Issuu

Type:

Solution Manual

Resource:

Business Law

Edition:

10th Edition

Author(s):

Henry R. Cheeseman

LEGAL HERITAGE AND THE DIGITAL AGE

“Where there is no law, there is no freedom.” John Locke

I. Teacher to Teacher Dialogue One of the most common dilemmas facing instructors of business law is the issue of topic choice. By the very nature of the subjects we teach, the breadth of materials is so wide that choosing what to focus on in the limited classroom time we have with our students can be a most daunting task. This problem is especially exacerbated when the topics we are dealing with are all of deep interest and can stand alone as separate courses. In this chapter, for example, we are asked to introduce students to topics ranging from the definitions and purposes of law to how our system affects business decisions, to some of the most important provisions found in the U.S. Constitution. Any one of these subparts can provide the raw materials for an entire course at the law school level. Our job must start with a self-evident, but sometimes forgotten, point: this is not law school. We are here not to train future lawyers but rather students who need to know enough about these issues to recognize that they are issues. The technical legal problems they may be facing later will ultimately need to be resolved using law and other practitioners. The plus side of this dilemma is that because we have such a diverse menu to select from, we are able to pick and choose our areas of emphasis. For example, if your particular teaching and research interests lie in the area of ethics and the schools of jurisprudential thought from which they are derived, then by all means, run with it! Rather than trying to be all things to all people, it is better to focus your efforts on your strengths. This does not mean that you can shortchange the other material. All key objectives of the chapter should be fully outlined and incorporated in both your lecture and materials outline. But if you have a particular interest and expertise in, for example, the Law and Economics School of jurisprudential thought, then use them as focal points of comparison in the evolutionary process that seeks to distinguish the older schools of jurisprudence from newer approaches to these issues. In any event, remember that philosophical studies of what law is and what its role is in the larger scheme of things have always posed questions virtually impossible to answer. As mentioned in the student study guide, this chapter represents attempts by great thinkers to answer the unanswerable. It would be far too presumptuous for us to think that we can teach, in a few hours, what the great philosophers of the world have tried to do over hundreds of years. Perhaps this is an early lesson in what wisdom is really all about: the more we know of history, the more we know of our own limitations. If we can get that point across, the course is off to a good start. 1 .

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II. Learning Objectives and Chapter Contents • • • • • •

Define law. List and describe the schools of judicial thought. Learn the history and development of American Law. List and describe the sources of law in the United States. Learn what critical legal thinking is and how to apply it to analyzing legal cases. Learn what skills you will gain through this text.

III. Key Question Checklist • • • • •

What is law? Once you have identified the kind of societal expectation of behavior, what standard of behavior is most appropriate? Does law codify the standard? Do one or more of the schools of jurisprudence support the standard? What are the sources of law in the United States? What body of law and/or ethical standards apply? How would you apply these standards to the facts?

IV. Text Materials The first chapter’s objective is an introduction to the historical underpinnings of jurisprudential thought. This would include not only the functions of law listed in the summary, but also an early opportunity to introduce the role of ethics based on the various schools of jurisprudence discussed.

What is Law? 1.1 Define Law Laws consist of rules that regulate the conduct of individuals, businesses, and organizations, forbidding undesirable activities. Definition of Law – Law is a group of rules promulgated by a controlling authority, with legal consequences for lack of compliance. Functions of the Law – Laws are created to keep the peace, shape morals, promote social policies, maintain the status quo, facilitate change or planning, promote compromise, and/or to maximize individual freedoms. Fairness of the Law – The American legal system is, overall, a comprehensive and fair system. Yet it is occasionally misused and abused. Flexibility of the Law – U.S. law has evolved and grown as a reflection of changes in society, technology, and commerce. The same general principles that we were established on still exist.

Legal Heritage and the Digital Age

The modifications exhibit the flexibility and maturity of our system to be able to adapt to the changing commercial, social, and ethical environments. Critical Legal Thinking – The law in the U.S. is permitted to grow and change over time as our social values change as a society. Having some vagueness to the law allows the law to adapt more easily. Landmark U.S. Supreme Court Case: Brown v. Board of Education This box discusses the application of law where the Supreme Court overturned the “separate but equal” doctrine that condoned separate schools for black children and white children. Critical Legal Thinking: The states must treat all individuals in the same manner as others that are in similar positions or situations, without favoring residents or any other group. Equal application is the important idea here. Ethics: Separate but equal cannot be applied when it comes to education, so the decision in Plessy v. Ferguson was wrong. The Plessy decision was based on the idea of granting political and civil equality to African Americans, but left out social equality. The U.S. Constitution was drafted to reflect changing social, economic, technical, and intellectual ideas. This is what makes the Constitution unique, as it slowly adapts to the changing world around us.

Schools of Jurisprudential Thought 1.2 List and describe the schools of judicial thought. There are several different philosophies about how the law developed, ranging from the classical natural theory to modern theories of law and economics and critical legal studies. The different schools jurisprudential thought include the Natural Law School, based on the moral theory of law; the Historical School, with its recognition of the social traditions and customs that have developed over time; the Analytical School, where law is shaped by logic; the Sociological School, where law is applied to advance sociological goals; the Command School, whose laws are established by the ruling party rather than the society as a whole; the Critical Legal Studies School, who claim that laws are there only to maintain the status quo; and the Chicago School, or Law and Economics School, which promotes market efficiency. International Law: Command School of Jurisprudence of Cuba Cuba is a one party communist dictatorship that has been ruled by one family since 1959. Cuba’s legal system is based on communist theory and the Command School of jurisprudence.

History of American Law 1.3 Learn the history and development of American law. English Common Law – English common law, the primary basis for U.S. law, was based on judges issuing opinion when deciding a case. These opinions became the basis for precedent used by later judges. The historical underpinning of U.S. law can be further reinforced with some discussion of the tieins between the country’s political history with that of the legal traditions of England and other countries. This portion of the chapter material can be used to introduce students to a broad overview of the roles that the world’s major legal systems play in the world economy. For example, the role of the Law Merchant and its influence on international trade is critical to 3

Chapter 1

understanding most international rules on import/export laws today. The origins of the Law Merchant, in turn, are traceable in large part to the Roman civil law. In the end, the U.S. legal system represents the “Cuisinart” effect. There are ingredients from English common law, Roman civil law, and Judeo-Christian canon law all thoroughly processed into a bread of law. The individual ingredients are all present, but each is no longer independently identifiable. Law Courts – These were established following the Norman Conquest of England in 1066 to administer laws in a uniform method. Law Courts emphasized form over substance. Chancery Courts – These courts were established to serve when Law Courts provided inadequate remedies; they provided equitable solutions. These courts reviewed the merits of the case, rather than the procedural aspects. Merchant Courts – Law Merchant courts were developed as a separate entity to solve commercial disputes in the Middle Ages. They were not merged into the regular court system in England until the early 1900s. Landmark Law: Adoption of English Common Law in America All the states of the United States of America except Louisiana base their legal systems primarily on the English common law. Currently, the law of the United States is a combination of law created by the judicial system and by congressional legislation. Global Law: The Civil Law System of France and Germany The Romano-Germanic civil law system dates back to 450 B.C., when Rome adopted a set of laws based on civil codes that applied to all Romans. The sole source of civil law in a country is the application of code or statutes. Court decisions do not have the force of law.

