BSE Notes

Article VI

(the Supremacy Clause) for the supremacy of federal law over state law.

Skilling V. US

14th amendment. A statute may violate due process rights if it is so vaguely written that the ordinary person cannot understand it. The Skilling case that follows involves a void for vagueness claim arising from the infamous Enron fraud scandal that caused the former Houston, Texas, energy giant—then the seventh largest company in America—to collapse into bankruptcy in 2001. Enron founder Ken Lay (now deceased), chief executive officer Jeffrey Skilling, and chief accounting officer, Richard Causey, were among those indicted for various crimes in association with Enron's spectacular rise from its founding in 1985 to its collapse Interpreted to encompass only bribery and kickback schemes, Section 1346 is not unconstitutionally vague. Recall that the void-for-vagueness doctrine addresses concerns about (1) fair notice and (2) arbitrary and discriminatory prosecutions. . . . As to fair notice, "whatever the school of thought concern- ing the scope and meaning of" Section 1346, it has always been "as plain as a pikestaff that" bribes and kickbacks constitute honest-services fraud, Williams v. United States, 341 U.S. 97, 101, 71 S.Ct. 576, 95 L.Ed. 774 (1951). . . . As to arbitrary prosecutions, we perceive no significant risk that the honest-services statute, as we interpret it today, will be stretched out of shape. Its prohibition on bribes and kickbacks draws content not only from the pre-McNally case law, but also from federal statutes proscribing—and defining—similar crimes. The Supreme Court returned Skilling's case to the federal Fifth Circuit Court of Appeals where, in 2011, the Skilling saga ap- peared to be nearing its conclusion. The Fifth Circuit upheld Skilling's conviction finding the honest services error was "harmless" in that ample evidence unrelated to the honest services charge supported Skilling's conviction on 19 counts of securities fraud, conspiracy, insider trading and making false representations.60 At this writing, Skilling is serving his sentence in a Colorado prison, but an agreement was reached to reduce his 24-year sentence by 10 years because of a mis- take in interpreting the federal sentencing guidelines. Skilling also agreed to give up about $42 million, all of which will go to Enron fraud victims. The case now seems to be at an end, and Skilling may depart prison as early as 2017.

Due Process: Void for Vagueness

A statute may violate due process rights if it is so vaguely written that the ordinary person cannot understand it. The Skilling case that follows involves a void for vagueness claim arising from the infamous Enron fraud scandal that caused the former Houston, Texas, energy giant—then the seventh largest company in America—to collapse into bankruptcy in 2001. Enron founder Ken Lay (now deceased)

Fraud and Innocent Misrepresentation

A victim of fraud is entitled to rescind the contract in question and to seek damages, including, in cases of malice, a punitive recovery. Although fraud arises in countless situations and is difficult to define, the legal community has generally adopted the following elements, each of which must be proved: 1. Misrepresentation of a material fact. 2. The misrepresentation was intentional. 3. The injured party justifiably relied on the misrepresentation. 4. Injury resulted.

Judicial Review in Congress

Agency rules and orders may be challenged in court. Historically, however, the courts have taken a rather narrow approach to judicial review. The jurists, being generalists in the field of law, have been reluctant to overrule the judgment of specialists, and very crowded judicial calendars act as a natural brake on activist judicial review. For those reasons, judges readily sustain the judgment of the agency where reasonable. Of course, the courts overrule the agencies when appropriate, and review of controversial, high visibility rules such as many of those issued by the Environmental Protection Agency is common. Not surprisingly, judicial review of agency decisions raises a variety of technical issues of law. Cases turn on questions like these:

FCC vs Fox and ABC

Agency rules and orders may be challenged in court. Historically, however, the courts have taken a rather narrow approach to judicial review. The jurists, being generalists in the field of law, have been reluctant to overrule the judgment of specialists, and very crowded judicial calendars act as a natural brake on activist judicial review. For those reasons, judges readily sustain the judgment of the agency where reasonable. Of course, the courts overrule the agencies when appropriate, and review of controversial, high visibility rules such as many of those issued by the Environmental Protection Agency is common. Not surprisingly, judicial review of agency decisions raises a variety of technical issues of law. Cases turn on questions like these: The Commission failed to give Fox or ABC fair notice prior to the broadcasts in question that fleeting expletives and mo- mentary nudity could be found actionably indecent. Therefore, the Commission's standards as applied to these broadcasts were vague, and the Commission's orders must be set aside. We seem to be in the midst of a cultural war over social values, none of which is more hotly contested than the public role of sex in American life. Most famously, perhaps, Janet Jackson's "wardrobe malfunction" (when her right breast was momentarily bared during the halftime show of the 2004 Super Bowl) led to a $550,000 FCC fine levied against CBS television. In 2011, the Third Circuit Court of Appeals threw out the fine, calling the FCC action was "arbitrary and capricious" in that it was an unexplained departure from the agency's longtime tolerance of fleeting indecency.41 The Supreme Court declined to re- view that decision42 and the eight-year exposed breast saga came to an end. Supreme Court Chief Justice Roberts, however, reminded us that the courts' detailed examination of the FCC indecency policy has clarified some aspects of the law such that similar episodes may be subject to future penalties As noted in Fox II, FCC rules forbid indecent materials on conventional broadcast ser- vices between 6 am and 10 pm—hours when children are likely to be in the audience. The 10 pm to 6 am slot, on the other hand, offers a "safe harbor" for indecent programming. The rules do not reach subscription services such as programming delivered via satellite and cable services. The safe harbor hours are straightforward. Fox II and other cases have brought deeper understanding to the notice and due process elements of FCC practice. The Supreme Court, however, will likely need to revisit the First Amendment issues that were avoided in Fox I and Fox II. Parents and other critics favor sterner broadcast oversight as exemplified in the fleeting expletives/nudity situations whereas the broadcast industry and civil liberties ad- vocates prefer generous room for expression in the media along with aggressive defense of First Amendment free speech standards.

Hybrid Rule Making

Although not specifically provided for in the APA, agency rule- making now is often achieved by a compromise (hybrid) process that combines elements of formal and informal rule-making. Hybrid rule-making is informal rule making with ad- ditions in the form of some trial elements (more oral testimony and hearings) that have the effect of providing a more detailed record without all of the procedural requirements of formal rule-making. Whether by formal, informal, or hybrid procedures, final agency rules are published in the Federal Register and later compiled in the Code of Federal Regulations. [

Free Speech Balancing Test

Another tool frequently employed by the courts is the balancing test, where the judges must try to weigh the interests of the state against the expressive rights of the individual.

New Federalism

After decades of interpreting the Constitution in a flexible, expansive manner that accorded great power to the federal government, the Supreme Court in the mid-1990s revisited the federal-state balance of power with some decisions curbing federal authority. No major federal initiative was struck down, but the Court signaled legislators and lower courts to look more closely at the federal-state level. The new federalism expressed itself in a landmark 2013 U.S. Supreme Court decision, Shelby County v. Holder,10 that challenged the constitutionality of the federal Voting Rights Act of 1965 which, among other things, subjected nine mostly southern states to federal supervision of their election processes because of a long his- tory of discrimination against minorities in voting practices. Those states often gerrymandered election districts and imposed "voter in- tegrity" rules (e.g., literacy tests, character standards, and onerous identification requirements) that officially were designed to assure honesty in elections, but often had sought to exclude minorities from voting.

Article I

Article I creates Congress and enumerates its powers.

Bad Frog Brewery

Bad Frog is a Michigan corporation that manufactures and mar- kets several different types of alcoholic beverages under its "Bad Frog" trademark. This action concerns labels used by the company in the marketing of Bad Frog Beer, Bad Frog Lemon Lager, and Bad Frog Malt Liquor. Each label prominently fea- tures an artist's rendering of a frog holding up its four-"fingered" right "hand," with the back of the "hand" shown, the second "finger" extended, and the other three "fingers" slightly curled. We are unpersuaded by Bad Frog's attempt to separate the purported social commentary in the labels from the hawking of beer. Bad Frog's labels meet the three criteria identified in Bolger [463 U.S. 60 (1983)]: the labels are a form of advertising, identify a specific product, and serve the economic interest of the speaker. Moreover, the purported noncommercial message is not so "in- extricably intertwined" with the commercial speech as to require a finding that the entire label must be treated as "pure" speech.

