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Chapter Five Constitutional Principles

The Constitution

The Constitution provides the legal framework for our nation. The articles of the Constitution set out the basic structure of our government and the respective roles of the state and federal governments. The Amendments to the Constitution, especially the first 10, were primarily designed to establish and protect individual rights.

Federalism

Underlying the system of government established by the Constitution is the principle of 

federalism

, which means that the authority to govern is divided between two sovereigns or supreme lawmakers. In the United States, these two sovereigns are the state and federal governments. Federalism allocates the power to control local matters to local governments. This allocation is embodied in the U.S. Constitution. Under the Constitution, all powers that are neither given exclusively to the federal government nor taken from the states are reserved to the states. The federal government has only those powers granted to it in the Constitution. Therefore, whenever federal legislation that affects business is passed, the question of the source of authority for that regulation always arises. The Commerce Clause is the predominant source of authority for the federal regulation of business, as we will see later.

federalism

A system of government in which power is divided between a central authority and constituent political units.

Critical Thinking About The Law

The Constitution secures numerous rights for U.S. citizens. If we did not have these rights, our lives would be very different. Furthermore, businesses would be forced to alter their practices because they would not enjoy the various constitutional protections. As you will soon learn, various components of the Constitution, such as the Commerce Clause and the Bill of Rights, offer guidance and protection for businesses. The following questions will help sharpen your critical thinking about the effects of the Constitution on business.

1. One of the basic elements in the Constitution is the separation of powers in the government. What ethical norm would guide the framers’ thinking in creating a system with a separation of powers and a system of checks and balances?

Clue:  Consider what might happen if one branch of government became too strong.

2. If the framers of the Constitution wanted to offer the protection of unrestricted speech to citizens and businesses, what ethical norm would they view as most important?

Clue:  Return to the list of ethical norms in 

Chapter 1

. Which ethical norm might the framers view as least important in protecting unrestricted speech?

3. Why should you, as a future business manager, be knowledgeable about the basic protections offered by the Constitution?

Clue:  If you were ignorant of the constitutional protections, how might your business suffer?

In some areas, the state and federal governments have concurrent authority; that is, both governments have the power to regulate the matter in question. This situation arises when authority to regulate in an area has been expressly given to the federal government by the Constitution. In such cases, a state may regulate in the area as long as its regulation does not conflict with any federal regulation of the same subject matter. A conflict arises when a regulated party cannot comply with both the state and the federal laws at the same time. When the state law is more restrictive, such that compliance with the state law is automatically compliance with the federal law, the state law will usually be valid. For example, as discussed in 

Chapter 22

, in many areas of environmental regulation, states may impose much more stringent pollution-control standards than those imposed by federal law.

Supremacy Clause

The outcome of conflicts between state and federal laws is dictated by the 

Supremacy Clause

. This clause, found in Article VI of the Constitution, provides that the Constitution, laws, and treaties of the United States constitute the supreme law of the land, “any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” This principle is known as the principle of 

federal supremacy

: Any state or local law that directly conflicts with the federal Constitution, laws, or treaties is void. Federal laws include rules promulgated by federal administrative agencies. 
Exhibit 5-1
 illustrates the application of the Supremacy Clause to state regulation.

Supremacy Clause

Provides that the U.S. Constitution and all laws and treaties of the United States constitute the supreme law of the land; found in Article VI.

federal supremacy

Principle declaring that any state or local law that directly conflicts with the federal Constitution, laws, or treaties is void.

Federal Preemption

The Supremacy Clause is also the basis for the doctrine of 

federal preemption

. This doctrine is used to strike down a state law that, although it does not directly conflict with a federal law, attempts to regulate an area in which federal legislation is so pervasive that it is evident that the U.S. Congress wanted only federal regulation in that general area. It is often said in these cases that federal law

Exhibit 5-1 Application of the Supremacy Clause to state Regulation

“preempts the field.” Cases of federal preemption are especially likely to arise in matters pertaining to interstate commerce, such as when a local regulation imposes a substantial burden on the flow of interstate commerce through a particular state. This situation is discussed in some detail in the section on the Commerce Clause.

federal preemption

Constitutional doctrine stating that in an area in which federal regulation is pervasive, state legislation cannot stand.

Separation of Powers

The U.S. Constitution, in its first three articles, establishes three independent branches of the federal government, each with its own predominant and independent power. These three are the legislative, executive, and judicial branches. Each branch was made independent of the others and was given a separate sphere of power to prevent any one source from obtaining too much power and consequently dominating the government.

The doctrine of 

separation of powers

 calls for Congress, the legislative branch, to enact legislation and appropriate funds. The president is commander-in-chief of the armed forces and is also charged with ensuring that the laws are faithfully executed. The judicial branch is charged with interpreting the laws in the course of applying them to particular disputes. No member of one branch owes his or her tenure in that position to a member of any other branch; no branch can encroach on the power of another. This system is often referred to as being a system of checks and balances; that is, the powers given to each branch operate to keep the other branches from being able to seize enough power to dominate the government. 

Exhibit 5-2

 provides a portrait of this system.

separation of powers

Constitutional doctrine whereby the legislative branch enacts laws and appropriates funds, the executive branch sees that the laws are faithfully executed, and the judicial branch interprets the laws.

Despite this delicate system of checks and balances, on numerous occasions a question has arisen as to whether one branch was attempting to encroach on the domain of another. This situation arose in an unusual context: a sexual harassment charge against President Bill Clinton.

 Case 5-1 William Jefferson Clinton v. Paula Corbin Jones

Supreme Court of the United States 520 U.S. 681 (1997)

Plaintiff Paula Jones filed a civil action against defendant (sitting) President Bill Clinton, alleging that he made “abhorrent” sexual advances. She sought $75,000 in actual damages and $100,000 in punitive damages.

Defendant Clinton sought to dismiss the claim on the ground of presidential immunity, or, alternatively, to delay the proceedings until his term of office had expired.

The district court denied the motion to dismiss and ordered discovery to proceed, but it also ordered that the trial be stayed until the end of Clinton’s term. The court of appeals affirmed the denial of the motion to dismiss and reversed the stay of the trial. President Clinton appealed to the U.S. Supreme Court.

Justice Stevens

Petitioner’s principal submission—that “in all but the most exceptional cases,” the Constitution affords the President temporary immunity from civil damages litigation arising out of events that occurred before he took office—cannot be sustained on the basis of precedent.

Only three sitting presidents have been defendants in civil litigation involving their actions prior to taking office. Complaints against Theodore Roosevelt and Harry Truman had been dismissed before they took office; the dismissals were affirmed after their respective inaugurations. Two companion cases arising out of an automobile accident were filed against John F. Kennedy in 1960 during the Presidential campaign. After taking office, he unsuccessfully argued that his status as Commander in Chief gave him a right to a stay. The motion for a stay was denied by the District Court, and the matter was settled out of court. Thus, none of those cases sheds any light on the constitutional issue before us.

The principal rationale for affording certain public servants immunity from suits for money damages arising out of their official acts is inapplicable to unofficial conduct. In cases involving prosecutors, legislators, and judges we have repeatedly explained that the immunity serves the public interest in enabling such officials to perform their designated functions effectively without fear that a particular decision may give rise to personal liability.

That rationale provided the principal basis for our holding that a former president of the United States was “entitled to absolute immunity from damages liability predicated on his official acts.” Our central concern was to avoid rendering the President “unduly cautious in the discharge of his official duties.”

This reasoning provides no support for an immunity for unofficial conduct. . . . “[T]he sphere of protected action must be related closely to the immunity’s justifying purposes.” But we have never suggested that the President, or any other official, has an immunity that extends beyond the scope of any action taken in an official capacity.

Moreover, when defining the scope of an immunity for acts clearly taken within an official capacity, we have applied a functional approach. “Frequently our decisions have held that an official’s absolute immunity should extend only to acts in performance of particular functions of his office.” Petitioner’s strongest argument supporting his immunity claim is based on the text and structure of the Constitution. The President argues for a postponement of the judicial proceedings that will determine whether he violated any law. His argument is grounded in the character of the office that was created by Article II of the Constitution and relies on separation-of-powers principles.

As a starting premise, petitioner contends that he occupies a unique office with powers and responsibilities so vast and important that the public interest demands that he devote his undivided time and attention to his public duties. He submits that—given the nature of the office—the doctrine of separation of powers places limits on the authority of the Federal Judiciary to interfere with the Executive Branch that would be transgressed by allowing this action to proceed.

We have no dispute with the initial premise of the argument. We have long recognized the “unique position in the constitutional scheme” that this office occupies.

It does not follow, however, that separation-of-powers principles would be violated by allowing this action to proceed. The doctrine of separation of powers is concerned with the allocation of official power among the three coequal branches of our Government. The Framers “built into the tripartite Federal Government . . . a self-executing safeguard against the encroachment or aggrandizement of one branch at the expense of the other.” Thus, for example, the Congress may not exercise the judicial power to revise final judgments, or the executive power to manage an airport.

. . . [I]n this case there is no suggestion that the Federal Judiciary is being asked to perform any function that might in some way be described as “executive.” Respondent is merely asking the courts to exercise their core Article III jurisdiction to decide cases and controversies. Whatever the outcome of this case, there is no possibility that the decision will curtail the scope of the official powers of the Executive Branch. The litigation of questions that relate entirely to the unofficial conduct of the individual who happens to be the President poses no perceptible risk of misallocation of either judicial power or executive power.

Rather than arguing that the decision of the case will produce either an aggrandizement of judicial power or a narrowing of executive power, petitioner contends that—as a by-product of an otherwise traditional exercise of judicial power—burdens will be placed on the President that will hamper the performance of his official duties. We have recognized that “[e]ven when a branch does not arrogate power to itself . . . the separation-of-powers doctrine requires that a branch not impair another in the performance of its constitutional duties.” As a factual matter, petitioner contends that this particular case—as well as the potential additional litigation that an affirmance of the Court of Appeals judgment might spawn—may impose an unacceptable burden on the President’s time and energy and thereby impair the effective performance of his office.

Petitioner’s predictive judgment finds little support in either history or the relatively narrow compass of the issues raised in this particular case. If the past is any indicator, it seems unlikely that a deluge of such litigation will ever engulf the presidency. As for the case at hand, if properly managed by the District Court, it appears to us highly unlikely to occupy any substantial amount of petitioner’s time.

Of greater significance, petitioner errs by presuming that interactions between the Judicial Branch and the Executive, even quite burdensome interactions, necessarily rise to the level of constitutionally forbidden impairment of the Executive’s ability to perform its constitutionally mandated functions. Separation of powers does not mean that the branches “ought to have no partial agency in, or no control over the acts of each other.” The fact that a federal court’s exercise of its traditional Article III jurisdiction may significantly burden the time and attention of the Chief Executive is not sufficient to establish a violation of the Constitution. Two long-settled propositions . . . support that conclusion.

First, we have long held that when the President takes official action, the Court has the authority to determine whether he has acted within the law. Perhaps the most dramatic example of such a case is our holding that President Truman exceeded his constitutional authority when he issued an order directing the Secretary of Commerce to take possession of and operate most of the Nation’s steel mills, in order to avert a national catastrophe.

1

1 

Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579 (1952).

Second, it is also settled that the President is subject to judicial process in appropriate circumstances. We . . . held that President Nixon was obligated to comply with a subpoena commanding him to produce certain tape recordings of his conversations with his aides. As we explained, “neither the doctrine of separation of powers, nor the need for confidentiality of high-level communications, without more, can sustain an absolute, unqualified presidential privilege of immunity from judicial process under all circumstances.”

Sitting Presidents have responded to court orders to provide testimony and other information with sufficient frequency that such interactions between the Judicial and Executive Branches can scarcely be thought a novelty. President Ford complied with an order to give a deposition in a criminal trial, and President Clinton has twice given videotaped testimony in criminal proceedings.

“[I]t is settled law that the separation-of-powers doctrine does not bar every exercise of jurisdiction over the President of the United States.” If the Judiciary may severely burden the Executive Branch by reviewing the legality of the President’s official conduct, and if it may direct appropriate process to the President himself, it must follow that the federal courts have power to determine the legality of his unofficial conduct. The burden on the President’s time and energy that is a mere by-product of such review surely cannot be considered as onerous as the direct burden imposed by judicial review and the occasional invalidation of his official actions. We therefore hold that the doctrine of separation of powers does not require federal courts to stay all private actions against the President until he leaves office.

*

* 

William Jefferson Clinton v. Paula Corbin Jones, Supreme Court of the United States 520 U.S. 681 (1997). https://www.law.cornell.edu/supct/html/95-1853.ZO.html.

Reversed in part. Affirmed in part in favor of Respondent, Jones.

Comment:

After this case was sent back for trial on the merits, the case was ultimately dismissed on April 1, 1998, on a motion for summary judgment on the ground that the plaintiff’s allegations, even if true, failed to state a claim of criminal sexual assault or sexual harassment. It is ironic that despite the high court’s claim that the case would be “highly unlikely to occupy any substantial amount of the petitioner’s time,” matters arising out of this case managed to occupy so much of the president’s time and become such a focus of a media frenzy that many people were calling for the media to reduce coverage of the issues so the president could do his job.

2

2 

Jones v. Clinton and Danny Ferguson, 12 F. Supp. 2d 931 (E.D. Ark. 1998).

