This Document Contains Chapters 3 to 4 Chapter 3 Civil Dispute REsolution The Court System The Federal Courts [3-1] District Courts [3-1a] Courts of Appeals [3-1b] The Supreme Court [3-1c] Special Courts [3-1d] State Courts [3-2] Inferior Trial Courts [3-2a] Trial Courts [3-2b] Special Courts [3-2c] Appellate Courts [3-2d] Jurisdiction Subject Matter Jurisdiction [3-3] Federal Jurisdiction [3-3a] Exclusive Federal Jurisdiction Concurrent Federal Jurisdiction Exclusive State Jurisdiction [3-3b] Stare Decisis in the Dual Court System [3-3c] Jurisdiction over the Parties [3-4] In Personam Jurisdiction [3-4a] In Rem Jurisdiction [3-4b] Attachment Jurisdiction [3-4c] Venue [3-4d] Civil Dispute Resolution Civil Procedure [3-5] The Pleadings [3-5a] Complaint and Summons Responses to Complaint Pretrial Procedure [3-5b] Judgment on the Pleadings Discovery Pretrial Conference Summary Judgment Trial [3-5c] Jury Selection Conduct of Trial Jury Instructions Verdict Motions Challenging Verdict Appeal [3-5d] Enforcement [3-5e] Alternative Dispute Resolution [3-6] Arbitration [3-6a] Types of Arbitration Procedure International Arbitration Court-Annexed Arbitration Conciliation [3-6b] Mediation [3-6c] Mini-Trial [3-6d] Summary Jury Trial [3-6e] Negotiation [3-6f] Cases in This Chapter Mims v. Arrow Financial Services, LLC World-Wide Volkswagen Corp. v. Woodson Parker v. Twentieth Century-Fox Film Corp. DirectTV, Inc. v Imburgia Chapter Outcomes After reading and studying this chapter, the student should be able to: •List and describe the courts in the federal court system and in a typical state court system. •Distinguish among exclusive federal jurisdiction, concurrent federal jurisdiction, and exclusive state jurisdiction. •Distinguish among (1) subject matter jurisdiction and jurisdiction over the parties and (2) the three types of jurisdiction over the parties. •List and explain the various stages of a civil proceeding. •Compare and contrast litigation, arbitration, conciliation, and mediation. TEACHING NOTES The Court System Courts are established by governmental bodies; a court may render a binding decision only when it has jurisdiction over the dispute and the parties to that dispute. The United States has a dual court system: (1) a federal court system and (2) a system within each of the fifty states and District of Columbia. *** Chapter Outcome *** List and describe the courts in the federal court system and in a typical state court system. 3-1 The Federal Courts The judicial power of the United States is placed in one Supreme Court and the lower courts established by Congress, including special courts, district courts and appeals courts. Judges in the federal courts are appointed for life by the president, subject to Senate confirmation. NOTE: Figure 3-1 in the textbook shows the structure of the Federal court system. 3-1a District Courts The general trial level in the federal court system, where issues of fact are decided, serve districts each located entirely in a particular state. Each district court is presided over by one judge, except in certain cases, when three judges preside. Appeals from district courts usually go to the Circuit Court of Appeals where the district court is located. In a few cases, the appeals are taken directly to the U.S. Supreme Court. 3-1b Courts of Appeals Twelve Circuit Courts of Appeals are the next level in the federal system. They primarily hear appeals from the district courts and review decisions of administrative agencies, the Tax Court, and the Bankruptcy Courts. They generally hear cases in panels of three judges, although in some instances all judges of the circuit will sit en banc (all together in a session) to decide a case. NOTE: See Figure 3-2 in the textbook for a map showing the district and circuit courts. Appellate courts do not hear evidence or conduct a trial — they examine the record of a case to determine if the trial court committed prejudicial error (error substantially affecting the appellant’s rights and duties). If so, the appellate court will reverse or modify the judgment and, if necessary, remand or send the case back to the lower court for further proceeding. If there is no prejudicial error, the appellate court will affirm the decision of the lower court. 3-1c The Supreme Court The nation’s highest tribunal — consisting of a Chief Justice and eight Associate Justices — principally reviews cases of the Federal Courts of Appeals, and in some instances, decisions involving Federal law made by the highest State courts. Appellate cases reach the Supreme Court by: 1. appeal by right where review by the court is mandatory (very few cases), or 2. the discretionary writ of certiorari (sir’•sho•rare’•ee) (most cases). If four Justices vote to hear the case, a writ is granted. 3-1d Special Courts • The U.S. Court of Federal Claims hears claims against the United States. • The U.S. Bankruptcy Courts hear and decide certain matters under the Federal Bankruptcy Code, subject to review by the U.S. District Court. • The U.S. Court of International Trade has nationwide jurisdiction over cases involving international trade and customs issues. • The U.S. Tax Court hears certain cases involving federal taxes. • The U.S. Court of Appeals for the Federal Circuit reviews decisions of the Court of Federal Claims, the Patent and Trademark Office, patent cases decided by the U.S. District Courts, the U.S. Court of International Trade, the Merit Systems Protection Board and the U.S. Court of Veterans Appeals. 3-2 State Courts Each state and the District of Columbia has its own independent court system with elected judges. NOTE: See Fig. 3-3 for the structure of a typical state court system. 3-2a Inferior Trial Courts Lowest level of the state court system: decide the least serious criminal and civil matters and conduct preliminary hearings in more serious criminal cases. Usually do not keep complete written records. Small claims court — a type of inferior court — hears civil cases involving a limited amount of money with no juries, informal procedure, no attorneys. Appeals go to the trial court of general jurisdiction with no weight given to the small claims court decision. 3-2b Trial Courts Each state has trial courts of general jurisdiction, which may be called county, district, superior, circuit, or common pleas courts. They have no dollar limitation on civil cases, hear all criminal cases except minor offenses, and do maintain formal records of their proceedings. 3-2c Special Courts Some states have specialized courts, such as family courts, with jurisdiction over divorce and child custody cases or probate courts with jurisdiction over the administration of wills and estates. 3-2d Appellate Courts A state’s highest court — generally called the supreme court of the state — serves as a reviewing court and its decision is final except for cases reviewed by the U.S. Supreme Court. Most states have also created intermediate appellate courts to handle the large volume of cases. Jurisdiction To resolve a lawsuit, a court must have jurisdiction: the authority to hear and decide a given case. There are two kinds: jurisdiction over the subject matter of the lawsuit and jurisdiction over the parties to a lawsuit. *** Chapter Outcomes *** Distinguish among subject matter jurisdiction and jurisdiction over the parties. Distinguish among exclusive federal jurisdiction, concurrent federal jurisdiction & exclusive state jurisdiction. 3-3 Subject Matter Jurisdiction Refers to the authority of a particular court to judge a controversy of a particular kind. 3-3a Federal Jurisdiction The federal courts have exclusive jurisdiction over some areas, if Congress so provides. Otherwise, they share jurisdiction with the state courts, known as concurrent federal jurisdiction. Exclusive Federal Jurisdiction — over federal criminal prosecutions, maritime or seagoing law) bankruptcy, antitrust, patent, trademark and copyright cases, suits against the United States, and cases arising under certain federal statutes expressly providing for exclusive jurisdiction. Concurrent Federal Jurisdiction — Two types: (1) federal question jurisdiction over any case (no minimum dollar requirement) arising under the Constitution, statutes, or treaties of the United States, if there is not exclusive federal jurisdiction (2) civil suits where there is diversity of citizenship and the amount in controversy exceeds $75,000. Diversity of citizenship exists: • when the plaintiffs are citizens of a state or states different from the state or states of which the defendants are citizens; or • when a foreign country brings an action against citizens of the United States; or • when the controversy is between US citizens and citizens of a foreign country. When a State court hears a concurrent Federal question case, it applies Federal substantive law but its own procedural rules. CASE 3-1 Mims v. Arrow Financial Services, LLC SUPREME COURT OF THE UNITED STATES, 2012 565 US ___, 132 S.CT. 740, 181 L.ED.2d 881 http://scholar.google.com/scholar_case?case=15936914266018909724&q=132+S.Ct.+740&hl=en&as_sdt=2,34 Ginsburg, J. This case concerns enforcement * * * of the Telephone Consumer Protection Act of 1991 (TCPA or Act), [citation]. Voluminous consumer complaints about abuses of telephone technology—for example, computerized calls dispatched to private homes—prompted Congress to pass the TCPA. Congress determined that federal legislation was needed because telemarketers, by operating interstate, were escaping state-law prohibitions on intrusive nuisance calls. The Act bans certain practices invasive of privacy and directs the Federal Communications Commission (FCC or Commission) to prescribe implementing regulations. It authorizes States to bring civil actions to enjoin prohibited practices and to recover damages on their residents' behalf. The Commission must be notified of such suits and may intervene in them. Jurisdiction over state-initiated TCPA suits, Congress provided, lies exclusively in the U.S. district courts. Congress also provided for civil actions by private parties seeking redress for violations of the TCPA or of the Commission's implementing regulations. Petitioner Marcus D. Mims, complaining of multiple violations of the Act by respondent Arrow Financial Services, LLC (Arrow), a debt-collection agency, commenced an action for damages against Arrow in the U.S. District Court for the Southern District of Florida. Mims invoked the court's “federal question” jurisdiction, i.e., its authority to adjudicate claims “arising under the … laws … of the United States,” [citation]. The District Court, affirmed by the U.S. Court of Appeals for the Eleventh Circuit, dismissed Mims’s complaint for want of subject-matter jurisdiction. Both courts relied on Congress’ specification, in the TCPA, that a private person may seek redress for violations of the Act (or of the Commission's regulations thereunder) “in an appropriate court of [a] State,” “if [such an action is] otherwise permitted by the laws or rules of court of [that] State.” [Citation.] * * * We granted certiorari, [citation], to resolve a split among the Circuits as to whether Congress granted state courts exclusive jurisdiction over private actions brought under the TCPA. [Citations.] We now hold that Congress did not deprive federal courts of federal-question jurisdiction over private TCPA suits. Federal courts, though “courts of limited jurisdiction,” [citation], in the main “have no more right to decline the exercise of jurisdiction which is given, then to usurp that which is not given.” [Citation.] Congress granted federal courts general federal-question jurisdiction in 1875. [Citation.] * * * “The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U. S. C. §1331. * * * Because federal law creates the right of action and provides the rules of decision, Mims’s TCPA claim, in 28 U. S. C. §1331’s words, plainly “aris[es] under” the “laws . . . of the United States.” * * * Arrow agrees that this action arises under federal law, [citation], but urges that Congress vested exclusive adjudicatory authority over private TCPA actions in state courts. In cases “arising under” federal law, we note, there is a “deeply rooted presumption in favor of concurrent state court jurisdiction,” rebuttable if “Congress affirmatively ousts the state courts of jurisdiction over a particular federal claim.” [Citation.] * * * * * * Arrow’s arguments do not persuade us that Congress has eliminated §1331 jurisdiction over private actions under the TCPA. The language of the TCPA—“A person or entity may, if otherwise permitted by the laws or rules of court of a State, bring [an action] in an appropriate court of that State,” 47 U. S. C. §227(b)(3)—Arrow asserts, is uniquely state-court oriented. [Citation.] That may be, but “[i]t is a general rule that the grant of jurisdiction to one court does not, of itself, imply that the jurisdiction is to be exclusive. [Citation.] Nothing in the permissive language of §227(b)(3) makes state-court jurisdiction exclusive, or otherwise purports to oust federal courts of their 28 U. S. C. §1331 jurisdiction over federal claims. * * * Title 47 U. S. C. §227(b)(3) does not state that a private plaintiff may bring an action under the TCPA “only” in state court, or “exclusively” in state court. * * * * * * Nothing in the text, structure, purpose, or legislative history of the TCPA calls for displacement of the federal-question jurisdiction U. S. district courts ordinarily have under 28 U. S. C. §1331. In the absence of direction from Congress stronger than any Arrow has advanced, we apply the familiar default rule: Federal courts have §1331 jurisdiction over claims that arise under federal law. Because federal law gives rise to the claim for relief Mims has stated and specifies the substantive rules of decision, the Eleventh Circuit erred in dismissing Mims’s case for lack of subject-matter jurisdiction. * * * For the reasons stated, the judgment of the United States Court of Appeals for the Eleventh Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion. 3-3b State Jurisdiction Exclusive State Jurisdiction — The state courts have exclusive jurisdiction over all matters not involving exclusive Federal jurisdiction or concurrent jurisdiction, including but not limited to property, torts, contracts, agency, commercial transaction and most crimes. Choice of Law in State Courts — A state may choose to apply the law of another state to a case that has connections to both states. This conflict of laws rule may vary from state to state. NOTE: See Figure 3-4 for an illustration of the jurisdiction of the federal and state courts. 