The document provides an analysis of the Liebeck v. McDonald's Corporation and Pearson v. Custom Cleaners cases. It summarizes the key facts and legal issues of each case. In Liebeck, the plaintiff was severely burned by McDonald's coffee and sued for product liability. In Pearson, the plaintiff sued a dry cleaners for $54 million over lost pants. The document analyzes the applicable laws in each case and whether the court decisions were appropriate. It also discusses the ethical issues raised, such as punitive damages and economic theories of harm.

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Critical Thinking in the Legal Environment
An Analysis of Product vs. Service Liability Cases
Felicia Thomas
University of Maryland University College
Graduate School of Business
AMBA 610 9043 The Manager in Organizations and Society (2152)
Assignment Due: Tuesday, May 26, 2015
Turnitin Score: 13%

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Introduction
This analysis explores the Liebeck v. McDonald’s Corporation and Pearson v. Custom Cleaners cases by
first explaining the detailed factual events that lead to litigation. The issues at hand, although are not
specific laws, explain the underlying shared theme of tort litigation reform, specifically that of personal
liability vs. corporate responsibility and Loser Pays jurisdiction. These issues lead one to understand the
applicable laws relative to product vs. service liability and whether the specified laws directly link to the
overall decisions of the courts which differed in overall favor of the parties. Despite these cases receiving
media attention as being frivolous, the details will be further linked to characteristic of such claims or lack
thereof by first exploring their definitions in nature. Finally a reflection of prevention methods, including
the overall need and importance of legal astuteness in business will lead to an understanding of how the
defendants can move forward in business.
Facts and Issues
Case Facts
According to Rosemary Hartigan, et al summary of McCann, et al abbreviation of facts, Stella Liebeck
was in the passenger’s side of a stopped Ford Probe when she opened the lid of a McDonald’s coffee cup,
resulting in the spillage of coffee onto her lap. Despite expressing pain and agony, Liebeck initially stated
believing the burn was as a result of her own negligence. After being admitted in the hospital it was
determined that sixteen percent of Liebeck’s body was burned with the more extreme burns covering six
percent of her body, being of third degree. Liebeck spent a week in the hospital and left early due to a
lack of medical insurance. Liebeck had undergone subsequent treatment which did not prevent permanent
disfiguration and partial disablement. Liebeck then requested information regarding McDonald’s
production process, reimbursement of medical expenses, and changes in their corporate policy.
McDonald’s initially responded by offering Liebeck $800, resulting in Liebeck hiring Attorney Reed
Morgan who filed a complaint with the Second Judicial Circuit Court in New Mexico. (Hartigan, Sava, &
Ostas, 2014)

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According to the case documents, plaintiff Roy Pearson (Pearson) bought a pair of pants to
Custom Cleaner’s (CC) for servicing in July 2002. The pants were admittedly misplaced by the
defendant, who later reimbursed the plaintiff $150 for the value of the pants. CC indicated an
apprehension to continue services Pearson and suggested the parties terminate their business relationship.
Pearson responded by questioned the legality the defendants request, resulting in the owners compliance
and continued service to the plaintiff. Between April 30, 2005 and May 3, 2005 Pearson left two pairs of
pants to undergo alterations by CC, one of which was reportedly misplaced. The defendant asserted that
the pants were sent to the wrong facility but were later recovered; however Pearson believed they were
not the same pants that were originally left at CC for alteration. (Roy L. Pearson, Jr., Appellant, v. Soo
Chung, ET AL., Appeallees, 2008) Pearson requested reimbursement from the defendant who failed to
concede. Pearson further questioned the legality of the Chung’s posting signage’s of “Satisfaction
Guaranteed” and “Same Day Service” as a result of their alleged failure to render services. According to
the Washington Post, Pearson later sued Custom Cleaners for $54 million dollars as a result of the events
that had previously taken place (Cauvin E. H., 2007).
Case Issues
The underlying prescriptive issue concerning both cases beg the question if tort reform is necessary to
mitigate potentially frivolous cases. According to the American Academy of Actuaries, tort reform is an
effort to reduce tort litigation in the judicial system in order to limit the legal theories that can be used to
support plaintiff claims or cap damage awards. (The American Academy of Actuaries, 2009). Dating back
to the late 1980’s, tort reform was a response to the exponential growth in tort claims that exhausted
public resources, exploited the judicial system, and abused laws for purposes other than their original
intent. Although there are many subsets to tort litigation, these cases specifically address personal
liability vs. corporate responsibility as well as Loser Pays All jurisdiction.
The Liebeck v. McDonald’s Corporation case investigates the necessity of tort reform by
exploring what constitutes a fair balance between personal liability and corporate responsibility in tort
litigation. One might argue that although McDonald’s has a duty of care to its customers, there exists the