Voyeurism

Both men appealed their convictions and won a 2002 decision because the voyeurism law did not apply, the Washington State Supreme Court unanimously ruled, to actions in public places.52

FDA

Can regulate Tobacco Drug Safety Vioxx doubled risk of heart attacks Food Safety A 2012 salmonella outbreak in peanut butter prompted the FDA to force the closure of Sunland Inc.'s New Mexico production facility. FDA data show that one in six Americans suffers from a food-borne illness annually resulting in 3,000 deaths and 130,000 hospitalizations. The 2011 Food Safety and Modernization Act gave the FDA greatly expanded food safety power. With about one in six Americans suffering from eating contaminated food each year, the FDA has proposed new rules to implement the 2011 Act. The rules would require farmers to make sure, for example, that irrigation water is clean and that animals are kept out of fields. Food manufacturers will be expected to submit food safety plans to the government.

Agency Duties

Control of Supply: Some agencies control entry into certain economic activities. The Federal Communications Commission grants radio and television licenses. The Food and Drug Administration (see Chapter 15) decides which drugs may enter the American market. The Securities and Exchange Commission (see Chapter 9) acts as a gatekeeper, preventing the entry of new securities into the marketplace until certain standards are met. The general concern is that the market alone cannot adequately protect the public interest. 2. Control of rates. Historically, those federal agencies charged with regulating utili- ties and carriers (Federal Energy Regulatory Commission, ICC, and CAB) set the prices to be charged for the services offered within their jurisdictions, but the deregulation move- ment resulted in the elimination of the CAB and the ICC and a general decline in agency rate-setting. The federal government decided to reduce or eliminate its authority in deci- sions such as the price of airline tickets, cable TV rates, and long-distance telephone rates. 3. Control of conduct. a. Information. Agencies commonly compel companies to disclose consumer informa- tion that would otherwise remain private. Warning labels, for example, may be mandated. b. Standards. Where simply requiring information is deemed inadequate for the public needs, the government may establish minimum standards that the private sector must meet. A ladder might be required to safely hold at least a specified weight, or workers might law- fully be exposed to only a specified maximum level of radiation. c. Product banishments. In rare circumstances, products can be banned from the market. The Consumer Product Safety Commission banned the flame retardant Tris (used in children's sleepwear) because of evidence of the product's cancer-causing properties.

Article III

Court System

Free Speech Context: Panhandling

Courts have consistently concluded that begging for money on the street constitutes expression. The context of the begging, that is, when, where, and how the begging is conducted may affect its constitutionality. Thus, for example, some re- straints on panhandling in the street at stop signs or on aggressive panhandling might well be permissible. The content of the message (begging) is not restricted, but for compelling reasons, authorities might lawfully shift the time, place, or manner of the expression.

Obamacare outcomes

Critics, on the other hand, forecast big increases in insurance premiums, doctors retiring early or reducing their hours, and employers dropping health care coverage. Certainly Obamacare raises new finan- cial questions for employers. The Affordable Care Act requires companies with 50 or more full-time employees to pay a penalty if they do not provide health care coverage for their full-time employees (defined as those working at least 30 hours per week). Some organiza- tions reportedly are cutting employees' hours to avoid the law's requirements, but a 2013 survey found nearly 90 percent of employers do not intend to shift workers from full-time to part-time and most companies intend to maintain coverage for their full-time workers.44

Mixed Economy

Economist and columnist Sebastian Mallaby argues that we should acknowledge a role for both the market and government in our mixed economy and recognize that the American people will continue to demand more and more from the government (security from criminals and terrorists, clean air, safe food, good schools, and so on).64 Indeed, he argues that those public goods in our prosperous society probably matter more than private pleas- ures such as DVDs and fancy vacations. As a result, government will likely be under great pressure to spend more, but we should also "be ruthless about making government and markets more efficient."

Search Warrant

In general, a search warrant issued by a judge is necessary to comply with the Constitution in making a narcotics search. A warrantless search is permissible, however, where reasona- ble, as in association with an arrest or where probable cause exists to believe a drug-related crime has been committed but circumstances make securing a warrant impracticable. Incident to an arrest, a search may lawfully include the person, a car, and the immediate vicinity of the arrest. Furthermore, a police officer may lawfully secure drugs that have been abandoned or that are in plain view even though a warrant has not been obtained.

Commerce Clause Interstate competition

For example, a state may seek, directly or indirectly, to impose a tax on foreign goods that compete with those locally grown or manufactured. Such efforts are unconstitutional violations of the Commerce Clause and thus are unenforceable. Federal authority ov

Freedom of Speech Limitations

Freedom of speech is not absolute. Clearly we cannot freely make slanderous statements about others, publicly utter obscenities at will, speak "fighting words" that are likely to produce a clear and present danger of violence, or yell "Fire" in a crowded theater.

Further Deregulation or Reregulation: 2008

Did the market and self-regulation (ethics and social responsibility) fail? Unsurprisingly, free-market advocates say the market performed well. They blame the subprime problems on government intervention, especially easy credit policies designed to extend home ownership to as many as possible, with reduced attention to ability to pay.58 Critics of the free market on the other hand say that de- regulation was a big factor in the collapse. For 30 years prior to the meltdown, the government gradually diminished its oversight of the banking industry in an effort to allow the market a greater voice and to render American banks more competitive in the global market. Most prom- inently perhaps, the 1933 Glass-Steagall Act was partially repealed in 1999, thus allowing a mingling of commercial and investment banks. In total, the regulatory walls separating com- mercial banks, investment banks, brokerage firms, insurance, and commodities trading came down, giant "financial supermarkets" emerged, and risky investing arguably grew.5

Increased Gov: Insufficient Regulation

Does government intervention pay off? Free market advocates say "no" in many instances, but some powerful numbers and re- spected opinions say "yes." The federal Office of Management and Budget's 2013 draft "Report to Congress on the Benefits and Costs of Federal Regulations" found that the estimated annual benefits of major federal rules reviewed by the OMB for which data were available from 2002 to 2012 totaled between $193 billion and $800 billion whereas the estimated costs were between $57 billion and $84 billion.50 Legendary investor Warren Buffet weighed in enthusiasti- cally in a 2010 New York Times letter to "Uncle Sam" applauding what he viewed as a necessary and highly successful federal government intervention to save the financial markets in 2008 and thereafter. Buffet reminded readers of the economic meltdown the nation faced, the giant banks that were teetering, the major industrial companies that were running out of money and the millions of Americans whose prosperity was at risk. The threat was enormous, as Buffet saw it, and he judged the government to have pro- vided the proper remedy: More broadly, the World Bank's 2013 "Doing Business" report placed the United States fourth highest in the world in the ease of doing business, ranking behind only Singapore, Hong Kong, and New Zealand.

1942 Case

Even purely intrastate activities can be regu- lated by the federal government if they have a substantial effect on interstate commerce. In the 1942 case Wickard v. Filburn,10 the U.S. Supreme Court, in interpreting a federal statute regulating the production and sale of wheat, found that one farmer's production of 23 acres of homegrown and largely home-consumed wheat, in combination with other similarly situated farmers growing and consuming wheat locally, could substantially affect the interstate wheat market by reducing demand for that wheat among those such as Wickard, who grew it locally. Thus, a local product could be subject to federal regulation. In 2005, the Supreme Court affirmed the Wickard reasoning in an interesting California case, Gonzalez v. Raich,11 involving the federal government's constitutional authority to regulate the use of medical marijuana. that the Commerce Clause does not give the federal government the authority to regulate the noncommercial cultivation and personal, medical use of marijuana that does not cross state lines. She won at the U.S. Court of Appeals for the Ninth Circuit, but the U.S. Supreme Court, by a 6-3 vote, ruled against Raich. Addressing the central question, the Court reasoned that the wholly intrastate use of marijuana had a substantial effect on interstate commerce in marijuana and thus was subject to federal regulation, as the Court had ruled decades earlier in Wickard. Personal consumption of marijuana, even for med- ical purposes, has the potential to displace demand for marijuana in the illegal interstate market, thus substantially affecting interstate commerce.

