA’s preemptive effect and found that the only way to ensure uniformity is that they must rule the same way.

The failure-to-warn claims that the father filed against the various manufacturers and sellers of asbestos-containing automobile brakes were dismissed summarily because there was insufficient evidence of medical causation linking their products to second-hand exposure. “[T]he evidence showed that the father replaced brakes shoes contaminated with asbestos on four occasions over a period of eight years.”

When he was asked about these times, he could not recall the names of the manufacturers of the replaced brake shoes nor could he recount the number of times he installed new brakes manufactured by the named defendants. Therefore, “it was clear that even if the father was exposed to one of each of the automotive defendants’ products over the eight-year period in question, this exposure was so limited that it failed to meet the frequency, regularity, and proximity test that is required for this type of case.” Hence, this is why the case was dismissed.

Sydney is a political science major and legal studies minor at Seton Hall University, Class of 2016. 

Posted by Gerald Wrona.

Interesting. That is one word to describe the NY Times report on the pre-trial proceedings of the Libyan Investment Authority’s (LIA) suit against Goldman Sachs (Anderson). Acting as broker-dealer to the sovereign wealth fund, Goldman established a relationship with the fund’s managers in 2007. A year later, Secretary of State Condoleezza Rice was visiting Moammar Gadhafi in Libya’s capital to devise a “trade and investment agreement . . . which will allow the improvement of the climate for investment.” (Labbott). Shortly after that promising convention between the two political heads, Goldman and the Authority finalized the agreement and the bank sold derivative products totaling $1 billion to the LIA. Then the housing market “opened its mouth” and out came the demon of the subprime mortgage crisis.

Understandably, the LIA felt exploited. They bit the bullet. Their lawyers came to the London High Court armed with notions that those managing the sovereign wealth fund were ineffectual in understanding the investments presented to them by Goldman. To add insult to insult, they further asserted that the fund administrators were altered in their judgment by Goldman representatives’ leadership role in incidents allegedly involving the recreational consumption of alcohol and visits paid to what may have been brothels, or some other manufacturer of night entertainment, though a witness statement does not specify. Considering that it would never have been in Goldman’s interest to spend more time carousing then working on the deal with the authority, it is highly unlikely that the time spent in leisure outweighed the hours dedicated to the investigation of the necessary facts of the deal.

Though it is worth noting that Goldman has already been ousted for luring investors into crummy deals and then betting against those deals to increase revenue. This is how Goldman actually made money off the subprime mortgage crisis (Cohan).

Will evidence be disclosed that suggests Goldman dealt with the LIA in a similar way? It’s impossible to know. I believe the judge will find that the heart of the matter is whether Goldman conducted due diligence in their dealing with the LIA. For that reason, Robert Miles, one of the attorney’s representing Goldman, would do well to look to the Securities Act of 1933 for support. It states: “If a Broker Dealer conducts reasonable due diligence on a security and passes the information on to the buyer before a transaction, the Broker cannot be held liable for non-disclosure of information that was not found during the investigation.”  Securities Act of 1933, SEC §§ 38-1-28 (SEC 1933).

The trial is expected to start next year.

Gerald is a Business Administration and MIT major at Montclair State University, class of 2017.

Posted by Xiaoxie Zheng.

Now, more and more countries are beginning to regulate bitcoin and other cryptocurrencies. In this essay, I’ll focus on bitcoin. Unlike the French currency, there is no national credit endorsement behind bitcoin, and no guarantee of legal significance. It is implemented by the rules set by a group of people. Here are the main features of bitcoin:

First, there is no intermediary. The bitcoin publishing process is only controlled by the algorithm, and it is very difficult to control the centralizing mechanism.

Second, there is no inflation. Limited by the algorithm, the total supply of bitcoins is controlled and will never exceed 21 million.

Third, there is openness and transparency. Through technology, transactions are transparent and transaction costs are low.

Bitcoin is thoughtful. But the value of bitcoin is far from stable. The price of bitcoin can rise more than 100%, and sometimes it can collapse overnight. On the one hand, when it comes to determining value, it is difficult to do; on the other hand, the holder of bitcoin may be more speculative in his or her investment, which is not the ideal currency circulation function.

The problem with bitcoin is that hackers are a big threat. On June 19, 2011, a security hole in the Mt.Gox bitcoin trading center caused the price of one bitcoin to drop from $15 to a penny. In August 2011, the bitcoin exchange, MyBitcoin, was hacked, and more than 78,000 bitcoins worth $800,000 were missing.

