SOLUTION MANUAL
Business Law: Text And Cases
Page | 1
, Table Of Contents
Chapter 1: Legal And Constitutional Foundations Of Business
—Appendix To Chapter 1: Finding And Analyzing The Law
Chapter 2: Courts And Alternative Dispute ReSolution Chapter 3:
Ethics In Business
—Appendix To Chapter 3: Code Of Ethics Example Chapter 4:
Tort Law
Chapter 5: Intellectual Property Rights
Chapter 6: Internet Law, Social Media, And Privacy Chapter
7: Criminal Law And Cyber Crime Chapter 8: Agreement And
Consideration In Contracts Chapter 9: Capacity, Legality, And
Enforceability
Chapter 10: Contract Performance, Breach, And Remedies Chapter
11: Sales And Lease Contracts
Chapter 12: Performance And Breach In Sales And Lease Contracts Chapter 13:
Negotiable Instruments
Chapter 14: Banking
Chapter 15: Creditors’ Rights And Bankruptcy
Chapter 16: Agency Relationships In Business Chapter
17: Employment Law
Chapter 18: The Entrepreneur’s Options
Chapter 19: Corporations
Chapter 20: Investor Protection, Insider Trading, And Corporate Governance Chapter
21: Antitrust Law And Promoting Competition
Chapter 22: Consumer Law
Chapter 23: Personal Property, Bailments, And Insurance
Chapter 24: Real Property And Environmental Law
Chapter 25: International And Space Law
Page | 2
, Chapter 01: Legal And Constitutional Foundations Of Business
Table Of Contents
Critical Thinking Questions In Features 1
Adapting The Law To The Online Environment 1
Critical Thinking Questions In Cases 2
Case 1.1 2
Case 1.2 3
Case 1.3 3
Chapter Review4
Practice And Review 4
Practice And Review: Debate This 5
Issue Spotters 5
Business Scenarios And Case Problems 5
Critical Thinking And Writing Assignments 10
Critical Thinking Questions In Appendix Exhibit 1a–3 11
Exhibit 1a–3 11
Adapting The Law To The Online
Environment
Page | 3
,1. One Observer Has Said That The American Legal System Should Evaluate Social Media Companies
Based On How ―They Affect Us As Citizens, Not Only [On How] They Affect Us As Consumers. What
Is Your Opinion Of This Statement?
Solution
The Person Who Made This Statement Clearly Sees A ―Citizen As Having Different Motivations And
Concerns Than A ―Consumer. Presumably, A Citizen Is Mostly Concerned With The Good Of Society
As A Whole, And Therefore Would Be Open To The Idea Of Government Regulation That Restricted
The Negative Influence Of Social Media, Regardless Of The First Amendment. A Consumer, By
Contrast, Would Be Primarily Concerned With Having A Marketplace That Offers The Widest Possible
Varieties Of Freedom (Of Choice, Of Speech, Etc.) And Would For That Reason Be Opposed To
Government Regulation Of Social Media. There Is, However, An Argument To Be Made That The
Citizens That Make Up A Society Benefit When The Marketplace Of Ideas— Whether They Are
Subjectively
―Positive Or ―Negative—Is Allowed To Flourish In The Absence Of Government Regulation.
2. Tim Cook, Apple‘S Chief Operating Officer, Has Suggested That The United States Congress Should
Pass A Law Limiting The Ability Of Apple And Other Tech Countries To Keep Consumer Data Private.
Why Would A Business Executive Make Such A Request?
Solution
Cook May Have Wanted To End A Controversy That Puts Apple Squarely At Odds With The Federal
Government. After All, Large Companies Such As Apple Rely On Favorable Treatment From The
Government In Regulatory Matters, International Trade Agreements, And Many Other Areas. Also,
Large Corporations Such As Apple Sometimes Gain An Advantage Over Competitors When Their
Industries Are Regulated. For Example, Apple Has Significant Resources With Which To Lobby
Congress For Favorable Treatment, And It Is Better Positioned To Bear The Costs Of Regulation Than
Are Other, Smaller Tech Companies. Finally, Apple‘S Position As A Champion Of Consumer Privacy
Would Be Damaged If It ―Caved And Changed Its Stance Without Being Forced To Do So By A New
Federal Law.
