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The Nature of Law The Resolution of Private Disputes Business and The Constitution Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking © 2010 The McGraw-Hill Companies, Inc. All rights reserved.
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Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

Nov 14, 2014

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Page 1: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

The Nature of LawThe Resolution of Private Disputes

Business and The ConstitutionBusiness Ethics, Corporate Social

Responsibility, Corporate Governance, and Critical Thinking

© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

Page 2: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

Business & The Constitution

The very idea of the power and the right of the People

to establish government presupposes the duty of

every Individual to obey the established Government.

George Washington

Farewell AddressSeptember 19, 1796

© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

Page 3: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

Basics of the Constitution and federalism Relationship between federal and state powers Important legal principles: supremacy,

preemption Constitutional guarantees and limitations

Learning Objectives

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Page 4: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

Overview of the Constitution

Establishes a tripartite government to ensure a separation of powers: Article I sets forth the legislative powers

of Senate and Congress Article II gives executive power to

execute legislation, command armed forces, make treaties

Article III provides judicial power to the Supreme Court and subsidiary courts

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Page 5: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

Judicial Review

In Marbury v. Madison (1803), the Supreme Court interpreted the Constitution to grant federal courts the power of judicial review – power to declare statute or governmental action unconstitutional and void Irony: statute in question gave the

Supreme Court special powers

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Page 6: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

A System of Checks & Balances

No single branch may control government Supreme Court has power of judicial review States reserve certain powers Federal powers are limited

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Page 7: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

The Power to Regulate

Federal government has exclusive power to administer certain national concerns, such as war and currency

Some powers are shared with the states Example: power to tax, power to spend

States possess exclusive power to enact laws to protect general welfare, health, and safety

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Page 8: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

Federal Supremacy

The Constitution and statutes enacted by Congress, including treaties, are supreme law of the land Article VI, Clause

2

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Page 9: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

Federal Preemption Article I, Section 8 lists issues on which

Congress may pass statutes Thus, if Congress enacts a law on a

certain issue, then Congress “preempts” state regulation of that issue Example: Congress enacted the Civil

Rights Act of 1964, thus a state cannot enact a law allowing discrimination based on race, religion, or gender

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Page 10: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

Testing Constitutionality

Courts apply a means-ends test to review allegedly unconstitutional statute Rational basis test (minimal scrutiny)

If law has rational basis, it will stand Intermediate scrutiny

Law must substantially relate to important governmental objectives to stand

Strict scrutiny Law presumed invalid if, on its face, it is

based on race, ethnicity, and religion

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Page 11: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

The Commerce Power

Commerce clause literally applies to interstate commerce Article I, Section 8, Clause 3

Supreme Court has applied the power to intrastate commerce when the activity affects interstate commerce

Gonzales v. Raich emphasizes the far reach of the commerce power

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Page 12: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

The First Amendment First Amendment guarantees

freedoms of religion, speech, press, assembly, and petition to individuals And to corporations

Protection has never been afforded to certain classes of speech False, lewd, obscene, profane, libelous,

and insulting speech is not protected See U.S. v. American Library Assoc.,

Inc.

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Page 13: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

Commercial Speech

Speech proposing a commercial transaction Neither noncommercial expression nor political,

thus commercial speech not fully protected A restriction on commercial speech is valid

if it (1) seeks to implement a substantial gov’t interest, (2) directly advances the interest, and (3) is the least restrictive method of achieving the interest

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Page 14: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

Issue: Compelled Advertising

When government requires producers to pay for generic industry advertisements

U.S. Supreme Court concluded in Johanns v. Livestock Marketing Association that the beef assessment funding was for government speech, thus the promotional program is not subject to a First Amendment compelled-subsidy challenge

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Page 15: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

Constitutional Limitations

Fifth Amendment prohibits federal government from depriving “any person of life, liberty, or property without due process of law” Known as the due process clause Applied to states through Fourteenth

Amendment by process of incorporation

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Page 16: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

Constitutional Limitations Due process clause interpreted liberally

to be guarantee of protection from Unreasonable procedures

Procedural due process Unreasonable laws

Substantive due process Protection from government action

Federal funding may create “government” nexus

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Page 17: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

Constitutional Limitations Equal protection clause of Fourteenth

Amendment applies to states and federal government when classifying people Basic test: rational basis (minimal)

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Compare the tests applied in: City of Dallas v.

Stanglin Bush v. Gore

Page 18: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

Constitutional Limitations

Equal protection clause prohibits government from treating one person differently than another without reasonable grounds for classifying differently “Suspect” classifications (race, gender,

ethnicity) require higher level of scrutiny Examples: Gratz v. Bollinger, Grutter v.

Bollinger

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Page 19: Business Law: Chapter 3 The Ethical, Global, and E-Commerce Environment, 14th ed., by Mallor, Barnes, Bowers, Langvardt

Constitutional Limitations

Phrase “depriving a person … of property” known as the takings clause

Interpreted to require government to pay property owner just compensation in exchange for taking property by eminent domain; public use purpose required “Takings” for economic development

purpose satisfies public use requirement Kelo v. City of New London

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