3-3c Stare Decisis in the Dual Court System The doctrine of stare decisis — Latin for “Let the decision stand” — generally requires that lower courts abide by decisions of higher courts and all courts abide by their own previous decisions. This presents problems when there are two parallel court systems. 3-4 Jurisdiction Over the Parties Jurisdiction over the parties is the power of a court to bind the parties involved in the dispute. The court must give reasonable notification and a reasonable opportunity to be heard. Moreover, jurisdiction is valid only if the defendant has sufficient minimum contacts with that state. There are three ways to achieve jurisdiction over the parties: (1) in personam jurisdiction, (2) in rem jurisdiction, or (3) attachment jurisdiction. CASE 3-2 WORLD-WIDE VOLKSWAGEN CORP. v. WOODSON Supreme Court of the United States, 1980 444 U.S. 286, 100 S.Ct 559, 62 L.Ed.2d 490 http://scholar.google.com/scholar_case?q=100+S.CT.+559&hl=en&as_sdt=2,34&case=2649456870546423871&scilh=0 White, J. The issue before us is whether, consistently with the Due Process Clause of the Fourteenth Amendment, an Oklahoma court may exercise in personam jurisdiction over a nonresident automobile retailer and its wholesale distributor in a products-liability action, when the defendants’ only connection with Oklahoma is the fact that an automobile sold in New York to New York residents became involved in an accident in Oklahoma. Respondents Harry and Kay Robinson purchased a new Audi automobile from petitioner Seaway Volkswagen, Inc. (Seaway), in Massena, N.Y., in 1976. The following year the Robinson family, who resided in New York, left that State for a new home in Arizona. As they passed through the State of Oklahoma, another car struck their Audi in the rear, causing a fire which severely burned Kay Robinson and her two children. The Robinsons subsequently brought a products-liability action in the District Court for Creek County, Okla., claiming that their injuries resulted from defective design and placement of the Audi’s gas tank and fuel system. They joined as defendants the automobile’s manufacturer, Audi NSU Auto Union Aktiengesellschaft (Audi); its importer, Volkswagen of America, Inc. (Volkswagen); its regional distributor, petitioner World-Wide Volkswagen Corp. (World-Wide); and its retail dealer, petitioner Seaway. Seaway and World-Wide entered special appearances, claiming that Oklahoma’s exercise of jurisdiction over them would offend the limitations on the State’s jurisdiction imposed by the Due Process Clause of the Fourteenth Amendment. The facts presented to the District Court showed that World-Wide is incorporated and has its business office in New York. It distributes vehicles, parts, and accessories, under contract with Volkswagen, to retail dealers in New York, New Jersey, and Connecticut. Seaway, one of these retail dealers, is incorporated and has its place of business in New York. Insofar as the record reveals, Seaway and World-Wide are fully independent corporations whose relations with each other and with Volkswagen and Audi are contractual only. Respondents adduced no evidence that either World-Wide or Seaway does any business in Oklahoma, ships or sells any products to or in that State, has an agent to receive process there, or purchases advertisements in any media calculated to reach Oklahoma. In fact, as respondents’ counsel conceded at oral argument, [citation], there was no showing that any automobile sold by World-Wide or Seaway has ever entered Oklahoma with the single exception of the vehicle involved in the present case. * * * The Supreme Court of Oklahoma [held] that personal jurisdiction over petitioners was authorized by Oklahoma’s “long-arm” statute, [citation]. * * * * * * The Due Process Clause of the Fourteenth Amendment limits the power of a state court to render a valid personal judgment against a nonresident defendant. [Citation.] A judgment rendered in violation of due process is void in the rendering State and is not entitled to full faith and credit elsewhere. [Citation.] Due process requires that the defendant be given adequate notice of the suit, [citation], and be subject to the personal jurisdiction of the court, [citation]. In the present case, it is not contended that notice was inadequate; the only question is whether these particular petitioners were subject to the jurisdiction of the Oklahoma courts. As has long been settled, and as we reaffirm today, a state court may exercise personal jurisdiction over a nonresident defendant only so long as there exist “minimum contacts” between the defendant and the forum State. [Citation.] The concept of minimum contacts, in turn, can be seen to perform two related, but distinguishable, functions. It protects the defendant against the burdens of litigating in a distant or inconvenient forum. And it acts to ensure that the States, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system. The protection against inconvenient litigation is typically described in terms of “reasonableness” or “fairness.” We have said that the defendant’s contacts with the forum State must be such that maintenance of the suit “does not offend ‘traditional notions of fair play and substantial justice.’” [Citation.] The relationship between the defendant and the forum must be such that it is “reasonable * * * to require the corporation to defend the particular suit which is brought there.” [Citation.] Implicit in this emphasis on reasonableness is the understanding that the burden on the defendant, while always a primary concern, will in an appropriate case be considered in light of other relevant factors, including the forum State’s interest in adjudicating the dispute, [citation]; the plaintiff’s interest in obtaining convenient and effective relief, [citation], at least when that interest is not adequately protected by the plaintiff’s power to choose the forum, [citation]; the interstate judicial system’s interest in obtaining the most efficient resolution of controversies; and the shared interest of the several States in furthering fundamental substantive social policies, [citation]. * * * Thus, the Due Process Clause “does not contemplate that a state may make binding a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations.” [Citation.] * * * Applying these principles to the case at hand, we find in the record before us a total absence of those affiliating circumstances that are a necessary predicate to any exercise of state-court jurisdiction. Petitioners carry on no activity whatsoever in Oklahoma. They close no sales and perform no services there. They avail themselves of none of the privileges and benefits of Oklahoma law. They solicit no business there either through salespersons or through advertising reasonably calculated to reach the State. Nor does the record show that they regularly sell cars at wholesale or retail to Oklahoma customers or residents or that they indirectly, through others, serve or seek to serve the Oklahoma market. In short, respondents seek to base jurisdiction on one, isolated occurrence and whatever inferences can be drawn there from: the fortuitous circumstance that a single Audi automobile, sold in New York to New York residents, happened to suffer an accident while passing through Oklahoma. * * * Because we find that petitioners have no “contacts, ties, or relations” with the State of Oklahoma, [citation], the judgment of the Supreme Court of Oklahoma is Reversed. NOTE: In the case above, the plaintiff, Woodson, is the district judge against whom petitioners sought a writ of prohibition in the Supreme Court of Oklahoma to restrain him from exercising in personam jurisdiction over them. The website, http://www.findlaw.com is often helpful in determining such details about cases. 3-4a In Personam Jurisdiction Jurisdiction of a court over the parties to a lawsuit in contrast to its jurisdiction over their property — applies to persons domiciled in that state or those who are temporarily present in the state and are personally served process within the state. Most states have adopted long-arm statutes to allow courts to obtain jurisdiction over a nonresident defendant who: • has committed a tort (civil wrong) within the state, • owns property in the state, if that property is the subject of the lawsuit, • has entered into a contract within the state, or • has transacted business within the state, if that business is the subject matter of the lawsuit. 3-4b In Rem Jurisdiction Jurisdiction over claims to property situated within the state if the plaintiff gives those persons who have an interest in the property reasonable notice and an opportunity to be heard. 3-4c Attachment Jurisdiction Applies to property, like in rem jurisdiction, but is invoked by seizing the defendant’s property within the state to obtain payment of a claim against the defendant that is unrelated to the property seized. NOTE: Figure 3—6 summarizes the types of jurisdiction. 3-4d Venue The particular geographical place where a court with jurisdiction may hear a case; often confused with jurisdiction. Its purpose is to regulate the distribution of cases within a specific court system and to identify a convenient forum. Is usually the county of residence of one party or the county where an involved piece of real estate is located. Civil Dispute Resolution The most prominent mechanism to settle disputes is judicial resolution, governed by certain rules. Civil disputes are governed by the rules of civil procedure, which we will discuss in the first part of this section. Criminal cases are governed by the rules of criminal procedure, covered in Chapter 6. Dispute resolution by administrative agencies, which is also common, is discussed in Chapter 5. *** Chapter Outcome *** List and explain the various stages of a civil proceeding. 3-5 Civil Procedure Civil disputes that enter the judicial system must follow the rules of civil procedure. These rules are designed to resolve the dispute justly, promptly, and inexpensively. In addition, the federal court system and most state court systems provide for class action lawsuits in which one or more plaintiffs may file suit on behalf of similarly situated individuals who are referred to as “the class”. 3-5a The Pleadings A series of responsive, formal, written statements by each side to a lawsuit; purpose of pleadings is to give notice and to establish the issues of fact and law the parties dispute. Complaint and Summons — The complaint is the initial pleading by the plaintiff stating his case. The lawsuit begins when the county sheriff serves a summons and a copy of the complaint. The summons is a written document, issued by the clerk, that gives notice to the defendant that a suit has been brought against him. Service of the summons establishes jurisdiction over the defendant. Responses to Complaint — If the defendant fails to respond to the summons and complaint, a default judgment will be entered against him. At this point, the defendant may make pretrial motions contesting the court’s jurisdiction over him or asserting that the action is barred by the statute of limitations. He may also request that the complaint be further explained or may move for dismissal for failure to state a valid claim (also called demurrer). If he does not make pretrial motions, or if they are denied, the defendant will respond by filing an answer, which may contain denials, admissions, affirmative defenses, and counterclaims. If the defendant counterclaims, the plaintiff must respond through a reply, which may also contain admissions, denials, or affirmative defenses. 