Admin Law Judge

Failing a settlement, the parties proceed much as in a civil trial. Ordinarily the case is heard by an administrative law judge (ALJ). The respondent may be represented by counsel. Par- ties have the right to present their cases, cross-examine, file motions, raise objections, and so on. They do not have the right to a jury trial, however. The ALJ decides all questions of law and fact and then issues a decision (order). In general, that decision is final unless ap- pealed to the agency/commission. After exhausting opportunities for review within the agency, appeal may be taken to the federal court system.

TARP

Fearing the collapse of the American economy, the Bush administration in 2008 and the Obama administration thereafter loaned over $400 billion in government money to giant banks such as Citigroup and Goldman Sachs, insurance colossus AIG, General Motors, Chrysler, and many others, large and small. Although much of the Troubled Asset Relief Program (TARP) money has been repaid, taxpayers are still expected to lose as much $25 billion when the program is eventually concluded. Many financial leaders continue to believe the intervention was necessary to save those companies, though free-market advo- cates are unconvinced. They think TARP subjected the marketplace to a dangerous moral hazard; an economics argument claiming that an individual or business that is protected from risk (by government intervention, in this case) will increase its risk-taking behavior in the future in the belief that a bailout will follow, if needed.

Be Happy not Gay

Following a day designated to show support for gays and lesbians at her high school in Naperville, Illinois, student Heidi Zamecnik wore a T-shirt to school displaying the expression "Be Happy, Not Gay." The school's dean forbade the expression at the school. Another student, Alexander Nuxoll, unsuccessfully sought to wear a similar shirt. Both students objected to homosexuality on religious grounds. The two students subsequently sued the school for infringing their free speech rights. The Seventh Circuit U.S. Circuit Court of Appeals reasoned that the forbidden expression did not constitute "fighting words" or some other recognized First Amendment exception and ruled that the students had a right to wear the shirts and express their opinions.

Gov Employees

Government employees' free speech rights are substantially limited on the job. Los Angeles Deputy District Attorney Richard Ceballos lost his job in a whistle-blowing epi- sode. Ceballos sued; the U.S. Supreme Court in 2006 ruled that government employees who speak out "pursuant to their official duties" are speaking as employees, not citizens, and therefore are not protected by the First Amendment. From discipline, regardless of the content of their message. The Court pointed to the government's need for efficiency and order in its workplace.25 In 2014, the United States Supreme Court clarified that public workers act as citizens when they testify under oath; therefore, the First Amendment pro- tects them from retaliation based on their testimony.

Partial Takings

Government may take part of a piece of property in order to expand a road, install a bike path, or establish a buffer zone, for example. These are neither total takings nor exactions, but rather fall into a case-by-case analysis that, very briefly, considers the impor- tance of the government's goals and the extent of the burden on the property owner.

Business Searches

Government tries to protect us from business hazards including pollution, defective products, and unsafe workplaces as well as business crimes such as fraud and bribery. To do so, government agents often want to enter company buildings, observe working condi- tions, and examine company books. We know our homes are generally protected from searches in the absence of a warrant. Excepting urgent circumstances such as terrorism concerns, can the same be said for a place of business? The Supreme Court has answered that question:

DNA Samples

He appealed his conviction arguing that he was a victim of an unreasonable search in violation of his Fourth Amendment rights. Maryland law allowed the sampling in cases where the suspect had been arrested, but not yet convicted, of serious crimes including burglaries, rape, and murder. The U.S. Supreme Court, in a 2013 ruling, upheld the conviction by a 5-4 vote saying that DNA collection is simply a part of the booking process, much like fingerprinting, and thus was a minimal intrusion on privacy.53 DNA testing is a valuable tool in prosecuting criminals and in exonerating the innocent, but DNA collection by the government of suspicionless persons who are presumed innocent at the time raises significant privacy issues.

Total Takings

If a governmental body acts in a way that permanently takes all of the economic value of a property or permanently physically invades the property, the tak- ing requires just compensation unless the government is (1) preventing a nuisance or (2) the regulation was permissible under property law at the time of the purchase of the property. W

Commercial Speech

In 1942, the U.S. Supreme Court ruled that com- mercial speech was not entitled to First Amendment protection.33 Subsequently the Court changed its stance and extended First Amendment rights to commercial speech, but those rights were much more limited than for political speech. In more recent years, the Court has been gradually expanding protection for commercial speech.

Testing Students

In 1998, the school board in rural Tecumseh, Oklahoma, insti- tuted a mandatory random urinalysis drug-testing program for all students participat- ing in competitive extracurricular activities. The tests checked for illegal drugs but not for alcohol. Test results were not turned over to the police. An honor student, Lindsay Earls, challenged the program as a violation of her Fourth Amendment rights. A U.S. Court of Appeals agreed with her, ruling that school officials needed The U.S. Supreme Court, however, reversed that decision and held by a 5-4 margin that the school's interest in addressing drug problems outweighed students' pri- vacy rights.49 The Court reasoned that those participating in ex- tracurricular activities are subjected to many rules and restrictions that diminish their expectation of privacy, and the Court said the program is a health and safety measure rather than an assault on personal privacy. Some state supreme courts, however, have ruled that school drug testing violates state constitutional law,50 but even middle schools in at least eight states are now requiring drug testing for students participating in activities ranging from athletics to scrapbooking.51

Big Gov: Excessive Rules

In brief, the excessive regulation argument is that government rules reduce business effi- ciency, curb freedom, and unjustly redistribute resources while expanding the government bureaucracy and the taxes/borrowing that fund it. The Federal Register, the daily journal of federal rules (both final and proposed) along with presidential orders, totaled more than 82,000 pages, near records, in 2010 and 2011, before falling back to just over 77,000 pages in 2012.46 The conservative American Action Forum estimated that about 87 million worker hours (a year's work for about 43,000 full- time employees) were required to complete the 2012 paperwork burdens associated with the federal government's rules.47 Federal government civilian employees total about 1.9 million, and a new study sug- gests those people are paid about $8,000 more annually in salary and about $30,000 more annually in benefits than their private sector equivalents.48 (Critics say the study failed to properly match job categories and that federal employees are generally better educated and older than those in the private sector.) Perhaps the biggest risk from excessive government is slower economic growth and fewer jobs. The U.S. Chamber of Commerce argues that the threat of ever-growing regula- tions brings such uncertainty to the economy that businesses simply decline to invest out of fear that government might impose costly, new rules at any time. The Chamber pointed to the $1.8 trillion in cash reserves held by American businesses in 2010 and said: "Businesses are reacting by sitting on capital, afraid to invest or hire."49 [For an array of conservative analyses of tax issues, see www.atr.org. For more detailed criticisms of the federal regulatory process,

Why Congress Creates Agencies?

In creating an agency, Congress delegates a portion of its authority to that body. Congress acknowledges the existence of a problem and recognizes that it is not the appro- priate body to address the specific elements of that problem—hence the agency. The pres- ident, ordinarily with the advice and consent of the Senate, appoints the administrator or the several commissioners who direct each agency's affairs. Commissioners are appointed in staggered terms, typically of seven years' duration. The appointment of commissioners for most of the independent agencies must reflect an approximate political balance between the two major parties.

Substantive Due Process

Laws that arbitrarily and unfairly infringe on fundamental personal rights and liberties such as privacy, voting, and the various freedoms specified in the Bill of Rights may be challenged on due process grounds. Basically, the purpose of the law must be so com- pelling as to outweigh the intrusion on personal liberty or the law will be struck down.