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same duty for a consumer not to neglect its own safety. Tort reform activist seek to find balance between
this consideration and corporate responsibility, which extends into the social aspect of a corporations
contribution to the community. Since a corporation exists because of the sales driven from the
community, it in turn should reciprocate to its community by going over and above to prevent it from
harm through the use of its products or services. This form of tort reform is very different from that of the
Pearson v. Custom Cleaners case whose specific tort reform issue asks if Loser Pays All jurisdiction
should be implemented to prevent the victimization of vulnerable defendants. Although the case resulted
in favor of the Chung’s, the subsequent legal fees incurred ultimately contributed to the loss of a
substantial amount of business, in turn resulting in them becoming a victim in the case. Loser takes all
tort reform seeks to prevent such occurrences from happening however it fails to adequately deter “big
pocket” plaintiffs who may not suffer as steep a penalty by risking the costs of litigation. Knowledge of
the underlying issues can be further understood by exploring the applicable laws in the cases.
Applicable Laws
Comparing the Cases
The applicable laws differ greatly due to the fact that the litigations are a contrast between product and
service liabilities. Although Kubasek, et al. explores the elements and defenses of negligence based on
products, these cases compare by both possessing elements of negligence torts. According to Kubasek, et
al., negligence is the “failure to live up to the standard of care that a reasonable person would meet to
protect others from an unreasonable risk of harm.” The established elements include duty, breach of duty,
causation, and damages. (Kubasek, Brennan, & Brown, 2015, p. 175).
Liebeck v. McDonalds Corporation Applicable Laws
The applicable laws in the Liebeck v. McDonalds Corporation case are relative to Product Liability Law
through the Uniform Commercial Code (UCC) concerning a breach of implied warranty of
merchantability, breach of fitness for a particular purpose, and negligent failure to warn. According to
Kubasek, et al., the implied warranty of merchantability is a warranty that a good is reasonable fit for
ordinary use. In the Liebeck v. McDonald’s case, that good is assumed to be the coffee in which the

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plaintiff assumed a warranty of safety through ordinary consumption of the product. The warranty of
fitness for a particular purpose is also applicable due the fact that McDonald’s selling the coffee implied
that its temperature was suitable for use Liebeck’s use. Furthermore, Liebeck as the customer is relying
on McDonald’s expertise in the brewing of its coffee for any foreseeable risks to be mitigated.
Pearson v. Custom Cleaners Applicable Laws
Pearson v. Custom Cleaners differs overall from Liebeck v. McDonald’s Corporation in that the former is
primarily concerning service liability law. The case document asserts that the applicable laws involved
include District of Columbia (D.C.) Common Law Fraud (CLF), the D.C. Consumer Protection
Procedures Act (CPPA), and conversion (Roy L. Pearson, Jr., Appellant, v. Soo Chung, ET AL.,
Appeallees, 2008). CLF is summarized as false representation made with knowledge, intent to deceive,
and an action that is taken in reliance upon the representation (Roy L. Pearson, Jr., Appellant, v. Soo
Chung, ET AL., Appeallees, 2008). The plaintiff argues that the customer service guarantee constitutes a
violation of CLF as well as CPPA which is further accredited to the “Same Day Service” signage (Roy L.
Pearson, Jr., Appellant, v. Soo Chung, ET AL., Appeallees, 2008). The case documents has been
summarized that one is in violation of the D.C. CPPA regardless if a consumer is misled, deceived, or
damaged if a person a) presents their services have a source, sponsorship, approval, certification,
accessories, characteristics, uses, benefits, or quantities that they do not have; b) represent that services
are of particular standard, quality, grade, style, or model, if in fact they are of another; c) advertise or
offer services without the intent to sell them or without the intent to sell them as advertised or offered; or
f) represent that the subject of a transaction has been supplied in accordance with a previous
representation when it has not (Roy L. Pearson, Jr., Appellant, v. Soo Chung, ET AL., Appeallees, 2008).
Finally, conversion, which is the permanent removal of property from the rightful owner’s possession and
control (Kubasek, Brennan, & Brown, 2015, p. 173), is presented in reference to the pants originally
being delivered to another store.

