Legal and Regulatory Environment of Business 16th Edition Pagnattaro Solutions Manual 1

Chapter 06 - The Constitution
Solution Manual for Legal and Regulatory

Environment of Business 16th Edition
Pagnattaro Reed Shedd Morehead 0077437330
9780077437336
Download full solution manual at:
https://testbankpack.com/p/solution-manual-for-legal-and-regulatory-environment-
of-business-16th-edition-pagnattaro-reed-shedd-morehead-0077437330-
9780077437336/
Download full test bank at:

https://testbankpack.com/p/test-bank-for-legal-and-regulatory-environment-of-
business-16th-edition-pagnattaro-reed-shedd-morehead-0077437330-
9780077437336/
Chapter 6
The Constitution
Learning Objectives
This chapter introduces the basic concepts of the Constitution and how they create authority for
the framework of the federal government. Emphasis is placed on the role of the Contracts Clause
in business. It then introduces the student to the major amendments to the Constitution. Finally,
the chapter analyzes the basic protections created in the First, Second, and Fourteenth
Amendments.
References
• The Declaration of Independence and the Constitution of the United States. Georgetown
University Press (2003).
• Aman, A.C., Aman and Mayton’s Handbook on Administrative Law, 2nd Edition. West
Publishing (2001).
• Barendt, E.M., Freedom of Speech. Oxford University Press (2005).
• Cookson, C., Encyclopedia of Religious Freedom. Routledge (2003).
6-1
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
• George, R.P., Great Cases in Constitutional Law. Princeton University Press (2000).
• Hargreaves, R., The First Freedom: A History of Free Speech. Sutton (2002).
• Hartmann, T., Unequal Protection: The Rise of Corporate Dominance and the Theft of
Human Rights. St. Martin’s Press (2002).
• Labunski, R.E., James Madison and the Struggle for the Bill of Rights. Oxford University
Press (2006).
• Levinson, N., Outspoken: Free Speech Stories. University of California Press (2003).
• Levy, L.L., Origins of the Bill of Rights. Yale University Press (1999).
• Meyer, H.N., The Amendment that Refused to Die: Equality and Justice Deferred: The
History of the Fourteenth Amendment. Madison Books (2000).
• Orth, J.V., Due Process of Law: A Brief History. University Press of Kansas (2003).
• Parpworth, N., Constitutional and Administrative Law. Oxford University Press (2006).
• Riley, D. and B. Brophy-Baermann, Bureaucracy and the Policy Process: Keeping the
Promises. Rowman & Littlefield (2006).
• Schuck, P., Schuck’s Foundation of Administrative Law, 2nd Edition. West Publishing
(2003).
• Stillman, R.J., The American Bureaucracy: The Core of Modern Government.
Wadsworth/Thompson Learning (2004).
• Stoner, J.R., Common-Law Liberty: Rethinking American Constitutionalism. University
Press of Kansas (2003).
• Tushnet, M.V., A Court Divided: The Rehnquist Court and the Future of Constitutional
Law. W.W. Norton Co. (2005).
• Watry, R.A., Administrative Statutory Interpretation: The Aftermath of Chevron v. Natural
Resources Defense Council. LFB Scholarly Publications (2002).
Go to http://www.whitehouse.gov/government/independent-agencies.html for an alphabetical

