Super Sisters, Inc.

Gunther, Richard ; Efrat, Rafi

CASE DESCRIPTION

The primary subject matter of this case sequence is the integration of statistics and business law. Secondary issues examined include the use and meaning of descriptive statistics, regression analysis, statistical index numbers, the legal responsibilities for detaining a customer in a store, the liability of a merchant for compensatory damages arising out of the commission of a tort, and related strategic management issues. The case has a difficulty level of three, appropriate for junior level. The case is designed to be taught in three class hours. That time estimate includes a formal class presentation by a team and a challenge by another student team. It is expected to require ten to fifteen hours of outside preparation by students for the case.

CASE SYNOPSIS

After observing a customer engage in suspicious conduct, the Loss Prevention Manager of a store detains the shopper after grasping her by the arm and shoving her back to the store. Apparently, the shopper lost her balance and fell on her back sustaining significant physical damage. The shopper was then escorted to the loss prevention room where she was asked to wait for the store manager, who showed up more than an hour later. Following some questioning in the loss prevention room, the shopper was allowed to leave after it was determined that she did not engage in shoplifting. Due to the significant injuries the shopper sustained she was permanently unable to resume her work as a successful sales person for a pharmaceutical company. She is now suing the store for lost future income under the legal claim of false imprisonment.

The statistics portion of the case requires students to use Excel to compute descriptive statistics, perform regression analysis, and project future income. Students are also required to carefully define the statistical terms they are using and explain the meaning of their results In the legal portion of the case, students are referenced to legal opinions and asked to evaluate whether the shopper is likely to be able to recover under the claim of false imprisonment. The students are then expected to utilize their previous statistical analysis to conclude whether, and if so how much, the court is likely to award the shopper for lost future income. Students also need to determine if the shopper is likely to recover compensatory damages for injury and a punitive award. Finally, the student is asked to recommend strategic management policies that would serve to avoid reoccurrences of the problem.

This case requires students to apply materials learned in most Business School's lower division core (LDC). It is used in a course at the beginning of the junior year that has goals to integrate LDC material while developing teamwork and communication skills. Specifically, the case requires knowledge of elementary statistics and a beginning business law course. Student teams prepare the case with tutoring from faculty who provide "just-in-time" specific knowledge as requested by student teams. A team of students formally presents their case solution, another team acts as a "challenge team" and the whole class participates in an active question and answer session.

BODY OF THE CASE

Bruce Levin, Customer Relations Manager, for Super Sisters, Inc. ("Super"), was in a quandary. He pondered over a memo from Jimmie Lee, Loss Prevention Manager at Super, (Exhibit 1) and a letter addressed to him from Susan Kim, a customer, (Exhibit 2). What appeared to have been a routine shoplifting incident on the part of Mrs. Kim turned out to lack evidence. To make matters worse, the suspect was injured during apprehension. It appeared that Super faced the possibility of a lawsuit because of the incident. Donald West, Chief Administrator, had asked Mr. Levin to assess the legal and financial consequences of the case, make recommendations, and report back to him.

Super 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.

Suppose you are Bruce Levin. You have just confirmed that, for all practical purposes, Mrs. Kim will be unable to work at all during the next ten years, including all of 2002. Write a report, addressed to Donald West, Chief Administrator of Super, which covers the questions below.

Put the data from Exhibit 3 in an Excel file. Use Excel, along with this file, to determine Mrs. Kim'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, and standard deviation 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.

How do you interpret the price indices in Exhibit 3? How are they constructed? Use Excel regression to analyze the relationship between the adjusted price index (dependent variable, i.e. 1.136) and year (independent variable, i.e. 1987). Interpret your regression findings by discussing the coefficient of determination (R-square), the regression coefficient, the p-values, and the regression equation. Can you use the regression equation to predict the price indices? Take into account statistical, macroeconomic, and other considerations.

Assume that Mrs. Kim'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. Kim's work expectancy. Use the regression equation from question 2 to project adjusted price indices for the next ten years. Assume that Mrs. Kim 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. Kim's net actual income for the next ten years. What would be the likely amount of an award to Mrs. Kim based on a present value rate of 10%? Discuss the factors that could cause Mrs. Kim's future income to differ from your estimate.

Would the merchant's defense relieve Super Sisters, Inc. from liability under the cause of action of false imprisonment? In answering this question, please read and identify the relevant law from the following case precedent: Thomson v. LeBlanc, 336 So. 2d 344 (1976).

Assuming that Super Sisters, Inc. is liable for false imprisonment and assuming that Mrs. Kim 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. Kim is entitled to compensation? In your opinion, is Mrs. Kim's settlement offer reasonable? Support your opinions with a discussion of the legal and practical possibilities. In answering this question, please read and identify the relevant law from the following case precedent: Caldwell v. Kehler, 643 A.2d 564 (1994).

What actions would you recommend should be taken to prevent a reoccurrence of a situation similar to that involving Mrs. Kim? What company policies need to changed or added? Discuss the relevant management issues.

Richard Gunther, California State University, Northridge

Rafi Efrat, California State University, Northridge

EXHIBIT 1

MEMORANDUM

DATE: January 3, 2002

TO: File

FROM: Jimmie Lee, Loss Prevention
Manager

SUBJECT: Shoplifting Incident

At 2:20 p.m. today, I observed a customer, Susan Kim, 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. Kimberly Youseff, 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, Jennifer Parker, 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. Parker advised the
customer why she was being held up and asked her to empty her pockets.
However, no calligraphy set was found. Mrs. Parker 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 hurt.

EXHIBIT 2

Susan Kim
19853 Angel Blvd.
Angel City, Green

February 18, 2002

Donald West, Chief Administrator
Super Sisters, Inc.
10984 Glitter Blvd.
Beverly Flats, Green

Re: incident dated January 3rd, 2002

Dear Mr. West:

Based on permanent injuries inflicted on me by one of your employees
while falsely imprisoning me on January 3rd, 2002, I demand
compensation in the sum of $765,000 in medical care expense and
$750,000 for loss of future income.

On January 3rd, 2002, 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. Parker, 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. Parker 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 Derk, 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,

Susan Kim
Enclosures

EXHIBIT 3

Number Year Gross Income Price Index *

1 1987 41,273 113.6
2 1988 42,805 118.3
3 1989 44,239 124.0
4 1990 45,724 130.7
5 1991 47,472 136.2
6 1992 49,391 140.3
7 1993 52,888 144.3
8 1994 50,547 148.2
9 1995 54,810 152.4
10 1996 55,019 156.9
11 1997 58,734 160.5
12 1998 55,879 163.0
13 1999 61,125 166.6
14 2000 59,350 172.2
15 2001 62,781 177.1

* Source: U.S. Department of Labor, Urban Consumers, 1982-1984 = 100