Law Business PDF

A sole proprietorship is the simplest form of business. The owner is the business and the law considers all new, single-owner businesses to be sole proprietorships unless the owner affirmatively adopts some other form. No matter its form, any business must meet a variety of legal requirements, w...

A sole proprietorship is the simplest form of business. The owner is the business and the law considers all new, single-owner businesses to be sole proprietorships unless the owner affirmatively adopts some other form. No matter its form, any business must meet a variety of legal requirements, which typically relate to the following: (1) Business name registration. (2) Occupational licensing. (3) State tax registration (4) Health and environmental permits. (5)Zoning and building codes. (6) Import/export regulations. Advantages of the Sole Proprietorship: Proprietor owns the entire business and receives all the profits. There are fewer legal formalities with the setup of the business. Taxes: A sole proprietor pays only personal income taxes on the business's profits. Flexibility: The sole proprietor is free to make any decision she or he wishes concerning the business. Disadvantages of the Sole Proprietorship: Personal Assets at Risk: Owner has unlimited personal liability for all losses or liabilities incurred by the business. Alone bears the burden of losses or liabilities. Lack of Continuity/Limited Ability to Raise Capital: Business is automatically dissolved when the owner dies. When raising capital, the proprietor is limited to personal funds and loans that she/he can obtain for the business. Difficult to get investors because of liability issues. A partnership arises from an agreement (express or implied) between two or more persons to carry on a business for a profit. Partners are co-owners of the business who have joint control over its operation and the right to share in its profits. Partnership agreements identify the rights and obligations of partners and the partnership. Basic Partnership Concepts: The Uniform Partnership Act: In the absence of a partnership agreement the Uniform Partnership Act (UPA) —as adopted by most states-governs the partnership. - Definition of a Partnership: The UPA defines a partnership as an "association of two or more persons to carry on a business for profit." Basic Partnership Concepts: Essential Elements of a Partnership: Partnership presumed under UPA if Sharing of profits or losses. Joint ownership of the business. Equal right to be involved in the management of the business. Joint Property Ownership: Joint ownership of property does not in and of itself create a partnership [UPA 202(c)(1) and (2)]. The parties' intentions are key. As an entity, the partnership can hold title to real/personal property, rather than individual partners. Tax Treatment of Partnerships: Federal (and most state) tax laws treat a partnership as a "pass through" (the partnership doesn’t pay taxes) entity, with profits, losses, and taxes attributed on a pro-rata basis to the partners, as individual income. The partnership itself pays no taxes and is responsible only for filing an information return with the IRS. Formation and Operation: Agreements to form a partnership (or articles of partnership) can be: oral, written, or implied by conduct. They can include almost any terms that the parties wish. (management rights, compensation, dissociation, dissolution terms) Duration of the Partnership: Can be specified by the agreement. Partnership for a term (fixed duration). Partnership at will (indefinite duration, can dissolve at any time). Rights of Partners: - Management Rights: Equal among all partners; each gets one vote (regardless of interest in partnership, and the majority wins. Unanimous consent is needed for some actions. - Interest in the Partnership: Each partner is entitled to the proportion of business profits and losses that is specified in the partnership agreement. Rights of Partners: - Compensation: Each partner's income comes from distribution of profits according to the partner's share in the business. Inspection of the Books: Each partner has the right to receive full and complete information concerning the conduct of all aspects of partnership business (UPA 403). Accounting of Partnership Assets/Profits: An accounting of partnership assets or profits is required to determine the value of each partner's share. An accounting can be voluntary, or compelled by court order. Property Rights: Property acquired by the partnership remains partnership property and not of the partners individually (UPA 203). An individual partner has no right to sell, mortgage, or transfer the partnership property (UPA 501). Duties and Liabilities of Partners: Fiduciary Duties: Partners are fiduciaries and general agents of one another and the partnership- duty of care and loyalty. Duty of Loyalty: requires a partner to account to the partnership for "any property, profit, or benefit: derived by the partner in the conduct of the partnership's business or from the use of its property. Partners should also refrain from competing with the partnership in business or dealing with the firm as an adverse party. SEE MEINHARD V. SALMON (1928)-EXAMPLE 1 Duties and Liabilities of Partners: A partner's duty of care is limited to refraining from "grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law" [UPA 404(c)]. Partner is not liable for simple negligence or honest errors in judgment in conducting partnership business. Apparent Authority of Partners/Agency: In an ordinary partnership, partners can exercise all implied powers reasonably necessary and customary to carry on that particular business. Example: Partners can enter into contracts on behalf of the partnership and other partners will be liable for the contract.