listing of federal administrative agencies.
Teaching Outline
I. Basic Concepts
A. Separation of Powers (LO 6-1)
Emphasize:
• That a lesser emphasized separation of powers is that between the federal government
and governments at the state and local levels.
• The concept of federalism.
• The importance of the Tenth Amendment.
6-2
B. Supremacy Clause (LO 6-2)
Emphasize:
• That Article VI makes it clear that the Constitution is supreme under all laws and that
federal law is supreme over a state law or local ordinance.
• The reasons behind federal supremacy.
• That the Supremacy Clause is not a source of federal rights. Rather it secures federal
rights created elsewhere by giving them priority whenever they come in conflict with
state law.
Preemption
Emphasize:
• The meaning and purpose of preemption.
• Sidebar 6.1—“Examples of State Laws Preempted by Federal Law.”
• The example regarding Watters v. Wachovia Bank NA, 127 S.Ct. 1559 (2007).
Cases for Discussion:
1. Geier v. American Honda Motor Company, Inc., 120 S.Ct. 1913 (2000).
Geier sued American Honda Motor Company, Inc. after she sustained injuries when
her 1987 Honda collided with a tree. Geier’s car had shoulder and lap belts but no
airbags. Geier claims that Honda should have equipped the car with airbags and is
liable because it did not. Honda relies on federal statutes and regulations to absolve it
from liability since the federal authorities did not require, but permitted, the
installation of airbags in 1987 model cars.
Issues: Does the National Traffic and Motor Vehicle Safety Act of 1966 preempt
Geier’s lawsuit? Does the 1984 version of the Federal Motor Vehicle Safety Standard
(FMVSS 208) preempt Geier’s suit?
Held: No and Yes. The 1966 Act does not preempt the lawsuit because it has a
savings clause that “does not exempt any person from liability under common law.”
There exists a conflict between the FMVSS 208 safety standard allowing
manufacturers discretion whether to install airbags in 1987 models and a lawsuit
claiming the manufacturer is liable for failing to install airbags. The conflict is
resolved by finding that the federal safety standard preempts the state-based lawsuit.
6-3
2. Barnett Bank of Marion County, N.A. v. Nelson, 116 S.Ct. 1103 (1996).
Barnett Bank bought a Florida licensed insurance agency. The State of Florida
Insurance Commissioner ordered Barnett Bank to stop selling insurance. Florida law
prohibits any bank which is affiliated with other banks from selling insurance.
Barnett Bank sought a declaratory judgment that the federal law preempts Florida’s
law. A 1916 federal law allows banks in small towns (with less than 5,000 in
population) to sell insurance.
Issue: Does the federal law preempt the Florida law?
Held: Yes. There is a conflict between the meaning of the federal and Florida laws.
This conflict cannot be reconciled by enforcing both laws. The federal law preempts
the Florida law under the Supremacy Clause.
3. New York Blue Cross Plans v. Travelers Inc., 115 S.Ct. 1671 (1995).
A New York statute requires hospitals to collect a surcharge from patients covered
by certain commercial insurers and HMOs. Insureds under Blue Cross/Blue Shield
plans were not subject to the surcharge. Several insurance companies and HMOs
brought this action contending that the Employee Retirement Income Security Act of
1974 (ERISA) preempted the area of health insurance when such coverage is
purchased by an employee health-care plan governed by ERISA.
Issue: Are the health plans subject to the New York law sufficiently related to
employee benefit plans to fall within ERISA’s preemption?
Held: No. New York’s surcharges affect only indirectly the relative prices of
insurance policies. This result is no different from many state laws in areas
traditionally subject to local regulation. Congress could not possibly have intended to
eliminate all of these areas of regulation.
4. Garcia v. San Antonio Metropolitan Transit Authority, 105 S.Ct. 1005 (1985).
The U.S. Labor Department sought to enforce minimum wage and overtime pay
standards against the mass transit system in San Antonio, Texas. The case sought a
reversal of National League of Cities.
Issue: Does the federal law apply to these employees of a local transit system?
6-4
Held: Yes. Public transit authorities are required to comply with the overtime
provisions of federal law pursuant to congressional power to regulate interstate
commerce.
5. Capital Cities Cable, Inc. v. Crisp, 104 S.Ct. 2694 (1984).
The FCC regulates cable television. Oklahoma prohibited the broadcasting of

advertisements for alcoholic beverages.
Issue: Does the FCC preempt state regulation of TV advertising?
Held: Yes. Under supremacy clause, enforcement of state regulation may be

preempted by federal law in several circumstances, i.e., first, when Congress, in
enacting federal statute has expressed clear intent to preempt state law, second, when
it is clear, despite absence of explicit preemptive language, that Congress has
intended, by legislating comprehensively, to occupy entire field of regulation and has
thereby left no room for states to supplement federal law, and, finally, when
compliance with both state and federal law is impossible or when state law stands as
an obstacle to accomplishment and execution of full purposes and objectives of
Congress.
6. Perez v. Campbell, 91 S.Ct. 1704 (1971).
Arizona had a statute which provided for the suspension of licenses of drivers who
were unable to satisfy judgments even if bankrupt. P had filed a voluntary petition in
bankruptcy and had duly scheduled a judgment debt arising out of a traffic accident.
The court in bankruptcy discharged P. P filed a complaint seeking to retain a driver’s
license.
Issue: Is the Arizona law in conflict with the federal bankruptcy law?
Held: Yes. The Arizona statute is unconstitutional. The two provisions are in direct
conflict. The purpose of the Bankruptcy Act is to give debtors new opportunity
unhampered by the pressure and discouragement of preexisting debt. The challenged
state statute stands as an obstacle to the accomplishment and execution of the full
purposes and objectives of Congress.
II. Federal Government’s Authority to Regulate Business—The Commerce Clause (LO 6-

3)
6-5
Emphasize:
• That the commerce clause can be found in Article 1, Section 8, of the United States
Constitution.
A. Regulation of Foreign Commerce
Emphasize:
• That the power to regulate foreign commerce is vested exclusively in the federal
government, and it extends to all aspects of foreign trade.
B. Regulation of Interstate Commerce
Emphasize:
• That the Commerce Clause prohibits one state from interfering with commerce that
crosses state lines.
• That the case of Gibbons v. Ogden stands for the proposition that states cannot impede
interstate commerce.
C. Impact on Interstate Commerce
Emphasize:
• That the power of Congress over commerce is very broad; it extends to all commerce,
be it great or small.
D. Limitation on Federal Authority
Emphasize:
• The two perspectives from which this topic requires examination.
• Sidebar 6.2—“Constitutionality of Health Insurance Mandate?”
E. Contract Clause
Emphasize:
• That the clause does not apply to actions by the federal government that impair the
obligation of contracts.
• That under the contract clause, states cannot enact laws that impact rights and duties
under existing contracts.
• That the limitation on state action impairing contracts has not been given a literal
application.
6-6
Additional Matters for Discussion:

