Business Law: Chapter 1 Overview

Overview of Chapter 1

• Defines business law
• Recalls the purposes of law
• Distinguishes among types of law
• Differentiates between sources of the law
• Understands basic rules governing conflicts among sources of law

Law

• It is a body of enforceable rules governing relationships among individuals
• It also governs between individuals and their society

Business Law

• Is comprised of enforceable rules of conduct that govern commercial relationships
• Commercial refers to the purpose of making a profit and relates to the exchange of goods and services

Purposes Fulfilled by Law

• Supplies order to depend on a promise or expectation of obligations
• Serves as an alternative to fighting
• Facilitates sense that change is possible after rational consideration
• Encourages social justice
• Guarantees personal freedoms
• Serves as a moral guide

Schools of Jurisprudence

• Natural law describes certain ethical laws and principles believed to be morally right/humane
• Natural laws are “above” those devised by humans
• Natural rights are associated with these laws, for example, life, liberty, and property

Classification of Law - Private v Public

• Disputes are regulated by private law between private individuals/groups like contracts, torts, and property law
• Disputes are controlled by public law between private individuals/groups and their gov, like constitutional, criminal, procedural, and administrative law

Classification of Law - Civil v Criminal

• Civil law lays out rights and responsibilities implied in relationships between persons
• It operates between persons and their government
• The general consequence for violating a civil law is a remedy used to compensate the injured party for the injury
• However, some civil violations don't have a clear compensatory consequence due to their quasi-criminal nature
• Criminal law regulates situations in which someone commits an act against the public as a whole
• The general consequence for violating criminal law is punishment
• The same behavior might give rise to both civil and criminal violations, for example, a stockbroker who commits fraud may be guilty of criminal securities fraud
• The investor could sue the stockbroker in a civil case seeking compensation

Classification of Law - Relationships

• Matters that constitute civil law typically fall under private law
• One private party sues another private party for breaching a contract or causing a car accident
• Civil disputes are because one party is seeking a remedy from another party and fall under private law because they are disputes between individuals
• Some legal issues that fall under public law can be considered civil law even though the nature of the issues are arguably quasi-criminal
• The Securities and Exchange Commission might fine a company for violating federal securities regulations
• Criminal law is nearly always public law

Classification of Law - Cyberlaw

• It regulates activities conducted online
• These laws often modifications to laws that preexist the Internet
• Examples include laws that regulate electronic signatures necessary for a valid contract
• Further examples include laws that address defamation online or the use of intellectual property online

Sources of Business Law

• Sovereign power is a preliminary concept where the power of a governing body can govern itself
• This includes without interference from outside sources or bodies
• Several distinct and related systems of sovereign governing power exist within the United States
• These are Federal, State, and tribal systems

Law Types and Sources

• Exist within both the Federal and State Systems of Government
• These are constitutions (constitutional law)
• They include statutes (statutory law), created by the legislative branch that may also be created directly by citizens
• Further types are administrative law, where power is delegated to administrative agencies
• Cases (case law) are created by the judicial branch, executive orders are issued by the President or Governor
• Laws are created via treaty making that's negotiated by President and ratified by 2/3 of Senate
• Procedural Rulemaking by the judicial branch occurs when power to create rules is delegated by the legislative branch
• These are constitutions (constitutional law)
• Statutes (statutory law) are created by the legislative branch and may be created directly by citizens
• Administrative law is created by administrative agencies to which power is delegated by the legislative branch
• Cases (case law) are created by the judicial branch through court decisions
• Executive orders are issued by the President or Governor.
• The sources of laws identified at the federal level are also mirrored at the state level

Specific Law Examples in California

• California's Constitution provides Constitutional Law
• California's Legislative Branch creates Statutory Law
• California's Administrative Agencies create Administrative Law
• California's Judicial Branch creates Case Law
• California's Executive Branch issues Executive Orders
• States can enter into interstate compacts with each other.

Source Examples

• The U.S. Constitution is available online
• California's Constitution and statutory law are online
• Administrative Law at the Federal level is found in federal regulations online
• California's administrative law is available online
• Case decisions are made by courts in the judicial branch that set a precedent for future cases
• Case law started with "common law" of England – judicial decisions made by English Courts
• Case law includes decisions that have interpreted existing laws and decisions based on common law legal principles

Two Sources Clash - Which Source Wins?

