CourseSmart Reader

The Legal and Regulatory Environment of Business, 14th Edition

by Reed, O. Lee; Shedd, Peter; Morehead, Jere; Pagnattaro, Marisa

Publisher: McGraw-Hill Higher Education

Publishing Date: 2006/08/22

eText ISBN-10

0-07-722225-3

eText ISBN-13

978-0-07-722225-3

Print ISBN-10

0-07-304849-6

Print ISBN-13

978-0-07-304849-9

Saleable Print ISBN-10

0-07-304849-6

Saleable Print ISBN-13

978-0-07-304849-9

Table of Contents

Part One. Introduction to Law, 2

1. Law as the Foundation of Business, 4

Introduction, 4

1. WHY NATIONS ARE ECONOMICALLY WEAK OR STRONG, 6

Law, the Rule of Law, and Property, 7

3. THE RULE OF LAW, 8

sidebar 1.1 The Chief Justice and the Rule of Law, 8

sidebar 1.2 How Property Protects the Poor, 10

5. PROPERTY IN ITS BROADEST SENSE, 11

sidebar 1.3 Russia's Property Problems, 13

6. JURISPRUDENCE, 13

Classifications of Law, 14

7. COMMON LAW AND CIVIL LAW, 14

8. PUBLIC AND PRIVATE LAW, 15

sidebar 1.4 Cyber Law Connection, 15

9. CIVIL LAW AND CRIMINAL LAW, 16

10. SUBSTANTIVE LAW AND PROCEDURAL LAW, 16

Sources of Law, 16

11. CONSTITUTIONS, 16

12. LEGISLATION, 17

Uniformity of Legislation, 17

Uniform Commercial Code, 17

Interpretation of Legislation, 18

13. ADMINISTRATIVE REGULATION, 18

14. JUDICIAL DECISIONS OR CASE LAW, 18

Disadvantages, 19

Legal Sanctions, 20

15. FOR CRIMINAL CONDUCT, 20

16. FOR BREACH OF CONTRACT, 21

17. FOR TORTIOUS CONDUCT, 21

18. FOR VIOLATING STATUTES AND REGULATIONS, 22

A Property-Based Legal System and Corporate Governance, 22

19. THE SPECIFIC SENSE OF CORPORATE GOVERNANCE, 23

20. THE GENERAL SENSE OF CORPORATE GOVERNANCE, 23

2. The Ethical Basis of Law and Business Management, 28

Contemporary Business Ethics, 30

1. ETHICS AND SOCIETY, 30

Public Education and Family Structure, 31

Economic Interdependence, 31

News Media and the Internet, 31

sidebar 2.1 Fluctuating Values?, 31

2. ETHICS AND GOVERNMENT, 32

The Nature of Ethics, 32

3. ETHICS AND MORALITY, 32

4. ETHICS AND LAW, 33

sidebar 2.2 Price Gouging after Hurricane Katrina, 34

Two Systems of Ethics, 34

5. FORMALISM, 35

Kant and Formalism, 35

The Social Contract, 36

6. CONSEQUENTIALISM, 37

sidebar 2.3 Virtual Morality, 38

The Protestant Ethic, 38

7. COMPARING THE TWO ETHICAL SYSTEMS, 39

sidebar 2.4 Tobacco Facts, 40

Sources of Values for Business Ethics, 40

8. LEGAL REGULATION, 40

Liberty and Rights, 41

Confidentiality, 42

Conflicts of Interest, 43

9. PROFESSIONAL CODES OF ETHICS, 44

sidebar 2.5 American Bar Association Model Rules of Professional Conduct, 44

sidebar 2.6 American Institute of Certified Public Accountants Code of Professional Conduct, 45

10. ORGANIZATIONAL CODES OF ETHICS, 45

Different Approaches to Ethical Codes, 46

11. INDIVIDUAL VALUES, 46

Achieving an Ethical Business Corporation, 50

12. THE OBSTACLES, 50

The Emphasis on Profit, 50

sidebar 2.7 The Swedish Example of Lagom, 51

The Effect of the Group, 51

The Control of Resources by Nonowners, 51

sidebar 2.8 Corporate Governance Failure at Wordcom?, 52

13. THE STEPS, 52

Involvement of Top Management, 52

Openness in Communication, 53

Consideration of All Stakeholders, 54

sidebar 2.9 The Demise of Arthur Andersen, 55

14. THE REWARDS, 55

15. THE MORALITY OF PROPERTY, 56

Criticism of Property, 56

Support of Property, 56

sidebar 2.10 Moral Criticism of Property, 57

sidebar 2.11 Moral Support for Property, 58

Property as a System of Personal Ethics, 58

Part Two. Dispute Resolution, 62

3. The Court System, 64

sidebar 3.1 Corporate Governance and the Soaring Cost of Legal Representation, 66

