Completely answer questions 1-6, everything you need to answer the questions is attached (questions, case text, data, coaching slides). Also make slides for only question 4, thanks.
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DO IT YOURSELF CRAFT SUPPLIES – QUESTIONS
Suppose you are Chris Oliver. You have just confirmed that, for all practical purposes, Mrs. Bella
will be unable to work at all during the next ten years, including all of 2006. Write a report,
addressed to Alex Ivy, Chief Administrator of Craft Supplies, which covers the questions below.
Be sure to follow the guidelines for writing a report found in the Gateway Web Site.
Q. 1.
The data from Exhibit 3 is also in the Excel file income.xls on the course website. Use
Excel, along with this file, to determine Mrs. Bella’s real income for the last fifteen years.
Do this by first converting each price index from percent by dividing by 100. Then, divide
gross income by your converted (adjusted) price index. Using Excel, find the mean,
median, standard deviation, and variance of her past real income. Explain the meaning
of these statistics. Can you use mean income to forecast future earnings? Take into
account both statistical and non-statistical considerations.
Q. 2.
How do you interpret the price indices in Exhibit 3? How do economists construct them?
Use Excel regression to analyze the relationship between the adjusted price index
(dependent variable and year (independent variable). Interpret your regression findings
by discussing the coefficient of determination (R-squared), the regression coefficient, the
regression equation, and the p value. Can you use the regression equation to predict
the price indices? Take into account statistical, macroeconomic, and other
considerations.
Q. 3.
Assume that Mrs. Bella’s real income will not change over the next ten years. Use the
mean real income from question 1 to determine projected real income for the future ten
years of Mrs. Bella’s work expectancy. Use the regression equation from question 2 to
project adjusted price indices for the next ten years. Assume that Mrs. Bella pays 20% of
her actual income in taxes and that Green will not provide significant state assistance.
Use the projected real income and adjusted price indices to estimate Mrs. Bella’s net
actual income for the next ten years. What would be the likely amount of an award to
Mrs. Bella based on a present value rate of 8%? Discuss the factors that could cause
Mrs. Bella’s future income to differ from your estimate.
Q. 4.
Would the merchant’s defense relieve Craft Supplies from liability under the cause of
action of false imprisonment?
Q. 5.
Assuming that Craft Supplies is liable for false imprisonment and assuming that Mrs.
Bella is deemed unable to locate another job for life due to her present medical condition,
is a court likely to award her compensation for loss of future income? What standard will
a court consider in determining whether Mrs. Bella is entitled to compensation? In your
opinion, is Mrs. Bella’s settlement offer reasonable? Is she entitled to anything else in
her damage claims? Support your opinions with a discussion of the legal and practical
possibilities.
Q. 6.
What actions would you recommend should be taken to prevent a reoccurrence of a
situation similar to that involving Mrs. Bella? What company policies need to changed or
added? Discuss the relevant management issues.
Number
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Year
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Gross Income
50,599
53,109
53,301
56,885
56,745
60,493
61,978
61,631
63,297
66,531
67,600
66,889
70,024
70,056
71,857
Price Index
136.2
140.3
144.5
148.2
152.4
156.9
160.5
163.0
166.6
172.2
177.1
179.9
184.0
188.9
195.3
Adjusted Price Index
1.362
Real Income
37150.51
DO IT YOURSELF CRAFT SUPPLIES
Chris Oliver, Customer Relations Manager, for Do It Yourself Craft Supplies (“Craft Supplies”), was in a
quandary. He pondered over a memo from Lucas Williams, Loss Prevention Manager at Craft Supplies,
(Exhibit 1) and a letter addressed to him from Charlotte Bella, a customer, (Exhibit 2). What appeared to
have been a routine shoplifting incident on the part of Mrs. Bella turned out to lack evidence. To make
matters worse, the suspect was injured during apprehension. It appeared that Craft faced the possibility
of a lawsuit because of the incident. Alex Ivy, Chief Administrator, had asked Mr. Oliver to assess the
legal and financial consequences of the case, make recommendations, and report back to him.
Craft is a large stationery and drawing supplies retailer with approximately 50 stores located throughout
the State of Green. The firm has been established for many years, making steady, if unspectacular
profits.
