Solu琀椀on
Table of Contents
Critical Thinking Questions in Features......................................................................................................1
Managerial Strategy—Business Ques琀椀ons..............................................................................................1
Chapter Review...........................................................................................................................................2
Prac琀椀ce and Review................................................................................................................................2
Prac琀椀ce and Review: Debate This............................................................................................................2
Issue Spo琀琀ers..........................................................................................................................................3
Business Scenarios and Case Problems...................................................................................................3
Cri琀椀cal Thinking and Wri琀椀ng Assignments..............................................................................................8
Appendix Exhibit......................................................................................................................................9
Cri琀椀cal Thinking Ques琀椀ons in Features
Managerial Strategy—Business Ques琀椀ons
1. “When faced with a clearly erroneous precedent, my rule is simple,” writes Supreme Court Justice Clarence
Thomas. “We should not follow it.” How do these words offer a cautionary tale for managers relying on
stare decisis to make business decisions?
Solution
Simply put, the doctrine of stare decisis applies in all instances, except when it does not. As noted in the
text, a court is able to depart from precedent if it feels that legal, social, or technological changes have
rendered the previous decision untenable. In this case, just because the United State Supreme Court
believes, at present, that automobile salespeople are exempt from the overtime rules of the FLSA, there is a
possibility that the Court could reverse itself in the future. In this context, managers need to be aware that
(1) any decision they make based on a court decision is subject to change, and (2) if they believe that a
previous business law-related court decision is flawed, they can challenge it in court.
2. Should Roberta consider paying her salespeople overtime even though it is not required by federal law?
Why or why not?
Solution
Just because Roberta is legally able to avoid paying the salespeople at her new used car dealership
overtime, should she? As with so many managerial decisions, the answer to this question involves the
tricky determination of costs and benefits. On the one hand, Roberta’s costs will be lower if she does not
have to pay overtime to the salespeople. On the other hand, the salespeople may be more motivated if they
feel they are being properly compensated for the extra hours they spend on the lot. The extra motivation
will likely lead to additional sales, which very well may offset the overtime costs.
Chapter Review
Prac琀椀ce and Review
Suppose that the California legislature passes a law that severely restricts carbon dioxide emissions of
automobiles in that state. A group of automobile manufacturers files a suit against the state of California to
prevent enforcement of the law. The automakers claim that a federal law already sets fuel economy standards
, nationwide and that these standards are essentially the same as carbon dioxide emission standards. According to
the automobile manufacturers, it is unfair to allow California to impose more stringent regulations than those set
by the federal law. Using the information presented in the chapter, answer the following questions.
1. Who are the parties (the plaintiffs and the defendant) in this lawsuit?
Solution
In this situation, the automobile manufacturers are the plaintiffs, and the state of California is the defendant.
2. Are the plaintiffs seeking a legal remedy or an equitable remedy? Why?
Solution
The plaintiffs are seeking an injunction, which is an equitable remedy, to prevent the state of California
from enforcing its statute restricting carbon dioxide emissions.
3. What is the primary source of the law that is at issue here?
Solution
This case involves a law passed by the California legislature and a federal statute, thus the primary source
of law is statutory law.
4. Read through the appendix that follows this chapter, and then answer the following question: Where would
you look to find the relevant California and federal laws?
Solution
Federal statutes are found in the United States Code, and California statutes are published in the California
Code. You would look in both of these sources to find the relevant state and federal statutes.
Prac琀椀ce and Review: Debate This
1. Under the doctrine of stare decisis, courts are obligated to follow the precedents established in their
jurisdictions unless there is a compelling reason not to. Should U.S. courts continue to adhere to this
common law principle, given that our government now regulates so many areas by statute?
Solution
Both England and the U.S. legal systems were constructed on the common law system. The doctrine of
stare decisis has always been a major part of this system—courts should follow precedents when they are
clearly established, excepted when compelling reasons dictate otherwise. Even though more common law is
being turned into statutory law, the doctrine of stare decisis is still valid. After all, statutes often must to be
interpreted by courts. What better basis for judges to render their decisions than by basing them on
precedents related to the subject at hand?
