, SOLUTION MANUAL FOR
Business Law Today - The Essentials Text & Summarized Cases 14th
Edition Miller
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Constitutional Foundations of Business
Solution and Answer Guide
Miller, Business Law Today, The Essentials Text & Summarized Cases, 14e, 9798214045962;
Chapter 01: Legal and Constitutional Foundations of Business
TABLE OF CONTENTS
Critical Thinking Questions in Features ................................................................................... 1
Landmark in the Law—Application to Today’s World ................................................................ 1
Adapting the Law to the Online Environment—Critical Thinking ............................................... 2
Ethical Issue—Value Judgment.................................................................................................2
Building Analytical Skills—Result and Reasoning ..................................................................... 2
Critical Thinking Questions in Cases........................................................................................3
Case 1.1—Critical Thinking ....................................................................................................... 3
Case 1.2—Critical Thinking ....................................................................................................... 4
Case 1.3—Critical Thinking ....................................................................................................... 4
Chapter Review ........................................................................................................................... 5
Practice and Review..................................................................................................................5
Practice and Review: Debate This.............................................................................................6
Issue Spotters............................................................................................................................6
Business Scenarios and Case Problems...................................................................................7
Critical Thinking and Writing Assignments .............................................................................. 12
Critical Thinking Question in Appendix Exhibit 1A–3 ........................................................... 13
A Sample Court Case..............................................................................................................13
CRITICAL THINKING QUESTIONS IN FEATURES
LANDMARK IN THE LAW—APPLICATION TO TODAY’S WORLD
1. The equitable maxims listed here underlie many of the legal rules and principles that are commonly
applied by the courts today— and that you will read about in this book.
For instance, in the contracts materials, you will read about the doctrine of promissory estoppel.
Under this doctrine, a person who has reasonably and substantially relied on the promise of another
may be able to obtain some measure of recovery, even though no enforceable contract exists. The
court will estop (bar) the one making the promise from asserting the lack of a valid contract as a
defense. The rationale underlying the doctrine of promissory estoppel is similar to that expressed in
which of the maxims just listed?
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Constitutional Foundations of Business
Solution: The rationale underlying the doctrine of promissory estoppel is similar to that
expressed in the fourth and fifth equitable maxims listed in the feature. The fourth maxim
supports the notion that the law should not be applied unfairly just because the law does not
provide a solution to a particular problem. The fifth maxim holds that those administering the law
should not get bogged down in technicalities when doing so leads to unfairness or injustice. In a
perfect legal world, then, a lack of a valid contract should not punish a party who has justice and
fairness on their side.
ADAPTING THE LAW TO THE ONLINE ENVIRONMENT—CRITICAL THINKING
1. One observer has said that the American legal system should evaluate social media companies
based on how “they affect us as citizens, not only [on how] they affect us as consumers.” What is
your opinion of this statement?
Solution: The person who made this statement clearly sees a “citizen” as having different
motivations and concerns than a “consumer.” Presumably, a citizen is mostly concerned with the
good of society as a whole, and therefore would be open to the idea of government regulation
that restricted the negative influence of social media, regardless of the First Amendment. A
consumer, by contrast, would be primarily concerned with having a marketplace that offers the
widest possible varieties of freedom (of choice, of speech, etc.) and would for that reason be
opposed to government regulation of social media. There is, however, an argument to be made
that the citizens that make up a society benefit when the marketplace of ideas—whether they are
subjectively “positive” or “negative”—is allowed to flourish in the absence of government
regulation.
ETHICAL ISSUE—VALUE JUDGMENT
1. What are the pros and cons of a workplace policy that prohibits employees from discussing politics
while on the job?
Solution: The pros of a policy that prohibits employees from discussing politics while at work
would seem to be increased workplace harmony. Politics are a touchy subject. It is reasonable for
management to conclude that arguments over political views can negatively impact employee
relationships, which might have a negative impact on productivity, which would definitely have a
negative impact on the bottom line.
BUILDING ANALYTICAL SKILLS—RESULT AND REASONING
1. The Supreme Court ruled that Colorado cannot force Smith to speak in a manner that aligns with
state law but goes against her religious beliefs. In other words, the state’s interest in preventing
discrimination does not outweigh a business owner’s right to free speech. As part of its reasoning, the
Court asserted that Smith was not, in fact, negatively disposed toward same-sex couples. It was their
“message” that she objected to. Why might this distinction be legally important in these types of
cases?
Solution: In his majority opinion for this case, Associate Justice Neil Gorsuch explained that
while Lorie Smith was willing to serve gay customers, she was not willing to allow her website to
be used as a platform of gay marriage, which she believed “contradicts biblical truth.” In doing so,
Gorsuch drew a distinction between a business discriminating against a customer based on the
customer’s status, which is not allowed, and a business discriminating against the message a
customer represents, which, according to this ruling, is allowed.
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Constitutional Foundations of Business
Critics of this Supreme Court decision rejected this line of legal reasoning as being a distinction
without a difference. Whether Smith is objecting to the “message” promoted by homosexual
couples or the homosexual couples themselves, the result is the same. Many states have public
accommodation laws similar to Colorado’s, and civil rights activists worry that the Court has given
American businesses a broad First Amendment excuse to refuse service based on a customer’s
race, religion, gender, or sexual orientation.
CRITICAL THINKING QUESTIONS IN CASES
CASE 1.1—CRITICAL THINKING
1. Cultural. What “dangerous conditions” might have prompted the city to enact the ordinances at issue
in this case? Why?
Solution: As noted in the facts of the case, both ordinances at issue included an extensive
rationale for their adoption, stating essentially that a geographically small city has the right to
restrict a business from operating within the city when the restriction is for the safety of the city’s
citizens and visitors.