3-5b Pretrial Procedure Judgment on Pleadings — Either party may move for judgment on the pleadings which requests the judge to make a final binding determination as a matter of law whether the facts as alleged are sufficient to grant the requested relief. Discovery — is the pretrial exchange of information between opposing parties to a lawsuit — includes (1) pretrial depositions consisting of sworn testimony taken out of court; (2) sworn answers to written questions; (3) production of documents and physical objects; (4) examination by a physician of the physical condition of the opposing party; and (5) admissions of facts set forth in a request for admissions. Pretrial Conference — between the judge and the attorneys may be held (1) to simplify the issues and (2) to encourage settlement of the dispute without a trial. Summary Judgment — If the evidence disclosed by discovery clearly indicates that no trial is necessary, either party may move for a summary judgment, which is a final binding determination on the merits made by the judge before the trial commences. CASE 3-3 PARKER v. TWENTIETH CENTURY-FOX CORP. Supreme Court of California, 1970 3 Cal.3d 176, 89 Cal.Rptr. 737, 474 P.2d 689 http://scholar.google.com/scholar_case?q=474+P.2d+689&hl=en&as_sdt=2,34&case=8204943341098207403&scilh=0 Burke, J. Defendant Twentieth Century-Fox Film Corporation appeals from a summary judgment granting to plaintiff [Shirley MacLaine Parker] the recovery of agreed compensation under a written contract for her services as an actress in a motion picture. As will appear, we have concluded that the trial court correctly ruled in plaintiff’s favor and that the judgment should be affirmed. Plaintiff is well known as an actress, and in the contract between plaintiff and defendant is sometimes referred to as the “Artist.” Under the contract, dated August 6, 1965, plaintiff was to play the female lead in defendant’s contemplated production of a motion picture entitled “Bloomer Girl.” The contract provided that defendant would pay plaintiff a minimum “guaranteed compensation” of $53,571.42 per week for 14 weeks commencing May 23, 1966, for a total of $750,000. Prior to May 1966 defendant decided not to produce the picture and by a letter dated April 4, 1966, it notified plaintiff of that decision and that it would not “comply with our obligations to you under” the written contract. By the same letter and with the professed purpose “to avoid any damage to you,” defendant instead offered to employ plaintiff as the leading actress in another film tentatively entitled “Big Country, Big Man” (hereinafter, “Big Country”). The compensation offered was identical, as were 31 of the 34 numbered provisions or articles of the original contract. Unlike “Bloomer Girl,” however, which was to have been a musical production, “Big Country” was a dramatic “western type” movie. “Bloomer Girl” was to have been filmed in California; “Big Country” was to be produced in Australia. Also, certain terms in the proffered contract varied from those of the original. Plaintiff was given one week within which to accept; she did not and the offer lapsed. Plaintiff then commenced this action seeking recovery of the agreed guaranteed compensation. The complaint sets forth two causes of action. The first is for money due under the contract; the second, based upon the same allegations as the first, is for damages resulting from defendant’s breach of contract. Defendant in its answer admits the existence and validity of the contract, that plaintiff complied with all the conditions, covenants and promises and stood ready to complete the performance, and that defendant breached and “anticipatorily repudiated” the contract. It denies, however, that any money is due to plaintiff either under the contract or as a result of its breach, and pleads as an affirmative defense to both causes of action plaintiff’s allegedly deliberate failure to mitigate damages, asserting that she unreasonably refused to accept its offer of the leading role in “Big Country.” Plaintiff moved for summary judgment under Code of Civil Procedure section 437c, the motion was granted, and summary judgment for $750,000 plus interest was entered in plaintiff’s favor. This appeal by defendant followed. The familiar rules are that the matter to be determined by the trial court on a motion for summary judgment is whether facts have been presented which give rise to a triable factual issue. The court may not pass upon the issue itself. Summary judgment is proper only if the affidavits or declarations in support of the moving party would be sufficient to sustain a judgment in his favor and his opponent does not by affidavit show facts sufficient to present a triable issue of fact. The affidavits of the moving party are strictly construed, and doubts as to the propriety of summary judgment should be resolved against granting the motion. Such summary procedure is drastic and should be used with caution so that it does not become a substitute for the open trial method of determining facts. The moving party cannot depend upon allegations in his own pleadings to cure deficient affidavits, nor can his adversary rely upon his own pleadings in lieu or in support of affidavits in opposition to a motion; however, a party can rely on his adversary’s pleadings to establish facts not contained in his own affidavits. [Citations.] Also, the court may consider facts stipulated to by the parties and facts which are properly the subject of judicial notice. [Citations.] * * * Applying the foregoing rules to the record in the present case, with all intendments in favor of the party opposing the summary judgment motion—here, defendant—it is clear that the trial court correctly ruled that plaintiff’s failure to accept defendant’s tendered substitute employment could not be applied in mitigation of damages because the offer of the “Big Country” lead was of employment both different and inferior, and that no factual dispute was presented on that issue. The mere circumstance that “Bloomer Girl” was to be a musical review calling upon plaintiff’s talents as a dancer as well as an actress, and was to be produced in the City of Los Angeles, whereas “Big Country” was a straight dramatic role in a “Western type” story taking place in an opal mine in Australia, demonstrates the difference in kind between the two employments; the female lead as a dramatic actress in a western style motion picture can by no stretch of imagination be considered the equivalent of or substantially similar to the lead in a song-and-dance production. Additionally, the substitute “Big Country” offer proposed to eliminate or impair the director and screenplay approvals accorded to plaintiff under the original “Bloomer Girl” contract * * * and thus constituted an offer of inferior employment. No expertise or judicial notice is required in order to hold that the deprivation or infringement of an employee’s rights held under an original employment contract converts the available “other employment” relied upon by the employer to mitigate damages, into inferior employment which the employee need not seek or accept. [Citation.] * * * The judgment is affirmed. 3-5c Trial The U.S. Constitution guarantees the right to a jury trial in federal civil cases involving more than twenty dollars, and nearly every state constitution provides a similar right. The parties may choose not to have a trial by jury. The jury determines questions of fact, and the judge determines issues of law. When there is no jury, the judge serves both functions. Jury Selection — As the parties’ attorneys (or in some courts, the judge) examine the potential jurors, each party can prevent prospective jurors from serving on the basis of potential bias (called challenges for cause). Each party also has a limited number of peremptory challenges for which no cause is required to disqualify a prospective juror. (The Supreme Court ruled that the Constitution prohibits juror discrimi-nation based on race or gender.) The process of examination of jurors is called voir dire (vwar deer). Conduct of Trial — Both attorneys make an opening statement about the facts that they expect to prove. The plaintiff and his witnesses then testify on direct examination by the plaintiff’s attorney. Each is subject to cross-examination by the defense. After cross-examination and redirect examination of witnesses, the plaintiff rests her case. At this time, the defendant may move for a directed verdict — a final binding determination on the merits made by the judge during the trial, but before the jury renders a verdict. If the judge denies the motion for a directed verdict, the defendant then has the opportunity to present evidence. After the defendant has presented evidence and both parties have rested, then either party may move for a directed verdict, taking the case away from the jury, because the evidence is so clear that reasonable persons could not differ about the outcome of the case. If these motions are denied, then the attorneys make closing statements to the jury. Jury Instructions/Verdict — The jury receives jury instructions and then deliberates to reach a general verdict. The judge then applies the law to these findings and renders a judgment. Motions Challenging Verdict — The unsuccessful party has two options at this point (before appeal): A motion for a new trial may be granted if (1) the judge committed prejudicial error during the trial, (2) the verdict is against the weight of the evidence, (3) the damages are excessive, or (4) the trial was not fair. The judge has the discretion to grant a motion for a new trial (on ground 1, 3, or 4 above) even if the verdict is supported by substantial evidence. A motion for judgment notwithstanding the verdict (called a judgment n.o.v.) may be filed, but must be denied if there is substantial evidence supporting the verdict. This motion is similar to a motion for a directed verdict, only it is made after the jury’s verdict and is contrary to that verdict. 3-5d Appeal The purpose of an appeal is to determine whether the trial court committed prejudicial error. Generally, an appellate court reviews only errors of law such as the judge’s decisions to admit or exclude evidence; the judge’s instructions to the jury; and the judge’s actions in denying or granting various motions. The appellate court does not rehear any evidence or redetermine the facts. It decides the case on the records, abstracts, and briefs. 3-5e Enforcement If the defendant does not immediately pay the judgment, the task of enforcement remains. The clerk issues a writ of execution demanding payment of the judgment, which is served by the sheriff on the defendant. If further action is required, specific nonexempt property belonging to the defendant may be seized and sold at a public sale. The defendant’s bank accounts and wages may also be garnished to satisfy payment of the judgment. NOTE: See Figure 3-7 for the various stages in civil procedure. *** Chapter Outcome *** Compare and contrast litigation, arbitration, conciliation, and mediation. 3-6 Alternative Dispute Resolution Because litigation is complex, time-consuming and expensive, several nonjudicial methods of dealing with disputes have developed. The most important of these alternatives to litigation is arbitration. Others include conciliation, mediation, and “mini-trials.” Alternative dispute resolution methods are especially suitable where privacy, speed, preservation of continuing relations, and control over the process are important to the parties. 3-6a Arbitration A nonjudicial proceeding where a neutral third party renders a binding decision. The parties may be able to select an arbitrator with special expertise in the subject of the dispute. Types of Arbitration There are two basic types of arbitration: consensual (which is more common) and compulsory. a. Consensual arbitration occurs when parties to a dispute agree to submit to arbitration. b. Compulsory arbitration is required by statute for specific types of disputes such as those involving public employees like police officers or fire fighters. Procedure – The procedure is usually specified by the parties’ agreement. The decision of the arbitrator, called an award, is binding on the parties, but may be subject to limited judicial review if: (1) the award was procured by corruption, fraud, or other undue means; (2) the arbitrators were partial or corrupt; (3) the arbitrators were guilty of misconduct prejudicing the rights of a party to the arbitration proceeding; and (4) the arbitrators exceeded their powers. International Arbitration – The United Nations Committee on International Trade Law and the International Chamber of Commerce have set forth rules on arbitration which are usually followed. Some states have specific laws governing international arbitration. Court Annexed Arbitration – A non-binding form of arbitration, often used in medical malpractice suits, which is sometimes ordered by the court before allowing a case to come to trial. CASE 3-4 DIRECTV, INC. v. IMBURGIA Supreme Court of the United States, 2015 577 U.S. ___, ___S.Ct. ____, ___ L.Ed. ____ Breyer, J. DIRECTV, Inc., the petitioner [defendant], entered into a service agreement with its customers, including respondents [plaintiffs] Amy Imburgia and Kathy Greiner. Section 9 of that contract provides that “any Claim either of us asserts will be resolved only by binding arbitration.” [Citation.] It then sets forth a waiver of class arbitration, stating that “[n]either you nor we shall be entitled to join or consolidate claims in arbitration.” [Citation.] It adds that if the “law of your state” makes the waiver of class arbitration unenforceable, then the entire arbitration provision “is unenforceable.” [Citation.] Section 10 of the contract states that §9, the arbitration provision, “shall be governed by the Federal Arbitration Act.” [Citation.] In 2008, the two respondents brought this lawsuit against DIRECTV in a