Business Law Today COMPREHENSIVE EDITION TEXT & CASES, 11th Edition
Roger LeRoy Miller
Copyright © 2017 Cengage Learning. All Rights
• Chapter 2
• Chapter Outline
• 2-1 The Constitutional Powers of Government
• 2-2 Business and the Bill of Rights
• 2-3 Due Process and Equal Protection
• 2-4 Privacy Rights
Learning Objectives (slide 1 of 2)
1. What is the basic structure of the U.S. government?
2. What constitutional clause gives the federal government the power to regulate commercial activities among the various states?
3. What constitutional clause allows laws enacted by the federal government to take priority over conflicting state laws?
Learning Objectives (slide 2 of 2)
4. What is the Bill of Rights? What freedoms does the First Amendment guarantee?
5. Where in the Constitution can the due process clause be found?
2-1 The Constitutional Powers of Government
• 2-1a A Federal Form of Government
• The federal constitution was a political compromise between advocates of state sovereignty and central government.
2-1b The Separation of Powers
1. Legislative branch can enact a law but executive branch can veto
2. Executive branch is responsible for foreign affairs but treaties require consent from Senate
3. Congress determines jurisdiction of federal courts; president appoints federal judges (with advice/consent of Senate) but judicial branch has power to hold actions of other two branches unconstitutional
2-1c The Commerce Clause
– 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
Landmark in the Law
• 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.
2-1c The Commerce Clause
– The Commerce Clause and the Expansion of National Powers
• Case Example 2.1 Wickard v. Filburn (1942)
• Purely local production, sale and consumption of wheat was subject to federal regulation.
Classic Case 2.1
• Heart of Atlanta Motel v. United States (1964)
• Owner of the HoA motel unconstitutionally refused to rent to blacks. The Civil Rights Act of 1964 did not violate the interstate commerce clause.
2-1c The Commerce Clause (slide 1 of 3)
– The Commerce Clause Today
• Theoretically, the commerce clause applies to virtually all commercial transactions.
• Case Example 2.2 Gonzales v. Raich (2005)
2-1c The Commerce Clause (slide 2 of 3)
– The Regulatory Powers of the States
• Tenth Amendment reserves all powers to the states that have not been expressly delegated to the national government.
• States have inherent police powers including right to regulate health, safety, morals and general welfare, licensing, building codes, parking regulations, and zoning restrictions. – Police powers: powers possessed by the states as part of their
inherent sovereignty. These powers may be exercised to protect or promote the public order, health, safety, morals, and general welfare.
2-1c The Commerce Clause (slide 3 of 3)
– The “Dormant” Commerce Clause
• National government has exclusive power to regulate interstate commerce.
• States only have a “dormant” (negative) power to regulate interstate commerce.
• Courts balance state’s interest vs. national interest.
• Case Example 2.3 Tri-M Group, LLC v. Sharp (2011)
2-1d The Supremacy Clause
– Article VI of the Constitution provides that Constitution, laws and treaties of the United States are the “supreme law of the land.”
– Preemption: A doctrine under which certain federal laws preempt, or take precedence over, conflicting state or local laws.
– Congressional Intent • Case Example 2.4 Riegel v. Medtronic, Inc. (2008)
2-2 Business and the Bill of Rights
• Bill of Rights: The first ten amendments to the U.S. Constitution
1. First Amendment – freedom of religion
2. Second Amendment – right to keep and bear arms
3. Third Amendment – prohibits lodging of soldiers in any house without owner’s consent during peacetime
4. Fourth Amendment – unreasonable search and seizure
5. Fifth Amendment – rights to indictment by grand jury
6. Sixth Amendment – right to speedy and public trial
7. Seventh Amendment – right to trial by jury in civil cases
8. Eighth Amendment – prohibits excessive bail/fines and cruel/unusual punishment
9. Ninth Amendment – establishes people have rights in addition to those specified in Constitution
10. Tenth Amendment – establishes powers reserved for states
2-2a Limits on Federal and State Governmental Actions
– Originally, Bill of Rights only applied to the federal government.