In contrast, some students may argue that the doctrine of stare decisis is passé. There is certainly less
common law governing, say, environmental law than there was 100 years ago. Given that federal and state
governments increasingly are regulating more aspects of commercial transactions between merchants and
consumers, perhaps the courts should simply stick to statutory language when disputes arise.
Issue Spo琀琀ers
1. The First Amendment to the U.S. Constitution provides protection for the free exercise of religion. A state
legislature enacts a law that outlaws all religions that do not derive from the Judeo-Christian tradition. Is
this law valid within that state? Why or why not?
Solution
No. The U.S. Constitution is the supreme law of the land, and applies to all jurisdictions. A law in violation
of the Constitution (in this question, the First Amendment to the Constitution) will be declared
unconstitutional.
, 2. Apex Corporation learns that a federal administrative agency is considering a rule that will have a negative
impact on the firm’s ability to do business. Does the firm have any opportunity to express its opinion about
the pending rule? Explain.
Solution
Yes. Administrative rulemaking starts with the publication of a notice of the rulemaking in the Federal
Register. Among other details, this notice states where and when the proceedings, such as a public hearing,
will be held. Proponents and opponents can offer their comments and concerns regarding the pending rule.
After reviewing all the comments from the proceedings, the agency’s decision makers consider what was
presented and draft the final rule.
Business Scenarios and Case Problems
1. Binding versus Persuasive Authority. A county court in Illinois is deciding a case involving an issue that
has never been addressed before in that state’s courts. The Iowa Supreme Court, however, recently decided
a case involving a very similar fact pattern. Is the Illinois court obligated to follow the Iowa Supreme
Court’s decision on the issue? If the United States Supreme Court had decided a similar case, would that
decision be binding on the Illinois court? Explain. (See The Common Law.)
Solution
A decision of a court is binding on all inferior courts. Because no state’s court is inferior to any other
state’s court, no state’s court is obligated to follow the decision of another state’s court on an issue. The
decision may be persuasive, however, depending on the nature of the case and the particular judge hearing
it. A decision of the United States Supreme Court on an issue is binding, like the decision of any higher
court, on all inferior courts. The United States Supreme Court is the nation’s highest court, however, and
thus, its decisions are binding on all courts, including state courts.
2. Sources of Law. This chapter discussed a number of sources of American law. Which source of law takes
priority in the following situations, and why? (See Sources of American Law.)
1. A federal statute conflicts with the U.S. Constitution.
Solution
1. The U.S. Constitution—The U.S. Constitution is the supreme law of the land. A law in violation of the
Constitution, no matter what its source, will be declared unconstitutional and will not be enforced.
2. A federal statute conflicts with a state constitutional provision.
Solution
2. The federal statute—Under the U.S. Constitution, when there is a conflict between a federal law and a
state law, the state law is rendered invalid.
3. A state statute conflicts with the common law of that state.
Solution
3. The state statute—State statutes are enacted by state legislatures. Areas not covered by state statutory
law are governed by state case law.
4. A state constitutional amendment conflicts with the U.S. Constitution.
Solution
4. The U.S. Constitution—State constitutions are supreme within their respective borders unless they
conflict with the U.S. Constitution, which is the supreme law of the land.
3. Remedies. Arthur Rabe is suing Xavier Sanchez for breaching a contract in which Sanchez promised to sell
Rabe a Van Gogh painting for $150,000. (See The Common Law.)
1. In this lawsuit, who is the plaintiff, and who is the defendant?
Solution
, 1. In a suit by Arthur Rabe against Xavier Sanchez, Rabe is the plaintiff and Sanchez is the defendant.