-Example 4 Duties and Liabilities of Partners:  Liability of Partners: Partners are personally liable for the debts of the partnership. In most states, the liability is essentially unlimited, because the acts of one partner subject the other partners to personal liability (UPA 305). (Partnerships assets must be exhausted before creditors can touch individual assets.) Joint and Several Liability: → Third party has the option of suing all of the partner together (jointly, so they can use partnership assets to satisfy judgment) or one or more of the partners separately (severally) - All partners in the partnership can be held fully liable even if a particular partner did not participate in, know about, or ratify the conduct that gave rise to the lawsuit. Liability of Incoming Partners:[UPA 306(b)]. → a new partner's liability to existing creditors of the partnership is limited to his or her capital contribution to the firm and a new partner is not personally liable for any partnership obligations incurred before they became partner. Dissociation and Termination: Occurs when one partner ceases to be associated in the partnership business. Allows partners to have their interest purchased by the partnership. Terminates their voting interest in the partnership or authority to act for partnership. Partnership can continue to do business without the dissociated partner. Events That Cause Dissociation: Voluntary notice- express will to withdraw. Triggering event. Unanimous vote. Court/arbitrator order (if wrongful conduct). Partner's bankruptcy, assignment of interest, incapacity, or death. Effects of Dissociation: A partner's dissociation terminates the right to participate in the management and conduct of the partnership business (UPA 603). - Partner's duty of loyalty also ends, but the duty of care continues only with respect to events that occurred before dissociation or the winding up process. Effects of Dissociation: Buyouts: Contract that determines how remaining partners will buy out partners' interest in advance of an "event." → Under UPA, remaining partners must buyout dissociating partner.-Example 3 Wrongful Dissociation-If the partner lacks the right to dissociate, then the dissociation is considered wrongful under the law. Example: If the partnership agreement is to last 1 year and one of the partners dissociates from the partnership at 6 months-likely breached the partnership agreement by wrongfully dissociating. Effects of Dissociation: Liability to Third Parties: Partnership is bound for two years by acts of outgoing partner, unless proper notice is given. Dissociated partner may be liable for partnership obligations entered into during the two-year period following dissociation (UPA 703). Partnership Termination: - The termination of a partnership occurs in two stages: - Dissolution (the legal "death" of the partnership). - Winding Up and Distribution of Assets (collecting and distributing partnership assets). Partnership Termination: Dissolution: Can generally be brought about by acts of the partners, by operation of law, or by judicial decree (UPA 801). - Partners can agree to dissolve any partnership. Partnership Termination: - Winding Up and Distribution of Assets: Each partner must exercise good faith when dissolving a partnership. Partners cannot create new obligations on behalf of the partnership, only complete transactions begun at the time of dissolution and to wind up the business of the partnership [UPA 803, 804(1)]. Partnership Termination: - Winding Up and Distribution of Assets: Payment of debts, including those owed to partner and nonpartner creditors. Return of capital contributions and distribution of profits to partners. Winding Up and Distribution of Assets: If liabilities are greater than assets, partners bear losses in proportion in which they share profits, unless agreed otherwise. Partnership Buy-Sell Agreements: Before entering into a partnership, partners may form a buy-sell agreement (or buyout agreement) that provides for How assets will be valued and divided in the event that the partnership dissolves. one or more partners to buy out the other or others should the situation warrant. Partnership Buy-Sell Agreements: An agreement may specify that partner(s) will determine the value of the interest being sold and decide whether to buy or sell. Under UPA 701(a), if a partner's dissociation does not result in a partnership dissolution, a buyout of the partner's interest is mandatory. Nature of the LLC: Owners are called “members” (not shareholders) and their ownership is called an “interest” (not shares). Separate legal entities from owners. Can hold property separately. To create-file articles of organization and additional forms with state.