Licensure

Local regulation is much less economically significant than state regulation. Lo- cal government intervention in business typically involves various licensure requirements. For example, businesses like bars and theaters are often required to obtain a local permit to operate. More broadly, more than 1,000 of America's occupations (medicine, law, building Licensure is to protect the public from unsafe, unhealthful, and substandard goods and services, but critics contend that licensure is often designed to block the entry of competitors and that the benefits of licensure are ex- ceeded by its costs in increased prices, decreased services, and administrative overhead. Benedictine monks at St. Joseph Abbey outside New Orleans recently challenged a state licensure rule when they were ordered by the Louisiana State Board of Embalmers and Funeral Directors to close their business of building and selling caskets. The funeral industry cited a Louisiana regulation making it a crime for anyone other than state-licensed funeral directors to sell coffins in Louisiana. The monks sued and won when the Fifth U.S. Circuit Court of Appeals held that the funeral directors did not provide a rational basis for the chal- lenged rule. Judge Patrick Higginbotham wrote that the rule "adds nothing to protect con- sumers and puts them at a greater risk of abuse including exploitative prices."27 Other courts have upheld state regulatory policy in similar cases, but the state funeral directors' petition for review to the U.S. Supreme Court was rejected, and the monks can continue their work.

Granholm v. Heald

On the other hand, optimal efficiency, especially for the business commu- nity, often demands one uniform federal rule rather than a patchwork of 50 state rules.18 In the event of an irreconcilable conflict between federal and state law, the Supremacy Clause, as interpreted by the courts, provides that federal law will preempt (supersede) state or local law rendering it unconstitutional. In general, Supreme Court decisions have affirmed the federal government's regulatory authority even when faced with conflicting state rules. Were it not so, we would have great difficulty in achieving a unified national policy on any issue. Recent Supreme Court preemption decisions have been split, some allowing state law to stand despite conflicts with federal law, others being struck down.19 If a state chooses to allow direct shipment of wine, it must do so on evenhanded terms. Without demonstrating the need for discrimination, New York and Michigan have enacted regula- tions that disadvantage out-of-state wine producers. Under our Commerce Clause jurisprudence, these regulations [

Freedom of Speech Gov Employees

On the other hand, the First Amendment does gen- erally shield public-sector workers' off-the-job expressions when speaking as citizens about matters of public concern. Nonetheless, employer restrictions necessary to effective operation of the government enterprise may sometimes be permissible, as illustrated by the 2008 dismissal of Crystal Dixon, an African-American woman and the University of Toledo's interim associ- ate vice president for human resources. Dixon wrote, in response to another commentary and during off-work hours, an op-ed column in the Toledo Free Press newspaper in which she said, among other things, that homosexuals should not be considered civil rights victims because they choose their lifestyle whereas race is a mat- ter of genetics. Dixon's comments did not mention her job. Soon there- after Dixon was fired because her views were inconsistent with established university goals and values, including its diversity policies. Dixon sued, claiming, among other things, that her free speech rights were violated. In 2012, the Sixth Circuit Federal Court of Appeals ruled against Dixon, reasoning that the university's interest in efficient, effec- tive operations outweighed Dixon's First Amendment rights since she was a university policy maker who spoke on a policy related to her position.

Big Soda Ban

Opponents see the rule as more government overreach by a "nanny state" deter- mined to diminish personal freedom. A New York Times poll found about 6 in 10 New Yorkers opposed the ban.24 Some critics even consider the ban a discriminatory and pater- nalistic attack on minority populations who tend to suffer most from obesity-related prob- lems. The New York Times has pointed out, however, that many of the minority groups opposing the ban are the beneficiaries of tens of millions of dollars in beverage industry scholarships, conferences, and financial literacy classes.25 The contentious soda ban was struck down by a local state court judge in 2013, deter- mining the rule wasn't founded in fact and was riddled with loopholes and exceptions, making it unlawfully "arbitrary and capricious." The judge also found that the board of health "trespassed" on the legislative powers of the New York City Council, thus "eviscer- ating" the constitutional separation of powers doctri

Financial Reform

President Obama in 2010 approved the Dodd- Frank Wall Street Reform and Consumer Protection Act to improve America's financial regulatory structure. Dodd-Frank is primarily directed to large financial institutions whereas smaller, community banks are exempt from many of its provisions. As perhaps its chief goal, the new law is designed to prevent "systemic risks," financial collapses that would threaten the entire economy. Toward that objective, a 15-member Financial Stability Over- sight Council headed by the Secretary of the Treasury monitors the health of the entire U.S. financial system. Banks are required to maintain larger capital holdings in order to reduce risky lending, provide funds for emergencies, and make becoming dangerously large a less attractive direction. Big financial companies must create and update "funeral plans" to pro- vide for their own quick and orderly shutdown in the event of financial failure.

Executive Constraints for these agencies

Recent presidents have strengthened executive oversight of agency action by requiring cost-benefit analyses for new rules (President Clinton) and commanding agencies to cite a specific market failure before issuing a new rule (President George W. Bush). President Obama has maintained the cost-benefit expectation and he has introduced a new initiative to get rid of what he has labeled "dumb" rules. Recently, President Obama ordered all federal agencies to eliminate outdated rules that "stifle job creation and make our economy less competitive," and he has asked Congress for authority to consolidate a number of fed- eral agencies.

Freedom of Speech Corporations

Remember that the Constitution and Bill of Rights protect us from the government but not from, for example, our corporate employer.

2nd Amendment

Right to bear arms

Dick Heller

Security guard Dick Heller applied for and was denied a permit for a handgun in his home located in a dangerous Washington, D.C. neighborhood. He sued the District arguing that the gun ban violated his individual rights under the Second Amendment. The Court did preserve the constitutionality of "reasonable" gun regulations and Justice Scalia, writing for the majority, said nothing in the ruling should "cast doubt on long-standing prohibitions on the possession of firearms by felons or the mentally ill, or laws forbidding the carrying of firearms in sensitive places such as schools and government buildings, or laws imposing conditions and qualifications on the commercial sale of arms." "Dangerous and unusual" weapons also could be banned.

Article II

Sets up Exec branch

Corporation Free Speech

Should corporations enjoy full First Amendment rights? Can we properly think of corporate political expressions as commercial speech? Or is commercial speech limited to those expressions that propose a commercial transaction? Experts differ on these questions, but their importance is evident if we think for a moment about the controversial 2010 Citizens United decision allowing corporations to spend more freely on elections (dis- cussed previously in Chapter 3).34 In the late 1970s, Justices William Rehnquist and Byron White had described corporations as "creatures of the law" possessed of wealth-creation pow- ers but not entitled to the rights possessed by voters. By contrast, the Citizens United majority described corporations as "associations of citizens" deserving of free speech rights in the man- ner of individuals.35 Justice Scalia said: "To exclude or impede corporate speech is to muzzle the principal agents of the modern economy." "We should celebrate rather than condemn the addition of this speech to the public debate."36 This shift in constitutional interpretation reflects, according to a Los Angeles Times analysis, the President Ronald Reagan-era efforts to reduce government regulation of business.

Agency rules

Some agencies control entry into certain economic activities. The Federal Communications Commission grants radio and television licenses. The Food and Drug Administration (see Chapter 15) decides which drugs may enter the American market. The Securities and Exchange Commission (see Chapter 9) acts as a gatekeeper, preventing the entry of new securities into the marketplace until certain standards are met. The general concern is that the market alone cannot adequately protect the public interest. 2. Control of rates. Historically, those federal agencies charged with regulating utili- ties and carriers (Federal Energy Regulatory Commission, ICC, and CAB) set the prices to be charged for the services offered within their jurisdictions, but the deregulation move- ment resulted in the elimination of the CAB and the ICC and a general decline in agency rate-setting. The federal government decided to reduce or eliminate its authority in deci- sions such as the price of airline tickets, cable TV rates, and long-distance telephone rates. 3. Control of conduct. a. Information. Agencies commonly compel companies to disclose consumer informa- tion that would otherwise remain private. Warning labels, for example, may be mandated. b. Standards. Where simply requiring information is deemed inadequate for the public needs, the government may establish minimum standards that the private sector must meet. A ladder might be required to safely hold at least a specified weight, or workers might law- fully be exposed to only a specified maximum level of radiation. c. Product banishments. In rare circumstances, products can be banned from the market. The Consumer Product Safety Commission banned the flame retardant Tris (used in children's sleepwear) because of evidence of the product's cancer-causing properties.

