Assessing and Managing Legal Risks in Business To run a profitable and successful business the issues of liability, litigation and legal risks need to be assessed on a regular basis. By doing so companies can increase their bottom line, maintain a positive reputation and be prepared if and when issue arises. United States based Alumina, Inc. a $4 billion dollar company. Its business interests include automotive components, aluminum refining, packaging materials, bauxite mining and aluminum smelting.
The products and activities are regulated by region 6 of the EPA. Based on EPA regulations, products, business interests and location Alumina can implement systems to respond to possible legal issues. Foreseeable Risks Due to the nature of the products, their toxicity and international locations Alumina can reasonably predict the following legal issues could arise. Legal Issues1. Complying with EPA regulations2. Complying with International Laws3. Complying with safe transportation of products: interstate, intrastate and internationally These are the three main issues which Alumina can expect to encounter.
By putting into place systems to offset claims in these areas if issues arise will decrease time researching and developing a plan. Complying with EPA standards and regulations requires monitoring of and documenting soil, water, and air quality. A mechanism to monitor on periodic basis and spot checks should be routine. If there is an EPA violation Alumina can show it has been proactive; thus, the violation was accidental. The legal principle of negligence could be levied against Alumina.
It meets the first two elements: duty and breach of duty. The elements of causation, proximate cause and damages could also be met. Unfortunately, Alumina did not have a system in place and EPA did levy a violation against the company when PAH concentrations??™ were higher than the allowable limits. The violation could have resulted in a tort of negligence and strict tort liability because land was damaged.
The second issue which can be foreseen is complying with International laws regarding products of Alumina. Countries have varying regulations and laws regarding transporting, handling and the production of toxic products. Alumina should coordinate a team of individuals in the eight countries it operates or produces in whose duty will be to review and revise policy to stay within each country??™s regulations.
Keeping abreast of new policy will counteract torts of negligence and strict liability torts if a violation occurs. Thirdly, transporting and producing toxic or potentially toxic products mandates systems be in place to offset accidents. Accidents will happen. Equipment will break, human error and uncontrollable events by nature will occur.
A plan of action that is in place and has been practiced will decrease the amount of time to resolve an accident, will decrease the cost and will curry favor with the public for being ready. Documentation of safety precautions taken prior to shipment, quality assurance checks, development of an emergency action plan for a spill, for an explosion for a transporting accident; evacuation procedures in place for fumes if released into the air; and replacing equipment prior to the date of expected expiration from usage. Negligence could be brought against the company if a part were to fail or if an accident occurredbut if Alumina has taken precaution to avert and to handle the accident; hence, it would decrease the likelihood of negligence and strict liability. Risks – Simulation Alumina received a violation from the EPA during an EPA evaluation. PAH concentrations in the tests samples exceeding allowable limits.
Damage to the environment is monitor by the EPA. Negligence could have been charged, since no plan in place to self monitor PAH levels. Although Alumina had a good record prior to the incident and complied immediately it left Alumina open to possible litigation. Five years after the citation Kelly Bates alleges her daughter??™s leukemia stems from carcinogenic products associated with Alumina and is published in the local newspaper. Legal Issues ??“ EPA Violation1. Were systems in place to prevent increased PAH concentrations2. How did the company respond 3.
Did the company respond in a timely mannerLegal Issues ??“ The Newspaper Stories1. Are the paper??™s allegations true2. Is there any evidence high concentration of PAH or PAH cause leukemiaLegal Issues ??“ Mrs. Bates1. Can she prove a connection between Alumina and leukemia2. Is conducting an investigation of Mrs. Bates a violationLegal Issues ??“ Handling of the Allegation1.
Is releasing of information a violation 2. Will offering a trust fund infer guilt Legal Principles ??“ Simulation Alumina is involved in the two types of torts: intentional, and negligence. The violation that was incurred five years ago could have been considered a strict liability tort. Alumina was careless.
It did not have a system in place to monitor concentration levels prior to an EPA inspection. There was a duty to act; it was breached: a standard of care was not met; causation the environment would not have been affected if PAH concentrations had remained within EPA limits. The defense would be the assumption of risks. However, the EPA could have selected to view it differently since Alumina violated a stature.
Legal counsel for Alumina could charge the newspaper and Mrs. Bates with intentional torts. The paper and Mrs. Bates have made untrue statements regarding Alumina. They have been related to third party, published and continued to be published thus, meeting the tort of defamation with possible malice. If Diane Richards were to conduct an investigation of Ms. Bates then the tort invasion of privacy could be charged by Mrs. Bates.
An investigation would amount to intrusion into her personal affairs. This would end up in litigation and tarnish the positive image of Alumina. If counsel releases the full results of the independent audit and makes it public Alumina could then be faced with litigation surrounding release information that falls within the nine statutory exemptions of the Freedom of Information Act. Tort of invasion of privacy could be considered. A partial release of information from the audit would best serve all and eliminate the tort. Management and Prevention Management??™s choice to seek alternative dispute resolution was wise. Alumina was chargedwith maintaining its positive image while negating and nullifying the charges brought forth by Mrs. Bates and the newspaper.
To allow the exchange to continue would only give credence to an issue that had been resolved five years ago. To keep the story in the news would damage the company??™s reputation. To pursue a court battle would be costly financially and keep the story in the news.
The allegations are emotionally charged. The negative publicly from the court case may due further damage even if the outcome was in the favor of Alumina. Part of the price of business is defending against what could be perceived as negligence and strict liability. Not to consider these torts is tantamount to business suicide. Intentional torts by a company are easier to modulate and should be rare.
Unless the company is attacking another company??™s product or the company itself intentional torts should be few. Make sure your facts are true. Do not attack someone??™s integrity. Avoid talking or writing about an individual unless there is proof. But accidents will happen. To prevent further occurrences of incidents Alumina needs to be proactive. In addition to legal counsel and public relations counsel a team comprised of safety management individuals, environmentalists, quality assurance individuals and medical and scientific members to review and develop systems of intervention.
Alumina can not afford to wait for an accident to happen and respond. The consequences of reacting and the lasting impact on business, the environment and public trust were made clear by Exxon Valdez. ReferencesJennings, M. M. (2006) Business: Its Legal, Ethical, and Global Environment (7th ed., Ch. 5, 10, 11, 12).
Mason, OH: ThomsonSagamore (1997) Risk Management: What are Tort Why Do We Need to Understand Them Retrieved from the Web July 4,2009. www.sagamorepub.commany.orgPLEASE BE SMART – DO NOT COPY WORD FOR WORD