Linking Law and Business Finance

The principle behind the separation of powers in government is also modeled in another realm of business. In your accounting class, you learned that internal controls are the policies and procedures used to create a greater assurance that the objectives of an organization will be met. One feature of internal controls is the separation of duties. This feature calls for the functions of authorization, recording, and custody to be exercised by different individuals. The likelihood of illegal acts by employees is reduced when the responsibility of completing a task is dependent on more than one person. If there are three people responsible for carrying out a particular task, then each person acts as a deterrent to the other two in regard to the possibility of embezzlement by one or more employees. Therefore, the chance of dishonest behavior is minimized when employees act as a check on the other employees involved in striving to meet organizational objectives

Exhibit 5-2 System of Checks and Balances

Cases like Jones v. Clinton are not common. The reason is not that each branch generally operates carefully within its own sphere of power. Rather, the explanation lies in the fact that because it is difficult to determine where one branch’s authority ends and another’s begins, each branch rarely challenges the power of its competing branches. The powers of each branch were established so that, although the branches are separate and independent, each branch still influences the actions of the others and there is still a substantial amount of interaction among them. You can review this system by examining 
Exhibit 5-2
.

The Impact of the Commerce Clause on Business

The Commerce Clause as a Source of Federal Authority

The primary powers of Congress are listed in Article I of the Constitution. It is important to remember that Congress has only limited legislative power. Congress possesses only that legislative power granted to it by the Constitution. Thus, all acts of Congress not specifically authorized by the Constitution or necessary to accomplish an authorized end are invalid.

The 

Commerce Clause

 provides the basis for most of the federal regulation of business today. This clause empowers the legislature to “regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” Early in our history, the Supreme Court was committed to a laissez-faire ideology, an ideology that was grounded in individualism. A narrow interpretation of the Commerce Clause means that only a limited amount of trade or exchange can be regulated by Congress.

Commerce Clause

Empowers Congress to regulate commerce with foreign nations, with Indian tribes, and among the states; found in Article I.

Under the Court’s initial narrow interpretation, the Commerce Clause was interpreted to apply only to the transportation of goods. Manufacturing of goods, even of goods that were going to be sold in another state, was not considered to have a direct effect on interstate commerce and, thus, was not subject to federal regulation. Businesses conducted solely in one state were similarly excluded from the authority of Congress. Under this restrictive interpretation, numerous federal regulations, such as laws attempting to regulate the use of child labor in manufacturing plants,3 were struck down.

3 

Hammer v. Dagenhart, 247 U.S. 251 (1918).

During the 1930s, the Supreme Court’s interpretation of the Commerce Clause was broadened to allow a greater scope for federal regulations. In NLRB v. Jones & Laughlin Steel Corp.,4 for example, the Court said that:

4 

301 U.S. 1 (1937).

Although activities may be intrastate in character when separately considered, if they have such a close and substantial relationship to interstate commerce that their control is essential or appropriate to protect that commerce from burdens or obstructions, Congress cannot be denied the power to exercise that control.
*

* 
NLRB v. Jones & Laughlin Steel Corp, 301 U.S. 1 (1937). https://supreme.justia.com/cases /federal/us/301/1/case.html.

Over the next several decades, the Supreme Court continued to expand Congress’s power under the Commerce Clause to regulate intrastate activities that affect interstate commerce. For example, in Perez v. United States,
5 loan-sharking, conducted on a local basis, was deemed to affect interstate commerce because of its connection to organized crime on a national scale, as the funds from loan-sharking help to pay for crime across the United States. According to the subsequent ruling in International House of Pancakes v. Theodore,

6

 a locally owned and operated franchise located near two interstates and three hotels qualifies the restaurant as related to interstate commerce and thus subject to the Americans with Disabilities Act. This expansive view continued with United States v. Lake,

7

 in which the court ruled that a locally operated coal mine that sells its coal locally and buys its supplies locally can still be subjected to federal regulations (Federal Mine Safety and Health Act) because the local activities of all coal mines help to influence the interstate market for coal.

5 

402 U.S. 146 (1971).

6 

844 F. Supp. 574 (S.D. Cal. 1993).

7 

985 F.2d 265 (6th Cir. 1995).

As these cases illustrate, during most of the twentieth century, almost any activity, even if purely intrastate, could be regulated by the federal government if it substantially affected interstate commerce. The effect may be direct or indirect, as the U.S. Supreme Court demonstrated in the classic 1942 case of Wickard v. Filburn,8 when it upheld federal regulation of the production of wheat on a farm in Ohio that produced only 239 bushels of wheat solely for consumption on the farm. The Court’s rationale was that even though one wheat farmer’s activities might not matter, the combination of a lot of small farmers’ activities could have a substantial impact on the national wheat market. This broad interpretation of the Commerce Clause has made possible much of the legislation covered in other sections of this book.

8 

317 U.S. 111 (1942).

Since the mid-1990s, however, the Supreme Court has appeared to be scrutinizing congressional attempts to regulate based on the Commerce Clause a little more closely. In the 1995 case of United States v. Lopez,9 the U.S. Supreme Court found that Congress had exceeded its authority under the Commerce Clause when it passed the Gun-Free School Zone Act, a law that banned the possession of guns within 1,000 feet of any school. The Court found the statute to be unconstitutional because Congress was attempting to regulate in an area that had “nothing to do with commerce, or any sort of economic enterprise.” At first, commentators did not see this case, decided in a 5–4 vote, as a major shift in the Supreme Court’s Commerce Clause interpretation. As the Court’s ruling in Brzonkala v. Morrison

10

 demonstrates, however, Lopez may indeed have indicated that the courts are going to look more closely at congressional attempts to regulate interstate commerce, an action that seems consistent with the high court’s increasing tendency to support greater power for states in conflicts between the state and federal governments. In Morrison, the Court ruled that the Violence Against Women Act, which Congress justified through its Commerce Clause power, was unconstitutional. Despite the rulings in Lopez and Morrison, however, the following case, Gonzales v. Raich, shows that the Court may not be categorically opposed to an expansion of congressional power through the Commerce Clause.

9 

514 U.S. 549 (1995).

10 

529 U.S. 598 (2000).

 Case 5-2 Gonzales v. Raich

Supreme Court of the United States 545 U.S. 1 (2005)

In 1996, California voters passed the Compassionate Use Act of 1996, which allowed seriously ill residents of the state to have access to marijuana for medical purposes. Angel Raich and Diane Monson are California residents who were using medical marijuana pursuant to their doctors’ recommendations for their serious medical conditions.

County deputy sheriffs and federal Drug Enforcement Administration (DEA) agents investigated Raich’s and Monson’s use of medical marijuana. Although Raich and Monson were found to be in compliance with the state law, the federal agents seized and destroyed their cannabis plants.

Raich and Monson brought suit against the attorney general of the United States and the head of the DEA, seeking injunctive and declaratory relief prohibiting the enforcement of the federal Controlled Substances Act (CSA) to the extent it prevents them from possessing, obtaining, or manufacturing cannabis for their personal medical use. The district court denied the respondents’ motion for a preliminary injunction. A divided panel of the court of appeals for the Ninth Circuit reversed and ordered the district court to enter a preliminary injunction. The United States appealed.

Justice Stevens

Respondents in this case do not dispute that passage of the CSA, as part of the Comprehensive Drug Abuse Prevention and Control Act, was well within Congress’ commerce power. Nor do they contend that any provision or section of the CSA amounts to an unconstitutional exercise of congressional authority. Rather, respondents’ challenge is actually quite limited; they argue that the CSA’s categorical prohibition of the manufacture and possession of marijuana as applied to the intrastate manufacture and possession of marijuana for medical purposes pursuant to California law exceeds Congress’ authority under the Commerce Clause.

[There are] three general categories of regulation in which Congress is authorized to engage under its commerce power. First, Congress can regulate the channels of interstate commerce. Second, Congress has authority to regulate and protect the instrumentalities of interstate commerce and persons or things in interstate commerce. Third, Congress has the power to regulate activities that substantially affect interstate commerce. Only the third category is implicated in the case at hand.

Our case law firmly establishes Congress’ power to regulate purely local activities that are part of an economic “class of activities” that have a substantial effect on interstate commerce. As we stated in Wickard v. Filburn, 317 U.S. 111 (1942), “even if appellee’s activity be local and though it may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce.” We have never required Congress to legislate with scientific exactitude. When Congress decides that the “total incidence” of a practice poses a threat to a national market, it may regulate the entire class.

Our decision in Wickard is of particular relevance. In Wickard, we upheld the application of regulations promulgated under the Agricultural Adjustment Act of 1938, which were designed to control the volume of wheat moving in interstate and foreign commerce in order to avoid surpluses and consequent abnormally low prices. The regulations established an allotment of 11.1 acres for Filburn’s 1941 wheat crop, but he sowed 23 acres, intending to use the excess by consuming it on his own farm. Filburn argued that even though we had sustained Congress’ power to regulate the production of goods for commerce, that power did not authorize “federal regulation [of] production not intended in any part for commerce but wholly for consumption on the farm.” Justice Jackson’s opinion for a unanimous Court rejected this submission. He wrote:

The effect of the statute before us is to restrict the amount which may be produced for market and the extent as well to which one may forestall resort to the market by producing to meet his own needs. That appellee’s own contribution to the demand for wheat may be trivial by itself is not enough to remove him from the scope of federal regulation where, as here, his contribution, taken together with that of many others similarly situated, is far from trivial.

Wickard thus establishes that Congress can regulate purely intrastate activity that is not itself “commercial,” in that it is not produced for sale, if it concludes that failure to regulate that class of activity would undercut the regulation of the interstate market in that commodity.

The similarities between this case and Wickard are striking. Like the farmer in Wickard, respondents are cultivating, for home consumption, a fungible commodity for which there is an established, albeit illegal, interstate market. Just as the Agricultural Adjustment Act was designed “to control the volume [of wheat] moving in interstate and foreign commerce in order to avoid surpluses . . .” and consequently control the market price, a primary purpose of the CSA is to control the supply and demand of controlled substances in both lawful and unlawful drug markets. In Wickard, we had no difficulty concluding that Congress had a rational basis for believing that, when viewed in the aggregate, leaving home-consumed wheat outside the regulatory scheme would have a substantial influence on price and market conditions. Here too, Congress had a rational basis for concluding that leaving home-consumed marijuana outside federal control would similarly affect price and market conditions.

More concretely, one concern prompting inclusion of wheat grown for home consumption in the 1938 Act was that rising market prices could draw such wheat into the interstate market, resulting in lower market prices. The parallel concern making it appropriate to include marijuana grown for home consumption in the CSA is the likelihood that the high demand in the interstate market will draw such marijuana into that market. While the diversion of homegrown wheat tended to frustrate the federal interest in stabilizing prices by regulating the volume of commercial transactions in the interstate market, the diversion of homegrown marijuana tends to frustrate the federal interest in eliminating commercial transactions in the interstate market in their entirety. In both cases, the regulation is squarely within Congress’ commerce power because production of the commodity meant for home consumption, be it wheat or marijuana, has a substantial effect on supply and demand in the national market for that commodity.

Nonetheless, respondents suggest that Wickard differs from this case in three respects: (1) the Agricultural Adjustment Act, unlike the CSA, exempted small farming operations; (2) Wickard involved a “quintessential economic activity”—a commercial farm—whereas respondents do not sell marijuana; and (3) the Wickard record made it clear that the aggregate production of wheat for use on farms had a significant impact on market prices. Those differences, though factually accurate, do not diminish the precedential force of this Court’s reasoning.

The fact that Wickard’s own impact on the market was “trivial by itself” was not a sufficient reason for removing him from the scope of federal regulation. That the Secretary of Agriculture elected to exempt even smaller farms from regulation does not speak to his power to regulate all those whose aggregated production was significant, nor did that fact play any role in the Court’s analysis. Moreover, even though Wickard was indeed a commercial farmer, the activity he was engaged in—the cultivation of wheat for home consumption—was not treated by the Court as part of his commercial farming operation.

In assessing the scope of Congress’ authority under the Commerce Clause, we stress that the task before us is a modest one. We need not determine whether respondents’ activities, taken in the aggregate, substantially affect interstate commerce in fact, but only whether a “rational basis” exists for so concluding. Given the enforcement difficulties that attend distinguishing between marijuana cultivated locally and marijuana grown elsewhere, and concerns about diversion into illicit channels, we have no difficulty concluding that Congress had a rational basis for believing that failure to regulate the intrastate manufacture and possession of marijuana would leave a gaping hole in the CSA. Thus, as in Wickard, when it enacted comprehensive legislation to regulate the interstate market in a fungible commodity, Congress was acting well within its authority to “make all Laws which shall be necessary and proper” to “regulate Commerce . . . among the several States.” That the regulation ensnares some purely intrastate activity is of no moment. As we have done many times before, we refuse to excise individual components of that larger scheme.
*

* 
Gonzales v. Raich, Supreme Court of the United States 545 U.S. 1 (2005). https://www.law .cornell.edu/supct/html/03-1454.ZO.html.

Reversed and remanded in favor of Attorney General Gonzalez.

Critical Thinking About The Law

Analogies are a standard method for creating a link between the case at hand and legal precedent.

Wickard v. Filburn is a long-established precedent. The court’s reasoning in 

Case 5-2

 is that the use of medical marijuana by the plaintiffs is sufficiently similar to the facts in Wickard to rely on this precedent.

1. What are the similarities between the case at hand and Wickard?

Clue: Try to make a large list of similarities. Later, after you have made a large list, think about the logic the analogy is trying to support. Eliminate those similarities that do not assist that logic because they are not relevant to an assessment of the quality of the analogy.

2. Are there significant differences that the Court ignores or downplays?

Clue: First think about the purpose this analogy is serving. Then think about the differences in the facts for this case and the facts for Wickard.

Although the current Supreme Court seems to prefer greater regulatory power for states, Gonzales v. Raich and another recent case stand as examples in which the Supreme Court upheld congressional acts on the basis of the Commerce Clause. In Pierce County v. Guillen,11 the Supreme Court held that the Hazard Elimination Program was a valid exercise of congressional authority under the Commerce Clause. This program provided funding to state and local governments to improve conditions of some of their most unsafe roads. To receive federal funding, however, state and local governments were required to regularly acquire information about potential road hazards. The state and local governments were reluctant to avail themselves of the program for fear that the information they acquired to receive funding would be used against them in lawsuits based on negligence. To alleviate these fears, Congress amended the program, allowing state and local governments to conduct engineering surveys without publicly disseminating the acquired information, even for discovery purposes in trials.

