In the case, Margolin vs. Novelty Now Inc., the three founders of the aftershave Funny Face Ian, Matt, and Chris are sued by one Donald Margolin who alleges to have bought the product from the internet which later on caused a permanent blue shade on his face. The two laws, FPLA (Fair Packaging and Labelling Act) and FD & C Act (Federal Food, Drug, and Cosmetic Act) play part in the regulation of cosmetic products. The three founders reside in California whereas the Novelty Now Inc., the product manufacturer is located in Florida. By looking deeper into the case, Margolin’s suit was filed in New York where he procured and used the product from. Since the laws governing this case are federal laws, both the federal and state branches of government may be involved. Also, putting into consideration the parties involved in the case, the jurisdiction question arises.
In the U.S, the federal court system has full jurisdiction across the following cases involving bankruptcy, admiralty, trademarks, patents, federal copyright, lawsuits between states, and federal criminal prosecutions (Kubasek, 2011). For our case, it fails to meet the criteria of the Federal system of exclusivity but the case of citizenship diversity may apply. For the case of Diversity of Citizenship to play a part, two standards must be met; the dispute must involve a case above $75,000 and the plaintiffs and defendant(s) must reside in different states (Kubasek, 2011). Since the plaintiff and defendant live in different states in this case, an essential jurisdiction question arises, should a New York court preside over the case where the defendants do not live but the complaint was filed? For the case proceedings to preside in New York, there has to be proof that minimum contact standards have been met by the defendants. Provided that the defendant meets minimum contacts, the statutes of Long Arm grant the court the ability to serve outside the state (Kubasek, 2011). Since the Funny Face is delivered through the internet, it is virtually accessible at any location hence in the New York state, the Long Arm statutes may apply. Additionally, in the contract agreement between the three individuals and Novelty Now Inc., all disputes are to be settled in Florida.
In the litigation process, Magolin files a complaint that Novelty Now Inc., and the three individuals Matt, Ian, and Chris stating that the cosmetic product Funny Face formed a permanent blue shade on his face hence damaging his business reputation. Later on, the sued parties, file a Motion to Dismiss stating that even though the allegation made by Margolin is true, they cannot be sued, as stipulated in the website hence no legal claim exists. In the event, the judge rules in Magolin’s favour, the case proceeds where evidence is gathered and key witnesses and experts identified. However, the sued parties may decide to file a Motion for Summary Judgement if the evidence fails to support Margolin’s claim. If the judge ruled in the favour of the sued parties, the case is dismissed. However, if the judge rules in favour of Margolin, the case proceeds to trial where arguments and evidence presented is done before a jury where evidence is evaluated to issue a ruling. At the end of the process, the loser is accorded the chance to appeal.
Since the company’s disclaimer does not dismiss taking ADR (Alternative Dispute Resolution) as a course of action, one may argue that this may also be the most logical course of action. By choosing to utilize this approach, the parties in dispute may reach a settlement or agreement in a shorter period compared to taking legal action. Additionally, this approach has the advantage to have a significant effect on overall cost savings. This approach is cheaper and often time-saving as compared to courts’ conventional cases. Moreover, to limit public exposure, the cosmetic product founders may opt to resolve the case using ADR as this approach may also mitigate controversy to a strongly marketed campaign. However, since ADR hearing parameters are not as clear as course cases, Margolin may find himself at a disadvantage.
In the event ADR is agreed upon as the approach to solving the dispute, various ADR types may be considered. For instance, ADR’s simplest method, negotiation, is a kind of an informal process for bargaining. Negotiations may extend to mediation where a third neutral party is chosen to ease the negotiation process, proposing ways for dispute settlement (Kubasek, 2011). On the other hand, the parties may choose to use arbitration, which involves a third party in a judicial context (Kubasek, 2011). The two forms of ADR are often conducted in an informal setting and normally paves way for the parties in dispute to observe a positive working relationship at the same time formulating resolution ideas. Funny Face may opt for mediation or negotiation due to its informality and may ease their case burden. However, for Margolin, he would rather opt for arbitration with a neutral third party such that he is accorded more control over the procedure with choosing a third-party arbitrator.
By opting to substitute PYR to the aftershave product, despite the chemical being FDA unapproved, Funny Face may face charges of committing fraud. As defined by Kubasek (2011), criminal fraud is a deliberate act of deceit that may harm others. About SCOTUS rulings, corporate officers cannot evade accountability for crimes arising from their negligence and lack of responsibility. According to these rulings, Funny Face and Novelty Now Inc. may be held accountable for their roles in their business agreements. The defendants may be held liable with their resort to disregard FDA approvals which led to negative health concerns on Margolin. To avoid further legal action, the defendants ought to act and carry out their business proceedings following all applicable laws.
Regarding positive and negative business impacts in the event Margolin loses or wins the case, Funny Face would greatly suffer if Margolin wins the case. Not only would the firm suffer a significant financial hit, but it would also suffer from reputation damage which may, in turn, lead to a reduction in customer turnover and purchases, resulting in huge losses. Margolin’s win would harm Funny Face. However, if Funny Face would win the case, the financial costs to compensate Margolin would be avoided, and the firm accorded with a second chance to build their reputation among the customers. While the publicity due to the case would result in a certain degree of consumer purchases, a loss for Margolin and a win for Funny Face would play in the business’ favour as they are likely to maintain their innocence to the public and consumer.
FDA Authority over Cosmetics: How Cosmetics are not FDA-Approved but are FDA Regulated. Retrieved October 19, 2019, from http://www.fda.gov/Cosmetics/GuidanceRegulation/LawsRegulations/ucm074162.html.
Kubasek, N.K., Browne, M.N., Herron, D.J., Giampetro-Meyer, A., Barkacs, L.L., Dhooge, L.J., & Williamson, C., (2012). Dynamic Business Law 2nd Edition. New York, NY: McGraw-Hill/Irwin
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