1. JUDGES AND JUSTICES, 66

sidebar 3.2 Jury System Reforms, 68

Organization of the Court System, 70

4. SUBJECT MATTER JURISDICTION, 71

5. STATE COURTS, 71

Trial Courts, 71

Appellate Courts, 71

sidebar 3.3 Small-Claims Courts, 72

6. FEDERAL COURTS, 73

sidebar 3.4 Total Activity Test, 74

District Courts, 75

Appellate Courts, 75

7. DECISIONS BY THE U.S. SUPREME COURT, 75

sidebar 3.5 The Very Slim Odds, 77

sidebar 3.6 The Role of the Reviewing Court, 77

The Power of Judicial Review, 78

sidebar 3.7 Choosing a Supreme Court Justice, 79

8. JUDICIAL RESTRAINT, 79

sidebar 3.8 Understanding Judicial Restraint, 80

sidebar 3.9 Typical Judicial Restraint Decisions, 81

9. JUDICIAL ACTIVISM, 81

sidebar 3.10 Typical Judicial Activist Decisions, 82

10. A SAMPLE CASE, 82

sidebar 3.11 Supreme Court Justices, 83

sidebar 3.12 Typical Alignment of Justice, 83

case 3.1 KELO V. CITY OF NEW LONDON, CONNECTICUT, 84

11. THE NATURE OF THE JUDICIAL PROCESS, 87

case 3.2 THE NATURE OF THE JUDICIAL PROCESS, 88

4. Litigation, 92

Litigation—An Overview, 94

sidebar 4.1 Understanding the Sample Complaint, 94

2. STANDING TO SUE, 95

case 4.1 ELK GROVE UNIFIED SCHOOL DIST. V. NEWDOW, 96

sidebar 4.2 Identity Theft and Standing to Sue, 98

3. PERSONAL JURISDICTION, 98

sidebar 4.3 The Car Crash, 99

4. CLASS-ACTION SUITS, 99

sidebar 4.4 Class Actions in Federal Court, 100

sidebar 4.5 Examples of Recent Class-Action Lawsuits, 101

sidebar 4.6 Certifying a Class, 101

Pretrial Procedures, 102

5. PLEADINGS, 102

6. STEPS IN DISCOVERY, 103

7. SCOPE OF DISCOVERY, 104

sidebar 4.7 Costs of Discovery, 104

case 4.2 CHUDASAMA V. MAZDA MOTOR CORP., 105

sidebar 4.8 Destruction of Evidence, 107

8. MOTIONS, 108

9. FRIVOLOUS CASES, 109

10. JURY SELECTION, 110

sidebar 4.9 Corporate Governance and the Jury Selection Process, 110

sidebar 4.10 The Jury and Constitutional Limits on Preemptory Challenges, 111

case 4.3 UNITED STATES V. BROWN, 112

sidebar 4.11 Challenging the Use of a Preemptory Strike, 113

11. OTHER STEPS DURING A TRIAL, 113

sidebar 4.12 Technology in the Courtroom, 114

12. BURDEN OF PROOF, 115

Criminal Cases, 116

Civil Cases, 116

sidebar 4.13 Televising Jury Deliberations, 116

13. DECIDING THE CASE, 116

Posttrial Issues, 117

14. APPEALS, 118

Appellate Procedures, 118

Deference to Trial Courts, 118

sidebar 4.14 Appealing an Evidentiary Ruling, 119

15. ENFORCEMENT OF JUDGMENTS AND DECREES, 120

sidebar 4.15 How Do You Prevent a Lawsuit in Your Firm?, 120

16. RES JUDICATA, 120

5. Negotiation and Alternative Dispute Resolution Systems, 124

Conflicts and Negotiation, 126

1. CONFLICTS AND DISPUTES, 126

2. STYLES AND METHODS OF NEGOTIATION, 127

sidebar 5.1 Negotiation Styles, 127

sidebar 5.2 A Business Dispute, 128

3. POSITIONAL NEGOTIATION, 129

4. PRINCIPLED NEGOTIATION, 129

Communication, 129

Relationship, 130

Legitimacy, 130

Alternatives, 130

Commitment, 130

Alternative Dispute Resolution (ADR) Systems, 131

5. RANGE OF OPTIONS, 132

6. SETTLEMENTS, 132

sidebar 5.3 Ending Litigation through Settlements, 133

7. FOCUS GROUPS, 133

Arbitration, 133

sidebar 5.4 Examples of Contracts with Arbitration Clauses, 134

8. SUBMISSIONS, 135

sidebar 5.5 Sample Arbitration Clause, 135

sidebar 5.6 To Arbitrate or Litigate, 136

9. ARBITRATORS, 136

Number Chosen, 136

Authority over Certain Matters, 137

case 5.1 HOWSAM V. DEAN WITTER REYNOLDS, INC., 137

10. AWARDS, 138

11. THE FEDERAL ARBITRATION ACT, 139

Impact on Policy, 139

sidebar 5.7 Do Agreements to Arbitrate Limit the EEOC's Remedies?, 140

Impact on State Laws, 140

12. STATUTORILY MANDATED ARBITRATION, 140

Types of Cases, 140

Procedures, 141

13. VOLUNTARY/CONTRACT-BASED ARBITRATION, 141

case 5.2 GREEN TREE FINANCIAL CORP. V. RANDOLPH, 142

