Posted by Tiffany Zapata.

Wells Fargo is the most recent bank to get caught in the act of predatory lending. The bank was accused in court filings of targeting minorities, such as black and Latino borrowers, for more costly home loans in comparison to whites. The acts took place in Cook County, Illinois, with a population of about 5 million. The case was filed in Chicago federal court.

The bank’s strategies encompassed home-loan origination, refinancing, and foreclosure. Their main concentration was equity stripping. Equity stripping is asset based lending which maximizes lender profit and makes it nearly impossible for the borrower to pay it off due to onerous loan terms. Before getting caught, the bank got away with 26,000 loans. The court order called for 300 million dollars in money damages.

Tom Goyda, a spokesman for the San Francisco-based Wells Fargo stated: “It’s disappointing they chose to pursue a lawsuit against Wells Fargo rather than collaborate together to help borrowers and home owners in the county,’’ Goyda said. “We stand behind our record as a fair and responsible lender.”

Wells Fargo is also currently involved in a lawsuit with the federal government due to its mortgage lending. This is not the first time courts have seen these sorts of acts from banks. Miami and Los Angeles filed similar suits alleging banks were “red-lining” minorities to block loans and for not informing investors on the status of the mortgages that were sold.

Wells Fargo ended up wining the lawsuit brought by the City of Miami in July. The City claimed Wells Fargo sold predatory mortgages in neighborhoods immersed with minorities before the “housing bubble burst.” The judge decided the City was not qualified to file these claims under the Fair Housing Act. The decision is being appealed.

Tiffany is a business administration major with a concentration in international business at Montclair State Univsersity, Class of 2016.

Posted by Jen Suarez.

To what extent is defamation? From my last blog article, I defined defamation as “malicious and damaging misrepresentation,” where an organization was falsely accused of rape. However, can anyone play to the “defamation card” if they don’t like what other’s have to say? For example, Yelp.com is a website where consumers can post and rate the quality of businesses anonymously. The Rhodes Group, which is a Collin County Texas real estate firm, received a poor review on the Yelp website and is now suing on the grounds of defamation; they are requesting the name of the customer, whose username is “Lin L.” The Rhodes Group does not even believe that “Lin L.” is a real person. In fact, they openly suggest that this username belongs to someone from a competing organization, trying to ruin The Rhodes Group’s reputation. The Rhodes Group, however, is fighting in court against Public Citizen, which claims that revealing the user’s identity violates the user’s right to privacy. Though the negative Yelp review has been removed, there is no confirmation its removal was due to the impending lawsuit.

The Public Citizen lawyer, representing Yelp, stated that there is no justification for revealing the user’s identity, especially since The Rhodes Group did not file any complaint until well over a year after the review had been posted. According to its website, “Public Citizen maintains that the Rhodes Group’s claim violates the one-year statute of limitation for libel suits and, additionally, that the subpoena was issued in the wrong state and therefore cannot be enforced by the Texas court.” The Rhodes Group is fighting back stating, “You can’t use the First Amendment as a shield to make false and defamatory statements about an individual, particularly in a commercial arena.”

The Rhodes Group is absolutely right that Yelp cannot hide behind the “First Amendment Shield,” however, Yelp and Public Citizen are correct that the user’s identity should remain anonymous and there is no justification to reveal it. Bad, anonymous reviews, whether they are fake or genuine, are part of the online world. Millions of users have the ability to hide behind a keyboard and this allows us to bestow harsher criticism without fear of consequences. Freedom of speech does not include libel. Therefore, the result of this court case could determine how “free” freedom of speech actually is on the World Wide Web.

Jen is a business administration major with a concentration in management at Montclair State University, Class of 2017.

The Federal Reserve Bank of New York has come under fire recently with the release of secret tapes supposedly of regulators planning to “go soft” on Goldman Sachs.  Carmen Segarra, a former employee who was assigned to Goldman, claims in a lawsuit that she was under pressure by her superiors to overlook certain findings she made concerning the company.  The Fed eventually fired her allegedly because she refused to comply and change the findings.