• The U.S. Constitution takes precedence over all other laws at both levels
• The state constitution trumps all other laws within that state
• Federal constitutional, statutory, and administrative law all trumpsstate law
• Under the “preemption” doctrine, federal law has “preempted” the state law
• This arises from the Constitution's Supremacy Clause
• Federal case law interpreting federal law trumps state law
• Within each system, statutory law trumps administrative law
• Within each system, statutory law trumps case law, unless the case law is a ruling on the constitutionality of the statutory law
• Within each system, administrative law trumps case law, unless the case law is ruling on the constitutionality of the administrative law

Critical Thinking Tools for Business Managers

• Find facts
• Look for issues
• Identify the judge's reasons and conclusion
• Locate the rules of law that govern the judge's reasoning
• Apply critical thinking to the reasoning.

Overview of Chapter 3

• Explains the different types of jurisdiction a court must have before it can make a binding decision in a case
• Describes the dual court system structure
• Recognizes the steps in civil litigation
• This chapter focuses primarily on civil procedure
• However, a few topics apply to both civil and criminal disputes

Jurisdiction

• Is the power of a court to hear a case and render a binding decision
• A case must be filed in a court that satisfies all three of the following categories of jurisdiction
• A court must have an appropriate venue
• A starting case belongs in a court of original jurisdiction
• If appealing the case, it is filed in a court of appellate jurisdiction
• Further requirements include personal and subject matter jurisdiction
• After deciding which court system satisfies all three jurisdiction questions, venue is the right court location within that system

Original vs. Appellate Jurisdictions

• Refers to the power to initially hear and decide a case
• It is referred to as a trial court
• Parties present evidence and call witnesses to testify
• A trial court in California is the Superior Court
• The federal level trail court is the District Court
• Appellate jurisdiction Power is the power to review a decision previously made by a trial court
• Appeal courts primarily handle questions of law rather than questions of fact

Personal Jurisdiction

• It determines whether a court has power to exercise personal jurisdiction
• It establishes the state territory that contains courts having jurisdiction, based on connection between defendants or property to a state
• There must be "in personam" Personal jurisdiction over the person is more common than in rem jurisdiction over property
• Personal Jurisdiction becomes official once the defendant is served with process

In Personam Jurisdiction

• Based on the defendant's location or contacts
• It exists in the forum state in the following situations for a human defendant
• The defendant is located in the state when served with the lawsuit
• The defendant's official residency ("domicile") is in the state
• The defendant consents to jurisdiction via contract in advance by responding to the lawsuit
• The defendant has sufficient contacts with the state
• The greater the extent/strength of contacts, the more likely personal jurisdiction can be found
• The lawsuit arises out of a tort committed by the defendant within the forum state
• The lawsuit arises out of a contract that the defendant entered into or performed within forum state
• For a company it it needs to have a the business in the state where principal place of business is located

Subject Matter Jurisdiction

• In addition to state territory, the option to file the case in a Federal Court or State Court needs to be determined
• This determination of whether to exclusively file in a Federal Court or State Court, or in Both exists in the subject matter jurisdiction
• If the case arises out of a federal question and if Plaintiff is seeking to enforce rights from federal law, jurisdiction will exist
• This means that federal courts have jurisdiction if a case involves bankruptcy, patents, copyrights, admiralty law, states suing each other
• Also exists concurrently in State Court, unless the Federal law is one over which Federal Courts have exclusive jurisdiction.
• If the case involves an issue of state law, the state law must not be one for which State Courts have exclusive jurisdiction including divorce and adoption

Subject Matter Jurisdiction - Right of Removal

• Defendants can remove their case from state to federal court if subject matter jurisdiction exists over the case concurrently between courts

Circuit Courts

• The Federal Courts of Appeals are divided into Circuits
• California falls within the 9th Circuit and has five districts
• Central, Eastern, Northern, and Southern Districts are locations where federal trail courts are located

Structure of the Court

• Features U.S. District Courts, which are courts of general jurisdiction that can hear a range of cases and grant most any remedy
• Trial courts are of limited jurisdiction that can only hear specific subject matter cases
• At times, disputes begin in an administrative agency like the Patent and Trademark Office instead of entering a trial court

Civil Litigation Actors

• An attorney represents a party throughout the dispute
• Attorney-client information may not be disclosed for purposes of legal representation without client permission, absent an exception
• Documents prepared by an attorney or staff with a client are privileged and may not be revealed without the client's permission
• A trial court judge presides over the litigation from the complaint's filing through trial
• They rule on motions in the case, on legal questions, and on whether evidence is admissible
• In a bench trial without a jury, the judge decides questions of fact
• The jury decides questions of fact and its verdict in the federal court must be unanimous for both civil and criminal cases
• California criminal verdicts should be unanimous, but civil cases can be resolved with 3/4 of the jurors

Steps in Civil Litigation: Pretrial Stage

• It includes informal negotiations
• A Plaintiff files a Complaint
• The Plaintiff then serves the Complaint and a summons on the Defendant
• The Defendant must respond to the complaint by the required deadline
• The court can take a default judgement against a Defendant who fails to respond by the deadline to which the Plaintiff can automatically win
• The Defendant may file an Answer, a Dismissal Motion, or a CounterClaim

