ACCT 352 - Exam 1 (Class Notes)

Introduction

• Law, the rule of law, and property provide a necessary foundation for successful modern business and set maximum conditions for generating “wealth of nations”

Law and Regulations are Fundamental Foundations for Business

• Companies in the US must:

  • Be aware of the legal and regulatory landscape 

  • Take steps to ensure full compliance with the law to avoid civil and criminal liability

• Lawyers play a positive role in corporate boards 

Law

• Rules established by the state and backed up by enforcement

• Formal social force

• Adequate enforcement institutions are necessary to maintain order in society

What is Law?

• Consists of rules that regulate conduct of individuals, businesses, and other organizations in society

• Intended to protect people and their property from unwanted interference from others

• Forbids individuals from engaging in undesirable activities 

Rule of Law

• Laws are made generally (apply to various groups in the same way) and equally applicable (apply to all or most members of society) 

Functions of Law

• Keeping the peace, shaping moral standards, promoting social justice, maintaining the status quo, facilitating orderly change, facilitating planning, providing a basis for compromise, maximizing individual freedom 

• Facilitating planning

  • Well-designed commercial laws allow businesses to plan their activities, allocate their resources, and assess their risks

• Maximizing individual freedom

  • The rights of freedom of speech, religion, and the association granted by the First Amendment to the us Constitution

Property

• Property means Ownership

• Property: the legal right to exclude or keep others from interfering 

• Ownership: Private exclusive rights in resources  

Property - Broad Sense

• Property is the central concept underlying Western legal systems

Classifications of Law Overview

• Civil Law - Common Law

• Public Law - Private Law

• Civil Law - Criminal Law

Civil Law Common Law Classification

• Two Major Legal Systems

  • Civil Law 

    • Law based on statutory codification of law

    • Romano-Germanic

  • Common Law

    • Law based on written judicial decisions that establish precedent 

    • Anglo - American\

Civil Law

• Examples 

  • Continental Europe

  • Latin America

  • Japan

  • Former French Colonies

  • Spain 

Common Law

• Examples

  • United Kingdom 

  • Canada

  • Jamaica

  • New Zealand

  • United States

  • India

History of American Law 

• English system of law was adopted as system of jurisprudence in early American colonies

  • Foundation based on which American judges developed common law in America 

English Common Law 

• Law Courts

  • Uniform system of law

  • Relief available was monetary award for damages

• Courts of Chancery (equity courts) 

  • Formed to surpass limited remedies of law courts

  • Equitable remedies shaped to fit each situation 

• Merchant Courts

  • Solved commercial disputes based on trade practices and usage 

Adoption of English Common Law in America

• All states except Louisiana base their legal systems on the English common law

• Louisiana bases its law on the civil law

  • Influence of its French heritage (Napoleonic Code)

Public Law Private Law Classification

• Public Law

  • Law dealing with the regulation of society

    • Constitutional law

    • Administrative law 

    • Criminal Law

• Private Law

  • Law dealing with issues that concern private resource relationships

    • Property Law

    • Contract Law

    • Tort Law

Civil Law Criminal Law Classification

• Civil Law

  • Law dealing with private rights between people

    • Torts & contracts

    • Damages

    • No punishment 

• Criminal Law 

  • Law dealing with offenses against society at large

    • Prosecuted by gov’t 

    • Results in punishment

Substantive Law Procedural Law Classification

• Substantive Law

  • The part of the law creating, defining, and regulating rights, duties, and powers

    • The what

• Procedural law

  • The part of the law telling the methods/means for having rights or duties enforced

    • The how

Sources of Law

• Constitutions

  • Set forth fundamental rights

  • Describe and empower government

  • Set forth limitations on power

• Legislation

  • Laws by Congress or state legislature and local ordinances 

• Administrative Regulation

  • Rule or order by federal, state, or local regulatory agencies

• Judicial Decisions or Case Law

  • Decisions by courts that interpret and enforce laws or the common law 

Sources of Law in the US

• US Constitution 

  • “Supreme law of the land”

  • Established structure of federal government

    • Legislative branch

    • Executive branch

    • Judicial branch

  • Enumerates federal powers

  • Reserves all other powers to states 

• State Constitutions

• Codified Law: Statues and Ordinances

  • The US Congress enacts federal statues 

  • State legislatures enact state statues

  • Municipalities and local government bodies enact ordinances

  • Federal laws preempt state and local laws 

• Executive Orders

  • Issued by the president and state governors

    • Ex-order requiring federal agencies to buy more hybrid vehicles

    • Ex order allowing oil drilling on federal land

  • Power derived from express delegation from legislative branch or implied from constitutional powers 

• Regulations and Orders of Administrative Agencies

  • Empowered by legislative and executive branches of government

    • Adopt rules and regulations

    • Enforce statues

    • Hear and decide disputes

  • Many agencies regulate business 

    • Ex SEC, FTC, DOT

• Judicial Decisions

  • Courts decide controversies

  • Judicial decisions (called “opinion”) usually state the rationale used by the court in reaching that decision; foundation of the “common law”

Doctrine of Stare Decisis

• Based on the common law tradition, past court decisions become precedent for deciding future cases

• Lower courts follow the precedent established by higher courts

• Dobbs overrules Roe - 50 years 

  • The first time they took away a constitutional right

Doctrine of Stare Decisis (continued)

• Both federal and state courts must follow the precedents established by US Supreme Court decisions

• Courts in one state or local jurisdiction are not bound by precedent of another state or local jurisdiction but may look at it for guidance 

