Eskew Lamb & Furness Convenience, Inc. ("ELF") owns and operates convenience stores ("C-stores") - with gas stations and a robust retail inventory - throughout New England. ELF has about 2000 employees, ranging from minimum-wage cashiers to C-Suite executive employees. The stores sell alcoholic beverages, tobacco and e-cigarettes, and typical convenience store items. It uses a different supplier for each of those categories of products. If ELF is to make sound business decisions, its management team must be aware of a broad array of legal considerations. Sometimes, legal principles may constrain ELF's business decisions; at other times, the law may prove a valuable ally of ELF in the successful operation of the firm's business.

Of course, the ELF management group will rely on the advice of in-house counsel or outside attorneys who are in private practice. The approach of simply "leaving the law to the lawyers," however, is likely to be counterproductive. It will often be up to non-lawyers to identify a potential legal issue or pitfall about which ELF needs professional guidance. Failing to spot an issue in a timely manner may allow legal problems to develop and fester, and even the most skilled attorneys may have difficulty rescuing the firm from the resulting predicament.

On the other hand, failure to identify a legal consideration can mean a failure to seek advice in time to obtain an advantage that applicable law would otherwise have provided, and the corporation may lose out on a beneficial opportunity.

Ivan's Candy Bars are manufactured in Malaysia by Roi's Confections and imported by ELF for sale in its stores. News reports state that a recent shipment has been found to contain ethylene glycol, but this has not been confirmed by the FDA, which says, "We are awaiting test results and urge caution."

Assume you are a manager in ELF's corporate headquarters and aware that ELF sells Ivan's. In fact, you make a habit of stopping at ELF Marts when you are traveling around the New England area and have occasionally picked up an Ivan's bar.

Before these reports, Lizzie buys an Ivan's Peanut Butter Delight Bar at her local ELF Mart and allows it as a treat for her five year old daughter, Amy. That night, Amy becomes quite ill with symptoms that look very much like ethylene glycol toxicity.Doctors initially think she has stomach flu and treat her with Tylenol and fluids. Amy's condition worsens, and she experiences a small seizure. After consultation with a medical toxicologist, treatment changes are instituted.

Amy ultimately recovers but while she is ill, Lizzie misses a week of work and is fired from her job. Assume that her firing is consistent with the "employment at will" philosophy that undergirds work policy in the United States.

Additionally, the medical bills exceed insurance coverage.

ELF finally receives notice from the FDA about high levels of ethylene glycol in the Ivan's Bars.The FDA Consumer Products Act prohibits the presence of ethylene glycol in more than 10 parts per million in products intended for human consumption.The FDA also reports that the Malaysian factory appears to have closed and so further information ELF updates its in-store notice.

ELF Marts start advertising that they have the CHEAPEST BEER IN TOWN!!New Hampshire, alarmed that price contests will encourage people, especially young drinkers, to buy more beer and thus, consume more alcohol, passes a statute prohibiting any alcohol advertising that mention price in a comparative way, i.e., cheapest, discount, low low price, etc.Vendors may mention the actual price, however.

ELF Mart's biggest competition are liquor stores, and its beer sales are important to the bottom line.ELF Mart employees are trained to always ask for identification and to never knowingly sell any alcohol to an underage or impaired person.ELF Mart takes this so seriously that it will terminate any employee who does not require ID for an alcohol purchase or who sells to a person who appears to be impaired.It provides in-person and on-line training.

BUT - ELF does not agree that its beer prices contribute to any illegal conduct and decides to challenge the New Hampshire statute.

During a guest appearance on Mad Money with Jim Kramer, ELF CEO Brandon Handsome explains that maintaining a lean and nimble inventory is the key to success in the Convenience- or C-store business and laughingly states that he will give five million dollars to any student at his alma mater, Connecticut Community College School of Business (CCCSoB), who can devise an inventory management system that reduces ELF's costs by 10%.Shruti Patel, an intrepid operations and sustainable supply chain major, spends the next weekend feverishly considering the problem. One week later, she mails her plan to Handsome's corporate address.She receives a note thanking her for the submission, together with a signed photograph of Handsome.

Unbeknownst to Shruti, Handsome reads the Plan, is impressed, and shows it to his VP Supply Chain, Ronnie Crump. Unbeknownst to Handsome, Crump immediately implements the Plan, and ELF recognizes noticeable cost savings as it reduces warehouse inventory while maintaining good stock on its ELF Mart shelves.

When ELF comes to CCCSoB to recruit, Shruti interviews with a young supply chain manager who brags about the revolutionary inventory management system recently implemented at ELF.She suspects this is her Plan. She hires an attorney who sends a demand letter to Handsome.

Assume that Handsome, after talking with Crump, acknowledges that ELF implemented Shruti's Plan, but that he was only joking when he said he would pay $5 million.He says, "First, I was just chatting with Jim Kramer about a common retail challenge. Moreover, I meant only to inspire the students at CCCSoB to consider how they might impact problems in business."But he feels badly for what he thinks is a misunderstanding and offers Shruti a job in the Boston headquarters.

Q: Under what theory will ELF bring its challenge? What will the court consider in its analysis?

Q: What's your analysis of this response?Do ELF and Handsome have legal risk?

Although she declines to dismiss her lawsuit, Shruti decides to take the job in ELF's Boston headquarters, much to everyone's surprise. Her second week on the job, she finds a picture of the burning World Trade Center towers on her desk with a note that says, "Go back to Baghdad where you belong!" Shruti is from Minneapolis and her family is Hindu, but she understands clearly that someone has assumed she is Muslim - and associates that with the events of 9/11 - and intends to insult her. It has happened before. She ignores it, but the ill-treatment continues. She finds out from others at ELF that persons of color and other religious and ethnic minorities have faced harassment - as well as insensitive comments and "jokes"- although sometimes the perpetrators are not known. Some have complained; most have tried to ignore it, fearing retaliation worse than the current abuse, although it is not clear that that fear is warranted.

Two weeks after complaining to her manager, Shruti's employment is terminated, allegedly for failure to submit satisfactory work product.

She files another lawsuit against ELF

Q3:What is her theory?What might you do -as managers - from an ethics perspective?

ELF's answer says that Shruti only complained to management once, thus depriving ELF of the opportunity to correct the situation.But, ELF argues, Shruti was fired for performance reasons, so the harassment, while regrettable, is beside the point.

Shruti admits to her attorney that her work was less than stellar, due both to the stress of the lawsuit against Handsome and the harassment she endured.Who will prevail?Why?

Q4: Given your company's desire to act ethically, what advice do you have for your employees about what help make an ethical culture and what sort of pitfalls they should know about and try to avoid?