Pretrial Motion

• They may be filed throughout litigation
• After discovery, a Motion for Summary Judgement ("MSJ") may be filed
• A party feels that no factual dispute exists and the the moving party is entitled to the judgment as a matter of law
• A Motion to Dismiss relies on the Complaint when resolving whereas and MSJ evaluates evidence

Discovery during Pretrial

• Interrogatories are used to have questions answered
• Requests for Production are made to produce relevant claim or defense documents
• Depositions can take place in which witnesses are examined under oath
• Requests for admission are made

Pretrial Conference

• This is to determine whether both parties are ready for trial and to resolve any matters if needed

Steps in Civil Litigation: The Trial

• The Trial includes jury selection to determine serving jurors
• Opening Statements made to explain facts and how the case should be decided
• Plaintiff's Case introduces witnesses, exhibits, and evidence to support claims
• Defendant's Case introduces witnesses, exhibits, and relevant evidence
• Closing Arguments occurs when Plaintiff and then Defendant then Plaintiff again closes
• The Judge gives jury instructions to state the law and instruct jury
• Finally, the jury engages in deliberations and verdict

Trial Standards of Proof for Verdict

• Most claims require proof with preponderance of the evidence
• Certain claims require heightened proof standard
• The prosecution must prove each element of its claims beyond a reasonable doubt
• The defendant has no obligation to prove anything unless the defendant is asserting a defense which is proved with preponderance of proof

Steps in Civil Litigation: Post Trial and Appellate Procedure

• Motions may be made at the trial court level
• An appeal to a trial error can occur
• Appeals are based on questions of law and appellate courts are not inclined to question the jury's factual determinations
• Appellate courts can affirm, modify, or reverse the lower court decision
• The case can be remanded back to the lower court, sometimes with instructions
• The U.S. Supreme Court hears a small fraction of attempted appeal cases via a writ of certiorari
• California Supreme Court has discretion to accept/deny appeals

Alternative Dispute Resolution (ADR)

• Includes government court system and tribunals
• Parties try to resolve disputes through alternative means of dispute resolution such as;
  • Negotiation during case
  • Mediation by a third-party mediator
  • Arbitration by a third-party arbitrator.
• Arbitrator decisions are similar to a judge's legally binding ruling
• It is usually faster than litigation and usually takes place in private

Federalism

• The U.S Constitution establishes it
• According to which sovereign power and the authority to govern is divided between federal and state governments

Specified and Ensured Power

• The federal government's powers are specified by the U.S. Constitution such as acting expressly from the Constitution
• Gov activities must originate from power in a source

More About Federalism

• 10th Amendment ensures powers are not given to the federal government and are reserved to the states or the people
• Powers are not specifically passed, and not prohibited to the states
• It is the states' power reserved where the 10th Amendment is sovereign
• The states' police power provides authority to act by passing laws to protect and promote the health, safety, morals, and welfare of the public
• The ultimate source of the Constitution is "We the People..."
• People have rights recognized and protected by the Constitution such as the Bill of Rights provided by the 14th amendment

The Supremacy Clause

• Concurrent authority is a federal and state role to pass laws regarding the same thing
• This occurs surrounding employment discrimination, securities fraud, environmental protection, and minimum wage
• Scenarios to avoid occur if Congress intends that only federal law addresses a matter and states that intent in itself
• Other problematic scenarios involve the impossibly of complying with both federal and state law
• The Supremacy Clause in the U.S. is where treaties and federal laws are held as supreme
• Under it, a state law can be preempted by a federal law, in such a case that the state law turns out to be invalid

Supremacy Clause details

• The Preemption is a congressional or other lawmaker intention for laws to preempt state law
• We know that this can occur if we look at the statute
• Conflict Preemption is when state and federal law directly conflict, which occurs if complying with both is impossible
• Field preemption is a standard where the federal government regulates pervasive areas where congressional intent is the only regulation
• A preemption can also occur when state law impedes a the federal objective
• It is important check all cases to see if these occur

The Commerce Clause

• Allows Congress to regulate commerce with foreign nations, Indian tribes, and among states
• It can empower any regulation of the federal gov and business
• Interstate commerce is where channels, instrumentalities, and substantial activities can be regulated
• Economic activities the NLRB cannot control are limited

Early Regulations

• The holding in the NLRB details that economic regulation cannot intrude intrastate activities
• However, it is crucial to keep relationships to commerce safe and essential
• In Wickard, small farmer wheat effect was not solely for the farm, but had a national market affect

