© 2008 West Legal Studies in Business A Division of Thomson Learning 1 BUSINESS LAW TODAY...

© 2008 West Legal Studies in BusinessA Division of Thomson Learning

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BUSINESS LAW TODAY Essentials 8th Ed.

Roger LeRoy Miller - Institute for University Studies, Arlington, TexasGaylord A. Jentz - University of Texas at Austin, Emeritus

Chapter

1The Historical and

Constitutional Foundations

The Historical and Constitutional Foundations


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Learning ObjectivesLearning Objectives What is the common law tradition? What is a precedent? When might a court

depart from precedent? What is the difference between remedies at

law and remedies in equity? What constitutional clause gives the federal

government the power to regulate commercial activities among the various states?

What is the Bill of Rights? What freedoms are guaranteed by the First Amendment?


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Sources of American LawSources of American Law

Constitutional Law.Found in text and cases arising from federal and

state constitutions.U.S. Constitution is the supreme law of the land.

Statutory Law.Laws enacted by federal and state legislatures.Local ordinances.Uniform Laws (e.g.,Uniform Commercial Code).


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Sources of American LawSources of American Law Administrative Law.

Rulemaking--Rules, orders and decisions of administrative agencies, federal, state and local.

Administrative agencies can be independent regulatory agency such as the Food and Drug Administration.

Adjudication--agencies make rules, then investigate and enforce the rules in administrative hearings.


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The Common Law TraditionThe Common Law Tradition

Early English Courts of Law.King’s courts started after Norman conquest

of 1066.Established the common law—body of

general legal principles applied throughout the English empire.

King’s courts used precedent to build the common law.


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Stare DecisisStare Decisis

Stare DecisisPractice of deciding new cases based on

precedent.A higher court’s decision based on certain

facts and law, is a binding authority on lower courts.

Helps courts stay efficient.


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Equitable Remedies & CourtsEquitable Remedies & Courts

Remedy: means to enforce a right or compensate for injury to that right.

Remedy at Law: in king’s courts, remedies were restricted to damages in either money or property.

Equitable Remedy: based on justice and fair dealing a chancery court does what is right: specific performance, injunction, rescission.

Plaintiffs (injured party initiating the lawsuit), Defendants (allegedly caused injury).


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Exhibit 1-1Exhibit 1-1


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Classifications of LawClassifications of Law

Substantive vs. Procedural LawSubstantive: laws that define and regulate

rights and duties.Procedural: laws that establish methods for

enforcing and protecting rights.

Civil Law and Criminal LawCivil: private rights and duties between

persons and government.Criminal: public wrongs against society.


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Classifications of LawClassifications of Law

National and International LawNational: laws of a particular nation.Civil vs. Common Law: Civil law countries

based on Roman code (e.g., Latin America).International: body of written and unwritten

laws observed by nations when dealing with each other.


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Comparision of Legal Comparision of Legal SystemsSystems


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A Federal Form of Government: the federal constitution was a political compromise between advocates of state sovereignty and central government.

Separation of Powers: Executive, Legislative and Judicial. Provides checks and balances.Legislative: enacts lawsExecutive: enforces lawsJudicial: declares laws/actions unconstitutional.

Constitutional Powers Constitutional Powers of Governmentof Government


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The Commerce ClauseThe Commerce Clause

U.S. Constitution gives Congress the power to

“regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes.” (Art. 1 § 8)

Greatest impact on business than any other Constitutional provision.


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The Commerce ClauseThe Commerce Clause

Gibbons v. Ogden (1824).To Chief Justice Marshall, commerce meant

all business dealings that substantially affected more than one state.

The national government had the exclusive power to regulate interstate commerce.

Today: commerce clause applies to e-commerce internet transactions.


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Expansion of National Expansion of National PowersPowers

Wickard v. Filburn (1942). Purely local production, sale and

consumption of wheat was subject to federal regulation.

CASE 2.1 Heart of Atlanta Motel v. U.S. (1964). Motel that provided public accommo-

dations to guests from other states was subject to federal civil rights legislation.


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Commerce Power TodayCommerce Power Today

Theoretically: the federal government has unlimited control over all business transactions since any enterprise (in the aggregate) can have a “substantial effect” on interstate commerce.

Practical Limits: Supreme Court has curbed federal regulatory powers in U.S. v. Lopez (1995) and U.S. v. Morrison (2000).


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Regulatory Powers of the Regulatory Powers of the StatesStates

Tenth Amendment reserves all powers to the states that have not been expressly delegated to the national government.

State have inherent “police powers.” Police powers include right to regulate health,

safety, morals and general welfare.Includes licensing, building codes, parking

regulations and zoning restrictions.

“Dormant” Commerce Clause


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Dormant Commerce ClauseDormant Commerce Clause U.S. Supreme Court has interpreted

commerce clause to give national government exclusive power to regulate.

