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Chapter 4 Constitutional Authority to Regulate Business. History.

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Before Revolutionary War, States wanted a confederation with weak national government and very limited powers. After the war, in 1787, States voted to amend Articles of Confederation and create a new, federal government that shared power with States.

1 constitutional powers of government
§1: Constitutional Powers of Government
  • Constitution established a federal form of government with checks and balances among three branches: executive, legislative and judicial.
  • National government has limited, enumerated powers delegated from States.
u s commerce clause
U.S. Commerce Clause
  • Power to regulate interstate commerce defined in Gibbons v. Ogden (1824).
  • Expansion to private businesses began with Wickard v. Fillburn (1942).
  • Today, Commerce Clause authorizes the national government to regulate virtually any business enterprise, including internet.
  • Limits: U.S. v. Lopez (1995), Alden v. Maine (1999).
state commerce
State Commerce
  • States possess inherent police powers to regulate health, safety, public order, morals and general welfare.
  • State laws that substantially interfere with interstate commerce will be struck down.
u s supremacy clause
U.S. Supremacy Clause
  • Article VI of the Constitution “Supreme Law of the Land.”
  • In case of direct conflict between state and federal law, state law is invalid.
  • Congress can preempt states.
  • Taxing Powers.
2 business and the bill of rights
§2: Business and the Bill of Rights
  • Bill of Rights are not absolute.
  • Originally the Bill of Rights was a limit on the national government’s powers.
  • During the early 1900’s, the Supreme Court applied the Bill of Rights to the States via the “due process” clause of the 14th amendment.
free speech
Free Speech
  • Afforded highest protection by courts.
  • Symbolic Speech.
    • Gestures, movements articles of clothing.
    • Texas v. Johnson (1989).
  • Commercial Speech: Advertising is protected speech. Any restriction must:
    • Implement substantial government interest;
    • Directly advance that interest; and
    • Go no further than necessary.
corporate political speech
Corporate Political Speech

Afforded significant protection by the first amendment but not to the degree of speech of natural persons.

  • First National v. Bellotti (1978).
  • Consolidated Edison v. Public Service Commission (1980).
unprotected speech
Unprotected Speech
  • Certain types of speech are not protected by the first amendment:
    • Slander.
    • Pornography, Obscenity.
    • Fighting Words.
  • What about “Hate Speech”?
    • Doe v. University of Michigan (1989).
  • What about cyber obscenity and hate speech?
freedom of religion
Freedom of Religion
  • First amendment many neither prohibit the “establishment” nor prohibit the “free exercise” of religion.
  • The first amendment does not require complete “separation of church and state.”
  • First amendment mandates accommodation of all religions and forbids hostility toward any.
    • Zorach v. Clauson (1952).
    • Lynch v. Donnelly (1984).
freedom of religion12
Freedom of Religion
  • First amendment guarantees the “free exercise” of religion.
  • Employers must reasonably accommodate beliefs as long as employee has sincerely held beliefs.
    • Frazee v. Illinois (1989).
self incrimination
  • Fifth amendment guarantees no person can be compelled to testify against himself in a criminal proceeding.
  • Does not apply to corporations or partnerships.
    • Verniero v. Beverly Hills Ltd (1998).
searches and seizures
Searches and Seizures
  • Fourth amendment requires warrant with “probable cause.”
  • Warrantless exceptions exist for “evanescent” evidence.
  • Searches of Business: generally business inspectors must have a warrant.
    • Marshall v. Barlow’s (1978).
3 other constitutional protections
§ 3: Other Constitutional Protections
  • Privileges and Immunities clause
    • Article IV, Section 2 of the U.S. Constitution.
    • Citizens can engage in basic activities (work, marriage, property) in any state.
  • Full Faith and Credit clause
    • Article IV, Section 1.
    • The Public Act or Record of another state shall be given equal weight in a sister state.
due process
Due Process
  • 5th and 14th amendments provide “no person shall be deprived of life, liberty or property without due process of law.”
  • Procedural and Substantive issues.
procedural due process
Procedural Due Process
  • Procedures depriving an individual of her rights must be fair and equitable.
  • Constitution requires adequate notice and a fair and impartial hearing before a disinterested magistrate.
substantive due process
Substantive Due Process
  • Focuses on the content or substance of legislation.
  • Laws limiting fundamental rights (speech, privacy, religion) must have a “compelling state interest.”
  • Laws limiting non-fundamental rights require only a “rational basis.”
equal protection
Equal Protection

Strict Scrutiny.