• Factors that may justify a state law that impairs private contract rights are:
o The law is enacted in an emergency situation.
o The law is broad to protect basic societal interests.
o The relief is properly tailored to meet those interests.
o The conditions of the law are reasonable.
o The law is limited to the duration of an emergency.
1. Pension Ben. Guar. Corp. v. R.A. Gray & Co., 104 S.Ct. 2709 (1984).
In 1980, Congress amended ERISA to require employers withdrawing from a

multiemployer pension plan to pay a fixed amount to cover unfunded benefits. The law
was made retroactive.
Issue: Is this application constitutional under the contract clause?
Held: Yes. The contract clause does not apply, either by its own terms or by convincing
historical evidence, to actions of the national government.
2. Energy Reserves Group, Inc. v. Kansas Power & Light Co., 103 S.Ct. 697 (1983).
A state regulation restricted the income of a utility.
Issue: Is this state regulation a violation of the contract clause?
Held: No. The law does not necessarily constitute substantial impairment for purposes
of the contract clause. If a substantial impairment is found, the state, in justification,
must have a significant and legitimate public purpose behind the regulation. Once such
a purpose has been identified, the adjustment of the contracting parties' rights and
responsibilities must be based upon reasonable conditions and must be of a character
appropriate to the public purpose justifying the legislation's adoption.
III. Amendments and Basic Protections (LO 6-4)
Emphasize:
• Table 6.1 showing the first fourteen amendments to the U.S. constitution.
• The four basic characteristics of constitutional guarantees, and give examples:
o Constitutional rights are not absolute.
6-7
o Constitutional issues often involve a weighing process between competing policies.

o Constitutional rights exist to remove certain issues from the political process and the
ballot box.
o Constitutional rights vary from time to time.
A. First Amendment Protections (LO 6-5)
Freedom of Religion
Emphasize:
• That the First Amendment of freedom of religion has two aspects: the establishment
clause and the free exercise clause.
• That if a law is based on economic considerations, it may be upheld if its
classifications are reasonable and in the public interest.
• Sidebar 6.3 regarding how the IRS defines churches.
• Sidebar 6.4 showing examples of freedom of religion issues affecting business.
1. Frazee v. Illinois Department of Employment Security, 109 S.Ct. 1514 (1989)
Frazee refused a temporary position offered to him by Kelly Services because the job
would have required him to work on Sunday. He was denied unemployment
compensation benefits since he was not a member of an established religious sect or
church and did not claim that his refusal to work resulted from a tenet, belief, or
teaching of an established religious body.
Issue: Does the denial of compensation constitute a violation of the Free Exercise
Clause?
Held: Yes. While membership in a sect would simplify the problem of identifying
sincerely held beliefs, the notion that one must be responding to the commands of a
particular religious organization to claim the protection of the Free Exercise Clause is
rejected. The fact that Sunday work has become a way of life does not constitute a
state interest sufficiently compelling to override a legitimate free exercise claim,
since there is no evidence that there will be a mass movement away from Sunday
employment if appellant succeeds on his claim.
2. Thomas v. Review Bd. of Indiana Employment Sec., 100 S.Ct. 1425 (1981).
6-8
Plaintiff, a Jehovah witness, was initially hired to work in his employer’s roll
foundry, but when the foundry was closed, he was transferred to a department that
fabricated turrets for military tanks. The plaintiff asserted that his religious beliefs
prevented him from participating in the production of weapons. His employer offered
no other non-war production jobs. The plaintiff requested to be laid off, but when his
request was denied, he quit. The plaintiff subsequently applied for but was denied
unemployment compensation. Indiana state law requires applicants for
unemployment compensation to show that they left work for a good cause in
connection with the work.
Issue: Is the denial a violation of the First Amendment?
Held: Yes. When the state conditions receipt of an important benefit upon conduct
proscribed by a religious belief, thereby putting substantial pressure on an adherent
to modify his behavior and to violate his beliefs, a burden upon religion exists. The
state may justify an inroad on religious liberty by showing that it is the least
restrictive means of achieving some compelling state interest. However, only those
interests of the highest order can overbalance legitimate claims to the free exercise of
religion. The interests advanced by the state to avoid widespread unemployment and
to avoid a detailed probing by employers into job applicant’s religious beliefs do not
justify the burden placed on free exercise of religion.
Other Important Freedom of Religion Cases:
1. Jimmy Swaggart Industries v. Board of Equalization of California, 110 S.Ct. 688