-LLC’s name, principal place of business, must have LLC in name. Best entity if not seeking investors and want limited liability of a corporation and tax benefits of a partnership. Limited Liability of Members: LLC members are shielded from personal liability in most situations and any liability of members is normally limited to the amount of their investments. Flexibility in Taxation: Two or more members can choose to be taxed as partnership (pass-through) or corporation (double-tax). A one-member LLC is taxed as a partnership unless the owner wishes to be taxed as a corporation. Disadvantages of the LLC: The main disadvantage is the lack of uniformity with state laws. Businesses that operate in multiple states may not receive consistent treatment. Investors do not generally invest in LLC’s. When Liability May Be Imposed: Alter-ego doctrine: The courts may hold the owners of a business personally liable for its debts or “pierce the corporate veil” to achieve justice. Examples: comingling of bank accounts, spending LLC money for personal use, undercapitalized LLC. Example 1 (Limited Liability Business Forms Handout) Jurisdictional Requirements: For federal diversity jurisdiction, the LLC may be treated differently than a corporation. Citizenship of an LLC is the citizenship of its members, which may live in multiple jurisdictions. Management of an LLC: An LLC can be member-managed or manager-managed. In member management, all members participate in management and decisions. Fiduciary Duties: Under the ULLCA, managers in a manager-managed LLC owe fiduciary duties (the duty of loyalty and the duty of care) to the LLC and its members [ULLCA 409(a), 409(h)]. Duties owed are the same as partnerships. LLC Operating Agreement: Analogous to corporation’s bylaws. Fiduciary duties can be expanded or limited by the operating agreement. Not required for LLC to exist, but strongly recommended the agreement be in writing. LLC Operating Agreement: Management and how future managers will be chosen. How profits will be divided. How membership interests may be transferred. Dissociation procedures. Whether formal meetings will be held. How voting rights will be apportioned. Example 4 The limited liability partnership (LLP) is a hybrid form of business designed mostly for professionals who normally do business as partners in a partnership. An LLP allows a partnership to continue as a pass-through entity for tax purposes but limits the personal liability of the partners. Formation of an LLP: LLPs must be formed and operated in compliance with state statutes The appropriate forms must be filed with a central state agency and  The business’s name must include either “Limited Liability Partnership” or “LLP” (UPA 1001, 1002). à In most states, it is easy to convert a traditional partnership into an LLP. Liability in an LLP: An LLP allows professionals to avoid personal liability for the malpractice of other partners. This entity is great for individuals who deal with professional malpractice issues such as accountants, doctors and lawyers. A partner in an LLP is still liable for her or his own wrongful acts. The partner who supervised the individual who committed a wrongful act is also liable. Sharing Liability among Partners: When more than one partner in an LLP commits malpractice, a general partner is jointly and severally liable for the entire result in most states. Corporation – A legal entity created and recognized by state law. A corporation can have one or more owners (called shareholders). Both individuals and other businesses can be shareholders. Advantages Corporations are the best entity if seeking investors, want limited liability, and/or looking to grow. Much easier to obtain investors. Investors prefer this entity-they understand it and One of the key advantages of the corporate form is the limited liability of its owners. Normally, corporate shareholders are not personally liable for the obligations of the corporation beyond the extent of their investments. Disadvantages Each state has its own body of corporate law, and these laws are not entirely uniform. corporate profits can be subject to double taxation. The company pays tax on its profits. If the profits are passed on to the shareholders as dividends, the shareholders must also pay income tax on them along with their personal income taxes. Incorporations Procedures Select State of Incorporation Permitted to incorporate in state that has the best tax laws For convenience, businesses can incorporate in the state they plan to do business. Select Name: Corporation (C o r p.) Incorporated (I n c.) (Corporation) Company (C o.) Limited (L t d.) Prepare the Articles of Incorporation The document that is filed with the appropriate state official, usually the secretary of state, when a business is incorporated and that contains basic information about the corporation. The articles serve as a primary source of authority for the corporation’s future organization and business functions. The articles must include the following information [R M B C A 2.02]: 