Critical Thinking Questions In Cases
Case 1.1
1. What ―Dangerous Conditions Might Have Prompted The City To Enact The Ordinances At Issue In This
Case?
Why?
Solution
Page | 4
,As Noted In The Facts Of The Case, Both Ordinances At Issue Included An Extensive Rationale For
Their Adoption, Stating Essentially That A Geographically Small City Has The Right To Restrict A
Business From Operating Within The City When The Restriction Is For The Safety Of The City‘S Citizens And
Visitors.
The Appellate Court Referred To ―The Dangerous Conditions Created By The Irresponsible Driving
Behavior Of Scooter Renters, Especially At Night, Amplified By The Lack Of Training, Supervision,
And Oversight Practiced By The Rental Scooter Businesses That ―Existed Throughout The Entire City
As The Basis For The City‘S Regulation. The Court Paraphrased The Expressive Clauses In The
Ordinances More Specifically:
• The City Is Geographically Small And Crowded And Is Being Besieged By Inexperienced
Scooter Drivers Seeking Amusement And Driving In A Dangerous Manner.
• The City Is A Tourist Destination Frequented By Tens Of Thousands, And Its Streets Are
Congested By Scooters That Are Being Driven Illegally And In Areas Where They Are Not Permitted.
• The City‘S Residents And Visitors Are Put In Dangerous Situations As A Result Of The
Improper Use Of Scooters, Especially At Night.
• City Businesses Have Complained About Numerous Trespasses On Their Property By People
Driving Scooters While Being Disruptive
• City Police Have Been Unable To Cope With The Situation And Essential Police Resources
Are Being Drained.
• The City Has Been Unable To Control The Situation Through Less Restrictive Means.
2. What Is The Likely Economic Impact Of The Ordinances On The Businesses In The City? Discuss.
Solution
With The Exception Of The Scooter Rental Businesses, The Effect On The City‘S Economy Is Likely To Be
Positive In Light Of The Result In The Classy Case.
The Answer To The Previous Question Contains The Reasons In Support Of This Outlook. With A Ban
On Motorized Scooters, The ―Small And Crowded City Is Not Likely To Be ―Besieged By
Inexperienced Scooter Drivers Seeking Amusement And Driving In A Dangerous Manner. The Streets,
Filled With ―Tens Of Thousands Of Tourists Will Not Be ―Congested By Scooters That Are
Being Driven Illegally And In Areas Where They Are Not Permitted. Residents And Visitors Will Not
Be ―Put In Dangerous Situations As A Result Of The Improper Use Of Scooters, Especially At Night.
There Will Be An End To The ―Numerous Trespasses On Business Property ―By People Driving
Scooters While Being Disruptive. And ―Essential Police Resources Will Not Be ―Drained, At Least Not By
Irresponsible Scooter Drivers And Riders. All Of Which Bodes Well For Business.
Page | 5
,Case 1.2
1. If This Case Had Involved A Small, Private Retail Business That Did Not Advertise Nationally,
Would The Result Have Been The Same? Why Or Why Not?
Solution
It Is Not Likely That The Result In This Case Would Have Been Different Even If The Facts Had
Involved A Small, Private Retail Business That Did Not Advertise Nationally. The Intended Impact Of
The Decision In Heart Of Atlanta Was To Uphold The Constitutionality Of The Civil Rights Act Of 1964
And The Power Of Congress To Regulate Interstate Commerce To Stop Local Discriminatory Practices.
In The Supreme Court‘S Opinion,
―The Power Of Congress To Promote Interstate Commerce 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.
Thus, If The Case Had Involved A Small, Local Retail Business, The Court Would Have Found
Participation In Interstate Commerce Based On The Use Of A Phone, Or A Facebook Page (Or Other
Web Presence), Or Sales To Customers Who Traveled Across State Lines—Or, As In Wickard V.
Filburn, Participation Might Have Been Based On Any Transaction That Might Otherwise Have Occurred
In Interstate Commerce.