EXHIBIT 1
MEMORANDUM
DATE:
January 3, 2006
TO:
File
FROM:
Lucas Williams, Loss Prevention Manager
SUBJECT:
Shoplifting Incident
______________________________________________________________________________
At 2:20 p.m. today, I observed a customer, Charlotte Bella, who was standing next to calligraphy sets in the store,
make a sudden move to her pocket. She then proceeded at an accelerated pace toward the exit. I noticed that her
side pocket was stuffed. I then proceeded directly to where the customer had been standing and noticed that a
calligraphy pen set was missing. It so happened that I noticed earlier that day that the calligraphy pen sets were fully
stocked up. I assumed that the customer, who I had previously observed, had shoplifted the set. As the customer
was about to leave the store by then, I began chasing after her and reached her at the store’s entrance. Fearing that I
might lose her in the crowd, I shouted at her to stop. I then grasped her by the arm and shoved her back to the store.
Apparently, the customer lost her balance and fell on her back hitting one of the checkout counters. She seemed to
be hurt a little, but then I offered to help her stand up, although she continued to limp. I then asked her if she had
forgotten to pay for something. She seemed surprised and said that she does not understand what I am talking about.
I then directed her to follow me to the Loss Prevention room. Debbie Hernandez, one of the checkout employees,
helped her walk toward the Loss Prevention room as the customer complained she was having difficulties walking
and was experiencing terrible back pain. I closely walked behind the two of them.
Per store’s protocol, I then advised the customer that she would have to wait until the store’s manager would come
back from a meeting for the investigation to begin. The store’s manager, Serena Lara, was due to return from a
meeting at 2:30 p.m. that day. Unfortunately, she only returned at 3:30 p.m. At that time, Mrs. Bella advised the
customer why she was being held up and asked her to empty her pockets. However, no calligraphy set was found.
Mrs. Bella then apologized for the inconvenience, gave her a $25 gift certificate, and wished the customer well.
I really did not mean to hurt the customer, but apparently her fall did some damage to her as she kept complaining
that her back hurts.
EXHIBIT 2
Charlotte Bella
2235 Yolanda Avenue
Green City, Green
February 18, 2006
Alex Ivy, Chief Administrator
Do It Yourself Craft Supplies
111 Bright Blvd.
Rose City, Green
Re: incident dated January 3rd, 2006
Dear Mr. Ivy:
Based on permanent injuries inflicted on me by one of your employees while falsely imprisoning me on January 3 rd,
2006, I demand compensation in the sum of $765,000 in medical care expense and $500,000 for loss of future
income.
On January 3rd, 2006, I came to your store to locate some art supplies for my daughter’s art project at school. While I
was examining a number of calligraphy sets that you had on the shelves, I was not able to find the calligraphy set my
daughter’s teacher requested. Rushed to make it back to an appointment I had with a client that afternoon, I headed
toward the store’s exit. As I was about to leave the store’s premises, I heard someone shout behind me ordering me
to stop immediately while using some foul language. When I looked back, I saw a six-foot, two hundred pound man
grabbing my arm and shoving me back to the store. Due to the tremendous force of that shoving, I lost balance and
fell on my back, right against one of the store’s checkout counters. I immediately felt extreme pain in my back and
was unable to move. I was then helped out by a store’s employee and was ordered to go to the Loss Prevention
room. I was told that police would be called to the premises if I did not directly go the Loss Prevention room. There
were approximately twenty-five customers watching me as I was escorted to the Loss Prevention room. I felt
extremely embarrassed by the ordeal. Once we got to the Loss Prevention room, I asked the man, who accosted me
at the store’s entrance and who then followed me to the room, the reason for my detention. He then mentioned that it
is against the store’s policy for him to discuss the matter further and that I would have to wait for the store’s manager.
Almost an hour later, the store manager, Ms. Bella, arrived. At that point she notified me that I have been detained
because one of the store’s employees had observed me stealing a calligraphy pen set. I immediately denied any
involvement in the matter and offered to empty my pockets. Ms. Bella was then satisfied that I have done nothing
wrong. She politely apologized and allowed me to leave the store’s premises.
Later that afternoon, I was admitted to Ceder Sinai Hospital emergency room as I was experiencing severe back pain
arising out of my fall earlier that day. That same night, a team of surgeons operated on my back as the condition
severely deteriorated. However, they were unable to successfully treat the back injuries in this and in two other
surgeries that followed. I am now diagnosed with an abnormal degeneration of my spine resulting in irreparable back
injury and permanent disability. This condition prevents me from ever walking again or from ever sitting down for
more than ten minutes at a time. As a result of this permanent condition, I had to quit my job as a regional
salesperson for Weise, a pharmaceutical company. My doctor’s diagnosis indicates that these injuries to my back
would prevent me from ever working again.
Besides my past and future medical bills, I am also demanding that you compensate me for loss of future income. As
a fifty-five year old, highly successful career woman in the field of pharmaceutical sales, I am now deprived of any
prospects of employment for the rest of my life. I am attaching a copy of my gross yearly income from my sales
position during the last fifteen years. (See Exhibit 3).