1.The name of the corporation 2.The number of shares of stock the corporation is authorized to issue 3.Name/address of each incorporator 4.Name of the registered office and agent for service of process. Piercing the corporate veil – Court disregards the corporate entity and holds the shareholders personally liable for corporate debts and obligations. Generally, courts pierce the veil: When the corporate privilege is abused for personal benefit-Personal and corporate interests are commingled. When the corporate business is treated so carelessly that it is indistinguishable from that of a controlling shareholder. ­Statutory corporate formalities are not followed-no board meetings, no board of directors, etc. The corporation is set up never to make a profit or always to be insolvent. Board of Directors: responsible for the overall management of the firm. Board is elected by the shareholders. The board of directors: Makes the policy decisions Hires corporate officers and other employees to run the daily business operations Boards are made up of both inside and outside directors. Board does not run the day to day operations of the business. Doctrine of Respondeat Superior: Corporations can be liable for torts committed by their agents and employees when acting within the scope of their employment. Corporations can be liable for crimes committed by their officers and agents. LLC has double taxation Pre-incorporation contracts The responsibility of the person that signed them. Novation to release you of liability. Tort Law Tort: harms persons or property. Tort law: designed to compensate those who have suffered a loss or injury due to another person’s wrongful act. Classification of Torts: Two broad classifications of torts: intentional torts and unintentional torts (those involving negligence). Intentional Tort: The tortfeasor (person committing the tort) must “intend” to commit the act: §He intended the consequences of his act; or He knew with substantial certainty that certain consequences would result. Transferred Intent: Intent of tortfeasor is transferred when he intends to harm person “A” but unintentionally harms person “B” as well. Assault: Any intentional and unexcused threat of immediate harmful or offensive contact—whether words or acts—that create a reasonably believable threat. No physical contact is necessary for an assault to occur. Battery is the completion of the assault: It is unexcused and harmful or offensive physical contact intentionally performed. The contact can be made by the defendant or by some force set in motion by the defendant. Defenses to Assault and Battery Consent-agree to harmful contact Self-Defense-whatever force reasonably necessary to prevent harmful contact. Defense of Others-same as above Defense of Property. -same as above. Infliction of Emotional Distress: An intentional act that amounts to extreme and outrageous conduct resulting in severe emotional distress to another. The act must be extreme and so outrageous that it exceeds the bounds of decency accepted by society in order to be actionable. False Imprisonment: The intentional confinement of another person or restraint of another person’s activities without justification. The confinement may occur through the use of physical barriers, physical restraint, or threats of physical force. Merchants can reasonably detain customers if there is probably cause. Infliction of Emotional Distress: An intentional act that amounts to extreme and outrageous conduct resulting in severe emotional distress to another. The act must be extreme and so outrageous that it exceeds the bounds of decency accepted by society in order to be actionable. Defamation: Defamation involves wrongfully hurting a person’s good reputation. Law imposes a duty to refrain from making false statements of fact about others. Orally breaching this duty is slander; breaching it in writing is libel. Are statements published on the internet libel or slander? Slander - ‘say” oral Libel- written, social media, video, online False Statement of fact: Published statement must be a fact. Statements of opinions are protected speech under the First Amendment and not actionable. Publication Requirement: The false statement must hold an individual up to hatred, contempt, or ridicule in the community and be “publicized” (communicated) to a third party. Damages for Libel: General damages are presumed and the plaintiff does not have to prove actual injury. Damages include compensation for disgrace, dishonor, humiliation, injury to reputation, and emotional distress. Damages for Slander: The plaintiff must prove special damages (actual economic loss). Why do you have to prove damages for slander and not for libel? What is the distinction? Slander per se is an exception and no proof of damages is necessary when the statement involves a loathsome communicable disease, business improprieties, serious crime, or serious sexual misconduct. Defenses to Defamation: Truth is generally an absolute defense for defamation. Defenses to Defamation: Absence of Malice: False and defamatory statements made about public figures are protected from defamation claims unless the plaintiff can show: Actual malice (knowledge