11 

537 U.S. 129 (2003).

Following his spouse’s death in an automobile accident, Ignacio Guillen sued Pierce County and sought information related to previous accidents at the intersection where his wife died. The county argued that such information was protected under the provisions of the Hazard Elimination Program. Reversing the appellate court’s holding that Congress exceeded its powers when amending the act, the Supreme Court concluded that the amended act was valid under the Commerce Clause. The Supreme Court reasoned that Congress had a significant interest in assisting local and state governments in improving safety in the channels of interstate commerce, the interstate highways. The Court validated Congress’s belief that state and local governments would be more likely to collect relevant and accurate information about potential road hazards if those governments would not be required to provide such information in discovery. Hence, the Supreme Court held that the amended act of Congress was valid on the basis of the Commerce Clause.

Despite the Court’s ruling in Pierce County v. Guillen, many Supreme Court commentators had thought that the Court’s turn toward a more restrictive interpretation of the Commerce Clause would lead the Court to rule that Congress cannot justify regulating states’ decisions regarding medical marijuana through the Commerce Clause. Instead, Justice Stevens distinguished Gonzales v. Raich from United States v. Lopez and Brzonkala v. Morrison, explaining that the federal regulations at issue in Lopez and Morrison were not related to economic activity, even understood broadly, and thus in both cases Congress had overstepped its bounds. Raich’s activities, however, did involve economic activity, even if it is the economic activity of an illegal, controlled substance. 

Exhibit 5-3

Exhibit 5-3 Modern Supreme Court Interpretations of the Commerce Clause

offers a summary of a number of Commerce Clause cases the Supreme Court has decided since Lopez. One inference a person could draw after examining the cases in 
Exhibit 5-3
 is that the Court is willing to limit congressional power but not necessarily in every instance where such restriction is possible.

The Commerce Clause as a Restriction on State Authority

Because the Commerce Clause grants authority to regulate commerce to the federal government, a conflict arises over the extent to which granting such authority to the federal government restricts the states’ authority to regulate commerce. The courts have attempted to resolve the conflict over the impact of the Commerce Clause on state regulation by distinguishing between regulations of commerce and regulations under the state police power. 

Police power

 means the residual powers retained by the state to enact legislation to safeguard the health and welfare of its citizenry. When the courts perceived state laws to be attempts to regulate interstate commerce, these laws would be struck down; however, when the courts found state laws to be based on the exercise of the state police power, the laws were upheld.

police power

The states’ retained authority to pass laws to protect the health, safety, and welfare of the community.

Since the mid-1930s, whenever states have enacted legislation that affects interstate commerce, the courts have applied a two-pronged test. First, they ask: Is the regulation rationally related to a legitimate state end? If it is, then they ask: Is the regulatory burden imposed on interstate commerce outweighed by the state interest in enforcing the legislation? If it is, the state’s regulation is upheld. 

Case 5-3

 is an example of a state statute that has been upheld by considering this two-pronged test.

 Case 5-3 Nat’l Ass’n of Optometrists & Opticians v. Brown

United States Court of Appeals for the Ninth District 682 F.3d 1144 (2012)

California had a regulation that prohibited licensed opticians from offering prescription eyewear in the same city or location where professional eye examinations are provided. The National Association of Optometrists and Opticians, LensCrafters, Inc., and EyeCare Centers of America, Inc. challenged this California statute, stating that it places a burden on interstate commerce that “excessively outweighs the local benefits of the law.” In this case, the district court granted the State’s motion for summary judgment. The plaintiff companies appealed.

Judge Hug

Plaintiffs challenge these laws to the extent they prohibit opticians and optical companies from offering prescription eyewear at the same location in which eye examinations are provided and from advertising that eyewear and eye examinations are available in the same location. The district court denied Plaintiffs’ motion for summary judgment and granted the State’s motion for summary judgment. The court effectively concluded that, based on the facts and the law, there were no genuine issues of material fact. Plaintiffs argued that the challenged laws impermissibly burdened interstate commerce because: (1) the challenged laws preclude an interstate company from offering one-stop shopping, which is the dominant form of eyewear retailing; and (2) interstate firms would incur a great financial loss as a result of the challenged laws. The district court concluded that it need not consider the evidence supporting these theories because both theories failed as a matter of law. In reaching this conclusion, the court reasoned that, because there was no cognizable burden on interstate commerce, it need not attempt to balance the “non-burden” against the putative local interests under the test derived from Plaintiffs timely appealed, and that appeal is now before us.

Modern dormant Commerce Clause jurisprudence primarily “is driven by concern about economic protectionism—that is, regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors.” “The principal objects of dormant Commerce Clause scrutiny are statutes that discriminate against interstate commerce.” “The central rationale for the rule against discrimination is to prohibit state or municipal laws whose object is local economic protectionism,” because these are the “laws that would excite those jealousies and retaliatory measures the Constitution was designed to prevent.”

Although dormant Commerce Clause jurisprudence protects against burdens on interstate commerce, it also respects federalism by protecting local autonomy. Thus, the Supreme Court has recognized that “under our constitutional scheme the States retain broad power to legislate protection for their citizens in matters of local concern such as public health” and has held that “not every exercise of local power is invalid merely because it affects in some way the flow of commerce between the States.”

In a long line of dormant Commerce Clause cases, the Supreme Court has sought to reconcile these competing interests of local autonomy and burdens on interstate commerce. In one of those cases, Pike v. Bruce Church, Inc., the Supreme Court set forth the following summary of dormant Commerce Clause law, stating:

Although the criteria for determining the validity of state statutes affecting interstate commerce have been variously stated, the general rule that emerges can be phrased as follows: Where the statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities.

Unfortunately, the Pike test has not turned out to be easy to apply. As the Supreme Court has acknowledged, there is “no clear line” in Supreme Court cases between cases involving discrimination and cases subject to Pike’s “clearly excessive” burden test.

Justice Scalia

has candidly observed that “once one gets beyond facial discrimination our negative-Commerce-Clause jurisprudence becomes (and long has been) a quag-mire.” According to the Supreme Court, only a small number of its cases invalidating laws under the dormant Commerce Clause have involved laws that were “genuinely nondiscriminatory, in the sense that they did not impose disparate treatment on similarly situated in-state and out-of-state interests.” The threshold issue in this appeal is whether Plaintiffs have produced sufficient evidence that the challenged laws, though non-discriminatory, impose a significant burden on interstate commerce. As discussed below, we hold that the Plaintiffs have not produced such evidence.

We conclude that Supreme Court precedent establishes that there is not a significant burden on interstate commerce merely because a non-discriminatory regulation precludes a preferred, more profitable method of operating in a retail market. Where such a regulation does not regulate activities that inherently require a uniform system of regulation and does not otherwise impair the free flow of materials and products across state borders, there is not a significant burden on interstate commerce.

We find no support in the law for Plaintiffs’ proposition that there is a significant burden on interstate commerce whenever, as a result of nondiscriminatory retailer regulations, there is an incidental shift in sales and profits to in-state entities from retailers that operate in-state but are owned by companies incorporated out-of-state. In light of this law, it is apparent that, in the case before us, there is no material issue of fact regarding whether the challenged laws place a significant burden on interstate commerce. Plaintiffs have not produced evidence that the challenged laws interfere with the flow of eyewear into California; any optician, optometrist, or ophthalmologist remains free to import eyewear originating anywhere into California and sell it there. In addition, we are not concerned here with activities that require a uniform system of regulation. Thus, Plaintiffs have failed to raise a material issue of fact concerning whether there is a significant burden on interstate commerce. Relying on Pike, Plaintiffs argue that, in determining whether a regulation violates the dormant Commerce Clause, courts are required to examine the actual benefits of nondiscriminatory regulations. However, [HN20] Pike discusses whether the burden on interstate commerce is “clearly excessive in relation to the putative local benefits.” See Pike, 397 U.S. at 142. It does not mention actual benefits as part of the test for determining when a regulation violates the dormant Commerce Clause.

Even if Pike’s “clearly excessive” burden test were concerned with weighing actual benefits rather than “putative benefits,” we need not examine the benefits of the challenged laws because, as discussed above, the challenged laws do not impose a significant burden on interstate commerce. If a regulation merely has an effect on interstate commerce, but does not impose a significant burden on interstate commerce, it follows that there cannot be a burden on interstate commerce that is “clearly excessive in relation to the putative local benefits” under Pike. Accordingly, where, as here, there is no discrimination and there is no significant burden on interstate commerce, we need not examine the actual or putative benefits of the challenged statutes. For the foregoing reasons, the district court’s order granting the State’s motion for summary judgment and denying Plaintiffs’ motion for summary judgment is affirmed.
*

* 
Nat’l Ass’n of Optometrists & Opticians v. Brown, United States Court of Appeals for the Ninth District 682 F.3d 1144 (2012). http://cdn.ca9.uscourts.gov/datastore/opinions/2012/06/13/10-16233 .

Affirmed.

Another example of a state statute that has been upheld is Chicago’s ban on the use of spray paint in the city. Paint retailers challenged the statute, arguing that it could have caused $55 million in lost sales over the next six years for spray paint retailers. The U.S. Court of Appeals eventually found the law to be constitutional. The state had a legitimate interest in trying to clean up graffiti, and it did not “discriminate against interstate commerce” nor violate the Commerce Clause. The appeals court reversed the previous ruling and allowed Chicago’s enactment of this ordinance to remain intact.

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 Despite the rulings in the United Haulers and Chicago cases, it is not necessarily easy to craft a state statute that affects interstate commerce that will be upheld. Frequently, the courts will find that state legislation that impinges upon interstate commerce in some way is an unconstitutional interference with interstate commerce.

12 

National Paint & Coatings Association et al. v. City of Chicago, 45 F.3d 1124 (7th Cir. 1995).

The most recent illustration of the United States Supreme Court’s addressing a state’s attempt to evade the power of the dormant commerce clause occurred in 2015 in the case of Comptroller of the Treasury of Maryland v. Wynne et ux.

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 Maryland’s personal income tax on state residents consisted of a “state” tax and a “county” tax. Maryland residents who earned money in other states received a “state” tax credit for the taxes they paid to the state where the income was earned, but not a “county” tax credit, resulting in double taxation of out-of-state income.

13
 135 S. Ct. 1787 (2015).

The law was challenged by the Wynnes, who claimed a tax credit for the taxes paid on their out-of-state earnings. The state comptroller denied their claim of a credit against their “county” tax and assessed them a deficiency. The appeals board of the comptroller’s office affirmed the assessment, as did the Maryland Tax Court, but the Court of Appeals for Howard County reversed on grounds that Maryland’s tax system violated the Constitution. The court applied the four-part test previously used by the Supreme Court in examing state tax systems, a test that asks whether a “tax is applied to an activity with a substantial nexus with the taxing State, is fairly apportioned, does not discriminate against interstate commerce, and is fairly related to the services provided by the State.” The court found that the law failed the fair apportionment test because if every state had a law like Maryland’s, interstate commerce would be taxed at a higher rate than intrastate commerce and create a risk for multiple taxation. It also failed the nondiscrimination part because by denying residents tax credit on interstate commerce it made them pay a higher tax rate on income earned on interstate commerce.

Noting that a state “may not tax a transaction or incident more heavily when it crosses state lines than when it occurs entirely within the State,” the Supreme Court affirmed the decision of the appellate court. In striking down Maryland’s law, the court reiterated the point that when a tax system has the potential to result in the discriminatory double taxation of income earned out of state, it creates a powerful incentive to engage in intrastate rather than interstate economic activity, and thereby places an undue burden on interstate commerce in violation of the dormant Commerce Clause.

Take a look at the cases described in 

Table 5-1

. They further illustrate how the courts attempt to determine when a state statute that affects interstate commerce will be upheld.

Applying The Law To The Facts . . .

The Alabama legislature proposed an amendment to the state constitution that would require certain public works projects, such as highway construction and public transportation, to not be funded unless the company receiving the funds “is an Alabama based company or corporation employing only Alabama residents.” What is the potential constitutional problem with this proposed amendment?

Table 5-1 DORMANT COMMERCE CLAUSES CASES

Black Star Farms v. Oliver, 600 F.3d 1225 (9th Cir. 2010)

The state of Arizona developed a scheme of regulating wine sales whereby suppliers sell wine to wholesalers, who then sell the wine to retailers, who sell wine to the public. Exceptions to this distribution scheme were made for (1) small wineries that produce no more than 20,000 gallons of wine annually, who are allowed to sell directly to the public, and (2) direct shipments to consumers who visit a winery and request, in person, that purchased winery be shipped to their address. A winery that produces 35,000 bottles a year challenged the state scheme as unconstitutionally interfering with interstate commerce, thus violating the dormant Commerce Clause.

Because the law applied equally to wineries in all states, including Arizona, it did not unfairly burden interstate commerce. The appellate court thus upheld the District Court’s grant of a motion for summary judgment to the state of Arizona and denying the winery’s motion for summary judgment.

Family Winemakers of California, et al. v. Jenkins, 592 F.3d 1 (2010)

Massachusetts passed a statute allowing only “small” wineries, defined as those producing 30,000 gallons or less of grape wine a year, to obtain a “small winery shipping license” that allows them to sell their wines in Massachusetts in three ways: by shipping directly to consumers, through wholesaler distribution, and through retail distribution. All of Massachusetts’s wineries, and some out-of-state wineries, are “small” wineries.