(1990)
California’s imposition of its general 6 percent sales and use taxes on religious
merchandise sold in the state by religious organizations does not violate the First
Amendment. A generally applicable sales and use tax, which is not a flat license tax,
which constitutes only a small part of the sale price, and which is applied neutrally
without regard to the nature of the seller or purchaser, does not place an onerous
burden on religious activity.
2. Hobbie v. Unemployment Appeals of Florida, 107 S.Ct. 1046 (1987).
When a state denies the receipt of a benefit because of conduct mandated by religious
belief, a burden on the exercise of religion exists. Not only is it apparent that
Hobbie’s declared ineligibility for benefits derived solely from the practice of
religion, but also the pressure on her to forego that practice (not working on her
6-9
Sabbath) is unmistakable. The First Amendment protects the free exercise rights of
employees who adopt religious beliefs or convert from one faith to another after they
are hired. The timing of Hobbie’s conversation is immaterial to our determination
that her free exercise rights have been burdened.
3. Thornton v. Caldor, 105 S.Ct. 2914 (1985).
A Connecticut statute which provided Sabbath observers with absolute and

unqualified right not to work on their Sabbath, violated the establishment clause. It
imposed on employers and employees an absolute duty to conform their business
practices to a particular religious practice of the employee by enforcing observances
of the Sabbath the employee unilaterally designated.
4. United States v. Lee, 102 S.Ct. 1051 (1982).
The payment of social security taxes and the receipt of benefits does not interfere
with the Free Exercise rights of the Amish.
Freedom of Speech
Emphasize:
• That the Amendment protection does not apply to private action.
• That free speech also covers conduct or actions considered symbolic speech.
• That “fighting words” are not protected speech.
• The difficulty in defining obscenity. The proper inquiry, in deciding whether
allegedly obscene materials have any “literary, artistic, political, or scientific value.”
• Sidebar 6.5—“Art and Obscenity”
• Sidebar 6.6—“The FCC is Not Amused”
• Sidebar 6.7—“Picketing as Free Speech”
• Sidebar 6.8—“Free Speech and an Individual’s Right of Privacy”
• Case 6.1: Snyder v. Phelps. 131 S.CT. 1207 (2011)
Commercial Speech
Emphasize:
• That the protection of commercial speech was a major constitutional development
during the latter part of the 20th century (since 1970).
• Sidebar 6.6—“The FCC Is Not Amused”
• Sidebar 6.9 concerning Cigarette warning labels.
• Case 6.2: Brown v. Entertainment Merchants Association, 564 U.S. ____ (2011).
6-10
1. Greater New Orleans Broadcasting Association, Inc. v. United States, 119 S.Ct.
1923 (1999).
The Federal Communications Commission (FCC) seeks to prohibit the advertising of

lotteries by radio and television stations in Louisiana since these ads may be heard or
seen in neighboring Texas and Arkansas where lotteries are illegal. The Greater New
Orleans Broadcasting Association seeks to have the FCC restrictions declared in
violation of the First Amendment’s protection of commercial speech.
Issue: Are the FCC restrictions sufficiently narrow in scope to meet constitutional
requirements?
Held: No. The Supreme Court reaffirms the four-step analysis announced in Central
Hudson. The Court rejects the FCC’s argument that its restrictions on lottery
advertising are sufficiently narrow. The advertiser and the listening/viewing public,
not the government, should be allowed to assess the value of accurate and
nonmisleading information about lawful conduct.
2. 44 Liquormart, Inc. v. Rhode Island, 116 S.Ct. 1495 (1996).
The State of Rhode Island allows advertising of alcoholic beverages prices only in
the stores where the alcohol is sold. State law bans such advertising “outside the
licensed premises.” 44 Liquormart, Inc., a licensed retailer, ran a newspaper ad
stating the low prices at which peanuts, potato chips, and Schweppes mixers were
being offered, identifying various brands of packaged liquor, and including the word
“WOW” in large letters next to pictures of vodka and rum bottles. As a result of this
ad, the Rhode Island Liquor Control Administrator assessed 44 Liquormart a fine of
$400. Liquormart paid the fine and sought a declaratory judgment in Federal District
Court that the Rhode Island law prohibiting off-premise advertising was in violation
of the First Amendment’s free speech protection.
Issue: Is the Rhode Island limitation on alcohol pricing advertisements

unconstitutional?
Held: Yes. Rhode Island failed to produce credible evidence that its restriction on
advertising of alcohol prices reduced consumption of alcohol. There are other,
perhaps more effective, methods of regulating the use of alcohol. A ban on truthful,
6-11
non-misleading commercial speech is not supported under these facts.
3. Rubin v. Coors Brewing Co., 63 U.S.L.W. 4319 (1995)
The Federal Alcohol Administration Act prohibits beer labels from displaying the
alcohol content. Coors proposed to include such content on its label, and the Bureau
of Alcohol, Tobacco and Firearms refused to grant Coors’s application for this label.
Issue: Is this restriction a violation of Coors’s First Amendment rights?
Held: Yes. To regulate commercial speech that is truthful and not misleading, the
government’s interest must be substantial and directly related to the interest being
sought. Here, the government’s concern to limit “strength wars” between breweries
is substantial. However, restricting the contents of the labels on beer cans will do
little good when the breweries are allowed to advertise the alcohol content of their
beer in other ways. Thus the label restrictions are in violation of the First
Amendment.
4. Levron v. National Railroad Passengers Corp., 115 S.Ct. 961 (1995)
The National Railroad Passenger Corporation (Amtrak) refused to accept Lebron’s