of falsity OR reckless disregard of the truth or falsity). Consider “sources” used by tabloid journalists Damages Available in Tort Actions: Compensatory: Reimburse plaintiff for actual losses. Special: For quantifiable losses, such as medical expenses, lost wages, and benefits. General: For non monetary aspects, such as pain, suffering, and reputation. Punitive: Punish the wrongdoer and deter similar conduct in the future. Legislative Caps on Damages: State laws limit the amount of damages—both punitive and general—that can be awarded to the plaintiff. uMore than half the states cap general damages (pain and suffering) to: $250,000-$750,000 More than thirty states have limited punitive damages with some imposing outright bans. Intent Intentional Reckless Negligence Negligence: Tortfeasor does not intend the consequences of the act or believes they will occur. Actor’s conduct merely creates a foreseeable risk of injury. The plaintiff must prove the following: Duty: Defendant owed plaintiff a duty of care. Breach: Defendant breached that duty. Causation: Defendant’s breach caused the injury. Damages: Plaintiff suffered legal injury. Negligence  1. Duty 2. Breech 3. Causation 4. Damages DEF owes duty to protect PL from foreseeable risks that DEF knew or should have known about. A foreseeable risk is one in which the reasonable person would anticipate and guard against it. Reasonable Person Standard: Reasonably Prudent Person Standard-RPP How should a reasonable person have acted in the same circumstances? The measure is objective. Determined by society’s judgment on how people should act Not based on how individuals think reasonable people act. Duty of Landowners: Landowners must exercise reasonable care to protect persons on their property from harm—even trespassers. Business owners must warn invitees of potential harm on their premises. Example 9 & 10 Obvious risks require no warning. Duty of Professionals: Professionals may owe higher duty of care based on special education, skill, or intelligence. §Breach of duty is called professional malpractice. Applies to doctors, attorneys, and accountants. Causation: Even though a tortfeasor owes a duty of care and breaches the duty of care, the act must have caused the plaintiff’s injuries. Courts ask two questions: Is there causation in fact? Was the act the proximate (or legal) cause of the injury? Causation in Fact: Did the injury occur because of the defendant’s act, or would the injury have occurred anyway? Usually determined by the “but for” test. Proximate Cause: When the causal connection between the act and injury is strong enough to impose liability. Foreseeability: Were the injuries foreseeable? (Would be a reasonable person. foresee the potential for injury and guard against it?)Judges use proximate cause to limit liability of defendants.Examples 13 & 14 SEE PALSGRAF V. LONG ISLAND RAILROAD CO. (1928). THE INJURY REQUIREMENT AND DAMAGES:TO RECOVER, PLAINTIFF MUST SHOW LEGALLY RECOGNIZABLE INJURY. COMPENSATORY DAMAGES ARE DESIGNED TO REIMBURSE PLAINTIFFS FOR ACTUAL LOSSES.PUNITIVE DAMAGES ARE DESIGNED TO PUNISH THE TORTFEASOR AND DETER OTHERS FROM WRONGDOING. GOOD SAMARITAN STATUTES: PROTECTS SOMEONE WHO RENDERS AID TO AN INJURED PERSON FROM BEING SUED FOR NEGLIGENCE. DRAM SHOP ACTS: LIABILITY FOR INJURIES MAY BE IMPOSED UPON THE BARTENDER AND BAR OWNER. ADMINISTRATIVE AGENCIES ARE EXPERTS IN THEIR FIELDS. AA’S PASS REGULATIONS THAT ARE BINDING ON BUSINESS/COMMUNITY JUST LIKE CONGRESS. EXAMPLES OF ADMINISTRATIVE AGENCIES EEOC EPA OSHA CONGRESS TYPICALLY ADOPTS GENERAL LEGISLATION-1934 SECURITIES REGULATION ACT AA’S ARE THERE TO FILL IN THE BLANKS-RULE 10B5 (INSIDER TRADING). AA’S EXIST AT BOTH THE FEDERAL AND STATE LEVEL. AGENCIES PROVIDE A COMPREHENSIVE REGULATORY SCHEME: BUSINESS AND CONSUMER GROUPS HAVE INCENTIVES TO INFLUENCE REGULATORY AGENCIES. CONSUMERS LIKE MORE REGS/BUSINESS LIKES LESS. THE STUDY OF ADMINISTRATIVE LAW REQUIRES AN UNDERSTANDING OF: ENABLING LEGISLATION. THE TYPES OF AGENCIES. AGENCY POWERS AND THE CONSTITUTION. DELEGATION DOCTRINE SECTION 8 OF U.S. CONSTITUTION- GIVES CONGRESS POWER TO MAKE ALL LAWS NECESSARY FOR EXECUTING ITS SPECIFIED POWERS. CONGRESS HAS THE POWER TO ESTABLISH AGENCIES THAT CREATE RULES FOR IMPLEMENTING THOSE LAWS. CONGRESS ALSO HAS POWER TO DIMINISH OR ELIMINATE AGENCY POWER. TO CREATE AN ADMINISTRATIVE AGENCY, CONGRESS PASSES ENABLING LEGISLATION THAT SPECIFIES THE NAME, PURPOSES, FUNCTIONS, AND POWERS OF THE AGENCY. AN AGENCY’S ENABLING STATUTE DEFINES ITS LEGAL AUTHORITY. CONGRESS CAN GIVE AGENCY POWER AND TAKE IT AWAY. AN AGENCY CANNOT REGULATE BEYOND THE POWERS GRANTED BY THE STATUTE. A QUESTION THAT ALWAYS ARISES IS HAS AN AGENCY ACTED WITHIN ITS STATUTORY AUTHORITY UNDER ITS’ ENABLING LEGISLATION OR OTHER LEGISLATION IT ADMINISTERS AND/OR CREATES? EXAMPLE 1 TYPES OF AGENCIES ACCOUNTABILITY OF REGULATORS EXECUTIVE AGENCIES ARE SUBJECT TO THE AUTHORITY OF THE PRESIDENT-PART OF THE PRESIDENT'S CABINET. (U.S. DEPARTMENT OF LABOR/OSHA) CAN APPOINT OFFICERS/DIRECTORS CAN FIRE OFFICERS/DIRECTORS INDEPENDENT ADMIN. AGENCIES-PRESIDENT’S INFLUENCE LESS PRONOUNCED. (FEDERAL RESERVE) OFFICERS SERVE FOR FIXED TERMS CANNOT BE REMOVED