Case Study

1. Your score will be determined by evaluation of your substantive content. Your analysis and solutions must be based on the principles of law, ethics, and business—not on your opinions. You must describe how the application of the principles to the key facts supports your determination of the issues. In other words, you need to show the reasoning behind your decision.
2. Key facts are those facts that determine if the principles of law are met. You must demonstrate that you recognize the key facts in this case. List the key facts individually. Do not simply repeat or retype the factual scenario.
3. The length of your response has no bearing on your score. There is no minimum or limit, however, most responses will be between two and three substantial pages.

Sterling, Inc. is a manufacturer of state-of-the-art computers. For the past ten years, Sterling has acquired all of its microchips from NoBugs Corporation, the only producer of chips meeting Sterling's high specifications. The relationship has been mutually profitable. Sterling could not have built its reputation as an industry leader without NoBugs's reliable and consistently high-quality products; Sterling's business has enabled NoBugs to grow rapidly while providing its investors with an attractive rate of return.
Some months ago, several of Sterling's computers exploded shortly after installation. Upon investigation, Sterling discovered that tiny imperfections in NoBugs's microchips had aggravated a dormant design defect in the computers, causing the explosions. Analysis of the chips indicated that they were indeed below specifications and that the imperfections were caused by a slight miscalibration of NoBugs's encoding equipment. NoBugs recalibrated the equipment and promptly resumed production of perfect chips.
Sterling's losses from the explosions—lost profits, out-of-pocket costs associated with compensating customers for the explosions, and injury to business reputation—are estimated to exceed $20 million. Sterling and NoBugs disagree on the amount of the loss for which NoBugs should be responsible. Sterling has a strong legal case for breach of contract against NoBugs. Sterling's CEO is considering a lawsuit. She asks you to prepare a report discussing litigation strategy and the advantages and disadvantages of litigation, and discussing pretrial planning should the company opt for litigation.