California stae court. They seek damages for early termination fees that they believe violate California law. *** DIRECTV, pointing to the arbitration provision, asked the court to send the matter to arbitration. The state trial court denied that request, and DIRECTV appealed. The California Court of Appeal thought that the critical legal question concerned the meaning of the contractual phrase “law of your state,” in this case the law of California. *** At one point, the law of California would have made the contract’s class-arbitration waiver unenforceable. In 2005, the California Supreme Court held in Discover Bank v. Superior Court, [citation], that a “waiver” of class arbitration in a “consumer contract of adhesion” that “predictably involve[s] small amounts of damages” and meets certain other criteria not contested here is “unconscionable under California law and should not be enforced.” [Citations.] But in 2011, this Court held that California’s Discover Bank rule “‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress’” embodied in the Federal Arbitration Act. AT&T Mobility LLC v. Concepcion, [citations]. The Federal Arbitration Act therefore pre-empts and invalidates that rule. [Citations.] The California Court of Appeal subsequently held in this case that, despite this Court’s holding in Concepcion, “the law of California would find the class action waiver unenforceable.” [Citation.] The court noted that Discover Bank had held agreements to dispense with class-arbitration procedures unenforceable under circumstances such as these. [Citation.] It conceded that this Court in Concepcion had held that the Federal Arbitration Act invalidated California’s rule. [Citation.] But it then concluded that this latter circumstance did not change the result—that the “class action waiver is unenforceable under California law.” [Citation.] *** The court reasoned that just as the parties were free in their contract to refer to the laws of different States or different nations, so too were they free to refer to California law as it would have been without this Court’s holding invalidating the Discover Bank rule. The court thought that the parties in their contract had done just that. And it set forth two reasons for believing so. First, §10 of the contract, stating that the Federal Arbitration Act governs §9 (the arbitration provision), is a general provision. But the provision voiding arbitration if the “law of your state” would find the class-arbitration waiver unenforceable is a specific provision. The court believed that the specific provision “‘is paramount to’” and must govern the general. [Citation.] Second, the court said that “‘a court should construe ambiguous language against the interest of the party that drafted it.’” [Citation.] DIRECTV had drafted the language; to void the arbitration provision was against its interest. Hence the arbitration provision was void. The Court of Appeal consequently affirmed the trial court’s denial of DIRECTV’s motion to enforce the arbitration provision. The California Supreme Court denied discretionary review. [Citation.] DIRECTV then filed a petition for a writ of certiorari, noting that the Ninth Circuit had reached the opposite conclusion on precisely the same interpretive question decided by the California Court of Appeal. [Citation.] We granted the petition. No one denies that lower courts must follow this Court’s holding in Concepcion. The fact that Concepcion was a closely divided case, resulting in a decision from which four Justices dissented, has no bearing on that undisputed obligation. Lower court judges are certainly free to note their disagreement with a decision of this Court. But the “Supremacy Clause forbids state courts to dissociate themselves from federal law because of disagreement with its content or a refusal to recognize the superior authority of its source.” [Citation.] The Federal Arbitration Act is a law of the United States, and Concepcion is an authoritative interpretation of that Act. Consequently, the judges of every State must follow it. [Citation.] While all accept this elementary point of law, that point does not resolve the issue in this case. As the Court of Appeal noted, the Federal Arbitration Act allows parties to an arbitration contract considerable latitude to choose what law governs some or all of its provisions, including the law governing enforceability of a class-arbitration waiver. [Citation.] In principle, they might choose to have portions of their contract governed by the law of Tibet, the law of prerevolutionary Russia, or (as is relevant here) the law of California including the Discover Bank rule and irrespective of that rule’s invalidation in Concepcion. The Court of Appeal decided that, as a matter of contract law, the parties did mean the phrase “law of your state” to refer to this last possibility. Since the interpretation of a contract is ordinarily a matter of state law to which we defer, [citation], we must decide not whether its decision is a correct statement of California law but whether (assuming it is) that state law is consistent with the Federal Arbitration Act. Although we may doubt that the Court of Appeal has correctly interpreted California law, we recognize that California courts are the ultimate authority on that law. While recognizing this, we must decide whether the decision of the California court places arbitration contracts “on equal footing with all other contracts.” [Citation.] And in doing so, we must examine whether the Court of Appeal’s decision in fact rests upon “grounds as exist at law or in equity for the revocation of any contract.” [Federal Arbitration Act, §2.] That is to say, we look not to grounds that the California court might have offered but rather to those it did in fact offer. *** We recognize *** that when DIRECTV drafted the contract, the parties likely believed that the words “law of your state” included California law that then made class-arbitration waivers unenforceable. But that does not answer the legal question before us. That is because this Court subsequently held in Concepcion that the Discover Bank rule was invalid. Thus the underlying question of contract law at the time the Court of Appeal made its decision was whether the “law of your state” included invalid California law. *** After examining the grounds upon which the Court of Appeal rested its decision, we conclude that California courts would not interpret contracts other than arbitration contracts the same way. Rather, several considerations lead us to conclude that the court’s interpretation of this arbitration contract is unique, restricted to that field. *** *** California’s interpretation of the phrase “law of your state” does not place arbitration contracts “on equal footing with all other contracts,” [Citation.] For that reason, it does not give “due regard . . . to the federal policy favoring arbitration.” [Citation.] Thus, the Court of Appeal’s interpretation is pre-empted by the Federal Arbitration Act. [Citation.] Hence, the California Court of Appeal must “enforc[e]” the arbitration agreement. [Citation.] The judgment of the California Court of Appeal is reversed, and the case is remanded for further proceedings not inconsistent with this opinion. 3-6b Conciliation A nonbinding, informal process in which a third party (the conciliator) selected by the parties attempts to help them reach a mutually acceptable agreement by improving communications, explaining issues, scheduling meetings, discussing differences of opinion, and serving as an intermediary. 3-6c Mediation A process in which a third party (the mediator) selected by the disputants helps them to reach a resolution of their disagreement. The mediator, unlike the conciliator, proposes possible solutions for the parties to consider, but like the conciliator he does not have the power to render a binding decision. 3-6d Mini-Trial Typically occurs when both disputants are corporations. Attorneys for the two corporations conduct limited discovery and present evidence to a panel of managers from each company as well as a neutral third party, who may be a retired judge or other attorney. 3-6e Summary Jury Trial A mock trial in which both parties present their cases to a jury, which issues a non-binding verdict to be used in negotiations following the trial. 3-6f Negotiation A consensual bargaining process with no third-party mediator, in which parties try to reach an agreement without a trial. Chapter 4 Constitutional Law Basic Principles of Constitutional Law [4-1] Borrowing and Coining Money Federalism [4-1a] Eminent Domain Federal Supremacy and Preemption [4-1b] Limitations on Government [4-3] Judicial Review [4-1c] Contract Clause [4-3a] Separation of Powers [4-1d] First Amendment [4-3b] State Action [4-1e] Corporate Political Speech Powers of Government [4-2] Commercial Speech Federal Commerce Power [4-2a] Defamation State Regulation of Commerce [4-2b] Due Process [4-3c] Regulations Substantive Due Process Taxation Procedural Due Process Federal Fiscal Powers [4-2c] Equal Protection [4-3d] Taxation Rational Relationship Test Spending Power Strict Scrutiny Test Intermediate Test Cases in This Chapter Chapter Outcomes After reading and studying this chapter, the student should be able to: •Explain the basic principles of constitutional law. •Describe the sources and extent of the power of the federal and state governments to regulate business and commerce. •Distinguish the three levels of scrutiny used by the courts to determine the constitutionality of government action. •Explain the effect of the First Amendment on (1) corporate political speech, (2) commercial speech, and (3) defamation. •Explain the difference between substantive and procedural due process teaching notes A constitution is the fundamental law of a particular level of government. It: • establishes the structure of government • defines political relationships within it • states the rights and authority vested in the government The drafters of the original Constitution of the United States considered it unnecessary to list liberties the people kept to themselves, but agreed that the Constitution would contain a Bill of Rights, which consists of the first ten amendments. The States insisted on these as curbs on the power of the federal government. The U.S. Constitution is divided into seven Articles. Articles I–III established the Legislative, Executive, and Judicial branches respectively. Article IV covers the relationship between the states and the federal government while Article V prescribes the method by which the Constitution can be amended. Article VI covers several unrelated matters including the well known supremacy clause. The final Article discusses the procedures used in ratifying the Constitution. *** Chapter Outcome *** Explain the basic principles of constitutional law. 4-1 Basic Principles 4-1a Federalism The power to govern is divided between the federal and states government. Any powers not specifically given to the federal government are reserved to the states and the people. 4-1b Federal Supremacy and Preemption The U.S. Constitution as the supreme law of the land takes precedence over all other conflicting law. No law—federal or state—is valid if it violates the U.S. Constitution. Federal preemption refers to the right of the federal government to regulate matters within its powers to the possible exclusion of state regulation. CASE 4-1 WILLIAMSON v. MAZDA MOTOR OF AMERICA, INC. Supreme Court of the United States, 2011 562 U.S.___, 131 S.CT. 1131, 179 L.ED.2D 75 http://scholar.google.com/scholar_case?q=131+S.CT.