Case 1.3
1. Whose Interests Are Advanced By The Banning Of Certain Types Of Advertising?
Solution
The Government‘S Interests Are Advanced When Certain Ads Are Banned. For Example, In The Bad
Frog Case, The Court Acknowledged, By Advising The State To Restrict The Locations Where Certain
Ads Could Be Displayed, That Banning Of ―Vulgar And Profane Advertising From Children‘S Sight
Arguably Advanced The State‘S Interest In Protecting Children From Those Ads.
2. If Bad Frog Had Sought To Use The Offensive Label To Market Toys Instead Of Beer, Would The Court‘S
Ruling Likely Have Been The Same? Explain Your Answer.
Solution
Probably Not. The Reasoning Underlying The Court‘S Decision In The Case Was, In Part, That ―The
State‘S Prohibition Of The Labels . . . Does Not Materially Advance Its Asserted Interests In Insulating
Children From Vulgarity . . . And Is Not Narrowly Tailored To The Interest Concerning
Children. The Court‘S Reasoning Was Supported In Part By The Fact That Children Cannot Buy Beer. If The
Labels Advertised Toys, However, The Court‘S Reasoning Might Have Been Different.
Page | 6
,Chapter Review
Practice And Review
A State Legislature Enacted A Statute That Required Any Motorcycle Operator Or Passenger On The
State‘S Highways To Wear A Protective Helmet. Jim Alderman, A Licensed Motorcycle Operator, Sued
The State To Block Enforcement Of The Law. Alderman Asserted That The Statute Violated The Equal
Protection Clause Because It Placed Requirements On Motorcyclists That Were Not Imposed On Other
Motorists. Using The Information Presented In The Chapter, Answer The Following Questions.
1. Why Does This Statute Raise Equal Protection Issues Instead Of Substantive Due Process Concerns?
Solution
When A Law Or Action Limits The Liberty Of Some Persons But Not Others, It May Violate The Equal
Protection Clause. Here, Because The Law Applies Only To Motorcycle Operators And Passengers, It
Raises Equal Protection Issues.
2. What Are The Three Levels Of Scrutiny That The Courts Use In Determining Whether A Law
Violates The Equal Protection Clause?
Solution
The Three Levels Of Scrutiny That Courts Apply To Determine Whether The Law Or Action Violates
Equal Protection Are (1) Strict Scrutiny (If Fundamental Rights Are At Stake), (2) Intermediate Scrutiny
(In Cases Involving Discrimination Based On Gender Or Legitimacy), And (3) The ―Rational Basis Test
(In Matters Of Economic Or Social Welfare).
3. Which Level Of Scrutiny Or Test Would Apply To This Situation? Why?
Solution
The Court Would Likely Apply The Rational Basis Test, Because The Statute Regulates A Matter Of
Social Welfare By Requiring Helmets. Similar To Seat-Belt Laws And Speed Limits, A Helmet Statute
Involves The State‘S Attempt To Protect The Welfare Of Its Citizens. Thus, The Court Would Consider It
A Matter A Social Welfare And Require That It Be Rationally Related To A Legitimate Government
Objective.
4. Under This Standard Or Test, Is The Helmet Statute Constitutional? Why Or Why Not?
Solution
Page | 7
,The Statute Is Probably Constitutional, Because Requiring Helmets Is Rationally Related To A
Legitimate Government Objective (Public Health And Safety). Under The Rational Basis Test, Courts
Rarely Strike Down Laws As Unconstitutional, And This Statute Will Likely Further The Legitimate
State Interest Of Protecting The Welfare Of Citizens And Promoting Safety.
Practice 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 Under Compelling Reasons. Even Though
More Common Law Is Being Turned Into Statutory Law, The Doctrine Of Stare Decisis Is Still Valid.
After All, Even Statutes Have 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 Spotters
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. South Dakota Wants Its Citizens To Conserve Energy. To Help Reduce Consumer
Consumption Of Electricity, The State Passes A Law That Bans All Advertising By Power
Page | 8
,Utilities Within The State. What Argument Could The Power Utilities Use As A Defense To The
Enforcement Of This State Law?
Solution
Even If Commercial Speech Is Neither Related To Illegal Activities Nor Misleading, It May Be
Restricted If A State Has A Substantial Interest That Cannot Be Achieved By Less Restrictive Means. In
This Situation, However, The Interest In Energy Conservation Is Substantial, But It Could Be Achieved
By Less Restrictive Means. That Would Be The Utilities‘ Defense Against The Enforcement Of This
State Law.
