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CHAPTER 1: Sources of the Law and the Court System

CHAPTER 2: Torts

CHAPTER 3: Criminal Law

Unit I The Legal Environment

of Business

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T he study of law as it affects business is essential for every businessperson. We live in the most litigious society on earth. As a result, business owners, managers, and employees need to have an awareness of legal issues that affect business as well as a

solid grasp of basic legal principles so that they can spot potential problem areas and seek expert legal advice before problems grow into costly and time-consuming impediments. The question most persons involved with business need to ask is not whether they are ever likely to be involved in litigation, but rather when they are likely to encounter it. Conse- quently, awareness of basic legal principles is probably the best (and cheapest) risk man- agement tool available to any businessperson. Indeed, an employee who fully understands basic legal principles and can recognize potential legal problems before they arise can be a company’s greatest asset.

In Unit I we begin our journey into practical legal training by examining the sources of American law and our court system, as well as the basic principles of tort and criminal law.

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Chapter Overview

Sources of the Law and the Court System

Learning Objectives

After studying this chapter, you will be able to:

1. Distinguish between common law and civil law.

2. Describe the structure and function of both state and federal courts.

3. Define jurisdiction and its implication.

1.1 Sources of the Law • The Civil Law Tradition • The Common Law Tradition • Constitutional Law • Statutory Law • Administrative Law

1.2 The Courts • State Court Systems • The Federal Court System • Jurisdiction: The Power to Decide a Case

1.3 Chapter Summary • Focus on Ethics • Case Study: Snyder v. Phelps • Case Study: Citizens United v. Federal

Election Committee • Critical Thinking Questions • Hypothetical Case Problems • Key Terms

iStockphoto/Thinkstock

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CHAPTER 1Section 1.1 Sources of the Law

Law, distilled to its essence, can be described as rules of conduct decreed and enforced by government for the benefit of its citizens. Laws are by no means the only type of rules that regulate conduct. A restaurant may require patrons to wear ties and jackets when dining in its premises, a college professor may demand that students refrain from talking in class, and a religious institution may command that its members abstain from using certain types of contraceptives. In all three cases, a penalty may be imposed for failure to observe the rules: the restaurant may deny entrance to anyone not wear- ing the proper attire, the professor may expel a student who talks during class, and the church may ostracize any member who challenges the prohibition on contraceptive tech- nology. Nevertheless, these rules do not rise to the level of laws simply because they are not enacted and enforced by the state.

Note also that while law in a sense is derived from a society’s sense of morality, or what people think is right and wrong, law is distinctly different from either morals or ethics. Nonetheless, it is worthwhile to consider the ethical implications of the law.

In this chapter, we will trace the law to its various sources, as well as explore an overview of the federal and state court systems in order to gain a better understanding of our sys- tem of justice.

1.1 Sources of the Law

It is a common misconception to think of the law as a set of rules written down in old, dusty books that show little change over time. Such a vision of the law makes it seem stagnant and inflexible. The reality, however, is quite different. Law in the United States is vibrant, adaptable, and ever changing (albeit slowly). The U.S. Constitution is the start- ing point for our law. Statutes passed by legislative bodies such as the U.S. Congress and the various states’ legislatures are an important part of the law, as are decisions handed down by federal and state judges, and the regulations and administrative decisions of state and federal agencies. All of these taken together make up what we commonly refer to as the law. We will examine each of these important sources separately in order to gain a better understanding of how they help to shape our law. We will begin with the two basic legal systems in the world: civil law and common law. The civil law system empha- sizes lawmakers setting down rules in written codes, whereas common law derives from judges making decisions in actual lawsuits.

The Civil Law Tradition Civil law is the dominant legal system, favored by most non-English-speaking countries in Europe, Asia, Africa, and Latin America. The civil law system is based on a tradition that dates back to the Code of Hammurabi (2100 bce), which reduces the law to statutes, or written codes. For example, there is a section that provides for the liability of a builder when a house collapses. A contractor in ancient times could thus reference the code and know the risks of shoddy work in advance!

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http://www.archives.gov/exhibits/charters/constitution.html

CHAPTER 1Section 1.1 Sources of the Law

This tradition continued with Roman law, which traces its recorded origin to the Twelve Tables (450 bce)—bronze tab- lets setting down the law which were attached to the orator’s platform in the Roman Forum so that all citizens could read and know the law. Finally, the tra- dition reached its zenith around 533 ce when the Byzantine emperor Justinian I undertook the task of recording and inte- grating 1000 years of existing law into a single code—the Corpus Juris Civilis (lit- erally the body of the civil law), more commonly referred to as the Justinian Code. That nearly 1500-year-old code forms the most important pillar of the civil law system.

The tradition of putting the law into a code that the general public can read and under- stand continues today in most countries using a civil law system. Civil law requires that law be written and made accessible to the people so that they may know their rights and obligations as citizens. There is relatively little leeway given to judges in interpreting civil law, and little room for debate as to the meaning and application of the law in any given circumstance. Civil law jurisdictions generally make it simpler for citizens to know the law and to predict its outcome. As a result, there tends to be less litigation and less need for attorneys in civil law societies, and many routine tasks are handled by paralegals. Societal opinions, changing values, or the cumulative wisdom of judicial interpretation of the law gleaned from legal precedent have a lesser role in civil law systems than they do under a common law system. Therefore, the law tends to be relatively inflexible and changes only when and if legislative bodies see fit to change it.

The Common Law Tradition The common law system emphasizes the making of rules through court decisions, and traces its roots to England. After the Norman Conquest of 1066, King William I began the attempts to consolidate what were at times conflicting laws throughout the country into a unified common law that would apply throughout the realm. By the 13th century, magistrates traveled throughout the countryside, hearing cases as they went from town to town in regular circuits. Since the magistrates had no great body of written law to rely upon, they in essence created the law as they decided cases, by applying basic principles of fairness drawn from the customs, traditions, and ethics of the time. Ultimately, these decisions were written down and used as precedents or guidelines, to be referred to and followed when similar cases arose in the future. Before the United States of America came into existence, this land consisted largely of English colonies, which adopted the common law tradition. The exception is Louisiana, which still adheres to much of the civil law sys- tem developed as a French colony.

