Chapter 6 Administrative Law

Its Legal, Ethical, and Global Environment

Marianne M. Jennings

Business

11th Ed.

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Nonlegislative/Nonjudicial Body

Exist at every level of government

They make, interpret, and enforce regulations

Legislatures pass enabling acts

Sets up basic law, purpose, penalties

Sets up administrative agencies to handle the enforcement

What Are Administrative Agencies?

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Examples of Federal Administrative Agencies

Department of Agriculture

Department of the Interior

Federal Maritime Commission

Veterans Administration

What Are Administrative Agencies?

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The SEC

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Specialization

Needed to deal with complexities of legislation

Agencies can hire the necessary expertise

Examples: Environmental, occupational safety, nuclear, securities − regulation in these areas requires special expertise

Role of Administrative Agencies

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Role of Administrative Agencies

Protect Small Interests and Small Business

Examples: Corrective advertising, consumer complaints

Provide for More Rapid Enforcement and Relief

Do not have to use court system for enforcement

Licensing and permits can be done quickly

Achieve Social Goals

Examples: Environmental Protection Agency; Federal Home Loan Bank Board; Resolution Trust Corporation

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Laws Governing Administrative Agencies

Administrative Procedures Act (APA)

Established uniform procedures for agencies to follow in promulgating rules

Other acts have separate names but are amendments to the APA

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Freedom of Information Act (FOIA)

APA amendment passed in 1966

Purpose was to allow public access to agency records

Types of information required to be published

Location of offices

Names of responsible individuals

Rules and regulations

Reports

Policy statements

Laws Governing Administrative Agencies

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Freedom of Information Act (FOIA)

Types of information not published

Hearing orders

Non-published interpretations

Personnel policies and procedures

Laws Governing Administrative Agencies

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Freedom of Information Act (FOIA)

Unpublished information can be obtained through an FOIA request

Must be written

Must describe the information and/or documents sought

Agency can charge for time and copy costs

Laws Governing Administrative Agencies

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Freedom of Information Act (FOIA)

Wrongful refusal to supply information allows requester to bring suit and obtain court order for release as well as recovering cost

Laws Governing Administrative Agencies

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Laws Governing Administrative Agencies

Freedom of Information Act (FOIA)

Exemptions from disclosure

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Laws Governing Administrative Agencies

Federal Privacy Act

Passed in 1974 as an APA amendment

Intended to cut down on the pervasive and casual exchange of information about individuals between and among agencies

Agencies cannot obtain individuals’ records from other agencies without the consent of that person

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Government in Sunshine Act

Open meeting law passed in 1976

Federal Register Act

Authorizes a formal record of agency actions called the Federal Register

Regulatory Flexibility Act

Requires publication of proposed rulemaking in trade publications

Laws Governing Administrative Agencies

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Functions of Administrative Agencies

Promulgating Regulations − Business Input

Formal rulemaking

Congress passes Enabling Act

Agency researches a problem

Proposed regulations

Public comment period

Action on rules is taken

Challenges to adopted agency rules

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Steps in Rulemaking

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Notice of Proposed Rulemaking

Notice of Proposed Rulemaking Expanding Access to Mobile Wireless Services Onboard Aircraft

A Proposed Rule by the Federal Communications

ACTION: Proposed Rules

AGENCY: Federal Communications Commission

SUMMARY: In this Notice of Proposed Rulemaking (NPRM), the Commission proposes to revise outdated rules and adopt consistent new rules governing mobile communications services aboard airborne aircraft. These rule changes would give airlines, subject to applicable Federal Aviation Administration (FAA) and Department of Transportation (DoT) rules, the choice of whether to enable mobile communications services using an Airborne Access System and, if so, which specific services to enable. The proposed rules would also replace an existing patchwork of regulatory prohibitions on airborne use of mobile services in some, but not all, of the heavily used mobile wireless bands with a consistent regulatory framework that explicitly forbids airborne use of mobile services in those bands unless they are operating on an aircraft equipped with an Airborne Access System.

Synopsis

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Notice of Proposed Rulemaking (cont.)

