Understanding the Legal Environment of Business: Constitutions, Courts, and Jurisdiction -, Study notes of Business and Labour Law

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Law and the Key Functions of the Legal System  In the legal environment of business, law refers to the rules, standards, and principles that define the behavioral boundaries for business activities.  Nations have both formal rules, that is, what are commonly called laws, and informal rules that come from a society’s history, customs, commercial practices, and ethics. Improving Social Stability by Influencing Behavior o The legal system is a major institution that helps define acceptable social behavior. o The law limits activities that are detrimental to the “public interest”. o Different societies use the law to enforce different social norms. Conflict Resolution o A critical function of the law is dispute resolution. o A formal mechanism for the resolution of disputes is the court system, which is used for both private disputes between members of society and public disputes between individuals and the government. Social Stability and Change o Every society is shaped by its values and customs; law plays a role in maintaining the social environment. o The legal system provides a way to bring about changes in “acceptable” behavior.  Ex. Gay marriage, Jim Crow Laws, alcohol use, etc.  Major changes in law in regards to these issues happen slowly.
Sources of Law in the United States Constitutions o A constitution is the fundamental law of a nation; it establishes and limits the powers of government.  A constitution need not be a written document, but it usually is. The US Constitution  The US constitution is the oldest written constitution in force in the world.  It is mostly made up of general principles in terms of setting forth the general organization, powers, and limits of the federal government.  It includes a division of the legislative, executive, and judicial branches referred to as the separation of powers.  The separation of powers means that each branch of the government has functions to perform that can be checked by other branches. State Constitutions  The powers and structures of all state governments are based on written constitutions.  The constitutions specify how state officials are chosen and removed, how laws are passed, how the court systems run, and how finances and revenues are paid and collected.  Each state’s constitution is the highest form of law for that state, although the federal Constitution can override the state constitutions. Legislatures and Statutes o Congress and state legislatures are the sources of statutory law. o Statutes make up much of the law that significantly affects business behavior. o Federal courts may review statues passed by Congress to ensure that they do not violate the US Constitution.  If as state legislature enacts a statute that violates the US Constitution, and the state court doesn’t strike it down, it will be stricken down by a federal court. State Legislatures  Each state has lawmaking bodies similar to Congress in their functions and procedures.  All states (except Nebraska) have a two-part legislature containing a House of Representatives and a Senate.  The organization of law can be thought of in several ways, such as whether it originated from a constitution, a legislative body, or the judiciary.  It is common to classify law on the basis of whether is it public/private, civil/criminal, or procedural/substantive. o Laws usually fall into more than one classification. Public and Private Law o Public law concerns the legal relationship between members of society (businesses and individuals) and the government.  Public law includes statutes enacted by Congress and state legislatures and regulations issued by administrative agencies.  Examples: administrative law, criminal law, labor law, environmental law, securities regulation o Private law sets forth rules governing the legal relationships among members of society.  It helps to resolve disputes and to provide a way for the values and customs of society to influence law.  Unlike public law, which at times makes major changes in legal rules, private law tends to be quite stable and changes slowly.  Examples: agency law, contract law, tort law, partnership law Civil and Criminal Law o When a legislative body enacts a statute, it decides whether the law is to be civil, criminal, or both. o Criminal law concerns legal wrongs or crimes committed against the state.  As determined by federal or state statute, a crime is classified as a felony or a misdemeanor.  A person found guilty of a criminal offense may be fined, imprisoned, or both.  The trial court much find that the evidence presented showed beyond a reasonable doubt that the person committed the crime in order to find a person guilty.  Examples: simple assault, larceny, trespassing, homicide, robbery o Civil law is concerned with the rights and responsibilities that exist among members of society or between individuals and the government in noncriminal matters.  A person found liable for a civil wrong may be required to pay money damages to the injured party, to do or refrain from doing a specific act, or both.  The jury must find that the preponderance of the evidence favored the injured party.  Examples: contract law, battery, trespassing, medical malpractice Substantive and Procedural Law o Substantive law includes common law and statutory law that define and establish legal rights and regulate behavior. o Procedural law determines how substantive law is enforced through the courts by determining how a lawsuit begins, what documents need to be filed, which court can hear the case, how the trial proceeds, and so on. Chapter 2: The Court Systems Madi Ralston