+1131&hl=en&as_sdt=2,34&case=17793025419262348357&scilh=0 Breyer, J. Federal Motor Vehicle Safety Standard 208 (1989 version) requires, among other things, that auto manufacturers install seatbelts on the rear seats of passenger vehicles. They must install lap-and-shoulder belts on seats next to a vehicle’s doors or frames. But they have a choice about what to install on rear inner seats (say, middle seats or those next to a minivan’s aisle). There they can install either (1) simple lap belts or (2) lap-and-shoulder belts. [Citation.] * * * In 2002, the Williamson family, riding in their 1993 Mazda minivan, was struck head on by another vehicle. Thanh Williamson was sitting in a rear aisle seat, wearing a lap belt; she died in the accident. Delbert and Alexa Williamson were wearing lap-and-shoulder belts; they survived. They, along with Thanh’s estate, subsequently brought this California tort suit against Mazda. They claimed that Mazda should have installed lap-and-shoulder belts on rear aisle seats, and that Thanh died because Mazda equipped her seat with a lap belt instead. The California trial court dismissed this tort claim on the basis of the pleadings. And the California Court of Appeal affirmed. The appeals court noted that in Geier v. American Honda Motor Co., [citation], this Court considered whether a different portion of (an older version of) Federal Motor Vehicle Safety Standard 208 (FMVSS 208)—a portion that required installation of passive restraint devices—pre-empted a state tort suit that sought to hold an auto manufacturer liable for failure to install a particular kind of passive restraint, namely, airbags. * * * * * * [W]e granted certiorari * * *. * * * Under ordinary conflict pre-emption principles a state law that “stands as an obstacle to the accomplishment and execution of the full purposes and objectives” of a federal law is pre-empted. [Citations.] In Geier we found that the state law stood as an “‘obstacle’ to the accomplishment” of a significant federal regulatory objective, namely, the maintenance of manufacturer choice. [Citation.] We must decide whether the same is true here. * * * Like the regulation in Geier, the regulation here leaves the manufacturer with a choice. And, like the tort suit in Geier, the tort suit here would restrict that choice. But unlike Geier, we do not believe here that choice is a significant regulatory objective. * * * In 1984, DOT [Department of Transportation] rejected a regulation that would have required the use of lap-and-shoulder belts in rear seats [Citation.] Nonetheless, by 1989 when DOT promulgated the present regulation, it had “concluded that several factors had changed.” [Citation.] DOT then required manufacturers to install a particular kind of belt, namely, lap-and-shoulder belts, for rear outer seats. In respect to rear inner seats, it retained manufacturer choice as to which kind of belt to install. * * * DOT here was not concerned about consumer acceptance; it was convinced that lap-and-shoulder belts would increase safety; it did not fear additional safety risks arising from use of those belts; it had no interest in assuring a mix of devices; and, though it was concerned about additional costs, that concern was diminishing. * * * * * * Nor did DOT seek to use its regulation to spur the development of alternative kinds of rear aisle or middle seat safety devices. [Citation.] * * * The more important reason why DOT did not require lap-and-shoulder belts for rear inner seats was that it thought that this requirement would not be cost-effective. * * * But that fact—the fact that DOT made a negative judgment about cost effectiveness—cannot by itself show that DOT sought to forbid common-law tort suits in which a judge or jury might reach a different conclusion. For one thing, DOT did not believe that costs would remain frozen. Rather it pointed out that costs were falling as manufacturers were “voluntarily equipping more and more of their vehicles with rear seat lap/shoulder belts.” [Citation.]. For another thing, many, perhaps most, federal safety regulations embody some kind of cost-effectiveness judgment. While an agency could base a decision to pre-empt on its cost-effectiveness judgment, we are satisfied that the rulemaking record at issue here discloses no such pre-emptive intent. And to infer from the mere existence of such a cost-effectiveness judgment that the federal agency intends to bar States from imposing stricter standards would treat all such federal standards as if they were maximum standards, eliminating the possibility that the federal agency seeks only to set forth a minimum standard potentially supplemented through state tort law. We cannot reconcile this consequence with a statutory saving clause that foresees the likelihood of a continued meaningful role for state tort law. [Citation.] Finally, the Solicitor General tells us that DOT’s regulation does not pre-empt this tort suit. As in Geier, “the agency’s own views should make a difference.” [Citation.] * * * Neither has DOT expressed inconsistent views on this subject. In Geier, the Solicitor General pointed out that “state tort law does not conflict with a federal ‘minimum standard’ merely because state law imposes a more stringent requirement.” [Citation.] And the Solicitor General explained that a standard giving manufacturers “multiple options for the design of” a device would not pre-empt a suit claiming that a manufacturer should have chosen one particular option, where “the Secretary did not determine that the availability of options was necessary to promote safety.” [Citation.] This last statement describes the present case. In Geier, then, the regulation’s history, the agency’s contemporaneous explanation, and its consistently held interpretive views indicated that the regulation sought to maintain manufacturer choice in order to further significant regulatory objectives. Here, these same considerations indicate the contrary. We consequently conclude that, even though the state tort suit may restrict the manufacturer’s choice, it does not “stan[d] as an obstacle to the accomplishment . . . of the full purposes and objectives” of federal law. [Citation.] Thus, the regulation does not pre-empt this tort action. The judgment of the California Court of Appeal is reversed. 4-1c Judicial Review Describes the process by which the courts examine governmental actions to determine whether they conform to the U.S. Constitution. It extends to legislation, acts of the executive branch, and the decisions of inferior courts. It includes the actions of both the federal and state governments and applies the same standards of constitutionality to both governments. The U.S. Supreme Court is the final authority as to the constitutionality of any federal or state law. 4-1d Separation of Powers The allocation of powers among the legislative, executive and judicial branches of government to prevent any branch of government from gaining too much power. It also permits each branch to function without interference from any other branch. NOTE: See textbook for Figure 4-1—Separation of Powers: Checks and Balances. 4-1e State Action Refers to actions of the federal and state governments and their subdivisions, such as city or county governments and agencies, as opposed to actions taken by private individuals. Only the Thirteenth Amendment, which abolishes slavery or involuntary servitude, applies to the actions of private individuals. Otherwise, the Constitution proscribes only action taken by governments that violate constitutionally protected rights. Action taken by private individuals may constitute state action if the government exercised coercive power over the challenged private action. CASE 4-2 BRENTWOOD ACADEMY v. TENNESSEE SECONDARY SCHOOL ATHLETIC ASSOCIATION Supreme Court of the United States, 2001 531 U.S. 288, 121 S.Ct. 924, 148 L.Ed.2d 807 http://scholar.google.com/scholar_case?q=121+S.Ct.+924&hl=en&as_sdt=2,34&case=2890003226740495113&scilh=0 Souter, J. The issue is whether a statewide association incorporated to regulate interscholastic athletic competition among public and private secondary schools may be regarded as engaging in state action when it enforces a rule against a member school. The association in question here includes most public schools located within the State, acts through their representatives, draws its officers from them, is largely funded by their dues and income received in their stead, and has historically been seen to regulate in lieu of the State Board of Education’s exercise of its own authority. We hold that the association’s regulatory activity may and should be treated as state action owing to the pervasive entwinement of state school officials in the structure of the association, there being no offsetting reason to see the association’s acts in any other way. Respondent Tennessee Secondary School Athletic Association (Association) is a not-for-profit membership corporation organized to regulate interscholastic sport among the public and private high schools in Tennessee that belong to it. No school is forced to join, but without any other authority actually regulating interscholastic athletics, it enjoys the memberships of almost all the State’s public high schools (some 290 of them or 84% of the Association’s voting membership), far outnumbering the 55 private schools that belong. A member school’s team may play or scrimmage only against the team of another member, absent a dispensation. The Association’s rulemaking arm is its legislative council, while its board of control tends to administration. The voting membership of each of these nine-person committees is limited under the Association’s bylaws to high school principals, assistant principals, and superintendents elected by the member schools, and the public school administrators who so serve typically attend meetings during regular school hours. Although the Association’s staff members are not paid by the State, they are eligible to join the State’s public retirement system for its employees. Member schools pay dues to the Association, though the bulk of its revenue is gate receipts at member teams’ football and basketball tournaments, many of them held in public arenas rented by the Association. The constitution, bylaws, and rules of the Association set standards of school membership and the eligibility of students to play in interscholastic games. Each school, for example, is regulated in awarding financial aid, most coaches must have a Tennessee state teaching license, and players must meet minimum academic standards and hew to limits on student employment. Under the bylaws, “in all matters pertaining to the athletic relations of his school,” [citation], the principal is responsible to the Association, which has the power “to suspend, to fine, or otherwise penalize any member school for the violation of any of the rules of the Association or for other just cause,” [citation]. * * * The action before us responds to a 1997 regulatory enforcement proceeding brought against petitioner, Brentwood Academy, a private parochial high school member of the Association. The Association’s board of control found that Brentwood violated a rule prohibiting “undue influence” in recruiting athletes, when it wrote to incoming students and their parents about spring football practice. The Association accordingly placed Brentwood’s athletic program on probation for four years, declared its football and boys’ basketball teams ineligible to compete in playoffs for two years, and imposed a $3,000 fine. When these penalties were imposed, all the voting members of the board of control and legislative council were public school administrators. Brentwood sued the Association and its executive director in federal court * * * claiming that enforcement of the Rule was state action and a violation of the First and Fourteenth Amendments. The District Court entered summary judgment for Brentwood and enjoined the Association from enforcing the Rule. [Citation.] * * * The United States Court of Appeals for the Sixth Circuit reversed. [Citation.] It recognized that there is no single test to identify state actions and state actors but applied three criteria * * *, and found no state action under any of them. It said the District Court was mistaken in seeing a symbiotic relationship between the State and the Association, it emphasized that the Association was neither engaging in a traditional and exclusive public function nor responding to state compulsion * * * We granted certiorari, 528 U.S. 1153 (2000), to resolve the conflict and now reverse. * * * Thus, we say that state action may be found if, though only if, there is such a “close nexus between the State and the challenged action” that seemingly private behavior “may be fairly treated as that of the State itself.” [Citation.] * * * Our cases have identified a host of facts that can bear on the fairness of such an attribution. We have, for example, held that a challenged activity may be state action when it results from the State’s exercise of “coercive power,” [citation], when the State provides “significant encouragement, either overt or covert,” [citation], or when a private actor operates as a “willful participant in joint activity with the State or its agents,” [citation]. We have treated a nominally private entity as a state actor when it is controlled by an “agency of the State,” [citation], when it has been delegated a public function by the State, [citations], when it is “entwined with governmental policies” or when government is “entwined in [its] management or control,” [citation]. * * * * * * [T]he “necessarily fact-bound inquiry,” [citation], leads to the conclusion of state action here. The nominally private character of the Association is overborne by the pervasive entwinement of public institutions and public officials in its composition and workings, and there is no substantial reason to claim unfairness in applying constitutional standards to it. The Association is not an organization of natural persons acting on their own, but of schools, and of public schools to the extent of 84% of the total. Under the Association’s bylaws, each member school is represented by its principal or a faculty member, who has a vote in selecting members of the governing legislative council and board of control from eligible principals, assistant principals and superintendents. Although the findings and prior opinions in this case include no express conclusion of law that public school officials act within the scope of their duties when they represent their institutions, no other view would be rational, * * *. Interscholastic athletics obviously play an integral part in the public education of Tennessee, where nearly every public high school spends money on competitions among schools. Since a pickup system of interscholastic games would not do, these public teams need some mechanism to produce rules and regulate competition. The mechanism is an organization overwhelmingly composed of public school officials who select representatives (all of them public officials at the time in question here), who in turn adopt and enforce the rules that make the system work. Thus, by giving these jobs to the Association, the 290 public schools of Tennessee belonging to it can sensibly be seen as exercising their own authority to meet their own responsibilities. * * * In sum, to the extent of 84% of its membership, the Association is an organization of public schools represented by their officials acting in their official capacity to provide an integral element of secondary public schooling. There would be no recognizable Association, legal or tangible, without the public school officials, who do not merely control but overwhelmingly perform all but the purely ministerial acts by which the Association exists and functions in practical terms. * * * To complement the entwinement of public school officials with the Association from the bottom up, the State of Tennessee has provided for entwinement from top down. State Board members are assigned ex officio to serve as members of the board of control and legislative council, and the Association’s ministerial employees are treated as state employees to the extent of being eligible for membership in the state retirement system. * * * The entwinement down from the State Board is therefore unmistakable, just as the entwinement up from the member public schools is overwhelming. Entwinement will support a conclusion that an ostensibly private organization ought to be charged with a public character and judged by constitutional standards; entwinement to the degree shown here requires it. * * * The judgment of the Court of Appeals for the Sixth Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion. It is so ordered. 