I. Introduction and Background

II. Discussion

A. Changes to Current Rules Restricting Airborne Mobile Broadband Use

B. Airborne Access Systems

1. Potential Harmful Interference From Uncontrolled Airborne Mobile Devices

2. Benefits of Airborne Access Systems

3. Technical Requirements

C. Airborne Commercial Mobile Use

D. Other Issues

1. Service Below 3,048 Meters (10,000 Feet)

2. Voice Service Onboard Aircraft

Dates

Submit comments on or before February 14, 2014. Submit reply comments on or before March 17, 2014.

Paperwork Reduction Act (PRA) comments should be submitted March 17, 2014.

Addresses

You may submit comments, identified by WT Docket No. 13-301 or FCC 13-157, by any of the following methods:

Federal Communications Commission’s Web site: http://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting comments.

Mail: FCC Headquarters, 445 12th St. SW., Washington, DC 20554.

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Activity During Comment Period

Legislative process and lobbying and donations are different from executive branch participation

Businesses can provide information/comments, but providing favors for regulators creates a fine line

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Interacting with the Executive Branch

Case 6.1 McDonnell v. U.S. (2016)

What kinds of favors and gifts were given by Jonnie Williams?

What action did Governor McDonnell take in exchange?

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Agency Options Following Comments

Promulgate the new rule

Modify and promulgate

Modify and request additional comments

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Authority of Administrative Agencies: Court Challenges

Case 6.2 Hornbeck Offshore Services, L.L.C. et al., v. Salazar (2010)

What was done with the regulation to result in this judicial decision and why?

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Sunset Laws

Agency created for a limited time

Must justify its existence within that time

Zero-Base Budgeting

Ongoing budget for agency is not assumed

Must justify its budget each year

Proactive Business Strategies in Regulation

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Enforcement Actions

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Enforcement Actions

Licensing and Inspection

Enforcement and Inspection

Up-front approval

Some checks imposed

Enforcement by inspection

Health Code violation, Occupational Safety and Health Administration (OSHA) safety inspections

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Prosecution of Business

Enforcement by prosecution

Complaint is filed

Injunction can be obtained for this period

Consent decree

Like a plea bargain in a criminal case

Like a nolo contendere plea in a criminal case

Enforcement Actions

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Enforcement Actions

Prosecution of Business

Can go to hearing without an agreements

Administrative law judge (ALJ) hears the case

ALJ is like a judge at trial

Intervenors can appear in the case

Rules of evidence are relaxed

Must allow for due process

Exhaust administrative authority before appeal

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Enforcement Actions

Prosecution of Business

Penalties

Fines

Injunctions

Repayment to buyers

Corrective advertising

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Enforcement Actions

Prosecution and Business

Go to court of appeals

Appeals of decisions go to agency heads exhausting administrative authority (unless it would be futile) before court or appeals will consider

State court appeals also go to court of appeals; however, some states require new trail in state trial court

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Roles of Administrative Agencies

Activity Steps Parties Results

Passing Rules Rule Proposed Agency New Rules

Comments Consumers Modified Rule

Modification, Business Withdrawn Rules

Withdrawal Congress

Promulgation Agency

Enforcement Licensing Agency

Business

Inspections Agency Search and

Courts (if Inspection

Warranty is

Required)

Business

Complaints Agency Fines

Penalties

Injunctions

Consent decrees

Hearings

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Administrative Agencies in the International Market

The United States is Heavily Regulated

Some businesses have argued that regulations hinders them in the international marketplace

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Complexity of Federal Regulations

Documents and Populations Grade Level

Love Story 7.64

Reading Level of U.S. Population over Age 65 9.71

Playboy 11.46

Reading Level of General U.S. Population 11.68

Sports Illustrated 12.82

Your Medicare Handbook 14.94

ERISA Summary Plan Description 15.29

The Wall Street Journal 16.34

Social Security Handbook 17.51

Reading Level of Lawyers 19.00

Albermarle (U.S. Supreme Court Ruling) 20.30

Occupational Safety and Health Act 30.79

Employment Retirement Income Safety Act 32.10

Section 18 of the Social Security Act 41.04

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 National defense or foreign

policy matter

 Internal personnel rules of

the agency

 Statutorily protected

information

 Trade secrets

 Inter- and intra-agency

memos

 Personnel and medical

files

 Records of

investigations

 Banking audits

 Geological

information on w ell

sites

· National defense or foreign policy matter

· Internal personnel rules of the agency

· Statutorily protected information

· Trade secrets

· Inter- and intra-agency memos

· Personnel and medical files

· Records of investigations

· Banking audits

· Geological information on well sites

image1.wmf

Chapter 5 Business and the Constitution

Its Legal, Ethical, and Global Environment

Marianne M. Jennings

Business

11th Ed.

