Commercial Law (Mgmt 348)

Constitutional Authority to Regulate Business (Chapter 4)

Professor Charles H. SmithSpring 2011

Introduction to Constitutional Law

U.S. Constitution specifies powers/structure of federal government and guarantees individual rights.10th Amendment reserves to states all powers not delegated to federal government.Every state has its own constitution which often mirrors the U.S. Constitution but may also provide additional rights; e.g., right of privacy in the California Constitution.

Commerce Clause

U.S. Constitution, Article I, Section 8 gives Congress the power to “regulate Commerce . . . among the several states.”This has been interpreted to empower Congress to regulate activities that “substantially affect interstate commerce” which is not limited to commerce that crosses state lines.“Dormant” Commerce Clause – state regulation impinges on interstate commerce; court weighs state’s interest in regulating subject matter vs. burden state regulation puts on interstate commerce.

Commerce Clause cont.

Case studiesHeart of Atlanta Motel v. United States, 379 U.S. 241 (1964) (page 79 and footnote 10) – broad scope of “interstate commerce.”Gonzales v. Raich, 545 U.S. 1 (2005) (page 80 and footnote 14) – medical marijuana case.Granholm v. Heald, 544 U.S. 460 (2005) (pages 80-82) – state regulation of direct sales by out-of-state winemakers.Does State Regulation of Internet Prescription Transactions Violate the Dormant Commerce Clause? (pages 84-85).

Supremacy Clause – Preemption of State Law

U.S. Constitution, Article VI says federal law is “the supreme Law of the land.”Therefore, federal law “preempts” state law – two applications

State regulation in area of law is completely barred; case study – Case Problem 4-8 (page 97) based on Chamber of Commerce v. Brown, 128 S.Ct. 2408 (2008).State regulation not barred unless in conflict with federal law; case studies – state statute regulating arbitration will be preempted if in conflict with Federal Arbitration Act’s policy of enforcing arbitration agreements.

Free Speech

U.S. Constitution, 1st Amendment provides for freedom of speech, but not all “speech” (which can include oral, written and even symbolic communications) gets the same protection.Different types of “speech” include

Political speech – protected even if outrageous or offensive; free exchange of ideas will allow good ideas to prevail and bad ideas to be exposed.Commercial speech – may or may not be protected; see three-step analysis on page 86.Unprotected speech – examples include defamation or fraud.

Free Speech cont.

Case studiesBad Frog Brewery, Inc. v. New York State Liquor Authority, 134 F.3d 87 (2d Cir. 1998) (pages 87-88) – commercial speech.Lott v. Levitt, 469 F.Supp.2d 575 (N.D.Ill. 2007) (pages 88-89) – defamation alleged.Case Problem 4-5 – www.taubmansucks.com (page 96).Case Problem 4-9 – ban on sales of graffiti implements (page 97).Case Problem 4-10 – “A Question of Ethics” (page 97).

Religion - Establishment Clause

Intended to protect people from government imposition of or interference with religion.Case study – Singh v. Singh, 114 Cal.App.4th 1264 (2004).

Religion – Free Exercise Clause

Intended to provide freedom to practice chosen religion.Case studies – Case Problem 4-3 (page 96); FLDS Church compound raid by Texas children’s services in 2008.

Due Process

U.S. Constitution, 5th and 14th Amendments.Procedural due process – requires government to act fairly before deprivation of life, liberty or property; e.g., notice, opportunity to be heard, decision by neutral.Substantive due process – protects life, liberty and property against government action no matter what procedure used; e.g., if statute impacts fundamental right such as voting, marriage and family, compelling government interest must be shown.Case study – Case Problem 4-7 (pages 96-97).

Equal Protection

U.S. Constitution, 5th and 14th Amendments – government cannot enact laws that treat similarly situated individuals differently.Case studies – Perry v. Schwarzenegger, 704 F.Supp.2d 921 (N.D. Cal. 2010); Varnum v. Brien, 763 N.W.2d 862 (Iowa 2009); In re Marriage Cases, 43 Cal.4th 757 (2008).

Due Process vs. Equal Protection

Due Process works to invalidate laws that prohibit anyone from doing something or would deprive anyone of basic procedural rights.On the other hand, Equal Protection works to invalidate laws providing rights to some but not to others who are similarly situated.

Privacy Rights

No express mention in U.S. Constitution; however, various provisions interpreted to afford privacy rights; e.g., 4th Amendment.California Constitution does specifically provide for “right of privacy.”Privacy rights usually provided by host of statutes and cases dealing with varied topics of confidentiality of

Certain subjects; e.g., medical or academic records.Relationships; e.g., marital or attorney-client privileges.

Privacy Issues in the Workplace

Privacy issues in the workplace include drug testing as requirement for getting or keeping job

Generally cannot be required.Exceptions include public safety jobs, pre-employment testing, and testing per employment or union contract.