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Merits
Judge and Jury Decisions
According to Hartigan, et al, the final decision of Jury in the Liebeck v. McDonalds Corporation was in
favor of Liebeck on the claims of product defect, breach of implied warranty of merchantability, and
breach of implied warranty of fitness for a particular purpose. Comparative negligence on Liebeck’s part
was also found, resulting in 20% of the award being deducted from the plaintiff. (Hartigan, Sava, &
Ostas, 2014). Due to the fact that both parties were unable to reach an agreement through the courts, the
case was settled through a private agreement.
In the final decision of the judge related to Pearson v. Custom Cleaners case was in favor of the
defendant. The case conclusion states that Pearson “failed to establish either that the Chungs'
"Satisfaction Guaranteed" and "Same Day Service" signs constituted false or misleading statements or
that they lost his pants.“ (Roy L. Pearson, Jr., Appellant, v. Soo Chung, ET AL., Appeallees, 2008).
Appropriateness of Decisions
Based on the final decision, the judge in the case of Liebeck v. McDonald’s Corporation made
appropriate decisions against the defendant. However, the finding of contributory negligence was
unwarranted. Regarding the breach of implied warranty of merchantability there was a direct connection
between the coffee being unfit for the purposes for which it was used therefore resulting in an injury to
Liebeck. The reason the verdict concerning breach of implied warranty of fitness for a particular purpose
was appropriately rendered is because Liebeck and any other reasonable consumer would assume
McDonald’s to consider its product to be a good fit for their use. The coffee’s extreme temperature
breached this warranty. However, the verdict for comparative negligence was not appropriate because 1)
any reasonable consumer would have spilled coffee on themselves, deeming this action a normal
consideration in the use of the product. 2) it was McDonald’s duty to foresee the spillage and institute a
measure to prevent it from happening; 3) a spillage could occur regardless of the coffees temperature and
McDonalds possessed the ability to regulate the temperature to a range outside of what would create third
degree burns; and finally 4) McDonald’s was already aware of this issue prior to the plaintiff being harm.

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The judge in the Pearson v. Custom Cleaners case made an appropriate decision because he
determined that there were no links regarding Common Law Fraud, CPPA, or conversion. He further gave
the defendant specified solid rational for why he would not accept his motions. For example, the case
document highlights that “In the end, whether Pearson's claims are considered under a common law fraud
claim or under the CPPA makes no difference because he was unable to establish the underlying factual
basis for relief.” (Roy L. Pearson, Jr., Appellant, v. Soo Chung, ET AL., Appeallees, 2008)
Ethical Issues
The ethical issues regarding Liebeck v. McDonald’s Corporation include the severity of punitive damages
to defendants, contributory negligence, and the negative outcomes of moral economic theory.
Although the purpose of punitive damages is to punish the tortfeasor to an extend which prevents
similar violation, Tort Reform lobbyist arguing that punitive damages are unconstitutional, as they violate
defendants due process rights (Kubasek, Brennan, & Brown, 2015, p. 155) which includes fair judgment.
In the case of Liebeck v. McDonald’s Corporation, the final award of $480,000 prior to the undisclosed
settlement may have been unjust because it was three times the compensatory damages. However, one
might argue that the proposed award was miniscule when compared to $1.35 million in daily coffee sales.
This provides additional ethical concern regarding if the award was steep enough to discourage
McDonald’s from future violations, which is the sole purpose of punitive damages. Furthermore, the
severity of contributory negligence damages to plaintiff could be, proportionally more severe when
compared to that of the defendant, which begs another ethical issue. In the event that a case meets the four
elements of defendant negligence (Kubasek, Brennan, & Brown, 2015, p. 188), can a plaintiff’s
proportional contribution towards their own harm or death further punish them as the overall victim?
Although the number of cases resulting in favor of arguable contributory negligence has created much
ethical concern, Judd Lemaire et al. v. Farmington Ready Mix, Inc., a relatively similar case in nature
found that the Superior Court of Connecticut, Judicial District of Litchfiel rejected defenses of
comparative negligence and product misuse. The Plaintiff filed a lawsuit against a cement company for
liability to injuries relative to the delivery of cement, resulting in exposure which caused severe chemical