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The U.S. Constitution

Article I: Legislative Branch

Congress

House of Representatives

Senate

Article II: Executive Branch

President

Vice President

Article III: Judicial Branch

Creates U.S. Supreme Court

Authorizes Congress to create other courts

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The U.S. Constitution

Creates a System of Checks and Balances

Each branch has some power check over the others to keep any one from becoming too powerful

Examples

Nixon v. Administrator of General Services

Clinton v. Jones

Obama v. Alito

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The U.S. Constitution

Other Articles in the Constitution

Article IV: State Interrelationships

Article V: Procedures for Amendments

Article VI: Supremacy Clause

Article VII: State Ratification of the Constitution

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The U.S. Constitution

Bill of Rights

First: Freedom of speech

Fourth: Privacy

Fifth: Due process and self-incrimination

Sixth: Jury trial

Other Amendments

Fourteenth Amendment: Due Process and Equal Protection

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Role of Judicial Review

Determines the Rights Afforded by the U.S. Constitution

Determines the Scope of Rights

Plays Unique Role in Checks and Balances

Determines the appropriateness of the actions of other branches

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Limits of Economic Regulation

The Commerce Clause: Article I, Section 8

Standards for Federal Regulation of Interstate Commerce

Historical application

Initially, Court gave a narrow interpretation

Court held New Deal Legislation unconstitutional

Roosevelt proposed Court-Packing Plan

After these political battles, the court responded in NLRB v. Laughlin Steel with the affectation doctrine

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Limits of Economic Regulation

Economic Activity is an Economic Setting

e.g., Price Fixing by Multinationals

Economic Activity in a Non-Economic Setting

e.g., Loan Sharking on the Street Corner

Non-Economic Activity in an Economic Setting

e.g., Race Discrimination by a Hotel

Non-Economic Activity in a Non-Economic Setting

e.g., VAWA and Morrison?

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Table One – Part A

COMPARISON OF CONGRESSIONAL JURISDICTION FACTORS

CHILD LABOR WOMEN AND VIOLENCE

AWFUL; HORRIBLE 1. AWFUL; HORRIBLE

PERVASIVE 2. PERVASIVE

INSUFFICIENT 3. INSUFFICIENT

STATE ACTION STATE ACTION

BUSINESSES 4. MEN ARE DOING IT

WERE DOING IT

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Table One – Part B

CIVIL RIGHTS (LACK THEREOF)

CHILD LABOR GUNS IN SCHOOLS

1. DISPARATE 1. VIOLENCE IS AWFUL

2. UNSAFE–VIOLENCE 2. UNSAFE–VIOLENCE

3. INSUFFICIENT 3. INSUFFICIENT

STATE ACTION STATE ACTION

4. BUSINESSES 4. HIGH SCHOOL

WERE DOING IT STUDENTS DOING IT

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Table Two

The Factors of Wickard v. Filburn

Local Farmers

Individuals, But Still in Business

Local Commerce Affects Prices in National Market

National Economic Interest in Farm Products/Pricing

Combining Wickard with the decisions in Lopez and Morrison, we are able to develop a clear matrix on the Commerce Clause as depicted by Response to Razook Figure One and the specific examples listed in Razook Figure Two.

In the Lopez case, the court held that the act of having a gun on school property had no economic/commerce base and that federal laws could not regulate local school.

