Scenario: Solar Co. Inc., a solar panel manufacturing and installation company,

Question

Scenario: Solar Co. Inc., a solar panel manufacturing and installation company, has recently encountered a series of scandals and bad publicity relating to defective solar panels, poor workmanship, and employee allegations of harassment by executives within the company. One claim resulted in a two-year trial which Solar Co. lost; all other claims were settled out of court.

Solar Co. enters into a contract with XYZ Media to prepare a 6-month national advertising and public relations campaign to help restore its tarnished reputation at a cost of $600,000. XYZ Media launches the campaign, and it is successful for the first two months until XYZ's computer servers are hacked and all client information is lost because XYZ failed to have adequate backup systems in place. In addition, social media account information and passwords were compromised, resulting in derogatory and inappropriate posts being made on all of XYZ's social media accounts for several hours. Because XYZ was managing Solar Co.'s social media presence at the time, Solar Co.'s social media accounts were also taken over by the hackers for a brief time and filled with damaging posts.

XYZ issues a public apology; however, Solar Co. wishes to terminate the contract with XYZ and receive a refund of the $200,000 it paid for the first two months of the campaign due to the damages caused by the computer hack. XYZ refuses to cancel the contract or issue a refund, insisting that it can successfully continue the campaign and re-create all of the material that was lost. Solar Co. refuses to pay any further amounts due under the contract and has already begun seeking a new media relations firm to re-launch the campaign.

Part I

Write a 525- to 700-word recommendation to Solar Co.'s CEO advising whether Solar Co. should:

Your analysis should specifically discuss each of the nine factors provided in the "Contemporary Environment Cost-Benefit Analysis of a Lawsuit" feature found in Ch. 4, "Judicial, Alternative, and E-Dispute Resolution." Provide a clear explanation and reasoning for your recommendation based on the facts of the scenario.

Would your recommendation be different if you were advising XYZ Media's CEO? If so, how?

Part II

Solar Co. intends to use arbitration agreements with all clients, subcontractors and employees in the future.

Write a 350- to 525-word memo to Solar Co.'s CEO explaining the arbitration procedure and the enforceability of arbitration provisions under the Federal Arbitration Act.

Include a recommendation as to whether arbitration agreements should be used in the future to reduce Solar Co.'s legal risk and why.

Explanation / Answer

Part I:-

I would recommend Solar Co. Inc. CEO for use of Alternative Dispute Resolution. Firstly, let us discuss what is Alternative Dispute Resolution (ADR). It is the procedure for settling disputes without litigation, such as arbitration, mediation or negotiation. These procedures are usually less costly and more expeditious. Unlike adversarial litigation, ADR procedures are often collaborative and allow the parties to understand each other's postions. ADR also allows the parties to come up with more creative solutioins that a court may not be legally allowed to impose. In the instant case, Solar Co. entered into a contract with XYZ Media to prepare a 6-month national advertising and public relations campaign to help restore its tarnished reputation at a cost of $600,000. XYZ Media launched the campaign, and it was successful for the first two months until XYZ's computer servers are hacked and all client information was lost because XYZ failed to have adequate backup systems in place. Here it may be seen that the campaign launched by XYZ media was successful though for some period. Also they were not having any control on the outside attack of the hackers and they also might not had anticipated the software attack. But it is still a major lacuna on part of XYZ Media and it was their sole responsibility to prevent such attacks. Solar Co. image had already been tarnished and they had spent lot of money in settling the claims of its customers. So they cannot afford further expenditure on the same issue by again filing lawsuit against the XYZ Media or looking for any settlement as they may have to cough up hefty amount for the same. The best method for Solar Co. will be ADR. Both the CEOs of the companies may meet and look for arbitration which will be much cheaper option for both of them. As XYZ Media is ready to go ahead with their contract, they may be given a fair chance to further work on the ongoing contract while taking extra precaution this time so that any software attacks may be prevented in future. It will be a very expensive affair for Solar Co. to look for another media agency and award them with new contract. Instead they should look for arbitration, appoint an impartial third party and agree to the decision of the arbitration and it should be made binding to both the parties. Both the parties may mutually decide and finalise an arbitrator or a mediator which may also be a lawyer, to act as an impartial third party to guide the resolution and who will ensure that all the solution proposals are legal and binding. As they will hire a single lawyer, the cost incurred will be much lesser compared to filing of lawsuit against each other. Both the parties may decide the time period for resolution of the dispute which will not unnecessarily lengthen the arbitration which will in turn reduce the cost. As cost factor and time are of much importance at this time for Solar Co. and XYZ Media (as their image is also tarnished due to attack on their software by the hackers), arbitration will be the best and feasible option.

Part II:-

Memo to the Solar Co.'s CEO explaining the arbitration procedure and the enforceability of arbitration provisions under the Federal Arbitration Act.

MEMO

Date:- 01.01.2000

To, The Chief Executive Officer, Solar Co, Inc.

Subject:- Arbitration procedure and its enforceability under the Federal Arbitration Act.

Respected Sir,

As I have come to know that Solar Co. intends to use arbitration agreements with all clients, subcontractors and employees in the future, I would like to let you know about arbitration procedure. The general process for arbitration is given hereunder:-

Now, let me tell you about the enforceability of arbitration provisions under the Federal Arbitration Act. When it comes to enforcement of the arbitration agreements, the Federal Arbitration Act, 9 U.S.C.A. 1-16, has been the law of the land since it was enacted nearly a century ago. It declares arbitration is a favoured means of dispute resolution (9 U.S.C.A. 1) and agreements requiring arbitration of certain disputes are to be enforced in the same manner and to the same extent as any other contractual provisions (9 U.S.C.A. 2). Cases construing the FAA have concluded that any doubts about whether a particular dispute is subject to arbitration must be resolved in favour of arbitration.

Further, I would like to recommend you to use Aribitration Methods in future. In support of mt say, I produce here some of the advantages of the Arbitration methods:

You may convey me about your decision for further course of action after reading above procedure and clauses.

Thanking you.

Yours sincerly,

XYZ

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