Chapter 4
CONSTITUTIONAL LAW FOR
BUSINESS AND E-COMMERCE
Why can you not run into a crowded theater and yell “fire” when there is no fire?
I. Overview
The scales of justice have long been one of the key symbols of our judicial system. They represent the system’s effort to show evenhandedness and give fair weight to the evidence presented by competing parties. This symbol can also be used to illustrate the key learning objective of this chapter. Our founding fathers struggled long and hard to create a balance of power among the three branches of government in much the same way as the justice system attempts to weigh the evidence. This process of balancing among the competing sovereignties of federal, state, and local governments is a process of constant evolution and, like the scale, will constantly shift with the addition and deletion of new political, social, and demographic weights.
What makes this constitutional balancing both fascinating and yet sometimes traumatic is that business people and their entities, represented by all sorts of firms from the smallest sole proprietorship to the largest multinational corporation, are caught in the middle of these sovereign "turf wars." In today's legal environment, there is little doubt about the power of the government to create, regulate, control, and even ban business activities. The real question appears to be which flag to salute--the federal government, the state, the local government, or some combination of all of the above? Where the rules of the game seem to shift almost daily between competing referees, it becomes most difficult for businesses to play the game.
The basic ground rules for business are set out in the U.S. constitutional provisions directly addressed to business, such as the Commerce Clause, and in larger protections accorded to all persons in the Bill of Rights and other key amendments. Many business entities are classified as juristic persons (law created entities which are given a limited and controlled legal existence) such as corporations or trusts. Subsequent chapters will go into more detail on how and when these forms of doing business may be used. In the context of constitutional allocation of control over business activity, the most important provision is the Supremacy Clause. Under this clause, the national sovereign can preempt control over any particular form of business it chooses to. This clause, combined with very broad judicial interpretation of the Commerce Clause, has been a part of the process which attempts to create an even playing field for business, i.e., the federal sovereign has long believed that a states power to control commerce under its constitutional police power should be harnessed if it encumbers the national flow of commerce or if it somehow unduly favors local business at the cost of competing political entities such as other cities, states, or even regional interests. The balancing of the scale continues.
What makes this process of setting out the business playing rules even more difficult is that many of our basic rights, set out in the Bill of Rights such as freedom of speech, press, religion, and assembly, have been held by our courts to apply in varying degrees to business enterprises. How, when, where, and to what extent these rights should apply to business continues to be both a source for constant academic debate and a regulatory dilemma for both government and business alike. Law works best where all the players involved have a "bright line" or clear signal to use as a guidepost for their actions. When that line is blurred, all are disserved.
II. Multi-issue Essay Question
Brew Ha Ha Brewery is located in New Salem, California, and is engaged in the business of producing specialized low alcohol products for specifically identified niche markets. It produces diet beers for the overweight crowd, young malts for the young at heart, and aged malts for the over-the-hill yuppie couch potatoes.
Brew Ha Ha's newest product seeks to cash in on the latest craze, a revival of witchcraft! Their new product is named "The Devil Made Me Do It!" The "Devil" beer has the same low alcohol content as all its other products but is designed to look like a steamy caldron of some witch's brew that will conjure up images of the rich and diverse history of occult practices throughout the world.
The Texas State Liquor Control Board took umbrage at this product's motives and felt that it would foster and encourage the practice of witchery in its fair state. It thus decided to ban the sale of "The Devil Made Me Do It!" within the state on the grounds that this product would undermine the morals of its citizens through the practice of witchcraft. The Board claims its actions are allowable under both the U.S. and local constitutions. Brew Ha Ha, in turn, claims its constitutional rights are being violated. What result?
III. Outline
Major Functions of the Constitution
Creates the three branches of government
Executive—carries out laws
Legislative—makes laws
Judicial—interprets laws
Protects individual rights by limiting the government’s ability to restrict those rights
Separation of Powers
Article I
Establishes the legislative branch of government—create federal courts
Article II
Establishes the executive branch of government—needs legislative approval for treaties
Article III
Establishes the judicial branch of government—reviews acts of other branches for constitutionality
Supremacy Clause
Establishes that the federal Constitution, treaties, federal laws, and federal regulations are the supreme law of the land. No state law can conflict with them. Geier v. American Honda Motor Company, Inc. illustrates how federal passive restraint law preempted District of Columbia tort law.
Commerce Clause
Grants Congress the power “to regulate commerce with foreign nations, and among the several states, and with Indian tribes”
Gives the federal government authority to regulate interstate commerce within the state or substantially affects.
State “Police Power”
States can enact laws to protect or promote public health, safety, morals, and general welfare
State and local laws cannot unduly burden interstate commerce or discriminate against interstate commerce Wisconsin law banning 55 ft. trucks while federal law banned 65 ft. trucks was unconstitutional.