As for the relationship between bitcoin and the economy, it has theoretically eliminated inflation and brought about deflation. In addition, the openness of technology is the intrinsic “spiritual value” of bitcoin, and therefore the competition of a large number of new virtual assets is inevitable. Its homogeneity itself leads to the risk of impairment of value and internal collapse.

Some countries have adopted a strict ban on bitcoin, such as Ecuador and Bolivia. But prohibition is not the best way to handle the matter. Comprehensively denying the authenticity and financial connotation of bitcoin and digital assets will not detract from its significance in financial transactions.

The lack of oversight of bitcoin can pose a significant systemic risk. The chaos of the digital asset floor and the trading platform can bring systemic risks. For example, money laundering is a public safety hazard. As a result, it is difficult to restrain speculation and the financial risks brought by it. Instead, governments cannot strictly regulate it under the current financial legal framework, nor can it effectively protect financial consumers.

The US Congress is right to impose stricter federal regulations on these emerging asset classes.

Xiaoxie is an accounting major at the Stillman School of Business, Seton Hall University, Class of 2019.

Source:

https://www.foxbusiness.com/politics/us-congress-sets-sights-on-federal-cryptocurrency-rules

Posted by Giancarlo Barrera.

First it was Target, Home Depot, and now, JPMorgan Chase.  They are the next victim under cyber attack. Chase is the biggest bank by assets in the US. They are also the dominate bank in New York City, where the majority of banks’ cooperate headquarters are located . “JPMorgan Chase has 65.8 million open credit card accounts, and 31.8 million of those accounts with sales activity, according to its most recent quarterly report. Chase also has 30.1 million checking accounts.”  According to what the FBI has been investigating, names, addresses, phone numbers, and emails were taken, but no passwords and social security numbers

It was reported that the hackers did not receive any money from this cyberattack. “The bank’s Chairman and Chief Executive Officer Jamie Dimon said that the company will spend $250 million this year on cybersecurity, but has been losing security employees to other banks with more “expected to leave soon.”

Giancarlo is a finance major at Montclair State University, Class of 2016.

Posted by Ahmed Alzahrani.

In this article, the rapper DMX is accused of evading tax. The rapper pleaded not guilty to any of the charges against him.  He was later released in prison after spending one day in jail; this was after he paid $500,000 bond. The persecutor asserts that Earl Simmons also known as DMX evaded an estimated $1.7 million in tax in the peak of his profession between 2002 and 2005.

He purportedly avoided paying taxes, including establishing accounts on other names and paying most of his expenditure in cash. This was a violation of the law whether you are a celebrity rapper or not; paying taxes is necessary to all Americans. The prosecutor also indicated that DMX failed to file his returns in the period between 2010 and 2015; the prosecutor added that the accuser filed a fake affidavit in the US Bankruptcy Court (LIBBEY, 2017).

The bail postulated that DMX to be restrained in New York City. However, his lawyer reported that he would ask for permission for the accuser to travel for a show performance in summer. After the hearing, Mr. Simmons (aka DMX) told the journalist that his faith played a significant role in coping with a legal issue. It gave him the courage to face the situation.

Ahmed is a graduate accounting student at the Feliciano School of Business, Montclair State University.

Reference:

LIBBEY, P. (2017, July 16). DMX Pleads Not Guilty to Tax Fraud. Retrieved from The New York Times: https://www.nytimes.com/2017/07/16/arts/music/dmx-pleads-not-guilty-to-tax-fraud.html?rref=collection%2Ftimestopic%2FTax%20Evasion&action=click&contentCollection=timestopics&region=stream&module=stream_unit&version=latest&contentPlacement=1&pgtype=collect.

Posted by Mladen Trajkov.

Uber has become really successful and has grown and increased its market share tremendously in the last four years. The company is operating worldwide, and is valued around $62.5 billion. Their increase in presence can be seen in various places, especially in New York City. However, not everything looks so perfect with Uber. The drivers are not employed with the company, but they are self-employed and just sign contracts with Uber for the time period of work. Therefore, Uber is not entitled to pay them the minimum wage required by the state. “Research by Citizens Advice has suggested that as many as 460,000 people could be falsely classified as self-employed, costing [millions] a year in lost tax and employer national insurance contributions”, is written in the Guardian. Uber can`t classify its drivers are self-employed, therefore it has to provide the necessary benefits. This is based on two drivers in the UK who were employed by Uber. They were pressured to work long hours, instead of really working for themselves and make their schedule of working hours. Therefore, Uber was accused of “Resorting in its documentation to fictions, twisted language and even brand new terminology.”