Modern law has roots in ancient Rome.

Top Photo Group/Thinkstock

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CHAPTER 1Section 1.1 Sources of the Law

Under the doctrine of stare decisis (“let the decision stand”), courts today still follow prec- edent closely and decide cases in a way that is consistent with the way that similar cases were decided in the past. The role of lawyers in a common law system largely involves arguing how existing precedent should be applied to a particular set of facts.

Example 1.1. In an 1834 case titled Joel v. Morison, the court found that an employer could be liable under some circumstances where his servant, driving the master’s horse and cart, had collided with a pedestrian. The key issue was whether the servant was on the master’s business or on a small detour, in which case the master was liable, as opposed to the ser- vant’s going off on a frolic of his own, whereupon the master would not be liable. The same rules the court used in Joel are still being used today. If a United Parcel Service truck hits someone, the attorney for UPS will argue the driver was on a frolic, and the lawyer for the injured person will claim he was still on UPS business.

The characteristic distinguishing common law from civil law is that common law is pri- marily derived from judges deciding actual cases. That is not to say that only judges make law. Today, there are large bodies of statutes in common law (not unlike those of civil law jurisdictions) that seek to codify important areas of the law. Unlike civil law jurisdic- tions, however, statutes do not form the foundation of the law in most areas, but largely serve to alter or clarify the common law. For example, the basic rules governing contracts (enforceable agreements) have evolved from the common law, but today many contracts are subject to a statutory body of law, the Uniform Commercial Code (UCC). The UCC is a summary of traditional common law rules governing commercial transactions, which has been all or partially enacted into statutory law by the state legislatures. UCC rules are in many places identical to those from the common law.

Even in areas where the law has been largely modified by statute, the courts still retain the power of interpreting, modifying, and generally fine-tuning the law through legal deci- sions. In order to know what a given statute means, one must always look to see how it has been interpreted and applied by the courts.

Example 1.2. A number of federal statutes apply only in situations involv- ing “interstate commerce.” A commonsense definition of interstate com- merce might be “commercial transactions that cross state lines.” But the courts interpret the phrase far more broadly, so that a business exclusively within one state can still be regulated by federal statutes because of its potential effects on interstate commerce. Thus a barbeque restaurant in Alabama that refuses to promote African Americans to management posi- tions can be sued for racial discrimination (a federal law), even if the plain- tiff (the person suing) is also from Alabama (thus not crossing state bound- aries). The discrimination can potentially affect the interstate job market, since African Americans from other states might be less likely to seek jobs in Alabama.

Also unlike civil law, it can be difficult for the average layperson to know with any cer- tainty what the common law is with regard to any specific situation. In many instances, even experienced attorneys can only venture an educated guess on how a court is likely

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http://www.law.cornell.edu/ucc/ucc.table.html

CHAPTER 1Section 1.1 Sources of the Law

to apply the law to a given set of facts. And even the best judicial minds often disagree, based at least in part on their judicial philosophy and political ideology. Many decisions of the U.S. Supreme Court are not unanimous and are sometimes decided by narrow five- to-four margins, with judges interpreting the law very differently based in great part on their judicial philosophy.

Example 1.3. A majority of the Supreme Court has found that commercial speech (such as advertising) merits First Amendment protection, but not to the same degree as other types of speech. Nowhere in the First Amendment is this distinction drawn. Thus when Puerto Rico passed a law allowing casino gambling but forbidding advertising of gambling establishments, the Court said the First Amendment was not necessarily violated. Four judges dissented, partly because they thought it made no sense to allow the activity (gambling) but not speech about the activity. Supreme Court justices still disagree about whether commercial speech should be treated differently. Justice Clarence Thomas stated in a 1996 case, Liquormart, Inc. v. Rhode Island, “I do not see a philosophical or historical basis for asserting that ‘commercial’ speech is of ‘lower value’ than ‘noncommercial speech.’”

This uncertainty and susceptibility of the common law to varying interpretations, which may depend on judges’ personal philosophies and opinions, is perhaps its major drawback.

On the positive side, common law is not as inflexible as civil law; judges have a consider- able amount of power to change, adapt, and mold the law to fit particular cases in order to insure that justice is done and that the law reflects society’s changing social values. For example, consider the changing views of racial discrimination that caused the Supreme Court over time to switch from endorsing “separate but equal” segregation in the 1896 case Plessy v. Ferguson, which allowed states to mandate separate schools for African American children, to finding such policies unconstitutional in the 1954 case Brown v. the Board of Education.

Constitutional Law A constitution establishes a state or nation’s form of government and sets out its most fundamental legal principles. The United States has a federal Constitution as well as con- stitutions for each of the 50 states. In addition, local municipalities may have their own versions, known as charters. Article VI, Section 2 of the U.S. Constitution (see Appendix A) specifically states that the U.S. Constitution “shall be the supreme Law of the Land.” If a conflict arises between the U.S. Constitution and any other law, including a state con- stitution or city charter, the federal Constitution rules and the conflicting law is deemed unconstitutional, which means it has no force or effect.

Constitutions are of necessity rather broad documents stating the basic principles a gov- ernment must follow. The interpretation of the constitution is left to the courts and the final say on the meaning of the U.S. Constitution is reserved to the U.S. Supreme Court. Once the highest court in the land has interpreted the Constitution, all other courts are bound by its interpretation.

Example 1.4. The state of Texas enacts a statute that makes it a crime to destroy an American flag. Jennifer attends a protest against United States

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http://www.law.cornell.edu/supct/html/historics/USSC_CR_0163_0537_ZS.html

http://www.law.cornell.edu/supct/html/historics/USSC_CR_0347_0483_ZS.html

CHAPTER 1Section 1.1 Sources of the Law

involvement in Afghanistan, where she burns an Ameri- can flag, while shouting, “War sucks!” Jennifer is arrested, charged, and convicted under the Texas law. She appeals, stat- ing that this law violates her First Amendment right to free speech.

