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Running Head: CASE STUDY ONE

Milestone One: Case Study One

Southern New Hampshire University


Personal jurisdiction refers to the power of a court over the parties involved, this
means that the party must have a certain minimum contact with the state in question. In this
matter there are three states involved, an Internet company (Funny Face) based in California
which is manufactured in Florida by the company Novelty Now Inc. provided a consumer in
New York with a faulty product. The product in question was an aftershave lotion which had an
adverse side effect, due to the replacement of a key ingredient for another (PYR) that is not FDA
approved, to the customer in the state of New York. According to the contract between Funny
Face and manufacturer Novelty Now all the disputes must go through the state of Florida. In the
scenario this case would be under the state of Florida jurisdiction in accordance with contract
between both companies. Subject matter jurisdiction means the power a court has to hear certain
cases and minimum contact refers to a nonresident interaction or contact with the state where the
lawsuit is brought. Here the plaintiff, Mr. Donald Margolin and his company, is suing the
manufacturer Novelty Now for negligence however, it does not apply because there is not
conclusive understanding of what the minimum contact through the Internet is.
The parties involved in the case have the option to agree to an alternate dispute resolution
that may have its advantages over litigation. The alternative dispute resolution method, or ADR,
is using other methods to solve legal conflicts as opposed to using litigation. There are several
methods, however in this case it was stated on the Funny Face companys website that claims
must be resolved through arbitration. Arbitration has many pros and cons for example the
company Funny Face would lose credibility and would suffer damage to its reputation if the
incident were brought out publicly so privacy is a strong point of arbitration for the company in
question. A con, especially in this scenario, would be the companys ability to hide this dispute
from the public therefor letting Funny Face continue selling its product with the harmful


chemical PYR. Arbitration is very cost efficient and it is a neutral party with no biases towards
the issue. For Mr. Donald Margolin arbitration is beneficial rather than seeking litigation and
incurring great costs for him or his company, the parties can choose an arbitrator who is an
expert in the issue. There is much flexibility when making a decision however it is rather
difficult to appeal an award made by arbitration therefor a decision can be made that might be
seen as an injustice for example, a decision where Funny Face does not have to pay for damages
caused to Mr. Donald Margolin or perhaps the reward does not fully cover Mr. Margolins
medical bills. Likewise, arbitration can be advantageous to the company as they can use it to
keep their dispute private, come to a definite solution, and settle out of court. Novelty Now Inc.
would greatly benefit from using arbitration since they knowingly used a potentially harmful
chemical that indeed had adverse side effects, as in this case, turning Mr. Margolins face blue.
This error would definitely hurt their business and credibility as well as Funny Face who directed
them to use said chemical, they would suffer a greater impact as it could potentially harm their
entire customer base. The privacy surrounding arbitration is beneficial for the company at fault,
even if the public might suffer if the error was kept under wraps, and of course the cost would be
but a fraction of what litigation would have required.
The parties involved can also use a third party to assist in discussing their differences in
the matter and work out a solution, in other words mediation. Mediation can be used in order to
assist in coming to an agreeable resolution to the damages caused by their product to Mr.
Margolin, although he might want to seek criminal charges for a product that could harm a great
deal of its users, but in the long run it really does not provide any benefits to the case. In
mediation the third party does not determine who is right or wrong nor make a decision and one
side may be predisposed to not come to a reasonable solution, such as Mr. Margolin demanding


to be compensated an exuberant amount of money and the company refusing to pay the amount
therefor negotiations might fall apart.
Here, the founders of Funny Face Chris, Matt and Ian committed fraud, the use of
intentional deception for financial or personal gain. The fact is that Chris intentionally and
knowingly altered the recipe for their product with an essentially harmful chemical. Novelty
Now Inc. is also at fault for agreeing to create a product that might harm its users however, the
fact is that it was not a sure thing that the chemical was going cause any adverse effect. This
incident is a crime and both parties should be held responsible. The fact that Chris changed the
recipe to use a non-FDA approved ingredient is the first criminal action. Secondly, when the
manufacturer agreed to the changes of the recipe, as a manufacturer they must know which
chemicals are FDA approved and suitable for use. They completely disregarded that and
proceeded with production not know what type of issues it could cause, that in itself is
negligence, therefor a crime.
The Who, Purpose, How framework exists to assist in making ethical business decisions,
in this case Who being the consumers who are to be potentially affected by the same issue, as it
did to Mr. Margolin. By making that decision since they wanted lower manufacturing cost and
that applies to the Purpose element, they wanted efficiency, which definitely backfired. In this
scenario the parties at fault failed to make ethical decisions, even if it was to reduce cost, in the
end by seeking a way to save money has resulted being more expensive than making ethical



Bruhl, A. (2008). Subject Matter Jurisdiction.

Retrieved from

Boldon, R. M. (2011). Long-arm statutes and internet jurisdiction. The Business Lawyer, 67(1),
313-320. Retrieved from