Reference no: EM13371988
AlicianaSaukar and Jennifer Saukar (sisters) have been long term employees of Nib Corp.(a company earning $236,000 per year and is the only company providing food to a chain of guesthouses. The annual salary of the Saukars is $52,000 per year each. The contract between Nib Corp.and the guesthouses was established in 1977. It is currently being renewed every three years on October 1 taking effect January 1 of the following year. Nib Corp.and the guesthouses agreed to have four deliveries per day so that guests are adequately provided for.
The Saukars are aware that net profit from Nib Corp. catering operation average $236,000 per year. They also know that late arrivals have caused tension between the guesthouses and Nib Corp. - a scenario which is contrary to the agreements between the parties.
They have started their own food company (Saukars Inc.) and did not rule out service to the guesthouses. Since starting the company, the Saukars have been absent from Nib Corp. on a number of occasions without pay and this has contributed to the deteriorated service of Nib Corp. to the guesthouses.
In addition, seven guests at the guesthouses suffered food poisoning after consuming the food on August 5, 2013 and approached the guesthouses who then informed Nib Corp. The tainted food can be traced to the work of Jennifer Saukar. The Saukars have conceded that Nib Corp. had a recent City inspection on July 2 and was given 20 days to improve sanitary conditions at their kitchen or face closure. Nib Corp. complied with the City request. Nevertheless, the unsanitary conditions had the potential of causing food poisoning if employees did not exercise a certain level of care but Nib Corp. employees are expected to exercise such care when preparing food anyway. The Saukars are senior employees at Nib Corp. and Jennifer contends her work met expectations since the manager did not inspect nor disapprove of it. Four of the injured guests at the guesthouses were aware of the City inspection on July 2 and the potential of injury from the food.
In the fall 2013, as a result of the aforementioned occurrences, Nib Corp. received word that the guest houses would be terminating the agreement (set to expire on Dec 31, 2014) on November 15, 2013.
Given their intimate knowledge of the situation, the Saukar sisters were able to secure the contract with the guesthouses for the year 2013 at a price of $50,000 per year for the same services Nib Corp. had offered and will earn a total $170,000 per year from their operation. The Saukars do not intend to work at Nib Corp. again.
Nib Corp. discovered the Saukars new company and linked its existence to the Saukars' absence from their (Nib Corp.) work.
Nib Corp. is aware of secret meetings between the guesthouses and the Saukars and the impact these meeting have had on the agreement between Nib Corp. and the guesthouses - including the guesthouses' knowledge of the City inspection. City officials have not had reason to comment.
Nib Corp. will lose $65,000 per year as a result of losing the guesthouses contract and $8000 in 2013 due to the termination of the contract with the guest houses.
The guest suffered losses totaling $430 each and the guesthouses have been losing $1500 per month due to food poisoning but have not lost any profit because of late arrivals.
Required:
Identify the legal issues of a civil nature affecting each party.
Given the legal issues you identified, advise each party how they should proceed legally and explain the results you expect.
Please consider the claims each party can make and the positions they can take as well as the opposing argument.
Include possible action by Nib Corp. against the Saukars other than termination of employment.
Include a discussion of punitive damages and the effect they would have on efficiency.
Discuss the possibility of a Coasean solution between the parties.