The appellate court referred to “the dangerous conditions” created by the irresponsible driving
behavior of scooter renters, especially at night, amplified by the lack of training, supervision, and
oversight practiced by the rental scooter businesses that “existed throughout the entire city” as
the basis for the city’s regulation. The court paraphrased the expressive clauses in the
ordinances more specifically:
• The City is geographically small and crowded and is being besieged by inexperienced scooter
drivers seeking amusement and driving in a dangerous manner.
• The City is a tourist destination frequented by tens of thousands, and its streets are congested
by scooters that are being driven illegally and in areas where they are not permitted.
• The City’s residents and visitors are put in dangerous situations as a result of the improper use
of scooters, especially at night.
• City businesses have complained about numerous trespasses on their property by people
driving scooters while being disruptive
• City police have been unable to cope with the situation and essential police resources are being
drained.
• The City has been unable to control the situation through less restrictive means.
2. Economic. What is the likely economic impact of the ordinances on the businesses in the city?
Discuss.
Solution: With the exception of the scooter rental businesses, the effect on the city’s economy is
likely to be positive in light of the result in the Classy case.
The answer to the previous question contains the reasons in support of this outlook. With a ban
on motorized scooters, the “small and crowded” city is not likely to be “besieged by inexperienced
scooter drivers seeking amusement and driving in a dangerous manner.” The streets, filled with
“tens of thousands” of tourists will not be “congested by scooters that are being driven illegally
and in areas where they are not permitted.” Residents and visitors will not be “put in dangerous
situations as a result of the improper use of scooters, especially at night.” There will be an end to
the “numerous trespasses” on business property “by people driving scooters while being
disruptive.” And “essential police resources” will not be “drained,” at least not by irresponsible
scooter drivers and riders. All of which bodes well for business.
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,Solution and Answer Guide: Miller, Business Law Today, The Essentials Text & Summarized Cases, 14e, 9798214045962; Chapter 01: Legal and
Constitutional Foundations of Business
CASE 1.2—CRITICAL THINKING
1. What If the Facts Were Different? If this case had involved a small, private retail business that did
not advertise nationally, would the result have been the same? Why or why not?
Solution: It is not likely that the result in this case would have been different even if the facts had
involved a small, private retail business that did not advertise nationally. The intended impact of
the decision in Heart of Atlanta was to uphold the constitutionality of the Civil Rights Act of 1964
and the power of Congress to regulate interstate commerce to stop local discriminatory practices.
In the Supreme Court’s opinion, “The power of Congress to promote interstate commerce also
includes the power to regulate the local incidents thereof, including local activities in both the
States of origin and destination, which might have a substantial and harmful effect upon that
commerce.”
Thus, if the case had involved a small, local retail business, the Court would have found
participation in interstate commerce based on the use of a phone, or a Facebook page (or other
online presence), or sales to customers who traveled across state lines—or, as in Wickard v.
Filburn, participation might have been based on any transaction that might otherwise have
occurred in interstate commerce.
CASE 1.3—CRITICAL THINKING
1. Economic. Whose interests are advanced by laws designed to regulate the labeling of plant-based
meat products?
Solution: Certainly, the overriding objective of such laws is to protect the consumer. Indeed, the
stated goal of Louisiana’s Truth in Labeling of Food Products Act is to “protect consumers from
misleading and false labeling of food products that are edible by humans.” It would be naïve,
however, to ignore the role that special interest groups play in getting legislation passed. Here,
critics of the Louisiana statute, including animal rights and environmental groups, pointed out that
the law was supported by “animal agriculture interests,” otherwise known as meat producing
businesses. Presumably, these businesses assumed that a product labeled “veggie burger” was
more appealing to consumers searching for meat alternatives than would have been a product
labeled “veggie puck.” As the court pointed out, however, the Louisiana law has not had this
effect.
2. What If the Facts Were Different? Assume the Louisiana statute explicitly prohibited companies
from labeling plant-based products in a manner that potentially could confuse consumers about the
products’ meat content. Would the court’s ruling likely have been the same? Explain.
Solution: Probably not. In general, under the First Amendment, free speech protections only
apply to commercial speech that is neither misleading nor related to unlawful activity. That is, if
commercial speech is either of these things, it is not protected and can be regulated by the
government. Commercial speech that is potentially misleading is protected by the First
Amendment, but this protection is not absolute. In other words, courts will consider the facts on a
case-by-case basis to determine whether commercial speech that is potentially confusing can be
regulated.
In this case, the district court agreed with Tofurky that the Louisiana law threatened commercial
speech that is only potentially misleading, leading it to find the statute unconstitutional. In
reversing, the appellate court ruled that Louisiana was not, in fact, trying to prohibit potentially
confusing commercial speech. Rather, the law applied only to food labels that were actually and
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Constitutional Foundations of Business
intentionally misleading. It is likely that the law’s emphasis on intent was included expressly to
protect it from First Amendment challenges such as the one brought by Tofurky.
CHAPTER REVIEW
PRACTICE AND REVIEW
A state legislature enacted a statute that required any motorcycle operator or passenger on the state’s
highways to wear a protective helmet. Jim Alderman, a licensed motorcycle operator, sued the state to
block enforcement of the law. Alderman asserted that the statute violated the equal protection clause
because it placed requirements on motorcyclists that were not imposed on other motorists. Using the
information presented in the chapter, answer the following questions.
1. Why does this statute raise equal protection issues instead of substantive due process concerns?
Solution: When a law or action limits the liberty of some persons but not others, it may
violate the equal protection clause. Here, because the law applies only to motorcycle
operators and passengers, it raises equal protection issues.
