1. Chapter 2 Constitutional Law for Business Part II

2. Commerce Clause Cont. No Undue Burden on Interstate Commerce The states did not delegate all power to regulate business to the federal government. They retained the power to regulate intrastate and much interstate business activity that occurs within their borders. This is commonly referred to as state’s police power. Police power permits states (and, by delegation, local governments) to enact laws to protect or promote the public health, safety, morals, and general welfare. This includes the authority to enact laws that regulate the conduct of business. Zoning ordinances, state environmental laws, corporation and partnership laws, and property laws are enacted under this power. State and local laws cannot unduly burden interstate commerce. If they do, they are unconstitutional because they violate the Commerce Clause.

3. Case LawUndue Burden on Interstate Commerce Glanholm, Governor of Michigan v Heald (2005) Background: Under state law, the Michigan Liquor Control Commission generally bans out-of- state direct shipment of alcoholic liquor to consumers' doorsteps, but permits in- state licensed wineries to direct ship to consumers, and out-of-state wineries to import through in-state licensed wholesalers. Out-of-state wineries may also petition the State Liquor Control Commission for an order permitting them to ship wine directly to consumers in the State. Any denial of such a request may be appealed through the State court system. Section 2 of the 21st Amendment to the United States Constitution expressly prohibits importation of alcoholic beverages into any state for delivery or use, in violation of the laws of the State. The Court of Appeals declared Michigan's alcoholic liquor importation law facially unconstitutional in violation of the Commerce Clause. Issue: Does the state of Michigan law that permits in-state wineries to sell wine directly to Michigan consumers but that restricts the ability of out-of- state wineries to do so violate the Commerce Clause of the U.S. Constitution?

4. Glanholm, Governor of Michigan v Heald (2005) cont. Language of the U.S. Supreme Court Technological improvements, in particular the ability of wineries to sell wine over the internet, have helped make direct shipments an attractive sales channel. State bans on interstate direct shipping represent the single largest regulatory barrier to expanded e-commerce in wine. Time and again this court has held that, in all but the narrowest circumstances, state laws violate the Commerce Clause if they mandate differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter. This rule is essential to the foundations of the Union. The mere fact of non-residence should not foreclose a producer in one state from access to markets in other states. States may not enact laws that burden out-of-state producers or shippers simply to give competitive advantage to in-state businesses. Rivalries among the states are thus kept to a minimum, and a proliferation of trade zones is prevented. Laws of the type at issue in the instant case contradict these principles.

5. Glanholm, Governor of Michigan v Heald (2005) cont. They deprive citizens of their right to have access to the markets of other states on equal terms. Allowing states to discriminate against out-of-state wine invites a multiplication of preferential trade areas destructive of the very purpose of the Commerce Clause. State laws that discriminate against interstate commerce face a virtually per se rule of invalidity. The Michigan law by its terms violates this proscription. Decision Yes. The United States Supreme Court held that the Michigan state law that discriminated against out-of-state wineries in favor of in-state wineries violated the Commerce Clause of the U.S. Constitution.

6. Bill of Rights The U.S. Constitution provides that it may be amended. In 1791, the 10 amendments that are commonly referred to as the Bill of Rights were approved by the states and became part of the U.S. Constitution. The Bill of Rights guarantees certain fundamental rights and protects these rights from intrusive government action. Originally, the Bill of Rights limited intrusive actions by the federal government only. Intrusive actions by state and local governments were not limited until the Due Process Clause of the Fourteenth Amendment was added to the Constitution in 1868. The Supreme Court has applied the incorporation doctrine and held that most of the fundamental guarantees contained in the Bill of Rights are applicable to state and local government action.

7. Freedom of Speech The First Amendment to the U.S. Constitution “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.” One of the most honored freedoms guaranteed by the Bill of Rights is the freedom of speech of the First Amendment. The First Amendment’s Freedom of Speech Clause protects speech only, not conduct. The U.S Supreme Court places speech into three categories: (1)fully protected (2)limited protected (3)unprotected speech

8. Freedom of Speech cont. Fully Protected Speech Fully protected speech is speech that the government cannot prohibit or regulate. Political speech is one area of speech that is fully protected. The First Amendment protects oral, written, and symbolic speech. Case LawFirst Amendment United States v. Playboy Entertainment Group, Inc. (2000) Facts of the Case: In 1996, Congress enacted the Communications Decency Act, of which section 505 required that cable operators, providing channels "primarily dedicated to sexually-oriented programming," either to "fully scramble or otherwise fully block" those channels or to broadcast those channels during the "safe-harbor" hours of 10 p.m. to 6 a.m. - times when young children were unlikely to be watching. The purpose of section 505 was to protect non- subscribers, and their children, from "signal bleed," or when audio and visual portions of the scrambled programs might be heard or seen. In February