In the recordings, one supervisor tells Segarra that basically consumer laws do not apply to certain institutions.  Michael Lewis, best-selling author of “Flash Boys: A Wall Street Revolt,” said after listening to the tapes that, “The Ray Rice video for the financial sector has arrived.”

Segarra’s lawsuit was dismissed for failing to connect her firing with the alleged Goldman disclosures.  The suit is pending appeal.  Nevertheless, the tapes may prompt a Congressional investigation into the matter.  Sen. Elizabeth Warren (D-Mass.), a member of the Senate Banking Committee, stated, “When regulators care more about protecting big banks from accountability than they do about protecting the American people from risky and illegal behavior on Wall Street, it threatens our whole economy.”  She further stated, “Congress must hold oversight hearings on the disturbing issues raised by today’s whistleblower report when it returns in November.”

Posted by Claudine Rosca.

Endo International PLC is a generics and pharmaceutical company that delivers medicines to patients in the fields of urology, men’s health, etc. Despite their professionalism, their products allegedly were defective resulting in liability. Product liability is the responsibility that a manufacturer incurs because they sell or create a faulty product. In 2014, Endo “agreed to pay more than $400 milion to resolve lawsuit allegations.”

Their vaginal-mesh implants had eroded in their female patients which cause painful side effects. The devices are used to “support internal organs and treat incontinence,” which is a lack of control over urination or defecation. Officer Rajiv De Silva “said the company way adding $400 million to its $1.2 billion liability reserve for the devices.” The company was blamed for organ damage in women, combining to over 10,000 suits. The issue with the company was their lack of “stricter safety requirements because they are high-risk devices.” As a result of the 2014 issues among companies such as Endo and Johnson & Johnson, the FDA ordered “vaginal-implant makers to study rates of organ damage and complications linked to the devices.”

Following the allegations in 2014, Endo continues to pay millions to resolve the sums of lawsuits against the company’s vaginal-mesh implants. Recently, Endo set aside $755 million for the eroded implants which constitutes almost $2.6 billion that was paid to wipe out cases. Their Dublin-based Endo was shut down after a piling of complaints against their devices. Other previously named companies continue to face thousands of lawsuits from women who argue against their devices. The U.S. FDA continues to increase regulations on mesh inserts but companies continue to manufacture and sell faulty products.

Claudine is an accounting and IT major at the Stillman School of Business, Seton Hall University, Class of 2021.

Sources:

https://www.bloomberg.com/news/articles/2014-10-01/endo-said-to-pay-400-million-plus-in-vaginal-mesh-accord

https://www.bloomberg.com/news/articles/2017-08-07/endo-sets-aside-775-million-to-settle-remaining-mesh-lawsuits

Posted by Victoria Gencarelli.

Product liability is a prevailing issue and concern for companies and businesses who are marketing and selling their products. It is a company’s duty to take the liability for manufacturing and selling a product that is defective or damaged. By creating and issuing a defective product to the public, it increases the risk for dangers, damages, or harmful occurrences to take place with the use of the product. If in the case that a product is defective and capable of any danger, it is the company’s responsibility to issue a warning or a recall on the product. In this way they can they attempt to protect themselves from any legal issues and also protect the general public from encountering danger while using their products.

POM Wonderful is a company who produces fruit juices and fruit extracts, but is most commonly known for the produce of pomegranate juice. The Coca-Cola Company introduced a new “pomegranate blueberry” juice product, but POM wonderful believed the product to be false advertising to consumers. The juice was actually a blend together of apple and grape juices and only consisted of 0.2% pomegranate juice in it and also included the phrase “from concentrate with added ingredients and other flavors” in small typing. POM Wonderful presented this to the court in compliance with the Lanham Act because they believed that the name of the juice and the false advertising of the Coca-Cola Company’s “pomegranate blueberry” juice was misleading and contributing to a loss of sales for POM Wonderful.