14. JUDICIAL REVIEW, 143

Review of Voluntary/Contract-Based Arbitration Awards, 144

sidebar 5.8 Judicial Review of Arbitrator's Award, 144

Review of Statutorily Mandated Arbitration, 145

Review under the Federal Arbitration Act, 145

sidebar 5.9 Bill's and M&N Revisited, 148

15. PROCEDURES, 148

sidebar 5.10 Steps in the Mediation Process, 149

16. ADVANTAGES/DISADVANTAGES, 149

17. LACK OF JUDICIAL INVOLVEMENT, 150

18. COMBINATION OF ADR SYSTEMS, 150

Part Three. Business Foundations, 154

6. The Constitution and Business, 156

Basic Concepts, 158

1. SEPARATION OF POWERS, 158

2. SUPREMACY CLAUSE, 159

Preemption, 159

3. CONTRACT CLAUSE, 159

sidebar 6.1 Examples of State Laws Preempted by Federal Law, 160

The Commerce Clause, 160

4. REGULATION OF FOREIGN COMMERCE, 161

5. REGULATION OF INTERSTATE COMMERCE, 161

6. LIMITATION ON STATE POLICE POWER, 161

Exclusively Federal, 162

Exclusively State, 162

sidebar 6.2 Federalism and State Rights under the Commerce Clause, 163

Dual Regulation, 163

sidebar 6.3 $100 Fee: Regulating Interstate Commerce, 164

case 6.1 GRANHOLM V. HEALD, 165

7. LIMITATION ON STATE TAXATION, 169

Amendments and Basic Protections, 170

8. FREEDOM OF RELIGION, 170

sidebar 6.4 Examples of Freedom of Religion Issues Affecting Business, 171

9. FREEDOM OF THE PRESS, 171

10. FREEDOM OF SPEECH, 172

sidebar 6.5 Picketing as Free Speech, 173

sidebar 6.6 Free Speech versus an Individual's Right of Privacy, 173

Commercial Speech, 174

sidebar 6.7 Balancing the Protection of Commercial Speech, 174

11. EMINENT DOMAIN, 174

sidebar 6.8 Constitutional Standards for Regulatory Takings, 175

The Fourteenth Amendment, 176

12. DUE PROCESS OF LAW, 176

Incorporation Doctrine, 176

sidebar 6.9 Punitive Damages Limitation, 177

13. EQUAL PROTECTION, 177

Minimum Rationality, 178

sidebar 6.10 Economic Regulations and the Rational-Basis Test, 178

Strict Scrutiny, 178

case 6.2 ADARAND CONSTRUCTORS, INC. V. PENA, 179

Quasi-Strict Scrutiny, 182

sidebar 6.11 Analysis of Equal Protection, 183

7. Principles of Contract Law, 188

Basic Concepts, 190

1. CONTRACT LAW IN PRIVATE ENTERPRISE, 190

sidebar 7.1 The Confidentiality Agreement, 191

2. SOURCES OF CONTRACT LAW, 191

3. CONTRACTUAL CLASSIFICATIONS, 192

Bilateral and Unilateral Contracts, 192

Express and Implied-in-Fact Contracts, 193

sidebar 7.2 Terms of Delivery in the UCC, 193

Implied-in-Law or Quasi-Contracts, 194

4. CONTRACTUAL ENFORCEMENT TERMINOLOGY, 194

5. CONTRACTUAL PERFORMANCE TERMINOLOGY, 195

6. BREACH OF CONTRACT, 195

sidebar 7.3 Limiting Liability, 197

sidebar 7.4 Restitution Puts Parties in Precontractual Position, 197

Contract Formation, 197

7. OFFER TO CONTRACT, 198

sidebar 7.5 Does an Offer Exist?, 198

Definition of Terms, 199

Termination of Offer, 199

sidebar 7.6 When an Offer Terminates, 199

8. ACCEPTANCE OF OFFER, 199

Mirror Image Rule, 200

sidebar 7.7 UCC's Battle of the Forms, 200

Silence Not Acceptance, 200

Deposited Acceptance Rule, 201

sidebar 7.8 Impact of Mailings, 201

9. CONSIDERATION, 201

Must Be Bargained For, 202

Agreement Not to Sue, 202

Preexisting Obligation, 202

sidebar 7.9 Consideration Not Necessary, 203

10. CAPACITY OF PARTIES TO CONTRACT, 203

Intoxicated and Mentally Incompetent Persons, 204

Other Situations Involving Voidable Contracts, 204

11. LAWFUL PURPOSE, 205

sidebar 7.10 Examples of Illegal Contracts, 205

Contracts That Restrain Trade, 205

Other Contract Issues, 206

12. WRITTEN CONTRACTS, 206

Sale of an Interest in Land, 207

Collateral Promise to Pay Another's Debt, 207

Cannot Be Performed within One Year, 207

Sale of Goods of $500 or More, 208

sidebar 7.11 Exceptions to Statute-of-Frauds Requirement That Sale-of-Goods Contracts be in Writing, 208