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Response to Razook Figure One

Congress May Regulated conduct Regulated conduct

Regulate is economic is performed by an

(commercial (commercial

character) character to actor)

Congress May Regulated conduct Regulated conduct

Not Regulate is non-economic is not performed by

an economic entity

(non-commercial

character)

Jennings Figure R-1

Examples of Congressional Authority/Non-Authority After Morrison and Lopez

Congress may regulate

Congress may not regulate

Congress may regulate

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Table Three

Application of the Economic/Non-Economic Actor/ Activity Test to Specific Regulations

Gun Possession

Gun possessor (actor) – non-commercial, Congress may not regulate

Act of gun possession – non-commercial, Congress may not regulate

Violence Against Women

Abuser (actor) – non-commercial, Congress may not regulate

Act of abusing – non-commercial, Congress may not regulate

Farm Regulation (Wickard v. Filburn)

Farmer (actor) – commercial (livelihood), Congress may regulate

Act of selling – commercial, Congress may regulate

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Table Three (cont’d)

Title VII Civil Rights Discrimination

Hotel/Restaurant Owner (actor) – commercial, Congress may regulate

Act of discrimination – non-commercial, Congress may regulate

Labor/Unions/OSHA

Actors are business – commercial, Congress may regulate

Or Unions Engaged in Business – commercial, Congress may regulate

Act of Work/Employment – commercial, Congress may regulate

Lending (loan sharking)

Actors are loan sharks – commercial, Congress may regulate

(Facilities are not great, but they are a source of loans)

Act of lending – commercial, Congress may regulate

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Limits of Economic Regulation

Case 5.1 National Federation of Independent Business v. Sebelius (2012)

The court found that the individual mandate violated the Commerce Clause

Court upheld the law on other grounds

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Limits of Economic Regulation

The Commerce Clause: Article I, Section 8

Standards for state regulation of commerce

If Congress has regulated, there is an overriding concern about the Supremacy Clause

If Congress has not acted, there is a benefit/burden analysis

Balance police power (state’s interest in regulation) with the burden on commerce

State law cannot give in-state businesses an advantage

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Limits of Economic Regulation

Case 5.2 Rowe v. New Hampshire Motor Transport Association (2008)

Maine passed a law that prohibited anyone other than a Maine-licensed retailer from accepting an order of tobacco

The law required a special receipt, signed by someone over the age of 18 that showed a Maine-licensed dealer had received the tobacco

Out-of-state shippers and tobacco sellers challenged the Maine law as favoring Maine sellers

Court grapples with the purpose of the law and the burden on commerce

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Limits of Economic Regulation

Congressional Regulation of Foreign Commerce

The power of Congress to regulate foreign commerce applies regardless of where it begins and ends

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Taxation of Business

Congress’ Power to Tax – Article I, Section 8: The Ability of Congress to Tax Has Been Consistently Upheld

State and Local Taxation of Interstate Commerce

Interstate business is not exempt from state and local taxes just because they are interstate businesses

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Taxation of Business

Requirements for Valid State Tax

Tax cannot discriminate against interstate commerce

Tax cannot be an undue burden on interstate commerce

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Requirements for Valid State Tax

Must be a “sufficient nexus” between the state and the business being taxed

Examples: Does business there, holds property titles there, manufactures there, inventory stored there

Must be apportioned fairly

Example: A corporation doing business in fifty states cannot have all income taxed in all fifty states – must be apportioned according to its revenues in the states

Taxation of Business

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Case 5.3 New Mexico Taxation & Revenue Department v. BarnesandNoble.com LLC (2012)

Explain Barnes and Noble’s operations

Is there a physical presence sufficient for taxation?

Taxation of Business

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The “Jock Tax”

Discuss the allocation of athletes’ income tax among cities and states and the formulas used.

What constitutional issues do you see?

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State vs. Federal Regulation

The Supremacy Clause and Preemption

Article VI exists to determine which laws control in the event both state and federal governments regulate the same thing

If state law directly conflicts with federal law, state law is invalid

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The Supremacy Clause and Preemption

Whether there is preemption is controlled by answering several questions:

What does legislative history provide?

What is the level of detail in the federal regulation?

What benefit flows from the federal regulation?

What is the nature of conflict − can the two laws survive?

State vs. Federal Regulation

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Case 5.4 Mutual Pharmaceutical Co., Inc. v. Bartlett (2013)

Federal law regulates labels for prescription drugs

State law provides product liability rights of recovery for failure to warn

Federal law does not allow generic producers to change label by manufacturer, so they cannot include additional disclosures

State law was pre-empted by federal regulation – no product liability

State vs. Federal Regulation

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First Amendment

Provides some protection for commercial speech

Commercial speech is speech used to further the economic interests of the speaker

Advertising and commercial speech protection

Can regulate advertising

Substantial government interest must be furthered

Is the regulation the least restrictive means of accomplishing the interest

Bill of Rights

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First Amendment Full Protection

First Amendment Protections

and Business Speech

Business Political Speech

Governmental Regulation of Commercial Speech

Business Advertising

Bill of Rights

Speech

on Social Issues and Business: Nike, Professions

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Bill of Rights

First Amendment

Commercial Speech Protections

Government regulation of commercial speech is permitted

Three-prong test:

Is there a substantial government interest in restricting speech?