In California federal district court, they deliberated the case and had not found POM successful in proving that the Coca-Cola Company was misleading their consumers into thinking that their “Enhanced Pomegranate Blueberry Flavored 100% Juice Blend” did not actually contain a high percentage of pomegranate juice. When the case reached the highest court, they disregarded POM Wonderful’s claim against the Coca-Cola Company and stating that Coca-Cola was not violating the FDA guidelines on product labeling. The POM Wonderful Company did lose out on millions of dollars in revenue and sales, but it was not seen as unfair competition and the jury ended the case in favor of the Coca-Cola Company. All in all, an issue such as this one has an overall impact on the food industry to be careful when labeling, marketing, and advertising their products to the public. It is always important to keep product liability in mind when generating products and selling them in order to avoid any potential problems in the long run.

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

Posted by Amber Piskunov.

GNC is a widely known and trusted nutritional health retailer that is now being sued for allegedly selling products known to contain an illegal amphetamine-like stimulant. The two chemicals are called Picamilon and BMPEA. In addition to selling the illegal drug, GNC clearly intended for it to be hidden because the chemical was not listed under the nutritional facts or ingredients. In today’s world, many people want to see fast results, such as losing weight or gaining muscle. Stimulants can do that by reducing digestion and hunger, while also increasing your energy output. However, it should be known that these drugs are illegal, addictive, and sometimes deadly. GNC didn’t properly label the product, making it dangerous for the consumers without prior knowledge of purchasing. The investigation is being aided by the US Food and Drug Administration; they have announced that the chemical is illegal and should not be sold to consumers. After this was found by the FDA, GNC has taken all products containing the chemical off the shelves for sale.

The lawsuit states that “GNC sells products obtained from third-party vendors that GNC knows or should have known it contained unlawful and potentially unsafe ingredients.” Being a previously trusted 2.6 billion dollar retailer of “nutritional and healthy supplements,” GNC has now publicly hurt their name because of the chemicals found. Consumers are most likely going to be worried about buying products from GNC because of the secret ingredients that were previously hidden. GNC has since denied any knowledge of the drug in their products or on their shelves, and the ones in question have been removed. They have also mentioned they are protected by federal regulations. The company is denying the claims against them and is strongly defending themselves against the lawsuit.

GNC has caused their company to have bad publicity, a decline in stocks, and also a decline in profits. This is a serious lawsuit regarding consumer safety. GNC was not properly selling their product and did not have the best intentions for the well being of the consumers. With that being said, GNC is now trying to gain sales back by promoting lower prices and a better store experience. This is a way for the company to try to stay stable while dealing with the negative attention the lawsuit has brought. The warning made by the FDA stated the product is, “a substance that does not meet the statutory definition of a dietary ingredient.” The laws were not followed when the company decided to not only put the chemicals in the product but to also not have it labeled for consumer knowledge. The public will now be safer with the product being off shelves. GNC ended up losing profits instead of gaining profits because statutory laws were not met.

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

Sources used:

http://www.bidnessetc.com/56383-gnc-holdings-inc-gnc-hits-new-52week-low-whats-instigating-the-crash/

http://money.cnn.com/2015/10/22/news/companies/oregon-ag-lawsuit-gnc/

http://www.bizjournals.com/pittsburgh/blog/the-pulse/2015/11/gnc-targeted-in-5m-class-action-lawsuit.html

Under new FDA rules, movie theaters, chain restaurants, and supermarkets with 20 or more locations will have to provide calorie counts on the foods they sell.  The stores have until November 2015 to comply and provide calorie information on their menus.  Amusement parks, vending machines, bakeries, coffee shops, and convenience stores must also comply with the new rules.