Incorporation Doctrine
A doctrine that states that most fundamental guarantees contained in the Bill of Rights are applicable to state and local government action
Bill of Rights
Government cannot take away rights without reason. More fundamental the right, the stronger the reason must be.
Freedom of Speech—written, spoken, and symbolic
Fully protected speech
Speech the government cannot prohibit or regulate due to lack of compelling reasons
Limited protected speech
Commercial speech—subject to proper time, place, and manner restrictions
Offensive speech—subject to proper time, place, and manner restrictions
Unprotected speech—no compelling reasons exist to prohibit
Dangerous speech
Fighting words
Speech that incites the violent or revolutionary overthrow of the government
Defamatory language
Child pornography
Obscene speech
Certain sections of the Computer Decency Act were held unconstitutional limits on adult free speech.
Freedom of Religion
Establishment Clause
Prohibits government from establishing a government sponsored religion or promoting one religion over others law must be neutral on its face (school voucher system constitutional)
Free Exercise Clause
Prohibits government from enacting laws that prohibit or inhibit people from participating in or practicing their chosen religion without a compelling reason
Equal Protection Clause
Strict scrutiny test or compelling interest test (needs compelling reason)
Applied to classifications based on race
Intermediate scrutiny test (needs reasonable relation to legitimate government purpose)
Applied to classifications based on protected classes other than race (e.g. sex or age)
Rational basis test (needs justifiable reason)
Applied to classifications not involving a suspect or protected class
Due Process Clause
Substantive due process
Requires governmental laws to be clear and not overly broad; the test is whether a reasonable person can understand the law
Procedural due process
Requires government to give people proper notice and hearing before depriving them of life, liberty, or property
Privileges and Immunities Clause
Prohibits states from enacting laws that unduly discriminate in favor of their residents when dealing with essential activities without substantial reason
Relationship of Due Process and Equal Protection:
Neither the State nor the Federal Government can take away someone’s rights or
discriminate against someone without a good reason. The more fundamental the
right or the more suspect the class the better the reason must be.
Strict Scrutiny/Compelling Interest Test / Intermediate Test / Rational Basis Test↓ / ↓ / ↓
used for fundamental rights / used for non-fundamental rights
or / ↓ / or
Suspect Classes / Special Classes / Non-Suspect Classes
↓ / ↓ / ↓
compelling reason needed/narrowest application / fair and substantial relation to important governmental objective / reasonable basis needed
↓ / ↓ / ↓
e.g. religion, speech/race, religion discrimination / gender discrimination / education/poverty discrimination
IV. Objective Questions:
Terms:
1.Under the U.S. Constitution, the states delegated certain powers to the federal government. These powers are known as ______powers.
2.Under the U.S. Constitution, the three branches of government are given different powers. This is known as the doctrine of ______.
3.When a state law conflicts with a federal law, the federal law takes precedent. This concept is known as the ______.
4.The constitutional provision that addresses the issues of a national market and free trade among the states is known as the ______.
5.The power the states retain to regulate private and business activity within their borders is the ______.
6.Dangerous speech, defamatory language, and obscene speech are examples of ______.
7.Examples of speech that are not prohibited under the First Amendment, but may be restricted are ______speech and ______speech.
8.The First Amendment contains two religion clauses. The ______prevents a state from establishing or promoting a state religion. The ______prohibits the government from prohibiting or inhibiting people from participating in their religion.
9.Although the freedom is not absolute, the ______is the only business given explicit constitutional protection.
10.The Fourteenth Amendment's Due Process Clause has two categories of due process; ______due process and ______due process.
True/False:
1.____ The Bill of Rights was part of the U.S. Constitution as originally adopted in 1787.
2.____ The federal government has the exclusive right to regulate foreign commerce.
3.____ If a state’s law is in its best interest, it can preempt any relevant federal law.
4.____ All provisions of the Bill of Rights are applicable only to the federal government.
5.____ The Freedom of Speech Clause extends to protect both speech and conduct.
6.____ Offensive speech, like obscene speech, can be forbidden under the First Amendment.
7.____ Commercial speech can never be restricted under the First Amendment.
8.____ Government action that "impacts" on religion, but does not "promote" it is valid.
9.____ The requirements of the Due Process Clause apply to both state and federal government, but
never to private individuals.
10.____ The U.S. Supreme Court uses different standards when reviewing equal protection cases,
depending on the classification affected.
11. ____All countries of the world are democracies.
Multiple Choice:
1.The federal government is given the power to set international trade policies in the U.S. Constitution under which doctrine or clause?
A.Doctrine of Separation of Powers.
B.Commerce Clause.
C.Preemption Doctrine.
D.Supremacy Clause.
2.Under the Miller v. California standard for determining whether speech is obscene, there is a three-part test that is analyzed from the viewpoint of:
A.An objective standard.
B.The person who produced the allegedly obscene speech.
C.The person who is offended by the obscene material.
D.Contemporary community standards.