Sources of Law in the United States 1.4 List and describe the sources of law in the United States. Constitutions – One of the goals of this chapter is to introduce students to the role of the U.S. Constitution and its pivotal role in the ultimate distribution of powers between the federal government and the states vis-à-vis the control of business conduct in the U.S. This section also explains the three branches of the federal government: the legislative, executive, and judicial branches. Treaties – The Constitution establishes that only the president, upon the advice and consent of the Senate, can enter into treaties with foreign powers. Federal Statutes – Statutes are written laws that establish and enforce certain courses of conduct. Congress enacts federal statutes, whilst state legislatures enact state statutes. Ordinances are adopted by local governmental bodies. Contemporary Environment: How a Bill Becomes Law The U.S. Congress is composed of two chambers, the U.S. House of Representatives and the U.S. Senate. Thousands of bills are introduced in the U.S. Congress each year, but only a small percentage of them become law. First, a bill must be sponsored by a member of the U.S. House of Representative or the U.S. Senate. Then, it is referred to the appropriate committee for review and study. Bills that receive the vote of a committee are reported to the full chamber, where they are 4

Legal Heritage and the Digital Age

debated and voted on. If the bill receives majority vote from the full chamber, and a subsequent second chamber, then it is forwarded to the president’s desk. The bill becomes law when it is signed by the president. State Statutes – State legislatures enact state statutes. Such statutes are placed in code books. State statutes can be assessed in these hardcopy code books or online. Ordinances – State legislatures often delegate lawmaking authority to local government bodies, including cities and municipalities, counties, school districts, water districts, and such. These governmental units are empowered to adopt ordinances. Ordinances are also codified. Executive Orders – The executive branch of the government is empowered to issue executive orders. Regulations and Order of Administrative Agencies – Agencies are created to interpret and enforce statutes enacted by both federal and state Congresses. Judicial Decisions – Judges issue written decisions explaining their legal reasoning. Doctrine of stare decisis establishes past court decisions as a precedent for future decisions. Priority of Law in the United States – The U.S. Constitution and treaties take precedence over all other laws, followed by federal statutes and federal regulations. Federal law takes precedence over conflicting state law, which has precedence over local laws. Similarly, state constitutions take precedence over state statutes and regulations. Critical Legal Thinking – This concept gives the law consistency so that citizens are treated fairly and similarly. Without stare decisis, our judges may have too much untampered authority. Law in the Digital Age The electronic age arrived before new laws were written that were unique and specific for this environment. Courts have applied existing laws to the new digital environment by requiring interpretations and applications. In addition, new laws have been written that apply specifically to this new environment. The U.S. Congress has led the way, enacting many new federal statutes to regulate the digital environment.

Critical Legal Thinking 1.5 Learn what critical legal thinking is and how to apply it to analyzing legal cases. Critical Legal Thinking is a method of thinking that consists of investigating, analyzing, evaluating, and interpreting information to solve a legal problem. Socratic method – Is a process of asking a series of questions and answers and give-and-take inquiry and debate between a professor and students. IRAC method – Examines a law case by issue, rule, application and conclusion. Case 1.1 Affirmative Action in University Admissions Fisher v. University of Texas at Austin 5

Chapter 1

136 S. Ct 2198 (2016) Facts: UT was admitting students giving weight to race as an admissions factor. A Caucasian student otherwise qualified was denied admission and sued. Issue: Is race-conscious admissions lawful under the Equal Protection Clause at UT? Decision: Race may be a positive factor in favor of admissions but only one factor to help diversify a public university. Ethics: Students will have differing opinions about the issue. Case 1.2 Voting Rights Act Shelby County, Texas v. Holder 133 S.Ct. 2612 (2013) Facts: The 15th Amendment makes it unlawful for states to alter the rights of citizens as to voting. In 1965, a statute was passed to address this issue in a more fulsome manner. The 1965 VRA basically also put a lockdown on the ability of certain Southern states to change any districts. Issue: Is the coverage provision of the VRA legal? Decision: No, it is unconstitutional. This was a close decision of 5-4. Ethics: Students will have differing opinions on this issue.

V. Key Terms and Concepts • • • • •

• • • • • • • • •

Administrative agencies—Agencies (such as the Securities and Exchange Commission and the Federal Trade Commission) that the legislative and executive branches of federal and state governments are empowered to establish. Administrative rules and regulations—Used by administrative agencies to enforce statutes. These rules and regulations have the force of law. Analytical School—School of jurisprudence maintains that the law is shaped by logic. Bill—Many bills are introduced each year at the U.S. Congress, out of which a few are passed as law. Brown v. Board of Education—A landmark Supreme Court case in which a unanimous decision reversed prior precedent and held that the separate but equal doctrine violated the Equal Protection Clause of the Fourteenth Amendment to the Constitution. The decision led to the banning of school segregation. Chamber—The U.S. Congress is composed of two chambers, the U.S. House of Representatives and the U.S. Senate. Civil Law—A code of laws applicable to Romans. Also known as the Romano-Germanic civil law system. Code book—Federal statutes are organized by topic into code books. Codified law—Federal statutes that have been organized into code books. Command School—School of jurisprudence that believes that the law is a set of rules developed, communicated, and enforced by the ruling party rather than a reflection of the society’s morality, history, logic, or sociology. Committee—Bills from either of the two chambers of the U.S. Congress are reviewed and studied by an appropriate committee. The committee may reject the bill, report it to the full chamber for a vote, not act on it, or send it to a subcommittee for further study. Conference committee—Committee made up of members of both the U.S. House of Representatives and the U.S. Senate. Constitution of the United States of America—The supreme law of the United States. Court of Chancery—Court that granted relief based on fairness. Also called equity court. 6

Legal Heritage and the Digital Age

• • • • • • • • • • • • • • • • • • • • • • • • •

Critical Legal Studies School—School of Jurisprudence that proposes legal rules are unnecessary and are used as an obstacle by the powerful to maintain the status quo. English common law—Law developed by judges who issued their opinions when deciding a case. The principles announced in these cases became precedent for later judges deciding similar cases. Executive branch—A branch of the U.S. government that has the power to enforce the law. The president of the United States constitutes the executive branch of the government. Executive order—An order issued by a member of the executive branch of the government. Federal Statute—Written laws, enacted by the U.S. Congress, that regulate foreign and interstate commerce. Fourth Amendment—Protects against searches and seizures without probable cause. French Civil Code of 1804—One of the models used by countries that adopted civil codes. Also known as the Napoleonic Code. German Civil Code of 1896—One of the models for countries used by countries that adopted civil code. Such codes act as the sole source of law in most civil law countries. Historical School—School of jurisprudence that believes the law is an aggregate of social traditions and customs that have developed over the centuries. Judicial branch—A branch of the U.S. government that has the power to interpret and determine the validity of the law. Also known as the courts. Judicial decision—A decision about an individual lawsuit issued by federal and state courts. Jurisprudence—The philosophy or science of law. Law—That which must be obeyed and followed by citizens, subject to sanctions or legal consequences; a body of rules of action or conduct prescribed by controlling authority and having binding legal force. Law court—A court that developed and administered a uniform set of laws decreed by the kings and queens after William the Conqueror, legal procedure was emphasized over merits at this time. Law and Economics School—School of jurisprudence that believes that promoting market efficiency should be the central goal of legal decision making. Also called Chicago School. Law Merchant—Rules based on common trade practices and usage that were applied by merchants around England and Europe, in the Middle Ages, to solve commercial disputes. Also known as “law of merchants.” Legislative branch—A branch of the U.S. government that has the power to enact the law. Also known as the U.S. Congress. Merchant Court—The separate set of courts established to administer the “law of merchants.” Moral theory of law—Theory that proposes that the law should be based on morality and ethics. Natural Law School—School of jurisprudence that postulates that the law is based on what is “correct.” Order—A decision of an administrative agency. Ordinance—Laws enacted by local government bodies, such as cities and municipalities, counties, school districts, and water districts. Precedent—A rule of law established in a court decision. Lower courts must follow the precedent established by higher courts. Romano-Germanic civil law system—Legal system that dates back to 450 BCE when Rome adopted the Twelve Tables, a code of laws applicable to the Romans. Commonly known as civil law. Sociological School—School of jurisprudence that asserts that the law is a means of achieving and advancing certain sociological goals. 7

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• • • • • • • • •

Stare decisis—Latin for “to stand by the decision.” Adherence to precedent. State Constitution—Constitutions that establish the legislative, executive, and judicial branches of state government and establish the powers of each branch. State Statute—Statute enacted by state legislatures and placed in code books. Statute—Written law enacted by the legislative branch of the federal and state governments that establishes certain courses of conduct that covered parties must adhere to. Subcommittee—Studies bills sent by the committee. After review, the subcommittee may either let the bill die or report it back to the full committee. Treaty—A compact made between two or more nations. U.S. Congress—Branch of the government that creates federal law by enacting statutes. U.S. House of Representatives—A chamber of the U.S. Congress. U.S. Senate—A chamber of the U.S. Congress.