Case Law 

• Advantages

  • Stare Decisis 

    • Judges follow precedents 

    • Gives certainty & predictability 

    • Flexibility (power to depart from or change precedent when warranted - Brown v Board) 

• Disadvantages

  • Volume of cases 

  • Conflicting precedents

  • Conflicts of Law

Priority of Law in the US 

• The US Constitution and treaties take precedence over all other laws

• Federal statutes take precedence over federal regulations

• Valid federal law takes precedence over conflicting state or local law

• The doctrine of federal “preemption” 

• State constitutions rank as the highest state law

• State statutes take precedence over state regulations

• Valid state law takes precedence over local laws/ordinances 

Brown v Board of Education

• Decision challenged separate but equal doctrine as it applied to public elementary and high schools

• A unanimous Supreme Court reversed prior precedent and held that the separate but equal doctrine violated:

  • The Equal Protection Clause of the Fourteenth Amendment to the Constitution

• After the decision, it took court orders and US Army enforcement to integrate public schools in the country 

Case 1.2: Voting Rights Act

• Case

  • Shelby County, Texas v Holder

  • 133 S.Ct 2612 (2013) Supreme Court of the United States

• Issue

  • Is the coverage provision of the Voting Rights Act that singles out several states for the federal clearance requirement constitutional?

Legal Sanctions

• Methods used by law enforcement officials and courts to encourage or force compliance with the law

• Remedy: Right of an individual to take another person's resources as the person failed to meet the requirements of the law

Sanctions for Criminal Conduct

• Crime: Public wrong against society

  • Punishments

    • Death, imprisonment, fine, removal, disqualification

Sanctions for Breach of Contract

• Breach of contract: Failure to perform a contractual promise

  • Remedies

    • Damages (money), compensatory, consequential damages, specific performance

Tortious Conduct

• Tort: Civil wrong (other than breach of contract), intentional, negligence, strict liability 

  • Remedies

    • Compensatory damages (money), punitive damages (exemplary damages) 

Corporations

• Businesses chartered by the state to do business as legal persons

• Owned by shareholders

• The board of directors runs the business

• Managers are in charge of day-to-day business operations 

Food for Thought 

• Corporate governance, in a property-based environment, requires a viable court system

In the Federal System, the Lowest Level Trial Court is: 

1. Circuit court 

2. District Court

3. Supreme Court

4. Chancery Court

Long Arm Jurisdiction: 

1. Allows state court to assert jurisdiction over non-resident

2. Increases the geographic scope of court jurisdiction

3. Does not apply in every state

4. Arises under common law

Court Systems in US

• Two major systems:

  • Federal court system

  • Court systems of the 50 states and the District of Columbia

  • State courts resolve more than 95% percent of all lawsuits

Federal and Most State Court Systems

• Trial courts → Appellate Courts → Supreme Courts 

• Subject Matter Jurisdiction - Power over Particular Issues

State Court Systems

• Supreme Court

• Intermediate appellate courts

• Limited jurisdiction trial courts

• General jurisdiction trial courts

State Courts Sources of Authority

• State constitution

• State laws

• Court rules of procedure 

Typical State Court System

Subject Matter Jurisdiction

• Power over the issues involved in the case

• Jurisdiction can be limited to a subject matter or area in which the parties live

• Probate courts - Deal with wills and estates of deceased persons

• Traffic courts - Deal with traffic violations

State Court Systems (continued)

• Limited jurisdiction trial courts

  • Hear matters of a specialized or limited nature

    • Traffic court, juvenile court, justice of the peace court, probate court, family law court, misdemeanor criminal court, small claims court 

• General-jurisdiction trial courts

  • Hear cases of a general nature that are not within the jurisdiction of limited jurisdiction courts 

    • Real estate, business law, contracts, negotiable instruments

  • Record and store testimony evidence 

• Intermediate Appellate Courts

  • Hear appeals from trial courts

  • Review trial court record to determine if there have been any errors at trial that would require reversal or modification

  • No new testimony or evidence 

• Highest State Court

  • In most states called “supreme court” 

  • Hears appeals from intermediate state courts and certain trial courts

  • No new testimony or evidence

  • Decisions of state supreme courts are final unless a question of law is involved that is appealable to the US Supreme Court

Federal Courts

• Article III of the Constitution

• Reviews

  • Federal Jurisdiction

    • Questions of Federal Law

    • US As Party

    • State Disagreements

    • Suits Between Citizens of Different States 

      • Cant be fired and serve for life (makes them unbiased) 

Federal Court System

• US Supreme Court

• US Courts of Appeals

• Special Federal Courts

• US District Courts 

Federal Questions Cases

• Federal Questions

  • US Constitution Issues

  • Federal Statute Issues

  • No $ Limit

Diversity of Citizenship

• Diversity 

• Plaintiffs/Defendants - Citizens of Different States

• Each claim must be $75,000+

• Guard against state court bias

Figure 3.2 - Federal Court System

Federal District Courts

• Federal trial courts

• General jurisdiction

• Receive Evidence

• Evaluate Testimony

• Impanel Juries

• Resolve Disputes

• Lifetime Appointments for Judges

US Courts of Appeals

• Intermediate appellate courts

• Hear appeals from the district courts located in their circuit

• 13 Circuits (11+DC+Federal)

• Lifetime appointments

US Courts of Appeal (continued)

• 3-judge panel or en banc

  • Normally odd numbers (3 normally federal) 

• Review the record of lower courts of administrative agency proceedings

• Determine if there has been any error of law that would warrant reversal or modification of the lower court decision

• No new evidence or testimony

US Supreme Court

• Hears appeals from:

  • Federal circuit courts of Appeals

  • Highest state courts

  • Special federal courts

  • Conflicting decisions of US Circuit Courts

• Decision Becomes “Law of Land” - not subject to review

• No new evidence or testimony

• 9 justices with lifetime appointments 

US Supreme Court

• Accepts about 100 cases each year out of about 10,000 petitions filed

• Decisions can be:

  • Unanimous (9-0)

  • Majority (More than 5-4)

  • Plurality (5-4)

  • Tie (lower court decision stays the same)

US Supreme Court (continued)

• Petition of Certiorari 

  • A petition asking the Supreme Court to hear case

• Writ of Certiorari 

  • An official notice that the Supreme Court will review a case 

Power of Judicial Review

• Judicial review: Ultimate power to invalidate actions by the president or Congress

• Judicial restraint: Power should not be used except in unusual cases

• Judicial activism: Power should be used when the needs of society justify its use 

Judicial Restraint

• Philosophy is referred as strict constructionism or judicial abstention

• Followers favor a very limited role for the courts in system of government 

• Belief that change in society should result from the political process

• Supporters take a pragmatic approach to litigation 

Judicial Activism

• Supporters favor a more expansive role for courts in system of government

• Activists are value-oriented and policy-directed

• Courts are more result-conscious and place less reliance on precedent 

Standing to Sue - Article III

• Plaintiff must have a stake in the outcome of case

  • Ex one cannot sue on behalf of a friend who has been injured

In Personam Jurisdiction

• Personal jurisdiction exists over any plaintiff who files a lawsuit

• Personal jurisdiction exists over defendant who is within the boundaries of the state

  • Corporation is subject to personal jurisdiction in any state where it is incorporated, has principal office, or does business

In Personam Jurisdiction (continued)

• Long-Arm Statue allows state courts to obtain personal jurisdiction over persons or businesses located in another state

  • Allows summons to be served in other states

  • Must have minimum contacts with state

  • Must uphold notions of fair play and substantial justice 

Long-Arm Statue (continued)

• Exercised over non-residents who have:

  • Committed torts within the state

  • Entered into a contract either in the state or that affects the state (internet sales - interactive sites??)

  • Transacted other businesses in the state that allegedly caused injury to another person

Venue

• Court near location in which incident occurred or where parties reside

  • Several courts may have jurisdiction

  • Which one is proper venue?

  • Ex: crime occurred in California, so California court is likely venue

• May be change of venue to avoid pretrial publicity that may have prejudiced potential jurors 

Forum Selection, Choice-of-Law Clauses 

• Parties may specify in a contract what court to use (forum selection)

• They may also agree on the states or countrys law that will apply to the contract (choice of law)

Jurisdiction in Cyberspace

• Case that addressed jurisdiction in cyberspace was Zippo Manufacturing Company v. Zippo Dot Com, Inc

• It established a test for determining when a court has jurisdiction over the owner or operator of an interactive, semiinteractive, or passive website

Introduction 

• An impartial enforcement and dispute resolution process is essential to any system that preserves private property interests

• To conduct business and enforce rights, we need a process to resolve disputes 

The Document that Starts a Lawsuit is:

1. Answer

2. Counterclaim

3. Complaint

4. Reply

Most Companies Prefer Arbitration as Opposed to Court Litigation

1. True 

2. False

Getting Into Court

• Need all three to get into court 

  • Subject Matter Juridiction 

  • Standing to Sue

  • Personal Jurisdiction 

Parties

• Plantiff: Party who files civil action

• Defendant: Party sued by the plaintiff or person against whom a criminal charge is filed by state 

• Third-party defendant: Parties bought in by the defendant to complete the determination of a controversy 

Phases of Litigation

• Pleadings (complaint, answer/counterclaim, reply)

• Pre-trial (motions to dismiss/summary judgment)

• Trial

• Post-trial(JNOV, motion for new trial)

• Appeal

Pleadings

• Complaint

• Answer

• Counterclaim

• Reply

Complaint and Summons

• Plaintiff files complaint to start suit

  • Lists parties

  • Alleges facts and laws violated

  • Prayer for relief (ask for damages, injunction, etc)

• Court issues Summons

  • Directs defendant to appear and answer within a specified time (ex 21 days)

Answer 

• Defendant must file an Answer

  • Admitting or denying fact allegations

  • Stating affirmative defenses

• If no answer filed, default judgment entered

Counterclaim and Reply

• Defendent may sue plaintiff for damages or some other remedy

• Pleading is a counterclaim combined with answer

• Original plaintiff must file a reply and serve on defendant

  • Reply is the “answer” to the counterclaim (admit/deny allegations; affirmative defenses)

Intervention and Consolidation

• Intervention

  • Other pirates have interest in lawsuit and become parties

    • Ex: bank with security interest in property that is subject of lawsuit

• Consolidation

  • Several plaintiffs have filed lawsuits stemming from same situation

  • Court will consolidate if no undue prejudice

  • Reduces strain on court system

E-Filing 

• “Virtual courthouse”  allows e-filing of documents and electronic conferences 

  • Available in federal courts

  • Available in some states

• Advantages 

  • Saves paper

  • Saves time

  • Easier to track documents

Statute of Limitations

• Establishes the period during which plaintiff must bring a lawsuit against a defendant

• If a lawsuit is not filed within this time period, plaintiff loses the right to sue

• Established for each type of lawsuit

  • Ex: 2 years for tort claim for personal injuries

  • 4 years for breach of contract under UCC

Discovery 

• A legal process during which both paries discover/investigate facts of the case from the other party and witnesses prior to trial