WITHOUT JUST CAUSE REALITY: THE PRESIDENT'S AUTHORITY TO EXERT CONTROL OVER ALL AGENCIES IS SIGNIFICANT. AGENCY POWERS AND THE CONSTITUTION. LEGISLATIVE RULES: ACT AS LEGALLY BINDING AS LAWS PASSED BY CONGRESS. AGENCIES ALSO PASS INTERPRETIVE RULES. (NOT BINDING AND GENERALLY DONE TO GIVE AN IDEA OF WHERE THE AGENCY IS HEADED WITH RULEMAKING. EXECUTIVE CONTROLS. ISSUE WARRANTS/FINES JUDICIAL CONTROLS. EXHAUSTION DOCTRINE: PARTY SEEKING COURT REVIEW MUST FIRST EXHAUST ALL ADMINISTRATIVE REMEDIES BEFORE SUING. RULEMAKING. NOTICE AND COMMENT RULEMAKING INVOLVES THREE STEPS: NOTICE OF THE PROPOSED RULEMAKING. COMMENT PERIOD. THE FINAL RULE. À INFORMAL AGENCY ACTION/INTERPRETIVE RULES-EXEMPT FROM APA-DOES NOT ESTABLISH LEGAL RIGHTS. NOTICE AND COMMENT RULEMAKING (APA) NOTICE OF THE PROPOSED RULE AGENCY PUBLISHES A NOTICE OF PROPOSED RULEMAKING PROCEEDINGS IN THE FEDERAL REGISTER FEDERAL REGISTER IS A DAILY PUBLICATION OF THE EXECUTIVE BRANCH THAT PRINTS GOVERNMENT ORDERS, RULES, AND REGULATION. COMMENT PERIOD INTERESTED PARTIES EXPRESS THEIR VIEWS ON THE PROPOSED RULE. LOBBYISTS/ADVOCACY GROUPS AGENCY RESPONDS. COMMENT PERIOD (CONT.) AGENCY MUST RESPOND BY EITHER MODIFYING THE FINAL RULE OR EXPLAINING WHY IT WAS NOT MODIFIED. THE FINAL RULE FINAL RULE IS PUBLISHED IN THE FEDERAL REGISTER. CAN ALTER THE RULE BASED ON COMMENTS, BUT CANNOT RADICALLY CHANGE-OTHERWISE NEW NOTICE AND COMMENT PERIOD REQUIRED. RULES ARE BINDING.-EXAMPLES 2 & 3 TYPES OF AGENCIES ACCOUNTABILITY OF REGULATORS EXECUTIVE AGENCIES ARE SUBJECT TO THE AUTHORITY OF THE PRESIDENT-PART OF PRESIDENT’S CABINET. (U.S. DEPARTMENT OF LABOR/OSHA) CAN APPOINT OFFICERS/DIRECTORS CAN FIRE OFFICERS/DIRECTORS INDEPENDENT ADMIN. AGENCIES-PRESIDENT’S INFLUENCE IS LESS PRONOUNCED. (FEDERAL RESERVE) OFFICERS SERVE FOR FIXED TERMS CANNOT BE REMOVED WITHOUT JUST CAUSE REALITY: PRESIDENT’S AUTHORITY TO EXERT CONTROL OVER ALL AGENCIES IS SIGNIFICANT. AGENCY POWERS AND THE CONSTITUTION. LEGISLATIVE RULES: ACT AS LEGALLY BINDING AS LAWS PASSED BY CONGRESS. AGENCIES ALSO PASS INTERPRETIVE RULES. (NOT BINDING AND GENERALLY DONE TO GIVE IDEA OF WHERE THE AGENCY IS HEADED WITH RULEMAKING. EXECUTIVE CONTROLS. ISSUE WARRANTS/FINES JUDICIAL CONTROLS. EXHAUSTION DOCTRINE: PARTY SEEKING COURT REVIEW MUST FIRST EXHAUST ALL ADMINISTRATIVE REMEDIES BEFORE SUING RULEMAKING. NOTICE AND COMMENT RULEMAKING INVOLVES THREE STEPS: NOTICE OF THE PROPOSED RULEMAKING. COMMENT PERIOD. THE FINAL RULE. À INFORMAL AGENCY ACTION/INTERPRETIVE RULES-EXEMPT FROM APA-DOES NOT ESTABLISH LEGAL RIGHTS. NOTICE AND COMMENT RULEMAKING (APA) NOTICE OF THE PROPOSED RULE AGENCY PUBLISHES A NOTICE OF PROPOSED RULEMAKING PROCEEDINGS IN THE FEDERAL REGISTER FEDERAL REGISTER IS A DAILY PUBLICATION OF THE EXECUTIVE BRANCH THAT PRINTS GOVERNMENT ORDERS, RULES, AND REGULATION. COMMENT PERIOD INTERESTED PARTIES EXPRESS THEIR VIEWS ON THE PROPOSED RULE. LOBBYISTS/ADVOCACY GROUPS AGENCY RESPONDS. NOTICE AND COMMENT RULEMAKING (APA) NOTICE OF THE PROPOSED RULE AGENCY PUBLISHES A NOTICE OF PROPOSED RULEMAKING PROCEEDINGS IN THE FEDERAL REGISTER FEDERAL REGISTER IS A DAILY PUBLICATION OF THE EXECUTIVE BRANCH THAT PRINTS GOVERNMENT ORDERS, RULES, AND REGULATION. COMMENT PERIOD INTERESTED PARTIES EXPRESS THEIR VIEWS ON THE PROPOSED RULE. LOBBYISTS/ADVOCACY GROUPS AGENCY RESPONDS. COMMENT PERIOD (CONT.) AGENCY MUST RESPOND BY EITHER MODIFYING THE FINAL RULE OR EXPLAINING WHY IT DID NOT MODIFY IT. THE FINAL RULE FINAL RULE IS PUBLISHED IN THE FEDERAL REGISTER. CAN ALTER THE RULE BASED ON COMMENTS, BUT CANNOT RADICALLY CHANGE-OTHERWISE NEW NOTICE AND COMMENT PERIOD REQUIRED. RULES ARE BINDING.-EXAMPLES 2 & 3 IN THE ABSENCE OF CLEAR CONGRESSIONAL DIRECTION (NO CLEAR DIRECTION IN ENABLING LEGISLATION): ALL FEDERAL AGENCIES MUST FOLLOW APA PROCEDURAL REQUIREMENTS IN NOTICE AND COMMENT RULEMAKING AND ADJUDICATION. ARBITRARY AND CAPRICIOUS TEST. THE APA GIVES COURTS POWER TO HOLD AGENCIES’ ACTIONS “ARBITRARY AND CAPRICIOUS” IF THEY ARE NOT IN COMPLIANCE WITH CONSTITUTIONAL DUE PROCESS. À FAILURE TO PROVIDE A RATIONAL EXPLANATION FOR A DECISION CHANGE IN PRIOR POLICY W/O EXPLANATION. FAILURE TO CONSIDER A RELEVANT FACTOR.-EXAMPLE 6 & 7 THE CHEVRON CASE. WHEN ASKED TO REVIEW AGENCY DECISIONS, COURT’S TYPICALLY GIVE DEFERENCE TO THE AGENCY’S JUDGMENT. ISSUE IN CHEVRON USA V. NATURAL RESOURCES DEFENSE COUNCIL WAS WHETHER COURTS SHOULD DEFER TO AN AGENCY’S INTERPRETATION OF A STATUTE GIVING IT AUTHORITY TO ACT. INVESTIGATION INCLUDES POWER TO: CONDUCT INSPECTIONS AND TESTS. ISSUE SUBPOENAS. THE SUBPOENA AD TESTIFICANDUM (“TO TESTIFY”) IS AN ORDINARY SUBPOENA. IT IS A WRIT (OR ORDER) COMPELLING A WITNESS TO APPEAR AT AN AGENCY HEARING. THE SUBPOENA DUCES TECUM (“BRING IT WITH YOU”) COMPELS AN INDIVIDUAL OR ORGANIZATION TO HAND OVER BOOKS, PAPERS, RECORDS, OR DOCUMENTS TO THE AGENCY. SEARCH WARRANTS. AN AGENCY’S SEARCH WARRANT IS AN ORDER DIRECTING LAW ENFORCEMENT OFFICIALS TO SEARCH A SPECIFIC PLACE FOR A SPECIFIC ITEM AND SEIZE IT FOR THE AGENCY. HOWEVER, AGENCIES CAN CONDUCT WARRANTLESS SEARCHES IN SEVERAL SITUATIONS:(WARRANTLESS INSPECTIONS IN: 1)HIGHLY REGULATED INDUSTRIES: FIREARMS OR LIQUOR; 2) HAZARDOUS SITUATIONS; 3) EMERGENCY SITUATIONS. ADJUDICATION: AFTER CONDUCTING AN INVESTIGATION OF A SUSPECTED RULE VIOLATION, AN AGENCY MAY INITIATE AN ADMINISTRATIVE ACTION AGAINST AN INDIVIDUAL OR ORGANIZATION. MOST ADMINISTRATIVE ACTIONS ARE RESOLVED THROUGH NEGOTIATED SETTLEMENTS AT THEIR INITIAL STAGES.SOME ACTIONS END IN FORMAL ADJUDICATION (THE RESOLUTION OF THE DISPUTE THROUGH A HEARING CONDUCTED BY THE AGENCY). FORMAL COMPLAINTS: IF A SETTLEMENT CANNOT BE REACHED, THE AGENCY MAY ISSUE A FORMAL COMPLAINT AGAINST THE SUSPECTED VIOLATOR. THE HEARING: AGENCY ADJUDICATION MAY INVOLVE A TRIAL-LIKE ARBITRATION PROCEDURE BEFORE AN ADMINISTRATIVE LAW JUDGE (ALJ). SIMILAR TO A TRIAL-CONDUCT DISCOVERY, EXAM WITNESSES, ETC. THE ROLE OF THE ADMINISTRATIVE LAW JUDGE: THE ALJ WORKS FOR THE AGENCY PROSECUTING THE CASE AND IS NOT AN INDEPENDENT JUDGE, THOUGH THE LAW REQUIRES AN ALJ TO BE UNBIASED. THE APA REQUIRES THAT THE ALJ BE SEPARATE FROM AN AGENCY’S INVESTIGATIVE AND PROSECUTORIAL STAFF. THE APA ALSO PROHIBITS EX PARTE (PRIVATE) COMMUNICATIONS BETWEEN THE ALJ AND ANY PARTY TO AN AGENCY PROCEEDING INCLUDING THE AGENCY. ADJUDICATION: AGENCY ORDERS: FOLLOWING A HEARING, THE ALJ RENDERS AN INITIAL ORDER (OR DECISION) ON THE CASE. EITHER PARTY CAN APPEAL THE ALJ’S DECISION TO THE BOARD OR COMMISSION THAT GOVERNS THE AGENCY. IF DISPLEASED WITH THE RESULT, THE PARTY CAN APPEAL THAT DECISION TO A FEDERAL APPELLATE COURT. IF THERE IS NO APPEAL, ALJ’S ORDER BECOMES FINAL RULING IN CASE.-IRS HANDOUT A NUMBER OF PIECES OF LEGISLATION MAKE AGENCIES MORE ACCOUNTABLE THROUGH PUBLIC SCRUTINY: FREEDOM OF INFORMATION ACT. GOVERNMENT IN THE SUNSHINE ACT. REGULATORY FLEXIBILITY ACT. SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT. FREEDOM OF INFORMATION ACT. REQUIRES THE FEDERAL GOVERNMENT TO DISCLOSE RECORDS ON REQUEST, BUT DENIAL CAN BE CHALLENGED IN COURT. ALL FEDERAL GOVERNMENT AGENCIES MUST MAKE THEIR RECORDS AVAILABLE ELECTRONICALLY ON THE INTERNET AND IN OTHER ELECTRONIC FORMATS. THE FOIA EXEMPTS CERTAIN TYPES OF RECORDS SUCH AS THOSE PERTAINING TO NATIONAL SECURITY AND THOSE CONTAINING CONFIDENTIAL OR PERSONAL INFORMATION. AN AGENCY’S FAILURE TO COMPLY WITH AN FOIA REQUEST CAN BE CHALLENGED IN A FEDERAL DISTRICT COURT. GOVERNMENT IN THE SUNSHINE ACT. REQUIRES THAT “EVERY PORTION” OF EVERY MEETING BE OPEN TO “PUBLIC OBSERVATION.” THE ACT ALSO REQUIRES THAT THE PUBLIC BE PROVIDED WITH ADEQUATE ADVANCE NOTICE OF SCHEDULED MEETINGS AND AGENDAS. REGULATORY FLEXIBILITY ACT. REQUIRES AN ANALYSIS OF THE COST A REGULATION WILL IMPOSE ON SMALL BUSINESS AND MUST CONSIDER LESS BURDENSOME ALTERNATIVES. ANALYSIS IS REQUIRED IF SIGNIFICANT IMPACT UPON A SUBSTANTIAL NUMBER OF SMALL ENTITIES ALSO REQUIRES ALERTING SMALL BUSINESSES OF COMING REGULATIONS SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT. ALLOWS CONGRESS TO REVIEW NEW FEDERAL REGULATIONS FOR AT LEAST SIXTY-DAYS BEFORE THEY CAN TAKE EFFECT. FEDERAL AGENCIES MUST PREPARE GUIDES THAT EXPLAIN IN PLAIN ENGLISH HOW SMALL BUSINESSES CAN COMPLY WITH FEDERAL REGULATIONS. ALLOWS CONGRESS TO ENFORCE THE REGULATORY FLEXIBILITY ACT INTERNATIONAL LAW: THE BODY OF LAW—FORMED AS A RESULT OF INTERNATIONAL CUSTOMS, TREATIES, AND ORGANIZATIONS—THAT GOVERNS RELATIONS AMONG OR BETWEEN NATIONS. CREATED TO ALLOW NATIONS TO HAVE RELATIONSHIPS WHILE MAINTAIN POWER OVER THEIR OWN AFFAIRS. NATIONAL LAW: THE SYSTEM OF LAWS WITHIN A PARTICULAR NATION. SOURCES OF INTERNATIONAL LAW: INTERNATIONAL CUSTOMS: THOSE THAT HAVE EVOLVED AMONG NATIONS IN THEIR RELATIONS WITH ONE ANOTHER. TREATIES AND INTERNATIONAL AGREEMENTS: BILATERAL AGREEMENT: FORMED BY TWO NATIONS TO GOVERN THEIR COMMERCIAL EXCHANGES OR OTHER RELATIONS WITH ONE ANOTHER. MULTILATERAL AGREEMENT: FORMED BY SEVERAL NATIONS. INTERNATIONAL ORGANIZATIONS: COMPOSED MAINLY OF OFFICIALS OF MEMBER NATIONS AND USUALLY ESTABLISHED BY TREATY. THE UNITED STATES IS A MEMBER OF MORE THAN ONE HUNDRED MULTILATERAL AND BILATERAL ORGANIZATIONS, INCLUDING AT LEAST TWENTY THROUGH THE U.N. SOURCES OF INTERNATIONAL LAW: INTERNATIONAL ORGANIZATIONS: ADOPT RESOLUTIONS: INTERNATIONAL ORGANIZATIONS ADOPT RESOLUTIONS, DECLARATIONS, AND OTHER TYPES OF STANDARDS THAT OFTEN REQUIRE NATIONS TO BEHAVE IN A PARTICULAR MANNER. EXAMPLES: THE GENERAL ASSEMBLY OF THE UN ADOPTED NUMEROUS NONBINDING RESOLUTIONS AND DECLARATIONS THAT EMBODY PRINCIPLES OF INTERNATIONAL LAW. DISPUTES INVOLVING THESE DECLARATIONS AND PRINCIPLES MAY BE BOUGHT BEFORE THE INTERNATIONAL COURT OF JUSTICE. THE COURT ONLY HAS AUTHORITY TO SETTLE DISPUTES WHEN NATIONS VOLUNTARILY SUBMIT TO ITS JURISDICTION. THE UN ALSO HAS A COMMISSION ON INTERNATIONAL TRADE LAW. THIS BODY HAS ADOPTED THE 1980 CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (CSIG: SIMILAR TO UCC). SPELLS OUT DUTIES OF INTERNATIONAL BUYERS AND SELLERS THAT WILL APPLY IF PARTIES HAVE NOT ALREADY AGREED OTHERWISE IN THEIR CONTRACTS. DESIGNED TO SETTLE DISPUTES BETWEEN INTERNATIONAL BUYERS AND SELLER. THE CISG ONLY GOVERNS SALES CONTRACTS BETWEEN TRADING PARTNERS IN NATIONS THAT HAVE RATIFIED THE CISG. COMMON LAW AND CIVIL LAW SYSTEMS: COMMON LAW SYSTEMS: COURTS INDEPENDENTLY DEVELOP RULES FOR GOVERNING CERTAIN AREAS SUCH AS CONTRACTS. COMMON LAW APPLIES TO AREAS THAT ARE NOT COVERED BY STATUTORY LAW. DOCTRINE