“Large” wineries, those producing more than 30,000 gallons per year, and which are all located out of state, must choose between relying upon wholesalers to distribute their wines in-state or applying for a “large winery shipping license” to sell directly to Massachusetts consumers. They cannot, by law, use both methods to sell their wines in Massachusetts, and they cannot sell wines directly to retailers under either option.

The District Court granted the plaintiffs request for injunctive relief. The Court of Appeals upheld the order, finding that the statute afforded significant competitive advantages to “small” wineries for no nondiscriminatory purpose.

Florida Transportation Services, Inc. v. Miami-Dade County, 703 F.3d 1230 (11th Cir. 2012)

If a licensed stevedore wanted to operate at the Port of Miami, a Florida statute required that person to also have a permit issued by the Director of the Port of Miami. In practice, the Port Director automatically renewed permits of existing holders and repeatedly denied permits to new applicants. Florida Transportation Services brought suit against the County, alleging that the County’s stevedore permit regulation, as applied by the Port Director, violated the dormant Commerce Clause by placing an undue burden on interstate commerce.

On appeal, the court affirmed the judgment of the district court in favor of the plaintiffs. Because the ordinance effectively shut out new entrants, even if they could have provided better service, better equipment, or lower prices than incumbent stevedores, the ordinance of the County did place an unconstitutional burden on interstate commerce.

Rousso v. State, 170 Wn.2d 70 (2010)

Rousso brought suit against a Washington statute that criminalized the knowing transmission and reception of gambling information by means such as the Internet. The plaintiff claimed that this regulation violated the dormant Commerce Clause. The plaintiff asserted that this state regulation, which effectively bans Internet gambling, excessively burdens interstate commerce.

The court ruled that the interests of Washington were best served by banning Internet gambling, and that the burden on interstate commerce was not clearly excessive in light of the state’s interests. The Washington statute did not violate the dormant Commerce Clause.

The Taxing and Spending Powers of the Federal Government

Article I, Section 8, of the Constitution gives the federal government the “Power to lay and collect Taxes, Duties, Imports and Excises.” The taxes laid by Congress, however, must be uniform across the states. In other words, the U.S. government cannot impose higher taxes on residents of one state than another.

Although the collection of taxes is essential for the generation of revenue needed to provide essential government services, taxes can be used to serve additional functions. For example, the government may wish to encourage the development of certain industries and discourage the development of others, so it may provide tax credits for firms entering the favored industries. As long as the “motive of Congress and the effect of its legislative action are to secure revenue for the benefit of the general government,”

14

 the tax will be upheld as constitutional. The fact that it also has what might be described as a regulatory impact will not affect the validity of the tax.

14 

J. W. Hampton Co. v. United States, 276 U.S. 394 (1928).

While we may all think we know what a tax is, sometimes a tax is not easy to recognize. For example, in 2012, many commentators were surprised when the United States Supreme Court determined that the penalty imposed by the Affordable Care Act (ACA) on those who did not purchase health insurance was a tax.

15

 Chief Justice Roberts explained that even though the imposition of the tax payment was designed to encourage certain behavior, taxes may legitimately be used by the federal government to encourage behavior. Nothing in the ACA made the failure to purchase insurance a violation of any law; it simply imposed the payment of a tax, collected by the IRS like all other taxes, on those who opted to not purchase health care insurance. The fact that the ACA referred to the tax as a penalty did not change the fundamental nature of the payment as a tax.

15 

National Federation of Independent Business v. Sebelius, 132 S. Ct. 2566 (2012).

This finding that the payment was a tax was an important decision because it preserved the constitutionality of the ACA, which most commentators thought would have been upheld not as a tax, but rather as an exercise of the federal government’s authority to regulate interstate commerce under the Commerce Clause. In fact, the high court rejected the argument that the ACA constituted an exercise of congressional authority under the Commerce Clause.

Article I, Section 8, also gives Congress its spending power by authorizing it to “pay the Debts and provide for the common Defence and general Welfare of the United States.” Just as Congress can indirectly use its power to tax to achieve certain social welfare objectives, it can do the same with its spending power. For example, the U.S. Supreme Court in 1987 upheld the right of Congress to condition the states’ receipt of federal highway funds on their passing state legislation making 21 the legal drinking age.

Taxation of the Internet?

The rapid rise in Internet commerce has many states wondering how they will collect their fair share of sales taxes. According to the U.S. Department of Commerce, Internet retail sales have continued to increase. U.S. retail e-commerce sales reached almost $142 billion in 2008, up from a revised $137 billion in 2007—an annual gain of 3.3 percent. From 2002 to 2008, retail e-sales increased at an average annual growth rate of 21.0 percent, compared with 4.0 percent for total retail sales. Although Internet sales constituted only 3.7 percent of overall retail sales in the United States during 2009, advocates of taxes on Internet sales insist that states are losing a considerable amount of revenue each year.

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16 

U.S. Census Bureau, E-Stats, May 27, 2010; access to these statistics is available at 

http://www .census.gov/econ/estats/2008/2008reportfinal

.

Currently, states are only allowed to require a business to submit sales tax payments if the business has a store or distribution center in the state. Otherwise, states are prohibited from collecting sales taxes, although residents are supposed to report the taxes on personal income tax returns. In addition to the e-commerce business, increased access to the Internet has some clamoring for a use tax on Internet access, in addition to a sales tax on Internet purchases.

In 1998, Congress approved the Internet Tax Freedom Act, which established a moratorium on Internet taxes until November 2001. The 1998 bill provided a grandfather clause that allowed several states to continue levying taxes on Internet access if those taxes were established before the Internet Tax Freedom Act was passed. In November 2001, Congress extended the moratorium for two more years to allow for more discussion and research on the effects of the ban on state governments.

In September 2003, the House of Representatives passed the Internet Tax Nondiscrimination Act (H.R. 49), a bill designed to replace the Internet Tax Freedom Act that would have expired in November 2003 with a permanent ban on taxes on Internet access and a permanent extension of the moratorium on multiple and discriminatory taxes on electronic commerce. On April 29, 2004, the Senate passed a different version of the Internet Tax Nondiscrimination Act (S. 150) that extended the moratorium on Internet taxes until November 2007. The Senate bill was a compromise between supporters of a permanent Internet tax ban and a group of senators who questioned how a permanent ban would affect state and local budgets.

The final version of the legislation, signed into law by President George W. Bush on December 3, 2004, had two different grandfather exemptions. States that taxed Internet service before October 1, 1998, were allowed to continue their taxes until November 1, 2007, whereas states that taxed Internet service before October 1, 2003, were allowed to continue their taxes until November 1, 2005. The law banned all other states from imposing Internet taxes from November 1, 2003 to November 1, 2007.

In 2007, Congress and the president extended the act until November 1, 2014, with the Internet Tax Nondiscrimination Act.

The Impact of the Amendments on Business

The first 10 amendments to the U.S. Constitution, known as the Bill of Rights, have a substantial impact on governmental regulation of the legal environment of business. These amendments prohibit the federal government from infringing on certain freedoms that are guaranteed to individuals living in our society. The 

Fourteenth Amendment

 extends most of the provisions in the Bill of Rights to the behavior of states, prohibiting their interference in the exercise of those rights. Many of the first 10 amendments have also been held to apply to corporations because corporations are treated, in most cases, as “artificial persons.” The activities protected by the Bill of Rights and the Fourteenth Amendment are not only those that occur in one’s private life, but also those that take place in a commercial setting. Several of these amendments have a significant impact on the regulatory environment of business, and they are discussed in the remainder of this chapter.

Fourteenth Amendment

Applies the entire Bill of Rights, excepting parts of the Fifth Amendment, to the states.

The First Amendment

The 

First Amendment

 guarantees freedom of speech and of the press. It also prohibits abridgment of the right to assemble peacefully and to petition for redress of grievances. Finally, it prohibits the government from aiding the establishment of a religion and from interfering with the free exercise of religion.

First Amendment

Guarantees freedom of speech, press, and religion and the right to peacefully assemble and to petition the government for redress of grievances.

Although we say these rights are guaranteed, they obviously cannot be absolute. Most people would agree that a person does not have the right to yell “Fire!” in a crowded theater. Nor does one’s right of free speech extend to making false statements about another that would be injurious to that person’s reputation. Because of the difficulty in determining the boundaries of individual rights, a large number of First Amendment cases have been decided by the courts.

Not surprisingly, student speech has given rise to a number of free speech cases. For example, in Tinker v. Des Moines Independent School District,

17

 the Court ruled that a school policy that prohibited students from wearing antiwar armbands was unconstitutional because the students’ message was political and was not disruptive to normal school activities. In Tinker, the Court famously stated that students do not “shed their constitutional rights . . . at the schoolhouse gate.”

18

 Subsequently, the Court ruled in Bethel School District No. 403 v. Fraser

19

 that speech that would otherwise be protected can be restricted within the school context. Fraser gave a speech at a school assembly that contained a graphic and extended sexual metaphor. The Court held that, although the speech would have been protected if given in the public forum, the fact that the speech was delivered at school allowed for administrators to censor the speech and restrict Fraser’s right to give the speech. Most recently, relying upon their rulings in Tinker and Fraser, the Court ruled in Morse v. Frederick

20

 that student speech advocating drug use during a school function can constitutionally be restricted. Morse v. Frederick is the much-discussed “Bong Hits 4 Jesus” case. The Court determined that the “Bong Hits 4 Jesus” banner clearly advocated drug use, and because the poster was displayed at a school function, the students responsible could be punished. Furthermore, the banner did not portray a political or religious message and thus was not protected speech.

17 

393 U.S. 503 (1969).

18 

Id. at 506.

19 

478 U.S. 675 (1986).

20 

127 S. Ct. 2618 (2007).

Attempts to regulate new technologies also raise First Amendment issues. For example, Congress passed the Communications Decency Act of 1996 (CDA) to protect minors from harmful material on the Internet; however, the U.S. Supreme Court found that provisions of the CDA that criminalized and prohibited the “knowing” transmission of “obscene or indecent” messages to any recipient under age 18 by means of telecommunications devices or through the use of interactive computer services were content-based blanket restrictions on freedom of speech. Because these provisions of the statute were too vague and overly broad, repressing speech that adults have the right to make, these provisions were found to be unconstitutional.

21

21 

Reno v. American Civil Liberties Union, 521 U.S. 844 (1997).

After the Supreme Court held that the CDA was unconstitutional, Congress responded by passing the Child Online Protection Act (COPA), which imposed a $50,000 fine and six months of imprisonment on individuals who posted material for commercial purposes that was harmful to minors. Websites that required individuals to submit a credit card number or some other form of age verification, however, were not in violation of the act. Nevertheless, the Supreme Court ruled that this act was also unconstitutional, as the provisions of the act likely violated the First Amendment.

22

 The Court reasoned that COPA was not narrowly tailored to meet a compelling governmental interest, and the regulations were not the least restrictive methods of regulating in this area, as filtering programs could more easily restrict minors’ access to obscene material than could criminal penalties.

22 

Ashcroft v. ACLU, 124 S. Ct. 2783 (2004).

Congress also passed the Child Internet Protection Act (CIPA), requiring libraries to implement filtering software to prevent minors from accessing pornography or other obscene and potentially harmful material. Libraries that did not comply with the provisions of CIPA would not receive federal funding for Internet access. In United States v. American Library Association,23 numerous libraries and website publishers brought suit, claiming that the CIPA was unconstitutional. Reversing the district court’s decision that the act was unconstitutional because it violated the First Amendment, the Supreme Court ruled in a split decision that the act was constitutional. Although six justices ruled that the act was not unconstitutional, there was greater disagreement about the Court’s opinion. The majority reasoned that the act did not violate an individual’s First Amendment rights, as libraries are afforded broad discretion about the kinds of materials they may include in their collections. In other words, a library is not a public forum in the traditional sense.

23 

539 U.S. 194 (2003).

An interesting issue that has arisen on many campuses is whether so-called hate speech—derogatory speech directed at members of another group, such as another race—is unprotected speech that can be banned. Thus far, hate-speech codes on campuses that were challenged as unconstitutional have been struck down by state courts or federal appeals courts, although the issue has not yet reached the Supreme Court. Hate speech is a serious issue that affects more than 1 million students every year, prompting 60 percent of universities to ban verbal abuse and verbal harassment and 28 percent of universities to ban advocacy of an offensive viewpoint.

24

 Because universities are often viewed as breeding grounds for ideas and citizen development, courts have not looked favorably on limits to speech on campuses.

24 

Timothy C. Shiell, Campus Hate Speech on Trial 2, 49 (Lawrence: University Press of Kansas, 1998).

The international community has been quicker than the United States to call hate speech unprotected, with a declaration from the United Nations and laws in several countries passed years ago.

25

 In October 22, 2009, however, the House and Senate passed the federal Matthew Shepard and James Byrd, Jr. Hate Crime Prevention Statute, and on October 28, 2009, President Obama signed the legislation.

26

 Under the law, a hate crime is defined as a crime of violence that is motivated by hatred of the group to which the victim belongs. Protected groups are those based on race, color, religion, national origin, gender, disability, sexual orientation, and gender identity.

25 

Id. at 32.

26 

Matthew Shepard and James Byrd, Jr. Hate Crimes Prevention Act. Accessed December 7, 2010 at http://www.hrc.org/laws_and_elections/5660.htm.

Corporate Commercial Speech

Numerous cases have arisen over the extent to which First Amendment guarantees are applicable to corporate commercial speech. The doctrine currently used to analyze commercial speech is discussed in the following case.

 Case 5-4 Central Hudson Gas & Electric Corp. v. Public Service Commission of New York

Supreme Court of the United States 447 U.S. 557 (1980)

Plaintiff Central Hudson Gas and Electric Corporation filed an action against Public Service Commission of New York to challenge the constitutionality of a regulation that completely banned promotional advertising by the utility but permitted “informational” ads—those designed to encourage shifting consumption from peak to nonpeak times. The regulation was upheld by the trial court. On appeal by the utility, the New York Court of Appeals sustained the regulation, concluding that governmental interests outweighed the limited constitutional value of the commercial speech at issue. The utility appealed.