2. What are the three levels of scrutiny that the courts use in determining whether a law violates the
equal protection clause?
Solution: The three levels of scrutiny that courts apply to determine whether the law or
action violates equal protection are (1) strict scrutiny (if fundamental rights are at stake),
(2) intermediate scrutiny (in cases involving discrimination based on gender or
legitimacy), and (3) the “rational basis” test (in matters of economic or social welfare).
3. Which level of scrutiny or test would apply to this situation? Why?
Solution: The court would likely apply the rational basis test, because the statute
regulates a matter of social welfare by requiring helmets. Similar to seat-belt laws and
speed limits, a helmet statute involves the state’s attempt to protect the welfare of its
citizens. Thus, the court would consider it a matter of social welfare and require that it be
rationally related to a legitimate government objective.
4. Under this standard or test, is the helmet statute constitutional? Why or why not?
Solution: The statute is probably constitutional, because requiring helmets is rationally
related to a legitimate government objective (public health and safety). Under the rational
basis test, courts rarely strike down laws as unconstitutional, and this statute will likely
further the legitimate state interest of protecting the welfare of citizens and promoting
safety.
PRACTICE AND REVIEW: DEBATE THIS
1. Legislation aimed at protecting people from themselves concerns the individual as well as the public
in general. Protective helmet laws are just one example of such legislation. Should individuals be
allowed to engage in unsafe activities if they choose to do so?
Solution: Both England and the U.S. legal systems were constructed on the common law system.
The doctrine of stare decisis has always been a major part of this system—courts should follow
precedents when they are clearly established, except when compelling reasons dictate otherwise.
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,Solution and Answer Guide: Miller, Business Law Today, The Essentials Text & Summarized Cases, 14e, 9798214045962; Chapter 01: Legal and
Constitutional Foundations of Business
Even though more common law is being turned into statutory law, the doctrine of stare decisis is still
valid. After all, statutes often must be interpreted by courts. What better basis for judges to render
their decisions than by basing them on precedents related to the subject at hand?
In contrast, some students may argue that the doctrine of stare decisis is passé. There is certainly
less common law governing, say, environmental law than there was 100 years ago. Given that federal
and state governments increasingly are regulating more aspects of commercial transactions between
merchants and consumers, perhaps the courts should simply stick to statutory language when
disputes arise.
ISSUE SPOTTERS
1. The First Amendment to the U.S. Constitution provides protection for the free exercise of religion. A
state legislature enacts a law that outlaws all religions that do not derive from the Judeo-Christian
tradition. Is this law valid within that state? Why or why not? (See Sources of American Law.)
Solution: No. The U.S. Constitution is the supreme law of the land, and applies to all
jurisdictions. A law in violation of the Constitution (in this question, the First Amendment to the
Constitution) will be declared unconstitutional.
2. South Dakota wants its citizens to conserve energy. To help reduce consumer consumption of electricity,
the state passes a law that bans all advertising by power utilities within the state. What argument could the
power utilities use as a defense to the enforcement of this state law? (See Business and the Bill of Rights.)
Solution: Even if commercial speech is neither related to illegal activities nor misleading, it may
be restricted if a state has a substantial interest that cannot be achieved by less restrictive
means. In this situation, however, the interest in energy conservation is substantial, but it could
be achieved by less restrictive means. That would be the utilities’ defense against the
enforcement of this state law.
BUSINESS SCENARIOS AND CASE PROBLEMS
1–1. Binding versus Persuasive Authority. A county court in Illinois is deciding a case involving an
issue that has never been addressed before in that state’s courts. The Iowa Supreme Court, however,
recently decided a case involving a very similar fact pattern. Is the Illinois court obligated to follow the
Iowa Supreme Court’s decision on the issue? If the United States Supreme Court had decided a similar
case, would that decision be binding on the Illinois court? Explain. (See The Common Law.)
Solution: A decision of a court is binding on all inferior courts. Because no state’s court is inferior
to any other state’s court, no state’s court is obligated to follow the decision of another state’s
court on an issue. The decision may be persuasive, however, depending on the nature of the
case and the particular judge hearing it. A decision of the United States Supreme Court on an
issue is binding, like the decision of any court, on all inferior courts. The United States Supreme
Court is the nation’s highest court, however, and thus, its decisions are binding on all courts,
including state courts.
1–2. Sources of Law. This chapter discussed a number of sources of American law. Which source of law
takes priority in the following situations, and why? (See Sources of American Law.)
1. A federal statute conflicts with the U.S. Constitution.
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Constitutional Foundations of Business
Solution: The U.S. Constitution—The U.S. Constitution is the supreme law of the land. A
law in violation of the Constitution, no matter what its source, will be declared
unconstitutional and will not be enforced.
2. A federal statute conflicts with a state constitutional provision.
Solution: The federal statute—Under the U.S. Constitution, when there is a conflict
between a federal law and a state law, the state law is rendered invalid.
3. A state statute conflicts with the common law of that state.
Solution: The state statute—State statutes are enacted by state legislatures. Areas not
covered by state statutory law are governed by state case law.
4. A state constitutional amendment conflicts with the U.S. Constitution.
Solution: The U.S. Constitution—State constitutions are supreme within their respective
borders unless they conflict with the U.S. Constitution, which is the supreme law of the
land.
1–3. Equal Protection. Abbott Laboratories licensed SmithKline Beecham Corp. to market an Abbott
human immunodeficiency virus (HIV) drug in conjunction with one of SmithKline’s drugs. Abbott then
increased the price of its drug fourfold, forcing SmithKline to increase its prices and thereby driving
business to Abbott’s own combination drug. SmithKline filed a suit in a federal district court against
Abbott. During jury selection, Abbott struck the only self-identified gay person among the potential jurors.
