1. © 2011 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. 1 The Historical and Constitutional Foundations Chapter 1 BUSINESS LAW TODAY Essentials 9 th Ed. Roger LeRoy Miller - Institute for University Studies, Arlington, Texas Gaylord A. Jentz - University of Texas at Austin, Emeritus

2. © 2011 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. 2 Learning Objectives  What are the four primary sources of law in the United States?  What is the common law tradition?  What constitutional clause gives the federal government the power to regulate commercial activities among the various states?  What constitutional clause allow slaws enacted by the federal government to take priority over conflicting state laws?  What is the Bill of Rights? What freedoms are guaranteed by the First Amendment?

3. © 2011 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. 3  Knowledge of “black letter” law is not enough.  Many different laws affect a single business transaction.  Ethics and business decision making. Ethics: what constitutes right or wrong behavior. Ethics: what constitutes right or wrong behavior. Business Activities and the Legal Environment

4. © 2011 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. 4 Sources of American Law  Constitutional Law. Found in text and cases arising from federal and state constitutions. Found in text and cases arising from federal and state constitutions. U.S. Constitution is the supreme law of the land. U.S. Constitution is the supreme law of the land.  Statutory Law. Laws enacted by federal and state legislatures. Laws enacted by federal and state legislatures. Local ordinances. Local ordinances. Uniform Laws (e.g.,Uniform Commercial Code). Uniform Laws (e.g.,Uniform Commercial Code).

5. © 2011 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. 5 Sources of American Law  Administrative Law. Rulemaking--Rules, orders and decisions of administrative agencies, federal, state and local. 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. 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. Adjudication--agencies make rules, then investigate and enforce the rules in administrative hearings.

6. © 2011 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. 6 The Common Law Tradition  Early English Courts of Law. King’s courts started after Norman conquest of 1066. King’s courts started after Norman conquest of 1066. Established the common law—body of general legal principles applied throughout the English empire. Established the common law—body of general legal principles applied throughout the English empire. King’s courts used precedent to build the common law. King’s courts used precedent to build the common law.

7. © 2011 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. 7 Stare Decisis  Stare Decisis. Practice of deciding new cases based on precedent. 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. A higher court’s decision based on certain facts and law, is a binding authority on lower courts. Helps courts stay efficient. Helps courts stay efficient.

8. © 2011 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. 8  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). Equitable Remedies and Courts of Equity

9. © 2011 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. 9 Exhibit 1-2 Procedural Differences

10. © 2011 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. 10 Classifications of Law  Substantive vs. Procedural Law. Substantive: laws that define and regulate rights and duties. Substantive: laws that define and regulate rights and duties. Procedural: laws that establish methods for enforcing and protecting rights. Procedural: laws that establish methods for enforcing and protecting rights.  Civil Law and Criminal Law. Civil: private rights and duties between persons and government. Civil: private rights and duties between persons and government. Criminal: public wrongs against society. Criminal: public wrongs against society.

11. © 2011 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. 11 Classifications of Law  National and International Law. National: laws of a particular nation. National: laws of a particular nation. Civil vs. Common Law: Civil law countries based on Roman code (e.g., Latin America). 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. International: body of written and unwritten laws observed by nations when dealing with each other.

12. © 2011 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. 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 Legislative: enacts laws Executive: enforces laws Executive: enforces laws Judicial: declares laws/actions unconstitutional. Judicial: declares laws/actions unconstitutional. Constitutional Powers of Government

13. © 2011 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. 13  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. The Commerce Clause

14. © 2011 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. 14  Gibbons v. Ogden (1824). To Chief Justice Marshall, commerce meant all business dealings that substantially affected more than one state. 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. The national government had the exclusive power to regulate interstate commerce.  Today: commerce clause applies to e- commerce internet transactions. The Commerce Clause

15. © 2011 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. 15  Wickard v. Filburn (1942). Purely local production, sale and consumption of wheat was subject to federal regulation. Purely local production, sale and consumption of wheat was subject to federal regulation.  CLASSIC CASE 1.1 Heart of Atlanta Motel v. U.S. (1964). Motel that provided public accommodations to guests from other states was subject to federal civil rights legislation. Expansion of National Powers

16. © 2011 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. 16  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). Commerce Power Today

17. © 2011 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. 17  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. Police powers include right to regulate health, safety, morals and general welfare. Includes licensing, building codes, parking regulations and zoning restrictions. Includes licensing, building codes, parking regulations and zoning restrictions.  “Dormant” Commerce Clause  Regulatory Powers of the States

18. © 2011 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. 18  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. Dormant Commerce Clause

19. © 2011 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. 19  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. The Supremacy Clause

20. © 2011 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. 20  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. Business and the Bill of Rights

21. © 2011 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. 21  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). Texas v. Johnson (U.S. 1989). Hodgkins v. Peterson (7 th Cir. 2004). Hodgkins v. Peterson (7 th Cir. 2004).  Reasonable Restrictions: balance government’s obligation to protect community vs. individuals right to speech. First Amendment: Freedom of Speech

22. © 2011 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. 22 Corporate Political Speech  Corporations also have protected political speech (although not to the degree of a natural person).  Supreme Court struck down campaign- reform finance laws as unconstitutional burden on corporate speech (FEC v. Wisconsin Right to Life).