Justice Powell

The Commission’s order [enforcing the regulation’s advertising ban] restricts only commercial speech, that is, expression related solely to the economic interests of the speaker and its audience. The First Amendment, as applied to the States through the Fourteenth Amendment, protects commercial speech from unwarranted governmental regulation. Commercial expression not only serves the economic interest of the speaker, but also assists consumers and furthers the societal interest in the fullest possible dissemination of information. In applying the First Amendment to this area, we have rejected the “highly paternalistic” view that government has complete power to suppress or regulate commercial speech. Even when advertising communicates only an incomplete version of the relevant facts, the First Amendment presumes that some accurate information is better than no information at all. Nevertheless, our decisions have recognized “the ‘common sense’ distinction between speech proposing a commercial transaction, which occurs in an area traditionally subject to government regulation, and other varieties of speech.”

The Constitution therefore accords a lesser protection to commercial speech than to other constitutionally guaranteed expression. The protection available for particular commercial expression turns on the nature both of the expression and of the governmental interests served by its regulation. Two features of commercial speech permit regulation of its content. First, commercial speakers have extensive knowledge of both the market and their products. Thus, they are well situated to evaluate the accuracy of their messages and the lawfulness of the underlying activity. In addition, commercial speech, the offspring of economic self-interest, is a hardy breed of expression that is not “particularly susceptible to being crushed by overbroad regulation.”

If the communication is neither misleading nor related to unlawful activity, the government’s power is more circumscribed. The State must assert a substantial interest to be achieved by restrictions on commercial speech. Moreover, the regulatory technique must be in proportion to that interest. The limitation on expression must be designed carefully to achieve the State’s goal. Compliance with this requirement may be measured by two criteria. First, the restriction must directly advance the state interest involved; the regulation may not be sustained if it provides only ineffective or remote support for the government’s purpose. Second, if the governmental interest could be served as well by a more limited restriction on commercial speech, the excessive restrictions cannot survive.

The second criterion recognizes that the First Amendment mandates that speech restrictions be “narrowly drawn.” The regulatory technique may extend only as far as the interest it serves. The State cannot regulate speech that poses no danger to the asserted state interest, nor can it completely suppress information when narrower restrictions on expression would serve its interest as well. In commercial speech cases, then, a four-part analysis has developed. At the outset, we must determine whether the expression is protected by the First Amendment. For commercial speech to come within that provision, it at least must concern lawful activity and not be misleading. Next, we ask whether the asserted governmental interest is substantial. If both inquiries yield positive answers, we must determine whether the regulation directly advances the governmental interest asserted and whether it is not more extensive than is necessary to serve that interest.

The Commission does not claim that the expression at issue is inaccurate or relates to unlawful activity. Yet the New York Court of Appeals questioned whether Central Hudson’s advertising is protected commercial speech. Because appellant holds a monopoly over the sale of electricity in its service area, the state court suggested that the Commission’s order restricts no commercial speech of any worth.

In the absence of factors that would distort the decision to advertise, we may assume that the willingness of a business to promote its products justifies belief that consumers are interested in the advertising. Since no such extraordinary conditions have been identified in this case, appellant’s monopoly position does not alter the First Amendment’s protection for its commercial speech.

The Commission offers two state interests as justifications for the ban on promotional advertising. The first concerns energy conservation. Any increase in demand for electricity—during peak or off-peak periods—means greater consumption of energy. The Commission argues that the State’s interest in conserving energy is sufficient to support suppression of advertising designed to increase consumption of electricity. In view of our country’s dependence on energy resources beyond our control, no one can doubt the importance of energy conservation. Plainly, therefore, the state interest asserted is substantial.

We come finally to the critical inquiry in this case: whether the Commission’s complete suppression of speech ordinarily protected by the First Amendment is no more extensive than necessary to further the State’s interest in energy conservation. The Commission’s order reaches all promotional advertising, regardless of the impact of the touted service on overall energy use. But the energy conservation rationale, as important as it is, cannot justify suppressing information about electric devices or services that would cause no net increase in total energy use. In addition, no showing has been made that a more limited restriction on the content of promotional advertising would not serve adequately the State’s interests.

Appellant insists that but for the ban, it would advertise products and services that use energy efficiently. These include the “heat pump,” which both parties acknowledge to be a major improvement in electric heating, and the use of electric heat as a “backup” to solar and other heat sources. Although the Commission has questioned the efficiency of electric heating before this Court, neither the Commission’s Policy Statement nor its order denying rehearing made findings on this issue. The Commission’s order prevents appellant from promoting electric services that would reduce energy use by diverting demand from less-efficient sources, or that would consume roughly the same amount of energy as do alternative sources. In neither situation would the utility’s advertising endanger conservation or mislead the public. To the extent that the Commission’s order suppresses speech that in no way impairs the State’s interest in energy conservation, the Commission’s order violates the First and Fourteenth Amendments and must be invalidated.

The Commission also has not demonstrated that its interest in conservation cannot be protected adequately by more limited regulation of appellant’s commercial expression. To further its policy of conservation, the Commission could attempt to restrict the format and content of Central Hudson’s advertising. It might, for example, require that the advertisements include information about the relative efficiency and expense of the offered service, both under current conditions and for the foreseeable future.
*

* 
Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, Supreme Court of the United States 447 U.S. 557 (1980).

Reversed in favor of Plaintiff, Central Hudson.

Critical Thinking About The Law

In Case 5-4, the Court had to balance government interests in energy efficiency, as well as fair and efficient pricing, with the conflicting constitutional value of Central Hudson’s right to free commercial speech. Having affirmed the validity of the government’s substantial interests in regulating the utility company, the Court sought to determine whether these interests could have been sufficiently served with more limited restrictions. Because this determination is of central importance to the Court’s reversal of the earlier court’s judgment, it will be the focus of the questions that follow.

1. What primary ethical norm is implicit in the legal requirement that regulations on commercial speech be of the most limited nature possible in carrying out the desired end of advancing the state’s substantial interest?

Clue: Review the four primary ethical norms. You want to focus not on the government regulation but on the rationale for limits on that regulation.

2. What information missing from the Court’s opinion must you, as a critical thinker, know before being entirely satisfied with the decision?

Clue: You want to focus on the issue about which the Public Service Commission and Central Hudson have conflicting viewpoints. What information would you want to know before accepting the soundness of the Court’s judgment in resolving this conflict?

The test set forth in Central Hudson was reaffirmed by the U.S. Supreme Court in two decisions handed down in the summer of 1995, when it applied the test in Rubin v. Coors Brewing Co.

27

 and Florida Bar v. Went for It and John T. Blakely.

28

 In the first case, Coors challenged a regulation of the Federal Alcohol Administration Act that prohibited beer producers from disclosing the beer’s alcohol content. The Court found that the government’s interest in suppressing “strength wars” among beer producers was “substantial” under the Central Hudson test, but held that the ban failed to meet the asserted government interest and be no more extensive than necessary to serve that interest.

27 

514 U.S. 476, 115 S. Ct. 1585 (1995).

28 

515 U.S. 618, 115 S. Ct. 2371 (1995).

A restriction that passed the Central Hudson test was the Florida ethics rule upheld in the Went for It case. The rule requires lawyers to wait 30 days before sending targeted direct-mail solicitation letters to victims of accidents or disasters. The high court found a substantial interest both in protecting the privacy and tranquility of victims and their loved ones against invasive and unsolicited contact by lawyers and in preventing the erosion of confidence in the profession that such repeated invasions have caused. The bar association had established, by unrebutted survey data, that Floridians considered immediate postaccident direct-mail solicitation to be an invasion of victims’ privacy that reflects poorly on lawyers. The Court also found that the ban’s scope was reasonably well tailored to meet the stated objectives. It was limited in duration, and there were other ways for injured Floridians to learn about the availability of legal services during the time period set by the ban. Thus, the ban was upheld as directly advancing the asserted legitimate interest in a manner no more extensive than necessary to serve that interest.

The U.S. Supreme Court once again reaffirmed and applied the four-part test of Central Hudson in the case of Lorillard Tobacco Co. et al. v. Thomas F. Reilly,29 a case challenging Massachusetts’s comprehensive set of regulations regarding cigarette, cigar, and smokeless tobacco advertising and distribution. The high court found that Massachusetts’s outdoor-advertising regulations that prohibited smokeless tobacco or cigar advertising within 1,000 feet of a school or playground violated the First Amendment because they failed the fourth part of the Central Hudson test. The Court reasoned as follows:

29 

533 U.S. 525 (2001).

Their broad sweep indicates that the Attorney General did not “carefully calculat[e] the costs and benefits associated with the burden on speech imposed.” The record indicates that the regulations prohibit advertising in a substantial portion of Massachusetts’ major metropolitan areas; in some areas, they would constitute nearly a complete ban on the communication of truthful information. This substantial geographical reach is compounded by other factors. “Outdoor” advertising includes not only advertising located outside an establishment, but also advertising inside a store if visible from outside. Moreover, the regulations restrict advertisements of any size, and the term advertisement also includes oral statements. The uniformly broad sweep of the geographical limitation and the range of communications restricted demonstrate a lack of tailoring. The governmental interest in preventing underage tobacco use is substantial, and even compelling, but it is no less true that the sale and use of tobacco products by adults is a legal activity. A speech regulation cannot unduly impinge on the speaker’s ability to propose a commercial transaction and the adult listener’s opportunity to obtain information about products. The Attorney General has failed to show that the regulations at issue are not more extensive than necessary.

30 

*

30 

Id.

* 
Lorillard Tobacco Co. et al., v. Thomas F. Reilly, 533 U.S. 525 (2001).

In that same case, the high court also struck down regulations prohibiting placement of indoor, point-of-sale advertising of smokeless tobacco and cigars lower than five feet from the floor of a retail establishment located within 1,000 feet of a school or playground because they failed both the third and fourth steps of the Central Hudson analysis. The Court found that the five-foot rule did not seem to advance the goals of preventing minors from using tobacco products and curbing demand for that activity by limiting youth exposure to advertising, because not all children are less than five feet tall, and those who are can look up and take in their surroundings. In the case, the Court overruled the circuit court’s finding that the regulations met the four-part test of Central Hudson, so it clearly is not always easy to know how the test is going to be applied.

31

31 

Id.

Corporate Political Speech

Not all corporate speech is considered commercial speech. Sometimes, for example, corporations might spend funds to support political candidates or referenda. At one time, states restricted the total amount of money corporations could spend on advertising because of a fear that, with their huge assets, corporations’ speech on behalf of a particular candidate or issue would drown out other voices. In the 1978 case of First National Bank of Boston v. Bellotti,

32

 however, the U.S. Supreme Court struck down a state law that prohibited certain corporations from making contributions or expenditures influencing voters on any issues that would not materially affect the corporate assets or business. Stating that “the concept that the government may restrict speech of some elements of our society in order to enhance the relative voice of others is wholly foreign to the First Amendment,” the high court ruled that corporate political speech should be protected to the same extent as the ordinary citizen’s political speech.

32 

435 U.S. 765 (1978).

The ability of the government to regulate corporate political speech was further restricted in 2010 by the landmark decision in Citizens United v. Federal Election Commission.

33

 By a 5–4 vote, the majority ruled that the corporate funding of independent political broadcasts in candidate elections cannot be limited under the First Amendment, thus finding political spending to be a form of protected speech. The decision struck down a provision of a 2002 campaign financing law that prohibited all corporations, both for-profit and not-for-profit, and unions from broadcasting “electioneering communications,” which were defined as “a broadcast, cable, or satellite communication that mentioned a candidate within 60 days of a general election or 30 days of a primary.” Arguably, this decision paved the way for the 2010 midterm election setting a record for midterm election spending, with an estimated $3.8 billion being spent.

34

33 

130 S. Ct. 876 (2010).

34 

US Mid-Term Elections Most Expensive: 3.98 Billion Dollars (Extra), M&C News. Accessed December 7, 2010 at http://www.monstersandcritics.com/news/usa/news/article_1596039.php /US-mid-term-elections-most-expensive-3-98-billion-dollars-Extra.

Our discussion of the First Amendment has focused on its effect on people’s ability to speak, but just as the First Amendment may also prevent the government from prohibiting speech, the Amendment may also prevent the government from compelling individuals to express certain views or from compelling certain individuals to pay subsidies for speech to which they object. This protection is illustrated by the 2001 case of United States Department of Agriculture v. United Foods, Inc.,35 in which the Court struck down a governmental assessment against mushroom growers that was used primarily for generic advertising to promote mushroom sales. The mushroom producer who challenged the assessment wanted to be able to promote his mushrooms as different from other producers’ mushrooms and, hence, did not want to be forced to help fund generic advertising that promoted the idea that all mushrooms were good. The Supreme Court agreed, stating that “First Amendment values are at serious risk if the government can compel a citizen or group of citizens to subsidize speech on the side that it favors.”

36

35 

533 U.S. 405, 121 S. Ct. 2334 (2001).

36 

Id. at 411.

Comparative Law Corner Corporate Speech in Canada

As the limits on political speech made by corporations in the United States have been expanded, Canada has been tightening its regulations. The recent Federal Accountability Act in Canada bans contributions by corporations, trade unions, and associations. This act signals a change in policy by eliminating the exception that allowed annual contributions of $1,000 to various political entities.

The law also tightens the limits on individual contributions, but not to the extent of a total ban. This reveals a difference in the treatment of corporations and people in Canada, despite the fact that corporations are considered juristic persons under Canadian law, just as they are in the United States. Although there are differences in the restrictions on individual and corporate speech in the United States, the recent trend in Supreme Court rulings has been to eliminate the differences between individual and corporate speech. Canada’s conservative government seems to be taking the opposite approach and restricting political speech for corporations.