The move to include these food establishments came from a push by the restaurant industry.  Restaurant owners argued that grocery stores and the like that sell prepared foods should also be made to place calorie counts on their food.  “Representatives for the supermarket industry have said it could cost them up to a billion dollars to put the rules in place — costs that would be passed on to consumers.”

Smaller outlets are exempt from the rules for now, as are airplanes, trains, and food trucks.

Posted by Da’Naysia Aarons.

In an article called “Forced Arbitration,” Gordon Gibb, describes how citizens in the United States are taken advantage of by popular rich companies, such as, Time Warner Cable, T-Mobile, Wells Fargo and several others. Many consumers who buy products from these companies do not realize that they are facing forced arbitration.

Companies forced arbitration through a contractual clause that waives any rights to purse a dispute through courts. For example, a consumer decides to purchase a phone from T-Mobile. Before the consumer can buy the product he or she has to sign a document. In many cases, the force arbitration clause occurs in fine print at the bottom of the page, so many consumers are not aware of what they are signing. If the consumer does not sign the contract, they are not able to purchase their item. However, if the consumer signs the contract they receive their item.

If the consumer decides that he or she wants to sue the company, because something went wrong with the product, that consumer will never get their day in court because he or she signed the contract giving over that right. In the article, an appellate attorney, Deepak Gupta, states, “[Forced arbitration] is really an exit clause from the civil justice system and people aren’t aware that they’re even entering into these contracts.”

Force arbitration has become a popular issue in the United States. Several people are now starting to challenge its use. It is not right on how the government and companies are taking advantage of these consumers.

Da’Naysia is an international business major at Montclair State University, Class of 2017.

Research proposal posted by Brian Kane.

In the digital age, the rights and laws regarding privacy are being contested now more than ever. Today personal privacy, both digital and physical, is being discussed. One of the earliest examples of privacy laws in the United States is the 4^th amendment. Under this amendment gives “the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures” (Fourth Amendment, U.S. Constitution). This and other laws, including the Federal Wiretap Law of 1968, are designed to protect the individual against unlawful searches of personal property by an unfair government. The individual right to privacy is held sacred in this country.

However, the laws of privacy protection are not absolute. Communications and interactions in general areas, such as online chatrooms, and digital communication used for work. Surveillance monitoring by employers has been contested by employees in courts in multiple cases. In City of Ontario, California v. Quon, for example, a search was justified because there were “reasonable grounds” and done “for a non-investigatory work-related purpose” (Ontario v. Quon).

Some argue that the privacy laws are for the best interests of individuals. Individuals and consumers are protected when the monitoring parties have clearly defined limits and barriers. When the government requires search warrants and the corporations are required to obtain consent, the best interests of those being monitored are kept in mind. The constant surveillance by powerful entities removes the right for individuals to act freely and live their own lifestyle. Gratuitous monitoring dehumanizes the employee and implies guilt without any evidence.

Privacy law is not completely virtuous, however. Like all laws, some may seek to exploit privacy law and use it to shield unproductive, immoral, and unethical behavior. When employees use corporate email accounts for personal business, they often claim a right to privacy when investigation begins. Many act recklessly online in this digital age, assuming that the right to privacy is absolute and unbreakable. There are instances where there is legitimate reasons to investigate an individual. When there is probable cause, public good supersedes individual privacy.

The issue of privacy and surveillance laws raises many ethical questions. The rights of individuals and the definition of individualism is put into question when anyone is monitored by a third party. There is concern for the maintenance of human dignity, as some see these searches dehumanizing and distressing on private lives. Pope Leo XIII spoke out against increased surveillance, saying that it intruded and lead to control over individuals. In Catholicism, the holy sacrament of confession revolves around the private recounting of sins and transgressions. When discussing privacy, the matter common good is raised. Aquinas believes that law is created for the common good, “made by him who has the care of the community and promulgated” (2 Bix).

Privacy and Surveillance Law is a widely contested issue in the catholic faith and general ethics. It has its advantages and disadvantages, as any other issue in law, but it will continue to be contested as new innovations shape the information age.

