Its Legal, Ethical & Global Environment 6 th Ed. Its Legal, Ethical & Global Environment 6 th Ed. B U S I N E S S MARIANNE M. JENNINGS Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. Chapter 5 Business and the Constitution

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 2 The U. S. Constitution  Article I: Legislative Branch Congress House of Representatives Senate  Article II: Executive Branch President Vice President  Article III: Judicial Branch Creates U.S. Supreme Court Authorizes Congress to create other courts  Article I: Legislative Branch Congress House of Representatives Senate  Article II: Executive Branch President Vice President  Article III: Judicial Branch Creates U.S. Supreme Court Authorizes Congress to create other courts

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 3 The U. S. Constitution  Creates a System of Checks and Balances Each branch has some power check over the others to keep any one from becoming too powerful Example: Clinton v. Jones, 520 U.S. 681 (1997), President is accountable for civil wrongs alleged by private citizens.  Creates a System of Checks and Balances Each branch has some power check over the others to keep any one from becoming too powerful Example: Clinton v. Jones, 520 U.S. 681 (1997), President is accountable for civil wrongs alleged by private citizens.

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 4 The U. S. Constitution  Other Articles in the Constitution Article IV: State interrelationships Article V: Procedures for amendments Article VI: Supremacy Clause  Other Articles in the Constitution Article IV: State interrelationships Article V: Procedures for amendments Article VI: Supremacy Clause

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 5 The U. S. Constitution  Bill of Rights First: Freedom of speech Fourth: Privacy Fifth: Due process and self-incrimination Sixth: Jury trial  Other Amendments to the Constitution Fourteenth Amendment: Equal protection  Bill of Rights First: Freedom of speech Fourth: Privacy Fifth: Due process and self-incrimination Sixth: Jury trial  Other Amendments to the Constitution Fourteenth Amendment: Equal protection

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 6 The Role of Judicial Review  Determines the Rights Afforded by the U.S. Constitution  Determines of the Scope of Rights  Plays Unique Role in Checks and Balances Determines the appropriateness of the actions of other branches  Determines the Rights Afforded by the U.S. Constitution  Determines of the Scope of Rights  Plays Unique Role in Checks and Balances Determines the appropriateness of the actions of other branches

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 7 Constitutional Limitations of Economic Regulation  The Commerce Clause: Article I, Section 8 Standards for Federal Regulation of Interstate Commerce. Historical application: Initially, Court gave a narrow interpretation Court held New Deal Legislation unconstitutional Roosevelt proposed Court-Packing Plan After these political battles, the court responded in NLRB v. Laughlin Steel with the affectation doctrine The affectation doctrine : Congress can regulate local activities that affect interstate commerce.  The Commerce Clause: Article I, Section 8 Standards for Federal Regulation of Interstate Commerce. Historical application: Initially, Court gave a narrow interpretation Court held New Deal Legislation unconstitutional Roosevelt proposed Court-Packing Plan After these political battles, the court responded in NLRB v. Laughlin Steel with the affectation doctrine The affectation doctrine : Congress can regulate local activities that affect interstate commerce.

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 8 Constitutional Limitations of Economic Regulation  Case 5.1 U.S. v. Morrison (2000) Victim of assault sued university under the Violence Against Women Act. Court found the VAWA was non- economic and therefore outside the scope of Congress’ power under the interstate commerce clause.  Case 5.1 U.S. v. Morrison (2000) Victim of assault sued university under the Violence Against Women Act. Court found the VAWA was non- economic and therefore outside the scope of Congress’ power under the interstate commerce clause.

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 9 Constitutional Limitations of Economic Regulation  The Commerce Clause: Article I, Section 8 Standards for state regulation of commerce If Congress has regulated, there is an overriding concern about the Supremacy Clause If Congress has not acted, there is a benefit/burden analysis Balance police power (state’s interest in regulation) with the burden on commerce State law cannot give in-state businesses an advantage  The Commerce Clause: Article I, Section 8 Standards for state regulation of commerce If Congress has regulated, there is an overriding concern about the Supremacy Clause If Congress has not acted, there is a benefit/burden analysis Balance police power (state’s interest in regulation) with the burden on commerce State law cannot give in-state businesses an advantage

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 10 Constitutional Limitations of Economic Regulation  Case 5.2 Fort Gratiot Sanitary Landfill, Inc. v. Michigan Dept. of Natural Resources (1992) Of what significance is it that the restrictions apply both to outside counties and to other states? Is economic protectionism involved?  Case 5.2 Fort Gratiot Sanitary Landfill, Inc. v. Michigan Dept. of Natural Resources (1992) Of what significance is it that the restrictions apply both to outside counties and to other states? Is economic protectionism involved?