9. United States v. Playboy cont. 1996, Playboy Entertainment Group, Inc. filed suit challenging section 505's constitutionality. A three-judge District Court panel found that section 505's content-based restriction on speech violated the First Amendment because the Government might further its interests in less restrictive ways. The court also found that the Act provided for a less restrictive alternative than section 505, in that section 504 stated that cable operators had an obligation to block channels at a customer's request. Question: Is section 505 of the Communications Decency Act of 1996 the least restrictive means to block the transmission of cable television channels primarily dedicated to sexually oriented programming, such that it does not violate the First Amendment? Conclusion: No. In a 5-4 opinion delivered by Justice Anthony M. Kennedy, the Court held that because the Federal Government failed to show that section 505 was the least restrictive means to further its interests, requiring cable television operators to fully scramble or limit time when sexually-oriented programming was transmitted violated the First Amendment’s free speech guarantee. In finding section 505 a content-based regulation, Justice Kennedy wrote for

10. United States v Playboy cont. the Court that "[i]f a statute regulates speech based on its content, it must be narrowly tailored to promote a compelling Government interest. If a less restrictive alternative would serve the Government's purpose, the legislature must use that alternative." In dissent, Justice Stephen G. Breyer maintained that the majority had not made a "realistic assessment of the alternatives.“

11. Limited Protected Speech The Supreme Court has held that certain types of speech have only limited protection under the First Amendment. The government cannot forbid limited protected speech, but it can subject this speech to time, place, and manner restrictions. Two types of speech are accorded limited protection: offensive speech and commercial speech. Offensive speech is speech that offends many members of society. The Supreme Court has held that the government may restrict offensive speech under time, place, and manner restrictions. The Federal Communications Commission (FCC) can regulate the use of offensive language to time periods when children would be unlikely to be watching (e.g. late at night).

12. Limited Protected Speech cont. Commercial Speech Commercial speech has been defined by the Supreme Court as speech where the speaker is more likely to be engaged in commerce, where the intended audience is commercial or actual or potential consumers, and where the content of the message is commercial in character. Commercial speech, such as advertisments, has been ruled by the Supreme Court to be entitled to less protection under the First Amendment than noncommerical speech. Under the First Amendment, noncommercial speech is entitled to full protection, and any sort of content-based regulation is only valid if it can withstand strict scrutiny. However, commerical speech is not given such deference. For a content-based regulation of commercial speech to be valid, it only must withstand intermediate scrutiny.First Amendmentstrict scrutinyintermediate scrutiny Additionally, commercial speech that is false or misleading is not entitled to any protection under the First Amendment, and therefore can be prohibited entirely.First Amendment

13. Two standards of judicial review Strict Scrutiny Strict scrutiny is a form of judicial review that courts use to determine the constitutionality of certain laws. To pass strict scrutiny, the legislature must have passed the law to further a "compelling governmental interest," and must have narrowly tailored the law to achieve that interest. A famous quip asserts that strict scrutiny is "strict in name, but fatal in practice." For a court to apply strict scrutiny, the legislature must either have significantly abridged a fundamental right with the law's enactment or have passed a law that involves a suspect classification. Suspect classifications have come to include race, national origin, religion, alienage, and poverty.national origin Intermediate Scrutiny Intermediate scrutiny is a test used in some contexts to determine a law's constitutionality. To pass intermediate scrutiny, the challenged law must further an important government interest by means that are substantially related to that interest. As the name implies, intermediate scrutiny is less rigorous than strict scrutiny, but more rigorous than rational basis review. Intermediate scrutiny is used in equal protection challenges to gender classifications, as well as in some First Amendment cases.strict scrutiny rational basisequal protectionFirst Amendment

14. Unprotected Speech The Supreme Court has held that the following types of speech are unprotected speech; they are not protected by the First Amendment and may be totally forbidden by the government. 1.Dangerous speech (“Yelling ‘fire’ in a crowded theater when there is no fire). 2.Fighting words that are likely to provoke a hostile or violent response from an average person. 3.Speech that incites the violent overthrow of the government (However, the mere abstract teaching of the morality and consequences of such action is protected). 4.Defamatory language. 5.Child pornography. 6.Obscene speech.