COMMON LAW, STATUTORY LAW, AND ADMINISTRATIVE LAW
Solution Manual for Cengage Advantage Books
Essentials of Business Law 5th Edition by Beatty
ISBN 1285427009 9781285427003
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Suggested Additional Assignments
Evolution of the Common Law
Ask students to summarize the common law principles of the bystander cases in the text and then create their own bystander examples. First, students should write a two- or three-sentence summary of the law given in each of these cases: Union Pacific Railway Co. v. Cappier, Carey v. Davis, Osterlind v. Hill, Tarasoff v Regents of the University of California, and Parra v Tarasco Then students should create their own modern hypothetical bystander situation and provide brief arguments for and against liability. This should help them see the gradual evolution of the law, and anticipate future changes in this doctrine
Research: Legislative Process
Have students find a newspaper article on a bill that is working its way through Congress They should report on the bill's exact status: which house it is in, which committee is responsible for it, who favors and opposes it, what interests are at stake, and what lobbyists have an interest in it If the article makes no mention of lobbyists, which ones would the students expect to be involved? What is their view of the proposed legislation? Students may want to supplement the text by reading How Our Laws Are Made on the Library of Congress’ THOMAS website (http://thomas.loc.gov/home/lawsmade.toc.html).
Research: Campaign Finance
Havestudentsresearchcampaigncontributionsmadeinarecent U.S.HouseorSenatecampaign.Campaign finance reports and data are available at the Federal Election Commission website at http://www.fec.gov/disclosure.shtml. Students can track how much money each candidate received, the identity of major contributors, which organizations spent money on electioneering communications, and how much they spent.
Agency Law
Students should write one-paragraph descriptions of three federal or state agency regulatory programs that affect their lives in some way. For example, a student could discuss airline regulation, food safety inspection, automobile recalls, and so forth Students should identify the agency involved, summarize the regulatory scheme, and briefly explain how those regulations affect them.
Research: Regulated Industries
Askstudentstoidentifywhat industrytheyintendtoenter upongraduation.Forexample, banking, financial planning, accounting, insurance, advertising, etc.Thenask students to research the various federal and state regulations that apply to that industry and report to the class.
Chapter Overview
Chapter Theme
Law is complex. Law becomes less baffling when we understand the different types of law and how law is made. This chapter examines Common Law, Statutory Law, and Administrative Law.
Common Law
The common law is judge-made law. It is the sum total of all the cases decided by appellate courts.
StareDecisis
Stare decisis means “let the decision stand.” Once a court has decided a particular issue, the court establishes precedent, and the court will generally apply the same rule in similar cases in the future.
A desire for predictability created the doctrine of stare decisis. Yet, there must also be flexibility in the law. There must be some means to respond to new problems and a changing social climate.
Bystander Cases
The “bystander rule” is an example of the conflict between the need for predictability and for flexibility in the law.
Historically, the common law rule about a bystander’s obligation was that a bystander had no duty to assist someone in peril unless the bystander created the danger. Often criticized as harsh and cruel, courts nonetheless followed this rule under the doctrine of stare decisis. The common law with respect to bystander cases changed slowly, however, as courts over time found small exceptions to the rule.
1
Case: Tarasoffv. RegentsoftheUniversityofCalifornia
Facts: Prosenjit Poddar killed Tatiana Tarasoff Tatiana's parents claimed that two months earlier Poddar had confided his intention to kill Tatiana to Dr Lawrence Moore, a psychologist employed by the UniversityofCaliforniaatBerkeley Theysuedtheuniversity, claimingthat Dr Mooreshouldhave warned Tatiana and/or should have arranged for Poddar's confinement.
Issue: Did Dr Moore have a duty to Tatiana Tarasoff? If so, did he breach that duty?
1 17 Cal. 3d 425, 551 P.2d 334, 131 Cal. Rptr. 14 Supreme Court of California, 1976.
Decision: Yes, Dr. Moore had a duty to Tatiana Tarasoff. Reasoning: Under the common law, one person generally owes no duty to control the conduct of another or to warn anyone who is in danger. However, courts make an exception when the defendant has a special relationship to a dangerous person or potential victim. A therapist is someone who has just such a special relationship with a patient.
It is very difficult to predict whether a patient presents a serious danger of violence, and no one can be expected to do a perfect job. A therapist must exercise only the reasonable degree of skill, knowledge, and care ordinarily possessed by others in the field. In this case, however, there is no dispute about whether Dr. Moore could have foreseen violence or predicted that Poddar would kill Tatiana. Once a therapist determines, or reasonably should determine, that a patient poses a serious danger of violence to someone, he must make reasonable effortsto protect the potential victim. TheTarasoffs have stateda legitimate claim against Dr. Moore.