The Fourth Amendment

The 

Fourth Amendment

 protects the right of individuals to be secure in their persons, their homes, and their personal property. It prohibits the government from conducting unreasonable searches of individuals and seizing their property to use as evidence against them. If such an unreasonable search and seizure occurs, the evidence obtained from it cannot be used in a trial.

Fourth Amendment

Protects the right of individuals to be secure in their persons, homes, and personal property by prohibiting the government from conducting unreasonable searches of individuals and seizing their property.

An unreasonable search and seizure is basically one conducted without the government official’s having first obtained a warrant from the court. The warrant must specify the items sought, and this requirement is strictly enforced, as the Supreme Court case from 2004 illustrates. In Groh v. Ramirez,

37

 the high court ruled that a search warrant was invalid on its face when it utterly failed to describe the persons or things to be seized, despite the fact that the requisite particularized description was contained in the search warrant application. The residential search that was conducted pursuant to this facially invalid warrant was therefore unreasonable, despite the fact that the officers conducting the search exercised restraint in limiting the scope of the search to materials listed in the application.

38

37 

450 U.S. 551, 124 S. Ct. 1284 (2004).

38 

Id.

Government officials are able to obtain such a warrant only when they can show probable cause to believe that the search will turn up the specified evidence of criminal activity. Supreme Court decisions, however, have narrowed the protection of the Fourth Amendment by providing for circumstances in which no search warrant is needed. For example, warrantless searches of automobiles, under certain circumstances, are allowed. Moreover, the Supreme Court even held in one case that an out-of-car arrest and subsequent warrantless search of the individual’s car did not violate the individual’s Fourth Amendment rights.

39

 The Supreme Court decided in another case that police highway checkpoints, where police officers questioned drivers on a particular highway for information about a recent incident, did not violate drivers’ Fourth Amendment rights, even though the police arrested one of the passing drivers for drunk driving.

40

39 

Thornton v. United States, 124 S. Ct. 2127 (2004).

40 

Illinois v. Lidster, 124 S. Ct. 885 (2004).

Improvements in technology have also caused problems in application of the Fourth Amendment, because it is now simpler to eavesdrop on people and to engage in other covert activities. One such case was decided by the U.S. Supreme Court in mid-2001.

41

 In that case, the police had information from informants that led them to believe that Danny Kyllo was growing marijuana in his home. Kyllo also had unusually high electricity bills (common when one is using heat lamps to grow the plants indoors). The police used a thermal imager, an instrument that can detect unusually high levels of heat emissions and translate them into an image, to provide them with the evidence necessary to get a warrant to physically search his house. The question the Court had to address was whether the use of the thermal imaging instrument on the property constituted a “search.” Or, if we think of the case the way judges do, by comparing it to past precedents, it is a question of whether thermal imaging is more like going through someone’s garbage or more like using a high-powered telescope to look through someone’s window. If the former situation is more analogous, then the behavior does not constitute a search; however, if the case is more analogous to the latter scenario, then using thermal imaging on a home is a search that requires a warrant. The Ninth Circuit, in a case of first impression (the first time an issue is ruled on by the court), found that using thermal imaging was not a search that was prohibited by the Fourth Amendment in the absence of a warrant.

41 

Kyllo v. United States, 533 U.S. 27, 121 S. Ct. 2038 (2001).

The U.S. Supreme Court, however, in a 5–4 decision, ruled that police use of a thermal imaging device to detect patterns of heat coming from a private home is a search that requires a warrant. The Court said further that the warrant requirement would apply not only to the relatively crude device at issue, but also to any “more sophisticated systems” in use or in development that let the police gain knowledge that in the past would have been impossible without a physical entry into the home. In explaining the decision, Justice Scalia wrote that in the home, “all details are intimate details, because the entire area is held safe from prying government eyes.” He went on to add that the Court’s precedents “draw a firm line at the entrance to one’s house.”

42

42 

Id.

Although many were happy with the Supreme Court’s decision in this case, some were quick to point out that this case is not necessarily the final word when it comes to the use of technology. They noted that Scalia seemed to rely heavily on the fact that the thermal imaging was used to see inside a home. It is, therefore, not clear whether thermal imaging of some other locale would be upheld.

As the U.S. Supreme Court continued to refine the definition of unreasonable searches in 2013, canine searches were the focus of two important cases. In the first case, Florida v. Harris,43 the court found that that the police had reasonable cause to search the defendant’s truck based on the reaction of a dog trained in drug detection during a routine traffic stop. When the policeman pulled Harris over for a routine traffic stop, he saw an open beer can in the truck and noted nervousness of the driver, so he asked permission to search the truck. When it was refused, he had the dog do a sniff test and the dog alerted at the driver’s side handle, leading the officer to conclude that he had reasonable cause for a search. The U.S. Supreme Court agreed, noting that, “All we have required is the kind of ‘fair probability’ on which ‘reasonable and prudent [people,]’ not legal technicians, act.” The court went on to say that as long as the State has produced proof from controlled settings that a dog performs reliably in detecting drugs, and the defendant has not contested that showing, then there is probable cause for the search.

43 

568 U.S. 133 S. Ct. 1050 (2013).

The second case, which follows, led to a contrary outcome. As you read the following case, think about the similarities and differences between the two to help you better understand how the court analyzes Fourth Amendment challenges.

 Case 5-5 Florida v. Jardines

United States Supreme Court 133 S. Ct. 1409 (2013)

Adetective received an unverified tip that marijuana was being grown in Jardines’ home. A month later, the Police Department and the Drug Enforcement Administration sent a joint surveillance team to Jardines’ home. The detective approached Jardines’ home accompanied by a trained canine handler who had just arrived at the scene with his drug-sniffing dog. The dog was trained to detect the scent of marijuana, cocaine, heroin, and several other drugs, indicating the presence of any of these substances through particular behavior recognizable by his handler.

As the dog approached Jardines’ front porch, he apparently sensed one of the odors he had been trained to detect, and began energetically exploring the area for the strongest point source of that odor. After sniffing the base of the front door, the dog sat, which is the trained behavior upon discovering the odor’s strongest point, which the handler described as a positive indicator of narcotics.

On the basis of what he had learned from the dog, the detective applied for and received a warrant to search the home. A later search revealed marijuana plants, and Jardine was charged with trafficking in cannabis.

At trial, Jardines moved to suppress the marijuana plants on the ground that the canine investigation was an unreasonable search. The trial court granted the motion, and the Florida Third District Court of Appeal reversed. On a petition for discretionary review, the Florida Supreme Court quashed the decision of the Third District Court of Appeal and approved the trial court’s decision to suppress, holding (as relevant here) that the use of the trained narcotics dog to investigate Jardines’ home was a Fourth Amendment search unsupported by probable cause, rendering invalid the warrant based upon information gathered in that search. The police department appealed.

Justice Scalia

We granted certiorari, limited to the question of whether the officers’ behavior was a search within the meaning of the Fourth Amendment.

The Fourth Amendment provides in relevant part that the “right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated.” The Amendment establishes a simple baseline, one that for much of our history formed the exclusive basis for its protections: When “the Government obtains information by physically intruding” on persons, houses, papers, or effects, “a ‘search’ within the original meaning of the Fourth Amendment” has “undoubtedly occurred” . . .

That principle renders this case a straightforward one. The officers were gathering information in an area belonging to Jardines and immediately surrounding his house—in the curtilage of the house, which we have held enjoys protection as part of the home itself. And they gathered that information by physically entering and occupying the area to engage in conduct not explicitly or implicitly permitted by the homeowner.

The Fourth Amendment “indicates with some precision the places and things encompassed by its protections”: persons, houses, papers, and effects . . . The Fourth Amendment does not, therefore, prevent all investigations conducted on private property; for example, an officer may gather information in what we have called “open fields”—even if those fields are privately owned—because such fields are not enumerated in the Amendment’s text . . .

But when it comes to the Fourth Amendment, the home is first among equals. At the Amendment’s “very core” stands “the right of a man to retreat into his own home and there be free from unreasonable governmental intrusion.” . . . This right would be of little practical value if the State’s agents could stand in a home’s porch or side garden and trawl for evidence with impunity; the right to retreat would be significantly diminished if the police could enter a man’s property to observe his repose from just outside the front window.

We therefore regard the area “immediately surrounding and associated with the home”—what our cases call the curtilage—as “part of the home itself for Fourth Amendment purposes” . . . This area around the home is “intimately linked to the home, both physically and psychologically,” and is where “privacy expectations are most heightened” . . .

Here there is no doubt that the officers entered [the cutilege]: The front porch is the classic exemplar of an area adjacent to the home and “to which the activity of home life extends.”

Since the officers’ investigation took place in a constitutionally protected area, we turn to the question of whether it was accomplished through an unlicensed physical intrusion . . . As it is undisputed that the detectives had all four of their feet and all four of their companion’s firmly planted on the constitutionally protected extension of Jardines’ home, the only question is whether he had given his leave (even implicitly) for them to do so. He had not.

“A license may be implied from the habits of the country,” . . . This implicit license typically permits the visitor to approach the home by the front path, knock promptly, wait briefly to be received, and then leave. Complying with the terms of that traditional invitation does not require fine-grained legal knowledge; it is generally managed without incident by the Nation’s Girl Scouts and trick-or-treaters. Thus, a police officer not armed with a warrant may approach a home and knock, precisely because that is “no more than any private citizen might do.”

But introducing a trained police dog to explore the area around the home in hopes of discovering incriminating evidence is something else. There is no customary invitation to do that. An invitation to engage in canine forensic investigation assuredly does not inhere in the very act of hanging a knocker. To find a visitor knocking on the door is routine (even if sometimes unwelcome); to spot that same visitor exploring the front path with a metal detector, or marching his bloodhound into the garden before saying hello and asking permission, would inspire most of us to—well, call the police. The scope of a license—express or implied—is limited not only to a particular area but also to a specific purpose. Consent at a traffic stop to an officer’s checking out an anonymous tip that there is a body in the trunk does not permit the officer to rummage through the trunk for narcotics. Here, the background social norms that invite a visitor to the front door do not invite him there to conduct a search . . . That the officers learned what they learned only by physically intruding on Jardines’ property to gather evidence is enough to establish that a search occurred . . .

The government’s use of trained police dogs to investigate the home and its immediate surroundings is a “search” within the meaning of the Fourth Amendment.

Judgment of the Florida Supreme Court affirmed, in favor of the Defendant.

During the second term of 2013, the high court handed down another important Fourth Amendment case, but that decision was not quite as clear as the holding in Jardines, and some lawyers thought it created as many questions as it answered. In Maryland v. King,44 the high court upheld a Maryland law allowing the warrantless collection of DNA samples from suspects accused of certain serious crimes. Writing the majority opinion in the 5–4 decision,

Justice Kennedy

said that the collection of DNA via a cheek swab was clearly a search, but the government’s substantial interest in using DNA evidence to identify arrestees and connect them to other crimes outweighs suspects’ privacy interests given the nonintrusive nature of the search. Kennedy observed that DNA testing was analogous to fingerprinting except more accurate. More than two dozen other states also have laws allowing the warrantless collection of DNA, some of which are broader than the Maryland statute, so some of those may still be challenged by defense lawyers.
*

44 

133 S. Ct. 1958 (2013).

* 
Florida v. Jardines, United States Supreme Court 133 S. Ct. 1409, 2013.

Another important Fourth Amendment case was handed down in 2014. In Riley v. California,
45 the high court ruled that the police generally may not, without a warrant, search digital information on a cell phone seized from an individual who has been arrested. While the officers may examine the phones’ physical aspects to ensure that the phones would not be used as weapons, digital data stored on the phones could not itself be used as a weapon to harm the arresting officers or to effectuate the defendants’ escape, so police have no justification for examining it. Further, the potential for destruction of evidence by remote wiping or data encryption was not shown to be prevalent and could be countered by disabling the phones. Moreover, the immense storage capacity of modern cell phones implicated privacy concerns with regard to the extent of information which could be accessed.

45 

134 S. Ct. 2473 (2014).

The Fourth Amendment protects corporations as well as individuals. This protection is generally applicable, as noted earlier, in criminal cases. Fourth Amendment issues also arise, however, when government regulations authorize, or even require, warrantless searches by administrative agencies.

Although administrative searches are presumed to require a search warrant, an exception has been carved out. If an industry has been subject to pervasive regulation, a warrantless search is considered reasonable under the Fourth Amendment. In such industries, warrantless searches are required to ensure that regulations are being upheld, and a warrantless search would not be unreasonable because the owner has a reduced expectation of privacy. When a warrantless search is challenged, and the state argues that the “pervasively regulated” exception should apply, before the court will find that the search was reasonable, the agency will have to demonstrate that:

1. there is “a substantial government interest that informs the regulatory scheme pursuant to which the inspection is made”

46

46 

New York v. Burger, 482 U.S. 691, 107 S. Ct. 2636 (1987).

2. the warrantless inspections must be “necessary to further the regulatory scheme”

47

47 

Id.

3. “the statute’s inspection program, in terms of the certainty and regularity of its application, must provide a constitutionally adequate substitute for a warrant”;

48

 that is, it advises the business owner that “the search is being made pursuant to the law and has a properly defined scope,” and limits the discretion of the inspecting officers.

49

48 

Id.

49 

Id.

As the Fourth Amendment is currently interpreted, a warrantless search authorized by the Gun Control Act or the Federal Mine Safety and Health Act would be legal. A warrantless search under the Occupational Safety and Health Act, however, would violate the Fourth Amendment because there is no history of pervasive legislation on working conditions before passage of that act.

Applying The Law To The Facts . . .