COURTS AND JURISDICTION

“I was never ruined but twice: once when I lost a lawsuit, and once when I won one.” Voltaire

I. Teacher to Teacher Dialogue Twenty-first century technological advances have provided our students with all kinds of instant access to information. These devices have provided the students with a variety of preconceptions. Among these is the average undergraduate’s notion of how trials are conducted and the role of attorneys in that process. Invariably these perceptions center on popular television series such as “Law and Order” and “Court TV”. This is not all bad. Current media focus on numerous law-related issues has generated a whole new wave of public interest in the workings of our legal system. The downside is that the media has created many myths on the folklore of law and lawyers. In the world of pop culture, no one knows until the end who really did it until a surprise witness shows up to identify the bad guy. In more modern versions, the attorney first has a business relationship with the client and then proceeds to get him or her acquitted. Regardless of the outcome, the process is always full of glamour and intrigue. The problem is that a trial rarely resembles the goings on found in the entertainment media. Trials are long, tedious, emotionally, and financially draining processes for all parties concerned. In many ways, a trial represents a failure by the parties to reach some sort of satisfactory solution of the issue beforehand. Rarely do the parties actually want to go through a labyrinth of pleadings, motions, and the like, feeling all the while totally dependent on the sometimes questionable competence of their attorneys. Unlike the make-believe world of entertainment, the job of an attorney is to keep his or her client out of court. (This often needs some reinforcement with the student.) The attorney’s professional advice should anticipate and resolve potential legal problems before, rather than after, the fact if at all possible. It is against this backdrop that we should try to present a more realistic picture of how our system works. We can basically start by discussing how few controversies actually get to the trial stage and how even fewer of those are actually reported in the National Reporter System. Additionally, a fair amount of time should be spent reviewing the growing trend toward alternative dispute resolution (ADR) mechanisms. Personal experience examples might be helpful in illustrating the growing trends toward ADR. To complete the cycle, we can then proceed to itemize the key steps used in a court trial in this chapter and in those that follow. 9 .

Chapter 2

II. Learning Objectives and Chapter Contents • • • • • •

Describe state court systems. Describe the federal court system. List and describe the types of decisions that are issued by the U.S. Supreme Court. Explain the jurisdiction of federal courts and compare it with the jurisdiction of state courts. Define standing to sue, jurisdiction, and venue. Explain how jurisdiction is applied to digital commerce.

III. Key Question Checklist • • • •

If the dispute or controversy needs to be resolved in a court of law, which court has jurisdiction? Once jurisdiction is established, was the proper sequence of pretrial steps taken? Was the trial sequence properly followed? After the trial is completed, are any appeals from the decision applicable?

IV. Text Materials One objective of this chapter is to familiarize students with the role of the major players in those events. The federal court system and the court systems of the 50 states and the District of Columbia are the two major court systems in the U.S. Litigation is the process of bringing, maintaining, and defending a lawsuit. In addition, there are a number of alternative dispute resolutions that can be used.

State Court Systems 2.1 Describe state court systems. Limited-Jurisdiction Trial Court – Inferior trial-like traffic courts, juvenile courts, justice-ofthe peace courts, probate courts, and family law courts hear specialized matters. Another example of these is the small claim courts that hear limited dollar amount civil cases. General-Jurisdiction Trial Court – Courts of Record keep a record of the testimony and evidence presented at trial for future reference. These courts hear felony cases, civil cases over a certain dollar amount, and other items. Intermediate Appellate Court – Courts of Appeal hear appeals from trial courts, reviewing records of trials for errors without hearing any new evidence. Highest State Court – State supreme courts hear appeals from intermediate state courts and some trial courts, without hearing new evidence. Business Environment: Delaware Courts Specialize in Hearing Business Disputes 10 Copyright ©2019 Pearson Education, Inc.

Courts and Jurisdiction Delaware has created a special Chancery Court to decide business litigation, with a reputation for handling corporate matters. Delaware’s laws also tend to favor corporate management, so together with the Chancery Court, the state has created an environment that encourages incorporation in that state. Other states are beginning to follow suit and create their own variation of Delaware’s Chancery Court.

Federal Court System 2.2 Describe the federal court system. Special Federal Courts – There are six courts of limited jurisdiction: the U.S. tax court, federal claims court, the Court of International Trade, bankruptcy court, and the courts of appeals for the armed services and for veteran’s claims. U.S. District Courts – These are the federal court system’s 94 trial courts of general jurisdiction. U.S. Courts of Appeal – These are the federal court system’s 13 intermediate appellate courts. Contemporary Environment Foreign Intelligence Surveillance Court Created in 1978, this court handles FBI, NSA, and warrants pertaining to national security issues called FISA warrants.

Supreme Court of the United States 2.3 Describe the U.S. Supreme Court and the types of cases it decides. The Supreme Court is composed of nine justices who are nominated by the President and confirmed by the Senate. The President appoints one as the chief justice who is responsible for the administration of the Court, while the other eight are considered associate justices. Contemporary Environment The Process of Choosing a U.S. Supreme Court Justice The President appoints Supreme Court justices, with the advice and consent of the Senate (majority vote). This allows a form of balance of power between the executive and legislative branches of the government. Jurisdiction of the U.S. Supreme Court – The Supreme Court hears appeals from the federal district courts and from the highest state courts. Legal briefs are filed, oral arguments are made, lower court records are reviewed, but neither new evidence nor testimony is heard. The Supreme Court decision is final. Decisions by the U.S. Supreme Court – Congress has established the rules for the mandatory appellate review by the Supreme Court, which may also elect to hear cases at its discretion. Petitioners file a petition for certiorari asking for the Supreme Court to review their case. If the court decides to sit on the matter, it issues a writ of certiorari. The court hears about 100 cases per year. Unanimous Decisions – All the justices voting and agree as to both the outcome and the reasoning. These decisions become precedent.

Chapter 2

Majority Decision – Decisions by the Supreme Court are considered majority decisions if a majority of the justices agree on the outcome and reasoning. These decisions become precedent. Plurality Decision – A plurality decision is when the majority of the justices agree on the outcome, but not the reasoning. This settles the case, but does not serve as precedent. Tie Decision – In this case the winner in the lower court prevails. This does not serve as precedent. Concurring Opinion – When a justice agrees with the outcome of the majority, but not the reasoning, they will issue a concurring opinion explaining their stand. Dissenting Opinion – Any justice who does not agree with the decision may state their opinion. Contemporary Environment “I’ll Take You to the U.S. Supreme Court!” This discusses the process necessary to win a review by the U.S. Supreme Court.

Jurisdiction of Federal Courts 2.4 Explain the jurisdiction of federal courts and compare it with the jurisdiction of state courts. Federal Question – Federal courts have limited jurisdiction to hear cases involving federal questions with no dollar amount limit. Diversity of Citizenship – The federal courts have jurisdiction to hear cases involving diversity of citizenship. There must be diversity of state citizenship or the cases must be between a citizen and a subject of a foreign country. The amount in controversy must be over $75,000.00. Jurisdiction of State Courts – State courts hear cases that the federal courts do not have the jurisdiction to hear. Federal courts may have concurrent jurisdiction with state courts to hear cases involving diversity of citizenship. Full Faith and Credit Clause – Federal constitutional clause which requires that a judgment from one state court be recognized by every other state. Case 2.1 Full Faith and Credit Clause V.L. v. E.L, 136 S.Ct. 1017 (2016) Facts: Two women in a romantic relationship use technology to have three children together. The couple raised them jointly until they split up. Issue: Who has maternity rights to the children? Does a Georgia court final judgment of adoption make one the legal parent over the other woman as it applies to Alabama? Decision: Full faith clause of the Constitution caused a remand of the case in Alabama for further proceedings. Ethics Question: Students will have differing opinions on this issue.