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 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
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
Page | 9
, 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
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
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. Equal Protection. Abbott Laboratories Licensed Smithkline Beecham Corp. To Market An Abbott
Human Immunodeficiency Virus (Hiv) Drug In Conjunction With One Of Smithkline‘S Drugs. Abbott
Then Increased The Price Of Its Drug Fourfold, Forcing Smithkline To Increase Its Prices And Thereby
Driving Business To Abbott‘S Own Combination Drug. Smithkline Filed A Suit In A Federal District
Court Against Abbott. During Jury Selection, Abbott Struck The Only Self-Identified Gay Person Among
The Potential Jurors. (The Pricing Of Hiv Drugs Is Of Considerable Concern In The Gay Community.)
Could The Equal Protection Clause Be Applied To Prohibit Discrimination Based On Sexual Orientation
In Jury Selection? Discuss. [Smithkline Beecham Corp. V. Abbott Laboratories, 740 F.3d 471 (9th Cir.
2014)] (See Due Process, Equal Protection, And Privacy.)
Solution
Yes. The Equal Protection Clause Can Be Applied To Prohibit Discrimination Based On Sexual
Orientation In Jury Selection. The Appropriate Level Of Scrutiny Would Be Intermediate Scrutiny. Under
The Equal Protection Clause Of The Fourteenth Amendment, The Government Cannot Enact A Law Or
Take Another Action That Treats Similarly Situated Individuals Differently. If It Does, A Court Examines
The Basis For The Distinction. Intermediate Scrutiny Applies In Cases Involving Discrimination Based
On Gender. Under This Test, A Distinction Must Be Substantially Related To An Important Government
Objective.
Gays And Lesbians Were Long Excluded From Participating In Our Government And The Privileges Of
Citizenship. A Juror Strike On The Basis Of Sexual Orientation Tells The Individual Who Has Been
Struck, As Well As The Trial Participants And The General Public, That The Judicial System Still Treats
Gays And Lesbians Differently. This Deprives These Individuals Of The Opportunity To Participate In A
Page | 10
Business Law: Text And Cases
Page | 1
, Table Of Contents
Chapter 1: Legal And Constitutional Foundations Of Business
—Appendix To Chapter 1: Finding And Analyzing The Law
Chapter 2: Courts And Alternative Dispute ReSolution Chapter 3:
Ethics In Business
—Appendix To Chapter 3: Code Of Ethics Example Chapter 4:
Tort Law
Chapter 5: Intellectual Property Rights
Chapter 6: Internet Law, Social Media, And Privacy Chapter
7: Criminal Law And Cyber Crime Chapter 8: Agreement And
Consideration In Contracts Chapter 9: Capacity, Legality, And
Enforceability
Chapter 10: Contract Performance, Breach, And Remedies Chapter
11: Sales And Lease Contracts
Chapter 12: Performance And Breach In Sales And Lease Contracts Chapter 13:
Negotiable Instruments
Chapter 14: Banking
Chapter 15: Creditors’ Rights And Bankruptcy
Chapter 16: Agency Relationships In Business Chapter
17: Employment Law
Chapter 18: The Entrepreneur’s Options
Chapter 19: Corporations
Chapter 20: Investor Protection, Insider Trading, And Corporate Governance Chapter
21: Antitrust Law And Promoting Competition
Chapter 22: Consumer Law
Chapter 23: Personal Property, Bailments, And Insurance
Chapter 24: Real Property And Environmental Law
Chapter 25: International And Space Law
Page | 2
, Chapter 01: Legal And Constitutional Foundations Of Business
Table Of Contents
Critical Thinking Questions In Features 1
Adapting The Law To The Online Environment 1
Critical Thinking Questions In Cases 2
Case 1.1 2
Case 1.2 3
Case 1.3 3
Chapter Review4
Practice And Review 4
Practice And Review: Debate This 5
Issue Spotters 5
Business Scenarios And Case Problems 5
Critical Thinking And Writing Assignments 10
Critical Thinking Questions In Appendix Exhibit 1a–3 11
Exhibit 1a–3 11
Adapting The Law To The Online
Environment
Page | 3
,1. One Observer Has Said That The American Legal System Should Evaluate Social Media Companies
Based On How ―They Affect Us As Citizens, Not Only [On How] They Affect Us As Consumers. What
Is Your Opinion Of This Statement?