(The pricing of HIV drugs is of considerable concern in the LGBTQ+ community.) Could the equal
protection clause be applied to prohibit discrimination based on sexual orientation in jury selection?
Discuss. [SmithKline Beecham Corp. v. Abbott Laboratories, 740 F.3d 471 (9th Cir. 2014)] (See Due
Process, Equal Protection, and Privacy.)
Solution: Yes. The equal protection clause can be applied to prohibit discrimination based on
sexual orientation in jury selection. The appropriate level of scrutiny would be intermediate
scrutiny. Under the equal protection clause of the Fourteenth Amendment, the government
cannot enact a law or take another action that treats similarly situated individuals differently. If it
does, a court examines the basis for the distinction. Intermediate scrutiny applies in cases
involving discrimination based on gender. Under this test, a distinction must be substantially
related to an important government objective.
Gays and lesbians were long excluded from participating in our government and the privileges of
citizenship. A juror strike on the basis of sexual orientation tells the individual who has been
struck, as well as the trial participants and the general public, that the judicial system still treats
gays and lesbians differently. This deprives these individuals of the opportunity to participate in a
democratic institution on the basis of a characteristic that has nothing to do with their fitness to
serve.
In the actual case on which this problem is based, SmithKline challenged the strike. The judge
denied the challenge. On SmithKline’s appeal, the U.S. Court of Appeals for the Ninth Circuit held
that the equal protection clause prohibits discrimination based on sexual orientation in jury
selection and requires that heightened scrutiny be applied to equal protection claims involving
sexual orientation. The appellate court remanded the case for a new trial.
1–4. Procedural Due Process. Robert Brown applied for admission to the University of Kansas School
of Law. Brown answered “no” to questions on the application asking if he had a criminal history and
acknowledged that a false answer constituted “cause for . . . dismissal.” In fact, Brown had criminal
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accessible website, in whole or in part.
, Solution and Answer Guide: Miller, Business Law Today, The Essentials Text & Summarized Cases, 14e, 9798214045962; Chapter 01: Legal and
Constitutional Foundations of Business
convictions for domestic battery and driving under the influence. He was accepted for admission to the
school. When school officials discovered his history, however, he was notified of their intent to dismiss
him and was given an opportunity to respond in writing. He demanded a hearing. The officials refused to
grant Brown a hearing and then expelled him. Did the school’s actions deny Brown due process?
Discuss. [Brown v. University of Kansas, 599 Fed.Appx. 833 (10th Cir. 2015)] (See Due Process, Equal
Protection, and Privacy.)
Solution: No. The school’s actions did not deny Brown due process. Procedural due process
requires that any government decision to take life, liberty, or property must be made fairly. The
government must give a person proper notice and an opportunity to be heard. The government
must use fair procedures—the person must have at least an opportunity to object to a proposed
action before a fair, neutral decision maker.
In this problem, Robert Brown applied for admission to the University of Kansas School of Law.
He answered “no” to the questions on the application about criminal history and acknowledged
that a false answer constituted cause for dismissal. He was accepted for admission to the school.
But Brown had previous criminal convictions for domestic battery and driving under the influence.
When school officials discovered this history, Brown was notified of their intent to dismiss him and
given an opportunity to respond in writing. He demanded a hearing. The officials refused, and
expelled him. As for due process, Brown knew he could be dismissed for false answers on his
application. The school gave Brown notice of its intent to expel him and gave him an opportunity
to be heard (in writing). Due process does not require that any specific set of detailed procedures
be followed as long as the procedures are fair.
In the actual case on which this problem is based, Brown filed a suit in a federal district court
against the school, alleging denial of due process. From a judgment in the school’s favor, Brown
appealed. The U.S. Court of Appeals for the Tenth Circuit affirmed, concluding that “the
procedures afforded to Mr. Brown were fair.”
1–5. The Commerce Clause. Regency Transportation, Inc., operates a freight business throughout the
eastern United States. Regency maintains its corporate headquarters, four warehouses, and a
maintenance facility and terminal location for repairing and storing vehicles in Massachusetts. All of the
vehicles in Regency’s fleet were bought in other states. Massachusetts imposes a use tax on all
taxpayers subject to its jurisdiction, including those that do business in interstate commerce, as Regency
does. When Massachusetts imposed the tax on the purchase price of each tractor and trailer in
Regency’s fleet, the trucking firm challenged the assessment as discriminatory under the commerce
clause. What is the chief consideration under the commerce clause when a state law affects interstate
commerce? Is Massachusetts’s use tax valid? Explain. [Regency Transportation, Inc. v. Commissioner of
Revenue, 473 Mass. 459, 42 N.E.3d 1133 (2016)] (See The Constitutional Powers of Government.)
Solution: Yes. Massachusetts’s use tax is valid under the commerce clause. When a state
regulation that affects interstate commerce is challenged under the commerce clause, the court
weighs the state’s interest in regulating the matter against the burden that the regulation places
on interstate commerce. Because a court balances the interests involved, it is difficult to predict
the outcome in a particular case. State laws that alter conditions of competition to favor in-state
interests over out-of-state competitors in a market are considered discriminatory and usually
invalidated.
In this problem, Regency Transportation, Inc., operates a freight business throughout the eastern
United States. Regency maintains a headquarters, warehouses, and other facilities in
Massachusetts. All of the vehicles in Regency’s fleet were bought in other states. When
Massachusetts imposed a use tax on the purchase price of each tractor and trailer in Regency’s
fleet, the trucking firm challenged the assessment as discriminatory under the commerce clause.
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 8
accessible website, in whole or in part.
