Ch 5, 6, and 8 Business Legal Environment

Franchising

An agreement whereby a domestic owner of a trademark, trade name, copyright, etc. permits a foreign company to use the trademark, trade name, copyright, etc. in return for a fixed fee or royalty.

Police Powers

State regulatory powers

Preemption

A doctrine under which certain federal laws preempt, or take precedence over, conflicting state or local laws.

Executive controls

A president or governor generally has the power to appoint agency officials and to veto enabling legislation as well as appropriations.

Treaty

A treaty is an agreement or con- tract between two or more nations that must be authorized and ratified by the supreme power of each nation. Under Article II, Section 2, of the U.S. Constitution, the president has the power "by and with the Advice and Consent of the Senate, to make Treaties, provided two- thirds of the Senators present concur."

Interpretive rules

Administrative agencies also issue interpretive rules, which simply declare policy and do not affect legal rights or obligations.

Adjudication

After an investigation reveals a suspected violation, an agency may begin to take administrative action against an individual or organization. Most administrative actions are resolved through negotiated settlements at their initial stages, without formal adjudication (the process of resolving a dispute by presenting evidence and arguments before a neutral decision maker)

Executive agencies

Agencies formed to assist the president or, at the state level, the governor, in carrying out executive functions. (ex. the justice department).

Independent regulatory agencies

Agencies neither designed to aid nor are directly accountable to the legislative or executive branches. (ex. the securities and exchange commission).

Licensing

An agreement whereby a domestic company permits a foreign company to produce and sell goods in the foreign market using the domestic company's materials or process in return for a royalty.

Intermediate scrutiny

Another standard, that of intermediate scrutiny, is applied in cases involving discrimination based on gender or discrimination against illegitimate children (children born out of wedlock). Laws using these classifications must be substantially related to important government objectives. For instance, an important government objective is preventing illegitimate teenage pregnancies. Because males and females are not similarly situated in this regard, a law that punishes men but not women for statutory rape will be upheld, even though it treats men and women unequally.

"Sunshine" Legislation

Subject to certain specified exceptions, agency meetings must be (1) noticed to the public in advance and (2) open for public observation, if not participation.

Due process

Both the fifth and the fourteenth amendment provide that no person should be deprived of "life, liberty, or property without due process of law." The due process clause of these constitutional amendments has two aspects—procedural and substantive. Note that the due process clause applies to "legal per- sons" (that is, corporations), as well as to individuals.

Commercial speech

Can be restricted as long as the restriction promotes a substantial government interest, directly advances said interest, and in no more restrictive than necessary in order to achieve the substantial government interest.

Unprotected speech

Certain types of speech may be prohibited, for example... speech or writing that defames or harms the good reputation of another person, threatening or "fighting" words, and obscene or pornographic speech.

Legislative Controls

Congress or the state legislature review and amend enabling legislation, and generally control appropriations (subject to executive veto) to an agency. Congress may also "freeze" the implementation of new rules before they take effect.

HIPPA

Congress passed the Health Insurance Portability and Accountability Act (HIPAA).41 This act defines and limits the circumstances in which an individual's "protected health information" may be used or disclosed.

Civil law system

In a civil law system, the primary source of law is a statutory code. Courts interpret the code and apply the rules to individual cases, but courts may not depart from the code and develop their own laws. Judicial precedents are not binding, as they are in a common law system. In theory, the law code sets forth all of the principles needed for the legal system. Trial procedures also differ in civil law systems. Unlike judges in common law systems, judges in civil systems often actively question witnesses.

Common law systems

In a common law system, the courts independently develop the rules governing certain areas of law, such as torts and contracts. These common law rules apply to all areas not covered by statutory law. Although the common law doctrine of stare decisis obligates judges to follow precedential decisions in their jurisdictions, courts may modify or even overturn precedents when deemed necessary.