Solution
The Person Who Made This Statement Clearly Sees A ―Citizen As Having Different Motivations And
Concerns Than A ―Consumer. Presumably, A Citizen Is Mostly Concerned With The Good Of Society
As A Whole, And Therefore Would Be Open To The Idea Of Government Regulation That Restricted
The Negative Influence Of Social Media, Regardless Of The First Amendment. A Consumer, By
Contrast, Would Be Primarily Concerned With Having A Marketplace That Offers The Widest Possible
Varieties Of Freedom (Of Choice, Of Speech, Etc.) And Would For That Reason Be Opposed To
Government Regulation Of Social Media. There Is, However, An Argument To Be Made That The
Citizens That Make Up A Society Benefit When The Marketplace Of Ideas— Whether They Are
Subjectively
―Positive Or ―Negative—Is Allowed To Flourish In The Absence Of Government Regulation.
2. Tim Cook, Apple‘S Chief Operating Officer, Has Suggested That The United States Congress Should
Pass A Law Limiting The Ability Of Apple And Other Tech Countries To Keep Consumer Data Private.
Why Would A Business Executive Make Such A Request?
Solution
Cook May Have Wanted To End A Controversy That Puts Apple Squarely At Odds With The Federal
Government. After All, Large Companies Such As Apple Rely On Favorable Treatment From The
Government In Regulatory Matters, International Trade Agreements, And Many Other Areas. Also,
Large Corporations Such As Apple Sometimes Gain An Advantage Over Competitors When Their
Industries Are Regulated. For Example, Apple Has Significant Resources With Which To Lobby
Congress For Favorable Treatment, And It Is Better Positioned To Bear The Costs Of Regulation Than
Are Other, Smaller Tech Companies. Finally, Apple‘S Position As A Champion Of Consumer Privacy
Would Be Damaged If It ―Caved And Changed Its Stance Without Being Forced To Do So By A New
Federal Law.
Critical Thinking Questions In Cases
Case 1.1
1. What ―Dangerous Conditions Might Have Prompted The City To Enact The Ordinances At Issue In This
Case?
Why?
Solution
Page | 4
,As Noted In The Facts Of The Case, Both Ordinances At Issue Included An Extensive Rationale For
Their Adoption, Stating Essentially That A Geographically Small City Has The Right To Restrict A
Business From Operating Within The City When The Restriction Is For The Safety Of The City‘S Citizens And
Visitors.
The Appellate Court Referred To ―The Dangerous Conditions Created By The Irresponsible Driving
Behavior Of Scooter Renters, Especially At Night, Amplified By The Lack Of Training, Supervision,
And Oversight Practiced By The Rental Scooter Businesses That ―Existed Throughout The Entire City
As The Basis For The City‘S Regulation. The Court Paraphrased The Expressive Clauses In The
Ordinances More Specifically:
• The City Is Geographically Small And Crowded And Is Being Besieged By Inexperienced
Scooter Drivers Seeking Amusement And Driving In A Dangerous Manner.
• The City Is A Tourist Destination Frequented By Tens Of Thousands, And Its Streets Are
Congested By Scooters That Are Being Driven Illegally And In Areas Where They Are Not Permitted.
• The City‘S Residents And Visitors Are Put In Dangerous Situations As A Result Of The
Improper Use Of Scooters, Especially At Night.
• City Businesses Have Complained About Numerous Trespasses On Their Property By People
Driving Scooters While Being Disruptive
• City Police Have Been Unable To Cope With The Situation And Essential Police Resources
Are Being Drained.
• The City Has Been Unable To Control The Situation Through Less Restrictive Means.
2. What Is The Likely Economic Impact Of The Ordinances On The Businesses In The City? Discuss.
Solution
With The Exception Of The Scooter Rental Businesses, The Effect On The City‘S Economy Is Likely To Be
Positive In Light Of The Result In The Classy Case.