billboard display for an Amtrak-owned billboard in Penn Station. Amtrak’s reason
for refusing this ad was due to its political nature. (This ad was an electronic
billboard criticizing Coors Brewing Company involvement in supporting the
Nicaraguan Contras.)
Issue: Is Amtrak a governmental agency support to the First Amendment?
Held: Yes. Amtrak is an agency or instrumentality of the United States for the
purpose of individual rights guaranteed by the Constitution.
Freedom of the Press
Emphasize:
• That the publishing business is the only organized private business that is given
explicit constitutional protection.
• Sidebar 6.10—“WikiLeaks, Edward Snowden, and the freedom of the press”
• What defamation and libel means.
• The contrast between prior restraint and the impositions of sanctions for publishing
material in violation of law.
6-12
1. Arkansas Writers’ Project, Inc. v. Ragland, 107 S.Ct. 1722 (1987)
The Arkansas sales tax applies to general interest magazines but exempts newspapers
and religious, professional, trade and sports journals.
Issue: Does the application of the sales tax to some but not all publications violate
the First Amendment?
Held: Yes. The law violates First Amendment’s freedom of the press guarantee; even
though there was no evidence of an improper censorial motive.
2. Philadelphia Newspapers, Inc. v. Hepps, 106 S.Ct. 1558 (1986)
A newspaper published a series of articles suggesting that plaintiff had ties to

organized crime. Plaintiff, the principal stockholder of a corporation that franchises
convenience stores, brought a defamation suit against the newspaper.
Issue: Should a private figure plaintiff involved in matters of public concern show
that the alleged defamatory statements were false and the defendants were at fault?
Held: Yes. The common law’s rule of falsity—that the defendant must bear the
burden of proving truth—must fall here to a constitutional requirement that the
plaintiff bear the burden of showing falsity, as well as fault, before recovering
damages.
3. Seattle Times Co. v. Rhinehart, 104 S.Ct. 2199 (1984)
A newspaper, which was defending a libel suit filed against it by a religious

organization, was prohibited from publishing information it obtained during
discovery relating to the foundation’s members and donors.
Issue: Is this prohibition constitutional?
Held: Yes. A protective order that prohibits a civil litigant’s publication of

information obtained in pretrial discovery does not violate the First Amendment.
Litigants have no First Amendment right of access to information made available
only for the purpose of trying a lawsuit. Such protective orders, however, apply only
6-13
to information obtained through discovery and do not preclude the litigant from
disseminating identical information obtained through different channels.
Examples of Laws Violating Free Speech:

1. Community cannot ban use of residential signs. City of Ladue v. Gilleo, 114 S.Ct.
2038 (1994).
2. A local ordinance in Forsyth County, Ga., required permit applicants to pay fees of
as much as $1,000, based on the estimated police and administrative costs associated
with their protests or marches. The Forsyth County ordinance violated the First
Amendment because it gave officials considerable discretion to set permit fees based
on how much opposition a demonstration is expected to stir up. Forsyth County v.
Nationalist Movement, 112 S.Ct. 2395 (1992).
3. A St. Paul ordinance made it a crime to burn a cross or do other acts that can arouse
“anger, alarm or resentment” on the basis of race, religion, or gender. The law
wrongly singled out for censorship the expression of particular ideas. However
objectionable those ideas might be, “The First Amendment does not permit St. Paul
to impose special prohibitions on those speakers who express views on disfavored
subjects.” R.A.V. v. City of St. Paul, 112 S.Ct. 2538 (1992).
4. Congress enacted a total ban on indecent dial-a-porn messages—that is, sexually
explicit or suggestive messages provided for a fee over the telephone. Congress may
ban dial-a-porn telephone messages that are “obscene,” but that lawmakers went too
far in also totally banning phone communications deemed merely “indecent.” Sable
Communications of California Inc. v. Federal Communications Commission, 109
S.Ct. 2829 (1989).
Examples of Law That Do Not Violate Free Speech:

1. Farmers can be required to contribute financially to the costs of generic advertising.
Glickman v. Wileman Brothers & Elliott, Inc., 117 S.Ct. 2130 (1997).
2. States may bar nightclub-style nude dancing under a public-indecency law. It is not
protected expressive conduct. The law furthers a substantial government interest in
protecting order and morality. Barnes v. Glen Theatre, 111 S.Ct. 2456 (1991).
3. State universities may ban commercial solicitation in student dormitory rooms.
Governmental regulation of commercial speech does not have to be accomplished by
the least restrictive means available. As long as such regulation is narrowly tailored
to achieve significant governmental interests, any reasonable “fit” between the
government’s ends and the means chosen to reach them will satisfy the First
Amendment. Board of Trustees of the State University of New York v. Fox, 109 S.Ct.
3028 (1989).
Second Amendment: The Right to Possess Guns
6-14
Emphasize:
• That in 2008 the U.S. Supreme Court addressed the meaning of the Second
Amendment as it applies to the maintenance of a militia versus an individual’s right
to possess and use guns in their homes.
• The case of District of Columbia v. Heller in which the Supreme Court upheld the
right of individuals to have handguns in their homes. See Sidebar 6.11 discussing the
Heller case.
Additional Matters for Discussion:

• Explain that striking down the District of Columbia’s ban on possession of handguns
does not necessarily mean other restrictions on the possession of guns are
unconstitutional.
• Use current examples (perhaps from the students’ local newspaper) concerning gun
controls and the controversy created.
The Fifth Amendment
Emphasize:
• That the takings clause recognizes the existence and importance of private
ownership, but allows the government to “condemn” and take specific private
resources for money under the power called eminent domain.
Public Use
Emphasize:
• That over the years public use has come to mean public purpose.
• That a number of states have passed laws preventing the units of government (cities
and counties) from taking private land for private development purposes.
Just Compensation
Emphasize:
• That the government can only take what belongs to private owners upon payment of
“just compensation.”
• That when the state decides to take an owner’s resources, it is determining that the
right of property in these resources no longer serves the common good and that the
greater common good requires that the resources be taken.
• Case 6.3: Kelo v. City of New London, Connecticut, 125 S.Ct. 2655 (2005)
6-15
The Fourteenth Amendment: Equal Protection and Due Process of Law
Emphasize:
• That two of this amendment’s provisions are of very special importance to
businesspeople—the due process clause and the equal protection clause.
• That the Fourteenth Amendment restricts actions by state and local governments.
B. Due Process of Law
Emphasize:
• The definition of due process as fundamental fairness and decency.
• That procedural due process cases involve whether proper notice has been given and a
proper hearing has been conducted.
1. BMW of North America, Inc. v. Gore, 116 S.Ct. 1589 (1996).
Dr. Ira Gore purchased in Birmingham, Alabama, a new BMW automobile for
$40,750.88. After nine months, Dr. Gore noticed that the paint was flawed. He was told
by the proprietor of “Slick Finish” that his car had been repainted. Upon inquiring at the
BMW dealership where he purchased the car, Dr. Gore was told that his car had been
repainted prior to its sale. BMW acknowledged that it had a nationwide policy that if the
cost of repairing damages done during manufacturing or transportation did not exceed
3% of the retail value, the car was sold as new. If such repairs exceeded the 3% figure,
the car was used by the company for a period of time and then sold as a used vehicle.
The actual cost of repairs to Dr. Gore’s car was $601.37. Since this was well below the
3% stated in BMW’s policy, the car was sold as new, and Dr. Gore was not informed of
the repairs. Feeling that he had been defrauded, Dr. Gore filed a lawsuit against BMW.
A jury awarded Dr. Gore $4,000 in compensatory damages and $4 million in punitive
damages. BMW appealed the award of punitive damages and argued that this amount
was constitutionally excessive. The Alabama Supreme Court reduced the punitive
damages by half but upheld an award of $2,000,000.
Issue: Is this award of punitive damages unconstitutional?
Held: Yes, this award violates the due process clause. There are three standards that
apply to ensure that a defendant is properly notified of the magnitude of a possible
sanction. These standards include (a) a reasonable relationship between the potential
punitive damages and the degree of reprehensibility of the defendant’s action; (b) an
6-16
appropriate ratio between the punitive damages and the actual harm caused by the
defendant; and (c) a reasonable comparison among the punitive damages awarded and
comparable sanctions in similar cases. Under these standards, the Alabama courts’
award is unconstitutionally excessive.
2. Connecticut v. Doehr, 111 S.Ct. 2105 (1991).
A Connecticut law allows a court to put a prejudgment lien on an individual’s home

without notice or a hearing.
Issue: Does the law violate the guarantee of due process?
Held: Yes. Due process requires notice and a hearing before a lien is attached to a home
or that there be emergency circumstances that make it impractical to hold a hearing first.
3. Tulsa Professional Collection Services v. Pope, 108 S.Ct. 1340 (1988)
An Oklahoma law required contract creditors of deceased persons to file claims within 2
months of the publication of a notice advising creditors of probate proceedings.
Issue: Is this State action a denial of due process?
Held: Yes. Creditors who are either known to the estate or whose identities are
reasonably ascertainable are entitled by the Due Process Clause to receive notice by
mail or other means certain to assure actual notice. The claim is a property interest and
the probate procedures are state action.
Incorporation Doctrine
Emphasize:
• How the incorporation doctrine made the protections of the Bill of Rights
applicable to individuals subject to state and local regulations.
C. Equal Protection
Emphasize:
• That not every classification nor is every discrimination a violation. The law requires
invidious discrimination.
• The three tests by contrasting the strict judicial scrutiny test with the minimum
rationality test and the quasi-strict scrutiny test.
6-17
• Sidebar 6.13—“Same Sex Marriages”