Direct exporting

In direct exporting, a U.S. company signs a sales contract with a foreign purchaser that pro- vides for the conditions of shipment and payment for the goods.

Rational basis test

In matters of economic or social welfare, a classification will be considered valid if there is any conceivable rational basis on which the classification might relate to a legitimate government interest. It is almost impossible for a law or action to fail the rational basis test.

Commerce Clause

Article I, Section 8, of the U.S. Constitution explicitly permits Congress "[t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." This clause, referred to as the commerce clause, has had a greater impact on business than any other provision in the Constitution. The commerce clause provides the basis for the national governme

Full faith and credit clause

Article IV, Section 1, of the U.S. Constitution provides that "Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State." This clause, which is referred to as the full faith and credit clause, applies only to civil matters. It ensures that rights established under deeds, wills, contracts, and similar instruments in one state will be honored by other states. It also ensures that any judicial decision with respect to such property rights will be honored and enforced in all states.

Privileges and Immunities Clause

Article IV, Section 2, of the Constitution provides that the "Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States." This clause is often referred to as the interstate privileges and immunities clause. It prevents a state from imposing unreasonable burdens on citizens of another state—particularly with regard to means of livelihood or doing business.

Supremacy clause

Article VI of the U.S. Constitution, commonly referred to as the supremacy clause, provides that the Constitution, laws, and treaties of the United States are "the supreme Law of the Land." When there is a direct conflict between a federal law and a state law, the state law is rendered invalid. Because some powers are concurrent (shared by the federal government and the states), however, it is necessary to determine which law governs in a particular circumstance.

Import restrictions

Devices designed to limit imports and thereby aid domestic businesses.

Export incentives

Devices designed to stimulate exports and thereby aid domestic businesses.

Normal trade relations status

Each member country of the World Trade Organization is required to grant normal trade relations (NTR) status (formerly known as most-favored-nation status) to other member countries. This means that each member is obligated to treat other members at least as well as it treats the country that receives its most favorable treatment with regard to imports or exports. Various regional trade agreements and associations also help to minimize trade barriers between nations.

Small Business Regulatory Enforcement Fairness Act (SBREFA)

Empowers federal courts to enforce the RFA, requires federal agencies to explain new regulations in "plain English," provides ombudsmen to receive comments and complaints from small businesses, and entitles small businesses to recover expenses and legal fees incurred due to "excessive" agency demands.

Expropriation

Expropriation occurs when a government seizes a privately owned business or privately owned goods for a proper public purpose and awards just compensation.

Children's internet protection act

Federal law requiring public schools and libraries to block children from accessing adult content, based on the meta tags, or key words, appearing on the blocked site. The United States V. American Library Association, the supreme court held that CIPA did not violate the first amendment.

Strict scrutiny

If a law or action prohibits or inhibits some persons from exercising a fundamental right, the law or action will be subject to "strict scrutiny" by the courts. Under this standard, the classification must be necessary to promote a compelling state interest. Also, if the classification is based on a suspect trait—such as race, national origin, or citizenship status—it must be necessary to promote a compelling government interest.

Compelling government interest

If a law regulates the content of the expression, it must serve a compelling state interest and must be narrowly written to achieve that interest. Under the compelling government interest test, the government's interest is balanced against the individual's constitutional right to free expression. For the statute to be valid, there must be a compelling government interest that can be furthered only by the law in question.

Indirect exporting

If sufficient business develops in a foreign country, a U.S. company may establish a specialized marketing organization there by appointing a foreign agent or a foreign distributor.

Initial order

In the context of administrative law, an agency's disposition in a matter other than rulemaking. The Administrative law judge's initial order becomes final unless it is appealed.

Symbolic speech

Is protected. Includes all forms of expressive content, including gestures, movements, and clothing.

Cooperate political speech

Is protected. Making political contributions or expenditures.