Works Cited

Bix, Brian H. “Secrecy and the Nature of Law.” October 2013. University of Pennsylvania School, Center for Ethics and the Rule of Law. Web. 3/3/2016. Avaliable: https://www.law.upenn.edu/live/files/2418-bixsecrecy-and-the-nature-of-law-full

City of Ontario v. Quon. 560 U.S. 746. Accessed 3/3/2016.

Posted by Issam Abualnadi.

Tax is a sum of money levied on incomes, property, sales, etc., by a government for its support or for specific services. (The American Heritage Dictionary). According to the IRS website, the origin of the income tax on individuals is generally cited as the passage of the 16th Amendment, passed by Congress on July 2, 1909, and ratified February 3, 1913; however, history, it actually goes back even further. During the Civil, War Congress passed the Revenue Act of 1861, which included a tax on personal incomes to help pay war expenses. The tax was repealed ten years later. In 1894, however, Congress enacted a flat rate Federal income tax, which was ruled unconstitutional the following year by the U.S. Supreme Court. The Court held it was a direct tax not apportioned according to the population of each state.

The 16th amendment, ratified in 1913, removed this objection by allowing the Federal government to tax the income of individuals without regard to the population of each State. (IRS Website). The sole purpose of income tax is based economics and social goals.( Income Tax Fundamentals 1-2). While the government tries to maximize its revenue, at the same time, Congress tries to make the tax law suitable and fair for each individual. Therefore, the tax law not only divides the taxpayers into categories upon their income, but also it allows them to minimize their taxes due by structuring their tax return in different methods. Unfortunately, not every citizen is law-abiding in this respect, and accordingly, some taxpayers break the tax law. In the foregoing, I will discuss the differences between tax avoidance, tax fraud, and tax evasion.    Avoidance of tax is not a criminal offense. According to the IRS, taxpayers have the right to reduce, avoid, or minimize their taxes by legitimate means. One who avoids tax does not conceal or misrepresent, but shapes and preplans events to reduce or eliminate tax liability within the parameters of the law. Take for example, Warren Buffett. Buffett wrote in The New York Times in 2011 “ Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent” ( The New York Times). But how Buffett can do that?

Buffett and many other super rich people use different tax rules to avoid paying taxes, like the “cash-rich split-off.” This code mechanism is used when Company (A) puts cash or other “investment assets” plus a business into a subsidiary that it then swaps tax-free to Company (B) in return for B’s holding of A’s stock. In 2010 Graham Holdings and Berkshire (Warren Buffett’s corporation), saved a total of about $675 million in federal and state income taxes by going the “cash-rich split-off” route. Graham Holdings is trading cash, Berkshire stock that it owns, and a TV station for most of Berkshire’s 23 percent stake in Graham Holdings. Tax avoidance matches the well-known saying, “Work smarter not harder.” Also, it is worth mentioning that massive tax avoidance draws attention to the notion of the efficiency of the tax codes, and the need to produce new rules or restrictions prevent such legal tax evasion. (The New York Times).

Tax fraud is another way some taxpayers use to minimize their tax liability. According to the IRS website, tax fraud “is deception by misrepresentation of material facts, or silence when good faith requires expression, which results in material damage to one who relies on it and has the right to rely on it. Simply stated, it is obtaining something of value from someone else through deceit.” (IRS Section 25.1.1.2). According to IRS’s definition of tax fraud, not all the mistakes in preparing a tax return are considered a fraud, and in order to consider a case as a fraud, two elements should be presented:

1. An additional tax due and owing as the result of a deliberate intent to evade tax; or

2. The willful and material submission of false statements or false documents in connection with an application and/or return. (IRS Section 25.1.1.1). Generally the expression “Tax Fraud” used for civil and criminal cases.