Business Law Today - The Essentials Text & Summarized Cases 14th
Edition Miller
Important Notes
The file includes the complete test bank, organized chapter by chapter.
A sample of selected pages has been provided for preview.
All available appendices and Excel files (if included in the original resources) are
provided.
We continuously update our files to ensure you receive the latest and most accurate
editions.
New editions are added regularly – stay connected for updates!
Purchase Guarantee
If you believe you have purchased the wrong file, don’t worry. Contact us anytime and we
will gladly replace it with the correct version.
Contact Email:
,Solution and Answer Guide: Miller, Business Law Today, The Essentials Text & Summarized Cases, 14e, 9798214045962; Chapter 01: Legal and
Constitutional Foundations of Business
Solution and Answer Guide
Miller, Business Law Today, The Essentials Text & Summarized Cases, 14e, 9798214045962;
Chapter 01: Legal and Constitutional Foundations of Business
TABLE OF CONTENTS
Critical Thinking Questions in Features ................................................................................... 1
Landmark in the Law—Application to Today’s World ................................................................ 1
Adapting the Law to the Online Environment—Critical Thinking ............................................... 2
Ethical Issue—Value Judgment.................................................................................................2
Building Analytical Skills—Result and Reasoning ..................................................................... 2
Critical Thinking Questions in Cases........................................................................................3
Case 1.1—Critical Thinking ....................................................................................................... 3
Case 1.2—Critical Thinking ....................................................................................................... 4
Case 1.3—Critical Thinking ....................................................................................................... 4
Chapter Review ........................................................................................................................... 5
Practice and Review..................................................................................................................5
Practice and Review: Debate This.............................................................................................6
Issue Spotters............................................................................................................................6
Business Scenarios and Case Problems...................................................................................7
Critical Thinking and Writing Assignments .............................................................................. 12
Critical Thinking Question in Appendix Exhibit 1A–3 ........................................................... 13
A Sample Court Case..............................................................................................................13
CRITICAL THINKING QUESTIONS IN FEATURES
LANDMARK IN THE LAW—APPLICATION TO TODAY’S WORLD
1. The equitable maxims listed here underlie many of the legal rules and principles that are commonly
applied by the courts today— and that you will read about in this book.
For instance, in the contracts materials, you will read about the doctrine of promissory estoppel.
Under this doctrine, a person who has reasonably and substantially relied on the promise of another
may be able to obtain some measure of recovery, even though no enforceable contract exists. The
court will estop (bar) the one making the promise from asserting the lack of a valid contract as a
defense. The rationale underlying the doctrine of promissory estoppel is similar to that expressed in
which of the maxims just listed?
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 1
accessible website, in whole or in part.
,Solution and Answer Guide: Miller, Business Law Today, The Essentials Text & Summarized Cases, 14e, 9798214045962; Chapter 01: Legal and
Constitutional Foundations of Business
Solution: The rationale underlying the doctrine of promissory estoppel is similar to that
expressed in the fourth and fifth equitable maxims listed in the feature. The fourth maxim
supports the notion that the law should not be applied unfairly just because the law does not
provide a solution to a particular problem. The fifth maxim holds that those administering the law
should not get bogged down in technicalities when doing so leads to unfairness or injustice. In a
perfect legal world, then, a lack of a valid contract should not punish a party who has justice and
fairness on their side.
ADAPTING THE LAW TO THE ONLINE ENVIRONMENT—CRITICAL THINKING
1. One observer has said that the American legal system should evaluate social media companies
based on how “they affect us as citizens, not only [on how] they affect us as consumers.” What is
your opinion of this statement?
Solution: The person who made this statement clearly sees a “citizen” as having different
motivations and concerns than a “consumer.” Presumably, a citizen is mostly concerned with the
good of society as a whole, and therefore would be open to the idea of government regulation
that restricted the negative influence of social media, regardless of the First Amendment. A
consumer, by contrast, would be primarily concerned with having a marketplace that offers the
widest possible varieties of freedom (of choice, of speech, etc.) and would for that reason be
opposed to government regulation of social media. There is, however, an argument to be made
that the citizens that make up a society benefit when the marketplace of ideas—whether they are
subjectively “positive” or “negative”—is allowed to flourish in the absence of government
regulation.
ETHICAL ISSUE—VALUE JUDGMENT
1. What are the pros and cons of a workplace policy that prohibits employees from discussing politics
while on the job?
Solution: The pros of a policy that prohibits employees from discussing politics while at work
would seem to be increased workplace harmony. Politics are a touchy subject. It is reasonable for
management to conclude that arguments over political views can negatively impact employee
relationships, which might have a negative impact on productivity, which would definitely have a
negative impact on the bottom line.
BUILDING ANALYTICAL SKILLS—RESULT AND REASONING
1. The Supreme Court ruled that Colorado cannot force Smith to speak in a manner that aligns with
state law but goes against her religious beliefs. In other words, the state’s interest in preventing
discrimination does not outweigh a business owner’s right to free speech. As part of its reasoning, the
Court asserted that Smith was not, in fact, negatively disposed toward same-sex couples. It was their
“message” that she objected to. Why might this distinction be legally important in these types of
cases?
Solution: In his majority opinion for this case, Associate Justice Neil Gorsuch explained that
while Lorie Smith was willing to serve gay customers, she was not willing to allow her website to
be used as a platform of gay marriage, which she believed “contradicts biblical truth.” In doing so,
Gorsuch drew a distinction between a business discriminating against a customer based on the
customer’s status, which is not allowed, and a business discriminating against the message a
customer represents, which, according to this ruling, is allowed.