OF STARE DECISIS COMMON LAW AND CIVIL LAW SYSTEMS: CIVIL LAW SYSTEMS: MOST OF EUROPE, ASIA, AFRICA, AND LATIN AMERICA USE LEGAL SYSTEMS BASED ON ROMAN CIVIL LAW, OR “CODE LAW.” COURTS INTERPRET THE CODE AND APPLY RULES TO INDIVIDUAL CASES BUT MAY NOT DEPART FROM THE CODE AND DEVELOP THEIR OWN LAWS. JUDICIAL PRECEDENTS ARE NOT BINDING. INTERNATIONAL PRINCIPLES AND DOCTRINES: PRINCIPLE OF COMITY: ONE NATION WILL DEFER AND GIVE EFFECT TO THE LAWS AND JUDICIAL DECREES OF ANOTHER COUNTRY SO LONG AS THE LAWS AND JUDICIAL DECREES OF THE COUNTRY ARE IN LINE WITH THE LAWS AND JUDICIAL DECREES OF THE ACCOMMODATING NATION. SCENARIOS 1 & 2 (INTERNATIONAL LAW SCENARIOS) INTERNATIONAL PRINCIPLES AND DOCTRINES: ACT OF STATE DOCTRINE: JUDICIAL BRANCH OF ONE COUNTRY WILL NOT EXAMINE THE VALIDITY OF PUBLIC ACTS BY A FOREIGN GOVERNMENT WITHIN ITS OWN TERRITORY. THE ACT OF STATE DOCTRINE (AND DOCTRINE OF SOVEREIGN IMMUNITY) TENDS TO SHIELD FOREIGN NATIONS FROM U.S. COURT JURISDICTION. ACT OF STATE DOCTRINE: THE DOCTRINE IS FREQUENTLY EMPLOYED IN CASES INVOLVING: EXPROPRIATION- OCCURS WHEN THE GOVERNMENT SEIZES A PRIVATELY OWNED BUSINESS OR PRIVATELY OWNED GOODS FOR A PROPER PUBLIC PURPOSE AND AWARDS JUST COMPENSATION. ­ACT OF STATE DOCTRINE APPLIES OR CONFISCATION- OCCURS WHEN THE GOVERNMENT SEIZES PRIVATE PROPERTY FOR AN ILLEGAL PURPOSE OR WITHOUT JUST COMPENSATION. ACT OF STATE DOCTRINE DOES NOT APPLY LINE IS OFTEN BLURRED BETWEEN 2 BECAUSE OF WHAT MAY BE CONSIDERED ILLEGAL AND WHAT IS JUST COMPENSATION.-SCENARIOS 3 & 4 EXPROPRIATION-SHIELDED 1. PUBLIC PURPOSE 2. JUST COMPENSATION CONFISCATION: ACT OF STATE DOESN’T APPLY, NOT SHIELDED, CAN BE SUED ABROAD 1. ILLEGAL PURPOSE: NOT PUBLIC 2. NO JUST COMPENSATION INTERNATIONAL PRINCIPLES AND DOCTRINES: DOCTRINE OF SOVEREIGN IMMUNITY: EXEMPTS FOREIGN NATIONS FROM JURISDICTION IN U.S. COURTS WHEN CERTAIN CONDITIONS ARE MET. A FOREIGN STATE IS NOT IMMUNE FROM U.S. JURISDICTION WHEN:FOREIGN STATE HAS WAIVED ITS IMMUNITY. INTERNATIONAL PRINCIPLES AND DOCTRINES: DOCTRINE OF SOVEREIGN IMMUNITY: FOREIGN STATES HAVE ENGAGED IN “COMMERCIAL ACTIVITY” WITHIN OR OUTSIDE THE UNITED STATES THAT HAS A “DIRECT EFFECT IN THE UNITED STATES.” FOREIGN STATE HAS COMMITTED A TORT IN UNITED STATES OR VIOLATED CERTAIN INTERNATIONAL LAWS. INTERNATIONAL PRINCIPLES AND DOCTRINES: DOCTRINE OF SOVEREIGN IMMUNITY: WHEN A FOREIGN STATE THAT HAS BEEN DESIGNATED “A STATE SPONSOR OF TERRORISM” IS SUED UNDER THE FSIA FOR “PERSONAL INJURY OR DEATH THAT WAS CAUSED BY AN ACT OF TORTURE” OR A RELATED ACT OF TERRORISM. RUBIN V. ISLAMIC REPUBLIC OF IRAN SCENARIO 5 REVIEW: INTERNATIONAL LAW IN-CLASS ASSIGNMENT EXPORTING: THE SIMPLEST WAY FOR U.S. FIRMS TO ENGAGE IN INTERNATIONAL BUSINESS IS TO EXPORT THEIR GOODS AND SERVICES TO FOREIGN MARKETS. DIRECT VERSUS INDIRECT EXPORTING: DIRECT EXPORTING. INDIRECT EXPORTING. UINDIRECT EXPORTING: §AGENCY RELATIONSHIPS VERSUS DISTRIBUTORSHIPS: AGENCY: FOREIGN FIRM THEN ACTS AS THE U.S. FIRM’S AGENT AND CAN ENTER CONTRACTS IN THE FOREIGN LOCATION ON BEHALF OF THE PRINCIPAL. À DISTRIBUTION AGREEMENT: A U.S. FIRM MAY WISH TO APPOINT A DISTRIBUTOR LOCATED IN A FOREIGN COUNTRY WHEN IT REPRESENTS A SUBSTANTIAL MARKET. MANUFACTURING ABROAD: THE ESTABLISHMENT OF FOREIGN MANUFACTURING FACILITIES—TYPICALLY, TO REDUCE COSTS. LICENSING: FOREIGN FIRMS USE AN ESTABLISHED NAME BRAND FOR A FEE. SUBSIDIARIES: A WHOLLY OWNED SUBSIDIARY FIRM IS USED TO EXPAND INTO A FOREIGN MARKET AND THE PARENT COMPANY REMAINS IN THE UNITED STATES. JOINT VENTURES: U.S. COMPANY OWNS ONLY PART OF THE OPERATION, WITH THE REST OWNED EITHER BY LOCAL OWNERS IN THE FOREIGN COUNTRY OR BY ANOTHER FOREIGN ENTITY.-SCENARIO 6 EXPORT CONTROLS: CONGRESS CANNOT IMPOSE ANY EXPORT TAXES, BUT IT CAN USE OTHER DEVICES TO RESTRICT OR ENCOURAGE EXPORTS, INCLUDING THE FOLLOWING: EXPORT QUOTAS (A LIMIT) RESTRICTIONS ON TECHNOLOGY EXPORTS. IMPORT CONTROLS: PROHIBITIONS: NO GOODS MAY BE IMPORTED FROM NATIONS THAT ARE DESIG-NATED ENEMIES OF THE UNITED STATES. OTHER LAWS PROHIBIT THE IMPORTATION OF ILLEGAL DRUGS, CERTAIN AGRICULTURAL PRODUCTS, AND GOODS THAT INFRINGE ON U.S. PATENTS. QUOTAS AND TARIFFS: QUOTAS LIMIT THE AMOUNT OF GOODS THAT CAN BE IMPORTED. TARIFFS ARE TAXES UPON IMPORTS. ANTIDUMPING DUTIES: EXTRA TARIFF THAT MAY BE ASSESSED TO DETER DUMPING (THE SALE OF IMPORTED GOODS AT “LESS THAN FAIR VALUE”). : DIFFERENCE B/N PRICE CHARGED IN US AND PRICED CHARGED IN EXPORTING COUNTRY.-SCENARIO 7 & 8 EXPORT NO EXPORT TAX QUOTA RESTRICTIONS IMPORTS BAN MINIMIZING TRADE BARRIERS: ELIMINATION OF TRADE BARRIERS (RESTRICTIONS ON IMPORTS) IS SOMETIMES SEEN AS ESSENTIAL TO THE GLOBAL ECONOMIC WELL-BEING. MINIMIZING TRADE BARRIERS: REGIONAL TRADE AGREEMENTS AND ASSOCIATIONS HELP TO MINIMIZE TRADE BARRIERS BETWEEN NATIONS: WTO EUROPEAN UNION (EU). USMCA (REPLACED NAFTA) WORLD TRADE ORGANIZATION: §MOST OF WORLD’S LEADING TRADING NATIONS ARE MEMBERS OF THE WTO. §TO MINIMIZE TRADE BARRIERS AMONG MEMBER NATIONS, EACH MEMBER COUNTRY IS REQUIRED TO GRANT NORMAL TRADE RELATIONS STATUS TO OTHER MEMBER COUNTRIES. THIS MEANS THAT EACH MEMBER MUST TREAT OTHER MEMBERS AT LEAST AS WELL AS IT TREATS THE COUNTRY THAT RECEIVES IT MOST FAVORABLE TREATMENT WITH REGARD TO EXPORTS AND IMPORTS.