Courts and Jurisdiction

Standing to Sue, Jurisdiction and Venue 2.5 Define standing to sue, jurisdiction, and venue. Standing to Sue – The plaintiff must have a stake in the outcome of the lawsuit. In Personam Jurisdiction – In personam jurisdiction over the person is achieved by the plaintiff filing a lawsuit with a court and by serving a summons on the defendant. If personal service is unavailable, notice of the case by mail or publication in newspapers is allowed. Defendants disputing the jurisdiction of a court may make a special appearance to argue their case, and cannot be served while making this appearance. Long-Arm Statute – A court can obtain jurisdiction over persons and businesses located in another state through use of a long-arm statute, provided the defendant has had some minimum contact with the state. Critical Legal Thinking International Shoe Company v. State of Washington International Shoe had salespeople that sold shoes door-to-door within the state of Washington, and were paid on a commission basis. They had no office in the state. Washington State determined that they had failed to pay unemployment taxes on International’s employees, and serve notice to the organization on one of their Washington sales representatives as well as by mailing the notice to the headquarters in St. Louis. International made a special appearance to argue that it had insufficient contacts within the state to warrant payment of the tax. The unemployment office and appeals board, as well as various courts within the state ruled against International, which appealed to the U.S. Supreme Court. The Supreme Court ruled that International had neither casual nor irregular contacts within the state, and was, therefore, subject to in personam jurisdiction and service upon one of their agents, based on their “minimum contacts” within the state. The Supreme Court clearly stated that the Due Process Clause permits jurisdiction over a defendant in any state in which the defendant has “certain minimum contacts such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Critical Legal Thinking Questions – There are firmly established standards developed through case law which allow a court to determine when minimum contact has been made with a state. Case 2.2 Long Arm Statute MacDermid, Inc. v. Deiter 702 F.3d 725 (2012) 2nd Circuit Facts: Prior to her employment termination, the defendant took proprietary property from her employer who in turn sued her to get it back. Issue: Does the district court have personal jurisdiction over the defendant? Decision: Yes Ethics Questions: The defendant took property that did not belong to her which seems to be a more pressing substantive issue than personal jurisdiction. In Rem Jurisdiction – Courts may have jurisdiction over property found within the state, based on in rem (over the thing) jurisdiction. Quasi In Rem Jurisdiction – Attachment jurisdiction occurs when a plaintiff who has obtained a judgment attempts to satisfy the judgment by attaching property located in another state.

Chapter 2

Venue – The court with the jurisdiction that is located closest to where the incident occurred or where the parties live should hear the lawsuit. Pretrial publicity may prejudice jurors and may lead to a request for a change of venue in order to get a more impartial jury. Forum shopping is the process of looking for a more favorable court without a valid reason, and it is frowned upon by most courts. Forum-Selection and Choice-of-Law Clauses – Because many business agreements are formed between people from different states and different countries, many contracts have clauses that specifically address the state’s or country’s laws that will be applied in the case of a dispute, in what are known as choice-of-law clauses. Additionally, they will often agree as to which court will have jurisdiction over any dispute in forum-selection clauses. 2.2 Forum-Selection Clause Carter’s of New Bedford, Inc. v. Nike, Inc. 790 F.3d 289 (2015) Facts: Nike attempts to enforce a forum-selection clause against Carter’s, a retailer of its shoes in Massachusetts. Issue: Is the forum-selection clause enforceable? Decision: Yes Critical Legal Thinking Questions: Students will have differing ideas on these questions.

Jurisdiction in Digital Commerce 2.6 Explain how jurisdiction is applied to digital commerce. Today, with the advent of the Internet and the ability of persons and businesses to reach millions of people in other states electronically, particularly through websites, modern issues arise as to whether courts have jurisdiction in cyberspace. Zippo Manufacturing Company v. Zippo Dot Com, Inc. is an important case that established a test for determining when a court has jurisdiction over the owner or operator of an interactive, semi-interactive, or passive website. Information Technology Jurisdiction Over an Internet eBay Seller Internet forums like eBay expand the seller’s market across the world and sellers know that and avail themselves of the benefits. This opens up personal jurisdiction much more broadly. International Law: Judicial System of Japan There is very little litigation in Japan when compared to the United States. A primary reason for the difference is cultural because Japan nurtures the attitude that confrontation should be avoided. Other reasons include the high cost that must be borne by plaintiffs who want to file a lawsuit. Even if the plaintiff wins, the damages awarded are low. In the past, a relatively low number of lawyers graduated every year from the few law schools in Japan. But now, due to increasing business and personal disputes, the government is building new law schools and plans to double the number of lawyers by the year 2020. V. Terms and Concepts •

Article III of the U.S. Constitution— It provides that the federal government’s judicial power is vested in one “Supreme Court.” This court is the U.S. Supreme Court. 14 Copyright ©2019 Pearson Education, Inc.

Courts and Jurisdiction • • • • • • • • • • • • • • • • • • • • • • • • • •

Associate Justices of the U.S. Supreme Court—The eight other justices apart from the Chief Justice of the U.S. Supreme Court. Change of Venue—In certain circumstances, when pretrial publicity may prejudice jurors, a change of venue may be requested so that a more impartial jury can be found. Chief Justice of the U.S. Supreme Court—Appointed by the president and responsible for administration of the U.S. Supreme Court. Choice-of-law clause—A contract provision that designates a certain state’s law or country’s law that will be applied in any dispute concerning nonperformance of the contract. Circuit—The geographical area served by each U.S. court of appeals. Concurrent jurisdiction—Jurisdiction shared by two or more courts. Concurring opinion—An opinion that can be issued by a justice of the Supreme Court who agrees with the outcome of a case but not the reason proffered by the other justices. Court of Appeals for the Federal Circuit—A court of appeals in Washington, D.C., that has special appellate jurisdiction to review the decisions of the Claims Court, the Patent and Trademark Office, and the Court of International Trade. Delaware Court of Chancery—A special court which decides cases involving corporate governance, fiduciary duties of corporate officers and directors, mergers and acquisitions, and other business issues. Dissenting opinion—An opinion which sets forth the reason why a justice of the Supreme Court does not agree with a decision. District—The geographical area served by a U.S. district court. District of Columbia Circuit—The 12th circuit court, located in Washington, DC. Diversity of citizenship—A case between (1) citizens of different states and (2) a citizen of a state and a citizen or subject of a foreign country. En banc review—A review that can be requested by a petitioner in the U.S. court of appeals after a decision is rendered by a three-judge panel. Exclusive jurisdiction—Jurisdiction held by only one court. Federal question case—A case arising under the U.S. Constitution, treaties, and federal statutes and regulations. FISA warrant—A warrant issued by a FISA Court for the government to conduct surveillance against persons who are suspected of being threats to national security. Forum shopping—Looking for a favorable court without a valid reason. Forum-selection clause—Contract provision that designates a certain court to hear any dispute concerning nonperformance of the contract. Full Faith and Credit Clause—A clause of the U.S. Constitution under which a judgment of a court of one state must be given “full faith and credit” by the courts of another state. General-jurisdiction trial court—A court that hears cases of a general nature that are not within the jurisdiction of limited-jurisdiction trial courts. Testimony and evidence at trial are recorded and stored for future reference. Highest state court—The highest court in a state court system; it hears appeals from intermediate appellate state courts and certain trial courts. In personam jurisdiction—Jurisdiction over the parties to a lawsuit. In rem jurisdiction—Jurisdiction to hear a case because of jurisdiction over the property of the lawsuit. Intermediate appellate court—An intermediate court that hears appeals from trial courts. International Shoe Company v. State of Washington—A landmark U.S. Supreme Court case that established the minimum contacts standard.