The third area is tax evasion. Tax evasion, “Involves some affirmative act to evade or defeat a tax, or payment of tax. Examples of affirmative acts are deceit, subterfuge, camouflage, concealment, attempts to color or obscure events, or make things seem other than they are” (IRS Section 25.1.1.2.4). “It is typically used in the criminal context, and it is a subset of the tax fraud.”

Tax fraud and tax evasion are very close in their meaning; both are illegal way to reduce the tax liability. The IRS indicates tax fraud by two major indicators. The first indicator is when the taxpayer knowingly understates their tax liability often leaving evidence in the form of identifying earmarks. The second indicator is that serve as a sign or symptom, or signify that actions may have been done for the purpose of deceit, concealment or to make things seem other than what they are. Usually the IRS cannot prove that to court, because taxpayer can easily claim a good faith misunderstanding of the law or good faith belief that one is not violating the law negating willfulness. Therefore, the IRS chooses to prosecute the taxpayer civilly for underpaying taxes. In such cases, the IRS can impose a tax fraud penalty, which is 75% of the tax owed plus the interest on this penalty. On the other hand, tax evasion is a subset of tax fraud. In tax evasion cases, the very difficult burden for the IRS is to prove the willfulness, which means a voluntary, intentional violation of a known legal duty. (IRS, Section 25.1.1.1) To prove fraud, they must show the court that the taxpayer did the act deliberately for the purpose of deceit. Examples include omissions of specific items where similar items are included; concealment of bank accounts or other assets. (ISR Section 25.1.1.3). So if the IRS can prove that, then it is a tax evasion case. In tax evasion cases, the penalty range is up to five years in jail plus a big fine and plus the costs of prosecution for each separate tax crime.

In conclusion, the tax law was created to enable the government to support the economical and social activities in the American society. The lawmaker enacted some tax codes to help eligible taxpayers reduce their tax liability under exact conditions, but some still try to deceive the government by using illegal means.

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

Works Cited

“Sixteenth Amendment.” West’s Encyclopedia of American Law, edition 2. 2008. The Gale Group 17 Nov. 2014. http://legal-dictionary.thefreedictionary.com/Sixteenth+Amendment

tax.” The American Heritage® Dictionary of the English Language, Fourth Edition. 2003. Houghton Mifflin Company 23 Nov. 2014 http://www.thefreedictionary.com/tax

“Brief History of IRS.” Brief History of IRS. Web. 10 Oct. 2014. .

Whittenburg, Gerald E., and Ray Whittington. “The Individual Income Tax Return.” Income Tax Fundamentals. 2014 ed. St. Paul: Cengage Learning, 2014. 1-2. Print.

“Internal Revenue Manual – 25.1.1 Overview/Definitions.” Internal Revenue Manual – 25.1.1 Overview/Definitions. Web. 23 Nov. 2014. .

BUFFETT, WARREN. “Stop Coddling the Super-Rich.” The New York Times 14 Aug. 2011. Web.

Posted by Da’Naysia Aarons.

In an article called, “Lawsuits and Consumer Reporters Fight Home Warranty Companies,” Heidi Turner discusses how home warranty companies are being sued by consumers. An investigative reporter was asked to look into a company called Sensible Home Warranty who was allegedly selling consumers a warranty policy. However, when one consumer asked for a new microwave, Sensible Home warranty refused to pay out her claim. While investigating the company, a reporter name Michelle Mortensen found that Sensible Home Warranty has more than 1,950 complaints. In the article it states, “An investigation into the company was undertaken by the Nevada Division of Insurance but in the meantime, the company reportedly went out of business.”

Due to the fact that the company was mistreating their consumers and taking advantage of their money, the company was fined $5,000 dollars for not complying with the state’s Service Warranty Act. In the article it further states, “The business failed to pay legitimate claims made on home warranty contracts sold in the State of Utah, or to pay them in a timely manner, and the business failed to respond to inquiries of the commissioner.”

Since many other home warranty companies have been taking advantage of other consumers, lawsuits have been filed against them.

