Recognizing and Minimizing Tort and Regulatory Risk Plan Business Law LAW531 June 14, 2010 Recognizing and Minimizing Tort and Regulatory Risk Plan Organizations in today’s business world must deal with regulatory risks such as tort liability daily. Proper management and preventative measures can reduce a business’s tort liability and remains the key to a successful business. Federal and state laws and regulations are enforcing severe fines and penalties for damages. Failure to comply with local, state, and federal laws and regulations can effect a business through assets, earnings, and image.
Businesses allocating resources to identify any existing regulatory risks and implementing action plans can avoid possibilities of non-compliance of government regulations and tort liabilities. The paper will cover tort liability and regulatory risks of Alumina, Inc. a United Stated based organization operating as a manufacturer of packaging materials, bauxite mining, alumina refining, and aluminum smelting (University of Phoenix, 2010). The business simulation states that Alumina, Inc. as found to be in violation of environmental pollution during a routine Environmental Protection Agency (EPA) compliance evaluation inspection five years ago (University of Phoenix, 2010). PAH levels were above the legal limit and a cleanup was ordered by the EPA. Alumina, Inc. complied with the EPA orders and an audit report concluded the violation was corrected (University of Phoenix, 2010). Alumina, Inc. did not make plans for prevention of this type of regulatory risks or future torts from reccurring. Kelly Bates has accused Alumina, Inc. f water contamination of Lake Dira with the cancer causing chemical PAH, and has stated the cause of her daughter’s leukemia is because of the consumption of the water (University of Phoenix, 2010). Alumina, Inc. has claimed the use of state-of- the-art technology for toxic waste cleanup as well as compliant with the Clean Water Act (University of Phoenix, 2010). Upon use of current technology Alumina, Inc. claims the PAH levels are below the legal limit. The measures implements have eliminated the risk of torts occurring. Alumina, Inc. did not make the information of the measures taken to the public so the public was not aware.
Management agreed to conduct independent studies checking for any new violations and provide the information to the EPA. The EPA provides incentives to organization for self policing, 100% penalty waivers for voluntary disclosure, and correction of any violations (University of Phoenix, 2010). Alumina, Inc. could have shown good business practice by publishing reports annually of the current state of the environment to all stakeholders. In the event of any negative test results Alumina, Inc. would remain one step-ahead by taking corrective measures and informing the EPA of such event.
The EPA audit policy provides and incentive for organizations to self-policing ensuring state and federal compliance with all environmental laws and regulations (Federal Register, 2000). The policy provides opportunities to organizations to repair violations found by self-policing by disclosure of the information to the EPA. The EPA has nine policy conditions required to incur a no gravity-based penalty, and the policy aids in the reduction of civil penalties and support against criminal prosecution for disclosing information (Federal Register, 2000).
The business simulation stated Bates and the Erehwon Reporter requested a copy of the EPA environmental audit report with the documentation of the violation five years ago (University of Phoenix, 2010). The Freedom of Information Act (FOIA) of 1966 law states the federal government to disclose information or release records to anyone’s request (Federal Register, 2000). The Erehwon Reporter posted an article accusing Alumina, Inc. of water contamination of Lake Dira. Alumina’s independent study showed the PAH levels were well below the EPA’s legal limit.
Considering the article by the Erehwon Reporter was untrue, Alumina can sue the paper for defamation. The false article harmed Alumina’s reputation and image in such that the organization can be rewarded by a court of law for the damages. The American Scientific Society (ASS) proved that the increase in PAH levels was due to increased boat traffic in Lake Dira. Presented is enough evidence to prove defamation of character has been committed on Alumina, Inc. , but going to trial is a lengthy and costly route. Alumina, Inc. decided that mediation would be the best route to solve the dispute for both parties involved.
Both parties settled on reimbursement of medical expenses for the daughter, an education fund if the daughter survives leukemia. Bates agreed to sign a release of all claims and strict confidentiality agreement (University of Phoenix, 2010). The simulation showed negligence to be the most common theory under which Bates based her complaints. Bates claimed Alumina failed to comply with strict EPA regulations that caused her daughter’s illness. Throughout the simulation Bates accused Alumina of contamination the water of Lake Dira of which her daughter had consumed.
Alumina’s side of defense states the contamination problem was corrected five years ago and was not the cause of Bates 10-year-old daughter’s illness. In fact, the scientific society report shows the increase in PAH levels are due to the increase of boat traffic on the water. Alumina can show that the PAH discharge levels is well within the legal limits of the EPA. Alumina’s independent study proves no new violations have occurred. Bates claim is based on Alumina’s EPA violation five years ago even though the audit shows the violations were corrected at the time of the incident.
Bates will have to prove the illness of her daughter is directly connected to the violation the occurred five years ago. Bates accusations appear to be tenuous up until this point in the case. The tort of strict liability states an organization or person can be held liable for injuries caused by an activity even without shown negligence (Cheeseman, 2010). In Alumina’s case the claim of Bates stating the manufacturing process is hazardous regardless of faults. Alumina can reduce the risks of strict liability by complying with all industry and EPA standards.
Alumina’s legal counsel can transfer such risks by seeking indemnification. The simulation showed invasion of privacy when Diane Richards wanted to conduct a private investigation of Bates. Because Bates claim was false the private investigation would cause more problems for Alumina, Inc. Bates could pursue a lawsuit with Alumina and the company could be ordered to pay punitive damages. Alumina’s image would be harmed if such a case became known to the public. Punitive damages were shown in the simulation when Bates claimed Alumina is responsible for repeated violations of EPA standards.
No evidence exists in the simulation that Alumina violated any EPA standards after the 2005 violation. There remains a risk of liability if Alumina was found guilty of negligence in the 2005 incident. The best way for Alumina to handle the issue is through arbitration. Trained arbitrators can resolve any disputes without going to court saving a business time and expenses. The arbitration process is a win-win situation for both parties involved in the dispute. In conclusion businesses must be prepared to manage and minimize any tort liabilities or regulatory risks.
The simulation shows how the public as well as press can respond immediately to the assumptions of violations a business may have committed. Alumina, Inc. must institute high organizational standards as well as the implementation of protocols for compliance with environmental regulations will create a positive image for the organization, industry, and public. Organizations have a responsibility to produce products within stated laws and regulations of the EPA and government to protect the environment, citizens, and communities.
Because of Alumina’s violation in 2005 the company has implemented state-of-the-art technology to prevent any future contamination of the water in Lake Dira. Alumia, Inc. has proved to be a productive and responsible company creating a positive organizational image and concern for the environment. References Chesseman, H. (2010). Business Law: Legal environment, online commerce, business ethics, and international issues (7th ed. ). Upper Saddle River, NJ: Pearson Prentice Hall. Scheytt, T. , Soin, K. , Sahlin-Anderson, K. , & Powers, M. (2006, September). Introduction: Organizations, Risk and Regulation.
Journal of Management Studies, 43(6). Retrieved June 14, 2010 from Business Source Complete database. The Freedom of Information Act. (2010). The National Security Archive. Retrieved June 14,2010, from http://www. gwu. edu/~nsarchiv/nsa/foia. html United States Environmental Protection Agency. (2000). Federal Register. Retrieved June 14, 2010, from http://www. epa. gov/oecaerth/resources/policies/incentives/auditing/auditpolicy51100. pdf University of Phoenix (2010). Business Regulation Simulation [Computer Software]. Retrieved June 14, 2010, from University of Phoenix, rEsource, Simulation, LAW531-Business Law Web site.