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Limited-jurisdiction trial court—A court that hears matters of a specialized or limited nature. Long-arm statute—A statute that extends a state’s jurisdiction to nonresidents who were not served a summons within the state. Majority decision—A decision of the U.S. Supreme Court where a majority of the justices agree as to the outcome and reasoning used to decide a case. Minimum contact—A nonresident defendant in a civil lawsuit must have had some minimum contact with the state such that the maintenance of that lawsuit in that state does not offend traditional notions of fair play and substantial justice. Petition for certiorari—A petition asking the Supreme Court to hear one’s case. Plurality decision—A decision of the U.S. Supreme Court where a majority of the justices agree as to the outcome of a case but not as to the reasoning for reaching the outcome. Quasi in rem jurisdiction—Jurisdiction allowed a plaintiff who obtains a judgment in one state to try to collect the judgment by attaching property of the defendant located in another state. Rule of four—The votes of four justices are necessary to grant an appeal and schedule an oral argument before the Supreme Court. Service of process—A summons is served on the defendant to obtain personal jurisdiction over him or her. Small claims court—A court that hears civil cases involving small dollar amounts. Special federal courts—Federal courts that hear matters of specialized or limited jurisdiction. Standing to sue—The plaintiff must have some stake in the outcome of the lawsuit. State courts—A separate court system that is present in each state, Washington, DC and each territory of the United States. It includes limited-jurisdiction trial courts, generaljurisdiction trial courts, intermediate appellate courts, and a supreme court. State supreme court—The highest court in a state court system; it hears appeals from intermediate state courts and certain trail courts. Supreme Court of the United States— The highest court in the land located in Washington, DC. Tie decision—A Supreme court decision where the number of votes cast by the justices leads to a tie and the decision of the lower court is affirmed. It occurs when all nine judges are not present. Unanimous decision—A Supreme court decision where all the justices voting agree as to the outcome and reasoning used to decide a case. U.S. Bankruptcy Court—Special federal court that hears cases involving federal bankruptcy laws. U.S. Courts of Appeals—The federal court system’s intermediate appellate court. U.S. Court of Appeals for the Armed Forces—Special federal court that exercises appellate jurisdiction over members of the armed services. U.S. Court of Appeals for Veterans Claims—Special federal court that exercises jurisdiction over decisions of the Department of Veterans Affairs. U.S. Court of Federal Claims—Special federal court that hears cases brought against the United States. U.S. Court of International Trade—Special federal court that handles cases that involve tariffs and international trade disputes. U.S. district courts—The federal court system’s trial courts of general jurisdiction.

Courts and Jurisdiction •

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U.S. Foreign Intelligence Surveillance (FISA Court)—Located in Washington DC, the court hears requests by federal law enforcement agencies for warrants to conduct physical searches and electronic surveillance of against persons who are deemed to be threats to national security. U.S. Tax Court—Special federal court that hears cases that involve federal tax laws. Venue—A concept that requires lawsuits to be heard by the court with jurisdiction that is nearest the location in which the incident occurred or where the parties reside. Writ of certiorari—An official notice that the Supreme Court will review one’s case. Zippo Manufacturing Company v. Zippo Dot Com, Inc.—An important case that established a test for determining when a court has jurisdiction over the owner or operator of an interactive, semi-interactive, or passive website.

Judicial, Alternative, and E-Dispute Resolution

JUDICIAL, ALTERNATIVE, AND E-DISPUTE RESOLUTION

“We’re the jury. Dread our fury!” William S. Gilbert

I. Teacher to Teacher Dialogue Only a small percentage of cases make it to trial. The reality is that most cases settle at some point in the process. Settling is safer, quicker, and usually less costly. Few modern American lawyers try cases through a decision at this juncture. Most cases are settled during the discovery process. As such, I try to present a more realistic picture of how our system works. I basically start by presenting statistics on how few controversies actually get to the trial stage and how even fewer of those are actually reported in the National Reporter System. In addition, I spend a fair amount of time reviewing the growing trend towards alternative dispute resolution (ADR) mechanisms. I illustrate the key identifying features of each method. I use both personal experience examples, as well as local statutory enactments, to help illustrate the growing trends towards ADR. If none of these out-of-court methods are feasible, proceed to itemize the key steps used in a court trial. For those of you who are practicing trial attorneys or who have worked in that arena before coming to academia, this material gives you an obvious area of focus and further elaboration. In any event, I always try to use this opportunity to ask students about their own personal contact with our court system. I do, however, preface these conversations with the caveat that they need not volunteer information that might be embarrassing, confidential, inappropriate, or personal in nature.

II. Learning Objectives and Chapter Contents • • • • • • • •

Describe how attorneys are compensated. Describe the pretrial litigation process. Define complaint, summons, and answer and describe the pleading process. Define class action and describe the requirements for bringing a class action lawsuit. Describe the discovery process and the various methods of discovery. Contrast the different types of pretrial motions. Describe the goals and procedures of a settlement conference. Describe the trial process. 19

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Explain how electronic technology is being used in courts and legal proceedings. Describe the appellate process and the possible results of an appeal. Explain the use of arbitration and other methods of alternative dispute resolution. Describe forms of e-dispute resolution.

III. Key Question Checklist • • • • •

Does the dispute or controversy lend itself to out-of-court resolution? If the dispute or controversy needs to be resolved in a court of law, which court has jurisdiction? Once jurisdiction is established, was the proper sequence of pretrial steps taken? Was the trial sequence properly followed? After the trial is completed, are any appeals from the decision applibable?

IV. Text Materials

Introduction to Judicial, Alternative, and E-Dispute Resolution Alternative Dispute Resolution One solution to the expense of litigation in terms of both time and money is alternative dispute resolution.

Attorney Representation 3.1 Describe how attorneys are compensated Compensation through hourly, retainer, flat fee, or contingency-fee structures. Case 3.1 Contingency-Fee Agreement Goesel v. Boley International (H.K.) Ltd. 806 F.3d 414 (2015) In a personal injury type of case, a federal court enforced and upheld a contingency-fee agreement on appeal. One objective of this chapter is to familiarize students with the court trial sequence. Litigation is the process of bringing, maintaining, and defending lawsuits. Because it is often difficult and expensive, people turn to various forms of non-judicial dispute resolution, or alternative dispute resolution.

Pretrial Litigation Process 3.2 Describe the pretrial litigation process The pretrial litigation process can be divided into the following major phases: pleadings, discovery, pretrial motions, and settlement conference.

Judicial, Alternative, and E-Dispute Resolution

Pleadings 3.3 Define complaint, summons, and answer and describe the pleading process. The paperwork filed to initiate and respond to a lawsuit is known as the pleadings. These include the complaint and summons, the answer, and any cross-complaints and replies, as well as interventions and consolidation requests. Complaints and Summons – To initiate a lawsuit, the party who is suing (the plaintiff) must file a complaint in the proper court. A summons is a court order directing the defendant to appear in court and answer the complaint. The complaint and summons are served on the defendant. This is called service of process. Answer – The defendant, the party who is being sued, must file an answer to the plaintiff’s complaint. Cross-Complaint and Reply – A defendant who believes that he or she has been injured by the plaintiff can file a cross-complaint against the plaintiff in addition to an answer. The original plaintiff must file a reply (answer) to the cross-complaint. Intervention and Consolidation – If other persons have an interest in a lawsuit, they may intervene and become parties to the lawsuit. This is called intervention. If several plaintiffs have filed separate lawsuits stemming from the same fact situation against the same defendant, the court can consolidate the cases into one case if doing so would not cause undue prejudice to the parties. Statute of Limitation – Federal and state law establishes time bars or limitations as to how long plaintiffs may have until a case must be filed against a defendant in a particular legal matter and cause of action. This is a statutory period during which the plaintiff must file his lawsuit or lose the right to sue.

Class Action 3.4 Define class action and describe the requirements for bringing a class action lawsuit. A class action occurs when a group of plaintiffs collectively bring a lawsuit against a defendant. Critical Legal Thinking – The purpose of class actions is to provide individual consumers with the financial ability to address claims they have against major corporations. Yes, many plaintiffs would not be able to afford to sue large companies as individual plaintiffs. The Class Action Fairness Act (CAFA) gives federal courts power to hear cases which are worth over $5 million that state courts would have otherwise heard in the past. Federal courts also may rule upon the reasonableness of non-cash or coupon settlements. Case 3.2 Class Action Tyson Foods, Inc. v Bouaphakeo 136 S. Ct. 1036 (2016) Facts: Employees of Tyson sued Tyson sued for Tyson’s alleged failure to pay time and a half wages during certain periods of time prescribed under the Fair Labor Standards Act. Issue: Should a class be certified in the case? 21

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Decision: SCOTUS determined the class should be certified. Ethics Questions: Students will have varying thoughts on this question.

