Understanding Business and Constitutional Powers in Chapter 2

Chapter 2: Business and the Constitution I. Constitutional Powers of Government A. Federal Form of Government 1. Power is divided between national government and state governments. 2. Partnership between national and state governments. B. Regulatory Powers of the States 1. Sovereignty – power to govern themselves stems from the 10 th amendment. 2. Police Powers – right of state governments to regulate private activities to protect or promote the public order, health, safety, morals, and the general welfare. C. Relations among the States 1. Privileges and Immunities Clause. a. Article IV, Section 2 of the US Constitution – “the Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States.” b. Meaning – If citizens of one state engage in basic and essential activities in another state (“foreign state”), they must be treated same as citizens of the foreign state unless the foreign state has a substantial reason for treating nonresidents differently from its own residents and the reason for the discrimination is substantially related to the foreign state’s purpose in adopting the legislation. Example:

2. Full Faith and Credit Clause. a. Article IV, Section 1 of the US Constitution – “Full Faith and Credit shall be given in each State to the public Acts, Records, and Judicial Proceedings of every other State.” 1. Applies only to civil matters. 2. Rights established under deeds, wills, and contracts will be honored in other states. D. Separation of Powers between 3 branches of government with checks and balances. 1. 2. 3. E. Commerce Clause. 1. Article I, Section 8 of US Constitution. 2. Regulates commerce with foreign nations and between states. 3. Federal power. 4. Expansion of Federal Power. a. Gibbons v. Ogden (US 1824) – Federal government can regulate intrastate if the commerce concerns more than one state. b. Wickard v. Filburn (US 1942) – Farmer’s crop production to be used wholly for consumption on his farm was subject to federal regulation because it affected interstate commerce. c. Heart of Atlanta Motel v U.S. (US 1964) – Classic Case 2.1

5. Commerce Clause Today a. US v. Morrison (2000) – Congress exceeded its authority in passing federal Violence against Women Act, because it attempted to regulate an area that had nothing to do with commerce or any sort of enterprise. b. Medical Marijuana and the Commerce Clause– Supreme Court allows the federal government to regulate noncommercial activities taking place wholly within a state’s borders. Gonzales v. Raich (2005). 6. Dormant Commerce Clause: states do not have the authority to regulate interstate commerce a. State regulations can affect interstate commerce: 1. Courts must balance state’s interests in the purposes of the regulation against the burden placed on interstate commerce. 2. Raymond Motor Transp., Inc. v. Rice – 3. See Case in Point 2.3 E. Supremacy Clause and Federal Preemption 1. US Constitution, laws, and treaties are “supreme law of the land.” 2. Preemption a. b.

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F. Taxing Power 1. Congress has power to tax, but must be uniform throughout the U.S. 2. Courts allow tax if it is a valid revenue-raising measure. G. Spending Power. 1. Congress pays debts and provides for defense and general welfare of US. 2. Rarely challenged – problem with standing – plaintiff must show a direct and immediate personal injury to challenge federal spending power. 3. Congress can spend revenues to promote any objective it deems worthwhile. II. Business and the Bill of Rights. A. Bill of Rights. (See Exhibit 2-1 Bill of Rights). 1. Originally only applied to the federal government. 2. Most, but not all, have been incorporated to states through 14 th Amendment. 3. US Supreme Court is final interpreter of the Constitution. B. Freedom of Speech – 1 st Amendment. 1. What is it? 2. Symbolic speech (non-verbal expressions). a. Gestures, movements, articles of clothing. b. Burning American Flag. 1) Texas v. Johnson (US 1989)

3. Reasonable Restrictions – Expression – oral, written or symbolized by conduct – is subject to reasonable restrictions. a. Balancing of rights of citizens vs. government’s duty to protect its citizens b. Content Neutral Restrictions - Case in Point 2.6 c. Laws that restrict content of speech must serve a compelling state interest and be narrowly written to achieve that interest Case in Point 2.7 - “Bong Hits 4 Jesus” case (US 2007) 4. Corporate Political Speech – 5. Commercial speech – What is it? a. Protection is there, but not to the degree as normal (noncommercial) speech. b. Restriction on commercial speech is OK if it: 1) the speech itself is lawful and not misleading; 2) the law (restriction) seeks to implement a substantial government interest - “reasonable fit” between government interest in limiting speech and the restriction chosen to accomplish the objective; 3) the law directly advances that interest; and 4) the law goes no further than necessary to accomplish the objective. Case 2.3 Bad Frog Brewery, Inc. v. New York State Liquor Authority

6. Unprotected speech: a. Defamation (see Torts) b. Lewd and obscene speech 1) Supreme Court has difficulty defining this. 2) Left to local standards. 3) Child Pornography is completely banned. c. Threatening Speech C. Freedom of Religion. 1. Establishment Clause. a. Federal or state regulation can have an impact on religion as long as it does not place a significant burden on religion. b. 1 st Amendment does not require a complete separation of Church and state. c. See Case in Point 2.11 2. Free Exercise Clause. a. If law is contrary to a person’s religious beliefs, exemptions are often made to accommodate those beliefs. b. If religious beliefs work against public policy and welfare, the government can act.

