Prepare answers to the following chapter-end Critical Legal Thinking Cases.

• Case 4.2: Supremacy Clause on page 79
• Case 4.7: Equal Protection Clause on page 80

Your responses should be well-rounded and analytical, and should not just provide a conclusion or an opinion without explaining the reason for the choice.

For full credit, you need to use the material from this week’s lectures, text, and/or discussions when responding to the questions. It is important that you incorporate the question into your response (i.e., restate the question in your introduction) and explain the legal principle(s) or concept(s) from the text that underlies your judgment.

For each question, you should provide at least one reference in APA format (in-text citations and references as described in detail in the Syllabus). Each answer should be double-spaced in 12-point font, and your response to each question should be between 300 and 1,000 words in length.

Submit this assignment as a single Word document covering both cases.

Note: Please be sure you refer to the numbers that appear on the printed pages in your electronic readings, not the numbers that appear with the navigation icons.

This week’s lecture:

Managing Legal Issues

“Don’t bother me with a legal headache. I have a business to run. Let my lawyer handle it.”

This oft-heard plea illustrates two common fallacies people have about the law: that the law is the enemy, and that legal problems are lawyers’ problems. The law is not simple; as such, there are no simple solutions to complex legal problems in the business world. There is also a basic presumption that everyone should know the law. Hence, the expression, “ignorance of the law is no excuse.”

One premise of this course is that business people need help to prevent avoidable legal situations, and to do that, they must recognize legal issues and understand the basic rules of law applicable to business situations. The second premise of this course is that the law works best when it is used as a management tool, not as a last resort. The law does not become important only when something goes wrong—it is an ongoing factor in operating any business. Contract law is one of the most important management tools used by successful business people in meeting their business goals, and it is one of the legal topics we’ll focus on in this course.

Who Makes the Law

A common misconception is that legislatures, which include Congress and state legislatures, may enact any law they wish. The reality is different. Congress may enact laws only on those matters that the U.S. Constitution gave Congress the power to legislate. The areas of law on which Congress may enact legislation is found in Article I, Section 8, and includes regulating interstate commerce and commerce with foreign nations, immigration and naturalization, bankruptcy, patents (for inventors), copyrights (for authors), and other topics. Because Congress is expressly given the power to legislate on these issues, state legislatures and city and county governments may not legislate in these areas.

Example

Article I, Section 8 gives Congress the power to enact uniform laws on immigration and naturalization. Political pressures in recent years have led some cities and counties to take action over the issue of illegal immigration due to Congressional inaction. In Cherokee County, Georgia, for example, the county commission enacted a law imposing fines on landlords who rent to illegal aliens. The law was immediately challenged in court on the ground that it violates the exclusive right of Congress to enact laws on immigration. Similar laws enacted in other cities and counties have also been challenged on this ground. While taking action might be politically popular, it is not necessarily constitutional.

The Constitution did not give Congress the right to legislate on every topic either. Congress may not enact a law on a topic that is not listed in Article I, Section 8. These topics are reserved for the states. The Tenth Amendment of the Constitution also reiterates this principle—powers not delegated to the federal government are reserved to the states. Because laws on a variety of topics existed in the states before the U.S. Constitution was adopted, those topics remain for state, city, and county legislatures. For example, the law of contracts, real estate, personal injury, business formation, and family law are topics for state legislatures. State legislatures also have the right to enact laws to protect the health and welfare of their residents. These laws are collectively referred to as the police power of the states. Despite its name, this power extends far beyond the act of hiring police officers. It includes laws regulating unfair and deceptive business practices, for example.

There are some topics of law on which both Congress, acting under Article I, Section 8, and state legislatures may legislate. However, if a direct conflict arises between a federal law and a state law, the Supremacy Clause of the U.S. Constitution (Article VI) says that federal law is supreme over state law.

Example

Congress has the authority to regulate controlled substances. Congress does this by delegating authority to federal agencies, such as the Food and Drug Administration, which Congress created. (Congress created all federal agencies.) If the FDA declares marijuana to be a controlled substance and Congress outlaws the sale or possession of marijuana, this will conflict with a state law that allows certain individuals to grow and sell marijuana for medical purposes, a law several states enacted under their police powers to promote public health. The medical marijuana laws were thus held unconstitutional because they conflicted with federal law.

Federal and state government administrative agencies also make law. The laws they make, known as regulations, can significantly impact business. For example, the Securities and Exchange Commission (SEC) regulates the sale of stock, bonds, and other investments sold by companies to the public. The Federal Trade Commission (FTC) regulates deceptive trade practices, including deceptive ads. The Federal Communications Commission (FCC) regulates the telecommunications industry. In fact, most industries are substantially regulated by some combination of federal and state agencies. In mid- to large-sized businesses, it is common to have one or more employees whose job consists of ensuring regulatory compliance by the business. Therefore, it is important for today’s businesspeople to have a strong command of the regulations that govern their type of business to be sure that their company remains in compliance even as the laws that govern their behavior change. This is why it is equally important to understand where to find the law, so you can keep up to date on amendments as they are enacted.