2. If Rabe wants Sanchez to perform the contract as promised, what remedy should Rabe seek?
Solution
2. Specific performance is the remedy that includes an order to a party to perform a contract as promised.
Table of Contents
Critical Thinking Questions in Features......................................................................................................1
Managerial Strategy—Business Ques琀椀ons..............................................................................................1
Chapter Review...........................................................................................................................................2
Prac琀椀ce and Review................................................................................................................................2
Prac琀椀ce and Review: Debate This............................................................................................................2
Issue Spo琀琀ers..........................................................................................................................................3
Business Scenarios and Case Problems...................................................................................................3
Cri琀椀cal Thinking and Wri琀椀ng Assignments..............................................................................................8
Appendix Exhibit......................................................................................................................................9
Cri琀椀cal Thinking Ques琀椀ons in Features
Managerial Strategy—Business Ques琀椀ons
1. “When faced with a clearly erroneous precedent, my rule is simple,” writes Supreme Court Justice Clarence
Thomas. “We should not follow it.” How do these words offer a cautionary tale for managers relying on
stare decisis to make business decisions?
Solution
Simply put, the doctrine of stare decisis applies in all instances, except when it does not. As noted in the
text, a court is able to depart from precedent if it feels that legal, social, or technological changes have
rendered the previous decision untenable. In this case, just because the United State Supreme Court
believes, at present, that automobile salespeople are exempt from the overtime rules of the FLSA, there is a
possibility that the Court could reverse itself in the future. In this context, managers need to be aware that
(1) any decision they make based on a court decision is subject to change, and (2) if they believe that a
previous business law-related court decision is flawed, they can challenge it in court.
2. Should Roberta consider paying her salespeople overtime even though it is not required by federal law?
Why or why not?
Solution
Just because Roberta is legally able to avoid paying the salespeople at her new used car dealership
overtime, should she? As with so many managerial decisions, the answer to this question involves the
tricky determination of costs and benefits. On the one hand, Roberta’s costs will be lower if she does not
have to pay overtime to the salespeople. On the other hand, the salespeople may be more motivated if they
feel they are being properly compensated for the extra hours they spend on the lot. The extra motivation
will likely lead to additional sales, which very well may offset the overtime costs.
Chapter Review
Prac琀椀ce and Review
Suppose that the California legislature passes a law that severely restricts carbon dioxide emissions of
automobiles in that state. A group of automobile manufacturers files a suit against the state of California to
prevent enforcement of the law. The automakers claim that a federal law already sets fuel economy standards
, nationwide and that these standards are essentially the same as carbon dioxide emission standards. According to
the automobile manufacturers, it is unfair to allow California to impose more stringent regulations than those set
by the federal law. Using the information presented in the chapter, answer the following questions.
1. Who are the parties (the plaintiffs and the defendant) in this lawsuit?
Solution
In this situation, the automobile manufacturers are the plaintiffs, and the state of California is the defendant.
2. Are the plaintiffs seeking a legal remedy or an equitable remedy? Why?
Solution
The plaintiffs are seeking an injunction, which is an equitable remedy, to prevent the state of California
from enforcing its statute restricting carbon dioxide emissions.
3. What is the primary source of the law that is at issue here?
Solution
This case involves a law passed by the California legislature and a federal statute, thus the primary source
of law is statutory law.
4. Read through the appendix that follows this chapter, and then answer the following question: Where would
you look to find the relevant California and federal laws?
Solution
Federal statutes are found in the United States Code, and California statutes are published in the California
Code. You would look in both of these sources to find the relevant state and federal statutes.
Prac琀椀ce and Review: Debate This
1. Under the doctrine of stare decisis, courts are obligated to follow the precedents established in their
jurisdictions unless there is a compelling reason not to. Should U.S. courts continue to adhere to this
common law principle, given that our government now regulates so many areas by statute?
Solution
Both England and the U.S. legal systems were constructed on the common law system. The doctrine of
stare decisis has always been a major part of this system—courts should follow precedents when they are
clearly established, excepted when compelling reasons dictate otherwise. Even though more common law is
being turned into statutory law, the doctrine of stare decisis is still valid. After all, statutes often must to be
interpreted by courts. What better basis for judges to render their decisions than by basing them on
precedents related to the subject at hand?