• Usually involves review of documents (paper and electronically stored information (email) and taking depositions) 

Discovery (continued)

• Purposes: 

  • Preventing surprise

  • Allowing parties to thoroughly prepare for trial

  • Preserving evidence

  • Saving court time

  • Promoting settlement of cases 

• The major forms of discovery are:

  • Depositions

  • Interrogatories

  • Production of documents

  • Physical and mental examination

  • Requests for Admissions

Scope of Discovery

• Discoverable information: allowable if it will lead to evidence admissible at trial

• Evidence admissible at trial

• High Cost of Discovery caused by

  • Time searching for information

  • Preparing depositions

  • Copying and shipping costs

  • Attorneys fees interpreting requests 

Depositions

• Oral testimony given by party or witness

  • Under oath

  • Parties must give depositions

  • Witnesses can be compelled by subpoena

  • Evidence preserved by court reporter or on videotape

  • May be used to impeach testimony at trial

Interrogatories

• Written questions submitted by one party to the other

• Must be answered and returned within a set time period

• Answers affirmed under oath 

Production of Documents

• Documents that parties request the other side to produce or make available for review

  • Ex: company records, correspondence, memoranda, email (electronic files)

  • Discoverable if may lead to admissible evidence

Examinations

• If the physical or mental condition of a party are in question, an examination by an expert may be required 

Requests for Admissions

• Written statements propounded on the opposing party with request to “admit” or “deny” the statement as true

• Admissions can be used as evidence at trial 

Dismissals and Pretrial Judgements

• Pretrial Motion

  • A motion a party can make to try to dispose of all or part of a lawsuit prior to trial

    • Motion for judgment on the pleadings

    • Motion to dismiss (jurisdiction, failure to state a valid legal claim for relief, etc)

    • Motion for summary judgment

• Motion for Judgement on the Pleadings

  • Even if all the facts presented in the pleadings are taken as true, the party making the motion would win the lawsuit when the proper law is applied to these facts 

• Motion for Summary Judgment

  • Motion that asserts that there are no factual disputes to be decided buy the jury 

  • Judge can apply the proper law to the undisputed fact and decide the case without a jury 

  • These motions are supported by affidavits, documents, and deposition testimony 

Settlement Conference

• Federal court rules and most state rules allow for a pretrial hearing or settlement conference

• In judges chambers

• At least 95% of all cases settle before trial 

Cost-Benefit Analysis of a Lawsuit

• Consider:

  • Probability of winning or losing. Never certain

  • The amount of money to be won or lost

  • Lawyers fees and other costs of litigation

  • Loss of time by managers and other personnel

  • Effect on relationships and reputation

  • Aggravation and psychological costs

  • Other?

Trial

• The 7th Amendment guarantees the right to a jury trial in civil cases in federal court

  • Can be 6-12 jurors

  • Can be majority and not unanimous

• Most state constitutions contain a similar guarantee for state court actions 

Trial (continued)

• If either party requests a jury, the trial will be by jury

• If both parties waive their right to a jury, the trial will be without a jury

  • Many business disputes are bench trials (ex: chancery court in DE)

Phases of Trial

1. Jury Selection/ Voir Dire

2. Opening Statements

3. Plaintiffs Case

4. Defendants Case

5. Rebuttal

6. Closing Arguments

7. Jury Instructions

8. Jury Deliberation 

9. Verdict 

10. Entry of Judgement 

Food for Thought…

• Supreme Court outlawed racial discrimination in peremptory challenges 

  • Batson v Kentucky, 475 US 79 (1986)

• Gender discrimination is banned in the jury selection process

  • J.E.B. v Alabama Ex Rel. T.B., 511 US 127(1994)

• Courts are divided on the issue of banning discrimination based on religion in peremptory challenges 

Table 4.1 - Litigating Parties

Burden of Proof

• Burden/responsibility of evidence

• Criminal cases - beyond a reasonable doubt

• Civil cases 

  • Preponderance of evidence

  • Clear & convincing proof

Post-Trial

• Motion for JNOV (judgment notwithstanding the verdict)

• Motion for new trial

Appeal 

• In a civil case

  • Either party can appeal the trial courts decision

  • Appeal can be filed once a final judgment is entered

• In a criminal case,

  • Only a defendant can appeal 

Appeal (continued)

• Appeal is made to the appropriate appellate court (intermediate or supreme) according to timetable set by procedural rules - if miss deadline, appeal dismissed

• Appellate court will reverse lower court for errors of law

  • Will reverse finding of fact only if it is “clearly erroneous” 

Alternative Dispute Resolution (ADR)

• Methods of resolving disputes other than litigation

• Developed in response to the expense and difficulty of bringing a lawsuit 

Arbitration

• Common in commercial and labor disputes 

• Voluntary agreement between parties

• Parties choose neutral third party to hear evidence and testimony and decide the case

• Arbitrator makes a decision and enters an award

• Award is final and binding - no appeal 

Key ADR Legislation

• Uniform Arbitration Act

  • Adopted by half of the states

  • Promotes the arbitration of disputes at the state level 

• Federal Arbitration Act

  • Arbitration agreements involving commerce are valid, irrevocable, and enforceable contracts

US Supreme Court - Class Action Waivers

• Case

  • AT&T Mobility LLC v Concepcion

  • 131 S.Ct 1740, 179 L.Ed.2d 742 (2011)

  • Supreme Court of the United States

• Issue

  • Does the Federal Arbitration Act (FAA) preempt California law that outlaws class action waivers 

