© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C HAPTER 1 T HE H ISTORICAL AND C ONSTITUTIONAL F OUNDATIONS 1

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. L EARNING O BJECTIVES  What are four primary sources of law in the United States?  What is a precedent? When might a court depart from precedent?  What is the difference between remedies at law and remedies in equity?  2

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. L EARNING O BJECTIVES  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 do the First Amendment guarantee? 3

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Law consists of enforceable rules governing relationships among individuals and between individuals and their society.  4 B USINESS A CTIVITIES AND THE L EGAL E NVIRONMENT

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Law establishes rights, duties, and privileges that are consistent with the values and beliefs of a society or its ruling group. 5 B USINESS A CTIVITIES AND THE L EGAL E NVIRONMENT

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. S OURCES OF A MERICAN L AW  Constitutional Law. Found in text and cases arising from federal and state constitutions. U.S. Constitution is the supreme law of the land.  6

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. S OURCES OF A MERICAN L AW  Statutory Law. Laws enacted by federal and state legislatures. Local ordinances. Uniform Laws (e.g., Uniform Commercial Code). 7

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. S OURCES OF A MERICAN L AW  Administrative Law. Federal or State agencies. Agency Creation. Administrative agencies can be independent regulatory agency such as the Food and Drug Administration. Rulemaking: rules, orders and decisions of administrative agencies.  8

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. S OURCES OF A MERICAN L AW  Administrative Law. Rulemaking and Enforcement. Final Rule published in the Federal Register. The Dodd-Frank Act provides recent examples of administrative process, e.g., the Financial Oversight Council.  9

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. S OURCES OF A MERICAN L AW  Administrative Law. Adjudication. Purpose is to ensure that the rule issued is based on a consideration of relevant factors rather than being arbitrary and capricious, which include the powers to: Conduct Inspections and Tests. Issue Subpoenas. Search Warrants. 10

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. S OURCES OF A MERICAN L AW  Case Law and Common Law Doctrines. Rules and decisions made by courts, otherwise known as case law. Governs all areas of law not covered by statutory or administrative law. 11

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T HE C OMMON L AW T RADITION  Early English Courts. King’s Courts established the common law—body of general legal principles applied throughout the English empire. King’s courts used precedent to build the common law. 12

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T HE C OMMON L AW T RADITION  Stare Decisis. Controlling Precedent: practice of deciding new cases based on precedent; a higher court’s decision is a precedent that has binding authority on lower courts. Departures from Precedent. 13

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T HE C OMMON L AW T RADITION  Equitable Remedies and Courts of Equity. 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.  14

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T HE C OMMON L AW T RADITION  Equitable Remedies and Courts of Equity. Remedies in Equity: based on justice and fair dealing a chancery court does what is right: specific performance, injunction, rescission.  15

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T HE C OMMON L AW T RADITION  Equitable Remedies and Courts of Equity. Merging of Law and Equity: most courts today can award remedies in law or equity.  16

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T HE C OMMON L AW T RADITION 17

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C LASSIFICATIONS OF L AW  Substantive vs. Procedural Law. Substantive: laws that define and regulate rights and duties. Procedural: laws that establish methods for enforcing and protecting rights. 18

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C LASSIFICATIONS OF L AW  Civil Law and Criminal Law. Civil: private rights and duties between persons and government. Criminal: public wrongs against society. 19

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C LASSIFICATIONS OF L AW  National and International Law. National: laws of a particular nation. International: body of written and unwritten laws observed by nations when dealing with each other. 20

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  A Federal Form of Government: the federal constitution was a political compromise between advocates of state sovereignty and central government.  21 C ONSTITUTIONAL P OWERS OF G OVERNMENT

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C ONSTITUTIONAL P OWERS OF G OVERNMENT  Separation of Powers: Executive, Legislative and Judicial. Provides checks and balances. Legislative: enacts laws Executive: enforces laws Judicial: declares laws/actions unconstitutional. 22

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C ONSTITUTIONAL P OWERS OF G OVERNMENT  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.  23

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C ONSTITUTIONAL P OWERS OF G OVERNMENT  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.  24

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C ONSTITUTIONAL P OWERS OF G OVERNMENT  Commerce Clause. Wickard v. Filburn (1942). Purely local production, sale and consumption of wheat was subject to federal regulation. CASE 1.1 Heart of Atlanta Motel v. U.S. (1964). Motels that provided public accommodations were subject to federal civil rights legislation. 25

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C ONSTITUTIONAL P OWERS OF G OVERNMENT  Commerce Clause 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.  26

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C ONSTITUTIONAL P OWERS OF G OVERNMENT  Commerce Clause 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.  27

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C ONSTITUTIONAL P OWERS OF G OVERNMENT  Commerce Clause TODAY. Supreme Court has curbed federal regulatory powers in U.S. v. Lopez (1995) and U.S. v. Morrison (2000). But see Gonzalez v Raich (2005) in which the Supreme Court ruled that Congress can prohibit intrastate sale of marijuana. 28

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C ONSTITUTIONAL P OWERS OF G OVERNMENT  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” (health, safety, morals and general welfare). 29

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C ONSTITUTIONAL P OWERS OF G OVERNMENT  “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 30

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C ONSTITUTIONAL P OWERS OF G OVERNMENT  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.  31

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C ONSTITUTIONAL P OWERS OF G OVERNMENT  The Supremacy Clause. Preemption: when Congress chooses to act in a concurrent area, federal law preempts state law. 32