– Later, the Bill of Rights was “incorporated” and applied to the States as well.
– Some protections also apply to businesses.
2-2b The First Amendment—Freedom of Speech (slide 1 of 3)
– Right to Free Speech is the basis for our democratic government.
– Free speech also includes symbolic speech, including gestures, movements, articles of clothing.
– Reasonable Restrictions
• Content-Neutral Laws – Case Example 2.6 Commonwealth v. Ora (2008)
• Laws That Restrict the Content of Speech – Case Example 2.7 Morse v. Frederick (2007)
2-2b The First Amendment—Freedom of Speech (slide 2 of 3)
– Corporate Political Speech
• Political speech by corporations is protected by the First Amendment.
• Case Example 2.8 Citizens United v. Federal Election Commission (2010)
2-2b The First Amendment—Freedom of Speech (slide 3 of 3)
– Commercial Speech
– Case Example 2.9 Café Erotica v. Florida Department of Transportation (2002)
– Courts give substantial protection to commercial speech (advertising). – Restrictions must: Implement substantial government
interest; directly advance that interest; and go no further than necessary.
Spotlight on Beer Labels: Case 2.2
• Bad Frog Brewery, Inc. v. New York State Liquor Authority (1998)
• Did the State unconstitutionally restrict commercial speech when it prohibited a certain gesture (illustration) on beer labels?
2-2b The First Amendment—Freedom of Speech
– Unprotected Speech
–Obscenity – It is a crime to disseminate and possess obscene materials,
including child pornography.
– Defining obscene speech has proved difficult.
– It is difficult to prohibit the dissemination of obscenity and pornography online.
– Virtual Child Pornography – It is a crime to intentionally distribute virtual child
pornography—which uses computer-generated images, not actual people—without indicating that it is computer- generated.
2-2c The First Amendment—Freedom of Religion (slide 1 of 2)
• The Establishment Clause: The provision in the First Amendment that prohibits the government from establishing any state-sponsored religion or enacting any law that promotes religion or favors one religion over another.
• Applicable Standard
• Religious Displays – Case Example 2.10 Trunk v. City of San Diego (2011)
2-2c The First Amendment—Freedom of Religion (slide 2 of 2)
• The Free Exercise Clause: The provision in the First Amendment that prohibits the government from interfering with people’s religious practices or forms of worship.
– Restrictions Must Be Necessary
• Case Example 2.11 Mitchell County v. Zimmerman (2012)
– Public Welfare Exception
• When religious practices work against public policy and the public welfare, the government can act.
• Holt v. Hobbs (2015)
• United States Supreme Court decision on the free exercise clause and how restrictions must be necessary
2-3 Due Process and Equal Protection
• 2-3a Due Process
– Procedural Due Process
• Any government decision to take life, liberty, or property must be fair.
• Requires: Notice and Fair Hearing
– Substantive Due Process
• Focuses on the content or the legislation (the right itself)
2-3b Equal Protection
– Government must treat similarly situated individuals (or businesses) in the same manner. Courts apply different tests:
– Strict Scrutiny – fundamental rights
– Intermediate Scrutiny
• Applied in cases involving discrimination based on gender or legitimacy
– The “Rational Basis” Test – economic rights
• Case Example 2.18 Maxwell’s Pic-Pac, Inc. v. Dehner (2014)
2-4 Privacy Rights
• Constitutional Protection of Privacy Rights
– Olmstead v. United States (1928)
– Griswold v. Connecticut (1965) found a right to personal privacy implied in constitution, expanded in Roe v. Wade (1973).
2-4a Federal Privacy Legislation
– Freedom of Information Act (1966)
– Privacy Act (1974)
– Health Insurance Portability and Accountability Act (HIPAA) (1996)
2-4b The USA Patriot Act
– Passed by Congress in the wake of the terrorist attacks of September 11, 2001, and then reauthorized twice (2006) and (2011)
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