Synopsis
In the interactive simulation in negligence regulatory compliance, Alumina Inc. is an aluminum producing company that operates in eight countries around the world. The company has business interests in automotive components, the manufacturing of packaging materials, bauxite mining, alumina refining, and aluminum smelting. Although Alumina operates in many countries, the United States accounts for nearly 70% of Alumina’s sales figures. (UoP, 2002 )
Five years ago, in a routine Environmental Protection Agency (EPA) compliance evaluation, Alumina was reported to be in violation of environmental discharge norms. According to the evaluation results, the Polycyclic Aromatic Hydrocarbons (PAH) concentration in water test samples were above the prescribed limit. (UoP, 2002)
As a result, the EPA ordered a mandatory clean up; to which Alumina immediately complied and upon an EPA audit, received a report as the issue being “corrected.” Furthermore, up to the date of the EPA’s findings and the five years following, Alumina has had no other blemishes on its environmental regulation compliance record.
Now, five years later, a story in the local newspaper, The Erehwon Reporter, reports that Kelly Bates, a 38-year-old single mother, is making accusations that Alumina has repeatedly contaminated the water of Lake Dira with carcinogenic effluents; which is being blamed for the proximate cause of her 10 year daughter’s diagnosis of leukemia.
Risks
The threat of a lawsuit presents many risks to the well-being of Alumina. As the main threat is responsibility of negligence on the part of Alumina, there are also some subsequent torts that Alumina may be presented. If Alumina is not smart about how they go about handling the accusations of Ms Bates, they run the risk of making an already stressful and embarrassing situation even worse. As the simulation begins, the initial knee-jerk reaction by Alumina CEO, Roger Lloyd, is to perform a full background investigation on Ms Bates. As it is understandable to want to know if Ms. Bates has a legitimate case, however, then manner in which an investigation in performed can result in further legal issues. If improperly performed, Alumnia can be breaching an invasion of privacy; which holds especially true where minors are involved. Such provisions as the HIPPA Act and COPPA can prevent Alumina from obtaining certain information legally. However, Alumina can use sources from public records to obtain information. A second option, which is probably in the best interest of Alumina is to conduct an independent audit. The EPA independent audit is designed to provide major incentives for regulated companies that voluntarily discover, disclose, and correct noncompliance, rendering formal EPA investigation and enforcement action unnecessary. In addition, disclosures are often preceded by consultations between EPA and the company, so that mutually acceptable disclosure details and compliance and audit schedules can be discussed. If policy conditions are met, most penalties may be waived and further civil or criminal prosecution may not be pursued. (EPA.gov, 2011) This option would demonstrate that Alumina is within the compliance for EPA regulations. Another avenue that presented itself in the simulation was the ongoing publications by the The Erehwon Reporter and its claims of repeated negligence by Alumina. The newspaper has contacted the EPA in efforts to receive reports in findings conducted by the EPA. While perfectly legal because of the Freedom of Information Act, which is a law ensuring public access to U.S. government records, (National Security Archive, 2009) Alumina can take the high road and disclose some of the findings themselves. In this instance, the simulation showed the Alumina management team on deciding whether Alumina should force the newspaper into printing a retraction or to disclose all of their reports and EPA findings during its evaluations. Both options put Alumina in a precarious situation as forcing the newspaper to print a retraction without proving proof in its defense could further tarnish Alumina’s public image. Furthermore, Alumina may also threaten The Erehwon Reporter with a defamation and/or slander lawsuit. Again, this type of publicity could only hurt Alumina’s reputation. The logical solution, according to the simulation, was to disclose a small portion of EPA findings; just enough to disprove The Erehwon Reporter’s allegations’. This move not only ensured that there would be no legal ramification’s as well as maintaining the reputation and standards that Alumina has worked so hard to build.
Lawsuit
Even after Alumina was able to work its way though some difficult legal matters in dealing with contamination allegations, Ms. Bates has continued to threat a 5 million dollar lawsuit against Alumina to recover compensatory and punitive damages. While neither side can prove the cause for Ms. Bates’ daughters’ diagnosis of leukemia, the threat of a verdict of negligence is still imminent. Therefore, Alumina must weigh its options on how to best remedy this situation. One option could be for Alumina to take the “public relations” side and offer a settlement to help pay for Ms. Bates medical expenses. However, this would lead the public to believe that Alumina is indeed guilty of negligence and is trying to “buy” their way out of court. Another route could be to reaffirm their innocence and make Ms Bates prove Alumina was negligent in court. Unfortunately, Alumina would potentially have a great deal to lose in the event they received a guilty verdict. The third and best solution would be for Alumina and Ms. Bates to seek arbitration. Resources such as the American Arbitration Association (AAA) provide arbitrary services to organizations and individuals who wish to settle their cases out of court. (American Arbitration Association, 2007) Arbitration offers a quicker resolution than the court system, is less expensive, and offers a definitive resolution. Furthermore, the decision in an arbitration case is confidential; thus eliminating the threat of negative publicity.
Conclusion
The simulation on negligence and regulatory compliance provided a very good representation of the types of legal scenarios that organizations face on a daily basis. In addition, the interactive solution method really lets one educate themselves on how to handle stressful situations in the best manner. Sources
The National Security Archive (2009). The Freedom of Information Act (FOIA). Retrieved March 5, 2011 from http://www.gwu.edu/~nsarchiv/nsa/foia.html
U.S. Environmental Protection Agency (2011). Compliance Incentives and Auditing. Retrieved March 6, 2011 from http://www.epa.gov/oecaerth/incentives/auditing/auditpolicy.html
American Arbitration Association (2007). About Us. Retrieved March 6, 2011 from http://www.adr.org/about
University of Phoenix (2002). Legal Environment of Business – Business Regulation Simulation. fromhttps://ecampus.phoenix.edu/secure/aapd/vendors/tata/sims/legal/regulation/legal_regulation_frame.html