The Answer To The Previous Question Contains The Reasons In Support Of This Outlook. With A Ban
On Motorized Scooters, The ―Small And Crowded City Is Not Likely To Be ―Besieged By
Inexperienced Scooter Drivers Seeking Amusement And Driving In A Dangerous Manner. The Streets,
Filled With ―Tens Of Thousands Of Tourists Will Not Be ―Congested By Scooters That Are
Being Driven Illegally And In Areas Where They Are Not Permitted. Residents And Visitors Will Not
Be ―Put In Dangerous Situations As A Result Of The Improper Use Of Scooters, Especially At Night.
There Will Be An End To The ―Numerous Trespasses On Business Property ―By People Driving
Scooters While Being Disruptive. And ―Essential Police Resources Will Not Be ―Drained, At Least Not By
Irresponsible Scooter Drivers And Riders. All Of Which Bodes Well For Business.
Page | 5
,Case 1.2
1. If This Case Had Involved A Small, Private Retail Business That Did Not Advertise Nationally,
Would The Result Have Been The Same? Why Or Why Not?
Solution
It Is Not Likely That The Result In This Case Would Have Been Different Even If The Facts Had
Involved A Small, Private Retail Business That Did Not Advertise Nationally. The Intended Impact Of
The Decision In Heart Of Atlanta Was To Uphold The Constitutionality Of The Civil Rights Act Of 1964
And The Power Of Congress To Regulate Interstate Commerce To Stop Local Discriminatory Practices.
In The Supreme Court‘S Opinion,
―The Power Of Congress To Promote Interstate Commerce 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.
Thus, If The Case Had Involved A Small, Local Retail Business, The Court Would Have Found
Participation In Interstate Commerce Based On The Use Of A Phone, Or A Facebook Page (Or Other
Web Presence), Or Sales To Customers Who Traveled Across State Lines—Or, As In Wickard V.
Filburn, Participation Might Have Been Based On Any Transaction That Might Otherwise Have Occurred
In Interstate Commerce.
Case 1.3
1. Whose Interests Are Advanced By The Banning Of Certain Types Of Advertising?
Solution
The Government‘S Interests Are Advanced When Certain Ads Are Banned. For Example, In The Bad
Frog Case, The Court Acknowledged, By Advising The State To Restrict The Locations Where Certain
Ads Could Be Displayed, That Banning Of ―Vulgar And Profane Advertising From Children‘S Sight
Arguably Advanced The State‘S Interest In Protecting Children From Those Ads.
2. If Bad Frog Had Sought To Use The Offensive Label To Market Toys Instead Of Beer, Would The Court‘S
Ruling Likely Have Been The Same? Explain Your Answer.
Solution
Probably Not. The Reasoning Underlying The Court‘S Decision In The Case Was, In Part, That ―The
State‘S Prohibition Of The Labels . . . Does Not Materially Advance Its Asserted Interests In Insulating
Children From Vulgarity . . . And Is Not Narrowly Tailored To The Interest Concerning
Children. The Court‘S Reasoning Was Supported In Part By The Fact That Children Cannot Buy Beer. If The
Labels Advertised Toys, However, The Court‘S Reasoning Might Have Been Different.
Page | 6
,Chapter Review
Practice And Review
A State Legislature Enacted A Statute That Required Any Motorcycle Operator Or Passenger On The
State‘S Highways To Wear A Protective Helmet. Jim Alderman, A Licensed Motorcycle Operator, Sued
The State To Block Enforcement Of The Law. Alderman Asserted That The Statute Violated The Equal
Protection Clause Because It Placed Requirements On Motorcyclists That Were Not Imposed On Other
Motorists. Using The Information Presented In The Chapter, Answer The Following Questions.
1. Why Does This Statute Raise Equal Protection Issues Instead Of Substantive Due Process Concerns?
Solution
When A Law Or Action Limits The Liberty Of Some Persons But Not Others, It May Violate The Equal
Protection Clause. Here, Because The Law Applies Only To Motorcycle Operators And Passengers, It
Raises Equal Protection Issues.
2. What Are The Three Levels Of Scrutiny That The Courts Use In Determining Whether A Law
Violates The Equal Protection Clause?