The Parol Evidence Rule, 208

13. INTERPRETATION OF CONTRACTS, 209

case 7.1 NORFOLK SOUTHERN RAILWAY COMPANY V. KIRBY PTY. LTD. DBA KIRBY ENGINEERING, 209

14. ASSIGNMENT OF CONTRACTS, 212

Notice of Assignment, 212

Contracts That Cannot Be Assigned, 213

15. PERFORMANCE OF CONTRACTS, 213

case 7.2 VENTURE MEDIA LIMITED PARTNERSHIP V. COLTS PLASTICS COMPANY, INCORPORATED, 214

16. DISCHARGE OF CONTRACTS, 217

sidebar 7.12 Events That Discharge a Party to a Contract, 217

Impossibility of Performance, 217

Commercial Impracticability, 217

8. Torts in the Business Environment, 222

Intentional Torts, 224

sidebar 8.1 Types of Intentional Torts, 224

1. ASSAULT AND BATTERY, 224

2. INTENTIONAL INFLICTION OF MENTAL DISTRESS, 225

case 8.1 VAN STAN V. FANCY COLOURS & COMPANY, 225

3. INVASION OF PRIVACY, 227

sidebar 8.2 The Man on the Coffee Jar, 227

4. FALSE IMPRISONMENT AND MALICIOUS PROSECUTION, 228

5. TRESPASS, 228

6. CONVERSION, 229

7. DEFAMATION, 229

Defamation and the First Amendment, 230

sidebar 8.3 Football Coaches as Public Figures, 230

case 8.2 WELLS FARGO BANK V. ARIZONA LABORERS, TEAMSTERS, AND CEMENT MASONS, 231

Additional Fraud Examples, 234

sidebar 8.4 Internet Torts, 234

Fraud and Corporate Governance, 234

9. COMMON LAW BUSINESS TORTS, 235

Injurious Falsehood, 235

Intentional Interference with Contractual Relations, 235

Negligence, 236

10. DUTY OF CARE, 236

sidebar 8.5 Elements of Negligence, 236

case 8.3 IANNELLI V. BURGER KING CORP., 237

sidebar 8.6 Medical Malpractice Crisis, 239

11. UNREASONABLE BEHAVIOR—BREACH OF DUTY, 239

Examples of Negligence, 239

Willful and Wanton Negligence, 240

12. CAUSATION IN FACT, 240

13. PROXIMATE CAUSATION, 241

sidebar 8.7 Explosion on the Long Island Railroad, 241

14. DEFENSES TO NEGLIGENCE, 242

Contributory Negligence, 242

Assumption of Risk, 242

Strict Liability in Tort, 243

15. STRICT PRODUCTS LIABILITY, 243

sidebar 8.8 Tort Reform, 245

16. ULTRAHAZARDOUS ACTIVITY, 245

sidebar 8.9 The Great Molasses Flood, 245

17. OTHER STRICT LIABILITY TORTS, 245

sidebar 8.10 Highest Jury Tort Awards of 2004, 246

18. COMPENSATORY DAMAGES, 247

19. PUNITIVE DAMAGES, 247

sidebar 8.11 Punitive Damage Guidelines, 248

Alternatives to the Tort System, 248

20. WORKERS' COMPENSATION ACTS, 249

The System, 250

Tests for Determining Compensation, 251

case 8.4 PEE V. AUM, INC., 251

Exclusive Remedy Rule, 253

The Future of State Workers' Compensation, 253

9. Criminal Law and Business, 258

sidebar 9.1 Examples of White-Collar Crimes, 260

sidebar 9.2 Handcuffs and Jail Time, 261

Terms and Procedures, 262

1. CLASSIFICATIONS OF CRIMINAL CONDUCT, 262

2. BASIC CONCEPTS, 262

sidebar 9.3 The Price of the $11 Billion Accounting Fraud at WorldCom, 263

3. THE GRAND JURY, 263

Constitutional Issues, 264

4. THE FOURTH AMENDMENT: ILLEGAL SEARCH AND SEIZURE, 264

5. THE FIFTH AMENDMENT: PROTECTION AGAINST SELF-INCRIMINATION, 265

6. THE FIFTH AMENDMENT: DOUBLE JEOPARDY, 266

case 9.1 HUDSON V. UNITED STATES, 266

7. THE SIXTH AMENDMENT: RIGHTS IN A CRIMINAL CASE, 268

sidebar 9.4 Know Your Miranda Rights, 269

Specific Crimes, 270

Mail and Wire Fraud, 270

sidebar 9.5 FBI Report: Common Fraud Schemes, 271

case 9.2 SCHMUCK V. UNITED STATES, 271

Securities Fraud, 273

Health Care Fraud, 273

Counterfeiting, 274

Bankruptcy Fraud, 274

9. CONSPIRACY, 275

sidebar 9.6 Elements of a Conspiracy, 275

case 9.3 UNITED STATES OF AMERICA V. HUGHES AIRCRAFT CO., INC., 276

10. OBSTRUCTION OF JUSTICE, 277

sidebar 9.7 Think Before You Act: Examples of Obstruction of Justice, 278

11. FALSE STATEMENT TO A BANK, 278

12. FALSE STATEMENT TO A FEDERAL AGENCY, 278

13. LARCENY, 279

14. RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT (RICO), 280

sidebar 9.8 RICO: What Is “Racketeering Activity”?, 280

15. CYBER CRIME, 281

sidebar 9.9 Unauthorized Access: Trouble by a Computer Science Graduate Student, 282