Jennifer would win her case, and her con- viction would not stand. The Supreme Court found in a 1989 case, Texas v. John- son, that flag burning is symbolic speech and protected by the First Amendment. Thus the Texas law is unconstitutional.

Suppose the Supreme Court finds a federal law unconstitutional. What can Congress do if it disagrees with the U.S. Supreme Court’s interpretation of the Constitution? Only one thing: amend the Constitution. Under Article V, Congress has the right to amend the Constitution by a two-thirds vote by the House of Repre- sentatives and the Senate. If three-quarters of the states’ legislatures then approve the amendment, or if a constitutional convention in three-quarters of the states approves it, the amendment becomes law and the Constitu- tion is changed to include the new amendment. However, the right of each state to equal representation in the Senate may not be amended. It should be noted that it is relatively rare that the amendment procedure is successful; in the past 200 or so years, there have only been 27 amendments.

The First Amendment protects flag burning as a form of political speech. In 1967, demonstrators gathered in Sheep Meadow of Central Park and burned an American flag in opposition to the war in Vietnam.

1967/Daily News, L.P. (New York) / New York Daily News via Getty Images

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http://www.uscourts.gov/multimedia/podcasts/Landmarks/texasvjohnson.aspx

CHAPTER 1Section 1.1 Sources of the Law

In the Media: Eminem’s Lyrics—Free Speech or Defamation?

Marshall Mathers, better known as the rapper Eminem, is one of the best- selling hip hop artists of all time. He has sold over 85 million albums, all with the parental advisory warning stamped on the front. Drawing inspi- ration from his own, evidently difficult upbringing, Eminem has rapped about his mother, his ex-wife, a former schoolmate, and even his fans, in his notoriously abrasive style. As a result, he has been involved in numer- ous lawsuits for defamation.

Classmate DeAngelo Bailey sued Eminem in 2002, alleging that he was the subject for the song “Brain Damage” from Eminem’s 1999 debut album, The Slim Shady LP. “Brain Damage” is about a childhood bully who is physi- cally violent with little Marshall, and it includes the following lines: “I was harassed daily by this fat kid named DeAngelo Bailey. [. . .] [E]very day he’d shove me in the lockers. One day he came in the bathroom [. . .] and beat me into submission.” Although Bailey was working in sanitation when he filed the million-dollar suit, Bailey claimed that Eminem’s lyrical disparage- ment cost him a career in music. In 2003, the lawsuit was dismissed in a 14-page ruling, but not without Michigan trial judge Deborah A. Servitto finding her own lyrical voice. In footnote 11 of the order of dismissal, Judge Servitto wrote the following gem: “To convey the Court’s opinion to the fans of rap, the Court’s research staff has helped the Court put the decision into a universally understandable format:

Mr. Bailey complains that his rep is trash. So he’s seeking compensation in the form of cash. Bailey thinks he’s entitled to some monetary gain Because Eminem used his name in vain.

Eminem says Bailey used to throw him around Beat him up in the john, shoved his face in the ground Eminem contends that his rap is protected By the rights guaranteed by the first amendment

Eminem maintains that his story is true And that Bailey beat him black and blue In the alternative he states that his story is phony And a reasonable person would think it’s baloney

The Court must always balance the rights Of a defendant and one placed in a false light If the plaintiff presents no question of fact To dismiss is the only acceptable act.”

The First Amendment’s protection of the freedom of speech includes certain speech or communication that might seem to be hurtful, particularly when what is being expressed are opinions or, in this case, opinions as lyrics to a copyrighted song. Of course, asserting as fact something that is objectively false would not be protected by the Constitution and would be defamation.

Source: http://www.thesmokinggun.com/documents/crime/judge-raps-eminem-accuser

In 2009, Eminem received the “Best Hip Hop Video” award at the MTV Video Music Awards. The rapper is known for his strong lyrical style.

Jason DeCrow/Associated Press

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http://www.thesmokinggun.com/documents/crime/judge-raps-eminem-accuser

CHAPTER 1Section 1.1 Sources of the Law

Statutory Law Another important source of law in the United States is statutes enacted by federal, state, and local legislatures, which are elected lawmaking bodies. In general, the federal gov- ernment can legislate in any area for which it has been granted the power to regulate by the U.S. Constitution. Article I, Section 8 enumerates the powers of Congress, which include the power to levy taxes, borrow money, regulate international and interstate com- merce, award patents and copyrights, declare war, and so forth. While recognizing that some regulation must be done on a nationwide basis (imagine the chaos that would ensue from each state establishing its own currency, for example!) the framers of the Consti- tution intended to limit federal power, believing that most regulation is better done by government units that are closer to the people they govern. Under the Tenth Amend- ment, matters not granted to the federal government for regulation are left to the states. Nowhere in the Constitution is it stated that the federal government has the power to, for example, pass social legislation for the common good.

Where, then, does Congress get the authority to legislate in these areas? From Article I, Section 8, Clause 2 (the commerce clause), which gives Congress the power to regu- late “commerce with foreign nations, and among the several States, and with the Indian tribes.” In a long series of decisions concerning the commerce clause, the Supreme Court has interpreted the clause in the broadest possible sense, in effect giving Congress the power to regulate any activity that either directly or indirectly may affect or burden inter- state commerce. Consequently, the 1964 and 1991 Civil Right Acts enacted by Congress, for example, owe their existence to the commerce clause; the reason Congress has the power to pass these acts is that discrimination based on sex, race, color, religion, or national origin can burden interstate commerce. In passing the legislation, Congress was merely exercising its right to regulate commerce. Without such a broad interpretation of the con- stitution, Congress would lack the power to pass any social legislation that did not come under any of the areas specifically reserved to it in the constitution.