The Court Systems  Over many years, the federal court system developed into a three- level system.  It consists of the US district courts, the US court of appeals, and the US Supreme Court. o In addition, there are specialized courts and each court has its own role within the federal court system. Federal Judges o Federal judges are nominated by the president and confirmed by a majority vote in the US Senate. o They enjoy a lifetime appointment.  The writers of the Constitution gave federal judges job security because they wanted to guarantee that judges would be independent and free from the pressure of politics. State Judges o State judges are chosen by a variety of methods; they may be elected, appointed, or chosen by a method that mixes the election and appointment processes. o The judge selected then serves until the next election, at which time the public is asked to vote for or against him.  This system for selecting judges is referred to as the Missouri System. o In contrast to the position enjoyed by federal judges, most state judges serve for a fixed term.  Only Rhode Island provides a lifetime term of office. Judicial Immunity o Under the doctrine of judicial immunity, a judge is absolutely immune from suit for damages for judicial acts.  Without this rule, judges could fear being sued by parties unhappy with their judicial decisions. Organization of the Court Systems o Both state and federal court systems have lower courts of original jurisdiction, where disputes are first brought and tried, and courts of appellate jurisdiction, where the decisions of a lower court may be taken for review.  The courts of general jurisdiction have authority to decide almost any kind of dispute and are able to grant virtually every time of relief.  Courts of limited or special jurisdiction include municipal courts, justice of the peace courts, and other more specialized courts.  The jurisdiction of the municipal courts is similar to that of the district courts, except that municipal courts typically hear claims that involve less money.  On appeal, the parties will get a new trial or, in legal terminology, a trial de novo. State Courts of Appellate Jurisdiction o Every judicial system allows the review of trial court decisions by a court with appellate jurisdiction. Rule of Civil Procedure o From the moment the plaintiff – the party who claims to have suffered an injury that the law can remedy – brings an action, a lawsuit is governed by detailed procedural rules. o The rules also control how the parties to the dispute – the plaintiff and the defendant (the party who allegedly injured the plaintiff) – present evidence and arguments in support of their positions. o Although the states are free to develop their own procedural rules, most have adopted the Federal Rules of Civil Procedure or rules similar to them. Jurisdiction  The literally meaning of the term jurisdiction is “the power to speak of the law”.  A court’s jurisdiction defines the limits within which it may declare, administer, or apply the law.  If a court should rule in a particular case and it is later determined that jurisdiction was lacking, the judgment of that court will be declared null and void upon appeal.  Without jurisdiction, a court cannot exercise authority. Subject-Matter Jurisdiction o Subject-matter jurisdiction is created by a constitution or a statute regarding the types of disputes a court can accept to resolve. In the Federal Courts  The federal courts may hear only those cases within the judicial power of the United States.  That is, federal courts have the judicial power to hear cases involving a federal question.  When federal jurisdiction is based on the parties involved, most of the litigation is generated by cases in which the United States is a party to the suit or by cases involving citizens of different states.  The purpose for allowing federal jurisdiction when a dispute arises between citizens of different states – referred to as diversity-of-citizenship or diversity jurisdiction – is to provide a neutral forum for handling such disputes.  To establish federal jurisdiction in a diversity case, the parties must also show two things: that they are from different states and that the amount in controversy is more than $75,000. Personal Jurisdiction o Once it is established that the court has subject-matter jurisdiction, the plaintiff must meet the personal jurisdiction requirements. o A court’s power over the person of the defendant is referred to as in personam jurisdiction.  The defendant is served with a summons, a notice of the lawsuit; that is, after selecting the appropriate court, the plaintiff must properly notify the defendant of the action filed by service of process.  The court will issue a default judgment against a defendant who fails to appear. o Service of process is usually achieved by personal service. Jurisdiction over Out-of-State Defendants  If both parties to a lawsuit are residents of the same state, the courts of the state clearly have jurisdiction over both persons.  The most obvious method for obtaining in personam jurisdiction over nonresident defendants is to serve them with process while they are within the state.  The nonresident defendant need only be passing through the state to be legally served with a summons.  While it would seem as if defendants could avoid lawsuits by staying out of state, often the court can still exert jurisdiction.  If the defendant committed a wrong, such as causing an automobile accident within the court’s territorial boundaries, or has done business within the state, the court can exercise jurisdiction under the authority of the state’s long-arm statute. Jurisdiction over Out-of-State Business Defendants  Long-arm statutes are aimed primarily at nonresident businesses.  Juries tend to be hostile to business defendants, viewing them as more powerful, wealthy, and unfair, an entity against whom the state’s citizens need protection.  Courts primarily have jurisdiction over a corporation who is one of the following:  The court is in the state in which the corporation was incorporated.  The court is in the state where the corporation has its headquarters or its main plant.  The court is in a state in which the corporation is doing business. Jurisdiction Over Property o In some controversial or well-publicized cases, defendants request a change of venue from the court where the plaintiff filed the case. Forum Non Conveniens o Related to venue is the doctrine forum non conveniens. o A party asks the court to transfer a case to another court, even though the original court has jurisdiction, because there is another, more convenient court that could hear the case. Chapter 3: Trials and Resolving Disputes Madi Ralston