This is going to have a bigger impact, because Uber is not the only business that does the self-contracting principle. Looking at Uber, a lot of other companies follow what Uber does, implements similar principles, and traps their employees in the self-employment scheme, which of course is not ethical. “The effect of this judgment is that those kinds of business may owe a lot more to their workers, such as paid holiday and minimum wage, than they had bargained for,” is said in the Guardian. This is an opportunity for those workers to enjoy the same privileges as regular workers do, for which they were previously denied and not entitled for.

A self-employed driver for Uber means that they do not qualify for health insurance, holiday pay, or the national minimum wage. On the other side, being self-employed means that you get to choose your hours of work and how much you work; basically you are your own boss. There are drivers who agree with this model, however some drivers are still disappointed. Drivers who agree are happy mostly because of the benefits of health insurance; however, they believe they are going to make less money now if they work less hours and make only the minimum wage. Other drivers who disagree, don`t really see themselves being employed. They prefer the freedom of choosing the hours of work and having their flexible schedule.

Mladen is an accounting major at the Feliciano School of Business, Montclair State University, Class of 2017.

References:

https://www.theguardian.com/technology/2016/oct/28/uber-uk-tribunal-self-employed-status

http://www.bbc.com/news/business-37802386

Posted by Giancarlo Barrera.

First it was Target, Home Depot, and now, JPMorgan Chase.  They are the next victim under cyber attack. Chase is the biggest bank by assets in the US. They are also the dominate bank in New York City, where the majority of banks’ cooperate headquarters are located . “JPMorgan Chase has 65.8 million open credit card accounts, and 31.8 million of those accounts with sales activity, according to its most recent quarterly report. Chase also has 30.1 million checking accounts.”  According to what the FBI has been investigating, names, addresses, phone numbers, and emails were taken, but no passwords and social security numbers

It was reported that the hackers did not receive any money from this cyberattack. “The bank’s Chairman and Chief Executive Officer Jamie Dimon said that the company will spend $250 million this year on cybersecurity, but has been losing security employees to other banks with more “expected to leave soon.”

Giancarlo is a finance major at Montclair State University, Class of 2016.

Posted by Ashley Scales.

On February 22, 2018, Palantir was ordered to open their books to an investor who was seeking U.S. fraud probe.  The judge ruled, “Data analytics and security company Palantir Technologies Inc. must open its books to early investor Marc Abramowitz.”  Abramowitz wants to investigate possible fraud and misconduct at the esteemed private U.S. Company.  He sued the firm after a 2015 falling out with the company’s chief executive officer, Alexander Karp.  The lawsuit claims that Palantir prevented Abramowitz as well as many others from selling their stock in the privately owned company, while allowing sales by Karp and Chairman Peter Thiel.

Judge Joseph Slights of the Delaware Court of Chancery said that Abramowitz showed “a proper purpose of investigating potential wrongdoing and a credible basis to justify further investigation.”

Through the KT4 Partners LLC fund he manages, Abramowitz invested an initial $100,000 in Palantir in 2003.  According to Judge Slights’ 50-page opinion, Abramowitz’s investment is now estimated to be worth about $60 million.

Abramowitz and Karp had a close relationship until their falling out in 2015.  Karp “verbally abused” Abramowitz and accused him of taking intellectual property from the company.  Soon after their falling out, Abramowitz tried to sell his stock in Palantir, but he claimed that the company blocked the deal by making an offer of newly issued stock to the potential buyer.  According to Slights, Abramowitz began pursuing information from Palantir while he considered suing the company for blocking the sale of his stock.  In September 2016, in response to the potential claim against the company, Palantir sued Abramowitz for supposedly stealing trade secrets.  In a comment, Palanti said that they plan to continue to pursue their case against Abramowitz.

Abramowitz brought his case to Delaware in March 2017.  Palantir claimed that Abramowitz “should be denied information because he was likely to use it to build his lawsuit over the blocked sale”.  Judge Slights ruled, “Abramowitz could investigate Palantir’s lack of annual meetings, corporate amendments that limited KT4’s rights and the company’s sales of stock”.  However, Abramowitz would not be allowed to investigation Palantir’s value or Karp’s compensation.

Ashley is an accounting major at the Stillman School of Business, Seton Hall University, Class of 2020.

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.

Posted by Emanuel Sanfilippo.