Besides legislatures and agencies, the courts also make the law. It’s a common belief that judges decide cases based on their impressions of the parties and the evidence. While the evidence is important, the judge hearing that case does not decide the legal standard that applies in each court case. Judges apply the proper legal standard, but the standard itself comes from one of two sources: 1) a law that is in the books, or 2) something called the common law. All court decisions in federal courts are based on judges applying either a constitutional provision, a federal statute enacted by Congress, or a federal regulation, U.S. treaty, or executive order. In other words, federal judges do not decide cases based on their personal views of what they think the law should be. They are tasked with interpreting some other source of federal law. There is also a pecking order in the courts: Decisions of the U.S. Supreme Court bind all lower courts, federal and state. If there is no Supreme Court ruling on some issue, the decision of the federal appeals court applies. Federal trial courts must follow the rules of law laid down by these higher courts, a principle referred to in your text as precedent. Although there is a big body of precedent from which the courts draw when deciding cases, consider the issues that arise when there is no precedent on an issue. Cyberlaw and electronic contracts are two areas to keep in mind as you consider how a court should approach deciding cases for which there is no prior legal basis on the books.

In state courts, sometimes a decision is based on a state or federal constitutional provision, or a state statute or regulation. Here again, the judge is not making a personal decision about what he or she believes the law should be. Judges are required to apply relevant statutes, regulations, and other written law, such as case law. Sometimes there is no applicable constitutional provision, statute, or regulation. When that happens, state court judges apply the common law, which is law based on court decisions in similar cases in the past. Many areas of state law developed through the common law, including the law of contracts, negligence (careless conduct that harms others), agency (the basis for employment law), and many other topics that impact business. The theory behind the common law is that the law should be consistent and predictable. Without this, businesspeople would be unable to plan ahead and avoid legal liability.

With all of this said, the courts do not have the last word on the common law. Ultimately, a state legislature may change or abolish a rule of the common law with a stroke of the pen; a governor’s pen signing a state statute into law. Legislatures change the common law by enacting statutes. Once a statute is enacted, any prior common law that conflicts with it is no longer binding. Courts also have the ability to overturn laws enacted by the legislature if they are found to be unconstitutional, which helps to strike a balance of power between the legislature and the courts so that too much power does not rest with either branch of government as it pertains to lawmaking.

Example

Under the common law of agency and employment, employers had the right to hire and fire employees at will, which means that they could be fired for any reason or for no reason at all. Though the common law right of employers to hire and fire at will still exists in many situations, federal statutes enacted by Congress and state legislatures have severely limited this right. The Civil Rights Act prohibits employers from discriminating in hiring based on certain protected demographics, including race, gender, and religion. The Age Discrimination in Employment Act prohibits employers from discriminating against employees and job applicants over the age of 40. The Americans with Disabilities Act prohibits discrimination against those with certain disabilities. The common law right to hire and fire at will is now subject to all of these laws and more.

Not only legislatures can change common law. The highest court in each state has the right to change a rule of the common law in that state if the court believes that the rule no longer serves public policy. For example, some states courts have expanded the liability of accountants by removing the common law restriction that only the client may sue if careless auditing work results in damages. In many states, those who reasonably relied on the audit, such as banks loaning money to the business, may now sue the accountants whose negligence failed to discover their client’s financial troubles. This is where it is especially important for you to understand the ethical and legal principles that apply to the position you hold, as well as any professional standards that govern the behavior in the workplace. Public accountability is at the forefront of everyone’s mind after such scandals as Enron that had an unfortunately widespread effect.

Civil Remedies

When a court rules in favor of one side in a civil case, it must decide what remedy is appropriate. When a plaintiff, the person who files a civil lawsuit, successfully sues a defendant, the plaintiff is entitled to legal relief, which consists of an award of money damages against the defendant. This does not mean the plaintiff will collect the money he’s owed, and the court does not take action to collect it from the defendant. If the defendant doesn’t pay the money voluntarily, it is the responsibility of the plaintiff or their attorney to try to collect it. If the defendant has no money, property, or insurance available to pay the plaintiff, the plaintiff will not collect anything and may not have the defendant placed in jail for failure to pay. We long ago abolished debtor’s prisons. Many people today employ various strategies in carefully titling assets, for example, in an effort to make themselves judgment-proof to avoid recovery in such situations, leaving plaintiffs with few or no options for any monetary recovery.