Discovery 3.5 Describe the discovery process and the various methods of discovery. Discovery is a pretrial procedure designed to allow both sides to uncover information through depositions, interrogatories, production of documents, and physical or mental examinations. Deposition – A deposition is oral testimony given by a party or witness prior to trial. The person giving a deposition is called the deponent. Interrogatories – Interrogatories are written questions submitted by one party to a lawsuit to another party. Production of Document – One party to a lawsuit may request that the other party produce all documents that are relevant to the case prior to trial. This is called production of documents. Physical or Mental Examination – In cases that concern the physical or mental condition of a party, a court can order the party to submit to certain physical or mental examinations to determine the extent of the alleged injuries. Information Technology – Cellphone texting data is discoverable and social media posts and photos are as well.

Pretrial Motions 3.6 Contract the different types of pretrial motions. Pretrial motions like a motion for judgment on the pleadings and a motion for summary judgment are used to try to dispose of all or part of the lawsuit prior to trial. Motion for Judgment on the Pleadings – A motion for judgment on the pleadings can be made by either party once the pleadings are complete. This motion alleges that if all the facts presented in the pleadings are true, the party making the motion would win the lawsuit when the proper law is applied to these facts. Motion for Summary Judgment – A motion for summary judgment asserts that there are no factual disputes to be decided by the jury and that the judge should apply the relevant law to the undisputed facts and decide the case. Case 3.3 State Court Case Summary Judgment Wade v. Wal-Mart Stores, Inc. 39 N.E. 1141 (2015) Facts: A Wal-Mart client parked in a shopping parking lot and fell and broke her leg in a sizeable pothole in the lot. She sued Wal-Mart which sued for summary judgment on the basis

Judicial, Alternative, and E-Dispute Resolution that it did not owe the client a duty because the pothole was an open and obvious hazard for which Wal-Mart owed the customer no duty. Issue: On appeal, should Wal-Mart be granted summary judgment. Decision: Yes, Wal-Mart should be granted summary judgment. Ethics: Students will have differing thoughts on this issue.

Settlement Conference 3.7 Describe the goals and procedures of a settlement conference. Many courts require that the parties appear for a pretrial hearing known as a settlement conference in order to identify relevant issues and attempt settlement. Critical Legal Thinking – Cases are settled to give parties certainty and closure to business problems. Cases also are settled to reduce the amount of money which must be spent on legal fees to litigate matters. The American court system would not be able to handle additional cases which would result from cases not settling. Contemporary Environment: Cost-Benefit Analysis of a Lawsuit Plaintiffs should always perform a cost-benefit analysis before filing a lawsuit; taking into account both the tangible and intangible costs of the suit and weighing these against the expected return. Similarly, the defendant should consider all costs because it may prove to be more expedient to settle the suit.

Trial 3.8 Describe the trial process. Under the Seventh Amendment, parties to a lawsuit are guaranteed the right to a jury trial. If the parties wave their right to a jury trial, the judge sits as the trier of fact. Each party submits a trial brief to the judge, containing legal support for its side. Jury Selection – Jury selection is made through a process called voir dire, where lawyers for both sides and the sitting judge question prospective jurors to determine potential biases that would eliminate them from being seated on the jury. Opening Statements – Opening statements are made by both attorneys to summarize the factual and legal issues of the case. The Plaintiff’s Case – The plaintiffs present their case first and bear the burden of proof. They will call witnesses to give testimony, after which the defendant’s attorney will have the right to question them. The plaintiff’s attorney then has the chance to ask more questions. The Defendant’s Case – The defendant then has the opportunity to present his case, rebutting the plaintiff’s evidence, proving affirmative defenses, and proving any allegations in his crosscomplaint. Rebuttal and Rejoinder – After the defendant’s case, the plaintiff’s attorney may call witnesses to rebut the defendant’s case and introduce other evidence through a rejoinder. Closing Arguments – Following all testimony, each party’s attorney will make their closing arguments. 23

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Jury Instructions, Deliberation, and Verdict – The closing arguments are followed by the judge reading the jury instructions. The jury retires to deliberate and then returns their verdict. Entry of Judgment – The judge then either enters judgment or issues a judgment notwithstanding the verdict, overturning the jury verdict for bias or jury misconduct. The judge may reduce the monetary award through remitter. Ethics – Nondisclosure of evidence during discovery or trial is an ethical issue.

E-Courts 3.9 Explain how electronic technology is being used in courts and legal proceedings. Technology has a strong presence in legal proceedings. Briefs, motions, and pleadings are filed electronically and some courtrooms and court proceedings are actually conducted virtually.

Appeal 3.10 Describe the appellate process and the possible results of an appeal. In a civil trial, either party can file a timely appeal once a final judgment is entered. In fact, both parties may file an appeal. The petitioner or appellant files the appeal against the appellee, or respondent. The appellant usually files an opening brief, while the appellee files a responding brief. An appellate court will make a decision as to whether bias, abuse of process, error or law, or mistake of law has been made by a trial court.

Global Law International Law: British Legal System English law is based on common law, that is, law made by judges who decide cases by applying legal precedent established in prior cases (stare decisis) and their common sense. The court system of England consists of trial courts that hear criminal and civil cases and appellate courts. The House of Lords, in London, is the supreme court of appeal.

Alternative Dispute Resolution 3.11 Explain the use of arbitration and other methods of alternative dispute resolution. One solution to the expense of litigation in terms of both time and money is alternative dispute resolution. Negotiation – A procedure by which the parties to a dispute try to voluntarily settle their dispute. This is usually done through a series of offers and counteroffers. Successful negotiations will culminate in a settlement agreement. Arbitration – An impartial third party hears evidence and testimony and decides the dispute in arbitration. Arbitration clauses have become common in labor union agreements, franchise agreements, and commercial contracts. Critical Legal Thinking – Benefits of arbitration clauses are privacy and confidentiality. Detriments are that decisions can be binding and therefore, parties generally cannot appeal. 24

Judicial, Alternative, and E-Dispute Resolution

Landmark Law: Federal Arbitration Act Enacted in 1925, this act provides that commercial agreements calling for arbitration are valid, irrevocable, and enforceable. Arbitration Procedure – The arbitration agreement usually describes the procedures that must be followed, including the notices that must be given and how the arbitrator will be selected. The arbitrator issues an award after the hearing. The parties usually agree that this will be a binding decision. If a party fails to abide by the decision in binding arbitration, the other party may file an action in court to enforce the decision.

Case 3.4 Arbitration Agreement Kindred Nursing Centers Limited Partnership v. Clark 137 S.Ct. 1421 (2017) Facts: A nursing home attempts to hold a party to an arbitration agreement executed by the party’s power of attorney. Issue: Is the arbitration agreement binding when an attorney in fact executes it but has broad powers to do so? Decision: The arbitration agreement was enforced by SCOTUS and is binding. Ethics: Students will have differing views on this issue. Mediation – Mediation calls for a neutral third party to act as a mediator, but not decision maker. His job is to encourage settlement between the parties. If the two sides choose an interested third party to act as a mediator, he is considered a conciliator. Mini-trial – The attorneys for both sides present their cases to the representatives of both of the parties that have the authority to settle the case. Fact-Finding – The parties hire a neutral third party to investigate the dispute and recommend a settlement. Judicial Referee – The court can appoint a referee to conduct a private trial and render a judgment.

