1. Commercial Law (Mgmt 348) Professor Charles H. Smith Constitutional Authority to Regulate Business (Chapter 4) Spring 2009

2. Introduction to Constitutional Law U.S. Constitution specifies powers/structure of federal government and guarantees individual rights. U.S. Constitution specifies powers/structure of federal government and guarantees individual rights. 10 th Amendment reserves to states all powers not delegated to federal government. 10 th Amendment reserves to states all powers not delegated to federal government. Every state has its own constitution which often mirrors the U.S. Constitution but may also provide additional rights; e.g., right of privacy in the California Constitution. Every state has its own constitution which often mirrors the U.S. Constitution but may also provide additional rights; e.g., right of privacy in the California Constitution.

3. Commerce Clause U.S. Constitution, Article I, Section 8 gives Congress the power to “regulate Commerce... among the several states.” U.S. Constitution, Article I, Section 8 gives Congress the power to “regulate Commerce... among the several states.” This has been interpreted to empower Congress to regulate activities that “substantially affect interstate commerce” which is not limited to commerce that crosses state lines. This has been interpreted to empower Congress to regulate activities that “substantially affect interstate commerce” which is not limited to commerce that crosses state lines. “Dormant” Commerce Clause – state regulation impinges on interstate commerce; court weighs state’s interest in regulating subject matter vs. burden state regulation puts on interstate commerce. “Dormant” Commerce Clause – state regulation impinges on interstate commerce; court weighs state’s interest in regulating subject matter vs. burden state regulation puts on interstate commerce.

4. Commerce Clause cont. Case studies Case studies Heart of Atlanta Motel v. United States, 379 U.S. 241 (1964) (page 79 and footnote 10) – broad scope of “interstate commerce.” Heart of Atlanta Motel v. United States, 379 U.S. 241 (1964) (page 79 and footnote 10) – broad scope of “interstate commerce.” Gonzales v. Raich, 545 U.S. 1 (2005) (page 80 and footnote 14) – medical marijuana case. Gonzales v. Raich, 545 U.S. 1 (2005) (page 80 and footnote 14) – medical marijuana case. Granholm v. Heald, 544 U.S. 460 (2005) (pages 80-82) – state regulation of direct sales by out- of-state winemakers. Granholm v. Heald, 544 U.S. 460 (2005) (pages 80-82) – state regulation of direct sales by out- of-state winemakers. Does State Regulation of Internet Prescription Transactions Violate the Dormant Commerce Clause? (pages 84-85). Does State Regulation of Internet Prescription Transactions Violate the Dormant Commerce Clause? (pages 84-85).

5. Supremacy Clause – Federal Preemption of State Law U.S. Constitution, Article VI says federal law is “the supreme Law of the land.” U.S. Constitution, Article VI says federal law is “the supreme Law of the land.” Therefore, federal law “preempts” state law – two applications Therefore, federal law “preempts” state law – two applications State regulation in area of law is completely barred; case study – Case Problem 4-8 (page 97) based on Chamber of Commerce v. Brown, 128 S.Ct. 2408 (2008). State regulation in area of law is completely barred; case study – Case Problem 4-8 (page 97) based on Chamber of Commerce v. Brown, 128 S.Ct. 2408 (2008). State regulation not barred unless in conflict with federal law; case studies – state regulation of arbitration; state law will be preempted if in conflict with Federal Arbitration Act policy of enforcing arbitration agreements. State regulation not barred unless in conflict with federal law; case studies – state regulation of arbitration; state law will be preempted if in conflict with Federal Arbitration Act policy of enforcing arbitration agreements.

6. Free Speech U.S. Constitution, 1 st Amendment provides for freedom of speech, but not all “speech” (which can include oral, written and even symbolic communications) gets the same protection. U.S. Constitution, 1 st Amendment provides for freedom of speech, but not all “speech” (which can include oral, written and even symbolic communications) gets the same protection. Different types of “speech” include Different types of “speech” include Political speech – protected even if outrageous or offensive; free exchange of ideas will allow good ideas to prevail and bad ideas to be exposed. Political speech – protected even if outrageous or offensive; free exchange of ideas will allow good ideas to prevail and bad ideas to be exposed. Commercial speech – may or may not be protected; see three-step analysis on page 86. Commercial speech – may or may not be protected; see three-step analysis on page 86. Unprotected speech – examples include defamation or fraud. Unprotected speech – examples include defamation or fraud.