On Monday the 28^th, Diane Backis, a corporate accountant in New York, admitted to stealing at least $3.1 million from Cargill Inc., an agricultural business giant. In doing so, Backis caused $25 million in losses to Cargill’s grain shipping operations at the Port of Albany according to the Associated Press. Diane Backis pleaded guilty in federal court in Albany to mail fraud and a false income tax return. According to U.S. Attorney Richard Hartunian, Backis diverted customer payments to her own accounts over a 10 year period and caused $25 million in losses to Cargill Inc.

“Backis, 50, was an accounting department manager at Cargill’s Albany grain elevators at the port whose duties included creating customer contracts, generating invoices and processing payments.” Backis admitted in court that she sent customers invoices for animal feed prices much lower than what her employer paid, in doing so, she caused the company millions of dollars in losses in inventory. She tricked consumers into sending the payments directly to her bypassing Cargill’s corporate controls. In an essence, Diane Backis basically used her ability to access inventory and money from Cargill to sell their inventory privately for personal profit.

The Associate Press states how the tax fraud charge refers to Backis’s 2015 individual income tax return on which declared $61,208 in income and omitted more than $450,000 she received that year from stealing Cargill customer payments. In accordance with Backis’s guilty plea, she has to pay $3.5 million in restitution to Cargill and she has to forfeit her house, an investment brokerage account and her pension benefits from Cargill. According to Pete Stoddart, a Cargill spokesperson, Cargill has audited its controls and trading systems and confirmed that it was an isolated incident only affecting that one location and Cargill customers were not adversely affected. Diane Backis faces up to 20 years in prison when she’s sentenced on March 28^th.

Emanuel is a sports marketing and management major at the Stillman School of Business, Seton Hall University, Class of 2019.

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.

Members of organized crime, drug dealers, and terrorists transact their “business” in cash to hide their tracks. As part of a scheme to launder money (make it look it was earned legitimately), criminals will deposit their ill-earned cash in bank accounts. In response, Congress passed the Bank Secrecy Act, requiring banks to assist the government in catching money launderers.

Under the Act, banks are required to report any cash transaction or combination of cash transactions in excess of $10,000 to the IRS.  Knowing this, criminals resort to structuring. Structuring is the deliberate parcelling of a large cash deposit into a series of smaller transactions in order to avoid detection by regulators. When bank officials suspect structuring is occurring, they are required to file a suspicious activity report, or SAR, and notify regulators of what they believe is happening.

In Ratzlaf v. United States, 510 U.S. 135 (1994), the Supreme Court found that government had to prove that defendant acted with knowledge that structuring is unlawful. As a result, Congress removed the “willfulness” requirement making it easier for the government tor prosecute structuring cases. The IRS, however, has been seizing assets of legitimate businesses and individuals without any proof or any charges filed. Small business and individuals can be a target. In one case, the IRS seized $66,000 from an Army sergeant’s college savings account, even though the sergeant was told by the bank teller to make smaller deposits in order to avoid taxes. Removing the “willfulness” requirement makes structuring a strict liability crime.

In a written statement, Richard Weber, the chief of Criminal Investigation at the IRS, said, “After a thorough review of our structuring cases over the last year . . . IRS-CI will no longer pursue the seizure and forfeiture of funds associated solely with ‘legal source’ structuring cases unless there are exceptional circumstances justifying the seizure and forfeiture and the case has been approved at the director of field operations (D.F.O.) level.”

Posted by Hongkun Ma.

On Nov. 22nd, the ride-hailing app company Uber Technologies Inc. paid hackers $100,000 to conceal an incident that Uber revealed 57 million users’ personal information like names, phone numbers and addresses around the world. 600,000 Uber drivers’ license numbers also were released.

Whether the incident violated state law is being investigated by five state attorneys general: New York, Washington, Missouri, Connecticut and Massachusetts. Forty-eight states have laws that customers have right to know a company’s data breach and will impose fines if company violates them. For Uber, the incident has been so complicated, which lost the trust of millions of customers.

The incident reflected how a data breach can trigger responses from mass of regulators and enforcement agencies, and how a private company can have flexibility to deal with this kind of things. International regulators investigated the incident right away and data protection officers from throughout the European Union announced a task-force to look into the incident. Experts indicated that Uber had more flexibility in the way it report the incident, which can be reported as a security incident, because Uber is a private company. Uber is facing crisis of confidence and it’s difficult to win back the trust of their huge numbers of customers.