Does the restriction accomplish the government goal?

Is there any other way to accomplish the government’s objectives?

Evolving area: Company political speech – Nike example

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Bill of Rights

First Amendment

Corporate political speech

Corporate participation in campaigns is given full First Amendment protection

Nike case was never fully litigated to determine whether advertising regulation could be applied to, for example, letters to the editor or columns by corporate executives about controversial issues that affect the company, such as Nike’s labor practices in other countries

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Bill of Rights

Case 5.5 Citizens United v. Federal Election Commission (2010)

Case returns to holding in Belotti case that First Amendment rights are not contingent on how much money or power the speaker holds

Some limits on campaign contributions are appropriate

Controls on time, place, and manner of speech in the lead-up to elections have too chilling an effect on speech and dissemination of information

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Eminent Domain

Eminent domain is the right of government to take private property for public purpose for just compensation

Public use examples: Highways, schools, urban redevelopment, limits on mining, historical preservation, economic development

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Requirements

Taking or regulating

Examples: Prohibitions on use, elimination of use

In Loretto v. Teleprompter Manhattan CATV Corp. et al. (1982)

In Nollan v. California Coastal Commission (1987)

In Lucas v. South Carolina Coastal Council (1992)

Eminent Domain

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Eminent Domain

Just Compensation

Public Purpose

New issue is question of taking property for economic development or revitalization or just new projects

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Eminent Domain

Case 5.6 Kelo v. City of New London (2005)

Issue of taking for economic development

Who owned the land?

Who would get the land under the city’s plan?

What question in eminent domain was a problem for the court?

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Requirement: Procedural Due Process

Applies to criminal, civil, and administrative proceedings

Example: Summons and complaint provide notice to defendants

Right to notice of hearings

Right to be heard

The Raisin Farmers case: Horne v. U.S. Dept. of Agriculture

Procedural Due Process

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Requirement: Substantive Due Process

State laws cannot substantively eliminate rights without some benefit

Law must be logically related to legitimate governmental purpose

Example: Sunday blue laws − stores are closed by law − states must be able to show economic, health, social benefits of such closure

Substantive Due Process

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Equal Protection

Elements of Protection for Regulation

Regulation must apply to all businesses

Example: Courts have struck laws that allow small stores to stay open on Sunday while large stores could not

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Vague statutes and regulation violate substantive due process standards

FCC v. Fox Television Stations

Needed clearer standards for obscenity

The Cookie Monster case and substantive due process and free speech

Substantive Due Process

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International Law and Constitutions

General Types of Constitutions Found in the United States and England

Code Law Countries Found in Mexico and Many European Countries

Islamic Law: Based on Religion, Governs All Aspect of Personal and Business Life Law

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Chapter 7 International Law

Its Legal, Ethical, and Global Environment

Marianne M. Jennings

Business

11th Ed.

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7-1

Sources of International Law

Common Law

England

United States

Civil or Code Law

Statutes or codes are very detailed; little reliance on precedent

France, Germany, Spain

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Islamic Law

Religious tenets integrated

Combination of Islamic law and colonizers’ laws

Former Communist Countries

In transition

Sources of International Law

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Nonstatutory Sources

Language

Environment and Technology

Authority

Nonverbal behavior

Time Concept

Sources of International Law

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Contracts for the International Sale of Goods (CISG)

Governs the sale of goods internationally

Currently adopted by 53 countries, including the United States

Similar to Article 2 of the Uniform Commercial Code

Sources of International Law

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7-5

Tax Law

Tax laws of different countries provide widely varying rates

Companies go through mergers, acquisitions, and headquarter changes to obtain the most favorable rates

Sources of International Law

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Sources of International Law

Tariffs

Fees paid for imports and exports

Processing controls (raw materials)

7-6

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Sources of International Law

European Union (EU)