Public Goods

Some goods and services cannot be provided through the pricing system because we have no method for excluding those who choose not to pay. For such public goods, the added cost of benefiting one person is zero or nearly so, and, in any case, no one can effectively be denied the benefits of the activity. National defense, insect eradication, street lighting, and pollution control are examples of this phenomenon. P

Gov Regulation

Stage One in Tomain's life cycle is the free market itself, the period when government regulation is absent from the market in question. In Stage Two, a market failure is identified, suggesting the need for government intervention. In Stage Three, government regulation is imposed in the form of a rule (such as a minimum drinking age). In Stage Four, regulatory failure occurs because, in brief, we believe the benefits of the rule in question no longer exceed its costs. In Stage Five, the government may respond with regula- tory reform to correct the failure, or it may move to Stage Six, where the regulation in question is simply eliminated. The market, thus fully deregulated, has returned to Stage One (the free market) and the regulatory life cycle is complete.8

Regulatory Life Cycle

Stage One in Tomain's life cycle is the free market itself, the period when government regulation is absent from the market in question. In Stage Two, a market failure is identified, suggesting the need for government intervention. In Stage Three, government regulation is imposed in the form of a rule (such as a minimum drinking age). In Stage Four, regulatory failure occurs because, in brief, we believe the benefits of the rule in question no longer exceed its costs. In Stage Five, the government may respond with regula- tory reform to correct the failure, or it may move to Stage Six, where the regulation in question is simply eliminated. The market, thus fully deregulated, has returned to Stage One (the free market) and the regulatory life cycle is complete.8

Commerce clause (Article I Section 8)

State authority to regulate commerce resides in the police power specified by the Constitution. Police power refers to the right of the state governments to promote the public health, safety, morals, and general welfare by regulating persons and prop- erty within each state's jurisdiction. The states have, in turn, delegated portions of the police power to local government units.

George Mason

TThere is no direct evidence in the record concerning the subjective intent of the Fraternity members who conducted the contest. The Fraternity, which later apologized to the Uni- versity officials for the presentation, conceded during the liti- gation that the contest was sophomoric and offensive. Following the contest, a number of students protested to the University that the skit had been objectionably sexist and racist. Two hundred forty-seven students, many of them mem- bers of the foreign or minority student body, executed a petition, which stated, "[W]e are condemning the racist and The University nevertheless contends that discovery will demonstrate that the contest does not merit characterization as a skit but only as mindless fraternity fun, devoid of any artis- tic expression. It argues further that entitlement to First Amendment protection exists only if the production was intended to convey a message likely to be understood by a particular audience. . . . As indicated, we feel that the First Amendment protects the Fraternity's skit because it is inherently expressive en- tertainment. Even if this were not true, however, the skit, in our view, qualifies as expressive conduct under the test articulated in Texas v. Johnson, 491 U.S. 397 (1989). It is true that the Johnson test for determining the expressive- ness of conduct requires "'[a]n intent to convey a particu- larized message'" and a great likelihood "'that the message would be understood by those who viewed it.'" The University, however, urges us to weigh Sigma Chi's conduct against the substantial interests inherent in educa- tional endeavors. We agree wholeheartedly that it is the University officials' responsibility, even their obligation, to achieve the goals they have set. On the other hand, a public university has many constitutionally permissible means to pro- tect female and minority students. We must emphasize, as have other courts, that "the manner of [its action] cannot consist of selective limitations upon speech." The University should have accomplished its goals in some fashion other than silencing speech on the basis of its viewpoint.

10th Amendment

The 10th Amendment provides that all power not expressly accorded to the federal government in the Constitution resides in the states or the people.

Equal Protection

The 14th Amendment provides that no state shall "deny to any person within its jurisdiction the equal protection of the laws." The Due Process Clause of the Fifth Amendment has been interpreted to provide that same protection against the power of the federal government. Fundamentally, these laws forbid a government from treating one person (including a corporation) differently from another without a rational basis for doing so. Most notably, the Equal Protection and Due Process Clauses have played an enormous role in attacking discrimination (see Chapter 13), but they can also signifi- cantly influence routine business practice in many ways. For example, can we lawfully impose higher taxes on a gambling casino than we impose on the sale of groceries? Or can we require the oil industry to follow more rigorous environmental standards than we expect of coal mines?

Bill of Rights

The Bill of Rights protects our personal freedoms (speech, religion, and more) from encroachment by the federal government

Corporations and Citizens

The Constitution does not protect citizens from purely private concentrations of power, such as large corporations. In fact, corporations themselves are often entitled to the protections of the Constitution. (

14th Amendment

The Due Process Clauses of both the Fifth Amendment (applying to the federal govern- ment) and the 14th Amendment (applying to the states) forbid the government to deprive citizens of life, liberty, or property without due process of law.

Independent Agencies

The Federal Aviation Administration, for example, is a part of the Department of Transportation. Our primary interest is in the independent agencies (FTC, FCC, and SEC). Congress created those agencies via statutes labeled enabling legislation and accorded them substantial authority to regulate a specified segment of American life. The FTC, for example, is empowered by its enabling legislation to pursue unfair trade practices. The president has direct authority over the executive agencies while the independent agencies are intended to operate with less fear of interference. In practice, of course, the president and Congress have substantial influence on all the agencies.

The Fifth Amendment

The Fifth Amendment prohibits the taking of private property for public use without just compensation for the owner. In cases where owners do not want to sell, governments often use the power of eminent domain to take private property for public uses such as building highways, bike trails, and parks, while providing just compensation.

First Amendment

The First Amendment forbids (1) the establishment of an official state religion (the Estab- lishment Clause) and (2) undue state interference with religious practice (the Free Exercise Clause). Government may neither encourage nor discourage the practice of religion gener- ally, nor may it give preference to one religion over another. Broadly, the idea of the First Amendment is to maintain a separation between church and state.

Regulate a Video Game

The New York City police department practices a "stop-and-frisk" policy by which a police officer can stop and question those whom the officer reasonably believes to have committed, be committing, or be about to commit a felony or serious misdemeanor. Those stopped can be frisked for weapons if the officer reasonably believes he or she is in danger of physical injury. The stop-and-frisk police practice is constitutionally permissible if conducted properly, but in a 2013 class-action lawsuit, Floyd v. City of New York, federal district court judge Shira Scheindlin ruled that stop-and-frisk, as practiced in recent years in New York City, is an imper- missible violation of citizens' Fourth Amendment (search and seizure) and 14th Amendment (equal protection) rights. The judge ruled that police had routinely stopped innocent people without reasonable suspicion and that the police had been engaging in racial profiling. About 83 percent of the 4.4 million stops between 2004 and 2012 had involved blacks and Hispanics, two demographics that make up slightly more than 50 percent of the city population. The city argued that the racial pattern of the stops reflected the disproportionate share of crimes commit- ted by young minority men, but the judge rejected that reasoning saying that comparison would be valid only if those stopped were criminals, but 88 percent of those stopped were released with no finding of a justification for the stops. Judge Scheindlin did not order a halt to stop-and-frisk, which is an important law enforcement tool if properly employed. She did ap- point a monitor to ensure police compliance with remedies including the use of body-worn cameras by some officers. The case is on appeal at this writing.

Stop and Frisk

The New York City police department practices a "stop-and-frisk" policy by which a police officer can stop and question those whom the officer reasonably believes to have committed, be committing, or be about to commit a felony or serious misdemeanor. Those stopped can be frisked for weapons if the officer reasonably believes he or she is in danger of physical injury. The stop-and-frisk police practice is constitutionally permissible if conducted properly, but in a 2013 class-action lawsuit, Floyd v. City of New York, federal district court judge Shira Scheindlin ruled that stop-and-frisk, as practiced in recent years in New York City, is an imper- missible violation of citizens' Fourth Amendment (search and seizure) and 14th Amendment (equal protection) rights. The judge ruled that police had routinely stopped innocent people without reasonable suspicion and that the police had been engaging in racial profiling. About 83 percent of the 4.4 million stops between 2004 and 2012 had involved blacks and Hispanics, two demographics that make up slightly more than 50 percent of the city population. The city argued that the racial pattern of the stops reflected the disproportionate share of crimes commit- ted by young minority men, but the judge rejected that reasoning saying that comparison would be valid only if those stopped were criminals, but 88 percent of those stopped were released with no finding of a justification for the stops. Judge Scheindlin did not order a halt to stop-and-frisk, which is an important law enforcement tool if properly employed. She did ap- point a monitor to ensure police compliance with remedies including the use of body-worn cameras by some officers. The case is on appeal at this writing.