Please respond to my settlement offer on or before April 15. I hope this matter could be resolved amicably.
Sincerely,
Charlotte Bella
Enclosures
EXHIBIT 3
Number
Year
Gross Income
Price Index*
1
1991
50,599
136.2
2
1992
53,109
140.3
3
1993
53,301
144.5
4
1994
56,885
148.2
5
1995
56,745
152.4
6
1996
60,493
156.9
7
1997
61,978
160.5
8
1998
61,631
163.0
9
1999
63,297
166.6
10
2000
66,531
172.2
11
2001
67,600
177.1
12
2002
66,889
179.9
13
2003
70,024
184.0
14
2004
70,056
188.9
15
2005
71,857
195.3
* Source: U.S. Department of Labor, Urban Consumers, 1982 – 1984 = 100
Required:
Suppose you are Chris Oliver. You have just confirmed that, for all practical purposes, Mrs. Bella will be
unable to work at all during the next ten years, including all of 2006. Write a report, addressed to Alex
Ivy, Chief Administrator of Craft. Be sure to follow the guidelines for writing a report found in the Gateway
Web Site.
To prepare for this case, you may want to review business law LDC concepts 2 and 9, financial
accounting LDC concept 7, macroeconomics LDC concept 1, and statistics LDC concepts 1, 4, and 8.
DO IT YOURSELF CRAFT SUPPLIES LIBRARY
PAUL CALDWELL, PLAINTIFFRESPONDENT, v. TODD
KHLER DEFENDANT-APPELLANT
A-108 September Term 1993
Supreme Court of Green
March 14, 1994, Argued
July 6, 1994, Decided
PRIOR HISTORY: [***1]
COUNSEL: W. Stephen Leary argued the
cause for appellant.
Raymond T. Roche argued the cause for
respondent
OPINIONBY: HANDLER
OPINION:
On May 21, 1987, Todd Khler (hereinafter
defendant), who was operating a car struck
the rear end of a disabled vehicle at or near
the shoulder of the Pulaski Skyway. The
disabled car had stalled in the right lane of
the roadway and its owner, Deloris Haynes,
had left the car to seek help. Plaintiff, Paul
Caldwell, who remained in the disabled
vehicle, was injured by the impact. Caldwell,
who was thirty-five-years-old at the time of
the accident, was examined and treated
over the years by various doctors and
hospitals. For almost a year after the May
1987 accident, Caldwell continued treatment
with Dr. Sherman, a board-certified
internist, who initially treated Caldwell for a
spasm, tenderness, and a reduced range of
motion in his back. Despite Caldwell’s
treatment, he remained in pain. Eventually,
Dr. Sherman suspected the “possibility of
tuberculosis of the spine.” Dr. Sherman
testified that in his opinion “the accident
unmasked or reactivated latent tuberculosis”
because he could find no other provoking
factors, and medical literature indicated that
“significant auto trauma can be a provoking
factor.”
Later, Caldwell began treatment with Dr.
Lee, an orthopedic surgeon. In late 1990,
Dr. Lee admitted Caldwell to the hospital
because Caldwell was still experiencing
back pain and his “right leg was still getting
numb every now and then.” Caldwell
testified that Dr. Lee told him he had
tuberculosis of the spine. Dr. Lee’s
discharge summary indicated the final
diagnosis as post-traumatic lumbosacral
sprain with spasms, psoas abscess with
multiple lumbar abscesses, suspected
tuberculosis, and osteomyelitis with
destruction of certain vertebrae. Apparently,
Dr. Lee’s antibiotic treatment of Caldwell
ended the progress of the disease. No
evidence suggested that further destruction
of spinal bone or other increase in disability
had occurred or would occur in the future.
Caldwell testified that his back pain was
“sharp,” he was “in constant pain every
day,” and “everything became a problem,”
including tying his shoes, walking, and
driving. Caldwell denied ever having had
any back pain before the accident.
Before the accident, plaintiff had been
employed for two to three years as a general
laborer by a construction company that
repaired bridges and tunnels. At the time of
the accident, Caldwell earned $25.65 per
hour and worked forty or forty-five hours per
week, although his hours varied, seemingly
due to the seasonal nature of the work. After
the accident Caldwell missed three months
of work.
Caldwell testified that at the construction
company he earned an average gross
weekly income of about $ 1,000. His
testimony suggested that his pre-accident
annual salary before taxes had been about $
44,000. Caldwell stated that in 1987, the
year of the accident in which he missed
three months of work, he had earned $
33,000. However, Caldwell estimated that
his gross wages for the previous year in his
work for the same company were only
“twenty something” thousand.
