“A Day at the Beach”

1. “A Day at the Beach” Nelly Altamirano Bill Bowker Dmitriy Novak Vanessa Graciano Yiwen Zhang

2. Main Points • Background facts • Do flip flops in fact cause car accidents? • Who is liable in this case? • Calculation of damages • Recommendations Nelly Altamirano Group 7

3. Background Facts • In summer 2009, Ms. JitsyJetson was driving home from the beach • Apparently, Jetson’s Sandpiper flip flop got caught under her gas pedal • Jetson then lost control of her vehicle and collided head-on into a car driven by Mr. Patrick McDuff • As a result of the accident, Mr. McDuff became a quadriplegic • McDuffcan no longer work to support himself Nelly Altamirano Group 7

4. Are Flip Flops a Cause of Car Accidents? • Did flip flops cause this accident? • Analysis of government survey data Vanessa Graciano Group 7

5. The Issue of Causality • Correlation does not necessarily mean causation. • Some other factor(s) may explain the observed difference in accident rates. Other factors that should be considered include: • Youth of the drivers • Lifestyle • Use of mobile phones while driving • Driving under the influence Vanessa Graciano Group 7

6. Who is Liable? • Jitsy Jetson • A tortfeasoris always liable for his or her own torts • Jetson was negligent in wearing flip flops while driving • Sandpiper Footwear • Probably will not be found negligent in this case • Probably will not be found strictly liable • Comparison with other cases William Bowker Group 7

7. Who is Liable? • Fogal v. Get n’ Go • Defendant was found liable for negligence. • Plaintiff had no reason to be aware of the potential hazard. • Wayans v. Albert Landon and Black & Decker • Defendant was found strictly liable for plaintiff’s injury. • An additional component would have made the product safer. • “No responsibility to warn for damages that are generally known or obvious.” • Article: “The Flip Flop Craze” (Viewspeak, January 2009) • Demonstrates that problems related to wearing flip flops were common knowledge to some extent before the accident occurred. William Bowker Group 7

8. How to Proceed with Sandpiper? • Sandpiper probably not legally liable but may have some ethical responsibility for the accident. • Approach Sandpiper and attempt to get a settlement: • The company’s reputation will be negatively affected if the case goes to court, they may agree to settle. • We must advise Mr. McDuff that a lawsuit probably will not be successful and he will lose legal fees. • If Mr. McDuff wants to pursue a lawsuit regardless, that is his decision to make. Yiwen Zhang Group 7

9. Calculation of Damages:Lost Wages • Mr. McDuff was 53 years old at the time of the accident. • Mr. McDuff’s yearly salary for 2009: $48000 • Estimated mean inflation per year: 3.333% • Real increase in wages per year: 3% • Tax Rate: 25% • Present value rate: 8% • Mr. McDuff is owed over $411000 in lost wages through 2021. Dmitriy Novak Group 7

10. Calculation of Damages • Lost wages ≈ $411000 • Medical expenses = ? • Pain and suffering = ? • Caretaker expenses = ? • Mr. McDuff’s life expectancy is 77 years and he will need someone to help take care of him daily for the rest of his life. • The total amount for damages that Mr. McDuffis owed may well be several times the amount for his lost wages. Dmitriy Novak Group 7

11. Recommendations • Approach Sandpiper and try to negotiate a settlement out of court. • Advise Mr. McDuffthat a lawsuit against the company probably will not succeed. • Mr. McDuff may still decide to pursue a lawsuit against the company. • Pursue the negligence case against Jetson, as she will be found liable.

12. Questions?

13. Appendix A: Statistical Analysis • μ = the population difference in accident rates between drivers wearing flip flops and those wearing other footwear • Sample mean of the difference in accident rates = 5.8 • Population standard deviation is unknown. • Standard error of the sample mean SE ≈ .611 • H0: μ = 0 • Ha: μ ≠ 0 • T-statistic calculation: • The corresponding p-value is extremely small, nearly zero. Thus, • we reject the null hypothesis that the difference in accident rates • between drivers wearing flip flops and those wearing other • footwear is zero.

14. Appendix B: Calculation of Lost Wages Calculation of mean expected inflation rate: • We estimate that the mean annual inflation rate will be about 3.333%. • This figure, however, is based on the assumption that the Fed’s monetary policy over the next 12 years will remain consistent to keep inflation at about this level.

15. Appendix B: Calculation of Lost Wages • Mr. McDuff’s 2009 Yearly Salary: $48000 • Mean Inflation Rate Per Year: 3.333% • Real Increase in Wages Per Year: 3% • Tax Rate: 25% • Discount rate: 8% • Wages per year for any future year: (wages for previous year)(1.0333)(1.03) • [e.g. wages for 2010: (wages for 2009 = $48000)(1.0333)(1.03) = $51086.35] • Yearly wages after tax: (yearly wages)(.75) • Present value of future wages per year: (wages per year)(present value factor)

16. Appendix B: Calculation of Lost Wages • Half of wages for 2009, after tax: $48000/2(.75) = $18000 • Total wages owed: $393275.79 + $18000 = $411275.79