Knock Rules

The Supreme Court restricted the exclusionary rule in 2006 holding that the govern- ment need not forfeit evidence collected in constitutionally improper "no knock" searches.42 For many years, police conducting a search have been required to knock and announce themselves then wait a reasonable time to enter. Michigan police, in executing a search warrant, announced themselves but did not wait a reasonable time before entering and finding crack cocaine in Booker T. Hudson's pockets. Hudson was convicted of drug violations, and his appeal eventually reached the U.S. Supreme Court where Justice Antonin Scalia, writing the 5-4 opinion up- holding Hudson's conviction, expressed concern about guilty de- fendants who have been allowed to go free because of the exclusionary rule. He concluded that the social harm accompanying the knock and an- nounce rule was too great as compared with the added privacy offered by the rule. Then in 2009, the Court, in another 5-4 decision, further limited the exclusionary rule by finding that unlawful police conduct does not require the suppression of evidence if the miscon- duct involved only "isolated negligence."4

Procedural unconscionability.

The bargaining power of the parties was so unequal that the agreement, as a practical matter, was not freely entered. Procedural unconscionabil- ity usually arises from lack of knowledge (e.g., fine print) or lack of choice (e.g., urgent circumstances).

New London Case

The city council approved the plan in January 2000 and designated the NLDC as its development agent in charge of implementation. The city council also authorized the NLDC to purchase property or to acquire property by exercising emi- nent domain in the City's name. The NLDC successfully negoti- ated the purchase of most of the real estate in the 90-acre area, but its negotiations with petitioners failed. As a conse- quence, in November 2000 the NLDC initiated the condemna- tion proceedings that gave rise to this case. Clearly, however, governments need, and have long exer- cised, substantial authority to take property for economic de- velopment. Of course, government planning sometimes does not work out as expected, and the Pfizer development appears to be one of those failures. In 2009, Pfizer announced it was abandoning the Fort Trumbull office complex as a cost-saving measure. Fourteen hundred jobs were departing. The hotels, stores, and condominiums planned for the lots taken from Kelo and her neighbors have yet to materialize. Kelo produced one of the angriest backlashes to any Supreme Court decision in history. At least 44 states have passed legislation or amended their constitutions to limit eminent domain, but the effectiveness of those measures is unclear. Some of them still allow takings involving "blighted" property, an exception readily subject to abuse, from the critics' point of view.

Substantive unconscionability.

The clause or contract in question was so manifestly one-sided, oppressive, or unfair as to "shock the conscience of the court." A contract that does not provide a remedy for a breach, or contract terms completely out of line with the relative risks assumed by the parties are among the conditions that might lead to a finding of substantive unconscionability.

Obamacare

The core of the Supreme Court review involved what is called the "individual mandate:" a requirement in the bill forcing most Americans to maintain "minimum essential" health insurance. The mandate was chal- lenged on the grounds that it violated the Commerce Clause by attempting to regulate in activity (commanding action from those who are not buying health insurance) rather than regulating already existing interstate activity. The Court, by a 5-4 margin, ruled that the individual mandate was, indeed, a violation of the Commerce Clause. The Court reasoned that construing the Commerce Clause to allow Congress to regulate in- activity would open up potentially expansive new territory to congressional interven- tion. Nonetheless, the case turned out to be a victory for Obamacare. The Court, once again by a 5-4 margin, ultimately upheld the constitutionality of the individual mandate on the grounds that it constituted a tax on those who do not have health insurance. In as much as Congress clearly has the constitutional authority to "lay and collect Taxes" (Article I, Section 8, Clause 1—See the Constitution in Appendix A at the back of this text), the Court ruled that Obamacare's individual mandate is constitutionally permissible.

CFPB

The new agency, authorized by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, is charged with writing and enforcing rules covering consumer financial products and services including mortgages, credit cards, payday loans, loan servicing, check cashing, debt collection, and others. Another important element of the Bureau's charge is to provide financial education, thereby promoting Americans' financial literacy. The expectation is that the Bureau will protect us from a wide array of dishonest practices such as hidden credit card fees and misleading "teaser" rates for mortgages.

Judicial Review

The role of the judiciary has been a matter of particular controversy in recent years. The historic 1803 Marbury v. Madison decision8 was the first time the Supreme Court had de- clared an act of Congress unconstitutional, and the decision also established the principle of judicial review; that is, the power of the courts to consider and, if necessary, invalidate congressional and executive branch decisions. Although neither of those powers was ex- pressly provided for in the Constitution, the Court considered them to be implicit in the legal structure created by the Constitution. Critics today argue that the Marbury reasoning has been stretched too far and that, in effect, courts have been making law, rather than merely interpreting it. T

FCC

The rules were de- signed to protect communities from media monopolies and to increase diversity in the marketplace of ideas.31 The FCC, however, points to the Internet and other technological advances that reduce the threat of media monopoly, thus providing some space for in- creased cross-ownership. On the other hand, the critics, including many in Congress, main- tain a firm stance against most further consolidation. They note the FCC's 1996 decision to lift its limit on how many radio stations one company could own nationally. The result was the development of the Clear Channel network (currently about 850 stations) that has been broadly criti- cized for "homogenizing" radio and sharply reducing local pro- gramming.

Increased Gov: Ineffective regulation

The sources of that regulatory failure are multiple, but one problem is highlighted in a recent Government Account- ability Office (GAO) report detailing duplication of tasks in the federal government. According to the report, 15 different agencies oversee food safety, 80 programs ad- dress economic development, 82 programs improve teacher quality, 56 help people understand finances, and so on.55 Critics further charge that the regulatory process is corrupted by familiar bureaucratic problems including inefficiency, incompetence, low productivity, and inconsistent policy enforcement. Of course, the problem of regu- latory capture, explained earlier in this chapter, can play a powerful role in ineffectual regulation as Jacob Laksin explains in reviewing Timothy Carney's book The Big

Voyeur Dorm v Tampa

This appeal arises from Voyeur Dorm L.C.'s alleged violation of Tampa's City Code based on the district court's characteriza- tion of Voyeur Dorm as an adult entertainment facilit Whether the district court properly determined that the al- leged activities occurring at 2312 West Farwell Drive consti- tute a public offering of adult entertainment as contemplated by Tampa's zoning restrictions. [Issues 2. and 3. are omitted.—Ed.] DISCUSSION The threshold inquiry is whether section 27-523 of Tampa's city code applies to the alleged activities occurring at 2312 West Farwell Drive. Because of the way we answer that in- quiry, it will not be necessary for us to analyze the thorny con- stitutional issues presented in this case. **** * Tampa argues that Voyeur Dorm is an adult use business pursuant to the express and unambiguous language of fer adult entertainment. Moreover, the case law relied upon by Tampa and the district court concerns adult entertainment in which customers physically attend the premises wherein the entertainment is performed. Here, the audience or consumers of the adult entertainment do not go to 2312 West Farwell Drive or congregate anywhere else in Tampa to enjoy the entertainment. Indeed, the public offering occurs over the Internet in "virtual space." While the district court read Sec- tion 27-523 in a literal sense, finding no requirement that the paying public be on the premises, we hold that section 27-523 does not apply to a residence at which there is no public offer- ing of adult entertainment.

sales puffing

Thus normal sales puffing ("This baby is the greatest little car you're ever gonna drive") is fully lawful, and consumers are expected to exercise good judgment in responding to such claims.

