BUSINESS LAW TODAY
Essentials 8 th Ed.
Roger LeRoy Miller - Institute for University Studies, Arlington, Texas
Gaylord A. Jentz - University of Texas at Austin, Emeritus
Chapter
1
© 2008 West Legal Studies in Business
A Division of Thomson Learning
1


What is the common law tradition?

What is a precedent? When might a court depart from precedent?

What is the difference between remedies at law and remedies in equity?

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 are guaranteed by the First Amendment?
© 2008 West Legal Studies in Business
A Division of Thomson Learning
2


Constitutional Law.
 Found in text and cases arising from federal and state constitutions.
 U.S. Constitution is the supreme law of the land.

Statutory Law.
 Laws enacted by federal and state legislatures.
 Local ordinances.
 Uniform Laws (e.g.,Uniform Commercial
Code).
© 2008 West Legal Studies in Business
A Division of Thomson Learning
3


Administrative Law.
 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.
 Adjudication--agencies make rules, then investigate and enforce the rules in administrative hearings.
© 2008 West Legal Studies in Business
A Division of Thomson Learning
4


Early English Courts of Law.
 King’s courts started after Norman conquest of 1066.
 Established the common law —body of general legal principles applied throughout the
English empire.
 King’s courts used precedent to build the common law.
© 2008 West Legal Studies in Business
A Division of Thomson Learning
5


Stare Decisis
 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.
 Helps courts stay efficient.
© 2008 West Legal Studies in Business
A Division of Thomson Learning
6


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).
© 2008 West Legal Studies in Business
A Division of Thomson Learning
7

© 2008 West Legal Studies in Business
A Division of Thomson Learning
8


Substantive vs. Procedural Law
 Substantive: laws that define and regulate rights and duties.
 Procedural: laws that establish methods for enforcing and protecting rights.

Civil Law and Criminal Law
 Civil: private rights and duties between persons and government.
 Criminal: public wrongs against society.
© 2008 West Legal Studies in Business
A Division of Thomson Learning
9


National and International Law
 National: laws of a particular nation.
 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.
© 2008 West Legal Studies in Business
A Division of Thomson Learning
10

© 2008 West Legal Studies in Business
A Division of Thomson Learning
11


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
 Executive: enforces laws
 Judicial: declares laws/actions unconstitutional.
© 2008 West Legal Studies in Business
A Division of Thomson Learning
12


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.
© 2008 West Legal Studies in Business
A Division of Thomson Learning
13


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.

Today: commerce clause applies to ecommerce internet transactions.
© 2008 West Legal Studies in Business
A Division of Thomson Learning
14


Wickard v. Filburn (1942).
 Purely local production, sale and consumption of wheat was subject to federal regulation.

CASE 2.1
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.
© 2008 West Legal Studies in Business
A Division of Thomson Learning
15


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).
© 2008 West Legal Studies in Business
A Division of Thomson Learning
16


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.
 Includes licensing, building codes, parking regulations and zoning restrictions.

“Dormant” Commerce Clause 
© 2008 West Legal Studies in Business
A Division of Thomson Learning
17


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.

CASE 2.2
Granholm v. Heald (2005).
© 2008 West Legal Studies in Business
A Division of Thomson Learning
18


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.
© 2008 West Legal Studies in Business
A Division of Thomson Learning
19


Article I Section 8: Congress has the power to “lay and collect taxes, duties, imposts and excises.”

Today: if federal tax has a reasonable relationship to revenue production, it will be held constitutional.

Congress can spend tax revenues on any express or implied constitutional power.
© 2008 West Legal Studies in Business
A Division of Thomson Learning
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.
© 2008 West Legal Studies in Business
A Division of Thomson Learning
21


Right to Free Speech is the basis for our democratic government.
 Free speech also includes “symbolic” speech, including gestures, movements, articles of clothing.
 Texas v. Johnson (U.S. 1989).
 Hodgkins v. Peterson (7 th Cir. 2004).
© 2008 West Legal Studies in Business
A Division of Thomson Learning
22


Commercial speech (advertising) is given substantial protection. Government restrictions must:
 Seek to implement substantial government interest,
 Directly advance that interest, and
 Must go no further than necessary to accomplish.

Corporations also have protected political speech (although not to the degree of a natural person).
© 2008 West Legal Studies in Business
A Division of Thomson Learning
23


U.S. Supreme Court has held that certain speech is NOT protected:
 Defamatory speech.
 Threatening speech that violates criminal laws.
 Fighting Words.
 Obscene Speech is patently offensive, violates community standards and has no literary, artistic, political or scientific merit.
 CASE 2.3
Lott v. Levitt (2007).
© 2008 West Legal Studies in Business
A Division of Thomson Learning
24


Protected or Unprotected?
 Some of Congress’ attempts to protect children from online pornography have been ruled unconstitutional restriction on free speech.
• Communications Decency Act (1996).
• 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.
 What about “hate” speech on the web?
© 2008 West Legal Studies in Business
A Division of Thomson Learning
25


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.

Free Exercise: person can believe what he wants, but actions may be unconstitutional.

What about freedom of religion and illegal drug use?
© 2008 West Legal Studies in Business
A Division of Thomson Learning
26


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.
 Non-Fundamental: rational relationship to state interest.
© 2008 West Legal Studies in Business
A Division of Thomson Learning
27


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.
 Intermediate scrutiny.
 Strict Scrutiny – fundamental rights.
© 2008 West Legal Studies in Business
A Division of Thomson Learning
28


Fourth amendment protects against unreasonable search and seizures.

Griswold v. Connecticut (1965) found a right to personal privacy implied in constitution, expanded in Roe v. Wade
(1973).

Website privacy policies. What about private information on the internet?

What about USA PATRIOT ACT (2001)?

HIPAA (1996) (healthcare privacy).
© 2008 West Legal Studies in Business
A Division of Thomson Learning
29


Finding Statutory Law.
 United States Code (USC).
 State Statutes.

Finding Administrative Law.
 Code of Federal Regulations (CFR).

Finding Case Law (Case Citations).
© 2008 West Legal Studies in Business
A Division of Thomson Learning
30

© 2008 West Legal Studies in Business
A Division of Thomson Learning
31


Reading & Understanding Case Law
 Legal cases are identified by a “legal citation”
(or a “cite”) as the example below:
, 448 Mass. 170, 859 N.E.2d 801
(2007).
Title: First Party is Plaintiff, second party is Defendant. The parties are either italicized or underlined.
© 2008 West Legal Studies in Business
A Division of Thomson Learning
32


Reading & Understanding Case Law
 Legal cases are identified by a “legal citation”
(or a “cite”) as the example below:
448 Mass. 170, 859 N.E.2d 801
(2007).
© 2008 West Legal Studies in Business
A Division of Thomson Learning
This is a 2007 State Supreme Court Case found in volume 448, page 170 of the
Massachussets Reports, OR volume 859, page 801 of the NorthEastern Reporter 2 nd .
33