Administrative Law Administrative agencies are a kind of hybrid part of government, which in some instances act in a legislative manner by making administrative laws, or rules, and in others take on judicial functions by holding hearings and issuing decisions. Agencies also have investi- gatory and enforcement powers when their rules are alleged to be violated. These agen- cies exist on federal, state, and local levels, but the focus here will be on federal agencies.

There are many instances in which the executive or legislative branches lack the tech- nical expertise or even the time to regulate and control an area over which they have jurisdiction. Consider the plight of Congress, entrusted with regulating civil aviation in the United States. What do senators know about how often commercial planes should be inspected, how airline personnel should be trained, or what safety features airplanes need to adopt? Only aviation experts can make such determinations. Congress, recognizing its limitations, created the Federal Aviation Administration (the FAA) to act on its behalf and empowered the agency to create regulations affecting commercial flight and enforce these regulations through the administrative process.

Some federal agencies, such as the Internal Revenue Service (IRS) and Food and Drug Administration (FDA), are considered to be part of the executive branch of

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http://www.archives.gov/education/lessons/civil-rights-act/

http://www.eeoc.gov/eeoc/history/35th/1990s/civilrights.html

CHAPTER 1Section 1.2 The Courts

government, and thus are more subject to direction from the president. Others are independent, such as the Environmental Protection Agency (EPA) and Federal Communications Commission (FCC). Congress cre- ates administrative agencies through legislation when it sees the need for special regulation in a particular area. Thus the Interstate Commerce Commission was established in the heyday of the railroads, when rules were needed to govern this early version of mass tran- sit, and the Equal Employment Opportunity Commis- sion was born out of the 1960s civil rights movement.

The administrative process requires that those who are subject to agency regulation be given the opportunity to be heard before any new regulation is passed; the pro- cess tries to ensure that agencies do not act in a vacuum, but rather remain responsive to the needs and concerns of those they regulate. If, for example, the Federal Avia- tion Administration were to propose a new rule affect- ing the airline industry (e.g., prohibiting flight personnel from drinking any alcoholic beverage 48 hours prior to a flight), it would have to go through public hearings giv- ing all interested individuals the right to testify before it and make their point of view known before the new rule could be adopted. Agencies also exercise quasi-judicial powers through hearings and administrative decisions.

Persons accused of violating agency rules are brought before the agency for a hearing resembling a trial. Such hearings are held before administrative law judges who are employees of the agency empowered to decide administrative hearings, although their rulings can also be challenged in court.

1.2 The Courts

As we’ve seen, laws are interpreted and implemented by the courts. There are, in effect, 52 court systems (which are sometimes referred to as jurisdictions), in the United States: the federal courts, state court systems for each of the 50 states, and a court system for Washington D.C. Even though there are some differences between court systems, they are structured in a similar manner.

State Court Systems State court systems generally conform to the following model, albeit with occasional minor variations (see Figure 1.1):

1. Lower courts of limited jurisdiction 2. Trial courts of general, original jurisdiction 3. Intermediate appeals courts 4. The state’s highest appellate court (generally, the state’s supreme court)

The FAA, a federal administrative agency, regulates all aspects of U.S. air travel, including safety protocol, flight standards, and pilot certificates.

Stockbyte/Thinkstock

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CHAPTER 1Section 1.2 The Courts

Lower State Courts Most states have several lower courts of limited jurisdiction, which function to hear par- ticular types of cases and to help reduce the workload of the general trial courts, which often have crowded calendars. Such courts include small claims courts (which hear civil cases involving small dollar amounts that vary from state to state but are generally in the $1,500 to $15,000 range), justice of the peace courts (where minor criminal offenses are adjudicated), traffic court, surrogate court (where matters relating to trusts and estates are heard), and family court (where child custody, divorce, separation, and a variety of other matters pertaining to families are adjudicated).

State Trial Courts of General Jurisdiction Unless a case involves a type of subject matter that means it will go to a limited jurisdic- tion court, the trial court of general jurisdiction is where most cases will begin. Nearly all cases affecting business will be litigated in these courts. As the name implies, trial courts, or courts of original general jurisdiction, try almost any type of criminal or civil case. Trial courts of general jurisdiction can award an unlimited amount of money damages in civil cases and can also hear a type of civil action known as an equity case, where the person suing seeks something other than money damages. They have the widest trial jurisdiction available. Typical cases heard by trial courts include crimes, breach of contract actions, and torts.

Intermediate State Appeals Courts Intermediate appeals courts have jurisdiction to hear appeals from most trial and some limited jurisdiction courts, as well as some rulings of administrative agencies. These courts provide parties who believe that a legal error was made by the original trial judge with the opportunity to have their trial court record reviewed. Appellate courts only review questions of law and do not review findings of fact. Accordingly, no new witness testi- mony or evidence is presented in the appeals court. A court of appeals will only consider

Traffic CourtFamily CourtTrial Courts Small Claims Court

(Appeal is not always available)

Surrogate Court

State Supreme Court

Intermediate Appellate Courts

Figure 1.1: The state court system

The highest state court system is usually known as the state supreme court, followed by the intermediate appellate courts. Beneath these are the lower state courts, which include trial courts, family court, traffic court, surrogate court, and small claims court (in which appeal is not always available).

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CHAPTER 1Section 1.2 The Courts

the testimony and evidence presented at the trial court. Thus, for example, a losing party could successfully appeal on the grounds that the trial judge improperly instructed the jury on a point of law, or failed to sustain a valid objection by the losing litigator (both questions of law), but an appeal based on a contention that a witness lied at the trial (a question of fact) would not be valid.

State Supreme Court The state’s highest court—usually named the State Supreme Court—has the final say on all appeals from trial and intermediate appeals courts. Whether a state’s highest court hears a case on appeal is usually at its own discretion. If the court does hear a case on appeal from an intermediate appellate court, its decision is final and can only be over- turned by the U.S. Supreme Court if a federal question such as a violation of the U.S. Constitution is involved. State supreme courts operate much like intermediate appellate courts. They only review questions of law and not findings of fact. They do not hear wit- ness testimony or consider evidence that was not previously admitted at the trial court.

