Unit 1 Business Law Alternative Dispute Resolution (ADR) Case Analysis


Case Analysis

In light of your understanding of the civil and alternative dispute resolution (ADR) process, consider the following scenario:

Pete was seriously injured when the four-wheeled all-terrain vehicle (ATV) he was driving through the trails behind his house rolled over. As a result of his injuries, Pete is unable to work and has incurred $75,000 in medical bills. Pete has filed a lawsuit against the ATV manufacturer to receive compensation for the financial harm resulting from his injuries. Pete claims that the manufacturer defectively designed the ATV, causing it to have a tendency to roll over on rough terrain.

The ATV manufacturer claims that the ATV is not defectively designed and that the rollover was caused by Pete driving at an excessive rate of speed around a corner.

Consider the steps in civil litigation and ADR, and assess the factors that Pete and the ATV manufacturer will consider when deciding whether they should settle this lawsuit. If you were Pete’s lawyer, what resolution would you advise? Be sure to consider the primary forms of ADR and all ADR factors described in the lesson and textbook.

Finally, research and select at least one case from an outside source to support your resolution to the ATV case. Your answer should be a minimum of 500 words. Cite any direct quotes or paraphrased material from these sources. Use APA format to properly reference your information.

The Nature of Law, Judicial Process,
and Alternative Dispute Resolution
Course Learning Outcomes for Unit I
Upon completion of this unit, students should be able to:
4. Demonstrate research skills using all modalities available for legal issues.
4.1 Identify the various forms of alternative dispute resolution (ADR).
Reading Assignment
Chapter 1: An Introduction to the Fundamentals of Dynamic Business Law
Chapter 3: The U.S. Legal System and Alternative Dispute Resolution
Unit Lesson
Introduction to Business Law
Law—a brief definition: Business law is defined law as “the enforceable rules of conduct that govern the
actions of buyers and sellers in market exchanges” (Kubasek, Browne, Herron, Dhooge, & Barkacs, 2016,
p. 3). Business law intersects with the six functional areas of business. These include corporate management,
production and transportation, marketing, research and development, accounting and finance, and human
resource management. These are the core activities in business, and the law plays a significant role in all
(Kubasek et al., 2016).
Law is dynamic, and in some senses, it is a living thing. This core concept requires understanding of the
origins of law. Law embodies fundamental rules of behavior and the institutions of defining, changing,
clarifying, refining, redefining, and applying these rules. It is the natural consequence of humans living and
working together. For an ordered society to exist, there has to be a way to resolve the inevitable disputes that
come up. Law can be seen as the activity of subjecting human conduct to the governance of rules. Business
law encompasses the rules of conduct for commercial relationships.
What are the roots of law? At some point in your upbringing, you learned the difference between right and
wrong. Your home life and the experiences you had in school, church, and/or in the larger community all
impacted your viewpoint on right and wrong.
One way to classify law is private versus public law. Private law is for resolution of disputes between private
individuals or groups, whereas public law addresses disputes between private individuals or groups and their
government. Both private and public law are significant for business law.
Another classification is civil versus criminal law. Civil law governs the rights and responsibilities either
between persons or between persons and their government. Criminal law is the body of laws that involves the
rights and responsibilities an individual has with respect to the public as a whole. A clear example of the
dichotomy was displayed in the O.J. Simpson trial—O.J. was found not guilty in his criminal case for the
murders of Nicole Brown Simpson and Ronald Goldman, but he was found to be legally responsible for their
deaths in his civil case.
Law evolves. It predates recorded history. In the early days of human existence, laws were created one by
one, as disputes arose and were settled. These early laws existed before written law and before courts of law.
For thousands of years, societies created and evolved customary legal systems that reflected how a certain
group of people treated one another. The customary or private laws of one group of people could vary from
those of another group.
BBA 3210, Business Law
Current laws in the United States reflect how society has shifted away from the
private law
systems to a mixture of customs and ways. This shift resulted in the need for laws
Titleto coercively be enforced
by the state—by government.
Sources of business law: There are different sources of law in the United States. Law comes from
constitutions, statutes or legislative actions, case law or precedent, administrative law, treaties, and executive
Statutory law is law created by a legislative body, either at the federal level or the state level. Common law is
judge-made law. If similar cases arise in the future, there is a good chance the court will use the same rule of
law generated from those previous cases. This consistency is known as stare decisis or “let the decision
stand.” As a result, we have precedent, and future judicial bodies may refer to the previous similar case and
The U.S. Constitution and federal laws are considered the supreme law of the land. Additionally, each state