  • Laws that affect the fundamental rights of similarly situated individuals in a different manner are subject to the “strict scrutiny” test.
  • Any “suspect class” (race, national origin) must serve a “compelling state interest” which includes remedying past discrimination.
equal protection20
Equal Protection
  • Intermediate Scrutiny.
    • Applied to laws involving gender or legitimacy.
    • To be constitutional laws must be substantially related to important government objectives.
      • (EXAMPLE: Illegitimate teenage pregnancy).
equal protection21
Equal Protection

Rational Basis Test.

  • Applied to matters of economic or social welfare.
  • Laws will be constitutional if there is a rational basis relating to legitimate government interest.
  • Fundamental right not expressly found in the constitution, but derived from 1st, 5th and 14th amendments.
  • Laws and policies affecting privacy are subject to the compelling state interest test.
  • Online privacy.
case 4 1 bad frog v ny state liquor authority
Case 4.1: Bad Frog v. NY State Liquor Authority
  • FACTS:
    • Bad Frog sells alcoholic beverages with labels that display a frog “giving the finger.”
    • NYSLA denied approval of the label because children might see the labels in grocery and convenience stores.
    • Bad Frog sued NYSLA in federal court asking for an injunction against this denial.
    • The court granted a summary judgment in favor of the NYSLA. Bad Frog appealed.
case 4 1 bad frog v ny state liquor authority24
Case 4.1: Bad Frog v. NY State Liquor Authority
    • The Second Circuit ruled that NYLSA’s ban on the use of the labels lacked a “reasonable fit” with the state’s interest in shielding minors from vulgarity, and the NYSLA did not adequately consider alternatives to the ban.
    • “In view of the wide currency of vulgar displays throughout contemporary society * * * barring such displays * * * cannot realistically be expected to reduce children’s exposure to such displays to any significant degree.”  
case 4 2 verniero v beverly hills ltd
Case 4.2: Verniero v. Beverly Hills, Ltd.
  • FACTS:
    • New Jersey investigated the marketing practices of Beverly Hills Limited, Inc.
    • Verniero, NJ’s Attorney General, served a subpoena on Beverly Hills which ordered the production of business records.
    • Beverly Hills demanded guarantee of immunity before turning over the records.
    • Verniero sued to enforce the subpoena but the Court ruled in favor of Beverly Hills.
    • Verniero appealed.
case 4 2 verniero v beverly hills ltd26
Case 4.2: Verniero v. Beverly Hills, Ltd.
    • A corporation could not invoke a privilege against self-incrimination and ordered Defendant to produce the records.
    • “[A] corporation may not invoke either the Fifth Amendment or the New Jersey privilege against self‑incrimination. Moreover, a custodian of corporate records may not rely upon his or her personal privilege against self‑incrimination as a basis for refusing to produce corporate records.”
case 4 3 whs realty v town of morristown
Case 4.3: WHS Realty v. Town of Morristown
  • FACTS:
    • Morristown ordinance provided free garbage collection service for certain residences but excluded all multifamily dwellings with four or more units.
    • WHS owned an apartment complex that consisted of 140 units and thus did not receive the free service.
    • WHS sued Morristown claiming ordinance violated the equal protection clause.
    • The court held the ordinance was unconstitutional, finding it was not rationally related to any legitimate state interest.
case 4 3 whs realty v town of morristown28
Case 4.3: WHS Realty v. Town of Morristown
    • The Superior Court remanded for determination of damages.
    • “[T]here is nothing about the mechanics or costs of solid waste collection that justifies differentiating between apartment complexes and other residents.”
    • Morristown argued that “apartment units have a lesser value for tax assess­ment purposes,” justifying different service. The court responded that this was not a serious argument.
case 4 4 reno v condon privacy rights
Case 4.4: Reno v. Condon (Privacy Rights)
  • FACTS:
    • Federal government passed Driver’s Privacy Protection Act 1994 (DPPA) that required a driver to “opt in” before a state could sell a driver’s personal data.
    • Condon, South Carolina Attorney General, sued Reno in federal court alleging DPPA violated the Constitution. Under South Carolina state law, the information may be released unless a driver “opts out.”
    • The Court granted an injunction to prevent the DPPA’s enforcement, which the U.S. Court of Appeals for the Fourth Circuit upheld. Reno appealed.
case 4 4 reno v condon privacy rights30
Case 4.4: Reno v. Condon (Privacy Rights)
    • US Supreme Court held DPPA was a proper exercise of Congress’s power under the commerce clause.
    • “The motor vehicle information which the States have historically sold is used by insurers, manufacturers, direct marketers, and others engaged in interstate commerce to contact drivers with customized solicitations.
    • The information is also used in the stream of interstate commerce by various public and private entities for matters related to interstate motoring.”
    • The DPPA did not require South Carolina to assist in the enforcement of federal statutes regulating private individuals.”