Solution
The Three Levels Of Scrutiny That Courts Apply To Determine Whether The Law Or Action Violates
Equal Protection Are (1) Strict Scrutiny (If Fundamental Rights Are At Stake), (2) Intermediate Scrutiny
(In Cases Involving Discrimination Based On Gender Or Legitimacy), And (3) The ―Rational Basis Test
(In Matters Of Economic Or Social Welfare).
3. Which Level Of Scrutiny Or Test Would Apply To This Situation? Why?
Solution
The Court Would Likely Apply The Rational Basis Test, Because The Statute Regulates A Matter Of
Social Welfare By Requiring Helmets. Similar To Seat-Belt Laws And Speed Limits, A Helmet Statute
Involves The State‘S Attempt To Protect The Welfare Of Its Citizens. Thus, The Court Would Consider It
A Matter A Social Welfare And Require That It Be Rationally Related To A Legitimate Government
Objective.
4. Under This Standard Or Test, Is The Helmet Statute Constitutional? Why Or Why Not?
Solution
Page | 7
,The Statute Is Probably Constitutional, Because Requiring Helmets Is Rationally Related To A
Legitimate Government Objective (Public Health And Safety). Under The Rational Basis Test, Courts
Rarely Strike Down Laws As Unconstitutional, And This Statute Will Likely Further The Legitimate
State Interest Of Protecting The Welfare Of Citizens And Promoting Safety.
Practice 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 Under Compelling Reasons. Even Though
More Common Law Is Being Turned Into Statutory Law, The Doctrine Of Stare Decisis Is Still Valid.
After All, Even Statutes Have 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 Spotters
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. South Dakota Wants Its Citizens To Conserve Energy. To Help Reduce Consumer
Consumption Of Electricity, The State Passes A Law That Bans All Advertising By Power
Page | 8
,Utilities Within The State. What Argument Could The Power Utilities Use As A Defense To The
Enforcement Of This State Law?
Solution
Even If Commercial Speech Is Neither Related To Illegal Activities Nor Misleading, It May Be
Restricted If A State Has A Substantial Interest That Cannot Be Achieved By Less Restrictive Means. In
This Situation, However, The Interest In Energy Conservation Is Substantial, But It Could Be Achieved
By Less Restrictive Means. That Would Be The Utilities‘ Defense Against The Enforcement Of This
State Law.
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 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
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
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, 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
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
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. Equal Protection. Abbott Laboratories Licensed Smithkline Beecham Corp. To Market An Abbott
Human Immunodeficiency Virus (Hiv) Drug In Conjunction With One Of Smithkline‘S Drugs. Abbott
Then Increased The Price Of Its Drug Fourfold, Forcing Smithkline To Increase Its Prices And Thereby
Driving Business To Abbott‘S Own Combination Drug. Smithkline Filed A Suit In A Federal District
Court Against Abbott. During Jury Selection, Abbott Struck The Only Self-Identified Gay Person Among
The Potential Jurors. (The Pricing Of Hiv Drugs Is Of Considerable Concern In The Gay Community.)
Could The Equal Protection Clause Be Applied To Prohibit Discrimination Based On Sexual Orientation
In Jury Selection? Discuss. [Smithkline Beecham Corp. V. Abbott Laboratories, 740 F.3d 471 (9th Cir.
2014)] (See Due Process, Equal Protection, And Privacy.)
Solution
Yes. The Equal Protection Clause Can Be Applied To Prohibit Discrimination Based On Sexual
Orientation In Jury Selection. The Appropriate Level Of Scrutiny Would Be Intermediate Scrutiny. Under
The Equal Protection Clause Of The Fourteenth Amendment, The Government Cannot Enact A Law Or
Take Another Action That Treats Similarly Situated Individuals Differently. If It Does, A Court Examines
The Basis For The Distinction. Intermediate Scrutiny Applies In Cases Involving Discrimination Based
On Gender. Under This Test, A Distinction Must Be Substantially Related To An Important Government
Objective.
Gays And Lesbians Were Long Excluded From Participating In Our Government And The Privileges Of
Citizenship. A Juror Strike On The Basis Of Sexual Orientation Tells The Individual Who Has Been
Struck, As Well As The Trial Participants And The General Public, That The Judicial System Still Treats
Gays And Lesbians Differently. This Deprives These Individuals Of The Opportunity To Participate In A
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