Mediation and Conciliation

• Mediation

  • Parties choose a neutral third party to assist them negotiate a settlement

  • Mediator does not make judgment or issue award

  • If no settlement, no affect on case

  • Mediation is non-binding and voluntary 

Online Dispute Resolution

• Register with ADR service provider online

• Service provider notifies other party by email

• Parties trade offers and counter-offers with aim of settling dispute, or online mediator may be involved

• “Chat rooms” used in process

• May be quicker, cheaper, and less adversarial than traditional methods 

E-Courts and E-Dispute Resolution

• E-Courts

  • Used to settle disputes via the internet 

  • Allow online filing of pleadings, briefs, and documents

  • Evidence and documents can be scanned for storag

  • Scheduling and conferences with the judge are held via telephone conferences and e-mail

Food for Thought…

• The United States Constitution is the oldest and shortest written Constitution of any major government in the entire world

Functions of the US Constitution

• Creates three branches of government (executive, legislative, and judicial) and allocates power to these branches

• Protects individual rights by limiting the government's ability to restrict those rights 

Marbury v Madison Established The Principle Of…

1. Stare decisis

2. Judicial review

3. Preemption

4. Supremacy 

Table 6.1 - First Fourteen Amendments to the US Constitution

Basic Constitutional Concepts

• Federalism and Delegated Powers

  • 2 systems of government that coexist → federal and state, make different rules and overlapping rules and operate at the same time 

  • Delegated powers → designated powers, how much they can regulate  

• Separation of Powers

• Checks and Balances 

  • No part of the government can go rogue 

  • Different levels of government that watch over one another 

Federalism and Delegated Powers

• US form of government is federalism

  • Federal government and state governments share powers

  • Certain powers - the “enumerated powers” - delegated to the federal government by the states

    • Ex: federal government deals with international affairs, interstate commerce, etc 

Federalism and Delegated Powers (continued)

• Any powers not specifically delegated to the federal government by the Constitution are reserved to the states (10th Amendment) 

• State governments are empowered to deal with local affairs

  • Ex: states handle education, local public safety issues

    • Congress set a floor but not a ceiling 

Separation of Powers

• The federal government is separated into 3 branches 

• Article I - Congress

  • Article I of the Constitution establishes the legislative branch of government

    • Bicameral legislature

      • Senate (every state gets just 2 regardless of size - less biased and more open) 

      • House of Representatives (more population, more representative)

  • Role to make federal law

    • Congress spends money and makes law 

• Article II - President and VP 

  • Artile II of the Constitution establishes the executive branch of government

    • Provides for the election of President and Vice President (have to be born in the us) 

      • Establishes Electoral College

  • Role to enforce federal Law 

• Article III - Federal Courts 

  • Article III of the Constitution establishes the judicial branch of the government

    • Supreme Court → hold a lifelong position unless impeached 

    • Other federal courts that may be created by the Congress

  • Role to interpret federal law 

Checks and Balances

• Built into the Constitution to ensure that no one branch of the government becomes too powerful

• “Judicial review” - federal courts have the authority to examine the acts of the other two branches of government and determine whether these acts are constitutional

  • Marbury v Madison (1803) 

    •  Most important supreme case of all time because it created the concept of judicial review 

• Executive branch can enter into treaties with foreign governments only with the advice and consent of the Senate 

  • Most of what they can do has to be approved by Senate → check and balance

• Legislative branch is authorized to create federal courts and determine their jurisdiction and to enact statutes that change judicially made law 

Supremacy Clause

• Establishes that the federal Constitution, treaties, federal laws, and federal regulations are the supreme law of the land

  • State and local laws that conflict with valid federal law are unconstitutional 

Preemption Doctrine

• The concept that federal law takes precedence over state or local law

• Congress may expressly provide that federal statue exclusively regulates an area or activity

  • EX: EPA → one standard on car emissions unless states get specific permission 

• More frequently, federal, state, and local governments have concurrent power

  • Congress lets states do certain things 

  • Ex: minimum wage, set a floor but not a ceiling 

Commerce Clause

• Congress has power:

  • “To regulate commerce with foreign nations, and among the several states, and with Indian tribes.”

Commerce Clause (continued)

• Federal government has exclusive power to regulate commerce with foreign nations

  • Direct or indirect regulation by states that unduly burdens foreign commerce is unconstitutional

  • Ex: Massachusetts anti-Myanmar statute

Commerce Clause (continued)

• The federal government may regulate: 

  • Interstate commerce that crosses state borders

  • Intrastate commerce that affects interstate commerce 

Commerce Clause (continued)

• Interstate commerce very broadly defined 

  • Ex: wheat grown for home consumption or refusing to rent motel rooms based on race both tied to interstate commerce so that federal regulation proper

• Broad interpretation gives federal government great power to regulate, so that this clause has greater impact on business than any other constitutional clause 

Commerce Clause (continued)

• States have power to regulate private and business activities within their borders (“police powers”)

• States may enact laws that protect or promote the public health, safety, morals, and general welfare as long as the laws do not unduly burden interstate commerce 

Commerce Clause (continued)

• Examples of state laws regulating business including zoning ordinances, state environmental laws, corporation and partnership laws, property laws

• Area of considerable current litigation

  • Ex: Granholm v Heald (Michigans interstate wine ban found to be unconstitutional); Affordable Care Act

E-Commerce and the Constitution

• Electronic commerce (e-commerce)

  • Parties are permitted to obtain website domain names and conduct business electronically

  • E-commerce can be used for

    • Sales of goods

    • Licensing of Intellectual property

    • Sales of services 

The Bill of Rights

• The Bill of Rights provides certain freedoms and protections to individuals and businesses

What “Speech” is fully protected under the constitution?