E-Dispute Resolution 3.12 Describe forms of e-dispute resolution. E-Courts – Due to the Internet and other technologies, electronic courts, or e-courts, also referred to as virtual courthouses, are substantially being used by courts. Technology allows for the electronic filing—e-filing—of pleadings, briefs, and other documents related to a lawsuit. Digital Law: E-Dispute Resolution Legal disputes are now often resolved using electronic dispute resolution, or e-dispute resolution. Many ADR providers offer electronic arbitration, or e-arbitration services. Most of these services allow a party to a legal dispute to register the dispute with the service and then notify the other party by e-mail of the registration of the dispute. Several websites offer electronic mediation, or e-mediation services. 25

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V. Key Terms and Concepts • • • • • • • • • • • • • • • • • • • • • • • • •

Affirmative defense—May be asserted by a defendant along with an answer to a complaint. Alternative dispute resolution (ADR)—Methods of resolving disputes other than litigation. Answer—The defendant’s written response to the plaintiff’s complaint that is filed with the court and served on the plaintiff. Appeal—The act of asking an appellate court to overturn a decision after the trial court’s final judgment has been entered. Appellant—The appealing party in an appeal. Also known as petitioner. Appellee—The responding party in an appeal. Also known as respondent. Arbitration clause—A clause contained in many international contracts that stipulates that any dispute between the parties concerning the performance of the contract will be submitted to an arbitrator or arbitration panel for resolution. Arbitration—A form of alternative dispute resolution in which the parties choose an impartial third party to hear and decide the dispute. Arbitrator—The neutral party in an arbitration. Binding arbitration—The type of arbitration where the parties agree to be bound by an arbitrator’s decision and remedy. Burden of proof—Borne by the plaintiff to persuade the trier of fact of the merits of his or her case. Class action—A lawsuit where a group of plaintiffs with common claims collectively bring a lawsuit against a defendant. Class action waiver—When a consumer waives her right to join a common class of plaintiffs in a lawsuit against a defendant. Closing argument—An argument made to the jury by each party’s attorney at the conclusion of the presentation of evidence. Complaint—The document the plaintiff files with the court and serves on the defendant to initiate a lawsuit. Consolidation—The act of a court to combine two or more separate lawsuits into one lawsuit. Cost-benefit analysis—Performed by both the plaintiff and defendant to determine whether to bring or defend a lawsuit in court. Cross-complaint—Filed by the defendant against the plaintiff to seek damages or some other remedy. Cross-complainant—The defendant who files a cross-complaint against the plaintiff. Cross-defendant—The original plaintiff against whom a cross-complaint has been filed. Cross examination—When opposing counsel examines a witness for the other side in a lawsuit. Defendant—The party who is being sued. Defendant’s case—Proceeds after the plaintiff’s case. It must rebut the plaintiff’s evidence, prove any affirmative defenses asserted by the defendant, and prove any allegations contained in the defendant’s cross-complaint. Deponent—Party who gives his or her deposition. Deposition—Oral testimony given by a party or witness prior to trial. The testimony is given under oath and is transcribed.

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Direct examination—Examination carried out by the plaintiff’s attorney, during the plaintiff’s case, after a witness has been sworn in. Discovery—A legal process during which both parties engage in various activities to discover facts of the case from the other party and witnesses prior to trial. Electronic arbitration—The arbitration of a dispute using online arbitration services. Electronic court— A court that either mandates or permits the electronic filing of pleadings, briefs, and other documents related to a lawsuit. Also called a virtual courthouse. Electronic dispute resolution—The use of online alternative dispute resolution services to resolve a dispute. Electronic filing—The online filing of pleadings, briefs, and other documents related to a lawsuit. Electronic mediation—The mediation of a dispute using online mediation services. Error of law—Error in court records which may lead an appellant court to reverse a lower court’s decision. Federal Arbitration Act (FAA)—Enacted by the Congress to promote arbitration of disputes. Final judgment—A court’s decision or remedy. Finding of fact—An appellate court will not reverse a finding of fact made by a jury, or made by a judge if there is no jury, unless such finding is unsupported by the evidence or is contradicted by the evidence. Impanel—Once the appropriate number of jurors is selected, they are impaneled to hear the case and are sworn in. Interrogatories—Written questions submitted by one party to another party. The questions must be answered in writing within a stipulated time. Intervention—The act of joining others as parties to an existing lawsuit. Judgment—A decision entered by a judge based on the verdict given by the jury. Judgment notwithstanding the verdict—The overturning of a verdict by a court due to bias or jury misconduct. Jury deliberation—The retiring of the jury to consider the evidence and to attempt to reach a verdict. Jury instruction— Instructions that the judge gives to the jury that inform the jurors of the law to be applied in the case. Jury trial—A trial which involves a jury. Litigation—The process of bringing, maintaining, and defending a lawsuit. Mediation—A form of ADR in which the parties chose a neutral third party to act as the mediator of the dispute. Mediator—A neutral third party who assists in mediation. Mini-trial—A voluntary private proceeding in which lawyers for each side present a shortened version of their case to the representatives of both sides. Motion for judgment on the pleadings—Motion that alleges that if all the facts presented in the pleadings are taken as true, the moving party would win the lawsuit when the proper law is applied to these asserted facts. Motion for summary judgment—Motion that asserts that there are no factual disputes to be decided by the jury; if so, the judge can apply the proper law to the undisputed facts and decide the case without a jury. These motions are supported by affidavits, documents, and deposition testimony. Negotiation—A procedure whereby the parties to a dispute engage in discussions and bargaining to try to reach a voluntary settlement of their dispute. 27

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Nonbinding arbitration—An arbitration where the decision and award of the arbitrator can be appealed to the courts. Nonjudicial dispute resolution—The resolution of disputes outside of the court judicial system. Notice of appeal—Notice that must be filed by a party within a prescribed time after a court judgment is entered. Opening brief—Filed by the appellant’s attorney; it sets forth legal research and other information to support his or her contentions on appeal. Opening statement—Remarks made by each counsel in a lawsuit at the beginning of the trial before witness testimony is taken. Physical or mental examination—A court may order another party to submit to a physical or mental examination prior to trial. Plaintiff—The party who files the lawsuit. Plaintiff’s case—A plaintiff bears the burden of proof to persuade the trier of fact of the merits of his or her case. This is called the plaintiff’s case. Pleadings—The paperwork that is filed with the court to initiate and respond to a lawsuit. Pretrial motion—A motion a party can make to try to dispose of all or part of a lawsuit prior to trial. Production of documents—Request by one party to another party to produce all documents relevant to the case prior to the trial. Rebuttal—After the defendant’s attorney has finished calling witnesses, the plaintiff’s attorney can call witnesses and put forth evidence to rebut the defendant’s case. Record—An account of court proceedings. Re-direct examination—After the defendant’s attorney completes his or her questions, the plaintiff’s attorney can ask questions of the witness. Rejoinder—The defendant’s attorney can call additional witnesses and introduce other evidence to counter the rebuttal. Remittitur—The judge’s decision to reduce the amount of monetary damages awarded by the jury if he or she finds the jury to have been biased, emotional, or inflamed. Reply—Filed by the original plaintiff to answer the defendant’s cross-complaint. Responding brief—May be filed by the appellee to answer the appellant’s contentions. Sequester—The separation of the jury from family during the entire course of a trial which is important or controversial. Service of process—A summons is served on the defendant to obtain personal jurisdiction over him or her. Settlement agreement—An agreement that is voluntarily entered into by the parties to a dispute that settles the dispute. Settlement conference—A hearing before a trial in order to facilitate the settlement of a case. Statute of limitations—Statute that establishes the time period during which a lawsuit must be brought; if the lawsuit is not brought within this period, the injured party loses the right to sue. Submission agreement—Agreement by parties to submit a dispute to arbitration after the dispute arises. Summons—A court order directing the defendant to appear in court and answer the complaint. Trial briefs—Documents submitted by the parties’ attorneys to the judge that contain written legal arguments which support for their side of the case. Trier of fact—The jury in a jury trial; the judge where there is not a jury trial. 28

Judicial, Alternative, and E-Dispute Resolution • • • • •

Uniform Arbitration Act—An act which promotes the arbitration of disputes at the state level. Verdict—The decision reached by a jury after deliberation. Virtual courthouse—A court that either mandates or permits the electronic filing of pleadings, briefs, and other documents related to a lawsuit. Voir dire—The process whereby the judge and attorneys ask prospective jurors questions to determine whether they would be biased in their decisions or whether they would make good jurors for a trial. Written memorandum—It is issued by the trial court and sets forth the reasons for the judgment.