Heart of Atlanta Motel

Thus the power of Congress to promote interstate com- merce also includes the power to regulate the local incidents thereof, including local activities in both the states of origin and destination, which might have a substantial and harmful effect upon that commerce. One need only examine the evi- dence which we have discussed above to see that Congress may—as it has—prohibit racial discrimination by motels serv- ing travelers, however "local" their operations may appear. The only questions are (1) whether Congress had a rational basis for finding that racial discrimination by motels affected commerce, and (2) if it had such a basis, whether the means it selected to eliminate that evil are reasonable and appropriate. If they are, appellant has no "right" to select its guests as it sees fit, free from governmental regulation. It is doubtful if in the long run appellant will suffer eco- nomic loss as a result of the act. Experience is to the contrary where discrimination is completely obliterated as to all public accommodations. But whether this be true or not is of no con- sequence since this Court has specifically held that the fact that a "member of the class which is regulated may suffer economic losses not shared by others . . . has never been a barrier" to such legislation. . . . We, therefore, conclude that the action of the Congress in the adoption of the act as applied here to a motel which concededly serves interstate travelers is within the power

Freedom of Speech example

Thus, although the Ku Klux Klan can express hatred for black people (the content of the message), the state may restrict where and when and how those expressions are made (the context of the message) if necessary for the public safety.

Admin Law

Thus, the administrative law governing those agencies technically addresses the entire executive branch of government. Our attention, however, will be directed to the prominent regulatory agencies (Federal Trade Commission, Federal Communications Commission, Securities and Exchange Commission, and the like) rather than the various executive departments (Agriculture, Defense, and so on) and nonregulatory welfare agencies (Social Security Administration and Veterans Administration). W

Admin Hearing

Typically, after an investigation, a violation of a statute and/or rule may be alleged. Af- fected parties are notified. An effort is made to reach a settlement via a consent order, in which the party being investigated agrees to steps suitable to the agency but under which the respondent makes no admission of guilt (thus, retarding the likelihood of subsequent civil liability).

Supramacy Law

US law above State law On the other hand, optimal efficiency, especially for the business commu- nity, often demands one uniform federal rule rather than a patchwork of 50 state rules.18 In the event of an irreconcilable conflict between federal and state law, the Supremacy Clause, as interpreted by the courts, provides that federal law will preempt (supersede) state or local law rendering it unconstitutional. In general, Supreme Court decisions have affirmed the federal government's regulatory authority even when faced with conflicting state rules. Were it not so, we would have great difficulty in achieving a unified national policy on any issue. Recent Supreme Court preemption decisions have been split, some allowing state law to stand despite conflicts with federal law, others being struck down.19

Basel III

We should remember that regulation in the United States remains modest relative to the balance of the globe. Even though the cost of regulation in the United States is great, gov- ernment rules are, in fact, less burdensome in America than in most nations. The Washington Post in 2013 reported the critics' view that France is "drowning in rules and regulations,"68 and The New York Times in 2012 applied the word abysmal to Greece's climate for doing business while citing a McKinsey & Company study that found start-ups in Greece facing "immense amounts of red tape, complex administrative and tax systems and procedural disincentives."69 The global trend, however, seems to be toward more sensible rules. The 2013 World Bank Doing Business 2013 report found that significant progress has been made in the last 10 years in improving business regulatory practices around the globe. Since 2005, the average time to start a business has fallen from 50 to 30 days.70 We should also understand that regulation, particularly in the banking sector, is an in- creasingly cooperative, international process recognizing the value of cutting global red tape while also acknowledging the necessity of firm rules to maintain a healthy global economy and prevent future financial crises. The big industrial nations, at this writing, are We should remember that regulation in the United States remains modest relative to the balance of the globe. Even though the cost of regulation in the United States is great, gov- ernment rules are, in fact, less burdensome in America than in most nations. The Washington Post in 2013 reported the critics' view that France is "drowning in rules and regulations,"68 and The New York Times in 2012 applied the word abysmal to Greece's climate for doing business while citing a McKinsey & Company study that found start-ups in Greece facing "immense amounts of red tape, complex administrative and tax systems and procedural disincentives."69 The global trend, however, seems to be toward more sensible rules. The 2013 World Bank Doing Business 2013 report found that significant progress has been made in the last 10 years in improving business regulatory practices around the globe. Since 2005, the average time to start a business has fallen from 50 to 30 days.70 We should also understand that regulation, particularly in the banking sector, is an in- creasingly cooperative, international process recognizing the value of cutting global red tape while also acknowledging the necessity of firm rules to maintain a healthy global economy and prevent future financial crises. The big industrial nations, at this writing, are

Free Speech Content: Vile Words

Westboro baptist church

Externalities

When all the costs and benefits of a good or service are not fully internalized or absorbed by producers or consumers, those costs or benefits fall elsewhere as what economists have labeled externalities, neighborhood effects, or spillovers.

Same Sex Marriage

Windsor sued be- cause the government, consistent with DOMA, did not recognize her 2007 marriage to Thea Spyer, her long-time partner, who died in 2009. The couple had lived together for 40 years in New York City prior to their marriage in Canada. New York accepted their marriage, but Section 3 of the 1996 DOMA forbids the fed- eral government from recognizing same-sex marriage for the purposes of federal laws and programs. Consequently, the Internal Revenue Service required Windsor to pay $363,053 in taxes on the estate Spyer had left to her. Windsor claimed the federal es- tate tax exemption for surviving spouses, but because DOMA disallowed recognition of the marriage the federal exemption was not available to Windsor. Windsor sued be- cause the government, consistent with DOMA, did not recognize her 2007 marriage to Thea Spyer, her long-time partner, who died in 2009. The couple had lived together for 40 years in New York City prior to their marriage in Canada. New York accepted their marriage, but Section 3 of the 1996 DOMA forbids the fed- eral government from recognizing same-sex marriage for the purposes of federal laws and programs. Consequently, the Internal Revenue Service required Windsor to pay $363,053 in taxes on the estate Spyer had left to her. Windsor claimed the federal es- tate tax exemption for surviving spouses, but because DOMA disallowed recognition of the marriage the federal exemption was not available to Windsor.

Fourth Amendment

[T]he right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause

natural monopoly

where a single large firm, such as a utility, was more efficient (a natural monopoly) than several small ones. Today, attention in the monopoly area is largely directed to anticompetitive conduct such as price fixing and abuse of market dominance that results in a reduction of open, efficient competition.

asymmetric information

where some parties to a transaction simply know more than the other parties to that transaction, with the result that optimal efficiency cannot be achieved.

innocent misrepresentation,

which differs from fraud only in that the falsehood was unintentional. The wrongdoer believed the state- ment or conduct in question to be true, but he or she was mistaken. In such cases, the wronged party may secure rescission of the contract, but ordinarily damages are not awarded. The following case involves a fraud claim against Harley-Davidson.

Exclusionary Rule

which provides that, as a matter of due process, evidence secured in violation of the Fourth Amendment may not be used against a defendant at trial. As ultimately applied to all courts by the 1961 U.S. Supreme Court decision in Mapp v. Ohio,41 we can see that the exclusionary rule, while a very effective device for discourag- ing illegal searches, seizures, and arrests, also from time to time has the effect of freeing guilty criminals.

Article IV, VI, and 14

address the relationship between the federal government and the states.

Congressional Authority is limited to

certain enumerated powers (Article I, Sec- tion 8), such as the authority to regulate commerce.

Federal agencies are two kinds

executive and independent.

Nullifications by states on federal laws

guns, obamacare, etc.

Exaction/Mitigation

if the owner ded- icates some property interest (called an exaction) or money (called a mitigation or impact fee) to the government. Thus if you are developing land for housing, the city government might require that you devote a portion of that land to parks or pay a fee to help with com- munity recreation needs. The Supreme Court dealt with just such a case in Dolan v. Tigard.56 Florence Dolan, owner of a plumbing and electrical supply store in Tigard, Oregon, applied for a city permit to nearly double the size of her store and to pave her parking lot. Concerned with increased traffic and water runoff due to the proposed expan- sion, the city granted the permit, subject to a pair of conditions: (1) Dolan was to dedicate the portion of her property that lay within the 100-year floodplain to the city to improve drainage for the creek that ran along her property, and (2) she was to dedicate an additional 15-foot strip of her land adjacent to the floodplain for use as a bicycle path/walkway to relieve traffic congestion.