Finally, I would like to give some of my opinions. Uber is a private company, which is a third party between customers and taxi drivers. In China, Uber Company is almost monopoly. When it came into China market at the very beginning, most customers were attracted by its low price, which sometimes were even free to take a taxi. Uber gained a huge customer base from the beginning. Later, customers found Uber was not as cheap as before. It became more and more expensive, sometimes was more expensive than regular taxi. The strategy actually made the company lose some of their customers, but most customers stayed. And many customers found that Uber keeps ride details in their system for so long. Some of customers received messages that contained their personal information like history location, ride history or even private residences. From my perspective, it is possible that Uber sold customers’ personal information to third-party companies which would look for visits to key locations, such as particular market, meet-up events, café and so on.

The incident of Uber Company that they concealed the cybersecurity problem really violated law from state level, and not federal. For Uber, the challenge quickly became more complicated and needed to be handled.A company’s reputation can be easily built up and destroyed. And how to win back the trust of customers is becoming a really hard task for Uber Company.

Hongkun is an accounting major at the Stillman School of Business, Seton Hall University, Class of 2019.

Source: https://www.wsj.com/articles/uber-likely-to-face-a-barrage-of-state-legal-action-after-breach-1512131094

Posted by Julian Toledo.

Known for its multiple smart phones and other electronic products, Apple has recently been accused around the globe of intentionally shortening the battery life of older iPhones to boost its profits. Consumer groups and government officials, primarily of the United States, South Korea, and France, have forced this technology company to undergo many lawsuits for unethical business behavior for almost two months. During late December of 2017, customers questioned whether Apple had adjusted the performance of its phones after a Reddit user shared online that his old iPhone had been functioning poorly until he replaced its battery with a new one. Consequently, other people with different iPhone versions began to post about their similar experiences. After quickly receiving huge backlash, Apple explained that it slowed down its phones with aging batteries, including the iPhone 6, iPhone 6S, and iPhone SE, after introducing an iOS update last year to prevent these products from unexpectedly shutting down. In addition, the company claimed that it has “never—and would never—do anything to intentionally shorten the life of any Apple product.” Since the uproar, Apple has made battery replacement cheaper and said it will bring a new iOS update that will notify users about their phone’s battery health. Although some individuals believe that Apple acted responsibly for stopping phone shutdowns, others are still complaining that the company could have handled this issue better.

As of January 12, Apple is facing over thirty lawsuits around the United States, with the majority of them arguing about the company’s deliberate slowdown of older iPhones without advising users. Scott Grillo, a Californian citizen and the plaintiff of a recent lawsuit, criticized Apple for “unfair business practices” and “breach of implied contract.” He told the court that after updating his device from a software upgrade, his phone began to operate inefficiently. Furthermore, lawmakers have been accusing Apple for failing to properly communicate with customers and manage the widespread problem. One government official that has challenged the company in this way is Senator John Thune of South Dakota. Thune argued in his letter to Apple CEO Tim Cook that even if the company planned to slow down older models of the iPhone to ultimately prevent shutdowns, “there should have been better transparency with respect to these practices.”

Outside the United States, more than 120 members of the South Korean organization called Citizens United for Consumer Sovereignty filed a civil suit against Apple on January 11. Led by head plaintiff Go Gye-hyun, the group is currently suing for the alleged destruction of property. For the damages, this consumer organization strives for two million win, or about $2,050, for each plaintiff. In addition, Apple’s recent controversy spread to France, where it is illegal to intentionally reduce the lifespan of goods to force buyers to purchase new ones. In fact, according to French lawyers, if executives are found engaging in this type of unethical business activity, they can be sentenced up to two years in prison and have their companies fined five percent of their sales revenue. In Paris, the public prosecutor’s office received complaints from another consumer group known as Stop Planned Obsolescence. Laetitia Vasseur, the cofounder of this organization, seeks to protect all consumers, especially because of how much more expensive Apple products are in Europe than in the United States. She stated, “At more than €1,200 per phone, these practices are unacceptable and cannot go unpunished. It is our mission to defend consumers and the environment.” This amount in euros translates to about $1,400, which demonstrates how problematic it is for individuals to replace their older, malfunctioning iPhones.

Despite its financial success, technological influence, and popularity across the world, Apple holds a big responsibility in terms of legal issues. As a multinational company, Apple is seeking to regain its trust with consumer groups and government executives. However, with these many lawsuits filed against the company within a two-month period, it is uncertain how long it could take Apple to fix its reputation. Overall, this recent controversy accurately shows how such a small business action can significantly backfire. If a company’s conduct does not truly satisfy consumer demands, it can result in legal consequences that can ultimately impact its performance and status in the market.