After the accident and the three-month
absence, Caldwell continued working for the
company, with lighter work assignments but
at the same salary, until July 1990, more
than three years after the accident. In July
1990, the company discharged Caldwell.
Caldwell testified that he had been fired
because he could no longer “do the
strenuous work that it would take to do . . .
the lifting, and other things like that.”
Caldwell also stated that “[b]eing terminated
with a construction company means you
can be fired one day and back at work the
next day just because, you know . . .
[t]here’s quite a few they would fire one
week, hire back the next week. So I was just
one of them.” That was the first time the
company fired Caldwell. He did not seek to
be rehired. Caldwell remained unemployed
for a period of eighteen or nineteen months.
In February or March 1992, he found work
driving a senior citizens’ van twenty hours a
week at $ 5.50 per hour. At the time of trial,
Caldwell was earning a little over $ 6,000
per year. He said he was capable of driving
a full week, but the job offered only twenty
hours. Thus, in addition to the initial threemonth absence from work, Caldwell missed
eighteen or nineteen months between the
construction and the driving job. Then, he
worked part-time during a five- or six-month
period during which he had the twenty-hourper-week driving job.
Ultimately, the jury found defendant Todd
Khler 100% liable and awarded Caldwell a
total of $1,550,000: $ 50,000 for past lost
wages and $ 1.5 million for future lost
wages.
On appeal, defendant-appellant sought an
order for a new trial on the computation of
future lost wages.
663 (App. Div.1992). The verdict must shock
the judicial conscience. Carey v. Lovett, 622
A.2d 1279 (1993).
III.
The principal goal of damages in personalinjury actions is to compensate fairly the
injured party. Deemer v. Silk City Textile
Mach. Co., 475 A.2d 648 (App.Div.1984).
Fair compensatory damages resulting from
the tortious infliction of injury encompass no
more than the amount that will make the
plaintiff whole, that is, the actual loss. Ruff v.
Weintraub, 519 A.2d 1384 (1987). “The
purpose, then, of personal injury
compensation is neither to reward the
plaintiff, nor to punish the defendant, but to
replace plaintiff’s losses.” Domeracki v.
Humble Oil & Ref. Co., 443 F.2d 1245, 1250
(3d Cir.), (1971).
A.
An injured party has the right to be
compensated for diminished earning
capacity. Smith v. Red Top
Taxicab Corp., 168 A. 796 (E. & A.1933).
The measure of damages for tort recovery
encompassing diminished earning capacity
can be based on the wages lost as a result
of the defendant’s wrongdoing. Ibid. That
measure includes the value of the decrease
in the plaintiff’s future earning capacity. Coll
v. Sherry, 176, 148 A.2d 481 (1959). When
the effects of injury will extend into the
future, “the plaintiff is entitled to further
compensation — for [the] capacity to earn in
the future has been taken from the plaintiff,
either in whole or in part.” Robert J.
Nordstrom, Income Taxes and Personal
Injury Awards, 19 Ohio St.L.J. 213, 217
(1958).
II.
In assessing whether the quantum of
damages assessed by the jury is excessive,
a trial court must consider the evidence in
the light most favorable to the prevailing
party in the verdict. Taweel v. Starn’s
Shoprite Supermarket, 276 A.2d 861
(1971). Therefore, a trial court should not
interfere with a jury verdict unless the verdict
is clearly against the weight of the evidence.
Horn v. Village Supermarkets, Inc., 615 A.2d
However, the evaluation of such a decrease
in future earning capacity is necessarily
complicated by the uncertainties of the
future. Although generally objectionable for
the reason that their estimation is
conjectural and speculative, loss of future
income dependent upon future events are
allowed where their nature and occurrence
can be shown by evidence of reasonable
reliability. Case precedent recognize and
apply the general principle that damages for
the loss of future income are recoverable
where the evidence makes reasonably
certain their occurrence and extent. The
award of damages for loss of future income
depends upon whether there is a
satisfactory basis for estimating what the
probable earnings would have been had
there been no tort. A satisfactory basis for
an existing basis may include reliance on
specific economic or statistical models
based on past earnings record. See Tenore
v. Nu Car Carriers, Inc., 67 N.J. 466, 494,
341 A.2d 613 (1975). The “proper measure
of damages for lost future income in
personal-injury cases is net income after
taxes.” Ruff, supra, 105 N.J. at 238, 519
A.2d 1384.
The net-income rule embodies the principle
that “damages in personal-injury actions
should reflect, as closely as possible, the
plaintiff’s actual loss.” Ibid.; see Te …
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