1. Commercial speech

2. Obscenity

3. Defamation

4. Political Speech 

Bill of Rights

• Ten amendments added 1791

• Guarantees certain fundamental rights to “natural” persons (corporations = person?)

• Protects persons from intrusive government action

  • By federal government

  • By state governments (“Incorporation doctrine”)

Amendments & Basic Protections

• 1st amendment 

  • Freedoms: 

    • Religion, press, speech, assembly

  • Right to petition for redress

First Amdendment Religion and Expression

• Congress shall make no law respecting an establishment of religion or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

Freedom of Speech

• Freedom of Speech - the right to engage in oral, writtem, and symbolic speech

  • Fully protectcted speech (political)

  • Limited protected speech (commercial)

  • Unprotected Speech (Obscenity)

• Political speech is fully protected

  • Cannot be regulated or prohibited by government

  • Can be oral, written, or symbolic

    • Ex: writing editorial criticizing President, or flag burning as protest, or spening money to promote issues or candidates

Citizens United v FEC

• Corporations are “persons” whose political speech is protected by First Amendment

• Ban on political speech by corporations is unconstiutional

• Disclaimers and disclosures are valid

• Fractured 5-4 Supreme Court decision 

Freedom of Speech (continued)

• Speech with limited protection - can enact reasonable time, place, and manner restrictions

  • Offensive speech

    • Ex: offensive language on television may be restricted to late night hours

  • Commercial speech

    • Ex: billboards may be limited to certain locations, telemarketing calls may be restricted by Do-Not-Call registry, ads for commercial products must be truthful 

Freedom of Speech (continued)

• Unprotected speech

  • May be forbidden

    • Dangerous speech (“Fire” in a crowded theater) 

    • Fighting words intended to provoke violent reactions

    • Speech that incites the violent overthrow of the government 

    • Defamatory speech

    • Child pornography 

    • Obscene speech (limited exception)

Free Speech and Violent Video Games

• Case:

  • Brown, Governor of California v Entertainment Merchants Association 

  • 131 S. Ct. 2729, 180 L.Ed.2d 708 (2011) 

  • Supreme Court of the United States

• Issue

  • Does the California act that restricts violent video games violate the First Amendment?

Case 6.1: Freedom of Speech

• Case 

  • Snyder v. Phelps

  • 131 S.Ct 1207 (2011)

  • District Court for the District of Maryland

• Issue 

  • Westboro congregation members picketed at the funeral and memorial service of marine Lance Corporal Snyder causing emotional distress and invasion fo privacy by intrusion upon seclusion 

    • Does the First Amendment prohibit holding Westboro liable for its speech?

Freedom of Religion

• The US Constitution requires federal, state, and local governments to be neutral toward religion

• The Establishment Clause

  • First Amendment clause prohibiting the government from either establishing a state religion or promoting one religion over another

• The Free Exercise Clause

  • First Amendment clause that prohibits the government from interring with the free exercise of religion 

Case 4.5: Freedom of Religion

• Case

  • Burwell v Hobby Lobby Stores Inc

  • Supreme Court of the United States

  • Issue

  • Do owners of closely held corporations have to provide health insurance  coverage for their employers for methods of contraception that violate the owners sincerely held religious beliefs

Fourteenth Amendment

• Added to Constituion in 1868 along with 13th Amendment banning slavery

• Guarentees equal right to all persons after Civil War

• Prohibits discriminatory and unfair action by state and local governments

Fourteenth Amendment Rights Guarenteed: Privileges and Immunities of Citizenship, Due Process and Equal Protection

• Section 1. All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws

• Section 5. The Congress shall have power to enforce, by appropriate legislation, the provisions of this article.

Equal Protection Clause (continued)

• Provides that state cannot “deny to any person within its jurisdiction the equal protection of the laws”

• State, local, and federal governments are prohibited from enatcing laws that classify and treat “similary situated” persons differently

• Artifical persons, such as corporations, are also protected (Citizens United)

Case for Equality

• Case 

  • Obergefell v Hodges (2015)

  • Supreme Court of the United States

• Held

  • The Fourteenth Amendment’s Due Process and Equal Protection clauses require a State to license anmarriage between two people of the same sex and to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-State

Due Process Clause

• Under Fifth and Fourteenth Amendments, no person shall be deprived of “life, liberty, or property” without due process of law

• 14th Amendment Due Process used to “incorporate” Bill of Rights to apply to States 

Procedural Due Process

• “Life”

• “Liberty”

• “Property”

• “Deprevation”

• What process is due?

  • Notice 

  • Hearing 

Substantive Due Process

• Arbitrary abuse of governmental power

• No amount of process will permit deprivation

• Fundamental rights not enumerated elsewhere in Constitution 

• “Deliberate indifference” that “shocks the conscience” 

  • Whose conscience must be shocked?