CONSTITUTIONAL LAW FOR BUSINESS AND E-COMMERCE

“We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish the Constitution for the United States of America.” Preamble to the Constitution of the United States of America

I. Teacher to Teacher Dialogue Constitutional law is, for many legal academics, not only their reason for loving to teach but it also provides the ultimate challenge in illustrating the constant balance of competing but legitimate rights of the individual and the business community vis-à-vis the larger society. The only major drawback to this material is the frustration of having the time constraints inherent in a survey course. Because of these time limitations, teaching efforts might best be concentrated on two main objectives: 1. The concepts of federalism, dual sovereignty, and the balancing of rights among the often-competing sovereigns of federal and state government. 2. The enumeration of key individual civil liberties protections listed in the Bill of Rights with an extrapolation of those same theories to business. The most impressive fact that surfaces in the study of the Constitution is that the Constitution itself, but through rare Amendments, never changes itself but its interpretation is always in motion. This underscores the importance of the courts. To watch students as they uncover the mysteries found in this document is well worth the effort.

II. Learning Objectives and Chapter Contents • • • • • •

Describe the U.S. Constitution and the concepts of federalism and the doctrine of separation of powers. Define and apply the Supremacy Clause of the U.S. Constitution. Explain the federal government’s authority to regulate interstate commerce and foreign commerce. Describe how Commerce Clause is applied to e-commerce. Describe the Bill of Rights and the process for amending the U.S. Constitution. Explain how the freedom of speech is protected by the First Amendment. 31 Copyright ©2019 Pearson Education, Inc.

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Explain how the freedom of religion is protected and how the government may not promote religion. Explain the doctrines of equal protection and how it protects persons from unequal treatment by the government. Describe the Due Process Clause and substantive and procedural due process. Explain how the government can take private property but must pay just compensation for the taking. Explain how the privileges and immunities doctrine protects citizens from unfavorable treatment by the government.

III. Key Question Checklist • • • • •

Is this business activity one that is specifically addressed in the U.S. Constitution? What general direction of control may be taken by the appropriate government entity? Are there checks and balances or power sharing? What are a business’s courses of action if it chooses to resist the governmental action taken against it? Do any constitutional rights apply?

IV. Text Materials The key objective of this chapter is to introduce students to the role of the U.S. Constitution and its pivotal role in the ultimate distribution of powers between the federal government and the states, vis-à-vis the control of business conduct in the U.S. This aspect of the chapter will introduce students to key terms they will be using throughout the rest of the course, such as substantive and procedural due process. Introduction to Constitutional Law for Business and E-Commerce The colonies signed the Declaration of Independence in 1776 and gained their freedom through the American Revolution.

Constitution of the United States of America 10.1 Describe the U.S. Constitution and the concepts of federalism and the doctrine of separation of powers. In 1778, the Continental Congress formed a federal government, adopting the Articles of Confederation. The Constitutional Convention in 1787 agreed to a U.S. Constitution, which was ratified by the states in 1788. It established three branches of government, and protected the rights of individuals by limiting the United States’ government’s ability to restrict those rights. Federalism and Delegated Powers – The U.S. operates in federalism, which means power is shared between the federal government and the state governments. The Constitution delegates certain enumerated powers to the federal government. Doctrine of Separation of Powers – Articles 1, 2, and 3 establish the legislative, executive, and judicial branches of government, respectively.

Constitutional Law for Business and E-Commerce

Checks and Balances – A system of checks and balances are built into the Constitution, preventing any one branch from becoming too powerful.

Supremacy Clause 4.2 Define and apply the Supremacy Clause of the U.S. Constitution. The Supremacy Clause establishes that the federal Constitution, treaties, laws, and regulations are the supreme law in the U.S., and take precedence over state and local law. This concept of federal law taking precedence over state or local law is called the preemption doctrine. Any state or local laws that conflict, are considered to be unconstitutional. Congress can expressly provide that federal statutes will exclusively regulate an activity or area, or may allow for concurrent jurisdiction of that area with the state governments. Case 4.1 Supremacy Clause Mutual Pharmaceutical Company, Inc. v. Bartlett, 133 S.Ct. 2466 (2013) Does federal drug labeling law preempt a stricter state drug labeling law and the answer is “yes” based on the Supremacy Clause of the Constitution. The Supremacy Clause disallows state and local laws which are in conflict with federal standards. In terms of ethics, uniformity of law is a key principle in this country to treat citizens fairly across the various states. The United States needs to be consistent in its approach to labeling drugs. If Mutual had influence over the federal standard of drug labeling, it too would have lobbied at the state level regarding state standards for drug labeling. Critical Legal Thinking – Without the Supremacy Clause, the union of states would be far weaker and it would be difficult in today’s world for the United States to conduct business on an international basis. Federal law is becoming more and more important in the modern business environment.

Commerce Clause 4.3 Explain the federal government’s authority to regulate interstate commerce and foreign commerce. The Commerce Clause stipulates that Congress will regulate commerce with other nations, between the states, and with Native Americans. The federal government regulates all activities that affect interstate commerce. Native Americans – Many tribes of the indigenous people of the United States entered into treaties with the federal government, often under great pressure. They usually relinquished their claim on the native land and were relocated to reservations. Most of the treaties were eventually broken by the government. Although many tribes have maintained their own government, they are under the protection of the U.S. government, so they are separate nations, but domestically dependent. Indian Gaming Regulatory Act – This Act authorized the individual tribes to operate gaming facilities. Foreign Commerce Clause – The federal government has exclusive power to regulate commerce with foreign nations.

Chapter 4

Direct and indirect regulation of foreign commerce by state or local federal governments that discriminates against foreign commerce is a violation of the Foreign Commerce Clause and is therefore illegal. Interstate Commerce – The federal government regulates all activities that affect interstate commerce. Landmark U.S. Supreme Court case: Heart of Atlanta Motel V. United States The Heart of Atlanta motel solicited clients from outside the state through various forms of media. It refused to rent to blacks, even after the passage of the Civil Rights Act of 1964. The owner of the motel brought an action for declaratory relief in a federal district court to have the Act declared unconstitutional, arguing that Congress had exceeded its power to regulate interstate commerce. The U.S. District Court upheld the Civil Rights Act, enjoining the owner-operator from discriminating. An appeal to the U.S. Supreme Court was filed. The U.S. Supreme Court held that the Civil Rights Act of 1964 that had been enacted by Congress was constitutional. The Commerce Clause of the U.S. Constitution grants Congress the power to regulate commerce “among the several states,” i.e., interstate commerce. Originally, the Supreme Court interpreted the Commerce Clause to mean that the federal government could only regulate commerce that moved in interstate commerce. The modern rule, however, allows the federal government to regulate activities that affect interstate commerce. State and Police Power – The states have the right to regulate commerce within their borders, under the authority of the states’ police power. They also have the right to enact laws that promote public health, safety, morals, and general welfare, provided that they do not unduly burden interstate commerce. Dormant Commerce Clause – The federal government may opt to not regulate certain areas that it has the power to regulate under the dormant Commerce Clause. The states, under the theory of police power, can enact laws regulating these areas, provided that they do not unduly burden interstate commerce.

E-Commerce and the Constitution 4.4 Describe how Commerce Clause is applied to e-commerce. The Internet and other computer networks permit parties to obtain website domain names and conduct business electronically. This is usually referred to as electronic commerce or ecommerce. Some businesses conducting e-commerce over the Internet do not have any physical location, whereas many augment their traditional sales with e-commerce sales as well. Ecommerce is subject to the Commerce Clause of the U.S. Constitution. Information Technology E-Commerce and the Commerce Clause Michigan law prohibits out-of-state wineries from selling directly to customers through any medium, instead requiring them to sell to Michigan wholesalers, which will handle the instate distribution of the products. Domaine Alfred, located in California, sued, claiming that the law caused an undue burden on interstate commerce, violating the Commerce Clause. The U.S. District Court ruled in favor of Michigan, but the court of appeals reversed the decision. The state appealed.