Chapter 4 Constitutional Authority to Regulate Business

1© 2004 West Legal Studies in Business

A Division of Thomson Learning

Chapter 4Constitutional Authority

to Regulate Business

2© 2004 West Legal Studies in BusinessA Division of Thomson Learning

History

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


§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.

Privileges and Immunities Clause (Art. IV §2)Full Faith and Credit Clause (Art. IV §1)


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 it authorizes the national government to regulate virtually any business enterprise, including internet. Limits: U.S. v. Lopez (1995)

Case 4.1: Reno v. Condon (2000)


State Commerce

States possess inherent police powers to regulate health, safety, public order, morals and general welfare.

“Dormant” Commerce Clause. Case 4.2: Ferguson v. Friendfinders. Inc.

(2002)State laws that substantially interfere with

interstate commerce will be struck down.


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.Federal Taxing and Spending Powers.


§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

Afforded highest protection by courts.Symbolic Speech.

Texas v. Johnson (1989). R.A.V. vs. City of St.Paul (1992).


Commercial Speech

Advertising is protected speech. Restrictions must: Implement substantial government interest; Directly advance that interest; and Go no further than necessary.

Case 4.3: Bad Frog Brewery (1998).


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

Certain types of speech are not protected by the first amendment: Slander. Obscenity (Miller v. California). Fighting Words.

Online Obscenity CDA, COPA, Children’s Internet Protection Act.


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) and Lynch v. Donnelly (1984).


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).

http://caselaw.findlaw.com/scripts/getcase.pl?court=us&vol=489&invol=829



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).




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.


§3: Due Process and Equal Protection

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

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

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

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 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 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.


§4: Privacy Rights

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 interest test.


Law on the Web

Online Constitution Center See the “Vote-Smart” site on federalism.Federalist Society.com.ACLU.org.

Legal Research Exercises on the Web.

http://www.constitutioncenter.org/

http://www.vote-smart.org/issues/FEDERALISM_STATES_RIGHTS

http://www.fed-soc.org/

http://www.aclu.org/

http://wbl.westbuslaw.com/

Documents

Chapter 4 Constitutional Authority to Regulate Business