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c. See Case in Point 2.12 and d. Kennedy v. Bremerton School District (US 2022) – (condensed case posted on Canvas) D. Search and Seizure. 1. 4 th Amendment protects the “right of the people to be secure in their persons, houses, papers, and effects.” 2. Government officers must generally have a search warrant to search/seize private property. a. To obtain a warrant, officer must have probable cause to believe the search will find specific illegal activity. b. General warrants are prohibited. 1) Particular description of what is to be searched is required. 2) Search only extends to what is described in the warrant. 3. Exceptions to Search Warrant Requirement: a. If it is likely that the items to be searched/seized will be removed before warrant can be obtained. b. Plain view. c. Consent. 4. Searches of Business – less probable cause is necessary to get a warrant and no warrant is necessary if seizing spoiled or contaminated food, or searching a highly regulated industry (such as: guns, liquor)

E. Self Incrimination. 1. 5 th Amendment – No person “shall be compelled in any criminal case to be a witness against himself.” 2. Applies to sole proprietors and solo practitioners. 3. Does not apply to corporations or to partnerships. III. Due Process and Equal Protection. A. Due Process. 1. 5 th and 14 th Amendments – No person shall be deprived of “life, liberty, or property, without due process of law.” 2. Two types: a. Procedural Due Process. 1) Focus is on the procedures used when the government takes life, liberty, or property. 2) Requires strict procedural safeguards for government to be able to take away life, liberty, or property. b. Substantive Due Process. 1) Focus is on the content (substance) of legislation or governmental action. 2) Standards of review – Which standard depends on the type of legislation involved: a) Legislation restricting a “fundamental right” – apply the “strict scrutiny” test – a compelling or overriding governmental interest must be promoted by the legislation. Fundamental Rights: all 1 st Amendment rights (flag burning); privacy rights (drug tests, abortion); right to interstate travel; right to vote; marriage and family.

b) Other legislation – apply the “ rational basis” test – requires that legislation relate rationally to a legitimate governmental purpose. B. Equal Protection. 1. 14 th Amendment – A state may not “deny to any person within its jurisdiction the equal protection of the laws.” (Applies to federal government through the 5 th Amendment). 2. Meaning – 3. Difference between Substantive Due Process and Equal Protection: a. Substantive Due Process applies when the law or government action limits the liberty of all persons to do something. b. Equal Protection applies when the law or government action limits the liberty of some persons, but not others. 4. Standards of review: a. Strict Scrutiny Test: Government must have a compelling interest promoted by the legislation and the law must be narrowly tailored . Applies when the government action involves: 1) Fundamental rights (same as Due Process) 2) “Suspect class”: Examples: Public University admissions policies: Ch. Q 2-9:

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b. Intermediate Scrutiny Test: Government action must be substantially related to important government objectives. Applies when the government action involves: 1) Gender 2) Legitimacy – birth status (see example 2.18 & 2.19) Examples: statutory rape laws punishing only men City/State hiring an unqualified woman over a highly qualified man c. “Rational Basis” Test: Government action must relate rationally to a legitimate governmental purpose Applies when the government action involves: 1) Economic matters 2) Social issues Examples: Case in Point 2.20 IV. Privacy Rights A. Constitutional right??? Griswold v. Connecticut (US 1965) – implied from the 1 st , 3 rd , 4 th , 5 th and 9 th Amendments “The right to privacy is the most comprehensive of rights and the right most valued by civilized men”….Justice Louis Brandeis (1928) B. Federal Privacy Statutes 1. Freedom of Information Act 2. Electronic Communications Privacy Act 3. HIPPA

4. FERPA 5. USA PATRIOT Act 6. USA Freedom Act **We also learn other privacy rights and issues in chapters on Tort Laws; Consumer Laws; and Employment Laws Study Questions from the end of the chapter in the textbook to help you study: Practice and Review: answer on Canvas Issue Spotters: answers in Appendix B to textbook Business Scenarios and Case Problems: 1 Q has an answer in Appendix C to textbook; other selected Qs with answers on Canvas in file called “Ch. 2 Answers to Helpful Chapter Questions” See also: MindTap activities for Extra Credit (accessed through the link in Canvas)

Ch. 2 Guided Lecture Notes Outline

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