Basic Trial Procedures  A distinctive element of our judicial system is that it is an adversary system of justice. o It requires the parties to represent themselves, usually through their lawyers, and to argue their positions before a neutral court.  The court applies legal rules to the facts that the parties establish under rules of procedure and evidence. Pleadings Stage o To begin a lawsuit, the plaintiff files the first pleading, known as the complaint. o In the complaint, the plaintiff must state the basis of the court’s subject-matter jurisdiction and jurisdiction over the parties to the dispute. o The plaintiff then gives notice to the defendant by service of process, including a summons. o Pleadings are the formal statements made to the court by the parties to a case that lists their claims and defenses. o The complain contains statements:  Alleging the essential facts necessary for the court to take jurisdiction.  Of the facts necessary to claim that the plaintiff is entitled to a remedy.  Of the remedy the plaintiff is seeking. Responses to the Complaint o Following the service of the plaintiff’s complaints, the defendant must file an answer.  If the defendant does not respond, the court will presume the claims of the plaintiff are true and grant the plaintiff the relief requested in the complaint. o The defendant may file a motion to dismiss, an answer with or without an affirmative defense, and/or a counterclaim. Motion to Dismiss  A motion to dismiss by the defendant asks the court to dismiss the case because it does not have jurisdiction over either the subject matter of the dispute or the defendant’s person.  The defendant may also file a motion to dismiss for failure to state a claim or a demurrer.  This is an assertion that even if the facts asserted are true, the injury claimed by the plaintiff is one for which the law furnishes no remedy. Answer  If the defendant’s motion to dismiss is denied, or if the defendant does not make sure a motion, the defendant must file an answer with the court.  The defendant will admit, deny, or say that it does not know the truth, with respect to each assertion of the plaintiff.  An Affirmative defense is when the defendant admits to the facts claimed by the plaintiff, but offers additional facts he asserts constitute a defense – a legal excuse – to the plaintiff’s complaint. Counterclaim  The defendant’s claim is a counterclaim and may be based on the same events that the plaintiff bases the complaint on.  The counterclaim is a complaint by the defendant, and the plaintiff must respond to it just as the defendant responded to the original complaint. Reply  When the defendant files a counterclaim, the plaintiff answers with a reply, which is an answer to the counterclaim. Discovery State: Obtaining Information before Trial o After the initial exchange of pleadings, litigation enters the discovery stage. o The process of obtaining information is known as discovery. Purpose of Discovery  The disruption of business caused by having executive away from work for several days to prepare for and give a deposition is one more reason out-of-court settlements are likely. Summary Judgment  At the close of discovery, either party may move for a summary judgment.  The key is not that there are no differences over what happened but that, despite those differences, when the court looks at the undisputed facts, it can apply the law to the facts and resolve the dispute. Pretrial Conference  Either party or the court may request a pretrial conference.  These commonly held conferences normally involve only the attorneys and the judge.  Judges urge the parties to focus on key issue sand to attempt to reach and out-of-court settlement. Trial Stage o After discovery is complete, if there has been no dismissal, summary judgment, or settlement, the dispute is set for trial. The Jury  In criminal cases, there is a right to a jury trial.  In the federal court system, this right is guaranteed if the amount in controversy exceeds $20 and is a common-law claim.  There is no right to a jury trial when a private plaintiff request an equitable remedy, rather than money damages, or in civil cases in which the government seeks non-criminal penalties for violations of federal law. Decision to Use a Jury  The right to a jury trial does not have to be exercised  Prosecutors often request a jury trial in criminal cases even when defendants do not. Selection of the Jury  Jury selection begins when the clerk of the court sends a notice instructing citizens to appear on a particular day for jury duty.  The people called are in a jury pool.  The process used to select jury members is called voir dir.  The purpose is to determine whether a prospective juror is likely to be so biased that he or she could not reach a fair decision based on the evidence presented.  Attorneys are also allowed a limited number of challenges that permit them to reject prospective jurors without stating a reason. The Trial  Although judges have some freedom to change the structure of a trial, most follow the general order.  