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burns, despite the plaintiffs monitoring of the pouring of the cement. (Judd Lemaire et al. v. Farmington
Ready Mix, Inc., 2006). Finally, McDonald’s corporation presented an ethical issue through the use of
economic theory in their initial assessment of the importance of the complaints they previously received
concerning the coffee temperature. According to Hosmer, “economic outcomes in economic theory refer
to the net balance of benefits over harms for the full society as a result of a decision or action” (University
of Michigan, 2011). McDonald’s failed to change its policy despite having over 700 complaints regarding
the coffee temperature because it considered the number of complaints miniscule compared to the billion
cups served within a year. The ethical issues arising from this theory is the presence of injurious practices
(University of Michigan, 2011) that harm the minority of consumers who use their product.
The ethical issues relative to the Pearson v. Custom Cleaners case are regarding the negative
aspects of positive law and self-interest and personal virtues principles. According to Professor LaRue
Tone Hosmer (Hosmer) Positive law takes place when one is actively looking for opportunities within
existing laws that would advance the interest of its clients. (University of Michigan, 2011). Pearson,
representing both the client and attorney raised ethical and moral questions regarding if he was merely
exploiting the law. These further inquiries if Pearson possesses self-interest or personal virtue ethical
principles of which his short term actions do harm to the Chung’s more than he benefits from resolving
the issues at hand. Additionally it is to be explored if Pearson’s actions are exploiting the legal
ramifications of D.C. CLF and CPPA by exhausting legal resources for an issue of relatively little
economic value.
Ethical issues differentiating from legal issues
In both cases, the ethical issues and legal issues go hand in hand while simultaneously challenging
frivolousness and inherent validity. This is important because whether or not a case is frivolous
determines its merit and further warranted attention of the courts and public funding. However, the ethical
issues go a step further into challenging the overall guiding principles of the parties involved and how
those principles affect the parties’ actions in the cases.

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Frivolousness of Cases
According to uslegal.com, “Frivolous lawsuits are those filed by a party or attorney who is aware they are
without merit, because of a lack of supporting legal argument or factual basis for the claims. Frivolous
lawsuits waste time, money, and judicial resources. (uslegal.com, 2015). Although media publications
may differ in opinion, based on research the Liebeck V. McDonalds Corporation case is not frivolous by
definition. However there is concurrence with the media opinion regarding the frivolousness of the
Pearson v. Custom Cleaners case.
The Liebeck v. McDonald’s Corporation case lacks frivolousness because the legal arguments
and factual basis were clearly linked and articulated in the case. The breach of implied warranty through
merchantability was directly linked to McDonald’s coffee failing meet the standards of being 1) fit for
ordinary purposes for which the good are used, and 2) adequately contained, packaged, and labeled as the
agreement pay require. Once Liebeck was injured, the breach of warranty took place. Fitness for a
particular purpose was linked by McDonald’s admittedly testing it coffee and consistently serving it
between 180 and 190 degrees (Hartigan, Sava, & Ostas, 2014). This implied a warranty in which
McDonald’s told Liebeck as the consumer that the temperature was fit for her use/consumption (Kubasek,
Brennan, & Brown, 2015, p. 200).Finally, Negligent Failure to Warn was linked to McDonald’s
knowledge through previous complaints that the temperature of the coffee imposed a danger in ordinary
use and failed to give warning to Liebeck. (Kubasek, Brennan, & Brown, 2015, p. 189). Although the
litigation of the case was not the most efficient with regards to time and the financial and judicial
resources, it was credited to the fact that both parties were unable reach an agreement through initial
alternative dispute litigation.
In contrast, the Pearson v. Custom Cleaners case was found to be frivolous based on the case
documents for which the plaintiff failed to provide sufficient evidence to convince the courts to accept his
claims of CLF, violation of the CPPA, and conversion. Furthermore, according to Henri E. Cauvin of the
Washington Post, Judge Bartnoff initially ordered Pearson to pay the defendants attorney fees because he