Created by treaty of Rome

Purpose was open trade, unified monetary and fiscal policies, and creation of the Euro

Created European Parliament

Created European Court of Justice

7-7

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Sources of International Law

Treaties

General Agreement on Tariffs and Trade (GATT)

Multilateral treaty with 150 member nations that created the Work Trade Organization (WTO)

MFN status

Dispute Settlement Body for trade disputes

7-8

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7-9

North American Free Trade Agreement (NAFTA)

Became effective in 1994

Treaty between Canada, Mexico and the United States

Eliminated most tariffs between member countries

Sources of International Law

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7-10

Sources of International Law

Prohibition on Trade: Individual Nation Sanctions (Iran and Cuba lifts of prohibitions)

Primary and secondary boycotts

International Monetary Fund

The Hague Convention (litigation)

Climate Agreements

OPEC

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7-11

International Monetary Fund (IMF) and the World Bank

IMF is designed to foster international trade through currency stability

IMF creates the International Bank for Reconstruction and Development (The World Bank) which allows members to draw on line of credit to stabilize currency exchange rates

Sources of International Law

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Trust, Corruption, Trade, and Economics

Focus on Reducing Bribery

OECD

FCPA

7-12

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Foreign Corrupt Practices Act

Applies to all 1934 Act companies

Making, authorizing, promising payments or gifts of money or anything of value with intent to corrupt

Applies to gifts to government officials, parties, candidates, NGOs and anyone who transmits money to these persons/entities

7-13

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FCPA

Use of agents

Companies need to screen

Follow “four eyes” rule – two people must sign off on payments

Obtaining or directing business

7-14

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FCPA

Grease or facilitation payments under FCPA

Securing a permit or license

Obtaining paper processing

Securing police protection

Providing phone, water or power services

7-15

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FCPA

Enforcement and Penalties

OECD countries apply FCPA statutes to their citizens acting outside the native country

In U.S., fines of up to $250,000 per violation

7-16

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Principles

Expropriation: Act of State Doctrine

Act of foreign governments are recognized as valid whether or not such actions would be legal in the United States

Sovereign Immunity

Each nation is sovereign

Other nations do not take jurisdiction over a country’s internal operations, laws, and people

Does not apply to contractual relations

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Case 7.1

Case 7.1 In re Yukos Oil Securities Litigation (2006)

Issue of representations about income and tax laws in Russia

Securities fraud claimed

Can you claim sovereign immunity if the actions and decisions of the government affect your business?

7-18

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Principles of International Law

Hickenlooper Amendment to Foreign Assistance Act of 1962

Allows president to sanction countries that take property of U.S. companies

Treaties Afford Protections

Overseas Private Investment Corporation (OPIC) − federal agency that provides insurance for U.S. businesses against expropriation

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Repatriation

Repatriation

Limits on removal of profits from country where they are earned

Considered acts of state; cannot be litigated

Forum Non Conveniens

Dismisses cases brought in wrong court

Example: India was proper forum to bring suit against Union Carbide for what happened in Bhopal, India

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Checklist for Doing Business In Another Country

What is the economic climate?

What is the government structure?

What are the cultural attitudes about economic development?

What are the feelings of the indigenous peoples toward U.S. businesses?

What is the legal structure of the country?

How are laws passed?

How are disputes resolved?

What is the structure of the court system?

What commercial laws do they have?

What have been the experiences of other companies working there?

©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

7-22

Conflicts of Law

No two countries have the exact same commercial laws

Some countries have no commercial codes

Uniform Commercial Code is widely used

Resolving Conflicts of Law

If the parties agree, autonomy controls

If parties have not agreed, law of country where the contract is performed will apply

Conflicts of Law

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Case 7.2

Case 7.2 Tiffany and Company v. Andrew (2012)

What is the impact of counterfeiting?

How can banks help in preventing counterfeiting?

7-23

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7-24

Antitrust Laws

All firms doing business here are subject to antitrust jurisdiction

Export Trading Company Act

Allows joint ventures among competitors

For business in other countries

International Protections

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Protections for Intellectual Property

International protections of intellectual property are constantly being refined

Worldwide registration of patents, trademarks and copyrights may be within reach

International Protections

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Criminal Law Protections

All those present in a country are subject to that country’s criminal law

Subject to all regulations as well

International Protections

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