One of a store’s employees asked the mall security guards to stop a man that she thought had shoplifted some merchandise. They stopped him, handcuffed him, and searched his pockets while waiting for police to arrive. In his pocket they found a small pill bottle that contained bags of cocaine. They gave the bottles to the police when the police arrived. In his subsequent trial, the suspect argued that that the bottles of cocaine should not be used as evidence against him because the mall security guards searched him in violation of his Fourth Amendment rights. Do you think he has a good argument? Why or why not?

The Fifth Amendment

The 

Fifth Amendment

 provides many significant protections to individuals. For instance, it protects against self-incrimination and double jeopardy (that is, being tried twice for the same crime). Of more importance to businesspersons, however, is the 

Due Process Clause

 of the Fifth Amendment. This provision provides that one cannot be deprived of life, liberty, or property without due process of law.

Fifth Amendment

Protects individuals against self-incrimination and double jeopardy and guarantees them the right to trial by jury; protects both individuals and businesses through the Due Process Clause and the Takings Clause.

Due Process Clause

Provides that no one can be deprived of life, liberty, or property without “due process of law”; found in the Fifth Amendment.

There are two types of due process: procedural and substantive. Originally, due process was interpreted only procedurally. 

Procedural due process

 requires that a criminal whose life, liberty, or property would be taken by a

Technology and the Legal Environment

In 2010, in the case of United States v. Warshak,

50

 the Sixth Circuit Court of Appeals became the first appellate court to rule that the people who use email have a reasonable expectation of privacy in its contents, and that the government, therefore, must obtain a warrant under probable cause to have an ISP turn over the communications to it. The court analyzed the expectation of privacy regarding the various forms of communication, finding that email is the direct descendant of telephone and letters, because email has replaced those forms of communication. The same privacy considerations, therefore, apply to email and trigger the Fourth Amendment warrant requirement. Consequently, the court held that a subscriber enjoys a reasonable expectation of privacy in the contents of emails “that are stored with, or sent or received through, a commercial ISP.” However, despite ruling that the Stored Communications Act under which the warrantless search was unconstitutional, and finding that because they did not obtain a warrant, the government agents violated the Fourth Amendment when they obtained the contents of Warshak’s emails, the court in Warshak still allowed the government to use the email evidence it had acquired because the agents had relied in good faith on the Stored Communications Act, under which the ex parte order to the company to turn over the emails had been issued.

50 

United States v. Warshak, 631 F.3d 266 (6th Cir. 2010).

conviction be given a fair trial; that is, he or she is entitled to notice of the alleged criminal action and the opportunity to confront his or her accusers before an impartial tribunal. The application of procedural due process soon spread beyond criminal matters, especially after passage of the Fourteenth Amendment, discussed in the next section, which made the requirement of due process applicable to state governments.

procedural due process

Procedural steps to which individuals are entitled before losing their life, liberty, or property.

Today, the Due Process Clause has been applied to such diverse situations as the termination of welfare benefits,51 the discharge of a public employee from his or her job, and the suspension of a student from school. It should be noted, however, that the types of takings to which the Due Process Clause applies are not being continually increased. In fact, after a broad expansion of the takings to which this clause applied, the courts began restricting the application of this clause during the 1970s and have continued to do so since then. The courts restrict application of the clause by narrowing the interpretation of property and liberty. This narrowing is especially common in interpreting the Due Process Clause as it applies to state governments under the Fourteenth Amendment.

51 

Goldberg v. Kelly, 90 U.S. 101 (1970). In this case, the Supreme Court stated that the termination of a welfare recipient’s welfare benefits by a state agency without affording him or her opportunity for an evidentiary hearing before termination violates the recipient’s procedural due process rights.

What procedural safeguards does procedural due process require? The question is not easily answered. The procedures that the government must follow when there may be a taking of an individual’s life, liberty, or property vary according to the nature of the taking. In general, as the magnitude of the potential deprivation increases, the extent of the procedures required also increases.

The second type of due process is 

substantive due process

. The concept of substantive due process refers to the basic fairness of laws that may deprive an individual of his or her liberty or property. In other words, when a law is passed that will restrict individuals’ liberty or their use of their property, the government must have a proper purpose for the restriction, or it violates substantive due process.

substantive due process

Requirement that laws depriving individuals of liberty or property be fair.

During the late nineteenth and early twentieth centuries, this concept was referred to as economic substantive due process and was used to strike down a number of pieces of social legislation, including laws that established minimum wages and hours. Business managers successfully argued that such laws interfered with the liberty of employer and employee to enter into whatever type of employment contract they might choose. Analogous arguments were used to defeat many laws that would allegedly have helped the less fortunate at the expense of business interests. Economic substantive due process flourished only until the late 1930s. Today, many pieces of social legislation are in force that would have been held unconstitutional under the old concept of economic substantive due process.

The concept of substantive due process is not dead. Its use today, however, protects not economic interests, but personal rights, such as the still-evolving right to privacy. The right to privacy is a liberty now deemed to be protected under the Constitution. In order for a law restricting one’s right to privacy to conform to substantive due process, the restriction in question must bear a substantial relationship to a compelling governmental purpose.

And most recently, in the following case, we saw the Due Process Clause used to strike down the Defense of Marriage Act (DOMA).

 Case 5-6 United States v. Windsor

United States Supreme Court 133 S. Ct. 2675 (2013)

Edith Windsor and Thea Spyer were legally married in Canada, and moved to New York, which recognizes same sex marriage. When Spyer died in 2009, she left her entire estate to Windsor, who sought to claim the federal estate tax exemption for surviving spouses, but was barred from doing so by § 3 of the federal Defense of Marriage Act (DOMA), which amended the federal law that provides rules of construction for over 1,000 federal laws and all federal regulations—to define “marriage” and “spouse” as excluding same-sex partners. Windsor paid $363,053 in estate taxes and applied for a refund. When the Internal Revenue Service refused to give her the refund, Windsor filed suit, arguing that DOMA violates the principles of equal protection incorporated in the Fifth Amendment.

The District Court found that DOMA unconstitutionally violated principles of due process and equal protection enshrined in the Constitution. The Second Circuit Court of Appeals upheld the decision, saying the courts should apply strict scrutiny to classifications based on sexual orientation. (In an unrelated case, the United States Court of Appeals for the First Circuit also found § 3 of DOMA unconstitutional.) The United States then appealed the case to the U.S. Supreme Court.

Justice Kennedy

III

 . . . [S]ome States concluded that same-sex marriage ought to be given recognition and validity in the law for those same-sex couples who wish to define themselves by their commitment to each other. The limitation of lawful marriage to heterosexual couples, which for centuries had been deemed both necessary and fundamental, came to be seen in New York and certain other States as an unjust exclusion.

Against this background of lawful same-sex marriage in some States, the design, purpose, and effect of DOMA should be considered as the beginning point in deciding whether it is valid under the Constitution. By history and tradition the definition and regulation of marriage, . . . has been treated as being within the authority and realm of the separate States. Yet it is further established that Congress, in enacting discrete statutes, can make determinations that bear on marital rights and privileges. . . . Congress has the power both to ensure efficiency in the administration of its programs and to choose what larger goals and policies to pursue.

Though these discrete examples establish the constitutionality of limited federal laws that regulate the meaning of marriage in order to further federal policy, DOMA has a far greater reach; for it enacts a directive applicable to over 1,000 federal statutes and the whole realm of federal regulations. And its operation is directed to a class of persons that the laws of New York, and of 11 other States, have sought to protect. . . .

In order to assess the validity of that intervention it is necessary to discuss the extent of the state power and authority over marriage as a matter of history and tradition. . . . State laws defining and regulating marriage, of course, must respect the constitutional rights of persons, . . . but, subject to those guarantees, “regulation of domestic relations” is “an area that has long been regarded as a virtually exclusive province of the States.”

 . . . DOMA rejects the long-established precept that the incidents, benefits, and obligations of marriage are uniform for all married couples within each State, though they may vary, subject to constitutional guarantees, from one State to the next. . . . Here the State’s decision to give this class of persons the right to marry conferred upon them a dignity and status of immense import. When the State used its historic and essential authority to define the marital relation in this way, its role and its power in making the decision enhanced the recognition, dignity, and protection of the class in their own community. . . .

The Federal Government uses this state-defined class for the opposite purpose—to impose restrictions and disabilities. That result requires this Court now to address whether the resulting injury and indignity is a deprivation of an essential part of the liberty protected by the Fifth Amendment. What the State of New York treats as alike the federal law deems unlike by a law designed to injure the same class the State seeks to protect.

In acting first to recognize and then to allow same-sex marriages, New York was responding “to the initiative of those who [sought] a voice in shaping the destiny of their own times.” . . . These actions were without doubt a proper exercise of its sovereign authority within our federal system, all in the way that the Framers of the Constitution intended. The dynamics of state government in the federal system are to allow the formation of consensus respecting the way the members of a discrete community treat each other in their daily contact and constant interaction with each other.

The States’ interest in defining and regulating the marital relation, subject to constitutional guarantees, stems from the understanding that marriage is more than a routine classification for purposes of certain statutory benefits. Private, consensual sexual intimacy between two adult persons of the same sex may not be punished by the State, and it can form “but one element in a personal bond that is more enduring.” By its recognition of the validity of same-sex marriages performed in other jurisdictions and then by authorizing same-sex unions and same-sex marriages, New York sought to give further protection and dignity to that bond. For same-sex couples who wished to be married, the State acted to give their lawful conduct a lawful status. This status is a far-reaching legal acknowledgment of the intimate relationship between two people, a relationship deemed by the State worthy of dignity in the community equal with all other marriages. It reflects both the community’s considered perspective on the historical roots of the institution of marriage and its evolving understanding of the meaning of equality.

IV

DOMA seeks to injure the very class New York seeks to protect. By doing so it violates basic due process and equal protection principles applicable to the Federal Government. . . . The Constitution’s guarantee of equality “must at the very least mean that a bare congressional desire to harm a politically unpopular group cannot” justify disparate treatment of that group. . . . In determining whether a law is motived by an improper animus or purpose, “‘[d]iscriminations of an unusual character’” especially require careful consideration. . . . DOMA cannot survive under these principles. The responsibility of the States for the regulation of domestic relations is an important indicator of the substantial societal impact the State’s classifications have in the daily lives and customs of its people. DOMA’s unusual deviation from the usual tradition of recognizing and accepting state definitions of marriage here operates to deprive same-sex couples of the benefits and responsibilities that come with the federal recognition of their marriages. This is strong evidence of a law having the purpose and effect of disapproval of that class. The avowed purpose and practical effect of the law here in question are to impose a disadvantage, a separate status, and so a stigma upon all who enter into same-sex marriages made lawful by the unquestioned authority of the States.

The history of DOMA’s enactment and its own text demonstrate that interference with the equal dignity of same-sex marriages, a dignity conferred by the States in the exercise of their sovereign power, was more than an incidental effect of the federal statute. It was its essence. . . .

As the title and dynamics of the bill indicate, its purpose is to discourage enactment of state same-sex marriage laws and to restrict the freedom and choice of couples married under those laws if they are enacted. The congressional goal was “to put a thumb on the scales and influence a state’s decision as to how to shape its own marriage laws.” . . . The Act’s demonstrated purpose is to ensure that if any State decides to recognize same-sex marriages, those unions will be treated as second-class marriages for purposes of federal law. This raises a most serious question under the Constitution’s Fifth Amendment.

DOMA’s operation in practice confirms this purpose. When New York adopted a law to permit same-sex marriage, it sought to eliminate inequality; but DOMA frustrates that objective through a system-wide enactment with no identified connection to any particular area of federal law. DOMA writes inequality into the entire United States Code. The particular case at hand concerns the estate tax, but DOMA is more than a simple determination of what should or should not be allowed as an estate tax refund. Among the over 1,000 statutes and numerous federal regulations that DOMA controls are laws pertaining to Social Security, housing, taxes, criminal sanctions, copyright, and veterans’ benefits.

DOMA’s principal effect is to identify a subset of state-sanctioned marriages and make them unequal. The principal purpose is to impose inequality, not for other reasons like governmental efficiency. Responsibilities, as well as rights, enhance the dignity and integrity of the person. And DOMA contrives to deprive some couples married under the laws of their State, but not other couples, of both rights and responsibilities. By creating two contradictory marriage regimes within the same State, DOMA forces same-sex couples to live as married for the purpose of state law but unmarried for the purpose of federal law, thus diminishing the stability and predictability of basic personal relations the State has found it proper to acknowledge and protect. By this dynamic DOMA undermines both the public and private significance of state-sanctioned same-sex marriages; for it tells those couples, and all the world, that their otherwise valid marriages are unworthy of federal recognition. This places same-sex couples in an unstable position of being in a second-tier marriage. The differentiation demeans the couple, whose moral and sexual choices the Constitution protects, and whose relationship the State has sought to dignify. And it humiliates tens of thousands of children now being raised by same-sex couples. The law in question makes it even more difficult for the children to understand the integrity and closeness of their own family and its concord with other families in their community and in their daily lives.

Under DOMA, same-sex married couples have their lives burdened, by reason of government decree, in visible and public ways. By its great reach, DOMA touches many aspects of married and family life, from the mundane to the profound. It prevents same-sex married couples from obtaining government healthcare benefits they would otherwise receive. It deprives them of the Bankruptcy Code’s special protections for domestic-support obligations. It forces them to follow a complicated procedure to file their state and federal taxes jointly. It prohibits them from being buried together in veterans’ cemeteries.

The power the Constitution grants it also restrains. And though Congress has great authority to design laws to fit its own conception of sound national policy, it cannot deny the liberty protected by the Due Process Clause of the Fifth Amendment.