16. ENDANGERING WORKERS, 282

17. AIDING AND ABETTING, 283

18. SENTENCING GUIDELINES, 283

19. TRENDS, 285

10. Intellectual Property in the Property System, 290

sidebar 10.1 Enforcement and Dispute Resolution in the Property System, 292

1. THE JUSTIFICATION FOR INTELLECTUAL PROPERTY, 292

Intellectual Property and Competition, 293

sidebar 10.2 Relative Poverty and Property, 294

2. THE KNOWLEDGE ASSETS OF MODERN BUSINESS, 294

Trade Secrets, 295

3. TRADE SECRET: TAKING REASONABLE MEASURES TO KEEP THE SECRET, 295

Employees and Reasonable Measures, 296

4. TRADE SECRET: THE ECONOMIC VALUE REQUIREMENT, 296

5. TRADE SECRET: CIVIL ENFORCEMENT, 296

sidebar 10.3 Sport Drink Secrets, 297

6. TRADE SECRET: CRIMINAL ENFORCEMENT, 298

sidebar 10.4 ONCIX and Trade Secret Spies, 298

Patent Law, 299

sidebar 10.5 A Famous Writer's Love Affair with Patents, 299

7. OBTAINING A PATENT, 300

8. PATENTABLE SUBJECT MATTER, 300

case 10.1 J.E.M. AG SUPPLY, INC. V. PIONEER HI-BRED INTERNATIONAL, INC., 301

sidebar 10.6 Business Methods as Patentable Subject Matter, 303

9. NONOBVIOUSNESS, NOVELTY, AND USEFULNESS, 304

Patent Duration and Enforcement, 304

10. CURRENT ISSUES IN PATENT LAW, 305

Business Method Patents, 305

Pharmaceutical Patents, 305

Patenting Genes, 306

Trademark Law, 306

11. TYPES OF TRADEMARKS, 307

Trade Dress, 307

12. TRADEMARK REGISTRATION, 308

13. TRADEMARK ENFORCEMENT, 309

Trademarks and the Internet, 310

14. TRADEMARK DILUTION, 310

case 10.2 MOSELY V. V SECRET CATALOGUE, INC., 311

Copyright Law, 313

15. COPYRIGHT PROTECTION, 313

case 10.3 CAMPBELL V. ACUFF-ROSE MUSIC, INC., 314

16. COPYRIGHT IN THE DIGITAL AGE, 316

17. DIGITAL MILLENNIUM COPYRIGHT ACT, 316

Property and the Common Good, 317

18. PROPERTY AND NATURAL LAW, 317

sidebar 10.7 Marx, Locke, and Private Property, 318

A Problem with the Natural Law Approach to Property, 318

19. PROPERTY AND THE GENERAL WELFARE, 319

Property and Adverse Possession, 319

20. PROPERTY LIMITATIONS AND THE COMMON GOOD, 320

Duration Limitations on Property, 320

Zoning and Regulatory Limitations on Property, 321

21. EMINENT DOMAIN, 321

Eminent Domain and the Common Good, 321

Public Use, 322

Just Compensation, 323

22. TAXATION, 323

Part Four. Business Regulations, 328

11. Agency Law and Business Organizations, 330

1. FORMS OF BUSINESS ORGANIZATIONS, 332

sidebar 11.1 Possible Forms of Business Organizations, 332

Principles of Agency Law, 332

2. TERMINOLOGY, 333

3. TORT LIABILITY, 333

4. CONTRACTUAL LIABILITY, 334

Actual Authority, 335

Implied Authority, 335

Apparent Authority, 335

5. CRIMINAL LIABILITY, 336

case 11.1 ARTHUR ANDERSEN LLP. V. UNITED STATES, 336

Factors to Consider When Selecting a Business's Organizational Form, 339

6. CREATION, 339

7. CONTINUITY, 339

8. MANAGERIAL CONTROL, 340

9. LIABILITY, 340

10. TAXATION, 340

Selecting the Best Organizational Form, 340

11. SOLE PROPRIETORSHIPS, 340

12. PARTNERSHIPS, 341

sidebar 11.2 Formation and Naming of a Partnership, 342

Continuity, 342

sidebar 11.3 Anticipating a Partnership's Dissolution—Buy and Sell Agreements, 343