• Sidebar 6.14—“Analysis of Equal Protection”
1. Fitzgerald v. Racing Association of Central Iowa, 123 S.Ct. 2156 (2003).
The State of Iowa passed a law allowing slot machines to be placed on riverboats. The
proceeds from these machines were taxed at the rate of 20%. Subsequently, Iowa
permitted slot machines to be placed at race tracks. The proceeds from these machines
were taxed at a rate as high as 36%. The race tracks owners filed suit arguing that the
higher tax rate on their slot machines denied them the equal protection of laws.
Issue: Does the existence of two tax rates on similar slot machines violate the Equal
Protection Clause of the Fourteenth Amendment?
Held: No. The Supreme Court holds that Iowa is regulating economic activities in this
case. Therefore, the test of equal protection is based on minimal scrutiny. Since a
rational basis can be found (such as not wanting to encourage as many slot machines at
race tracks as on riverboats), the two tax rates are upheld.
2. FCC v. Beach Communications, Inc., 113 S.Ct. 2096 (1993).
The Cable Communications Policy Act requires that cable operators be franchised by
local governments. This Act exempts “a facility that serves only subscribers in 1 or
more multiple unit dwellings under common ownership, control, or management, unless
such facility or facilities use any public right-of-way.”
Issue: Does the exemption in this Act violate the equal protection clause?
Held: No. There is a rational basis for the distinction provided. And since this is an
economic regulation, the rational basis is applicable.
Minimum Rationality
Emphasize:
• That under the minimum rationality approach, a law creating different classifications
will survive an equal protection challenge if it has a rational connection to a
permissible state end.
• Sidebar 6.12—“Economic Regulations and the Rational-Basis Test”
6-18
Strict Scrutiny
Emphasize:
• That under the strict scrutiny test, a classification will be a denial of equal protection
unless the classification is necessary to achieve a compelling state purpose.
• That the strict scrutiny test is used if the classification involves either a suspect class
or a fundamental constitutional right.
Quasi-Strict Scrutiny
Emphasize:
• When quasi-strict scrutiny approaches are used.
• That one reason gender has not been moved to the strict scrutiny analysis is cases
involving gender discrimination are so infrequent; states understand that unequal
protection on the basis of gender is unacceptable.
Answers to Review Questions and Problems
Basic Concepts
1. Separation of Powers
a. The horizontal aspect of separation of powers provides the checks and balances among
the three branches of the federal government.
b. The vertical aspect of this constitutional concept assists in defining the roles among
various levels of government.
2. Supremacy Clause
Yes. Since there is a conflict between the federal and Florida laws, the court must decide if
the conflict can be reconciled. The U.S. Supreme Court found this conflict is irreconcilable;
therefore, the federal law preempts the Florida law under the Supremacy Clause. Barnett
Bank of Marion County, N.A. v. Nelson, 116 S.Ct. 1103 (1996).
3. Commerce Clause
a. The commerce clause requires analysis in the following four areas—regulation of

foreign commerce, regulation of interstate commerce, impact on interstate commerce,
and possible limitations on federal regulatory authority.
6-19
b. Students’ answers will vary. One issue that could be discussed is the question
concerning the scope and limit of federal authority under the Commerce Clause that
comes from the Affordable Care Act of 2010.
4. Contract Clause
a. This clause just addresses state government actions that may impair the obligation of
contracts.
b. This clause applies only to present contractual obligations. States are free to regulate
future contracts.
Amendments and Basic Protections
5. Freedom of Religion
The Establishment Clause assures that no government will attempt to create a sponsored
religion or church. The Free Exercise Clause protects each individual’s choice to practice
any particular religious faith.
6. Freedom of Speech
Silvia has the constitutionally protected right to use truthful information in promoting her
professional accomplishments and abilities. Ibanez v. Florida Department of Business and
Professional Regulation, Board of Accountancy, 114 S.Ct. 2084 (1994).
7. Freedom of the Press
a. Yes, the law protects artistic expression, such as a play, from repression prior to its
performance. There always is the possibility that a performance may not include the
objectionable material or activity.
b. Public persons are given less protection than enjoyed by private persons. Those in the
former group must prove that a false statement about him or her was made with malice
or an obvious disregard for the truth. A private person needs to establish only the
falsehood.
8. Right to Possess Guns
Individuals have the right to have guns, including handguns, in their homes for the purpose
of self-defense. The introductory clause of the Second Amendment provides an example of,
not a restriction to, the possession of guns by individuals.
6-20
9. Due Process of Law
The Incorporation Doctrine has been used by judges and justices to make the personal
protections from the federal government’s actions, as found in the Bill of Rights, applicable
to state and local governments as well. This incorporation process has been accomplished
through the use of the 14th Amendment’s due process clause.
10. Equal Protection
The three levels of judicial analysis under this clause are (a) rational basis, (b) quasi-strict
scrutiny, and (c) strict scrutiny. For a complete listing of the types of cases under each
category, refer to sidebar 6.14 labeled “Analysis of Equal Protection.”
Business Discussion #1
1. Should you contest their claim?
No. The freedom of religion cases have established that such employees are entitled to
unemployment compensation. This is a free exercise case.
2. What would be the result if the employees refuse to work on Sunday because of their desire
to play golf on that day?
No, the employee would not be entitled to compensation. The desire to play golf is not
constitutionally protected—at least not yet.
Business Discussion #2
1. Could the mayor prohibit the work from appearing in the show?
It is highly unlikely that the mayor could prohibit the work from being displayed.
2. Why or why not? Explain your answer using the appropriate legal standard.
Whether the work in question is obscene must be determined by applying contemporary