4-2 Powers of Government The Tenth Amendment declares that "the powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." Legislation enacted by Congress must therefore be based on a specific power granted to the federal government by the Constitution. Exclusive federal powers include the power to establish laws regarding bankruptcy, to establish post offices, to grant patents and copyrights, to coin currency, to wage war and to enter into treaties. Concurrent powers, which may be exercised by both the Federal government and the States, include taxation, spending, and the regulation of the public health, safety, and welfare. *** Chapter Outcome *** Describe the sources and extent of the power of the federal and state governments to regulate business and commerce. 4-2a Federal Commerce Power The U.S. Constitution provides that Congress has the power to regulate commerce with other nations, and among the states. The commerce clause grants virtually complete power to Congress to regulate the economy and business. Legislation enacted under the commerce clause may only be invalidated (1) if it is clear that the activity does not affect interstate commerce; or (2) if it is clear that there is no reasonable connection between the regulatory means selected and the stated ends. In 2010, Congress enacted the Patient Protection and Affordable Care Act (commonly called “Obamacare”) in order to increase the number of Americans covered by health insurance and decrease the cost of health care. One key provision—the individual mandate—requires most Americans to maintain “minimum essential” health insurance coverage or make a “shared responsibility payment” to the federal government. The constitutionality of the individual mandate was challenged as beyond the commerce and taxing powers of Congress. In deciding the Commerce Clause question, the U.S. Supreme Court explained that the Commerce Clause presupposes the existence of commercial activity to be regulated. “The individual mandate, however, does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce. Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority.” Accordingly, in a 5-4 vote the Court held that the individual mandate was not a valid exercise of the commerce power. National Federation of Independent Business v. Sebelius, 567 U. S. ____, (2012). 4-2b State Regulation of Commerce In addition to acting as a broad source of federal power, the commerce clause also restricts the states' power to regulate activities if the result obstructs or unduly burdens interstate commerce. Regulations–In determining the extent of permissible State regulation affecting interstate commerce the Court weighs and balances (1) the necessity and importance of the State regulation; (2) the burden it imposes on interstate commerce; and (3) the extent to which it discriminates against interstate commerce in favor of local concerns. In general, where a State statute regulates even-handedly to accomplish a legitimate State interest and its effects on interstate commerce is only incidental, the state will be upheld unless the burden imposed on interstate commerce is excessive compared to the local benefits. Where, however, the regulation is discriminatory, there must be no other reasonable method of achieving a legitimate local interest. CASE 4-3 DEPARTMENT OF REVENUE OF KENTUCKY v. DAVIS, ET AL. United States Supreme Court, 2008 553 U.S. 328, 128 S.Ct. 1801, 170 L.Ed.2d 685 http://scholar.google.com/scholar_case?q=128+S.Ct.+1801&hl=en&as_sdt=2,34&case=15768194217522904809&scilh=0 Souter, J. Like most other States, the Commonwealth of Kentucky taxes its residents’ income. [Citation.] The tax is assessed on “net income,” which excludes “interest on any State or local bond” (“municipal bond,” for short), [citation]. Kentucky piggybacks on this exclusion, but only up to a point: it adds “interest income derived from obligations of sister states and political subdivisions thereof” back into the taxable net. [Citation.] Interest on bonds issued by Kentucky and its political subdivisions is thus entirely exempt, whereas interest on municipal bonds of other States and their subdivisions is taxable. (Interest on bonds issued by private entities is taxed by Kentucky regardless of the private issuer’s home.) The ostensible reason for this regime is the attractiveness of tax-exempt bonds at “lower rates of interest … than that paid on taxable … bonds of comparable risk.” [Citation.] Under the Internal Revenue Code, for example, [citation], “if the market rate of interest is 10 percent on a comparable corporate bond, a municipality could pay only 6.5 percent on its debt and a purchaser in a 35 percent marginal tax bracket would be indifferent between the municipal and the corporate bond, since the after-tax interest rate on the corporate bond is 6.5 percent.” [Citation.] The differential tax scheme in Kentucky works the same way; the Commonwealth’s tax benefit to residents who buy its bonds makes lower interest rates acceptable, while limiting the exception to Kentucky bonds raises in-state demand for them without also subsidizing other issuers. The significance of the scheme is immense. Between 1996 and 2002, Kentucky and its subdivisions issued $7.7 billion in long-term bonds to pay for spending on transportation, public safety, education, utilities, and environmental protection, among other things. [Citation.] Across the Nation during the same period, States issued over $750 billion in long-term bonds, with nearly a third of the money going to education, followed by transportation (13%) and utilities (11%). [Citation.] Municipal bonds currently finance roughly two-thirds of capital expenditures by state and local governments. [Citation.] Funding the work of government this way follows a tradition going back as far as the 17th century. [Citation.] * * * * * * The Commerce Clause empowers Congress “[t]o regulate Commerce … among the several States,” Art. I, § 8, cl. 3, and although its terms do not expressly restrain “the several States” in any way, we have sensed a negative implication in the provision since the early days, [citation]. The modern law of what has come to be called the dormant Commerce Clause is driven by concern about “economic protectionism—that is, regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors.” [Citation.] The point is to “effectuat[e] the Framers’ purpose to ‘prevent a State from retreating into [the] economic isolation,’” [citation], “that had plagued relations among the Colonies and later among the States under the Articles of Confederation,” [citation]. * * * Under the resulting protocol for dormant Commerce Clause analysis, we ask whether a challenged law discriminates against interstate commerce. [Citation.] A discriminatory law is “virtually per se invalid,” [citation], and will survive only if it “advances a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives,” [citation]. Absent discrimination for the forbidden purpose, however, the law “will be upheld unless the burden imposed on [interstate] commerce is clearly excessive in relation to the putative local benefits.” Pike v. Bruce Church, Inc., [citation]. State laws frequently survive this Pike scrutiny, [citation], though not always, as in Pike itself, [citation]. Some cases run a different course, however, and an exception covers States that go beyond regulation and themselves “participat[e] in the market” so as to “exercis[e] the right to favor [their] own citizens over others.” [Citation.] This “market participant” exception reflects a “basic distinction … between States as market participants and States as market regulators,” [citation], “[t]here [being] no indication of a constitutional plan to limit the ability of the States themselves to operate freely in the free market,” [citations]. Our most recent look at the reach of the dormant Commerce Clause came just last Term, in a case decided independently of the market participation precedents. UnitedHaulers upheld a “flow control” ordinance requiring trash haulers to deliver solid waste to a processing plant owned and operated by a public authority in New York State. We found “[c]ompelling reasons” for “treating [the ordinance] differently from laws favoring particular private businesses over their competitors.” [Citation.] State and local governments that provide public goods and services on their own, unlike private businesses, are “vested with the responsibility of protecting the health, safety, and welfare of [their] citizens,” [citation], and laws favoring such States and their subdivisions may “be directed toward any number of legitimate goals unrelated to protectionism,” [citation]. That was true in United Haulers, where the ordinance addressed waste disposal, “both typically and traditionally a local government function.” [Citation.] And if more had been needed to show that New York’s object was consequently different from forbidden protectionism, we pointed out that “the most palpable harm imposed by the ordinances—more expensive trash removal—[was] likely to fall upon the very people who voted for the laws,” rather than out-of-state interests. [Citation.] Being concerned that a “contrary approach … would lead to unprecedented and unbounded interference by the courts with state and local government,” [citation], we held that the ordinance did “not discriminate against interstate commerce for purposes of the dormant Commerce Clause,” [citation]. It follows a fortiori from United Haulers that Kentucky must prevail. In United Haulers, we explained that a government function is not susceptible to standard dormant Commerce Clause scrutiny owing to its likely motivation by legitimate objectives distinct from the simple economic protectionism the Clause abhors, [citations]. This logic applies with even greater force to laws favoring a State’s municipal bonds, given that the issuance of debt securities to pay for public projects is a quintessentially public function, with the venerable history we have already sketched, [citation]. By issuing bonds, state and local governments “sprea[d] the costs of public projects over time,” [citation], much as one might buy a house with a loan subject to monthly payments. Bonds place the cost of a project on the citizens who benefit from it over the years, * * * and they allow for public work beyond what current revenues could support. [Citation.] Bond proceeds are thus the way to shoulder the cardinal civic responsibilities listed in United Haulers: protecting the health, safety, and welfare of citizens. It should go without saying that the apprehension in United Haulers about “unprecedented …. interference” with a traditional government function is just as warranted here, where the Davises would have us invalidate a centuryold taxing practice, [citation], presently employed by 41 States, [citation], and affirmatively supported by all of them, [citation]. * * * [T]he Kentucky tax scheme parallels the ordinance upheld in United Haulers: it “benefit[s] a clearly public [issuer, that is, Kentucky], while treating all private [issuers] exactly the same.” [Citation.] * * * Kentucky’s tax exemption favors a traditional government function without any differential treatment favoring local entities over substantially similar out-of-state interests. This type of law does “not ‘discriminate against interstate commerce’ for purposes of the dormant Commerce Clause.” [Citation.] * * * A look at the specific markets in which the exemption’s effects are felt both confirms the conclusion that no traditionally forbidden discrimination is underway and points to the distinctive character of the tax policy. The market as most broadly conceived is one of issuers and holders of all fixed-income securities, whatever their source or ultimate destination. In this interstate market, Kentucky treats