has its own constitution and laws. The relationship between the federal constitution, federal laws, state
constitutions, and state laws is complex. The Supremacy Clause of the U.S. Constitution mandates that all
state judges follow federal law when a conflict arises between federal law and either a state constitution or
state law. Case law establishes precedent. Generally, courts will adhere to the previous rulings in similar
cases, although this is not universally true.
There are over 100 federal administrative agencies that also create law. This will be the subject we address in
Unit II. For example, a treaty, such as the North American Free Trade Agreement, is also a source of law.
Executive orders come from the President of the United States and are also considered law.
Judicial Process and Alternative Dispute Resolution
General terms: Key terms that must be understood to develop an understanding of business law include
plaintiff, defendant, trial courts, appellate courts, questions of law versus questions of fact, complaint, and
Plaintiffs are listed first in a dispute because they are the party that initiates a lawsuit. In criminal cases, this
party is the government. The defendant is the person who must answer to the suit or charge. A trial court is
where the plaintiff first files the complaint or summons. At trial, the parties present their cases, calling
witnesses for testimony. This is also the time to present and explain any other pieces of evidence that may be
pertinent to the case. The jury weighs this evidence and determines what they believe actually happened. The
jury is often called the finder of fact, meaning they answer questions of fact. The judge controls the activities
in the courtroom, including answering questions of law, making decisions, and presenting the final verdict.
An appellate court reviews the trial court’s application of the law. There is no jury in an appeal, nor do the
lawyers present witnesses or, typically, other forms of evidence. Generally, the appellate court will accept the
facts as they were revealed in the trial court and make a decision based on the prior record.
Jurisdiction: Jurisdiction is the official power or authority to make legal decisions and judgments. There are
different jurisdictions with different degrees of power. The jurisdiction of a court has significant implications on
the decisions that can be made and which levels of the legal system can be used to conduct or appeal a
case. Types of jurisdiction include original, appellate, in personam, and in rem.
In addition to these distinctions, there is the subject-matter jurisdiction. There are exclusive federal
jurisdiction, state jurisdiction, and concurrent federal jurisdiction (i.e., sometimes both state and federal court
systems have jurisdiction). Kubasek et al. (2016) stated that there are two types of cases with concurrent
1. Federal question cases: These require interpretation of the Constitution, a federal statute, or a federal
2. Diversity-of-citizenship cases: These occur when the plaintiff and defendant reside in different states,
and the amount in controversy is in excess of $75,000. Diversity must be complete. Defendants have
the right to remove cases from state to federal court, such as in Hertz Corp. v. Friend (2010).
BBA 3210, Business Law
Threshold requirements for a court case are the three requirements that must UNIT
be met
before aGUIDE
court will hear
a case. These are standing, case or controversy, and ripeness. All three mustTitle
exist before a case can
proceed to court.
Settlement: In some situations, legal settlement may be better than undergoing a full trial. The key reasons
are expense, stress, privacy, time, finality, and flexibility. Additionally, in a settlement, there may be no verdict
of guilty or not guilty because the defendant (person or party on the defensive) may not want a record of guilt.
Settling a case is a way to pay for a mistake without having to admit wrongdoing (Shvartsman, 2015).
Alternate dispute resolutions: There are a variety of other options called alternative dispute resolutions
(ADRs) that involve the resolution of a dispute by a neutral third party outside the judicial setting. The types
most commonly used by businesses today primarily include negotiation, mediation, and arbitration. These can
have significant benefits in comparison to resolution through the justice system. The benefits can be to save
time and money, avoid uncertainty of a jury decision, avoid setting a precedent, maintain confidentiality,
and/or to preserve a business relationship.
Arbitration is one of the most frequently used methods of ADR. Often, arbitration is a voluntary process in that
parties have a contractual agreement to arbitrate any dispute. In this situation, there is an arbitration hearing
before a fact-finder. The decision of the fact-finder is legally binding. This is very court-like, but unlike a judge,
the arbitrator takes a much more active role in the hearing than a judge takes in a trial. Also, no official written
record of the hearing is kept in most arbitration cases.
A significant business and legal consideration is whether companies should be allowed to include binding
arbitration clauses in consumer contracts.
Hertz Corp. v. Friend, U.S. 130 S. Ct. 1181 (2010).
Kubasek, N., Browne, M. N., Herron, D. J., Dhooge, L. J., & Barkacs, L. (2016). Dynamic business law: The
essentials (3rd ed.). New York, NY: McGraw-Hill Education.
Shvartsman, S. (n.d.). To settle or not to settle? That is the question. Retrieved from
BBA 3210, Business Law

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