Question: After the Tarasoff case, do people generally have a duty to come to the aid of someone in danger?
Answer: No. The case merely carves one small exception in the general rule.
Question: What is the exception that this decision creates?
Answer: Once a therapist determines, or should have determined, that a patient poses a serious danger of violence to others, he must act reasonably to protect the potential victim.
Question: Therapists hear patients' anger all day long. How can a therapist know for sure whether a patient is serious in making a threat?
Answer: The therapist need not do a perfect job. He must analyze a patient the way a reasonable professional therapist would. If he concludes that the patient poses a serious threat, he must act.
2
Hardingham was a recovering alcoholic. Defendant United Counseling Service (UCS) gave him a job as an emergency services counselor. Halpin, UCS's executive director, learned that Hardingham was again drinking. Halpin and other UCS employees went to Hardingham's home, where they found him inebriated. They saw him attempt to drink from a bottle apparently filled with windshield wiper fluid They took the bottle away and took Hardingham to the local emergency room Hardingham refused to take a blood test and the UCS employees neglected to tell the hospital that he had evidently been drinking wiper fluid Because Hardingham refused to cooperate with hospital employees, the police took him to a correctional center Overnight, Hardingham suffered severe distress and the police returned him to the hospital Tests revealed methyl alcohol in his blood, apparently from the wiper fluid The substance left Hardingham with permanent injuries, including blindness He sued UCS and its employees under 12 V.S. A. §519
Question: Had hisrescuersspent afew moments advisingemergencyroompersonnel that Hardingham had drunk windshield washer fluid, they might have saved him from blindness and other serious injuries. Why doesn’t the court hold them liable for their failure to perform such a simple act?
Answer: The Vermont Good Samaritan statute3 states that a bystander who provides assistance to one in distress is only liable if he commits gross negligence. The majority of the Vermont Supreme Court ruled that no reasonable juror could find this to be gross negligence because the rescuers, after all, probably saved Hardingham’s life.
2 672 A.2d 480, 1995 Vt. LEXIS 129 Vermont Supreme Court 1995 3 12 V.S.A. §519 (requires a bystander to become involved in an emergency).
Additional Case: PehlevFarmBureauLifeInsuranceCompany,Inc.
4
Facts: When they applied for life insurance from Farm Bureau Life Insurance Company ("Farm Bureau") in 1999 Wyoming resident Gary Pehle and his wife, Renna, did not know they were infected with the Human Immunodeficiency Virus ("HIV"). Farm Bureau collected the initial premium and arranged for the Pehles to obtain blood tests as part of the application process. Farm Bureau forwarded the blood samples for analysis to LabOne, an independent laboratory, which reported the Pehle’s HIV-status to the insurance company. Farm Bureau then rejected the Pehle’s application and advised them that it would disclose the reason for their rejection to their physician if they desired. The Pehle’s did not follow up to learn the reason for the rejection.
Two years later Renna Pehle was diagnosed with AIDS. They looked into their medical records and learned that Farm Bureau had known of their HIV-positive status when it rejected their life insurance application. The Pehles sued Farm Bureau, LabOne, and LabOne’s medical director, Dr. J. Alexander Lowden, for negligence, for failing to tell them they were HIV-positive. The District Court found that Wyoming law recognized no duty running from a life insurance company to its applicants or from a laboratory hired by the life insurance company to its applicants. The court granted summary judgment in favor of all three defendants. The Pehles appealed.
Issue: Did Farm Bureau, LabOne, and Dr. Lowden have a duty to notify the Pehles of their HIV-positive status?
Holding: The Circuit Court of Appeals affirmed the trial court’s grant of summary judgment in favor of LabOne and Dr. Lowden and reversed its judgment in favor of Farm Bureau. The court concluded “that if an insurance company, through independent investigation by it or a third party for purposes of determining policy eligibility, discovers that an applicant is infected with HIV, the company has a duty to disclose to the applicant information sufficient to cause a reasonable applicant to inquire further.” The Pehle’s relationship with LabOne and its medical director was attenuated but theyhad “a good deal of contact” with Farm Bureau. Wyoming law had not directly addressed this issue, so the court made “an Erie-guess as to how the Wyoming Supreme Court would rule.”