7. Free Speech cont. Case studies Case studies Bad Frog Brewery, Inc. v. New York State Liquor Authority, 134 F.3d 87 (2d Cir. 1998) (pages 87-88) – commercial speech. Bad Frog Brewery, Inc. v. New York State Liquor Authority, 134 F.3d 87 (2d Cir. 1998) (pages 87-88) – commercial speech. Lott v. Levitt, 469 F.Supp.2d 575 (N.D.Ill. 2007) (pages 88-89) – defamation alleged. Lott v. Levitt, 469 F.Supp.2d 575 (N.D.Ill. 2007) (pages 88-89) – defamation alleged. Case Problem 4-5 – www.taubmansucks.com (page 96). Case Problem 4-5 – www.taubmansucks.com (page 96).www.taubmansucks.com Case Problem 4-9 – ban on sales of graffiti implements (page 97). Case Problem 4-9 – ban on sales of graffiti implements (page 97). Case Problem 4-10 – “A Question of Ethics” (page 97). Case Problem 4-10 – “A Question of Ethics” (page 97).

8. Religion Clauses Establishment Clause Establishment Clause Intended to protect people from government imposition of religion. Intended to protect people from government imposition of religion. Free Exercise Clause Free Exercise Clause Intended to provide freedom to practice religion. Intended to provide freedom to practice religion. Case studies – Case Problem 4-3 (page 96); FLDS Church compound raid by Texas children’s services in 2008. Case studies – Case Problem 4-3 (page 96); FLDS Church compound raid by Texas children’s services in 2008.

9. Due Process U.S. Constitution, 5 th and 14 th Amendments. U.S. Constitution, 5 th and 14 th Amendments. Procedural due process – requires government to act fairly before deprivation of life, liberty or property; e.g., notice, opportunity to be heard, decision by neutral. Procedural due process – requires government to act fairly before deprivation of life, liberty or property; e.g., notice, opportunity to be heard, decision by neutral. Substantive due process – protects life, liberty and property against government action no matter what procedure used; e.g., if fundamental right such as voting, marriage and family, compelling government interest must be shown. Substantive due process – protects life, liberty and property against government action no matter what procedure used; e.g., if fundamental right such as voting, marriage and family, compelling government interest must be shown. Case study – Case Problem 4-7 (pages 96-97). Case study – Case Problem 4-7 (pages 96-97).

10. Equal Protection U.S. Constitution, 5 th and 14 th Amendments – government cannot enact laws that treat similarly situated individuals differently. U.S. Constitution, 5 th and 14 th Amendments – government cannot enact laws that treat similarly situated individuals differently. Case study – same-sex marriage issue. Case study – same-sex marriage issue.

11. Due Process vs. Equal Protection Due Process works to invalidate law that prohibits anyone from doing something or would deprive anyone of basic procedural rights. Due Process works to invalidate law that prohibits anyone from doing something or would deprive anyone of basic procedural rights. On the other hand, Equal Protection works to invalidate law providing right to some but not to others who are similarly situated. On the other hand, Equal Protection works to invalidate law providing right to some but not to others who are similarly situated.

12. Privacy Rights No express mention in U.S. Constitution; however, various provisions interpreted to afford privacy rights (e.g., 4 th Amendment). No express mention in U.S. Constitution; however, various provisions interpreted to afford privacy rights (e.g., 4 th Amendment). California Constitution does provide for “right of privacy.” California Constitution does provide for “right of privacy.” Privacy rights usually specified or limited in host of statutes and cases dealing with topics as varied as confidentiality of certain subjects (e.g., medical or academic records) or relationships (e.g., husband-wife or attorney-client privileges). Privacy rights usually specified or limited in host of statutes and cases dealing with topics as varied as confidentiality of certain subjects (e.g., medical or academic records) or relationships (e.g., husband-wife or attorney-client privileges).

13. Privacy Rights cont. Privacy issues in the workplace include Privacy issues in the workplace include Drug testing – generally cannot be required but several exceptions. Drug testing – generally cannot be required but several exceptions. Job application process – relevant to job or cover for discrimination? Job application process – relevant to job or cover for discrimination? Internet/email use on company account/premises – who owns/provides? Internet/email use on company account/premises – who owns/provides?