1. © 2008 West Legal Studies in Business A Division of Thomson Learning 1 BUSINESS LAW TODAY Essentials 8 th Ed. Roger LeRoy Miller - Institute for University Studies, Arlington, Texas Gaylord A. Jentz - University of Texas at Austin, Emeritus Chapter 1 The Historical and Constitutional Foundations

2. © 2008 West Legal Studies in Business A Division of Thomson Learning 2 Learning 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?

3. © 2008 West Legal Studies in Business A Division of Thomson Learning 3 Sources 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).

4. © 2008 West Legal Studies in Business A Division of Thomson Learning 4 Sources 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.

5. © 2008 West Legal Studies in Business A Division of Thomson Learning 5 The 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.

6. © 2008 West Legal Studies in Business A Division of Thomson Learning 6 Stare Decisis  Stare Decisis Practice 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.

7. © 2008 West Legal Studies in Business A Division of Thomson Learning 7 Equitable 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).

8. © 2008 West Legal Studies in Business A Division of Thomson Learning 8 Exhibit 1-1

9. © 2008 West Legal Studies in Business A Division of Thomson Learning 9 Classifications of Law  Substantive vs. Procedural Law Substantive: laws that define and regulate rights and duties. Procedural: laws that establish methods for enforcing and protecting rights.  Civil Law and Criminal Law Civil: private rights and duties between persons and government. Criminal: public wrongs against society.

10. © 2008 West Legal Studies in Business A Division of Thomson Learning 10 Classifications of Law  National and International Law National: 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.

11. © 2008 West Legal Studies in Business A Division of Thomson Learning 11 Comparision of Legal Systems

12. © 2008 West Legal Studies in Business A Division of Thomson Learning 12  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 laws Executive: enforces laws Judicial: declares laws/actions unconstitutional. Constitutional Powers of Government

13. © 2008 West Legal Studies in Business A Division of Thomson Learning 13 The 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.

14. © 2008 West Legal Studies in Business A Division of Thomson Learning 14 The 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.

15. © 2008 West Legal Studies in Business A Division of Thomson Learning 15 Expansion of National Powers  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.

16. © 2008 West Legal Studies in Business A Division of Thomson Learning 16 Commerce 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).

17. © 2008 West Legal Studies in Business A Division of Thomson Learning 17 Regulatory Powers of the States  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 

18. © 2008 West Legal Studies in Business A Division of Thomson Learning 18 Dormant 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).

19. © 2008 West Legal Studies in Business A Division of Thomson Learning 19 The 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.

20. © 2008 West Legal Studies in Business A Division of Thomson Learning 20 Taxing 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.

21. © 2008 West Legal Studies in Business A Division of Thomson Learning 21 Business and the Bill of Rights  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.

22. © 2008 West Legal Studies in Business A Division of Thomson Learning 22 First Amendment: Freedom of Speech  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 (7 th Cir. 2004).

23. © 2008 West Legal Studies in Business A Division of Thomson Learning 23 Corporate Speech  Commercial speech (advertising) is given substantial protection. Government restrictions must: Seek to implement substantial government interest, Directly advance that interest, and Must go no further than necessary to accomplish.  Corporations also have protected political speech (although not to the degree of a natural person).

24. © 2008 West Legal Studies in Business A Division of Thomson Learning 24 Unprotected 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).

25. © 2008 West Legal Studies in Business A Division of Thomson Learning 25 Online (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?

26. © 2008 West Legal Studies in Business A Division of Thomson Learning 26 Freedom 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?

27. © 2008 West Legal Studies in Business A Division of Thomson Learning 27 Due 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.

28. © 2008 West Legal Studies in Business A Division of Thomson Learning 28 Equal Protection  14 th 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.

29. © 2008 West Legal Studies in Business A Division of Thomson Learning 29 Privacy 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).

30. © 2008 West Legal Studies in Business A Division of Thomson Learning 30 Appendix 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).

31. © 2008 West Legal Studies in Business A Division of Thomson Learning 31 Exhibit 1A-1

32. © 2008 West Legal Studies in Business A Division of Thomson Learning 32AppendixAppendix  Reading & Understanding Case Law Legal 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.

33. © 2008 West Legal Studies in Business A Division of Thomson Learning 33AppendixAppendix  Reading & Understanding Case Law Legal 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 2 nd.