Separate from legal relief, however, the plaintiff in a civil suit may be entitled to equitable relief, which comes in the form of a court order. Examples of equitable relief include such actions as an injunction (an order to stop doing something) or specific performance (an order to do something). Not every court is empowered to grant equitable relief, and equitable relief is available only in situations in which legal relief would not adequately compensate the plaintiff’s injury; generally, situations involving a continuing wrong by the defendant. A benefit of equitable relief is that if the defendant fails to comply with the court’s order, the plaintiff may go back to court to have the defendant found in civil contempt of court, triggering a fine paid to the court, or the possibility of some time in jail to encourage willingness to comply with the court’s order.

Example

Assume you operate a restaurant along a scenic creek and an upstream landowner is dumping trash into the stream. Though you could sue the upstream landowner for money damages associated with your cleanup costs, that won’t fully compensate you as long as the upstream owner continues to dump trash in the stream. In suing the upstream landowner, you could also request the equitable remedy of an injunction; a court order requiring that he stops the dumping. This remedy would be available in addition to damages (legal relief) you could seek for the cleanup costs. If the defendant fails to stop the dumping, you could return to court and seek to have him found in civil contempt.

Categories of Law

Basic categories of law are helpful in understanding where to find the answer to a legal issue. If you want to know what someone’s legal rights or responsibilities are in a given situation, you are looking for substantive law. For example, contract law, the law of voluntary agreements, is part of substantive law. If you want to know what rule or process applies to how you enforce your legal rights, you are looking for procedural law. The rules of evidence for presentation of testimony at trial are an example of procedural law. It is also important to distinguish between civil law issues and criminal law issues. There are, however, times in which both civil and criminal cases will stem from the same set of facts. Although there are different parties, procedural rules, burdens of proof, and penalties, the facts remain the same, as does much of the evidence. Knowing this, consider whether you think it is fair or equitable to have potentially different outcomes (for example, not guilty but financially liable) given that both cases are based on the same facts.

Example

Assume you want to start your own business. You must choose how your business is legally organized, perhaps as some type of partnership or corporation. The question of which business form will most protect you from liability and avoid double taxation of your business profits is a question of substantive law. Once you decide which type of business form to use, you will no doubt need to draft some documents and file them in the proper government offices. The question of what paperwork you prepare and where you file it in order to form your partnership or corporation or other business form is a matter of procedural law.

Most business law involves civil law issues, disputes between two private parties, either two individuals, an individual and a business, or two businesses. When the parties cannot resolve disputes on civil law issues, a civil action (lawsuit) may result. Criminal law issues involve wrongs against the state. In a criminal prosecution, the prosecutor, representing the interests of the peoplemust prove the defendant’s guilt beyond a reasonable doubt in order to win a conviction. In a civil action, the plaintiff may generally win a judgment (favorable outcome) against the defendant if a preponderance of the evidence (more likely than not) is in the plaintiff’s favor, meaning that more than half of the evidence favors the plaintiff’s position. For example, in a lawsuit brought by the surviving widow of a man who died from a heart attack, the makers of the medication Vioxx were found liable for negligently failing to disclose the medication’s risks, which included heart failure. The evidence was not overwhelming, but the jury decided that it met the preponderance standard. Some civil cases require a higher standard, such as clear and convincing evidence. No civil case requires as high a standard as that in a criminal case. Why is this the case? What is it about criminal versus civil law that commands a higher standard to apply? In considering these important issues, it is essential to focus on the penalties for each. Clearly, a higher standard should be applied to a criminal case if a loss of liberty is at stake to ensure that the correct decision is being made. Although civil court decisions are nonetheless important, the standard is lower when a mere monetary penalty is at issue.

Constitutional Rights and Business

What fundamental rights does the U.S. Constitution give to businesses? The short answer is some, but not all, of the rights it gives to individuals. The Bill of Rights, found in the first ten amendments to the U.S. Constitution, contains a number of guarantees that impact business. For example, the First Amendment guarantees businesses a right to commercial speech, which includes advertising. But the right to commercial speech is not as broad as that given to political speech. We’ll be exploring this issue in our discussions this week. Another example can be found in the Fifth Amendment, which guarantees that no person may be deprived of private property for public purposes without due process of law. If a local government wants to take property in order to build a new fire station or school, compensation must be paid to the person whose property is taken, whether that’s a homeowner or a business owner. Yet another example is found in the Fourteenth Amendment, which guarantees equal protection of the laws. Very often, the law will treat businesses differently. This doesn’t necessarily involve a lack of equal protection. When businesses are treated differently under the law, the different treatment must have a rational basis.

Example

A state imposes more extensive regulation on dance halls that serve alcohol than on dance halls that don’t serve alcohol. Though this might sound like lack of equal protection, there’s a rational basis for the different treatment: When alcohol is served, a place to go dancing is also a place to go drinking. Serving alcohol creates more public safety risks, warranting greater regulation.

Other constitutional rights also impact how businesses operate. Now that you know a bit about where we are headed this week, click on the objectives tab to get started. I’ll see you soon in the discussions!