Procedural Due Process

including notice and a fair hearing before taking an action affecting a citizen's life, liberty, or property. A fair hearing might require, among others, the right to present evidence, the right to a decision maker free of bias, and the right to appeal. The precise nature of proce- dural due process depends, however, on the situation. A murder trial requires meticulous attention to procedural fairness; an administrative hearing to appeal a housing officer's de- cision to banish a student from a dormitory, while required to meet minimal constitutional standards, can be more forgiving in its procedural niceties.

Article I Section 8

interpreted the Necessary and Proper Clause (Article I, Section 8) to afford Congress those implied powers neces- sary to execute the enumerated powers, thus achieving a workable national government

Consumer Product Safety Commission

is the federal agency charged with protecting us from "unreasonable risks of injury and death" from consumer prod- ucts. The YouTube attack was a product of frustration with the CPSC's response to a 2007 wave of toy recalls, largely because of dangerous levels of lead. T the CPSC unanimously voted to ban, effective June 28, 2011, the manufacture, sale, and resale (including yard sales) of the traditional drop-side baby crib that has cradled millions. The new stand- ard requires fixed sides. Reducing Risk In seeking compliance with safety expectations, the commission can exert a num- ber of expectations. Manufacturers must certify before distribution that products meet fed- eral safety standards. Manufacturing sites may be inspected, and specific product safety testing procedures can be mandated. Businesses other than retailers are required to keep product safety records. In cases of severe and imminent hazards, the CPSC has the power to enforce its decisions by seeking a court order to remove a product from the market. In less-urgent circumstances, the commission may proceed with its own administrative rem- edy.

Article 1 Section 8 Clause 3

it gives Congress the power to regu- late commerce (the Commerce Clause).

Regulatory Taking

normally do not require government compensation because doing so would severely impair the state's ability to govern in an orderly manner. Nonetheless, in recent years the courts have been more aggressive about requiring just compensation for some regulatory takings. Three broad classes of such takings have emerged in court decisions.

Expression

not limited to oral and written utterances. Freedom of speech clearly ex- tends to messages not communicated with words. Disrobing, for example, might well constitute expression under some conditions. In Tinker v. Des Moines School District, one of the leading free speech cases in American history, the U.S. Supreme Court found First Amendment protection for the wearing of a black armband to a high school as a protest against the Vietnam War where no evidence of disruption was presented.

Animal Cruelty

or violating a federal statute forbidding knowingly creating, sell- ing, or possessing "a depiction of animal cruelty" to be sold for commercial gain in inter- state or foreign commerce. Stevens moved to dismiss the indictment saying that the statute violated his First Amendment right to free speech. The Supreme Court, in an 8-1 ruling, agreed with Stevens by finding the federal statute overbroad in that it could legitimately be applied to legal activities such as hunting or the inhumane treatment of livestock as well as to the dog fights Stevens filmed.38 In an illustration of the balance of powers concept, Congress and President Obama quickly approved new federal legislation designed to attack certain animal cruelty videos while meeting constitutional requirements. The Animal Crush Video Prohibition Act of 2010 bans the creation and distribution of obscene animal torture videos. Those videos often depict women in high heels slowly crushing small animals, images that appeal to certain sexual fetishists. By limiting the law to obscene crush videos, Congress and the president believe the statute will address the overbreadth problem while fitting the statute into the well-settled obscenity exception to the First Amendment's speech protections.

Article V

provides for amendments to the Constitution.

Administrative Procedural Act

provides for both informal (often called "notice and comment") and formal rule-making processes for legislative rules. Under both approaches, the process begins with the publication of a Notice of Proposed Rule Making in the Federal Register (a daily publication of all federal rules, regulations, and orders). Thereafter, in the case of informal rule making, the agency must permit written comments on the proposal and may hold open hearings. To enhance participation in the rule-making process, the federal government provides an online portal where the public can comment on proposed rules In the case of formal rule-making, after providing notice, the agency must hold a public hearing conducted with most of the procedural safeguards of a trial, where all interested parties may call witnesses, challenge the agency evidence, and so on.

Federalism

that is, the Constitution provides for shared power among national, state, and local governments. A primary role of the Constitution is to balance central federal authority with dispersed state power.

Too Much Federal Power? Cause of Commerce Clause

that the Commerce Clause does not give the federal government the authority to regulate the noncommercial cultivation and personal, medical use of marijuana that does not cross state lines. She won at the U.S. Court of Appeals for the Ninth Circuit, but the U.S. Supreme Court, by a 6-3 vote, ruled against Raich. Addressing the central question, the Court reasoned that the wholly intrastate use of marijuana had a substantial effect on interstate commerce in marijuana and thus was subject to federal regulation, as the Court had ruled decades earlier in Wickard. Personal consumption of marijuana, even for med- ical purposes, has the potential to displace demand for marijuana in the illegal interstate market, thus substantially affecting interstate commerce. Strengthening its Lopez reasoning, the U.S. Supreme Court in the 2000 Brzonkala case15 ruled by a 5-4 vote that Congress exceeded its Commerce Clause authority in approving some portions of the federal Violence Against Women Act (VAWA). The law allowed women who had been victims of gender-based violence to sue in federal court even though the crimes did not directly involve more than one state. In debating VAWA, After Brzonkala complained to the university, Morrison was found guilty of abusive conduct by the VPI judicial committee and was suspended for one year, but that punishment was subsequently lifted. Brzonkala then sued for civil damages in federal court under the VAWA. As explained above, Brzonkala eventually lost, however, when the Supreme Court invalidated the portions of the VAWA that she was relying on by ruling that the acts of violence the VAWA was aimed at did not have a substantial effect on interstate commerce.

State can not regulate

the content of your speech. it does have authority to regulate the context of that speech (can restrict where, when and how you say certain things)

FTC

to prevent "unfair methods of competition and unfair or deceptive acts or practices in and affecting commerce." The FTC operates as a miniature government with powerful quasi-legislative (rule-making) and quasi-judicial (adjudication) roles. Rule Making Kardashian and all others hyping products and services on the Internet are now subject to penalties for false or misleading advertising if they fail to comply with the FTC's "Guides Concerning Use of Endorsements and Testimonials in Advertising." The rules, among other things, require those offering endorsements on new media sites (blogs, Twitter, Facebook, etc.) to disclose any connection they have (including in most cases, receiving cash or gifts) in exchange for their testimonials. Also telemarketing rules Fraud and Deception Product Quality: Skechers, for example, agreed to pay $50 million in 2012 to settle FTC and state charges that it misled the public by making unsupported claims that its toning sneakers allow buyers to, Consumer Privacy Identify theft. The FTC also enforces the privacy provisions in a number of other federal laws, including those addressing the use of consumer credit reports, chil- dren's online privacy, identity theft, personal health information, personal financial infor- mation, and others. In 2011, the FTC began enforcing its "Red Flags Rule" that is designed to slow identity theft. Under the rule, all "financial institutions" and "creditors" must es- tablish a written program to prevent identity theft in their organizations and then mitigate whatever losses may come from identity theft. The FTC identifies "Red Flags" as, for ex- ample, suspicious documents, financial account activities, or IDs .

Executive agencies

usually are located within the departments of the executive branch of the government.

Cell Phones

when the individual being arrested is close enough to the vehicle to reach in for a weapon or evidence and b. when the officer can reasonably believe that the vehicle contains evidence relevant to the crime of arrest. Thus, arrests for routine traffic stops ordinarily would not justify vehicle searches while such searches are more likely to be permissible incident to arrests for more seri- ous crimes

Vehicle Searches

when the individual being arrested is close enough to the vehicle to reach in for a weapon or evidence and b. when the officer can reasonably believe that the vehicle contains evidence relevant to the crime of arrest. Thus, arrests for routine traffic stops ordinarily would not justify vehicle searches while such searches are more likely to be permissible incident to arrests for more seri- ous crimes