Recognizing and Minimizing Tort and Regulatory Risk
Hector Sierra
University of Phoenix
Law 531

Businesses deal with tort liability and management in the day to day operations. Minimizing tort liability is a key factor in operating a successful business. Alumina Inc., has developed a plan to prevent, identify and implement corrective measures for handling tort liabilities.
Recognizing and Minimizing Tort and Regulatory Risk Alumina Inc. is a $4bn U.S. based international aluminum company with eight locations worldwide. Alumina Inc. falls under certain government regulatory agencies and laws such as The Environmental Protection Agency (EPA), Occupational Safety and Health Administration (OSHA), and CERCLA. Alumina Inc. was reported to be in violation of environmental discharge five years ago. Even though Alumina Inc. corrected the violation, Alumina Inc. still faces a possible bad reputation because of this incident. Alumina Inc. has had a good record ever since that incident was corrected. A local resident of the community named Kathy Bates has accused the company of repeatedly contaminating the waters of Lake Dira before. Kathy Bates has now filed a complaint against Alumina Inc. in regards to suspicion that her daughter contracted leukemia due to the consumption of contaminated water. This complaint calls for an investigation of the company’s practices with regard to the Clean Water Act of 1972. However, traffic is causing water pollution in Lake Dira as well. Increased traffic is poisoning the waters of Lake Dira with polycyclic aromatic hydrocarbons (PAHs) as much as hundred times greater than pre-urban conditions and pose a danger to animal, aquatic, and human life. While the fact remains that Alumina Inc. did violate the PAH discharge norms five years prior, the state has become heavily industrialized. The individual study that Alumina Inc. proceeded to conduct revealed that they were well within the standards, which leads to believe that Alumina Inc. is not fully responsible for the contamination. The EPA has implemented pollution control programs such as setting wastewater standards for industry and has also set water quality standards for all contaminants in surface waters. Under the provisions of this law, Kathy Bates’ complainant can legally hold Alumina Inc. responsible for the sickness if she can prove that Alumina is polluting the water in excess of standards set by the EPA for maintaining clean water. The EPA works with several federal agencies, state and local to prevent accidents and maintain superior response capabilities.
Issues
Kathy Bates is seeking compensation for damages. Due to Alumina Inc’s tort of negligence five years prior, Kathy Bates has a justifiable reason to pursue litigation for her daughter’s case. Alumina Inc. also faces another violation of EPA standard laws regarding the contamination of water. An accusation such as this could definitely damage the company’s name an public image. Another issue Alumina Inc. faces is defamation by the media. As we all know Kathy Bates lead the media to develop a story without supporting facts regarding Alumina Inc’s involvement in the whole dilemma. Kathy Bates is no stranger to Alumina Inc’s prior incident, which creates an assumption of risk on her part in the consumption of water. Since the claim is rooted towards prior performance by the company, public perception will be a central motivator in resolving the issue. This liability could have been reduced considerably by Alumina by allowing public awareness of federal regulatory improvements and compliance over the last five years. However, Alumina Inc. is indeed overall responsible for controlling their PAH standards. It is obvious that Kathy Bates is seeking some type of compensation for damages caused, so Alumina Inc. is facing litigation proceedings, although it is not finalized. Alumina Inc. has the ability to introduce mediation to Kathy Bates which might be the best route to take. Finding a solution for a problem after the damage has occurred does not create room for excuses regarding the issue at hand. With proper management, Alumina Inc. can develop several ways to find resolution for the issue at hand and create preventative measures to manage each risk.
Risk management Alumina Inc. is without a doubt facing a serious issue with the public. The first step that Alumina Inc. must take is to handle the situation at hand by suggesting mediation with the defendant. Alumina Inc. has the ability to avoid serious punitive damages by attempting to find a resolution between Kathy Bates and the company. Mediation will allow both parties to make suggestions in regards to reasonable compensation. Alumina Inc. and the defendant both found that reimbursement for past medical expenses as well as a college fund was reasonable compensation for both parties. This agreement avoided further litigation proceedings, costly court fees, and bad publicity. Mediation will definitely be the first step to handling similar situations. Defamation of Alumina Inc. by the media caused trauma to the company’s reputation for a brief time. Although the FOIA states that Alumina Inc. can withhold sensitive business information and any other deemed confidential from public dissemation, Kathy Bates and the media decided to proceed with the controversy. In order to prevent further damage via media, Alumina Inc. made the best decision of releasing partial information of the environmental audit report because doing so will not affect the company’s global competitiveness. Furthermore, Alumina Inc has the right to send a letter to the media in regards to retraction of any published information without supporting facts. This will prevent the company from having a negative appearance in the public’s eyes. These risks are the most impacting and relevant when compared to Alumina’s prior liabilities. These preventative measures would have kept consistency with positive business practices. Furthermore decreasing the threat of the defamation brought on by the local resident and the media as well as the violation of EPA standard laws. Without effective preventative measures implemented, the company will need to provide detailed detection on a case by case basis. Any data regarding the company’s results in meeting the federal regulations guidelines that are found to be untruthful will be weighed heavily against Alumina. To prevent information offered to the public from becoming a liability the company will need to centralize and scrutinize all information. An effective strategy for Alumina Inc. would be to hire a good PR representative in order to take action in a case such as this. The public relations representative must verify the content and public perception of information presented as prior to it being released to the public. Risk management will be performed to evaluate public response as well as accuracy. Some information even if factual is not always delivered accurately. In this case with the accusation of an EPA violation, the claimant states that child is sick because of Alumina’s neglect. The company must develop an effective response to include empathy, in order to persuade the public that the incident was indeed isolated. If the public continues to view the company in the same negative way, the company will need to apply corrective measures to counteract the public’s perception. Allowing partial audit information to be viewed by the media and Kathy Bates, Alumina Inc. is using an effective strategy to regain public trust and positive perception. However, the release of the company audit documents for investigation purposes, needs to be anticipated as a possible risk. In this regard, Alumina Inc. is protected under the FOIA. But the perception is that if the company doesn’t have anything to hide then it will happily deliver the information. This issue could have been prevented if the company made certain information readily available to the public for issues such as this. The public need to be informed can be confirmed by new inquiries or changes in the industry, accusations, and lawsuits. In the case brought against Alumina Inc. the accuser was on a fact finding mission to help support the claim. In conclusion, this review of tort liability and regulatory risks as identified is a guideline to managing risk in any company. Alumina Inc. can use this analysis to manage the three identified risks as preventative, detective, and corrective measures. Each risk can now be managed more effectively prior to an incident and even once the incident occurs. Risk management is part of making a business successful. Without development of a contingency plan, businesses create more of a liability for themselves.