3.If the government believes certain offensive language is inappropriate to air on a television program, the government:
A.Can do nothing; even though it is offensive, it is completely protected by the First Amendment.
B.Can completely ban the speech since offensive language is like obscene language and can be entirely forbidden.
C.Can regulate the language, restricting it to certain times the language can be aired.
D.Can use its discretion to do any of the above.
4.If the government believes certain commercial speech should be regulated, the government must:
A.Prove a substantial interest in restricting the speech.
B.Prove the restriction advances the government's interest.
C.Prove the restrictions are not more extensive than necessary.
D.All of the above.
5.IanInformant calls Janet Journalism at the Daily Reporter to tip her off about a scandalous politician. Janet meets with Ian and writes a very controversial story on the politician. Assume a lawsuit arises under a state law and this state has a "shield law."
A.Janet and the Daily Reporter are not protected by the First Amendment because a journalist can never write detrimental articles about politicians.
B.Janet and the Daily Reporter are protected by the First Amendment and cannot be forced to reveal that Ian was the source because of the shield law.
C.Janet and the Daily Reporter are protected by the First Amendment but can be forced to reveal that Ian was the source.
D.None of the above.
6.Assume the same facts as in question 5 except that the suit is brought under a law allowing federal prosecution.
A.Janet and the Daily Reporter are not protected by the First Amendment because a journalist can never write detrimental articles about politicians.
B.Janet and the Daily Reporter are protected by the First Amendment and cannot be forced to reveal that Ian was the source because of the shield law.
C.Janet and the Daily Reporter are protected by the First Amendment but can be forced to reveal that Ian was the source.
D.None of the above.
7.State X passes a law requiring all Caucasian citizens to pay an additional fee of $20 when applying for a driver's license. In examining the constitutionality of this requirement, the Supreme Court is likely to use which standard?
A.Strict scrutiny.
B.Intermediate scrutiny.
C.Rational basis.
D.Any of the above.
8.State X passes a law requiring that all lifeguards hired for public swimming pools must be men. In examining the constitutionality of this law, the Supreme Court is likely to use which standard?
A.Strict scrutiny.
B.Intermediate scrutiny.
C.Rational basis.
D.Any of the above.
9.Patron Paul is thrown in jail by the police for thirty days without a hearing for allegedly punching Customer Carl at the Big Bear Bar. Have the police violated any constitutional provisions?
A.No, because Carl told the police what happened, so the procedural due process requirement has been met.
B.No, because a reasonable person could understand it is illegal to injure someone else, so the substantive due process requirement has been met.
C.Yes, because procedural due process requires a notice and a hearing.
D.Yes, because a law against punching someone in a bar violates substantive due process.
10.Competitive Car Company lobbies several Congress members to pass a law giving U.S. car companies a tax break. Is this action protected under the Constitution?
A.Yes, it is protected by the freedom to petition.
B.No, the freedom to petition only protects individuals, not companies.
C.No, this issue is governed by the individual states.
D.None of the above.
Constitution Exercise:
Name the clause from the constitution that is relevant for handling the cases listed
below:
(1)Arizona statute suspends driver’s license for someone who can’t pay
judgments while Federal Bankruptcy Law exists______
(2)Alaskan statute requires that owners of Alaskan oil leases must hire
Alaskans______
(3)Federal Driver’s Privacy Protection Act prohibits states from selling
personal information without consent______
(4)Maryland statute stated that producers or refiners of petroleum
products were not permitted to operate retail service stations in
Maryland______
(5)Federal Telecommunication Act of 1996 prohibits state and local governments from blocking entry into telecommunications industry______
(6)Wheat grown by a farmer for home consumption can be regulated
by the Federal Government______
(7)The Telecommunications Act of 1996 requires cable operators not to transmit sexually explicit materials from 6AM to 10PM if signal bleed can occur______
(8)Federal Communications Commission regulations prohibit the broadcast of gambling and lottery information over radio and television______
(9)State high school policy permitting students of the high school to elect a student to give invocations over the public loud speaker at football games______
V. Answers to Objective Questions:
Terms:
1.Enumerated. These powers are expressly named or granted to the federal government by the Constitution.
2.Separation of powers. Under this doctrine, one branch is not permitted to encroach upon the domains of the other two branches.
3.Preemption doctrine. If certain matters are considered of national importance and the federal government has addressed the issue, states may not pass laws that are inconsistent with federal law. Federal law takes precedence over state law.
4.Commerce Clause. This provision is found in Article I, Section 8, Clause 3 of the U.S. Constitution and is the cornerstone of an enormous amount of exclusive legislative and regulatory power over interstate commerce by the federal government.
5.Police power. Based on the Tenth Amendment to the U.S. Constitution, the authority to secure the general health, safety, welfare and morals within their boundaries is conferred upon the states.
6.Unprotected speech. These are all forms of expression that have been found in varying degrees to be unprotected by the freedom of speech rights guaranteed by the First Amendment to the U.S. Constitution.