Dumping

Is the sale of imported goods at "less than fair value." Fair value is usually determined by the price of the goods in the exporting country. Foreign firms that engage in dumping in the United States hope to undersell U.S. businesses and obtain a larger share of the U.S. market. To prevent this, an extra tariff—known as

Quotas

Limits on the amounts of goods that can be imported are known as quotas.

Judicial Controls

Most agency decisions are subject are subject to judicial review, provided that the party seeking review can establish that it has standing to sue the agency, there is an actual controversy between it and the agency, and it has exhausted all administrative remedies.

Administrative law judge (ALJ)

One who presides over an administrative agency hearing and who has the power to administer oaths, take testimony, rule on questions of evidence, and make determinations of fact.

International customs

Practices that have evolved among nations in their relations with one another

Procedural due process

Procedural due process requires that any government decision to take life, liberty, or property must be made equitably. In other words, the government must give a person proper notice and an opportunity to be heard. Fair procedures must be used in determining whether a person will be subjected to punishment or have some burden imposed on her or him.

Regulatory Flexibility Act (RFA)

Provides that, whenever a new regulation will have a "significant impact" upon a "substantial number" of small businesses, the agency must consider less burdensome alternatives, notify small businesses about forthcoming regulations, and reduce the record-keeping responsibilities of small businesses.

The New York Convention

Requires courts in nations that have signed it to honor private agreements to arbitrate and recognize arbitration clauses. A court will compel the parties to arbitrate their dispute if all of the following are true: (1) There is a written (or recorded) agreement to arbitrate the matter (2) The agreement provides for arbitration in a convention signatory nation (3) The agreement arises out of a commercial legal relationship (4) One party to the agreement is not a U.S. citizen

Freedom of Information Act (FOIA)

Requires federal agencies to disclose certain records to any person on request, subject to restrictions as to time and place, and to make their records available electronically - including, but not limited to, via the Internet. Some states have similar legislation.

Federal form of government

The national government and the states share sovereign powers.

Substantive due process

Substantive due process focuses on the content of legislation rather than the fairness of procedures. Substantive due process limits what the government may do in its legislative and executive capacities. Legislation must be fair and reasonable in content and must further a legitimate governmental objective. A city cannot, for instance, pass an ordinance that allows police officers to break up any group of two or more persons who are standing together if one of those persons is believed to be a gang member.

Tariffs

Tariffs are taxes on imports. A tariff is usually a percentage of the value of the import, but it can be a flat rate per unit (such as per barrel of oil). Tariffs raise the prices of imported goods, causing some consumers to purchase domestically manufactured goods instead of imports.

Administrative procedure act

The Administrative Procedure Act (APA) requires that before the hearing takes place, the agency must issue a notice that includes the facts and law on which the complaint is based, the legal authority for the hearing, and its time and place.

International Tort Claims

The Alien Tort Claims Act allows U.S. citizens to bring actions against companies operating in other countries.

Anti discrimination laws

The Civil Rights Act of 1991 requires that U.S. companies abroad must abide by U.S. anti discrimination laws unless doing so would violate the laws of the country where their workplace is located.

The Patriot Act

The Patriot Act has given government officials increased authority to monitor Internet activities (such as e-mail and Web site visits) and to gain access to personal financial information and student information.

Comity

The principle of comity basically refers to legal reciprocity. One nation will defer and give effect to the executive, legislative, and judicial acts of another country, as long as the acts are consistent with the law and public policy of the accommodating nation.

The act of state doctrine

The act of state doctrine provides that the judicial branch of one country will not examine the validity of public acts committed by a recognized foreign government within the latter's own territory.

Administrative law

The body of rules, orders, and decisions issued by administrative agencies, such as the federal securities and exchange commission or a state's public utilities commission.

International law

The body of written and unwritten laws, including treaties, governing the relations between and among nations and between nations and the citizens of one or more other sovereign nations (e.g., the Geneva Convention on the Treatment of Prisoners of War, the Warsaw Convention on International Air Travel, the General Agreement on Tariffs and Trade, the Nuclear Test Ban Treaty).

