You are the CEO of Worldwide Accounting, an international accounting firm whose net profits in 2016 were $340 million. Worldwide Accounting, a Delaware corporation with its principle place of business in Pennsylvania, provides accounting services to clients in the United States and European Union. Your CFO has come to you to seek advice about the following situation which he states he just discovered. He tells you:
Over the past 5 years, when Worldwide accountants traveled to service a client, the client was billed directly for the full amount of first class airfare.
In the vast majority of cases, the accountant actually flew business class, not first class, at a 20% cost savings. Over the past 5 years this practice resulted in $10 million in increased profit to Worldwide.
The clients who were billed and paid for first class airfare have no knowledge of this practice.
In addition, Worldwide kept all the bonus miles accrued as a result of business travel on behalf of clients without ever telling them bonus miles were given. These accrued bonus miles had a value of $5 million over the 5 year period.
Prior to coming to you the CFO consulted with corporate counsel who advised that Worldwide is subject to the federal Unfair Trade Practices Act (UTPA). The UTPA provides that "any trade practice which materially misleads a consumer as to the true cost of services provided, and which results in monetary loss to the consumer, is unlawful."
First, employing rules of statutory interpretation, assess whether Worldwide's conduct is legal. Second, using ethical concepts, determine whether Worldwide's conduct is ethical and discuss whether you would continue such business practices. Third, a New Jersey client of Worldwide wants to sue Worldwide for $80,000 in excess airfare paid to Worldwide as a result of its business practices. Discuss in what court(s) the client can sue and identify the jurisdictional basis for each possible court.