Farm Bureau argued that there is a legal distinction between a duty arising from misfeasance acting wrongfully and nonfeasance failing to act. It argued that its failure to notify the Pehles was nonfeasance and put it in the same position under common law as a rescuer with no duty to help. The court did not agree for two reasons. First, it believed Farm Bureau’s actions could be characterized as either misfeasance or nonfeasance so any legal distinction between the two was not useful: “[p]utting HIV-positive applicants on notice of their infection could be considered a normal part of testing for HIV...” Second, “it is not clear whether Wyoming accepts the binary act/omission distinction in tort.” Whether Farm Bureau had a duty to notify the Pehles of their HIV-status depends on whether the law implies the existence of a confidential relationship “of trust and confidence:”
By encouraging the Pehles to purchase life insurance through them, Farm Bureau purported to act with the Pehles' best interests in mind. In submitting to a procedure for extraction and consenting to an examination of their blood, the Pehles demonstrated that Farm Bureau had gained their confidence. We do not think that insurance companies must exist to treat or diagnose HIV in order for a duty to arise that necessitates that applicants be properly put on notice to inquire further.
Because there was a genuine issue of material fact as to whether Farm Bureau disclosed to the Pehles “information sufficient to cause a reasonable applicant to inquire further” the trial court incorrectly granted summary judgment in favor of Farm Bureau.
Question: What is summary judgment?
Answer: A court may enter summary judgment in favor of one party when the parties do not dispute important facts and the law requires that, on those undisputed facts, only one party can win.
Question: Why did Farm Bureau distinguish between misfeasance acting wrongfully and nonfeasance failing to act?
Answer: Farm Bureau characterized its failure to notify the Pehles as nonfeasance and said it was analogous to the situation in the bystander cases, in which Farm Bureau as a bystander to the Pehles had no duty to help them.
Question: Did the court agree?
Answer: No the court said the distinction was not useful under Wyoming law.
Question: It appears that the Pehles never asked Farm Bureau why it rejected their application. If they had shown the slightest curiosity about the reason isn’t it likely that they would have learned then of their HIV-status?
Answer: Perhaps. The court cannot speculate on what might have happened. At trial, the court would consider whether FarmBureau’s denial of coverage would have caused a reasonable person to question the reasons for the denial.
Question: Doesn’t this case create a troubling precedent for life insurance companies? How can they know which medical conditions uncovered during blood work will impose on the company a duty to notify the applicant?
Answer: The court’s ruling is narrow it applies only to discovery that an insurance applicant is HIVpositive.
Question: But couldn’t a future plaintiff use this case as precedent if an insurance company failed to notify the plaintiff that it discovered some other serious disease during a blood test?
Answer: A future plaintiff in such a case would undoubtedly rely on this case as precedent but the principle of stare decisis would not require a court to follow it unless the future case involved HIVstatus. A future court could chose to distinguish the facts of such later case from this one.
Statutory Law
Statutory law consists of statutes passed by legislative bodies More law is created by statute than by the courts.
Bills
A bill is a proposed statute. To become law, a bill must be voted on and approved by both houses of Congress (the House of Representatives and the Senate). Once Congress passes a bill, the bill will be sent to the President. If the President signs the bill, it becomes law and is then a statute. If the President opposes the bill, he will veto it, in which case it is not law. Congress can pass the over the President’s veto with a two-thirds majority in each house
Statutory Interpretation
Courts interpret a statute by using the plain meaning rule; then, if necessary, legislative history and intent; and finally, if necessary, public policy.
Landmark Case: Griggsv. DukePowerCo.5
Facts: Duke Power used a high school completion requirement and an intelligence test in hiring and promotion. The result was that fewer minority applicants qualified for jobs at Duke Power. Griggs sued under Title VII.
Issue: Did Title VII of the 1964 Civil Rights Act require that employment tests be job-related?
Decision: Yes, employment tests must be job-related.
Reasoning: Congress's goal in enacting Title VII is plain from its language: to achieve equality of opportunity and remove barriers that have favored whites. An employer may not use any practice, procedure, or test that perpetuates discrimination. This is true not only for overtly discriminatory behavior but also for conduct that appears fair yet has a discriminatory effect. The key is business necessity. An employment test or restriction that excludes blacks is prohibited unless it is required to do the particular job. In this case, neither the high school completion requirement nor the general intelligence test is related to job performance, and therefore neither is permissible.
Question: What is the important issue that the Griggs case resolved?
Answer: Whether an employment practice that was neutral on its face could still violate Title VII.
Question: May such a practice violate Title VII?
Answer: Yes.
Question: Why did the court rule as it did?
Answer: The court said that Congress enactedTitle VIIto achieve equality of employment opportunity and remove barriers that had operated in the past to favor whites. If an employment practice, neutral on its face, continued to favor whites, it violated the purpose of the law.
