Reference no: EM133937129

Question

Alexei was sitting in his office feeling pleased about the positive feedback the company was receiving on its early prototypes and indications of interest from both an automobile manufacturer and a medical device firm specializing in stents. His thoughts were interrupted by a knock on his open door. He turned and saw Patrice Rodriquez, one of Genesist'ssales representatives, poke her head into the office. "Do you have a min-ute?" she asked."Sure, what's up?" Alexei replied. He watched Patrice, an acelacrosse player, sheepishly walk into the office and slouch into a chair."I messed up," Patrice said. "And now someone is threatening to sue me and the company.""Uh-oh," Alexei muttered. "Start from the beginning, and tell me everything,"Patrice explained that she had been meeting with Alyssa Hu, an employee from AutoPlate Technologies, a small company that was interested in using Genesist's technology in a new line of license-plate holders. The negotiations had been difficult, but Patrice and Alyssa had finally reached an agreement, at which point Alyssa offered to write up the term sheet. After Alyssa gave her the draft term sheet, Patrice discovered that Alyssa had incorporated all of Genesist's concessions but none of AutoPlate's. Enraged, Patrice ripped the term sheet in half and shoved it back across the table, striking Alyssa in the chest. Alyssa rose to leave, but Patrice moved quickly to block her exit."No, you don't," Patrice said. "Neither of us is leaving until we write up a term sheet that reflects our agreement." After two hours, both Patrice and Alyssa initialed a revised draft of the term sheet, and Alyssa left without saying a word.The next day Patrice received a phone call from an attorney representing Alyssa, threatening to sue her and Genesist for battery and false imprisonment. It was at this point that Patrice had gone to talk with Alexei.As Patrice finished the story, Alexei shook his head and sighed."Well, thank you for telling me about this," he said. "Let me look into it and we'll talk later." The moment Patrice left his office, Alexei picked up the phone, called Attorney Sarah Crawford, and said, "Sarah, I have a problem." After hearing his story, Sarah replied, "You're right, Alexei,you do." Sarah explained that under the doctrine of respondeat superior,Genesist was liable for the actions of its employees as long as they were acting within the scope of employment. Patrice's actions, although misguided, were within the scope of her employment because she was working on Genesist's behalf. As a result, Genesist was probably liable for battery and false imprisonment; the damages could easily reach$100,000 not counting attorney's fees.Although Genesist had purchased a liability policy that would coverthe damages, Alexei preferred not to use it because he knew the pre-miums would then go up. At the same time, Genesist did not have anextra $100,000 or even the tens of thousands of dollars that would beneeded for legal fees if the case went to trial. Sarah suggested that Alexeicall Alyssa and invite her to discuss the matter to see whether there wassome alternative to litigation.Alexei called Alyssa and asked whether they could meet at her officethe following day. After listening carefully to her story, Alexei told Alyssathat he agreed that Patrice had been way out of line. He then apologizedfor Patrice's actions. Alexei also assured Alyssa that he would sternlywarn Patrice about her behavior and put a memorandum describing theincident into her personnel file. He told Alyssa that he had alreadyassigned a different licensing representative to deal with AutoPlate inthe future and offered AutoPlate a 10% discount on its first order. Alyssaappreciated the apology and told Alexei that she was satisfied with thehandling of the situation and would drop the matter.Later that week, Piper walked down the hall to meet with DaveBrady, Genesist's Vice President of Operations. Dave wanted to talk toPiper about potential cost overruns caused by higher than anticipatedquantities of waste resins containing potentially toxic substances. Someof the substances required expensive disposal procedures. Genesist hadbeen working with ToxicSafe Enterprises, a reputable disposal servicethat specialized in hazardous waste. The initial cost was significant butaffordable. However, removing waste in excess of the amount called forby the contract would be borderline prohibitive. Dave told Piper that hehad carried on some quiet conversations with a few of the laboratorytechnicians who suggested that Genesist could temporarily avoid theadditional cost by hiring a new disposal service that charged only slightlymore than it would cost Genesist to haul the waste to the dump. Davehad checked out the new service and discovered that it had no experi-ence dealing with hazardous waste and was charging a fee that wasmore than 70% less than ToxicSafe and other experienced hazardouswaste disposal firms charged. Once Genesist was on more stable finan-cial footing, Dave said, Genesist could go back to using ToxicSafe. Untilthen, he said, it was the new firm's problem if it could not afford to dis-pose of the waste safely.Piper was stunned. As calmly as she could, she explained to Davethat his plan was completely out of the question. Given the bargainprices the new firm quoted, it was almost certain that it would not takethe expensive steps necessary to dispose of the resins safely. Genesist could not just turn a blind eye. Aside from the guilt each of them wouldfeel if a toxic substance leaked into the surrounding soil and groundwa-ter, such an event could put the company out of business and land theresponsible employees in prison. In addition to being fined, the companywould be liable for any injuries suffered by people coming into contactwith the substances, including the residents of the neighborhood nearthe city dump. Genesist would also be responsible for the cost of soilremediation and other cleanup required after a leak. Furthermore,Dave, Alexei, and Piper could be held personally liable and sent to prisonfor knowingly violating federal and state environmental laws. "It may beexpensive to dispose of the substances properly," Piper told Dave, "butdoing something like you've suggested is not worth the risk." Sheinstructed Dave to try to negotiate an immediate reduction in the over-age fees ToxicSafe was charging now that Genesist had a better senseof the amount of hazardous waste generated by its current operations.Piper also asked Dave to sit down with Genesist's engineers and labora-tory technicians to review the entire production cycle in hopes of findingways to reduce the hazardous waste. "Who knows," Piper said, "a moreefficient production process and utilization of less toxic materials couldend up saving us money in the long run."Alexei and Piper then went back to reworking the budget to try toavoid running out of cash before the next round of financing closed.Although they were tempted to draw on the account containing theincome tax withheld from employees' salaries, Sarah had warned themnot to do so. Because Alexei and Piper were authorized to write checkson that account, they would be personally liable if the employee taxes were not remitted to the Internal Revenue Service on time. Instead,Alexei met with the chief financial officer (CFO) to decide which suppli-ers would continue to ship Genesist's orders, even if Genesist was latepaying for them. They agreed that the CFO would reach out to certainsuppliers, explain Genesist's short-term cash crunch, and try to negotiate extensions.

How can the company founded by "Alexei and Piper" resolve a claim for battery and false imprisonment arising out of an altercation with one of the company's employees, and how can the company protect itself from such claims in the future? For purposes of this question, you can assume the altercation was between an employee and a customer.