Julian Toledo is a business management major at the Stillman School of Business, Seton Hall University, Class of 2020.

Sources:

http://money.cnn.com/2018/01/12/technology/apple-iphone-slow-battery-lawsuit/index.html

http://variety.com/2017/digital/news/apple-slow-iphone-backlash-1202647220/

Posted by Nimra Noor.

It is mid-morning on a long winter day: your body is low on cortisol production and you are hours away from getting off from work. Instantaneously, your brain directs you to walk towards the Starbucks franchise located in your office basement. Hoping that the tall latte you have ordered would boost your energy and sugar levels as you sip it while completing your project, to your utmost surprise, the beverage is already half emptied by the time you return to your desk. This disbelief leaves you wondering if you had gulped your coffee too greedily or if the barista underfilled your cup. However, even if you are certain that latter is the reason for your latte getting finished so soon, there is nothing much you can do about it, now that a new court ruling has “legally approved” the Starbucks barista to underfill your cup.

On January 5, 2018, Judge Yvonne Gonzales Rogers of the United States District Court for the Northern District of California provided a ruling that dismissed all allegations brought by Starbucks’ customers that the Seattle-based coffee chain was “uniformly underfilling its lattes and mochas” to “save on the cost of milk.”

CRYING OVER STEAMED MILK

California residents, Siera Strumlauf and Benjamin Robles and Brittany Crittenden of New York had accused Starbucks in their proposed nationwide class action of fraud and false advertising by underfilling 12-, 16- and 20-ounce lattes by about 25 percent.

“Starbucks lattes are uniformly underfilled pursuant to a standardized recipe,” the suit alleged. “By underfilling its lattes, thereby shortchanging its customers, Starbucks has saved countless millions of dollars in the cost of goods sold and was unjustly enriched by taking payment for more product than it delivers.”

To create a latte, the standardized Starbucks recipe follows filling a pitcher with steamed milk up to an engraved “fill to” line as per the size of the beverage ordered; using a separate serving cup for espresso shots; transferring the steamed milk from the pitcher into the serving cup; and finally topping with ¼” of milk foam, leaving ¼” of free space in the cup. Accusing the company of using a lower ratio of steamed milk to milk foam in order to economize by saving money on the milk, Starbucks’ customers argued that the engraved “fill to” lines in the pitchers are too low, by several ounces relative to the volume of the beverages advertised.

The plaintiffs further debated that the foam is not part of the beverage since it “isn’t measured on a volumetric basis.”

BARISTAS APPLYING THE THERMAL EXPANSION LAW

The famed coffee icon argued that its cups hold more than the advertised number of ounces, and the “fill to” lines guide baristas how much cold milk can be used as per each order. The volume of the milk then expands when it is steamed.

LEGALLY LOVED LATTE

Reuters reported that the Oakland, California-based Judge Yvonne Gonzalez Rogers said that the plaintiffs failed to provide enough evidence to prove that Starbucks cheated its customers, whether by having smaller cups; engraving “fill to” lines on milk pitchers too low to measure the proper volume; ordering baristas to cut down on ingredients; or leaving a quarter-inch of space before the top of the cup.

Judge Rogers also dissolved the plaintiff’s argument that milk foam should not be measured towards the total volume of the beverage. “No reasonable consumer would be deceived into believing that lattes which are made up of espresso, steamed milk and milk foam contain the promised beverage volume excluding milk foam,” Rogers wrote in the ruling.

WHY IT MATTERS

It is the third time since 2016 that Starbucks has won dismissal of a lawsuit over the volume of its drinks. Two similar charges, one from California federal court and one from an Illinois federal court, claimed that the Seattle-based coffee chain cheats its customers by underfilling its drinks and then added ice to fill up the unused space. The courts decided ruled that the ice counts toward the content of the customers’ drinks, similar to the fashion Judge Rogers regarded milk foam to be part of the hot beverage.

Nimra is an accounting major at the Stillman School of Business, Seton Hall University, Class of 2020.

Link to the Article:

Stempel, Jonathan. “Starbucks wins dismissal in U.S. of underfilled latte lawsuit.” Reuters, Jan. 7, 2008, https://www.reuters.com/article/us-starbucks-lawsuit/starbucks-wins-dismissal-in-u-s-of-underfilled-latte-lawsuit-idUSKBN1EW0V5. Accessed Feb. 24, 2018.