The Federal Court System The federal court system contains courts of limited jurisdiction, trial courts called U.S. District Courts, intermediate appeals courts known as the U.S. Courts of Appeals, and the U.S. Supreme Court (see Figure 1.2).

Patent and Trademark Office

Court of International Trade

U.S. Claims Court (Federal Circuit)

Tax Court

Administration Agency Court

Bankruptcy Court

United States Supreme Court

Court of Appeals for the Federal Circuit

District Courts of Appeal (11 Circuits and the

D.C. Circuit)

District Court

Figure 1.2: The federal court system

Below the United States Supreme Court is the Court of Appeals for the Federal Circuit and the District Courts of Appeal (11 Circuits and the D.C. Circuit). Below the Courts of Appeals for the Federal Circuit are the U.S. Claims Court, Court of International Trade, and Patent and Trademark Offices. Below the District Courts of Appeal are Bankruptcy Court, Administrative Agency Decisions, Tax Court, and District Courts.

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CHAPTER 1Section 1.2 The Courts

Federal Courts of Limited Jurisdiction The federal court system also contains a number of courts of limited original jurisdic- tion that try only specific types of cases. These include the U.S. Tax Court, Bankruptcy Court, Court of Claims (tries cases in which the U.S. government is a party), Court of International Trade (tries civil cases involving trade tariffs and related trade issues), and the Territorial Courts. A special Court of Military Appeals also exists to hear appeals from military tribunals.

U.S. District Courts The U.S. District Courts are the federal trial courts that hear both criminal and civil cases. Currently, there are 89 districts in the 50 states, in addition to district courts in Puerto Rico, the Virgin Islands, the District of Columbia, Guam, and the Northern Mariana Islands for a total of 94 judicial districts. The number and location of judicial districts can be changed by Congress at will and varies as changes in population and the load of district court calendars demand.

U.S. Circuit Courts of Appeals The U.S. Circuit Courts of Appeals are intermediate appellate courts that hear appeals from specialized federal court and federal district court decisions, and from many federal agency decisions. Just as in the state appellate courts, the U.S. Circuit Courts of Appeals decide questions of law, not fact. The U.S. Courts of Appeals review the testimony and evidence admitted in the U.S. District Courts. No new testimony or evidence is admit- ted. There are 11 judicial circuits, or geographic areas, each encompassing more than one state, plus the District of Columbia and the Federal Circuit (see Table 1.1) for a total of 13 circuits. Decisions of the Circuit Courts may be appealed to the U.S. Supreme Court, but generally the Supreme Court has the discretion to grant review or refuse it. Each year thousands of petitions for review, from both federal and state high courts, are made to the

Table 1.1: The federal court system

Circuit Name Composition District of Columbia District of Columbia

First Maine, Massachusetts, New Hampshire, Puerto Rico, Rhode Island

Second Connecticut, New York, Vermont

Third Delaware, New Jersey, Pennsylvania, Virgin Islands

Fourth Maryland, North Carolina, South Carolina, Virginia, West Virginia

Fifth Louisiana, Mississippi, Texas

Sixth Kentucky, Michigan, Ohio, Tennessee

Seventh Illinois, Indiana, Wisconsin

Eighth Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, South Dakota

Ninth Alaska, Arizona, California, Guam, Hawaii, Idaho, Montana, Nevada, Oregon, Washington

Tenth Colorado, Kansas, New Mexico, Oklahoma, Utah, Wyoming

Eleventh Alabama, Florida, Georgia

Federal Circuit All federal judicial districts [includes the U.S. Court of Federal Claims, the U.S. Court of International Trade, and the U.S. Court of Appeals for Veterans’ Claims]

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CHAPTER 1Section 1.2 The Courts

Supreme Court, but since the Court typically takes less than a hundred cases per term, the odds are that a federal appeals court decision will be the final word.

The Supreme Court of the United States Although the Constitution grants the Supreme Court both appellate jurisdiction and original (trial) jurisdiction in certain types of cases (for example, those involving foreign ambassadors or ones in which a state is a party), as a practical matter the Supreme Court functions as a court of appeals.

Litigants who are unhappy with the results from either the state’s highest court (in cer- tain types of cases) or a Circuit Court of Appeals may petition the Supreme Court for a writ of certiorari. These petitions essentially seek to convince the justices that the case is of such import that they should grant review. Generally, the Supreme Court is only interested in cases involving important constitutional issues or possibly a conflicting interpretation of federal law among the Circuit Courts of Appeals. The petitions circu- late among the nine justices; if at least four vote to take the case, the Court will issue a writ of certiorari, which means that the Supreme Court will decide the case. If the Court refuses to issue a writ of certiorari, the lower court’s decision is left standing. A refusal by the U.S. Supreme Court to issue a writ of certiorari is not necessarily an indication that it supports the lower court’s position; it merely means that at the time that the case was appealed, fewer than four justices wanted to hear it.

Jurisdiction: The Power to Decide a Case Before any court, state or federal, may validly accept and decide a case, that court must have jurisdiction over that case. The word “jurisdiction” is sometimes used to refer to a court system: for example, we might say that California and New York are different jurisdictions, meaning they make their own laws and a California court is not bound by a New York law. But juris- diction is used here to refer to any given court’s power to decide a given case. In other words, if a court does not have proper jurisdiction over the case, it will be over- turned on appeal.

Furthermore, to decide a case the court generally needs two types of jurisdiction: subject matter and personal. With regard to subject mat- ter jurisdiction, this means that you cannot get a divorce in bankruptcy court, because a bankruptcy court would lack jurisdiction. Personal jurisdiction requirements are designed to ensure that there is a basic fairness, or due pro- cess, in the way in which the law is used by or against a person. Suppose Heather is an

The Supreme Court, the highest court in the U.S., operates from this building in Washington, D.C.

iStockphoto/Thinkstock

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CHAPTER 1Section 1.2 The Courts

Illinois resident whose car collides with one driven by Aaron, and this takes place in Illi- nois. It would seem unfair to Heather to allow Aaron to sue her in Alaska, a place where she has never even been!