income from municipal bonds of other States just like income from bonds privately issued in Kentucky or elsewhere; no preference is given to any local issuer, and none to any local holder, beyond what is entailed in the preference Kentucky grants itself when it engages in activities serving public objectives. * * * These facts suggest that no State perceives any local advantage or disadvantage beyond the permissible ones open to a government and to those who deal with it when that government itself enters the market. [Citation.] * * * In sum, the differential tax scheme is critical to the operation of an identifiable segment of the municipal financial market as it currently functions, and this fact alone demonstrates that the unanimous desire of the States to preserve the tax feature is a far cry from the private protectionism that has driven the development of the dormant Commerce Clause. * * * The judgment of the Court of Appeals of Kentucky is reversed, and the case is remanded for further proceedings not inconsistent with this opinion. Taxation–The commerce clause in conjunction with the import-export clause limits the power of the States to tax interstate commerce. The import-export clause provides: "No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports." Once goods enter the stream of interstate or foreign commerce, the power of the State to tax ceases and does not resume until the goods are delivered to the purchaser or the owner terminates the movement of the goods through interstate or foreign commerce. The Patient Protection and Affordable Care Act’s individual mandate provision requires most Americans to maintain “minimum essential” health insurance coverage or make a “shared responsibility payment” to the federal government. The constitutionality of the individual mandate was challenged as beyond the commerce and taxing powers of Congress. In deciding the taxing power question, in a 5-4 vote the U.S. Supreme Court held that requiring certain individuals to “pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.” National Federation of Independent Business v. Sebelius, 567 U. S. 1, (2012). 4-2c Federal Fiscal Powers In addition to the powers granted in the commerce clause, the sources of federal fiscal regulatory power include (1) the power to tax; (2) the power to spend; (3) the power to borrow and coin money; and (4) the power of eminent domain. Taxation –The federal government’s broad power to tax is limited in the these ways: (1) direct taxes other than income taxes must be apportioned among the states; (2) custom duties and excise taxes must be uniform throughout the United States; and (3) no duties may be levied on exports from any state. Spending Power –The Constitution authorizes the federal government to pay debts and spend for the common defense and general welfare of the United States. The spending power of Congress is extremely broad and will be upheld so long as it does not violate a specific constitution limitation on federal power. Borrowing and Coining Money–The U.S. Constitution also grants Congress the power to borrow money on the credit of the United States and to coin money. These two powers have enabled the federal government to establish a national banking system, the Federal Reserve System, and specialized federal lending programs such as the Federal Land Bank. Eminent Domain–is the power of government to take private property for public use upon payment of fair compensation. Although this amendment applies only to the federal government, the Supreme Court has held that the takings clause is incorporated through the Fourteenth Amendment and is applicable to the states. NOTE: Figure 4-2 summarizes the powers granted to the Federal government, the state, and the people. 4-3 Limitations on Government The constitutional limitations on government most applicable to business are: (1) the contract clause; (2) the First Amendment; (3) due process; and (4) equal protection. The first of these, the contract clause, applies only to the actions of state governments while the other three apply to both Federal government and the states. None of these restrictions operates as an absolute limitation, but instead triggers a review of governmental power. Three levels of scrutiny are used: The rational relationship test, the intermediate test, and the strict scrutiny test. (These are discussed in section D, below.) NOTE: See textbook for Figure 4-3: Limitations upon Government. 4-3a Contract Clause Article I, Section 10 of the Constitution provides: "No state shall . . . pass any Law impairing the Obligation of Contracts. . . ” Although the Contract Clause does not apply to the federal government, due process places limitations on its power to impair contracts. *** Chapter Outcome *** Explain the effect of the 1st Amendment on (1) corporate political speech, (2) commercial speech , and (3) defamation. 4-3b First Amendment The First Amendment contains a guarantee of free speech, but that protection is not absolute. Some forms of speech, such as obscenity, receive no protection. CASE 4-4 BROWN v. ENTERTAINMENT MERCHANTS ASSOCIATION Supreme Court of the United States, 2011 564 U.S. ____, 131 S.CT. 2729, 180 L.ED.2D 708 (2011) http://scholar.google.com/scholar_case?q=131+S.Ct.+2729+(2011)&hl=en&as_sdt=3,34&case=12960598670321445636&scilh=0 Scalia, J. California Assembly Bill 1179 (2005), [citation], (Act), prohibits the sale or rental of “violent video games” to minors, and requires their packaging to be labeled “18.” The Act covers games “in which the range of options available to a player includes killing, maiming, dismembering, or sexually assaulting an image of a human being, if those acts are depicted” in a manner that “[a] reasonable person, considering the game as a whole, would find appeals to a deviant or morbid interest of minors,” that is “patently offensive to prevailing standards in the community as to what is suitable for minors,” and that “causes the game, as a whole, to lack serious literary, artistic, political, or scientific value for minors.” [Citation.] Violation of the Act is punishable by a civil fine of up to $1,000. [Citation.] Respondents, representing the video-game and software industries, brought a preenforcement challenge to the Act in the United States District Court for the Northern District of California. That court concluded that the Act violated the First Amendment and permanently enjoined its enforcement. [Citation.] The Court of Appeals affirmed, [citation], and we granted certiorari, [citation]. California correctly acknowledges that video games qualify for First Amendment protection. The Free Speech Clause exists principally to protect discourse on public matters, but we have long recognized that it is difficult to distinguish politics from entertainment, and dangerous to try. * * * Like the protected books, plays, and movies that preceded them, video games communicate ideas—and even social messages—through many familiar literary devices (such as characters, dialogue, plot, and music) and through features distinctive to the medium (such as the player’s interaction with the virtual world). That suffices to confer First Amendment protection. * * * And whatever the challenges of applying the Constitution to ever-advancing technology, “the basic principles of freedom of speech and the press, like the First Amendment’s command, do not vary” when a new and different medium for communication appears. [Citation.] The most basic of those principles is this: “[A]s a general matter, . . . government has no power to restrict expression because of its message, its ideas, its subject matter, or its content.” [Citation.] There are of course exceptions. “‘From 1791 to the present,’ . . . the First Amendment has ‘permitted restrictions upon the content of speech in a few limited areas,’ and has never ‘include[d] a freedom to disregard these traditional limitations.’” [Citations.] These limited areas—such as obscenity, [citation], incitement, [citation], and fighting words, [citation]—represent “well-defined and narrowly limited classes of speech, the prevention and punishment of which have never been thought to raise any Constitutional problem,” [citation]. Last Term, in [citation], we held that new categories of unprotected speech may not be added to the list by a legislature that concludes certain speech is too harmful to be tolerated. * * * * * * The California Act * * * does not adjust the boundaries of an existing category of unprotected speech to ensure that a definition designed for adults is not uncritically applied to children. * * * Instead, it wishes to create a wholly new category of content-based regulation that is permissible only for speech directed at children. That is unprecedented and mistaken. “[M]inors are entitled to a significant measure of First Amendment protection, and only in relatively narrow and well-defined circumstances may government bar public dissemination of protected materials to them.” [Citation.] No doubt a State possesses legitimate power to protect children from harm, [citation], but that does not include a free-floating power to restrict the ideas to which children may be exposed. “Speech that is neither obscene as to youths nor subject to some other legitimate proscription cannot be suppressed solely to protect the young from ideas or images that a legislative body thinks unsuitable for them.” [Citation.] California claims that video games present special problems because they are “interactive,” in that the player participates in the violent action on screen and determines its outcome. The latter feature is nothing new * * * As for the argument that video games enable participation in the violent action, that seems to us more a matter of degree than of kind. * * * Because the Act imposes a restriction on the content of protected speech, it is invalid unless California can demonstrate that it passes strict scrutiny—that is, unless it is justified by a compelling government interest and is narrowly drawn to serve that interest. [Citation.] The State must specifically identify an “actual problem” in need of solving, [citation], and the curtailment of free speech must be actually necessary to the solution, [citation]. That is a demanding standard. “It is rare that a regulation restricting speech because of its content will ever be permissible.” [Citation.] California cannot meet that standard. At the outset, it acknowledges that it cannot show a direct causal link between violent video games and harm to minors. * * * * * * California’s effort to regulate violent video games is the latest episode in a long series of failed attempts to censor violent entertainment for minors. While we have pointed out above that some of the evidence brought forward to support the harmfulness of video games is unpersuasive, we do not mean to demean or disparage the concerns that underlie the attempt to regulate them—concerns that may and doubtless do prompt a good deal of parental oversight. We have no business passing judgment on the view of the California Legislature that violent video games (or, for that matter, any other forms of speech) corrupt the young or harm their moral development. Our task is only to say whether or not such works constitute a “well-defined and narrowly limited clas[s] of speech, the prevention and punishment of which have never been thought to raise any Constitutional problem,” [citation] (the answer plainly is no); and if not, whether the regulation of such works is justified by that high degree of necessity we have described as a compelling state interest (it is not). Even where the protection of children is the object, the constitutional limits on governmental action apply. California’s legislation straddles the fence between (1) addressing a serious social problem and (2) helping concerned parents control their children. Both ends are legitimate, but when they affect First Amendment rights they must be pursued by means that are neither seriously underinclusive nor seriously overinclusive. [Citation.] As a means of protecting children from portrayals of violence, the legislation is seriously underinclusive, not only because it excludes portrayals other than video games, but also because it permits a parental or avuncular veto. And as a means of assisting concerned parents it is seriously overinclusive because it abridges the First Amendment rights of young people whose parents (and aunts and uncles) think violent video games are a harmless pastime. And the overbreadth in achieving one goal is not cured by the underbreadth in achieving the other. Legislation such as this, which is neither fish nor fowl, cannot survive strict scrutiny. We affirm the judgment below. Corporate Political Speech–The First Amendment guarantee of free speech applies not only to individuals but also to corporations, which may not be prohibited from speaking out on political issues. The Supreme Court, in 1990, upheld a state statute which prohibits corporations, except media corporations, from using general treasury funds to make independent expenditures in elections for public office. At that time, the Court ruled that corporations may use segregated funds set aside solely for political purposes to speak out on such issues. This limitation was removed in 2010 by a landmark five-to-four decision in Citizens United v. Federal Election Commission. The Supreme Court invalidated the restrictions as conflicting with the First Amendment, holding: “We return to the principle established in . . . Bellotti that the Government may not suppress political speech on the basis of the speaker’s corporate identity. No sufficient governmental interest justifies limits on the political speech of nonprofit or for-profit corporations.” Commercial Speech–An expression related to the economic interests of the speaker and his audience, such as advertisements of products and services. Speech that does no more than propose a commercial transaction is entitled to extensive protection but less protection than that accorded to political speech. Defamation–A civil wrong or tort consisting of a false communication that injures a person's reputation. Because defamation involves a communication, the protection generally extended to speech by the First Amendment becomes an issue. Public figures who pursue a cause of action for defamation must prove actual malice or proof the defendant had knowledge of the falsity of the communication or acted in reckless disregard of its truth or falsity. *** Chapter Outcome *** Explain the difference between substantive and procedural due process. 