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Critics of this Supreme Court decision rejected this line of legal reasoning as being a distinction
without a difference. Whether Smith is objecting to the “message” promoted by homosexual
couples or the homosexual couples themselves, the result is the same. Many states have public
accommodation laws similar to Colorado’s, and civil rights activists worry that the Court has given
American businesses a broad First Amendment excuse to refuse service based on a customer’s
race, religion, gender, or sexual orientation.
CRITICAL THINKING QUESTIONS IN CASES
CASE 1.1—CRITICAL THINKING
1. Cultural. What “dangerous conditions” might have prompted the city to enact the ordinances at issue
in this case? Why?
Solution: As noted in the facts of the case, both ordinances at issue included an extensive
rationale for their adoption, stating essentially that a geographically small city has the right to
restrict a business from operating within the city when the restriction is for the safety of the city’s
citizens and visitors.
The appellate court referred to “the dangerous conditions” created by the irresponsible driving
behavior of scooter renters, especially at night, amplified by the lack of training, supervision, and
oversight practiced by the rental scooter businesses that “existed throughout the entire city” as
the basis for the city’s regulation. The court paraphrased the expressive clauses in the
ordinances more specifically:
• The City is geographically small and crowded and is being besieged by inexperienced scooter
drivers seeking amusement and driving in a dangerous manner.
• The City is a tourist destination frequented by tens of thousands, and its streets are congested
by scooters that are being driven illegally and in areas where they are not permitted.
• The City’s residents and visitors are put in dangerous situations as a result of the improper use
of scooters, especially at night.
• City businesses have complained about numerous trespasses on their property by people
driving scooters while being disruptive
• City police have been unable to cope with the situation and essential police resources are being
drained.
• The City has been unable to control the situation through less restrictive means.
2. Economic. What is the likely economic impact of the ordinances on the businesses in the city?
Discuss.
Solution: With the exception of the scooter rental businesses, the effect on the city’s economy is
likely to be positive in light of the result in the Classy case.
The answer to the previous question contains the reasons in support of this outlook. With a ban
on motorized scooters, the “small and crowded” city is not likely to be “besieged by inexperienced
scooter drivers seeking amusement and driving in a dangerous manner.” The streets, filled with
“tens of thousands” of tourists will not be “congested by scooters that are being driven illegally
and in areas where they are not permitted.” Residents and visitors will not be “put in dangerous
situations as a result of the improper use of scooters, especially at night.” There will be an end to
the “numerous trespasses” on business property “by people driving scooters while being
disruptive.” And “essential police resources” will not be “drained,” at least not by irresponsible
scooter drivers and riders. All of which bodes well for business.
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CASE 1.2—CRITICAL THINKING
1. What If the Facts Were Different? If this case had involved a small, private retail business that did
not advertise nationally, would the result have been the same? Why or why not?
Solution: It is not likely that the result in this case would have been different even if the facts had
involved a small, private retail business that did not advertise nationally. The intended impact of
the decision in Heart of Atlanta was to uphold the constitutionality of the Civil Rights Act of 1964
and the power of Congress to regulate interstate commerce to stop local discriminatory practices.
In the Supreme Court’s opinion, “The power of Congress to promote interstate commerce also
includes the power to regulate the local incidents thereof, including local activities in both the
States of origin and destination, which might have a substantial and harmful effect upon that
commerce.”
Thus, if the case had involved a small, local retail business, the Court would have found
participation in interstate commerce based on the use of a phone, or a Facebook page (or other
online presence), or sales to customers who traveled across state lines—or, as in Wickard v.
Filburn, participation might have been based on any transaction that might otherwise have
occurred in interstate commerce.
CASE 1.3—CRITICAL THINKING
1. Economic. Whose interests are advanced by laws designed to regulate the labeling of plant-based
meat products?
Solution: Certainly, the overriding objective of such laws is to protect the consumer. Indeed, the
stated goal of Louisiana’s Truth in Labeling of Food Products Act is to “protect consumers from
misleading and false labeling of food products that are edible by humans.” It would be naïve,
however, to ignore the role that special interest groups play in getting legislation passed. Here,
critics of the Louisiana statute, including animal rights and environmental groups, pointed out that
the law was supported by “animal agriculture interests,” otherwise known as meat producing
businesses. Presumably, these businesses assumed that a product labeled “veggie burger” was
more appealing to consumers searching for meat alternatives than would have been a product
labeled “veggie puck.” As the court pointed out, however, the Louisiana law has not had this
effect.
2. What If the Facts Were Different? Assume the Louisiana statute explicitly prohibited companies
from labeling plant-based products in a manner that potentially could confuse consumers about the
products’ meat content. Would the court’s ruling likely have been the same? Explain.
Solution: Probably not. In general, under the First Amendment, free speech protections only
apply to commercial speech that is neither misleading nor related to unlawful activity. That is, if
commercial speech is either of these things, it is not protected and can be regulated by the
government. Commercial speech that is potentially misleading is protected by the First
Amendment, but this protection is not absolute. In other words, courts will consider the facts on a
case-by-case basis to determine whether commercial speech that is potentially confusing can be
regulated.
In this case, the district court agreed with Tofurky that the Louisiana law threatened commercial
speech that is only potentially misleading, leading it to find the statute unconstitutional. In
reversing, the appellate court ruled that Louisiana was not, in fact, trying to prohibit potentially
confusing commercial speech. Rather, the law applied only to food labels that were actually and
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intentionally misleading. It is likely that the law’s emphasis on intent was included expressly to
protect it from First Amendment challenges such as the one brought by Tofurky.