Managerial Control, 343

13. CORPORATIONS, 344

sidebar 11.4 Steps in Creation of a Corporation, 345

Continuity, 345

Managerial Control, 346

sidebar 11.5 Role of Corporate Boards, 347

sidebar 11.6 Director's Personal Liability, 348

case 11.2 MEYER V. HOLLEY, 349

sidebar 11.7 Corporate Tax Rates, 351

14. LIMITED PARTNERSHIPS, 352

Continuity, 353

Managerial Control, 353

sidebar 11.8 Actions by Limited Partner, 354

15. S CORPORATIONS, 354

sidebar 11.9 Applicable Tax Return—Personal versus Organizational, 354

16. LIMITED LIABILITY COMPANIES, 355

Continuity, 356

Managerial Control, 356

17. MAKING THE DECISION, 356

12. Administrative Law and Corporate Governance, 360

sidebar 12.1 Trends in Regulation: Growth of Government in the 20th Century, 362

Administrative Agencies, 363

sidebar 12.2 Major Federal Agencies, 363

1. REASONS FOR AGENCIES, 364

Providing Specificity, 364

Providing Expertise, 364

Providing Protection, 364

Providing Regulation, 365

Providing Services, 365

2. FUNCTIONS OF AGENCIES, 365

Rule Making, 365

Adjudicating, 366

sidebar 12.3 Recent Fines by Administrative Agencies, 366

Investigating, 367

3. ORGANIZATION OF AGENCIES, 368

In General, 368

Quasi-Judicial Staff, 369

sidebar 12.4 Procedures Followed in Quasi-Judicial Proceedings, 370

4. INFLUENCING AGENCY DECISIONS, 370

Judicial Review of Agency Decisions, 371

5. STANDING TO SUE, 371

Reviewability, 371

Aggrieved Party, 371

sidebar 12.5 Standing to Sue or Who May Challenge an Administrative Policy, 372

6. REVIEW OF RULE MAKING, 372

Is Delegation Valid?, 372

case 12.1 NATIONAL CABLE & TELECOMMUNICATIONS ASSOCIATION V. BRAND X INTERNET SERVICES, 373

Authority Exceeded?, 375

sidebar 12.6 The FCC and Video Descriptions: Going Too Far, 375

case 12.2 FOOD AND DRUG ADMINISTRATION V. BROWN & WILLIAMSON TOBACCO CORPORATION, 376

7. REVIEW OF ADJUDICATIONS: PROCEDURAL ASPECTS, 379

Exhaustion of Remedies, 380

sidebar 12.7 Exceptions to Requirement of Exhaustion, 380

Primary Jurisdiction, 380

8. REVIEW OF FACTUAL DETERMINATIONS, 381

9. EQUAL ACCESS TO JUSTICE ACT, 382

Criticism of Administrative Agencies, 382

10. THE COSTS TO BUSINESS, 382

sidebar 12.8 Criticisms of Administrative Process, 383

sidebar 12.9 Costs for Each Employee to Comply with Federal Regulations, 384

11. THE COSTS TO SOCIETY, 384

sidebar 12.10 Too Much Information—An Agency Overwhelmed?, 385

13. Antitrust Laws—Regulating Competition, 388

1. HISTORICAL DEVELOPMENT, 390

The Sherman Act, 391

2. RESTRAINT OF TRADE, 392

3. MONOPOLY, 392

sidebar 13.1 Example of Monopoly, 393

sidebar 13.2 Proving an Illegal Monopoly Exists, 394

sidebar 13.3 Settlement of Antitrust Lawsuits, 395

4. ANALYSIS IN ANTITRUST LAW, 395

The Rule of Reason, 395

Per Se Illegality, 396

5. SANCTIONS, 397

6. EXEMPTIONS, 398

Types of Cases, 399

7. HORIZONTAL PRICE FIXING, 399

8. VERTICAL PRICE FIXING, 401

case 13.1 STATE OIL COMPANY V. KHAN, 401

9. INDIRECT PRICE FIXING, 404

10. TERRITORIAL AGREEMENTS, 404

11. CONCERTED ACTIVITIES, 405

sidebar 13.4 Basic Provisions of National Cooperative Production Amendment Act, 405