In contrast, some students may argue that the doctrine of stare decisis is passé. There is certainly less
common law governing, say, environmental law than there was 100 years ago. Given that federal and state
governments increasingly are regulating more aspects of commercial transactions between merchants and
consumers, perhaps the courts should simply stick to statutory language when disputes arise.
Issue Spo琀琀ers
1. The First Amendment to the U.S. Constitution provides protection for the free exercise of religion. A state
legislature enacts a law that outlaws all religions that do not derive from the Judeo-Christian tradition. Is
this law valid within that state? Why or why not?
Solution
No. The U.S. Constitution is the supreme law of the land, and applies to all jurisdictions. A law in violation
of the Constitution (in this question, the First Amendment to the Constitution) will be declared
unconstitutional.
, 2. Apex Corporation learns that a federal administrative agency is considering a rule that will have a negative
impact on the firm’s ability to do business. Does the firm have any opportunity to express its opinion about
the pending rule? Explain.
Solution
Yes. Administrative rulemaking starts with the publication of a notice of the rulemaking in the Federal
Register. Among other details, this notice states where and when the proceedings, such as a public hearing,
will be held. Proponents and opponents can offer their comments and concerns regarding the pending rule.
After reviewing all the comments from the proceedings, the agency’s decision makers consider what was
presented and draft the final rule.
Business Scenarios and Case Problems
1. Binding versus Persuasive Authority. A county court in Illinois is deciding a case involving an issue that
has never been addressed before in that state’s courts. The Iowa Supreme Court, however, recently decided
a case involving a very similar fact pattern. Is the Illinois court obligated to follow the Iowa Supreme
Court’s decision on the issue? If the United States Supreme Court had decided a similar case, would that
decision be binding on the Illinois court? Explain. (See The Common Law.)
Solution
A decision of a court is binding on all inferior courts. Because no state’s court is inferior to any other
state’s court, no state’s court is obligated to follow the decision of another state’s court on an issue. The
decision may be persuasive, however, depending on the nature of the case and the particular judge hearing
it. A decision of the United States Supreme Court on an issue is binding, like the decision of any higher
court, on all inferior courts. The United States Supreme Court is the nation’s highest court, however, and
thus, its decisions are binding on all courts, including state courts.
2. Sources of Law. This chapter discussed a number of sources of American law. Which source of law takes
priority in the following situations, and why? (See Sources of American Law.)
1. A federal statute conflicts with the U.S. Constitution.
Solution
1. The U.S. Constitution—The U.S. Constitution is the supreme law of the land. A law in violation of the
Constitution, no matter what its source, will be declared unconstitutional and will not be enforced.
2. A federal statute conflicts with a state constitutional provision.
Solution
2. The federal statute—Under the U.S. Constitution, when there is a conflict between a federal law and a
state law, the state law is rendered invalid.
3. A state statute conflicts with the common law of that state.
Solution
3. The state statute—State statutes are enacted by state legislatures. Areas not covered by state statutory
law are governed by state case law.
4. A state constitutional amendment conflicts with the U.S. Constitution.
Solution
4. The U.S. Constitution—State constitutions are supreme within their respective borders unless they
conflict with the U.S. Constitution, which is the supreme law of the land.
3. Remedies. Arthur Rabe is suing Xavier Sanchez for breaching a contract in which Sanchez promised to sell
Rabe a Van Gogh painting for $150,000. (See The Common Law.)
1. In this lawsuit, who is the plaintiff, and who is the defendant?
Solution
, 1. In a suit by Arthur Rabe against Xavier Sanchez, Rabe is the plaintiff and Sanchez is the defendant.
2. If Rabe wants Sanchez to perform the contract as promised, what remedy should Rabe seek?
Solution
2. Specific performance is the remedy that includes an order to a party to perform a contract as promised.