23. © 2011 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. 23  Commercial speech is given substantial protection. Generally, government restrictions must: Seek to implement substantial government interest, Seek to implement substantial government interest, Directly advance that interest, and Directly advance that interest, and Must go no further than necessary to accomplish. Must go no further than necessary to accomplish.  CASE 1.2 Bad Frog Brewery, Inc. v. N.Y. State Liquor Authority (1998). Denial of label on beer lacked a “reasonable fit” with state’s interest in shielding minors from vulgarity, and was therefore unconstitutional. Commercial Speech

24. © 2011 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. 24  U.S. Supreme Court has held that certain speech is NOT protected: Defamatory speech. Defamatory speech. Threatening speech that violates criminal laws. Threatening speech that violates criminal laws. Fighting Words. Fighting Words. Obscene Speech is patently offensive, violates community standards and has no literary, artistic, political or scientific merit. Obscene Speech is patently offensive, violates community standards and has no literary, artistic, political or scientific merit. Unprotected Speech

25. © 2011 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. 25  Protected or Unprotected? Some of Congress’ attempts to protect children from online pornography have been ruled unconstitutional restriction on free speech. Some of Congress’ attempts to protect children from online pornography have been ruled unconstitutional restriction on free speech. Communications Decency Act (1996).Communications Decency Act (1996). COPA (1998-challenged, in court).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.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? What about “hate” speech on the web? Online Obscenity

26. © 2011 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. 26  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.  CASE 1.3 In re Episcopal Church Cases (2009). Secular court can resolve a church property dispute without “establishing” a church in violation of the First Amendment. Freedom of Religion

27. © 2011 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. 27  Free Exercise: person can believe what he wants, but actions may be unconstitutional.  What about freedom of religion and illegal drug use?  Within the Muslim faith, is it a religious violation for a woman to appear in public without a scarf (hijab) over her head? Freedom of Religion

28. © 2011 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. 28  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. Fundamental Right: requires compelling state interest. Non-Fundamental: rational relationship to state interest. Non-Fundamental: rational relationship to state interest. Due Process

29. © 2011 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. 29  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. Minimum scrutiny-economic rights. Intermediate scrutiny. Intermediate scrutiny. Strict Scrutiny – fundamental rights. Strict Scrutiny – fundamental rights. Equal Protection

30. © 2011 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. 30  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). Griswold v. Connecticut (1965) found a right to personal privacy implied in constitution, expanded in Roe v. Wade (1973).  Federal Statutory Protection: USA PATRIOT ACT (2001). USA PATRIOT ACT (2001). HIPAA (1996) (healthcare privacy). HIPAA (1996) (healthcare privacy). Privacy Rights

31. © 2011 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. 31  Finding Statutory Law. United States Code (USC). United States Code (USC). State Statutes. State Statutes.  Finding Administrative Law. Code of Federal Regulations (CFR). Code of Federal Regulations (CFR).  Finding Case Law (Case Citations). Appendix to Chapter 1

32. © 2011 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. 32 Exhibit 1-A - National Reporter System

33. © 2011 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. 33  Reading & Understanding Case Law Legal cases are identified by a “legal citation” (or a “cite”) as the example below: Legal cases are identified by a “legal citation” (or a “cite”) as the example below: Doe v. AOL, LLC, 552 F.3d 1077 (9 th Cir. 2009). Title: First Party is Plaintiff, second party is Defendant. The parties are either italicized or underlined. Appendix

34. © 2011 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. 34  Reading & Understanding Case Law Legal cases are identified by a “legal citation” (or a “cite”) as the example below: Legal cases are identified by a “legal citation” (or a “cite”) as the example below: Doe v. AOL, LLC, 552 F.3d 1077 (9 th Cir. 2009). Case is found in Federal 3 rd Reporter, volume 552, page 1077. Appendix

35. © 2011 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. 35  Reading & Understanding Case Law Legal cases are identified by a “legal citation” (or a “cite”) as the example below: Legal cases are identified by a “legal citation” (or a “cite”) as the example below: Doe v. AOL, LLC, 552 F.3d 1077 (9 th Cir. 2009). Case was decided by the Ninth Circuit Court of Appeals, in 2009. Appendix