CHAPTER REVIEW
PRACTICE AND REVIEW
A state legislature enacted a statute that required any motorcycle operator or passenger on the state’s
highways to wear a protective helmet. Jim Alderman, a licensed motorcycle operator, sued the state to
block enforcement of the law. Alderman asserted that the statute violated the equal protection clause
because it placed requirements on motorcyclists that were not imposed on other motorists. Using the
information presented in the chapter, answer the following questions.
1. Why does this statute raise equal protection issues instead of substantive due process concerns?
Solution: When a law or action limits the liberty of some persons but not others, it may
violate the equal protection clause. Here, because the law applies only to motorcycle
operators and passengers, it raises equal protection issues.
2. What are the three levels of scrutiny that the courts use in determining whether a law violates the
equal protection clause?
Solution: The three levels of scrutiny that courts apply to determine whether the law or
action violates equal protection are (1) strict scrutiny (if fundamental rights are at stake),
(2) intermediate scrutiny (in cases involving discrimination based on gender or
legitimacy), and (3) the “rational basis” test (in matters of economic or social welfare).
3. Which level of scrutiny or test would apply to this situation? Why?
Solution: The court would likely apply the rational basis test, because the statute
regulates a matter of social welfare by requiring helmets. Similar to seat-belt laws and
speed limits, a helmet statute involves the state’s attempt to protect the welfare of its
citizens. Thus, the court would consider it a matter of social welfare and require that it be
rationally related to a legitimate government objective.
4. Under this standard or test, is the helmet statute constitutional? Why or why not?
Solution: The statute is probably constitutional, because requiring helmets is rationally
related to a legitimate government objective (public health and safety). Under the rational
basis test, courts rarely strike down laws as unconstitutional, and this statute will likely
further the legitimate state interest of protecting the welfare of citizens and promoting
safety.
PRACTICE AND REVIEW: DEBATE THIS
1. Legislation aimed at protecting people from themselves concerns the individual as well as the public
in general. Protective helmet laws are just one example of such legislation. Should individuals be
allowed to engage in unsafe activities if they choose to do so?
Solution: Both England and the U.S. legal systems were constructed on the common law system.
The doctrine of stare decisis has always been a major part of this system—courts should follow
precedents when they are clearly established, except when compelling reasons dictate otherwise.
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Even though more common law is being turned into statutory law, the doctrine of stare decisis is still
valid. After all, statutes often must be interpreted by courts. What better basis for judges to render
their decisions than by basing them on precedents related to the subject at hand?
In contrast, some students may argue that the doctrine of stare decisis is passé. There is certainly
less common law governing, say, environmental law than there was 100 years ago. Given that federal
and state governments increasingly are regulating more aspects of commercial transactions between
merchants and consumers, perhaps the courts should simply stick to statutory language when
disputes arise.
ISSUE SPOTTERS
1. The First Amendment to the U.S. Constitution provides protection for the free exercise of religion. A
state legislature enacts a law that outlaws all religions that do not derive from the Judeo-Christian
tradition. Is this law valid within that state? Why or why not? (See Sources of American Law.)
Solution: No. The U.S. Constitution is the supreme law of the land, and applies to all
jurisdictions. A law in violation of the Constitution (in this question, the First Amendment to the
Constitution) will be declared unconstitutional.
2. South Dakota wants its citizens to conserve energy. To help reduce consumer consumption of electricity,
the state passes a law that bans all advertising by power utilities within the state. What argument could the
power utilities use as a defense to the enforcement of this state law? (See Business and the Bill of Rights.)
Solution: Even if commercial speech is neither related to illegal activities nor misleading, it may
be restricted if a state has a substantial interest that cannot be achieved by less restrictive
means. In this situation, however, the interest in energy conservation is substantial, but it could
be achieved by less restrictive means. That would be the utilities’ defense against the
enforcement of this state law.
BUSINESS SCENARIOS AND CASE PROBLEMS
1–1. Binding versus Persuasive Authority. A county court in Illinois is deciding a case involving an
issue that has never been addressed before in that state’s courts. The Iowa Supreme Court, however,
recently decided a case involving a very similar fact pattern. Is the Illinois court obligated to follow the
Iowa Supreme Court’s decision on the issue? If the United States Supreme Court had decided a similar
case, would that decision be binding on the Illinois court? Explain. (See The Common Law.)
Solution: A decision of a court is binding on all inferior courts. Because no state’s court is inferior
to any other state’s court, no state’s court is obligated to follow the decision of another state’s
court on an issue. The decision may be persuasive, however, depending on the nature of the
case and the particular judge hearing it. A decision of the United States Supreme Court on an
issue is binding, like the decision of any court, on all inferior courts. The United States Supreme
Court is the nation’s highest court, however, and thus, its decisions are binding on all courts,
including state courts.
1–2. Sources of Law. This chapter discussed a number of sources of American law. Which source of law
takes priority in the following situations, and why? (See Sources of American Law.)
1. A federal statute conflicts with the U.S. Constitution.
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Solution: The U.S. Constitution—The U.S. Constitution is the supreme law of the land. A
law in violation of the Constitution, no matter what its source, will be declared
unconstitutional and will not be enforced.
2. A federal statute conflicts with a state constitutional provision.
Solution: The federal statute—Under the U.S. Constitution, when there is a conflict
between a federal law and a state law, the state law is rendered invalid.
3. A state statute conflicts with the common law of that state.
Solution: The state statute—State statutes are enacted by state legislatures. Areas not
covered by state statutory law are governed by state case law.
4. A state constitutional amendment conflicts with the U.S. Constitution.
Solution: The U.S. Constitution—State constitutions are supreme within their respective
borders unless they conflict with the U.S. Constitution, which is the supreme law of the
land.