Privileges and Immunities

• Privilleges and Immunities Clause

  • “The Citizens of each state shall be entitled to all Privileges and Immunities of Citizens in the several states”

  • No state shall make or enforce any law that shall abridge the privileges or immunities of the citizens of the United States 

Privileges and Immunities (continued)

• The clauses prohibit states from enacting laws that unduly discriminate in favor of their residents

• The clauses apply only to citizens and do not protect corporations or aliens

Introduction to Criminal Law

• US criminal law system

  • Person charged is presumed innocent until proven guilty 

  • The burden of proof is on the government

  • Accused must be found guilty beyond a reasonable doubt

  • Conviction requires unanimous jury vote

  • Accused is provided with constitutional safeguards under the 4th, 5th and 6th Amendments

Definition of a Crime

• Crime: Any act done by an individual that violates a duty that he or she owes to society and for which the actor must pay a price to society 

Crime

• Inherently Wrong - Malum In Se

• Deemed Wrong By Legislature - Malum Prohibitum 

  • Examples

    • White-collar crime committed by: 

    • Business entities 

    • Desk workers

    • Accountants

    • Attorneys

    • Officers

Examples of White-Collar Crimes 

Definition of a Crime

• Penal Codes and Regulatory Statutes

  • Statutes are the source of criminal law

  • State penal codes and federal regulatory statutes define in detail: 

    • The activities considered to be crimes within their jurisdiction 

    • The penalties that will be imposed for their commission

  • Fines

  • Imprisonment 

Crime Classifications

• Felony → Indictment (Grand Jury) → Fine or Imprisonment

• Misdeamor → Information (Gov’t Charge) → Fine or Jail <1yr

Definition of a Crime

• Intent Crimes

  • Criminal act (actus reus)

  • Criminal intent (mens rea) 

    • Specific intent crime (murder)

    • General intent crime (manslaughter)

  • Merely thinking about a crime is not a crime because no action has been taken  

• Nonintent crimes

  • Imposes criminal liability without finding of intent 

  • Often imposed for reckless or grossly negligent conduct that causes injury to another person

  • Involuntary manslaughter is a nonintent crime 

Criminal Procedure

• Arrest (Probable Cause/Warrant)

• Indictment or Information (Grand Jury)

• Arraignment (Plea)

• Trial (Unanimous Verdict)

  • Deadlock on jury = mistrial

• Plea Bargain

• Appeal (only defendant can appeal unless mistrial – no Double Jeopardy)

Grand Jury

• Fifth Amendment to the U.S. Constitution

  • Before a trial, there must be presentment or an indictment by a grand jury

• Consists of 23 citizens

• Determine probable cause

  • Presumption of innocence: Presuming that an indicted person is innocent until found guilty by a petit jury

• Serves as an investigative body

• Functioning depends upon the secrecy of the proceedings

Arraignment 

• Accused informed of all charges

• Asked to enter a plea

  • Guilty

  • Not guilty

  • Nolo contendere

    • Does not admit guilt, but agrees to penalty

    • Cannot be used as evidence of liability in civil trials

Plea Bargaining

• Allows accused to plead to lesser crime

• Saves money, time

• Avoids risk of trial

• Prevents further overcrowding of jails

• Very common – more than 90% of cases

Criminal Trial

• Verdict must be unanimous

  • If any juror doubts the guilt of the accused, the accused cannot be found guilty

  • If jurors cannot agree, jury considered to be a hung jury (deadlock)

  • Convicted defendant can appeal

  • If defendant found not guilty, government cannot appeal

Common Crimes

• Murder

  • Unlawful killing of a human being by another person without justification

  • Different degrees of murder depending upon level of intent

  • Felony murder rule: Murder committed during commission of any felony may be prosecuted as murder

    • Intent to commit murder is inferred from intent to commit another crime

• Robbery

  • The taking of personal property from another person by use of fear or force

  • If a weapon is used, it is considered armed or aggravated robbery

• Burglary

  • The taking of personal property from another’s home, office, or commercial or other type of building

• Larceny

  • Wrongful and fraudulent taking of another person’s personal property

    • Includes tangible property, trade secrets, computer programs, other business property

  • Force or entry into a structure not required

  • States distinguish between grand and petit larceny, based on value of property taken

• Receiving stolen property

  • Knowingly receiving stolen property with the intention of depriving rightful owner of that property

  • Can be tangible property

• Arson

  • Malicious or willful burning of another’s dwelling

  • Latest law applies to burning all types of structures

  • Includes willful burning by structure’s owner

Business and White-Collar Crimes

• Forgery

  • Written documents fraudulently made or altered

  • Change affects legal liability of another person

  • Signing another person’s signature without intent to defraud is not forgery

• Embezzlement

  • Fraudulent conversion of property by person to whom property is entrusted (employee theft and dishonesty)

• Bribery

  • Offeror commits crime when bribe is offered

  • Offeree commits crime when bribe is accepted

  • Bribe can be of anything of value

• Extortion

  • Threat to expose something about another person unless that other person gives money or property

  • Also known as blackmail

• Criminal fraud

  • Obtaining money or property through deception or trickery

  • Includes:

    • Mail fraud

    • Wire fraud

  • Also called false pretenses or deceit

  • Requires intent to deceive, misstatement of material fact, justifiable reliance and injury

• Under Money Laundering Control Act, a crime to:

  • Knowingly engage in monetary transaction through financial institution involving property worth more than $10,000

  • Knowingly engage in a financial transaction involving proceeds of an illegal activity

  • If convicted, fines of up to $500,000 or twice the value of the property and up to 20 years in prison

• Racketeer Influenced and Corrupt Organizations Act (RICO)

  • Criminal RICO - A federal crime to acquire or maintain an interest in, use income from, or conduct or participate in the affairs of an enterprise through a pattern of racketeering activity

  • Civil RICO - Persons injured by a RICO violation can bring a private civil RICO action against the violator to recover for injury to business or property

• Criminal conspiracy

  • Two or more persons enter into an agreement to commit a crime

  • Requires an overt act

  • Crime does not have to be committed

• Obstruction of Justice

  • Act committed with intent to obstruct judicial or legislative proceedings/case:

    • Cleaning/purging/destroying electronic and paper files

    • Changing records of phone conversations

Cyber Crimes

• Hacker (Cracker) – unlawful access to electronic information

• Identity Theft

• Electronic Theft

  • Computer Fraud and Abuse Act (CFAA)(unauthorized access or exceeding authorized access to computer)