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 11 Constitutional Limitations of Economic Regulation  Congressional Regulation of Foreign Commerce The power of Congress to regulate foreign commerce applies regardless of where it begins and ends  Congressional Regulation of Foreign Commerce The power of Congress to regulate foreign commerce applies regardless of where it begins and ends

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 12 Constitutional Regulation of Business - Taxation  Congress Power to Tax: Article I, Section 8 The ability of Congress to tax has been consistently upheld  State and Local Taxation of Interstate Commerce Interstate business is not exempt from state and local taxes just because they are interstate businesses  Congress Power to Tax: Article I, Section 8 The ability of Congress to tax has been consistently upheld  State and Local Taxation of Interstate Commerce Interstate business is not exempt from state and local taxes just because they are interstate businesses

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 13 Constitutional Regulation of Business—Taxation  Requirements for Valid State Tax Tax cannot discriminate against interstate commerce Tax cannot be an undue burden on interstate commerce Example: Requiring out-of-state property to be appraised in state  Requirements for Valid State Tax Tax cannot discriminate against interstate commerce Tax cannot be an undue burden on interstate commerce Example: Requiring out-of-state property to be appraised in state

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 14  Requirements for Valid State Tax Must be a “sufficient nexus” between the state and the business being taxed Examples: Does business there, holds property titles there, manufactures there, inventory stored there Must be apportioned fairly Example: A corporation doing business in fifty states cannot have all income taxed in all fifty states. Must be apportioned according to its revenues in the states  Requirements for Valid State Tax Must be a “sufficient nexus” between the state and the business being taxed Examples: Does business there, holds property titles there, manufactures there, inventory stored there Must be apportioned fairly Example: A corporation doing business in fifty states cannot have all income taxed in all fifty states. Must be apportioned according to its revenues in the states Constitutional Regulation of Business—Taxation

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 15  Case 5.3 Quill Corp. v. North Dakota (1992) How did Quill come to have customers in North Dakota? Is there a difference between pamphlets in a state and salespeople in that state?  Case 5.3 Quill Corp. v. North Dakota (1992) How did Quill come to have customers in North Dakota? Is there a difference between pamphlets in a state and salespeople in that state? Constitutional Regulation of Business—Taxation

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 16 State vs. Federal Regulation of Business  The Supremacy Clause and Preemption Article VI exists to determine which laws control in the event both state and federal governments regulate the same thing If state law directly conflicts with federal law, state law is invalid  The Supremacy Clause and Preemption Article VI exists to determine which laws control in the event both state and federal governments regulate the same thing If state law directly conflicts with federal law, state law is invalid

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 17  The Supremacy Clause and Preemption Whether there is preemption is controlled by answering several questions: What does legislative history provide? What is the level of detail in the federal regulation? What benefit flows from the federal regulation? What is the nature of conflict—can the two laws survive?  The Supremacy Clause and Preemption Whether there is preemption is controlled by answering several questions: What does legislative history provide? What is the level of detail in the federal regulation? What benefit flows from the federal regulation? What is the nature of conflict—can the two laws survive? State vs. Federal Regulation of Business

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 18  Case 5.4 Geier v. Honda Motor (2000) Geier’s car did not have an air bag and she was injured. She sued claiming negligent manufacture, that Honda owed a duty to include an airbag. Case was dismissed and Supreme Court affirmed.  Case 5.4 Geier v. Honda Motor (2000) Geier’s car did not have an air bag and she was injured. She sued claiming negligent manufacture, that Honda owed a duty to include an airbag. Case was dismissed and Supreme Court affirmed. State vs. Federal Regulation of Business

