Since 2014, Porter, Inc. has bought all the microchips it uses to manufacture state-of-the-art hospital lab equipment from Daniels Industries. The relationship has benefited both parties: Porter built its reputation as an industry leader on Daniels reliability and consistently high-quality products and Porters expanding business has enabled Daniels to grow rapidly. Five months ago, several of Porters blood-testing machines malfunctioned shortly after installation. A slight miscalibration of Daniels encoding equipment, which rendered the chips below specification, apparently aggravated a dormant design defect in the lab equipment, causing the malfunctions. Daniels subsequently recalibrated their equipment and has resumed the production of perfect chips. Porter estimates that it suffered $185 million in damages from lost profits, out-of-pocket compensation to the hospitals that bought the defective lab equipment, and injury to its reputation. Fortunately, the defect was discovered quickly and there were no known patient injuries caused by misdiagnosis. Although Daniels admits that its chips were below specification, it disagrees with Porter that it should be responsible for the full amount of Porters injuries. Porters CEO is considering litigation and wants your input on several issues when you meet next week.

1.A Before you can advise her, what additional information would you like to know? How do you think this information might be helpful?

1.B How likely is it that Porter would win a lawsuit? Thoroughly explain your reasoning.

1.C Would the remedy make a lawsuit worthwhile? Why or why not? Explicitly discuss which (if any) factors in the Cost-Benefit Analysis support your conclusion.

1.D Are there alternatives other than litigation that Porter might pursue instead of a lawsuit?

1.E Based on your answers to the questions above, do you recommend that Porter file a lawsuit against Daniels Industries? Explain why or why not