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B USINESS AND THE B ILL OF R IGHTS  1791: Ten written guarantees of protection of individual liberties from government interference.  Originally: Bill of Rights only applied to the federal government.  33

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B USINESS AND THE B ILL OF R IGHTS  Today: the Bill of Rights has been “incorporated” and applied to the States as well.  Some protections apply to businesses. 34

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B USINESS AND THE B ILL OF R IGHTS  First Amendment: Freedom of Speech. Right to Free Speech is the basis for our democratic government. Symbolic Speech: includes gestures, movements, articles of clothing. Texas v. Johnson (U.S. 1989). Hodgkins v. Peterson (7 th Cir. 2004).  35

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B USINESS AND THE B ILL OF R IGHTS  First Amendment: Freedom of Speech. Reasonable Restrictions: balance government’s obligation to protect community vs. individuals right to speech. 36

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B USINESS AND THE B ILL OF R IGHTS  First Amendment: Freedom of Speech. Corporate Political Speech. Corporations have protected political speech to financially support candidates. Citizens United v. FEC (2010). 37

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B USINESS AND THE B ILL OF R IGHTS  First Amendment: Freedom of Speech. Commercial Speech is given substantial protection. Restrictions must: (1) Seek to implement substantial government interest, (2) Directly advance that interest, and (3) Must go no further than necessary to accomplish. 38

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B USINESS AND THE B ILL OF R IGHTS  First Amendment: Freedom of Speech. Commercial Speech. CASE 1.2 Bad Frog Brewery, Inc. v. N.Y. State Liquor Authority (1998). Denial of label on beer was unconstitutional because it lacked a “reasonable fit” with state’s interest in shielding minors from vulgarity. 39

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B USINESS AND THE B ILL OF R IGHTS  First Amendment: Freedom of Speech. Unprotected Speech. U.S. Supreme Court has held that certain speech is NOT protected: Defamatory speech. Threatening speech that violates criminal laws.  40

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B USINESS AND THE B ILL OF R IGHTS  First Amendment: Freedom of Speech. Fighting Words. Unprotected Speech. Obscene Speech is patently offensive, violates community standards and has no literary, artistic, political or scientific merit. 41

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B USINESS AND THE B ILL OF R IGHTS  First Amendment: Freedom of Speech. Online Obscenity. CIPA (2000) which requires filters for computers in public libraries and public schools). PROTECT Act (2003). Child pornography. What about “hate” speech on the web? 42

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B USINESS AND THE B ILL OF R IGHTS  First Amendment: Freedom of Religion. First Amendment guarantees that “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof…”  43

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B USINESS AND THE B ILL OF R IGHTS  First Amendment: Freedom of Religion. Establishment Clause: no state- sponsored religion or preference for one religion over another.  44

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B USINESS AND THE B ILL OF R IGHTS  First Amendment: Freedom of Religion. Free Exercise Clause. Guarantees that a person can hold and practice any (or no) religious belief. Only the actions of the government – not the individual – are prohibited.  45

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B USINESS AND THE B ILL OF R IGHTS  First Amendment: Freedom of Religion. Free Exercise Clause CASE 1.3 Mitchell County v. Zimmerman (2012). Local ordinance banning steel cleats on roads was unconstitutional because it was directed at the Mennonite religion. 46

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B USINESS AND THE B ILL OF R IGHTS  Due Process. Procedural: any government decision to take life, liberty or property must be fair. Requires: Notice and Fair Hearing.  47

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B USINESS AND THE B ILL OF R IGHTS  Due Process. Substantive: focuses on the content or the legislation (the right itself). Fundamental Right: requires compelling state interest. Non-Fundamental: rational relationship to state interest. 48

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B USINESS AND THE B ILL OF R IGHTS  Equal Protection. 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. 49

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. P RIVACY R IGHTS  Fourth amendment protects against unreasonable search and seizures.  Constitutional Protection: Griswold v. Connecticut (1965) found a right to personal privacy implied in constitution, expanded in Roe v. Wade (1973).  50

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. P RIVACY R IGHTS  Federal Statutes Protecting Privacy. HIPAA (1996) (healthcare privacy).  Technological Advances and Privacy Rights. Court Records. Is there an expectation of privacy? USA PATRIOT ACT (2001). 51

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. A PPENDIX  Finding Statutory and Administrative Law. United States Code (USC). State Codes. Administrative Rules - Code of Federal Regulations (CFR). 52

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. A PPENDIX  Finding Case Law. State Court Decisions. Regional Reporters: published by West Group. National Reporter System divides the country into: Atlantic, North Eastern, North Western, Pacific, South Eastern, South Western, and Southern reporters.  53

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. W EST ’ S N ATIONAL R EPORTER S YSTEM 54

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. A PPENDIX  Finding Case Law. Case Citations. Federal Court Decisions. West’s Federal Supplement (F.Supp or F.Supp.2d), United States Reports (U.S.) and West’s Reporter (S.Ct.). Unpublished Opinions. Old Cases. 55

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Reading & Understanding Case Law. Legal Citations. United States v. Jones, 132 S. Ct. 945 (2012). Title: First Party is Plaintiff, second party is Defendant. The parties are either italicized or underlined. A PPENDIX 56

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Reading & Understanding Case Law. Legal Citations. United States v. Jones, 132 S. Ct. 945 (2012). Case is found in the Supreme Court Reports published by West, Volume 132, page 945, decided A PPENDIX 57