Legislative rules

The constitutional principle of checks and balances allows each branch of government to act as a check on the actions of the other two branches. Furthermore, the U.S. Constitution authorizes only the legislative branch to create laws. Yet administrative agencies, to which the Constitution does not specifically refer, can make legislative rules, or substantive rules, that are as legally binding as laws that Congress passes.

The establishment clause

The establishment clause prohibits the government from establishing a state-sponsored religion, as well as from passing laws that promote (aid or endorse) religion or show a preference for one religion over another. Although the establishment clause involves the separation of church and state, it does not require a complete separation.

Final order

The final decision of an administrative agency on an issue. If no appeal is taken, or if the case is not reviewed or considered anew by the agency commission, the administrative law judge's initial order becomes the final order of the agency.

The free exercise clause

The free exercise clause guarantees that a person can hold any religious belief that she or he wants, or a person can have no religious belief. The constitutional guarantee of personal freedom restricts only the actions of the government and not those of individuals or private businesses.

Enabling legislation

To create an administrative agency, Congress passes enabling legislation, which specifies the name, purposes, functions, and powers of the agency being created. Federal administrative agencies can exercise only those powers that Congress has delegated to them in enabling legislation.

Rulemaking

The process of formulating new regulations. Rulemaking by federal agencies typically occurs in the following steps: Notice of Proposed Rulemaking: A proposed rule and some discussion of its rationale are published by the agency in the Federal Register. The notice invites public comment and notifies the public of the times and places of any hearings on the proposed rule. Comment Period: Following publication in the Federal Register, the agency must allow ample time for public comment. The agency need not respond to all comments, but it must respond to any significant comments that bear directly on the proposed rule by either modifying the proposed rule or explaining why the modification was not made. Final Rule: Once the final version of the rule is decided upon by the agency, it will be published first in the Federal Register and then compiled annually in the Code of Federal Regulations.

National law

The system of laws that govern rights and obligations of persons within a particular country.

International organization

The term international organization generally refers to an organization composed mainly of officials of member nations and usually established by treaty.

The delegation doctrine

This doctrine holds that Article I grants Congress the authority to delegate some of its power by establishing administrative agencies to create rules for implementing those laws.

Probable cause

To obtain a search warrant, law enforcement officers must con- vince a judge that they have reasonable grounds, or probable cause, to believe a search will reveal evidence of a specific illegality. To establish probable cause, the officers must have trustworthy evidence that would convince a reasonable person that the proposed search or seizure is more likely justified than not.

Antitrust laws

U.S. Antitrust laws (chapters 27-28) may apply to firms in foreign nations and may protect foreign consumers. Any conspiracy with a substantial effect on U.S. Commerce is subject to the Sherman Act.

Equal protection clause

Under the Fourteenth Amendment, a state may not "deny to any person within its jurisdiction the equal protection of the laws." The United States Supreme Court has interpreted the due process clause of the Fifth Amendment to make the equal protection clause applicable to the federal government as well. Equal protection means that the government cannot enact laws that treat similarly situated individuals differently.

Distribution agreement

When a foreign country represents a substantial market, a U.S. firm may wish to appoint a distributor located in that country. The U.S. firm and the distributor enter into a distribution agreement. This is a contract setting out the terms and conditions of the distributorship, such as price, currency of payment, guarantee of supply availability, and method of payment. Disputes concerning distribution agreements may involve jurisdictional or other issues, as well as contract law.

Confiscation.

When a government seizes private property for an illegal purpose and without just compensation, the taking is referred to as a confiscation.

Sovereign immunity

When certain conditions are satisfied, the doctrine of sovereign immunity exempts foreign nations from the jurisdiction of the U.S. courts.

Notice-and-comment rule making

notice-and-comment rule making involves three basic steps: notice of the proposed rule making, a comment period, and the final rule.