Federal Courts and Subject Matter Jurisdiction There are two types of federal subject matter jurisdiction: federal question jurisdiction and diversity jurisdiction. A federal court needs one of these to take a case. Federal ques- tions involve claims arising under the federal Constitution, a federal statute, or a federal treaty. For example, if Better Bank sues Bigger Bank for anticompetitive practices under the Sherman Act, an antitrust law, this would be a federal question case because a federal law is involved. On the other hand, if Better sues Bigger for breach of contract, it would be state subject matter because the law of contracts is state law.

Some federal subject matter is exclusive to the federal courts, meaning these cases can only be brought in federal courts. For example, if Microcorp sues Macrocorp for patent infringement, Micro would have to file its case in federal court. Other examples of exclu- sive federal jurisdiction include bankruptcy, copyright, the bulk of securities law claims, admiralty and maritime claims, cases in which the United States is a party, and cases involving foreign ambassadors or consuls. However, most federal laws fall into the con- current jurisdiction category, meaning the case can be brought in federal or state court.

The other type of federal subject matter jurisdiction is known as diversity of citizenship. Diversity jurisdiction means that the plaintiff (the person suing) and the defendant (the one being sued) are from different states. There is also a requirement that the claim be over $75,000. Since these cases typically involve state law claims such as breach of contract or personal injury, it may seem odd to find them in federal court. The rationale is that an out- of-state party might face local prejudice in state courts (where judges are often elected, and may lose their jobs if they make an unpopular decision) and so they are given the choice to go to federal court (where judges are appointed for life or until they retire or are impeached for misconduct).

Example 1.5. Beta Inc., a company that is incorporated in and has its head- quarters in Wisconsin, wants to sue Jared, a software developer who lives in Minnesota, for breach of contract, claiming damages of $100,000. Although this claim arises out of state law, the case could be brought in either a state or federal court, since diversity jurisdiction is present.

Personal Jurisdiction Whether the case is brought in federal or state court, there must also be jurisdiction over the parties involved, known as personal jurisdiction or in personam jurisdiction. Furthermore, the court must have personal jurisdiction over both the parties involved in the lawsuit. Since the plaintiff has chosen the court in which he or she files the case, the plaintiff submits voluntarily to the court and gives it the right to decide his or her fate. But what of the defendant, who certainly didn’t choose to be sued? Basic fairness, or due process (required by the U.S. Constitution in both the 5th and 14th Amendments), demands that at a minimum the defendant be given notice of the lawsuit, and that he or she has at least “minimum contacts” with the state in which the court is located (other- wise known as the forum).

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CHAPTER 1Section 1.3 Chapter Summary

The notice requirement is generally met by service of process, a procedure in which an agent of the plaintiff delivers the legal papers that commence the lawsuit to the defendant. These papers tell the defendant the basis for the lawsuit (such as negligence or breach of contract) and direct him or her how to proceed (such as filing an answer with the court or appearing in person).

If the defendant is a resident of the forum state (meaning the state in which the court is physically located), she may be served at her legal address, which can often be done by mail. But if the defendant is a nonresident, there must be minimum contacts with the forum, in order to serve the defendant out of state (known as long-arm jurisdiction, because the long arm of the law is reaching out to get the defendant back into the legal system). Minimum contacts may consist of doing business in the forum state, causing an injury there, or owning real estate there.

Example 1.6. Berry Gordy, founder of Motown records and resident of Cal- ifornia, sued the Daily News, which is located in New York, for libel (a tort, involving publishing a false statement) in California. The newspaper con- tended California lacked personal jurisdiction, pointing out that 99 percent of its business is in New York, and it does not solicit business in Califor- nia. But because the News did have 13 subscribers in California, and had deliberately targeted a California resident, the defendant had minimum contacts with California and could be sued in that state.

Venue A court that has subject matter jurisdiction and personal jurisdiction may still refuse to hear a case on the grounds that the action should be brought in the state with closer ties to the litigants or the subject matter of the action. For example, suppose Jason, a resident of California, is flying from Los Angeles to Bakersfield, California, aboard a charter plane operated by a California company, which then blows up in Nevada air- space. California will be the most likely venue to hear a case brought by Jason’s family against the charter company.

1.3 Chapter Summary

The basic foundation of U.S. law is the Constitution, but much of our legal tradition is also grounded in the common law tradition, where rules evolve through case precedent, and the concept of having written statutes has come from the civil law tradition. The law is generally enforced through the mechanism of the courts, which are organized in a manner that takes into account both geographical boundaries and subject matter restrictions. For any court to render a valid decision in a case, it must have both personal and subject matter jurisdiction.

The Constitution sets forth restrictions on the federal government’s lawmaking ability, and also guarantees certain individual liberties, such as freedom of expression, to indi- viduals. However, both the Constitution and the statutory law made by legislatures often must be fleshed out by the courts. Thus the law is not a static concept, but rather an evolv- ing system of rules that will change over time.

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CHAPTER 1Section 1.3 Chapter Summary

Focus on Ethics

While the First Amendment right to free speech includes the right to commercial speech, the limits on government restrictions are not always easy to predict. For example, courts have ruled that the government can compel speech to protect consumers from confusion and deception. The FDA is authorized by statute to regulate tobacco, and the agency required cigarette manufacturers to place graphic images showing smokers with tracheotomies and cancerous lesions on packages. A group of manufac- turers challenged the law on the basis that it violated their First Amend- ment rights, as the right to free speech often includes the right to not speak. The judge agreed with the defendants, and found the FDA require- ment unconstitutional.