1–3. Equal Protection. Abbott Laboratories licensed SmithKline Beecham Corp. to market an Abbott
human immunodeficiency virus (HIV) drug in conjunction with one of SmithKline’s drugs. Abbott then
increased the price of its drug fourfold, forcing SmithKline to increase its prices and thereby driving
business to Abbott’s own combination drug. SmithKline filed a suit in a federal district court against
Abbott. During jury selection, Abbott struck the only self-identified gay person among the potential jurors.
(The pricing of HIV drugs is of considerable concern in the LGBTQ+ community.) Could the equal
protection clause be applied to prohibit discrimination based on sexual orientation in jury selection?
Discuss. [SmithKline Beecham Corp. v. Abbott Laboratories, 740 F.3d 471 (9th Cir. 2014)] (See Due
Process, Equal Protection, and Privacy.)
Solution: Yes. The equal protection clause can be applied to prohibit discrimination based on
sexual orientation in jury selection. The appropriate level of scrutiny would be intermediate
scrutiny. Under the equal protection clause of the Fourteenth Amendment, the government
cannot enact a law or take another action that treats similarly situated individuals differently. If it
does, a court examines the basis for the distinction. Intermediate scrutiny applies in cases
involving discrimination based on gender. Under this test, a distinction must be substantially
related to an important government objective.
Gays and lesbians were long excluded from participating in our government and the privileges of
citizenship. A juror strike on the basis of sexual orientation tells the individual who has been
struck, as well as the trial participants and the general public, that the judicial system still treats
gays and lesbians differently. This deprives these individuals of the opportunity to participate in a
democratic institution on the basis of a characteristic that has nothing to do with their fitness to
serve.
In the actual case on which this problem is based, SmithKline challenged the strike. The judge
denied the challenge. On SmithKline’s appeal, the U.S. Court of Appeals for the Ninth Circuit held
that the equal protection clause prohibits discrimination based on sexual orientation in jury
selection and requires that heightened scrutiny be applied to equal protection claims involving
sexual orientation. The appellate court remanded the case for a new trial.
1–4. Procedural Due Process. Robert Brown applied for admission to the University of Kansas School
of Law. Brown answered “no” to questions on the application asking if he had a criminal history and
acknowledged that a false answer constituted “cause for . . . dismissal.” In fact, Brown had criminal
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convictions for domestic battery and driving under the influence. He was accepted for admission to the
school. When school officials discovered his history, however, he was notified of their intent to dismiss
him and was given an opportunity to respond in writing. He demanded a hearing. The officials refused to
grant Brown a hearing and then expelled him. Did the school’s actions deny Brown due process?
Discuss. [Brown v. University of Kansas, 599 Fed.Appx. 833 (10th Cir. 2015)] (See Due Process, Equal
Protection, and Privacy.)
Solution: No. The school’s actions did not deny Brown due process. Procedural due process
requires that any government decision to take life, liberty, or property must be made fairly. The
government must give a person proper notice and an opportunity to be heard. The government
must use fair procedures—the person must have at least an opportunity to object to a proposed
action before a fair, neutral decision maker.
In this problem, Robert Brown applied for admission to the University of Kansas School of Law.
He answered “no” to the questions on the application about criminal history and acknowledged
that a false answer constituted cause for dismissal. He was accepted for admission to the school.
But Brown had previous criminal convictions for domestic battery and driving under the influence.
When school officials discovered this history, Brown was notified of their intent to dismiss him and
given an opportunity to respond in writing. He demanded a hearing. The officials refused, and
expelled him. As for due process, Brown knew he could be dismissed for false answers on his
application. The school gave Brown notice of its intent to expel him and gave him an opportunity
to be heard (in writing). Due process does not require that any specific set of detailed procedures
be followed as long as the procedures are fair.
In the actual case on which this problem is based, Brown filed a suit in a federal district court
against the school, alleging denial of due process. From a judgment in the school’s favor, Brown
appealed. The U.S. Court of Appeals for the Tenth Circuit affirmed, concluding that “the
procedures afforded to Mr. Brown were fair.”
1–5. The Commerce Clause. Regency Transportation, Inc., operates a freight business throughout the
eastern United States. Regency maintains its corporate headquarters, four warehouses, and a
maintenance facility and terminal location for repairing and storing vehicles in Massachusetts. All of the
vehicles in Regency’s fleet were bought in other states. Massachusetts imposes a use tax on all
taxpayers subject to its jurisdiction, including those that do business in interstate commerce, as Regency
does. When Massachusetts imposed the tax on the purchase price of each tractor and trailer in
Regency’s fleet, the trucking firm challenged the assessment as discriminatory under the commerce
clause. What is the chief consideration under the commerce clause when a state law affects interstate
commerce? Is Massachusetts’s use tax valid? Explain. [Regency Transportation, Inc. v. Commissioner of
Revenue, 473 Mass. 459, 42 N.E.3d 1133 (2016)] (See The Constitutional Powers of Government.)
Solution: Yes. Massachusetts’s use tax is valid under the commerce clause. When a state
regulation that affects interstate commerce is challenged under the commerce clause, the court
weighs the state’s interest in regulating the matter against the burden that the regulation places
on interstate commerce. Because a court balances the interests involved, it is difficult to predict
the outcome in a particular case. State laws that alter conditions of competition to favor in-state
interests over out-of-state competitors in a market are considered discriminatory and usually
invalidated.
In this problem, Regency Transportation, Inc., operates a freight business throughout the eastern
United States. Regency maintains a headquarters, warehouses, and other facilities in
Massachusetts. All of the vehicles in Regency’s fleet were bought in other states. When
Massachusetts imposed a use tax on the purchase price of each tractor and trailer in Regency’s
fleet, the trucking firm challenged the assessment as discriminatory under the commerce clause.
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