12. INTERNATIONAL CASES, 406

sidebar 13.5 Microsoft in the Global Marketplace, 406

The Clayton Act, 407

13. INTRODUCTION, 407

14. PRICE DISCRIMINATION, 407

case 13.2 VOLVO TRUCKS NORTH AMERICA, INC. V. REEDER-SIMCO GMC, INC., 409

15. SPECIAL ARRANGEMENTS, 412

16. MERGERS AND ACQUISITIONS, 413

The Federal Trade Commission Act—Unfair Competition, 414

17. ENFORCEMENT, 415

18. PREVENTION, 415

14. Sarbanes-Oxley and Securities Regulations, 420

1. WHAT IS A SECURITY?, 423

case 14.1 SECURITIES AND EXCHANGE COMMISSION V. EDWARDS, 423

2. SECURITIES AND EXCHANGE COMMISSION, 425

sidebar 14.1 The Securities and Exchange Commission in the Headlines, 425

Sarbanes-Oxley Act of 2002, 426

3. REVITALIZATION OF SEC, 426

4. ACCOUNTING REFORMS, 426

5. CORPORATE GOVERNANCE, 427

6. FINANCIAL STATEMENTS AND CONTROLS, 427

sidebar 14.2 SOX Compliance by Smaller Companies, 429

7. SECURITIES FRAUD, 429

The Securities Act of 1933: Going Public, 429

8. PARTIES REGULATED, 430

9. DOCUMENTS INVOLVED, 431

Registration Statement, 431

Prospectus, 432

10. LIABILITY, 432

Section 11: Registration Statement, 433

Section 12: Prospectus and Other Communications, 433

Section 17: Fraudulent Transactions, 434

11. DEFENSES, 434

Materiality, 434

Statute of Limitations, 434

Due Diligence, 435

Securities Exchange Act of 1934: Being Public, 436

12. SECTION 10(b) AND RULE 10b-5, 436

sidebar 14.3 Language of Section 10(b) of the 1934 Act and SEC's Rule 10b-5, 437

case 14.2 SEC V. ZANDFORD, 437

sidebar 14.4 Proof of Loss Due to Fraud, 440

sidebar 14.5 Right to Contribution from Others, 440

Materiality, 440

13. INSIDER TRANSACTIONS, 441

14. NONPUBLIC INFORMATION, 442

case 14.3 UNITED STATES V. O'HAGAN, 443

15. ADDITIONAL CIVIL LIABILITY, 446

16. CRIMINAL LIABILITY, 446

Considerations beyond the Federal Securities Laws, 448

17. STATE BLUE SKY LAWS, 448

Registration Requirements, 449

Exemptions, 449

15. Employment and Labor Laws, 454

Employment Laws, 456

sidebar 15.1 Summary of Major Federal Employment Laws, 456

1. MINIMUM WAGES AND MAXIMUM HOURS, 456

sidebar 15.2 State versus Federal Minimum Wages, 457

case 15.1 IBP, INC. V. ALVAREZ, 457

2. THE WARN ACT, 460

3. THE FAMILY AND MEDICAL LEAVE ACT, 461

sidebar 15.3 FMLA: Can Employees Sue Their Government Employer?, 462

4. PENSION PLANS AND HEALTH CARE, 462

sidebar 15.4 Changes in Pension Plans, 463

5. LIMITATIONS ON EMPLOYMENT AT WILL, 463

sidebar 15.5 Federal Statutes Limiting Employment-at-Will Doctrine, 464

6. WORKERS' PRIVACY, 465

7. EMPLOYEE LAWSUITS, 465

Labor Laws, 467

sidebar 15.6 Federal Laws Governing Labor-Management Relations, 468

8. LAWS BEFORE 1935, 468

The Clayton Act, 469

The Railway Labor Act, 469

sidebar 15.7 How the Railway Labor Act Works, 469

The Norris-LaGuardia Act, 470

sidebar 15.8 Federal Courts Cannot Enjoin, 470

The Wagner Act, 470

sidebar 15.9 Congressional Actions through the Wagner Act, 471

9. THE NATIONAL LABOR RELATIONS BOARD, 471

NLRB Organization, 471

Jurisdiction, 472

sidebar 15.10 NLRB Assumes Jurisdiction over the Following, 472

Quasi-Judicial Authority, 472

sidebar 15.11 Limitation of NLRB's Remedies, 473

10. CERTIFICATION OF UNIONS, 473

Certification Elections, 473

Certification through Cards, 474

11. UNFAIR LABOR PRACTICES BY MANAGEMENT, 474

Interfering with Unionization, 474

case 15.2 ALLENTOWN MACK SALES AND SERVICE, INC. V. NATIONAL LABOR RELATIONS BOARD, 475

Dominating a Labor Organization, 478

Discriminating Based on Union Affiliation, 478

Discriminating as a Result of NLRB Proceedings, 478

Refusing to Bargain in Good Faith, 479

sidebar 15.12 Is Bargaining Required?, 479

The Taft-Hartley Act, 480

12. EIGHTY-DAY COOLING-OFF PERIOD, 480

sidebar 15.13 Major Provisions of Taft-Hartley Act, 481

13. FREE SPEECH, 481

14. UNION SHOP—MEMBERSHIPS AND FEES, 482

15. SUITS AGAINST UNIONS, 483

16. UNFAIR LABOR PRACTICES BY UNIONS, 483

sidebar 15.14 Unfair Labor Practices by Unions as Enacted in the Taft-Hartley Act, 484

Restraining or Coercing an Employee into Joining a Union, 484

Causing an Employer to Discriminate against a Nonunion Member, 484

Striking or Picketing for Illegal Purposes or Engaging in Secondary Boycotts, 484