Questions for Discussion

1. How do you think the government should balance the need to pro- tect public health with the right to free speech?

2. Tobacco companies have for years used advertising to convey a message to consumers that smoking is manly (the Marlboro cow- boy ads), sophisticated (product placement in Hollywood movies), cool, and fun. They have targeted children with cartoon ads such as Camel’s Joe Camel series. Is this ethical? Do the companies have a valid point that people, after all, decide for themselves whether to start smoking?

3. What are the pros and cons of requiring gruesome pictures on cigarette packages? Do they convey a message that verbal warnings do not? Are they just sensational fear-mongering?

4. Is there a valid reason to treat tobacco companies differently from other manufacturers whose products can damage health, such as alcoholic beverage manufacturers and the makers of junk food?

Does requiring such graphic pictures of smokers on cigarette labels violate the First Amendment?

2011 Getty Images

Case Study: Snyder v. Phelps

131 S. Ct. 1207, 179 L. Ed. 2d 172 (2011)

Facts: Mathew Snyder, a Marine, was killed in Iraq. A group from the Westboro Baptist Church picketed outside the funeral, holding signs that read “God Hates the USA,” “Fag Troops,” “America is doomed,” “Pope in hell,” and “Thank God for dead soldiers.” The pastor of the church was Fred Phelps, who believed that God hates homosexuality and is punishing America for tolerating it. In addition, the church’s website, www.godhatesfags.org, made statements that Snyder’s father, Albert, “taught Mat- thew to defy his creator,” “raised him for the devil,” and “taught him that God was a liar.” The picketers were on a public sidewalk and followed police directions. Albert Snyder sued, alleging among other things that the defendants had committed the torts (civil wrongs, to be discussed in Chapter Two) and caused him emotional distress. The trial ended in a $5 million judgment for the plaintiff. The case even- tually wound up in the Supreme Court. (continued)

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CHAPTER 1Section 1.3 Chapter Summary

Case Study: Snyder v. Phelps (continued)

Issue: Does the First Amendment right to free speech protect Westboro’s activities?

Discussion: The Court noted that the speech in question was of “public concern,” since it involved political/social issues, and thus was entitled to the highest degree of protection under the First Amendment. Whether the statements were inappropriate or controversial was irrelevant, and the fact that the church used the funeral of a marine as an occasion to convey its message, in part to gain publicity, did not matter.

The Westboro website’s comments were also protected, with a majority of the Court apparently agreeing with the reasoning of the Fourth Circuit Court of Appeals, which found a reasonable person would not take the statements literally, but rather would view it as “rhetorical hyper- bole,” not actual facts about the soldier and his father. Justice Breyer filed a concurring decision (meaning that he agreed with the majority’s result, but not necessarily with its reasoning), emphasizing that the picketing was within the First Amendment but not including comments on the website. Justice Alito filed a dissent (meaning that he disagreed with the holding), stat- ing that there could be open and vigorous debate on public issues without the need to protect vicious comments of the type involved in this case.

Holding: Westboro’s demonstration and website were protected under the First Amendment.

Questions for Discussion

1. The First Amendment restricts government controls on speech. Since Snyder was suing a private individual (Phelps and the church), how was the government involved?

2. Why did the majority of the Court decide this was protected speech? 3. Do you think it is hard to draw the line between speech that the First Amendment should

protect and speech that can be regulated? Explain. 4. Do you agree with the majority, the concurrence, or the dissent? Why? 5. Suppose a case arises where a website is devoted to negative remarks about a particular com-

pany. Employees and customers are invited to leave their opinions on a public bulletin board. Would this type of website be treated the same as the one involved in the Snyder case?

In 2007, Pastor Fred Phelps of Westboro Baptist Church demonstrated with family members outside the federal courthouse in Baltimore, Maryland, where a jury deliberated over a suit brought against him by Albert Snyder. Members of the church held signs at the funeral of Snyder’s son, a soldier killed in Iraq, in 2006.

Jed Kirschbaum/Associated Press

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CHAPTER 1Section 1.3 Chapter Summary

Case Study: Citizens United v. Federal Election Commission

558 U.S. 50 (2010)

Facts: A nonprofit corporation, Citizens United, produced a documentary called Hillary, which was critical of then Senator Hillary Clinton, who was a candidate for the Democratic Party’s presidential nomination in 2008. The film violated the Bipartisan Campaign Reform Act of 2002 (BCRA), Section 203, which bans “big money” from unfairly influencing federal elections. Citizens United, concerned about possible civil and criminal penalties for violating the BCRA, filed a suit against the Federal Elec- tion Commission (FEC) asking the court for an injunction to prohibit the FEC to apply Section 203 to the film. Citizens United argued that Hillary was protected political speech and could not be regulated by the FEC. The U.S. District Court for the District of Columbia denied the injunction and ruled that Section 203 was constitutional because of prior decisions of the U.S. Supreme Court on similar issues. In essence, the District Court reasoned that since Hillary was a form of express advocacy intended to inform voters that Senator Clinton was not qualified for the office of president, it was a campaign speech, and Section 203 was applied correctly. Citizens United appealed and the case eventually went to the Supreme Court.

Issues: Is an advocacy documentary created by a corporation protected as political speech under the First Amendment? Is Section 203 of the BCRA constitutional?

Discussion: The Court held that the prohibition on such corporate independent expenditures, backed by criminal sanctions, is an “outright ban on speech,” in violation of the First Amendment’s guarantee of the freedom of speech. As part of its decision, the majority said that as a vital part of democracy, “political speech must prevail against laws that would suppress it.” Since corporations have been rec- ognized by the Court as “persons,” they have the First Amendment rights. The Court ruled that the gov- ernment “may not suppress political speech on the basis of the speaker’s corporate identity.” The very basis of the First Amendment is to prevent the government from disfavoring certain viewpoints and speakers. The Court rejected the federal government’s argument that corporations should be treated differently under the First Amendment because they are not “natural persons” (although media cor- porations were exempted from Section 203 of the BCRA). The Court also rejected the government’s argument that the ban on corporate speech is necessary to prevent corruption. Furthermore, the Court overruled some of its prior decisions that allowed limitations on political speech. The Court concluded that Section 203 was unconstitutional and could not be applied to Hillary.