4-3c Due Process The Fifth and Fourteenth Amendments respectively prohibit the federal and state governments from depriving any person of life, liberty, or property without due process of law. Due process has two different aspects: substantive due process and procedural due process. Substantive Due Process–Requires governmental action to be compatible with liberties available to all citizens. Where fundamental rights of individuals are affected, the Court will carefully examine (under the strict scrutiny test) the legislation to determine that it is necessary to promote a compelling state interest. Procedural Due Process–Requires that governmental action depriving a person of life, liberty, or property be done through a fair procedure. Liberty generally includes the ability of individuals to engage in freedom of action and choice regarding their personal lives. Property includes all forms of real and personal property and also certain benefits (entitlements) conferred by government, such as social security payments and food stamps. 4-3d Equal Protection The Fourteenth Amendment requires that similarly situated persons be treated similarly by state government action. The Supreme Court has interpreted the due process clause of the Fifth Amendment to subject federal actions to the same standards of review. When governmental action impacts on the rights of certain classes of people or segments of society, the equal protection guarantee applies. The Supreme Court will use one of three following standards of review (depending on the nature of the right or classification involved). *** Chapter Outcome *** Distinguish the three levels of scrutiny used by the courts to determine the constitutionality of governmental action. Rational Relationship Test–The rational relationship test applies to economic regulation and requires that it is conceivable that the classification bears some rational relationship to a legitimate governmental interest furthered by the classification. Courts will overturn the governmental action only if clear and convincing evidence shows that there is no reasonable basis justifying the action. Strict Scrutiny Test–The strict scrutiny test is the most exacting test. Under this test, the courts independently determine whether the classification is constitutionally permissible. This test is applied when the governmental action affects fundamental rights or involves suspect classification. Fundamental rights include most of the provisions of the Bill of Rights and other rights. Suspect classifications include those based on race or national origin. The government action will be upheld only if it promotes a compelling state interest. Intermediate Test–The intermediate standard eliminates the strong presumption of constitutionality adhered to by the rational relationship test. It applies to governmental action based on gender and legitimacy. The governmental action will be upheld if there is a substantial relationship to an important governmental objective. CASE 4-5 BROWN v. BOARD OF EDUCATION OF TOPEKA Supreme Court of the United States, 1954 347 U.S. 483, 74 S.Ct. 686, 98 L.Ed. 873 http://scholar.google.com/scholar_case?q=74+S.Ct.+686&hl=en&as_sdt=2,34&case=12120372216939101759&scilh=0 Warren, C. J. These cases come to us from the States of Kansas, South Carolina, Virginia, and Delaware. They are premised on different facts and different local conditions, but a common legal question justifies their consideration together in this consolidated opinion. In each of the cases, minors of the Negro race, through their legal representatives, seek the aid of the courts in obtaining admission to the public schools of their community on a nonsegregated basis. In each instance, they have been denied admission to schools attended by white children under laws requiring or permitting segregation according to race. This segregation was alleged to deprive the plaintiffs of the equal protection of the laws under the Fourteenth Amendment. In each of the cases other than the Delaware case, a three-judge federal district court denied relief to the plaintiffs on the socalled “separate but equal” doctrine announced by this Court in Plessy v. Ferguson, [citation]. Under that doctrine, equality of treatment is accorded when the races are provided substantially equal facilities, even though these facilities be separate. In the Delaware case, the Supreme Court of Delaware adhered to that doctrine, but ordered that the plaintiffs be admitted to the white schools because of their superiority to the Negro schools. The plaintiffs contend that segregated public schools are not “equal” and cannot be made “equal” and that hence they are deprived of the equal protection of the laws. Because of the obvious importance of the question presented, the Court took jurisdiction. * * * Reargument was largely devoted to the circumstances surrounding the adoption of the Fourteenth Amendment in 1868. It covered exhaustively consideration of the Amendment in Congress, ratification by the states, then existing practices in racial segregation, and the views of proponents and opponents of the Amendment. This discussion and our own investigation convince us that, although these sources cast some light, it is not enough to resolve the problem with which we are faced. At best, they are inconclusive. The most avid proponents of the post-War Amendments undoubtedly intended them to remove all legal distinctions among “all persons born or naturalized in the United States.” Their opponents, just as certainly, were antagonistic to both the letter and the spirit of the Amendments and wished them to have the most limited effect. What others in Congress and the state legislatures had in mind cannot be determined with any degree of certainty. An additional reason for the inconclusive nature of the Amendment’s history, with respect to segregated schools, is the status of public education at that time. In the South, the movement toward free common schools, supported by general taxation, had not yet taken hold. Education of white children was largely in the hands of private groups. Education of Negroes was almost nonexistent, and practically all of the race were illiterate. In fact, any education of Negroes was forbidden by law in some states. Today, in contrast, many Negroes have achieved outstanding success in the arts and sciences as well as in the business and professional world. It is true that public school education at the time of the Amendment had advanced further in the North, but the effect of the Amendment on Northern States was generally ignored in the congressional debates. Even in the North, the conditions of public education did not approximate those existing today. The curriculum was usually rudimentary; ungraded schools were common in rural areas; the school term was but three months a year in many states; and compulsory school attendance was virtually unknown. As a consequence, it is not surprising that there should be so little in the history of the Fourteenth Amendment relating to its intended effect on public education. In the first cases in this Court construing the Fourteenth Amendment, decided shortly after its adoption, the Court interpreted it as proscribing all state-imposed discriminations against the Negro race. The doctrine of “separate but equal” did not make its appearance in this Court until 1896 in the case of Plessy v. Ferguson, involving not education but transportation. American courts have since labored with the doctrine for over half a century. In this Court, there have been six cases involving the “separate but equal” doctrine in the field of public education. * * * In none of these cases was it necessary to reexamine the doctrine to grant relief to the Negro plaintiff. And in Sweatt v. Painter, [citation], the Court expressly reserved decision on the question whether Plessy v. Ferguson should be held inapplicable to public education. In the instant cases, that question is directly presented. Here, unlike Sweatt v. Painter, there are findings below that the Negro and white schools involved have been equalized, or are being equalized, with respect to buildings, curricula, qualifications and salaries of teachers, and other “tangible” factors. Our decision, therefore, cannot turn on merely a comparison of these tangible factors in the Negro and white schools involved in each of the cases. We must look instead to the effect of segregation itself on public education. * * * Today, education is perhaps the most important function of state and local governments. Compulsory school attendance laws and the great expenditures for education both demonstrate our recognition of the importance of education to our democratic society. It is required in the performance of our most basic public responsibilities, even service in the armed forces. It is the very foundation of good citizenship. Today it is a principal instrument in awakening the child to cultural values, in preparing him for later professional training, and in helping him to adjust normally to his environment. In these days, it is doubtful that any child may reasonably be expected to succeed in life if he is denied the opportunity of an education. Such an opportunity, where the state has undertaken to provide it, is a right which must be made available to all on equal terms. We come then to the question presented: Does segregation of children in public schools solely on the basis of race, even though the physical facilities and other “tangible” factors may be equal, deprive the children of the minority group of equal educational opportunities? We believe that it does. In Sweatt v. Painter, [citation], in finding that a segregated law school for Negroes could not provide them equal educational opportunities, this Court relied in large part on “those qualities which are incapable of objective measurement but which make for greatness in a law school.” In McLaurin v. Oklahoma State Regents, [citation], the Court in requiring that a Negro admitted to a white graduate school be treated like all other students, again resorted to intangible considerations: “ * * * his ability to study, to engage in discussions and exchange views with other students, and, in general, to learn his profession.” Such considerations apply with added force to children in grade and high schools. To separate them from others of similar age and qualifications solely because of their race generates a feeling of inferiority as to their status in the community that may affect their hearts and minds in a way unlikely ever to be undone. The effect of this separation on their educational opportunities was well stated by a finding in the Kansas case by a court which nevertheless felt compelled to rule against the Negro plaintiffs: Segregation of white and colored children in public schools has a detrimental effect upon the colored children. The impact is greater when it has the sanction of the law, for the policy of separating the races is usually interpreted as denoting the inferiority of the Negro group. A sense of inferiority affects the motivation of a child to learn. Segregation with the sanction of law, therefore, has a tendency to (retard) the educational and mental development of Negro children and to deprive them of some of the benefits they would receive in a racial(ly)-integrated school system. Whatever may have been the extent of psychological knowledge at the time of Plessy v. Ferguson, this finding is amply supported by modern authority. Any language in Plessy v. Ferguson contrary to this finding is rejected. We conclude that in the field of public education the doctrine of “separate but equal” has no place. Separate educational facilities are inherently unequal. Therefore, we hold that the plaintiffs and others similarly situated for whom the actions have been brought are, by reason of the segregation complained of, deprived of the equal protection of the laws guaranteed by the Fourteenth Amendment. This disposition makes unnecessary any discussion whether such segregation also violates the Due Process Clause of the Fourteenth Amendment. Instructor Manual for Smith and Robersons Business Law Richard A. Mann, Barry S. Roberts 9781337094757, 9780357364000, 9780538473637
Close