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felt the case was also frivolous in nature (Cauvin, 2007). That motion was later withdrawn due to the
public’s assistance in helping to minimize the court fees for the Chung’s.
Case prevention
The validity of these cases is not as important as the methods in which the cases could have been
prevented due to the plethora of exhausted resources and media attention that affected all parties involved.
Both lawsuits could have been prevented through alternative dispute resolution (ADR). However these
cases warrant further prevention methods that are specific to the nature of their business situation.
McDonald’s Corporation could have prevented the lawsuit by conceding in an agreement an agreement
through alternative litigation. McDonald’s could have responding to earlier claims against their process
and assumed a proactive approach as it relates to the law.
The plaintiff’s initial attempt to resolve the dispute without legal counsel could have resulted in
the value of the case to be approximately $20,000. Once the plaintiff hired Reed Morgan to act through
negotiation and settlement, the defendant was thereby given an additional outlet to prevent the overall
award from exceeding $90,000. (Hartigan, Sava, & Ostas, 2014) These facts lead to the second method in
which this lawsuit could have been prevented, through ADR, specifically by McDonald’s not abandoning
negotiation and settlement alternative litigation. Although this case was ultimately settled through post-
trial conference the invested time, award value, and legal fees could have been minimized. According to
Hatigan, et al, despite the fact that McDonalds received over 700 complaints regarding their coffee
temperature, the complaints were considered insignificant when compared to the billion cups served
annually. At the moment that settlements reached their highest amount, McDonald’s should have
investigated their procedure and revised their policies and practices to prevent future litigation. However,
this preventative method does not address the overall lack of proactivity as it relates to the law and
McDonald’s strategy formation. According to Constance E. Bagley, “legally astute management teams
include legal constraints and opportunities at each stage of strategy formation and execution.” (Bagley,
2008) Therefore, McDonald’s could have prevented this case by educating top management of the legal

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ramification and opportunities related to the coffee temperature and instituting procedures that go over
and beyond those confines.
Custom Cleaners could have prevented their case through use of mitigation, consulting their
attorney early, and attaining their own legal literacy. Despite the Chung’s attempt to terminate their
business relationship with Pearson in 2002, the parties decided to continue transacting (Roy L. Pearson,
Jr., Appellant, v. Soo Chung, ET AL., Appeallees, 2008). Pearson further indicated his interest in doing
business with Custom Cleaners was due to convenience of the dry cleaners’ location. The inherent desire,
as it related to the plaintiff, to continue to do business implies that mediation would have been a method
of preventing the lawsuit. However, the early rise of events between the plaintiff and the defendant should
have prompted d the consultation of an attorney, especially if the defendant did not desire to continue the
business relationship. Furthermore, a legal professional would have been able to consult the Chung’s
regarding the prevention of additional unprofitable business transactions, liabilities due to misconstrued
marketing efforts, as well as the implementation of policies and procedures to limit the reoccurrence of
such mistakes. Finally, it is not enough for the Chung’s to rely solely on their legal resources to make
appropriate business decision as the case provides clear evidence that the Chung’s did not possess enough
legal astuteness for protection against the claims. Therefore the final preventative measures would have
been for the Chung’s top management to possess their own legal literacy to prevent a similar case from
taking place.
Future Advice to Defendant’s
Moving forward from this case, McDonald’s Corporation should consider restructuring its
complaints and consumer affairs department(s) to be shorter with the purpose of 1) encouraging a
positively cohesive relationship with legal affairs; 2) capturing minor individual complaint consistencies
whose sum could render the organization liable of major tort litigations; and 3) connecting senior
leadership with issues that have potential for media attention. Although Custom Cleaners is undergoing
challenges of rebuilding its business, this is fertile time to institute or an existing consumer affairs
department. One might argue that an organization of its size cannot adequately such a department.

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However, by simply installing a “complaint box” for example, and reviewing issues with their attorneys
quarterly, they could foresee and mitigate and similar litigations.
Conclusion:
The facts and issues of a case not only provide the framework for application to existing laws but they
allow judges and juries to make informed decisions affecting the parties involved. The Liebeck v.
McDonald’s case showed how an organizations failure to mitigate harm to their customers through the
use of their products can result in product liability claims. However, a consumer’s contributory
negligence can also hold them proportionally in the rendering of the court. On contrary, the Pearson v.
Custom Cleaners case shows that a plaintiff can be converted into a defendant of to the courts through the
use of frivolous or unfound claims. It is important that an organization rely equally on legal and ethical
implication when making decisions that could lead to future litigation.

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