Holding: The district court’s judgment was reversed as to the constitutionality of the restrictions on corporate independent expenditures.

Questions for Discussion

1. What was the purpose of the Bipartisan Campaign Reform Act (BCRA) of 2002? 2. Why did Citizens United file a lawsuit against the Federal Election Commission? What did

Citizens ask the district court to do? 3. What was the decision of the U.S. District Court for the District of Columbia? 4. What was the reasoning of the Supreme Court with respect to the constitutionality of Section

203 of the BCRA? Why this decision is considered controversial? 5. Do you agree that corporations, being “persons,” should enjoy the same constitutional

protection as “natural persons” (at least as it concerns the freedom of speech clause of the First Amendment)?

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CHAPTER 1Section 1.3 Chapter Summary

Critical Thinking Questions

1. Describe the differences between the common law and civil law systems. Which do you think is preferable? Explain.

2. Is the only law that which is written in statutes or court decisions? In Nazi Ger- many, those written laws made it legal for the government to commit genocide against certain groups such as Jews, homosexuals, and gypsies. After World War II ended, Nazis were prosecuted for those same acts, under the theory that they had violated “natural law.” Should there be such a thing as natural law? Are there some acts which should be considered illegal, regardless of what a statute says, or is this equating law and morality?

Hypothetical Case Problems

Case 1. Javier is traveling from his home in New York to Dallas, Texas. While driv- ing through Oklahoma, his brakes fail and he is injured in the ensuing crash. Javier wants to sue the maker of his car, Energy-Auto Inc. Energy’s headquar- ters is in New York. It does not have any dealerships in Oklahoma or do any advertising in Oklahoma.

A. In which state or states can the plaintiff sue the defendant? B. Assume that the plaintiff will sue the defendant for $100,000 in damages.

Can the suit be brought in federal court? Explain. C. If Javier only had relatively minor damage, and was suing for $9,000,

could he sue in federal court? D. In a similar situation, a defendant argued that the auto manufacturer

could still be held liable in Oklahoma, because it was foreseeable that the defective car could end up there and cause injury. The court disagreed, and found Oklahoma did not have jurisdiction. Why did the court think it inadvisable to base jurisdiction on foreseeability? If it had ruled otherwise, where would makers of products potentially have to stand trial? What would this do to their costs?

Case 2. Amanda is extremely annoyed with her next-door neighbor Nicole, whose perfume is so strong it lingers in the hallway of their apartment building. Amanda sues Nicole, and the trial court dismisses the case, saying that there is no legal basis for the claim. Amanda wants to appeal.

A. Would this case present a question of law or fact? B. Which court would likely handle the appeal? What would be the likely

outcome? C. Suppose Amanda loses her appeal at the state supreme court level, and

now petitions the U.S. Supreme Court to hear her case. Do you think the Supreme Court will grant her a writ of certiorari? Why or why not?

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CHAPTER 1Section 1.3 Chapter Summary

administrative agency A government entity that is part of the executive branch, which makes rules governing a specific type of activity and has the power to hold judicial type hearings.

administrative law The rules made by administrative agencies, which regulate in specialized areas.

civil law (1) Law designed to protect individual rights and allow individuals to sue for redress of wrongs, as opposed to criminal laws, which protect society in general; (2) a legal system that puts the most emphasis on statutory rules rather than judicial decisions.

commerce clause From Article I, Sec- tion 8 of the U.S. Constitution, giving the federal government the right to regulate interstate commerce. Broadly interpreted by the courts, it expanded the power of the federal government.

common law Law made by the decisions of judges in individual cases.

compel To force or mandate.

concurrent jurisdiction Cases which can be brought in either federal or state court.

constitution The supreme law of the land. Unless otherwise noted, the constitution is used generally to refer to the basic govern- ing document of the federal government, but states and other governmental units can also have constitutions.

court of limited jurisdiction A court that hears only cases involving a specific type of situation, or claims arising under a cer- tain law; for example, small claims court, tax court.

diversity jurisdiction A type of federal court subject matter jurisdiction applying to cases involving state law, which may be brought in federal court if the amount in controversy is over $75,000 and no plaintiff is from the same state as any defendant.

due process The concept of basic fairness in how the law is applied, that no person should be denied life, liberty, or property without due process of the law. Found in both the 5th and 14th Amendments to the U.S. Constitution.

exclusive jurisdiction Cases that can only be brought in federal court.

federal question jurisdiction A type of federal court subject matter jurisdiction applying to cases involving federal law.

forum The state where the court is located.

jurisdiction (1) A legal system; (2) the power of a court to validly decide a case.

law A set of rules capable of being enforced by government.

legislature An elected body of representa- tives that is empowered to enact statutory law. In the United States, Congress is the federal legislature, but legislatures also exist in every state, and on the local level in the form of bodies such as city councils.

minimum contacts The degree of connec- tion that a nonresident defendant must have with the forum state, consisting of owning real estate, doing business, or causing injury in the forum.

personal jurisdiction The right of the court to decide the fate of the parties before it.

Key Terms

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CHAPTER 1Section 1.3 Chapter Summary

precedent/doctrine of precedent/stare decisis The decision in a previous case sets a rule to guide the decisions of future cases.

service of process Procedure by which a defendant is given notice of a civil pro- ceeding against him, consisting of delivery of a summons and complaint.

statutes Codified law; law that is passed by legislatures and set out in written codes, accessible to the public.

subject matter jurisdiction The right of the court to decide the type of law pre- sented by a case before the court.

Uniform Commercial Code A statutory law for certain types of commercial trans- actions, including sales of goods, which has been adopted by all 50 states. Many of its rules are similar to the common law, but it contains important differences.

venue Legally proper or most convenient place where a particular case should be handled.

writ of certiorari Document granted by the U.S. Supreme Court, indicating it will hear a case.

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