Legal Environment of Business

I. You own a coffee shop. You take great pride in the coffee you serve, and always make sure that it is served nice and hot. One day while you are on vacation, the person you hired as manager of the shop decided to make a change in how the coffee is served. Several customers complained that the coffee was not hot enough, so the manager decided to turn up the heat on the coffee maker to its highest setting.

Shortly thereafter, the manager heard a loud scream from a customer who said: "The lid fell of my cup and the hot coffee spilled on my lap. I have been burned." The customer was rushed to the hospital where she was treated for third degree burns over 16% of her body. The customer decides to sue YOU for the cost of her medical care and for pain and suffering. What is the basis for her lawsuit and will the customer win? Fully explain your answer.

II. You are the CEO of a small hospital located in a southeastern state. You have successfully competed with larger hospitals in the area because your hospital is more efficient than the larger hospitals, and you have a dedicated staff of doctors who have remained loyal to you despite receiving lower pay than doctors at the large hospitals.

Your hospital serves a rural population of mostly lower middle-class farm families who work small tracts of land. Most of those small farms have been passed down from generation to generation. In addition, your hospital serves a large population of immigrant families who work as farm hands on the local farms. Most of these families live at or below the poverty level. Yours is the only hospital within 50 miles.

Recent news reports have caused you great concern. Several of the large hospitals have been successfully sued by patients who claimed they were injured as the result of medical malpractice. At least six hospitals have paid out multi-million-dollar damage claims, some of which included punitive damages.

You realize that even one such lawsuit would likely put your hospital out of business. At a recent conference of small rural hospitals that you attended, several CEO's warned that ours had become a very litigious society and that small hospitals need to protect themselves from these frivolous lawsuits. One speaker suggested that the tort laws should be changed to prevent these huge damage awards.

The more you listened, the more you realized that these kinds of lawsuits could destroy your business, leaving many patients without hospital service. The last speaker at the conference was a lobbyist hired by the hospital industry to try to convince the state legislature to pass, among other things, a law placing a cap on damage awards for medical malpractice. He invited all interested hospital CEO's to join in the effort to reform the tort law.

One of the members of the Board of Directors of your hospital also attended the conference. She has reported back to the full Board. As a result, the Board has voted to support the idea of tort reform. The Board has directed you to present, at the next meeting of the Board, a plan for tort reform in your state. Describe, in detail, the plan for tort reform that you will present at the next Board meeting.