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 19  First Amendment Provides some protection for commercial speech. Commercial speech is speech used to further the economic interests of the speaker Advertising and commercial speech protection Can regulate advertising Substantial government interest must be furthered Is the regulation the least restrictive means of accomplishing the interest  First Amendment Provides some protection for commercial speech. Commercial speech is speech used to further the economic interests of the speaker Advertising and commercial speech protection Can regulate advertising Substantial government interest must be furthered Is the regulation the least restrictive means of accomplishing the interest Business and the Bill of Rights

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 20 First Amendment Full Protection First Amendment Protections and Business Speech First Amendment Protections and Business Speech Business Political Speech Governmental Regulation of Commercial Speech Business Advertising Business and the Bill of Rights

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 21 Business and the Bill of Rights  Case Liquormart, Inc v. Rhode Island (1996). What was the compelling interest in this case?  Case 5.6 Simon & Schuster, Inc. v. Members of the New York State Crime Victims Board (1991) Does the Son of Sam statute violate the First Amendment?  Case Liquormart, Inc v. Rhode Island (1996). What was the compelling interest in this case?  Case 5.6 Simon & Schuster, Inc. v. Members of the New York State Crime Victims Board (1991) Does the Son of Sam statute violate the First Amendment?

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 22 Business and the Bill of Rights  First Amendment Corporate political speech Corporate participation in campaigns is given full First Amendment protection  First Amendment Corporate political speech Corporate participation in campaigns is given full First Amendment protection

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 23 Business and the Bill of Rights  Case 5.7 First National Bank of Boston v. Bellotti (1978) What did the Massachusetts statute regulate? How does the Court respond to the fact that corporate speech might be more persuasive?  Case 5.7 First National Bank of Boston v. Bellotti (1978) What did the Massachusetts statute regulate? How does the Court respond to the fact that corporate speech might be more persuasive?

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 24 Eminent Domain and the Takings Clause  Eminent Domain Eminent domain is the right of government to take private property for public purpose for just compensation Public use Examples: Highways, schools, urban redevelopment, limits on mining, historical preservation, economic development  Eminent Domain Eminent domain is the right of government to take private property for public purpose for just compensation Public use Examples: Highways, schools, urban redevelopment, limits on mining, historical preservation, economic development

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 25  Requirements Taking or regulating Examples: Prohibitions on use, elimination of use In Loretto v. Teleprompter Manhattan CATV Corp. et al. (1982) In Nollan v. California Coastal Commission (1987) In Lucas v. South Carolina Coastal Council (1992)  Requirements Taking or regulating Examples: Prohibitions on use, elimination of use In Loretto v. Teleprompter Manhattan CATV Corp. et al. (1982) In Nollan v. California Coastal Commission (1987) In Lucas v. South Carolina Coastal Council (1992) Eminent Domain and the Takings Clause

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 26  Requirement: Procedural Due Process  Applies to criminal, civil, and administrative proceedings Example: Summons and complaint provide notice to defendants Right to notice of hearings Right to be heard  Requirement: Procedural Due Process  Applies to criminal, civil, and administrative proceedings Example: Summons and complaint provide notice to defendants Right to notice of hearings Right to be heard Eminent Domain and the Takings Clause

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 27  Requirement: Substantive Due Process State laws cannot substantively eliminate rights without some benefit Law must be logically related to legitimate governmental purpose Example: Sunday blue laws—stores are closed by law—states must be able to show economic, health, social benefits of such closure  Requirement: Substantive Due Process State laws cannot substantively eliminate rights without some benefit Law must be logically related to legitimate governmental purpose Example: Sunday blue laws—stores are closed by law—states must be able to show economic, health, social benefits of such closure Eminent Domain and the Takings Clause

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 28 Equal Protection for Business  Elements of Protection for Regulation Regulation must apply to all businesses Example: Courts have struck laws that allow small stores to stay open on Sunday while large stores could not.  Elements of Protection for Regulation Regulation must apply to all businesses Example: Courts have struck laws that allow small stores to stay open on Sunday while large stores could not.

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved. 29 International Law and Constitutions  General Types of Constitutions Found in the United States and England  Code Law Countries Very specific codes that attempt to be all inclusive  Islamic Law Based on religion, governs all aspect of personal and business life law  General Types of Constitutions Found in the United States and England  Code Law Countries Very specific codes that attempt to be all inclusive  Islamic Law Based on religion, governs all aspect of personal and business life law