  • trade secrets; confidential , proprietary information

  • personnel records, customer lists, formulae

Cyber Crimes (Cont)

• Counterfeit Access Device and Computer Fraud and Abuse Act (CFAA)

  • Federal crime to use a computer knowingly to obtain:

    • Restricted federal government information

    • Financial records of financial institutions

    • Consumer reports of consumer reporting

• Identity Theft and Assumption Deterrence Act: 

  • Federal act that makes it a crime to transfer or use, without authority, the identity of another person knowingly and with the intent to commit any unlawful activity

• Information Infrastructure Protection (IIP) Act: 

  • Federal act that makes it a crime for anyone to access and acquire information intentionally from a protected computer without authorization

False Statement to a Bank 

• Law aims to protect banks and ensure the accuracy of financial information

• A statement or report is false if it:

  • Relates to a material fact and is untrue

  • Is known to be untrue by the person making it

Bribery and Kickbacks 

• Of a public official = Federal charge

• Illegal both domestically and internationally

  • Foreign Corrupt Practices Act

• “Fixing” a college or professional sporting event

  • FBI Sports Bribery Program

• “Kickback” - Giving money back to someone who made a decision that benefited you or your company.

Trends

• Increase in prosecution of white-collar criminals and legislative efforts to protect the public from fraud

  • Sarbanes-Oxley Act

• Investigation of illegal activities by top management

  • Plea bargaining with mid-level employees in exchange for testimony against top-level employees

• Prosecutors capitalize on high-profile prosecutions

Fourth Amendment Search and Seizure

• The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated; and no Warrants shall issue but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

Protection Against Unreasonable Search and Seizure 

• Fourth Amendment protects persons and corporations from overzealous investigative activities by the government

• Reasonable search and seizure by the government is lawful

• Search warrants based on probable cause are necessary in most cases

• Government may not search businesses without a search warrant

4th Amendment “Probable Cause”

• Reasonable, articulable suspicion that a crime has been, is being, or is about to be committed

• Objective reasonableness - careful consideration of all facts and circumstances - do not have to be right 

Major Exceptions to Search Warrant

• Consent

• Search Incident to Arrest

• Plain View

• Exigent Circumstances (fire, flight, etc.)

• Automobile and suitcase/container

• Stop/Frisk/Identify (Terry and Hiibel)

• Border/laptop (U.S. v. Arnold)

Case 13.1 - Search Warrant

• Case

  • Riley v. California

  •  573 U.S. __ (2014)

  • Supreme Court

• Issue

  • Riley was stopped for a traffic violation which led to his arrest on weapons charges

  • Plaintiff moved to suppress the evidence obtained from his cell phone

    • Trial court denied the motion

    • Supreme Court ruled that search of cell phone was unconstitutional

DNA Collection at Arrest

• Case

  • Maryland v. King

  • 133 S.Ct. 1958 (2013)(Supreme Court)

• Issue

  • Did Maryland’s collection of King’s DNA during the booking procedure in 2009 constitute an unreasonable search and seizure?

Protection Against Unreasonable Search and Seizure

• Exclusionary rule

  • Evidence obtained from an unreasonable search and seizure generally may not be used at trial

• Good faith exception

  • Evidence may be introduced if law enforcement reasonably believed that they were acting pursuant to valid warrant

Fifth Amendment Rights of Persons

• No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

Privilege Against Self-Incrimination

• Fifth Amendment states that no person shall be compelled in any criminal case to be a witness against himself or herself

• Protects natural persons only, not corporations

• Attorney-client privilege

  • Client can tell his or her attorney anything about the case without fear that the attorney will be called as a witness against the client

• No accountant-client privilege under federal law

Privilege Against Self-Incrimination

• Immunity from prosecution

  • Government may offer person immunity from prosecution in exchange for testimony

  • Person loses right to assert Fifth Amendment privilege

• Protection against double jeopardy

  • Fifth Amendment provides that persons cannot be tried twice for same crime (no appeal by government after not guilty verdict)

Sixth Amendment

• Provides multiple protections that offer the right to:

  • Speedy and public trial

  • Trial by jury

  • Be informed of the charge against oneself

  • Confront the accuser

  • Subpoena witnesses in one’s favor

  • Have the assistance of an attorney

Physically Abusive Governmental Conduct

• 4TH Amendment - objective standard

  • “reasonable force” in effecting arrest/seizure

• 8th Amendment – applies in police custody/jail

  • Subjective standard

  • No “cruel and unusual punishment” like torture 

  • “deliberate indifference” to “substantial risk of serious harm” (awareness of risk of harm)

• 14th Amendment Substantive Due Process –

• subjective standard

  • “deliberate indifference” that “shocks the conscience”

Miranda v Arizona (1966)

• Mirando warning required to be given by police to criminal suspects in police custody (or in a

• custodial situation) before they are interrogated.

  • Right to remain silent

  • Anything you say can and will be used against you in a court of law

  • Right to have an attorney present during questioning

  • If you cannot afford an attorney, one will be appointed for you at no charge to you

Miranda Warning

1. You have the right to remain silent

2. Anything you say can and will be used against you in a court of law

3. You have the right to talk to a lawyer and have him present with you while you are being questioned

4. If you cannot afford to hire a lawyer one will be appointed to represent you before any questioning if you wihs

5. You can divide at any time to exercise these rights and not answer any questions or make any statements

- *Waiver

1. Do you understand each of these rights I have explained to you? Hanging these rights in ming do you