community standards. This work does not depict offensive sexual conduct nor does it appeal
to prurient interests. The question regarding whether it lacks serious artistic value is an issue
for the citizens of New York and for the art community to decide. From a religious
perspective, while the work may be highly offensive to many, First Amendment Freedom of
6-21
Religion does not apply.
Note: This fact situation did occur and the work was exhibited. See Sidebar 6.5 regarding art
and obscenity.
6-22

Legal and Regulatory Environment of Business 16th Edition Pagnattaro Solutions Manual 1

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Legal and Regulatory Environment of Business 16th Edition Pagnattaro Solutions Manual 1

Uploaded by

Copyright:

Available Formats

Chapter 06 - The Constitution

Solution Manual for Legal and Regulatory

Download full test bank at:

Go to http://www.whitehouse.gov/government/independent-agencies.html for an alphabetical

A. Separation of Powers (LO 6-1)

B. Supremacy Clause (LO 6-2)

Cases for Discussion:

Issue: Does the federal law preempt the Florida law?

5. Capital Cities Cable, Inc. v. Crisp, 104 S.Ct. 2694 (1984).

The FCC regulates cable television. Oklahoma prohibited the broadcasting of

Issue: Does the FCC preempt state regulation of TV advertising?

Held: Yes. Under supremacy clause, enforcement of state regulation may be

6. Perez v. Campbell, 91 S.Ct. 1704 (1971).

II. Federal Government’s Authority to Regulate Business—The Commerce Clause (LO 6-

A. Regulation of Foreign Commerce

B. Regulation of Interstate Commerce

C. Impact on Interstate Commerce

D. Limitation on Federal Authority

Additional Matters for Discussion:

Cases for Discussion:

In 1980, Congress amended ERISA to require employers withdrawing from a

Issue: Is this application constitutional under the contract clause?

A state regulation restricted the income of a utility.

Issue: Is this state regulation a violation of the contract clause?

III. Amendments and Basic Protections (LO 6-4)

o Constitutional issues often involve a weighing process between competing policies.

A. First Amendment Protections (LO 6-5)

Cases for Discussion:

1. Frazee v. Illinois Department of Employment Security, 109 S.Ct. 1514 (1989)

Issue: Is the denial a violation of the First Amendment?

Other Important Freedom of Religion Cases:

1. Jimmy Swaggart Industries v. Board of Equalization of California, 110 S.Ct. 688

2. Hobbie v. Unemployment Appeals of Florida, 107 S.Ct. 1046 (1987).

3. Thornton v. Caldor, 105 S.Ct. 2914 (1985).

A Connecticut statute which provided Sabbath observers with absolute and

4. United States v. Lee, 102 S.Ct. 1051 (1982).

Cases for Discussion:

The Federal Communications Commission (FCC) seeks to prohibit the advertising of

2. 44 Liquormart, Inc. v. Rhode Island, 116 S.Ct. 1495 (1996).

Issue: Is the Rhode Island limitation on alcohol pricing advertisements

non-misleading commercial speech is not supported under these facts.

3. Rubin v. Coors Brewing Co., 63 U.S.L.W. 4319 (1995)

Issue: Is this restriction a violation of Coors’s First Amendment rights?

4. Levron v. National Railroad Passengers Corp., 115 S.Ct. 961 (1995)

The National Railroad Passenger Corporation (Amtrak) refused to accept Lebron’s

Issue: Is Amtrak a governmental agency support to the First Amendment?

Freedom of the Press

Cases for Discussion:

1. Arkansas Writers’ Project, Inc. v. Ragland, 107 S.Ct. 1722 (1987)

2. Philadelphia Newspapers, Inc. v. Hepps, 106 S.Ct. 1558 (1986)

A newspaper published a series of articles suggesting that plaintiff had ties to

3. Seattle Times Co. v. Rhinehart, 104 S.Ct. 2199 (1984)

A newspaper, which was defending a libel suit filed against it by a religious

Issue: Is this prohibition constitutional?

Held: Yes. A protective order that prohibits a civil litigant’s publication of

Examples of Laws Violating Free Speech:

Examples of Law That Do Not Violate Free Speech:

Second Amendment: The Right to Possess Guns

Additional Matters for Discussion:

The Fifth Amendment

The Fourteenth Amendment: Equal Protection and Due Process of Law

B. Due Process of Law

Cases for Discussion:

1. BMW of North America, Inc. v. Gore, 116 S.Ct. 1589 (1996).