Da’Naysia is an international business major at Montclair State University, Class of 2017.

Posted by Rizzlyn Melo.

The practice of corruption in any company hurts every single person involved. This is certainly the case with Petrobras, a Brazilian state-run oil company. The corruption that has been associated within the large company has caused it exponential damages and has tarnished the reputations of both business executives and political figures. In the BBC article, it was reported that the company suffered an “overall loss of $7.2 billion” and an impairment charge of $14.8 billion that reflects the decreased value of its assets. These figures represent the first losses the company has suffered in decades.

The unfortunate circumstances Petrobras is currently facing are the results of various criminal activities. One of the most scandalous discoveries made against Petrobras is its members’ involvement in bribery. Bribery can be defined as the unlawful offer or acceptance of anything of value in exchange for influence on a government or public official. Various government officials have been linked to these bribery allegations. Even Brazil’s president, Dilma Rousseff, has endured scrutiny for her alleged involvement. Rousseff was a board member of Petrobras during the time of the illegal activity. Thousands of Brazilian people have protested against their elected president. Later, however, an attorney general of any charges exonerated Rousseff. Another form of corruption Petrobras has been accused of is money laundering, which is the concealment of the origins of money obtained illegally. In this case, money laundering was employed to hide bribes as well as several illegal donations made to political parties.

At least forty politicians are currently under investigation. That number does not even include the numerous business executives that have lost their positions. The criminal activities of this one company have ruined countless lives and has shaken an entire nation. The corruption in Petrobras demonstrates how important business law is in keeping companies such as this in check. Petrobras has lost more trust than profit, and that is something it cannot easily make up.

Rizzlyn is a business administration major with a concentration in marketing at Montclair State University, Class of 2017.

Posted by Abigail Hofmann.

Francisco Garcia of the Sacramento Kings was lifting weights on a Ledraplastic exercise ball on October 9^th, 2009. The 195 pound player was lifting two 80 pound weights while on the ball when it suddenly burst beneath him. This supposed “burst resistant” ball advertised its ability to withstand weight up to 600 pounds. In the fall, Garcia suffered a fracture to his forearm, causing ineligibility for upcoming games. This injury came shortly after signing a five year, $30 million contract. Because of this, the Sacramento Kings wanted “to recoup the more than $4 million in salary, medical expenses and other costs it incurred after Garcia’s injury, as well as prejudgment interest.” (Bricketto)

Ledraplastic initially refused to reimburse the Kings or Garcia for the financial loss or issue a statement recalling the products or forewarning about potential dangers. In the Kings’ product liability case, they were able to prove that the ball burst at weights of mere 400 pounds, rather than the advertised 600 pounds, and that “for a very small expense, the ball could have been made thicker and would have provided the burst resistant capacity as represented.” (Bricketto) Eventually, a settlement was done in private, but the Kings “sought reimbursement for the salary they paid Garcia,” and “Garcia had also sought damages for pain and suffering as well as loss in future earning capacity.” (Lu)

Ultimately, this product liability case was pretty clear on who was at fault: Ledraplastic claimed to have a ball that withstood weights up to 600 pounds, yet failed to hold even 400 pounds. This caused an injury resulting in millions of dollars of damages, and up until the settlement, Ledraplastic refused to forewarn others about this potential danger. Although the settlement was private, we do know that Ledraplastic is now required to warn users of the dangers of using the ball while lifting free weights, hopefully preventing many similar injuries.

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

Works Cited:

Bricketto, Martin. “NBA Team Sues Exercise Ball Cos. Over $4M Injury – Law360.” NBA Team Sues Exercise Ball Cos. Over $4M Injury – Law360. N.p., n.d. Web. 08 Sept. 2016.

Lu, Andrew November 1, 2012 5:54 AM. “NBA Star Francisco Garcia Settles Exercise Ball Lawsuit.” Injured. N.p., n.d. Web. 07 Sept. 2016.