Commerce and Commercial Activity

• A key example is Lopez, where guns in school were federalized since it was not an environment for economic enterprise
• Interstate activities are regulated if the the activity aggregates with commerciality
• However, without commercial activities, this cannot be done, refer to the see lopez case

State Commerce Authority

• The Commerce Clause ensures federal regulation and interstate commerce
• This does not affect interstate commerce
• However, issues will arise if state police powers get involved that may affect interstate commerce

Dormant Commerce Clause

• Courts are meant to check police power in regards to interstate commerce
• It is essential to find motivations and whether the state has a protectionist view
• Laws that can be strictly scrutinized are not allowed
• This includes those that tax out of state benefits
• It also includes discrimination or affecting balancing tests due to a unduly burden law

Recent Commerce Clause

• A Colorado had laws for retailers to report tax and spend amounts
• Lawbreakers are subject to civil and legal penalties
• The DMA argues that this breaks the commerce clause due to out of state burdens, which the Court agrees but the dor appeals again
• When determining such factors, strictness is required
• The low may often burden interstate commerce
• A case resolution and application determines how to do all of this

Application of Commerce Clause

• The law is meant to promote neutrality across all lines
• It is essential to prevent the law from being violated
• There are 3 points to show non-discrimination and burdens

Taxing and Spending Powers

• Powers are for the federal gov
• Power of the federal level lies in excise and duties for taxes
• This entails congress paying the debts of general welfare
• Congress cannot implement taxes higher to others

Other Constitutional Restrictions

• Immunities prevent discrimination between states
• The court has standards that balance the effects
• Contracts may impair but can also provide obligations
• This can entail the serve of tailored public interest
• They were set so that state power could serve the population

Constitutional Admendments

• Admendments can only be restrictec by gov not private parties
• The bill of rights includes state and gov drafts
• Lower bodies like the supreme court also check these drafts

Freedom and Security Admendments

• Liberty and security exist
• First admendment is absolute not relaitve for all laws
• Laws may vary for speech but are not binding
• The right to speech can be granted to corporations as well
• Political speech has the tighest scrutiny due to gov interest
• Commercial speech is not protected
• Also remember that some restriction is allowed

Fourth Amendment

• Protects the right of individuals to be secure in their houses and property
• The government doesn't conduct seizures or searches
• The government requires probable warrant and cause
• There are technological admendments that exist

Fifth Amendment

• Protects businesses through the clause and takings clause
• Without due progress, one cannot have a deprived life or liberty
• Substantive and proceedural progress exists

Takings Clause

• The government can only take for public use
• There is a process for what is considered fair and not overbearing
• Takings and compensation must be regulatory for use not physically
• This is all done so that no one state has undue power than others

14th Amendment

• Prevents states from not providing equal protection
• There are 3 levesl for scrutiny to not have discrimination
• There must always be suffiecient justification for the discrimination
• There are catch all test that exist

Administrative Law

• Admin agencies include county, federal that are to carry out regular duties
• Congress has the right to delegate duties like these

Law Creation

• Admins create the laws
• The laws are created and must come by proceudure and law
• The government can give a specific entity power to run these processes

Law Application and Enforcment

• Congress often passes laws addressing complex matters on which members of
• Congress are not experts (e.g. the environment, consumer safety, technology matters).
• Administrative Agencies are operated by and staffed with experts in the
• particular fields that the agencies are intended to regulate.
• The legislative process can be slow and partisan. Administrative Agencies are more flexible than Congress in their ability to modify administrative rules to adapt to changing circumstances.

Congressional Power

• Thus, Congress will pass legislation that states the general purpose and general provisions of the law, but will then delegate power to an administrative agency to create the detailed rules necessary to achieve Congress’s goals and enforce and implement the law.
• The rules created by agencies are also called regulations. The phrase, “rules and regulations" is sometimes used, but the terms are essentially interchangeable.
• SometimestheStatutory law will be called “laws” while the administrative rules are called the "rules" and/or "regulations." Butregardless of the nomenclature used, statutes, rules, and regulations are all types of law

Regulations and Powers

• Grants power to an administrative agency to issue rules, investigate violations of rules orstatutes, and adjudicate disputes.
• Thus, while agencies usually fall under theExecutive Branch of government, an agency may include powers found in all three branches of government.
• Legislative power (Rule Making): Issue rules that have the force of law and are adhered to by individuals and businesses

Administrative Power Types

• Executive power (Investigation): Investigate whether the rules enacted by the agency have been properly followed by businesses and individual.
• Informal advising exists, preparing reports, and issuing guidelines.
• The Securities and Exchange Commission power is akin to that of the three branches of government

Administrative Agency Types

• Vast amounts fall in the federal government with branch backing
• Government support also comes from a mix of the legislature and judiciary Hybrid, executive or independent agencies do not fall cleanly into one classification or another.