States only have a “dormant” (negative) power to regulate interstate commerce.

Dormant power comes into play when courts balance state’s interest vs. national interest, e.g., internet transactions.

CASE 2.2 Granholm v. Heald (2005).


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The Supremacy ClauseThe Supremacy Clause

Supremacy Clause: Article VI of the Constitution provides that Constitution, laws and treaties of the United States are the “supreme law of the land.”

Concurrent: in few areas, both states and federal government share powers.

Preemption: when Congress chooses to act in a concurrent area, federal law preempts state law.


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Taxing and Spending PowersTaxing and Spending Powers Article I Section 8: Congress has the

power to “lay and collect taxes, duties, imposts and excises.”

Today: if federal tax has a reasonable relationship to revenue production, it will be held constitutional.

Congress can spend tax revenues on any express or implied constitutional power.


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Business and the Bill of Business and the Bill of RightsRights

1791: Ten written guarantees of protection of individual liberties from government interference.

Originally: Bill of Rights only applied to the federal government.

Today: the Bill of Rights has been “incorporated” and applied to the States as well.

Some protections apply to businesses.


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First Amendment: Freedom of First Amendment: Freedom of SpeechSpeech

Right to Free Speech is the basis for our democratic government.

Free speech also includes “symbolic” speech, including gestures, movements, articles of clothing. Texas v. Johnson (U.S. 1989).Hodgkins v. Peterson (7th Cir. 2004).


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Corporate SpeechCorporate Speech

Commercial speech (advertising) is given substantial protection. Government restrictions must:Seek to implement substantial government interest,Directly advance that interest, andMust go no further than necessary to accomplish.

Corporations also have protected political speech (although not to the degree of a natural person).


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Unprotected SpeechUnprotected Speech U.S. Supreme Court has held that

certain speech is NOT protected:Defamatory speech.Threatening speech that violates criminal

laws.Fighting Words.Obscene Speech is patently offensive,

violates community standards and has no literary, artistic, political or scientific merit.

CASE 2.3 Lott v. Levitt (2007).


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Online (Obscene) SpeechOnline (Obscene) Speech

Protected or Unprotected?Some of Congress’ attempts to protect

children from online pornography have been ruled unconstitutional restriction on free speech.

• Communications Decency Act (1996).• COPA (1998-challenged, in court).• Children’s Internet Protection Act (2000) which

requires filters for computers in public libraries and public schools). Challenged, in court.

What about “hate” speech on the web?


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Freedom of ReligionFreedom of Religion

First Amendment guarantees that “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof…”

Establishment clause: no state-sponsored religion or preference for one religion over another.

Free Exercise: person can believe what he wants, but actions may be unconstitutional.

What about freedom of religion and illegal drug use?


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Due ProcessDue Process

Procedural: any government decision to take life, liberty or property must be fair. Requires: Notice and Fair Hearing.

Substantive: focuses on the content or the legislation (the right itself).Fundamental Right: requires compelling state interest.Non-Fundamental: rational relationship to state

interest.


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Equal ProtectionEqual Protection

14th Amendment: A state may not “deny to any person within its jurisdiction the equal protection of the laws.”

Government must treat similarly situated individuals (or businesses) in the same manner.

Courts apply different tests:Minimum scrutiny-economic rights.Intermediate scrutiny.Strict Scrutiny – fundamental rights.


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Privacy RightsPrivacy Rights

Fourth amendment protects against unreasonable search and seizures.

Griswold v. Connecticut (1965) found a right to personal privacy implied in constitution, expanded in Roe v. Wade (1973).

Website privacy policies. What about private information on the internet?

What about USA PATRIOT ACT (2001)? HIPAA (1996) (healthcare privacy).


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Appendix to Chapter 1Appendix to Chapter 1

Finding Statutory Law.United States Code (USC).State Statutes.

Finding Administrative Law.Code of Federal Regulations (CFR).

Finding Case Law (Case Citations).


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Exhibit 1A-1Exhibit 1A-1


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AppendixAppendixAppendixAppendix

Reading & Understanding Case LawLegal cases are identified by a “legal citation” (or a “cite”) as the example below:

Nunez v. Carabba’s Italian Grill, Inc., 448 Mass. 170, 859 N.E.2d 801 (2007).

Title: First Party is Plaintiff, second party is Defendant. The parties are either

italicized or underlined.


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AppendixAppendixAppendixAppendix

Reading & Understanding Case LawLegal cases are identified by a “legal citation” (or a “cite”) as the example below:

Nunez v. Carabba’s Italian Grill, Inc., 448 Mass. 170, 859 N.E.2d 801 (2007).

This is a 2007 State Supreme Court Case found in volume 448, page 170 of the

Massachussets Reports, OR volume 859, page 801 of the NorthEastern Reporter 2nd.

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