Administrative Law
Administrative Law consists of regulations, orders, rules, and decisions promulgated by administrative agencies in order to perform powers and duties delegated to such agencies.
Agencies exist at the federal, state, and local level. Some federal agencies are part of the executive branch, while others are independent agencies. The President has much greater control of executive agencies than of independent agencies.
Rulemaking
Agencies may promulgate legislative rules, which generally have the effect of statutes, or interpretive rules, which merely interpret existing statutes.
Investigation
Agencies have broad investigatorypowers and mayuse subpoenas and, in some cases, warrantless searches to obtain information. A subpoena is an order to appear at a particular time and place to provide evidence.
Adjudication
Agencies adjudicate cases, meaning that they hold hearings and decide issues. Adjudication generally begins with a hearing before an Administrative Law Judge and may involve an appeal to the full agency or ultimately to federal court.
Ubiquitous Agencies
It is ironic that the effect on our lives of administrative regulations is so pervasive, yet the process by which administrative agencies create their regulations is rarely before us. What was the last movie or television drama in which the protagonist delivered an impassioned speech to a regulatory board? Law and Order: FTC hasnotmadeittotheairwaves.Onecanargue,however, that weexperiencetheworkofadministrative agencies more often than other law-making bodies.
Landmark Case: UnitedStatesv.Biswell6
Facts: Biswell operated a pawnshop and had a license to sell "sporting weapons." Treasury agents demanded to inspect Biswell's locked storeroom without a warrant, claiming that the Gun Control Act of 1968 gave them that right. Under this law, Treasury agents had permission to inspect firearm dealers’ business records, firearms and ammunition during business hours.
Biswell voluntarily opened the storeroom, and the agent found two sawed-off rifles inside. The guns did not remotelymeet the definition of "sportingweapons," and Biswell was convicted onfirearms charges.
The appellate court found that, because the search violated the Fourth Amendment, the rifles could not be admitted as evidence. It reversed the conviction, and the government appealed to the Supreme Court.
Issue: Did the agent’s warrantless search violate the Constitution?
Decision: No, the agent had a right to search the firearm dealer’s premises without a warrant.
Reasoning: The Gun Control Act of 1968 was a valid statute aimed at regulating firearms and preventing violent crime. As part of this effort, it gave the Treasury agents the right to perform frequent and unannounced inspections of firearm dealers’ premises. What good is a firearm inspection that is announced ahead of time? A warrant requirement would certainly frustrate the statute’s purpose of controlling illegal guns.
Warrants protect an individual’s expectation of privacy. Biswell had no justifiable expectation of privacy inhisstoreroom,sincehe,likeallfirearmsdealers,knewthathisbusinessrecords,firearmsandammunition were subject to inspection. Biswell accepted these rules when he obtained his license. In addition, he received annual reminders.
Since inspections furthered the Gun Control Act’s important purpose and Biswell could not reasonably expect his storeroom to be private, the seizure of the sawed-off rifles was permissible. They should have been admitted into evidence.
Question: Why should this case be evaluated under the Power of Agencies?
Answer: Both because it is a retail operation, governed by the Treasury, and because it is a firearms store, which must comply with the Gun Control Act of 1968.
Question: Should a Treasury agent be allowed to conduct a surprise search? Why or why not?
Answer: Yes, to ensure that business owners like Biswell comply with the law. Advance notification of a search would give a business owner to hide any evidence of wrongdoing.
Question: Did the agent’s warrantless search violate the Constitution?
Answer: The court said that the search was reasonable and that Biswell had been informed that this type of search was possible; thus, it did not violate the Constitution
Additional Case: Doev.MarylandBoardofSocialWorks7
Facts: “Mrs. F” was a licensed social worker in Maryland. One of her clients, “John Doe,” was convicted of child abuse and sex offenses involving his minor granddaughter. The Board of Social Work Examiners, an administrative agency, learned that Mrs. F. had likely violated the law by failingto report the abuse. The agency began an investigation and issued a subpoena duces tecum to Mrs. F., demanding all treatment records for John Doe and his wife Jane Doe, for the year in which the abuse occurred. The Does (“Petitioners”) sued, asking the court to quash the subpoena. They claimed that a social workerclient privilege prohibited disclosure of their records. The intermediate Court of Appeals declared the subpoena valid. The Does appealed to the state’s highest court.
6 406 U.S. 311, SUPREME COURT OF THE UNITED STATES (1972)
7 384 Md.161, 862 A.2d 996 Maryland Court of Appeals, 2004.
Issue: Was the subpoena valid?