sidebar 15.15 Example of Secondary Boycott, 485

17. AMENDMENTS, 485

Agreeing to Engage in a Secondary Boycott, 485

Picketing When Not Certified, 486

16. Discrimination in Employment, 490

The Civil Rights Act of 1964, 492

1. GENERAL PROVISIONS, 492

sidebar 16.1 Employers and Others Covered by Title VII, 493

2. ENFORCEMENT PROCEDURES, 494

The 1991 Amendments, 494

Winning a Title VII Civil Action, 495

3. DISCRIMINATION ON THE BASIS OF RACE OR COLOR, 496

sidebar 16.2 Examples of Disparate Impact on Race, 496

4. DISCRIMINATION ON THE BASIS OF NATIONAL ORIGIN, 497

5. DISCRIMINATION ON THE BASIS OF RELIGION, 497

6. DISCRIMINATION ON THE BASIS OF SEX, 498

Sexual Harassment, 498

sidebar 16.3 Examples of Illegal Sex Discrimination, 499

case 16.1 ONCALE V. SUNDOWNER OFFSHORE SERVICES, INC., 500

Pregnancy Discrimination Act, 502

Equal Pay Act, 502

sidebar 16.4 U.S. Gender Employment Figures for 2002, 503

Sexual Orientation Discrimination, 503

sidebar 16.5 Transgender Discrimination, 503

Employment Practices That May Be Challenged, 504

7. QUESTIONNAIRES, INTERVIEWS, TESTING, AND EDUCATIONAL REQUIREMENTS, 504

8. HEIGHT AND WEIGHT REQUIREMENTS, 505

9. APPEARANCE REQUIREMENTS, 505

10. AFFIRMATIVE ACTION PROGRAMS AND REVERSE DISCRIMINATION, 506

Private Employer Affirmative Action, 506

11. SENIORITY SYSTEMS, 507

Other Statutes and Discrimination in Employment, 508

12. CIVIL RIGHTS ACT OF 1866, 508

Unlimited Damages, 508

13. DISCRIMINATION ON THE BASIS OF AGE, 509

Types of Age Discrimination, 509

Employer Defenses in ADEA Cases, 510

Remedies under the ADEA, 510

14. DISCRIMINATION ON THE BASIS OF DISABILITIES, 510

Reasonable Accommodation under the ADA, 511

case 16.2 U.S. AIRWAYS, INC. V. BARNETT, 512

Remedies under the ADA, 514

15. DISCRIMINATION IN GETTING AND KEEPING HEALTH INSURANCE, 514

16. OTHER FEDERAL LEGISLATION, 515

17. STATE ANTIDISCRIMINATION LAWS, 515

18. TRENDS IN EMPLOYMENT DISCRIMINATION AND LITIGATION, 516

Surge in Private Lawsuits, 516

Discrimination Based on Genetic Testing, 516

Arbitration in Employment Discrimination Disputes, 516

sidebar 16.6 Circuit City's Arbitration Provision, 517

Insuring against Employment Discrimination Claims, 517

19. EMPLOYMENT DISCRIMINATION, CORPORATE GOVERNANCE, AND PROPERTY, 518

17. Environmental Laws and Pollution Control, 522

sidebar 17.1 Categories of Environmental and Pollution-Control Laws, 524

Government's Regulation of Itself, 524

1. THE NATIONAL ENVIRONMENTAL POLICY ACT, 524

NEPA Basics, 525

case 17.1 METROPOLITAN EDISON COMPANY V. PEOPLE AGAINST NUCLEAR ENERGY, 525

2. EVALUATION OF ENVIRONMENTAL IMPACT STATEMENTS, 527

Government's Regulation of Business, 528

3. THE ENVIRONMENTAL PROTECTION AGENCY, 528

sidebar 17.2 Responsibilities of the EPA, 528

4. AIR POLLUTION, 528

Clean Air Act and Amendments, 529

Clean Air Act Enforcement, 530

Air Pollution Sources, 530

5. CLEAN AIR ACT TRENDS, 530

Emissions Reduction Banking, 531

sidebar 17.3 Beyond the Clean Air Act, 531

Prevention of Significant Deterioration, 532

The Permitting Process, 532

Indoor Pollution, 532

sidebar 17.4 Indoor Pollution, 532

Conclusion, 533

6. WATER POLLUTION, 533

case 17.2 SOLID WASTE AGENCY V. UNITED STATES ARMY CORPS OF ENGINEERS, 533

Goals and Enforcement, 535

7. ENDANGERED SPECIES ACT, 535

Application of the ESA, 536

8. PESTICIDE CONTROL, 536

The Federal Pesticide Acts, 537

Enforcement, 537

9. SOLID WASTE, 537

The Solid Waste Disposal Act, 538

10. TOXIC AND HAZARDOUS SUBSTANCES, 539

The Problem, 539

Toxic Substances Control Act, 539

Resource Conservation and Recovery Act, 540

The Superfund, 541

case 17.3 COOPER INDUSTRIES, INC. V. AVIALL SERVICES, INC., 542

sidebar 17.5 Superfund in Decline?, 543

Suits by Private Individuals, 544

11. CITIZEN ENFORCEMENT, 544

12. TORT THEORIES, 544

Other Tort Doctrines, 545

Trends in Environmental Regulation, 546

13. AREAS OF ENVIRONMENTAL CONCERN, 547

Loss of Natural Ecosystems, 547

Greenhouse Effect, 547

Population Growth, 548

14. CORPORATE GOVERNANCE AND THE ENVIRONMENT, 548

15. PRIVATE PROPERTY AND THE ENVIRONMENT, 549

Part Five. Globalization, 554

18. International Law, 556

sidebar 18.1 What Are Corporate Codes of Conduct?, 558

International Law and Organizations, 559

1. SOURCES OF INTERNATIONAL LAW, 559

Public International Law, 559

Private International Law, 560

2. INTERNATIONAL ORGANIZATIONS, 560

United Nations, 561

World Trade Organization, 561

The European Union, 562

sidebar 18.2 Major Goals of the WTO/GATT System, 563

3. MAJOR AGREEMENTS AFFECTING TRADE, 564

Convention on the International Sale of Goods, 564

North American Free Trade Agreement, 564

Central America-Dominican Republic Free Trade Agreement, 565

Methods of Transacting International Business, 565

4. FOREIGN SALES, 565

case 18.1 VOEST-ALPINE TRADING USA V. BANK OF CHINA, 566

5. LICENSES OR FRANCHISES, 568

6. DIRECT FOREIGN INVESTMENT, 568

Risks Involved in International Trade, 569

sidebar 18.3 Risks in International Trade, 569

7. EXPROPRIATION AND NATIONALIZATION, 570

8. EXPORT CONTROLS, 570

sidebar 18.4 Arms Export Control Act: How Can a Company Avoid Violations?, 571

9. PRESSURES FOR BRIBES, 571

sidebar 18.5 FCPA: Legal or Permissible Payments, 572

Resolving International Disputes, 574

10. SUING FOREIGN GOVERNMENTS IN THE UNITED STATES, 574

case 18.2 DOLE FOOD COMPANY V. DEAD SEA BROMINE CO. AND BROMINE COMPOUNDS, LTD., 574

11. SUING FOREIGN FIRMS IN THE UNITED STATES, 576

case 18.3 MORELLIV. CEDEL, 576

sidebar 18.6 The Reach of U.S. Law: Spector v. Norwegian Cruise Line, Ltd. (2005), 578

Alien Tort Claims Act, 578

12. INTERNATIONAL ARBITRATION, 578

sidebar 18.7 U.S. Companies Sued for Violations of ATCA, 579

sidebar 18.8 The World Intellectual Property Organization Arbitration and Mediation Center, 579

Appendix I. Case Briefing and Legal Study Tips, 582

Appendix II. Sample Complaint, 584

Appendix III. The Constitution of the United States of America, 588

Appendix IV. Selected Sections of Article 2 of Uniform Commercial Code, 598

Appendix V. Selected Sections of the Sarbanes-Oxley Act of 2002, 604

Appendix VI. Selected Sections of Securities Act of 1933, 609

Appendix VII. Selected Sections of Securities Exchange Act of 1934, 611

Photo Credits, 649

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