What has been explained to this point should more than suffice to establish that the principal purpose and the necessary effect of this law are to demean those persons who are in a lawful same-sex marriage. This requires the Court to hold, as it now does, that DOMA is unconstitutional as a deprivation of the liberty of the person protected by the Fifth Amendment of the Constitution.

The liberty protected by the Fifth Amendment’s Due Process Clause contains within it the prohibition against denying to any person the equal protection of the laws. . . . While the Fifth Amendment itself withdraws from Government the power to degrade or demean in the way this law does, the equal protection guarantee of the Fourteenth Amendment makes that Fifth Amendment right all the more specific and all the better understood and preserved.

The class to which DOMA directs its restrictions and restraints are those persons who are joined in same-sex marriages made lawful by the State. DOMA singles out a class of persons deemed by a State entitled to recognition and protection to enhance their own liberty. It imposes a disability on the class by refusing to acknowledge a status the State finds to be dignified and proper. DOMA instructs all federal officials, and indeed all persons with whom same-sex couples interact, including their own children, that their marriage is less worthy than the marriages of others. The federal statute is invalid, for no legitimate purpose overcomes the purpose and effect to disparage and to injure those whom the State, by its marriage laws, sought to protect in personhood and dignity. By seeking to displace this protection and treating those persons as living in marriages less respected than others, the federal statute is in violation of the Fifth Amendment.
*

* 
United States v. Windsor, Supreme Court of the United States, 133.S. Ct. 2675.

Affirmed, in favor of Respondents.

The complete ramifications of this holding were not immediately clear at the time of the decision. Twelve states and the District of Columbia recognized same-sex marriage at that time, and employers at that time were scrambling to find out what their obligations would be under the new law. Over 1,000 federal regulations are affected by the ruling, many of those directly or indirectly affecting employers. Employers in states recognizing same-sex marriage were being forced to look carefully for policy changes they would need to make in three areas: health benefits, retirement plans, and family and medical leave policies. For example, the Family Medical Leave Act (discussed in greater detail in 

Chapter 19

), now covers same-sex marriage partners, whereas before it did not. There are also benefits from this ruling for many employers.

In 2015, however, the impact of this decision became even more extensive, as the recognition of same-sex marriages spread from those 12 states and the District of Columbia to every state in the Union, as the result of the ruling by the U.S. Supreme Court in the case of Obergefell et al. v. Hodges et al.

52

 In that case, the high court held that the Fourteenth Amendment requires a State to license a marriage between two people of the same sex and to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-State.

53

52 

135 S. Ct. 2584 (2015).

53 

Ibid.

The Fifth Amendment further provides that if the government takes private property for public use, it must pay the owner just compensation. This provision is referred to as the 

Takings Clause

. Unlike the protection against self-incrimination, which does not apply to corporations, both the Due Process Clause and the provision for just compensation are applicable to corporations. This provision for just compensation has been the basis of considerable litigation. One significant issue that has arisen is the question of what constitutes a “public use” for which the government can take property. This issue is discussed in greater detail in 

Chapter 13

.

Takings Clause

Provides that if the government takes private property for public use, it must pay the owner just compensation; found in the Fifth Amendment.

A second issue under this takings provision is the question of when a government regulation can become so onerous as to constitute a taking for which just compensation is required. These takings, which do not involve a physical taking of the property, are called regulatory takings. Environmental regulations, because they often have an impact on the way landowners may use their property, have been increasingly challenged as unconstitutional regulatory takings.

Perhaps one of the most important takings cases was Lucas v. South Carolina Coastal Commission,54 which was decided in 1992. The case arose out of a dispute between a beachfront property owner and the state of South Carolina, after the state passed a regulation prohibiting permanent construction on any eroding beach. Lucas had bought two beachfront lots for $975,000 a few years before the law was passed, and planned to build a couple of condominiums on the land. He challenged the law as constituting an unlawful taking because it prohibited him from building the condominiums or really doing anything with the property. The state court agreed with Lucas that the regulation denied him the economic value of his land and thus constituted an unconstitutional taking without compensation. It ordered the state to pay him $1.2 million in compensation. The South Carolina Supreme Court, however, citing U.S. Supreme Court precedents, overturned the lower court’s decision.

54 

505 U.S. 1003 (1992).

Lucas appealed the decision to the U.S. Supreme Court, which reversed the state supreme court ruling in a 6–3 decision. The Court held that a state regulation that deprives a private property owner of all economically beneficial uses of property, except those that would not have been permitted under background principles of state property and nuisance law, constitutes a taking of private property for which the Fifth Amendment requires compensation. The highest court in the land said that the state court had erred in applying the principle that the Takings Clause does not require compensation when the regulation at issue is designed to prevent “harmful or noxious uses” of property.

One of the factors that many commentators believed was critical to the Court’s ruling in Lucas was the fact that the law that led to his inability to develop his land had been enacted after Lucas had acquired his property. In the 2001 case of Palazzolo v. Rhode Island,

55

 however, the Supreme Court held by a 5–4 vote that someone who bought property after restrictions on development were in place could still challenge the restrictions as an unconstitutional “taking” of private property.

55 

533 U.S. 606 (2001).

Many advocates of private property rights now believe that the Takings Clause has taken on new importance because of cases such as Lucas and Whitney Benefits, Inc. v. United States,

56

 wherein a federal court found that the federal Surface Mining and Reclamation Act constituted a taking with respect to one mining company whose land became completely useless as a result of the act. Whether the “Property Firsters,” as they call themselves, will be successful in the future remains to be seen, but they have clearly brought back attention to an argument against regulation that had been fairly dormant for the past 50 years. Moreover, they are using their arguments primarily to challenge a broad range of environmental laws involving matters from forcing cleanups of hazardous waste sites to restricting grazing and rationing water, as well as land use planning statutes.

56 

926 F.2d 1169 (Fed. Cir. 1991).

For example, in Dolan v. Tigard,

57

 the owner of a store in the city’s business district sued when her receipt of a permit to double the size of her store and pave its gravel parking lot was made contingent on the condition that she dedicate a sixth of her land to the city. She was to make part of the land, which was in a floodplain, a public recreational greenway and part of a bike trail that could help reduce the increased congestion in the area that might result from the expansion of her store. The U.S. Supreme Court found that there was no evidence of a reasonable relationship between the floodplain easement required of Dolan and the impact of the new building. They held that the city had the right to take the easement for the greenway, but it had to provide just compensation for the regulatory taking.

57 

512 U.S. 374, 114 S. Ct. 2309 (1994).

Using the Fifth Amendment to bring individual challenges to land use regulations and zoning laws is a very time-consuming process, so many property rights organizations have instead focused on trying to pass state laws that would make it easier for property owners to get compensation when their property values fall because of new regulations. In 2004, such groups achieved their greatest success with the passage of Ballot Measure 37

58

 in the state of Oregon. The measure, which was initially struck down by the state court, but was subsequently upheld by the Oregon State Supreme Court, provides that any property owners who can prove that environmental or zoning laws have hurt their investments can force the government to compensate them for their losses or get an exemption from the rules. Other states that have laws providing compensation for aggrieved property owners are Florida, Texas, Louisiana, and Mississippi, but these laws provide compensation only after a particular loss threshold has been reached, usually a 25 percent reduction in the property’s value. Those laws also allow compensation only for losses caused by new land use laws. Whether the passage of the legislation in Oregon indicates the beginning of a new wave of legislation remains to be seen.

58 

Subsequently codified as Oregon Revised Statutes (ORS) 195.305.

Another factor that many who studied the Lucas case saw as important was the fact that the regulation really deprived its owner of any possible economically viable use for the land. Challenges based on the idea of a regulatory taking have not been quite as successful when there is just arguably a diminishment of the value of the property, as property rights advocates have found when attempting to use the law to challenge smoking bans as constituting a regulatory taking in violation of the Fifth Amendment. For example, operators of bars and restaurants in Toledo, Ohio were unsuccessful in challenging a citywide smoking ban as a violation of the Fifth Amendment, as applied to the states by the Fourteenth Amendment. They unsuccessfully argued that the statute denied them any “economically viable” use of their land because they would have to either spend huge amounts of money to establish smoking lounges in their establishments or lose all of their customers who smoked.

A final problem that often causes confusion among businesspersons is the question of the extent of Fifth Amendment protections for corporations. The Fifth Amendment protection against self-incrimination has not been held to apply to corporations. Some decisions, however, have raised questions about this long-standing interpretation. In United States v. Doe,

59

 the U.S. Supreme Court determined that even though the contents of documents may not be protected under the Fifth Amendment, a sole proprietor should have the right to show that the act of producing the documents would entail testimonial self-incrimination as to admissions that the records existed. Therefore, the sole proprietor could not be compelled to produce the sole proprietorship’s records.

59 

465 U.S. 605 (1984).

In the subsequent case of Braswell v. United States,60 however, the Court clearly distinguished between the role of a custodian of corporate records and a sole proprietor. In Braswell, the defendant operated his business as a corporation, with himself as the sole shareholder. When a grand jury issued a subpoena requiring him to produce corporate books and records, Braswell argued that to do so would violate his Fifth Amendment privilege against self-incrimination. The U.S. Supreme Court denied Braswell’s claim and said that, clearly, subpoenaed business records are not privileged, and, because Braswell was a custodian for the records, his act of producing the records would be in a representative capacity, not a personal one, so the records must be produced. The Court stated that, had the business been a sole proprietorship, Braswell would have had the opportunity to show that the act of production would have been self-incriminating. Because his business was a corporation, he was acting as a representative of a corporation, and regardless of how small the corporation, he could not claim a privilege. In 2003, the Court of Appeals for the Eighth Circuit applied the Supreme Court’s decision in the Braswell case, as the appellate court ordered a woman to produce corporate documents even though the corporation’s charter had been revoked.

61

 The appellate court reasoned that the subpoena of documents from an inactive corporation does not constitute a violation of the corporate custodian’s Fifth Amendment rights.

60 

487 U.S. 99 (1988).

61 

In re Grand Jury Subpoena, 75 Fed. Appx. 562 (2003).

The Fourteenth Amendment

The Fourteenth Amendment is important because it applies the Due Process Clause to the state governments. It has been interpreted to apply almost the entire Bill of Rights to the states, with the exceptions of the Fifth Amendment right to indictment by a grand jury for certain types of crimes and the right to trial by jury.

The Fourteenth Amendment is also important because it contains the Equal Protection Clause, which prevents the states from denying “the equal protection of the laws” to any citizen. This clause, discussed in more detail in 

Chapter 21

, has been a useful tool for people attempting to reduce discrimination in this country.

The most recent significant use of the Fourteenth Amendment to fight discrimination was the previously mentioned case of Obergefell et al. v. Hodges et al.

62

 In that case, the court demonstrated that the right to marry is a fundamental right inherent in the liberty of the person, and under the Due Process and Equal Protection Clauses of the Fourteenth Amendment couples of the same sex may not be deprived of that right and that liberty.

63

62 

Supra, note 53.

63 

Ibid.

Standard of Review

The Equal Protection Clause prohibits “invidious” discrimination, that is, discrimination not based on a sufficient justification. To determine whether a specific classification system being used by the government has sufficient justification, the Supreme Court has established standards of review based upon the nature of the classification. The standards are: strict scrutiny, intermediate scrutiny, and the rational basis test.

Strict scrutiny is used when a government activity classifies people based on their belonging to a suspect class (race, color, national origin). For the court to uphold such a classification, the government must have a compelling reason for the classification and the regulation must be narrowly drawn so that it goes no further than necessary to meet the compelling government interest. This is the same level of scrutiny applied when the government is attempting to deprive a person of their fundamental rights, as in the Obergefell case.

Intermediate scrutiny is applied when the classification is based on a protected class other than race, color, or national origin, such as sex, age, or religion. In such a case the government must have an important reason for treating those in the classification differently, and the regulation must be “reasonably related” to furthering that reason.

If the classification does not involve a suspect classification, then the court will simply apply a rational basis test, meaning that there has to be some legitimate reason why the government would treat members of that class differently. The regulation at issue must simply be reasonably related to furthering that reasonable government interest. For example, in 2008, the Iowa Supreme Court ruled that a law that taxed apartment buildings at a higher commercial rate rather than at the lower residential rate charged to owners of owner-occupied condominiums did not violate the Equal Protection Clause.

64

64 

State v. DeAngelo, 2009 WL 291169 (N.J. 2009).

SUMMARY

The framework of our nation is embodied in the U.S. Constitution, which established a system of government based on the concept of federalism. Under this system, the power to regulate local matters is given to the states; the federal government is granted limited powers to regulate activities that substantially affect interstate commerce. All powers not specifically given to the federal government are reserved to the states.

The Commerce Clause is the primary source of the federal government’s authority to regulate business. The same clause restricts states from passing regulations that would interfere with interstate commerce. The state and federal governments are limited in their regulations by the amendments to the Constitution, especially the Bill of Rights. The First Amendment, for example, protects our individual right to free expression; commercial speech is also entitled to a significant amount of protection in this area.

Other important amendments for the businessperson are the Fourth Amendment, which protects one’s right to be free from unwarranted searches and seizures, and the Fifth Amendment, which establishes one’s right to due process. A final amendment that has a significant impact on the legal environment is the Fourteenth Amendment, which applies most of the Bill of Rights to the states and also contains the Equal Protection Clause.

Assignment On The Internet

This chapter introduces you to the many constitutional principles that govern business activities. One such principle is free speech and the extent to which it applies to commercial speech. For example, should advertisements for pharmaceuticals be subject to Federal Drug Administration regulations and limitations?

Read the summary from a Supreme Court decision about the advertising of pharmaceuticals from the pharmaceutical industry, found at 

www.oyez.org

 (type in “advertisement of pharmaceutical” in the search bar and click on the first link, titled “Bolger vs. Youngs Drug Products Corp.). Can you determine from the summary whether the Central Hudson test was applied to the case? If so, how?