Holding: Validity of subpoena affirmed It wrote: A state statute affordssocial workers and their clients similar protectionsthat have longbeen applicable to other relationships where privacy issues and the need for open communication are of paramount importance, e.g., marital privilege, attorney client privilege, psychiatrist/psychologist patient privilege, clergyman communicant privilege, etc. We consider the information contained in those treatment records to be bothconfidential and privileged. Therefore, we must examine the Board's claim that its subpoena power and obligation to oversee the conduct of the licensed social workers of this State provides an exception to petitioners' privilege and confidentiality rights as provided by law.
The Board’s interests in obtaining Ms. F’s treatment records are clearly compelling. The legislature established the Board to protect the public by setting and maintaining high professional standards for social work. As the Court of Special Appeals stated: "To deny the Board access to patient files is to deny it the ability to carry out its legislative mandate.”
Neither the social worker client privilege nor any claim concerning petitioners' constitutional right to privacy automatically prevents the Board from subpoenaing petitioners' treatment records. While the Board is required by law to protect the petitioners' treatment records from further disclosure, the Board must be allowed to have access to those treatment records in order to fulfill its statutory mandate to protect the public by conducting a full investigation and, where appropriate, disciplining those licensed social workers who are found to be in violation of the [law].
Question: Did the Does move to quash the subpoena only because they sought to block the investigation?
Answer: They had a valid basis for their claim. The court acknowledged that the Does’ communications with Mrs. F were confidential and privileged, and thus merited legal protection.
Question: If those communications were confidential, than why may the Board of Social Work abrogate the Does’ privilege?
Answer: The Board must balance competing interests. It must balance the policies served by the Does’ privilege with its statutory mandate to protect the public. The Does’ cannot automatically block access to their records just by asserting that they are privileged. In reviewing the validity of the subpoena, the court must engage in similar balancing analysis.
Question: What facts support abrogating the privilege in this case?
Answer: Mrs. F, the Does’ social worker, may have violated her legal duty to report Mr. Doe’s abuse of his minor granddaughter. One responsibility of the Board of Social Work is to investigate whether a social worker has performed her duties consistentlywith professional standards and legal requirements. The Board could not satisfy its responsibility without obtaining and examining Mrs. F’s records of her treatment sessions with the Does.
General Question: If in reviewing the records, the Board discovered evidence that the Does had committed other crimes, could the Board act on its knowledge?
Answer: Agency subpoenas occasionally unearth evidence that may form the basis for a referral to the Department of Justice for criminal prosecution.
Additional Case: LeonardR.Friedmanv.BoardofRegistrationinMedicine8
Facts: The patient first saw Friedman, a board-certified forensic psychiatrist, at his office in 1980. She continued to visit him at least monthly until the summer of 1982. During a board hearing, the board found that during one or more of three office visits some form of sexual activity took place between Friedman and the patient. The board's decision recounts patient’s testimony regarding what happened on these occasions, but it does not make explicit findings about what occurred.
Theboard shouldnot have simplyrecited the patient's testimony. It should have made findings of fact based on, or in rejection of, her testimony. It is clear, however, that the board disbelieved Friedman's denials and rejectedhisclaimthatthepatientwasouttogetevenwithhim.Theboardfoundthat Friedmanhadexploited the patient sexually. Psychiatrist appealed.
Among the substantial evidence was testimony concerning a telephone conversation between the patient and Friedman. Patient’s son listened to the conversation on an extension line. In that conversation, the patient accused Friedman of sexual exploitation. Friedman did not deny the accusation.
Neither during the telephone conversation nor at the hearing did Friedman admit to the truthfulness of the patient's statements. He testified that it would have been inappropriate in the circumstances if he had called her a liar during the telephone conversation.
Issue: Did the hearing officer err when he found that Dr. Friedman had sexually exploited his patient even the hearing officer failed to make findings about what had occurred?
Holding: The Board finds that there was no error. The Board of Registration in Medicine revoked the registration of a forensic psychiatrist to practice medicine on the ground that the psychiatrist, who participated in sexual conduct with a patient during one or more office visits, had engaged in gross misconduct in the practice of medicine.
Question: What does it mean for the Board to make findings about the testimony?
Answer: A finding is a decision or verdict based on facts or evidence presented during a trial. Findings of fact are used in formulating a judgment.
Question: Why is that an issue here?
Answer: Mere recitation of facts cannot justify a judgment. A judge must decide the case based on a logical consistency to justify the conclusion. Without that, it is possible to strip the doctor of his license without justifying why. The Board corrected that error, but affirmed the decision.