In nonjury trials, the judge may put more limits on the attorneys’ opening statements and closing arguments, but is likely to put fewer restrictions on witnesses’ testimony. Start of the Trial  After the jurors have been sworn in, both attorneys make opening statements.  The attorneys tell the jury what the crucial facts are and how they will prove that those facts support their position. Presentation of Direct Testimony  Following the opening statement, the plaintiff’s attorney begins to call witnesses and present evidence.  Each witness is first questioned by the plaintiff’s attorney on direct examination.  The defendant’s attorney then examines that witness on cross-examination. Closing Arguments  Before the case goes to the jury, the attorneys each present a closing argument.  They summarize the evidence for the jury in a manner most favorable to their case. Instructions to the Jury  Before the jury retires to deliberate and reach a verdict, the judge gives the jury instructions, or charges.  After the instructions, the jurors are placed in the custody of the bailiff or other court official, who will see that they remain together and that there is no misconduct. Reaching a Verdict  The jury deliberates to reach an agreement and find for the plaintiff or the defendant.  In a civil trial, the parties must prove their contentions to the jury by a preponderance of the evidence.  If jurors are unable to reach a unanimous decision, the jury is said to be hung, and a new trial before a different jury may be necessary.  The jury is discharged and a mistrial is declared.  After the jury has reached a verdict, the verdict is read in court by the foreman of the jury or by the judge or the clerk of the court. Motions for a Verdict  The parties may ask the judge to issue a favorable verdict that makes jury deliberation unnecessary.  Most common is a motion for a directed verdict or a motion for judgment as a matter of law.  A preliminary injunction is a longer term court order, usually in force until the dispute is resolved. o An irreparable injury is generally one for which a payment of money would be insufficient to compensate the harmed party.  A permanent injunction is a final court order, issued after the conclusion of the trial or as part of a settlement agreement. o This is usually in force indefinitely. Appellate Stage o The decision in a case may be appealed if one of the parties believes an error of law was made during the trial. o Bases for appeal include failure by the trial judge to admit or exclude certain evidence, improper instructions being given to the jury, and the granting or denying of motions to dismiss the case. o Appellate courts ensure that the trial court judge correctly applied the law. Arguments before Appeals Courts  The parties present their arguments to the appellate court through written briefs and oral arguments, which focus on the law, not the facts of the case.  It has the power to affirm, reverse, or modify the judgment of the trial court. Decisions by Appeals Courts  An appellate court’s majority decision is referred to as the court’s majority opinion.  A judge may also write a concurring opinion, if he agrees with the outcome but has different reasons or wishes to make an additional argument, or a dissenting opinion, if she disagrees with the decision of the majority.  In such situations, the appeals court is likely to remand the case – return the case – to the trial court for retrial. Enforcement Stage o After a trial, if no appeal is taken or if no further appeal is available, the judgment, or decision, of the court becomes final. o The same dispute cannot be considered again in that or any other forum.  This is considered res judicata—a thing decided by judgment. Enforcing Judgments  When the plaintiff recovers a damage award and the defendant does not pay, the plaintiff can seek a writ of execution.  The writ is a court order to an official, such as the sheriff, to seize the property of the defendant to satisfy the judgment.  Courts may order garnishment of a debtor’s property, which usually involves an order to a third party who owes the debtor money to pay the money to the plaintiff instead.
Alternate Dispute Resolution  Arbitration is the most widely recognized form of alternate dispute resolution (ADR).  ADR consists of various ways to resolve disputes outside of the court system. Arbitration  Arbitration is a process similar to litigation in which two or more persons agree to allow a neutral person or panel to resolve a dispute.  The advantages of using a neutral party, called an arbitrator or arbiter include:  The arbitrator is mutually agreed upon by the parties and has the trust of both parties  Because the arbitrator is usually an expert in the subject matter, less time is needed to educate them about the dispute, which usually results in a faster resolution of the matter.  Because arbitrators do not usually issue public decisions or hold public hearings, the parties can keep the evidence and decision private.  In the Federal Arbitration Act (FAA), Congress states in the strongest terms that agreements to arbitrate must be upheld.  If a parties tries to avoid arbitration, courts are instructed by the FAA to compel and enforce arbitration. The Arbitration Agreement o It is common for parties to provide for arbitration of future disputes by inserting an arbitration clause in a contract. o Arbitration begins when a party files a submission to refer a dispute to arbitration. Selection of Arbitrators  In arbitration, the parties agree on who the arbitrator will be, or they agree to a selection method given the arbitrator rules specified in the arbitration agreement.  Arbitrators are required to be impartial, which means that they must avoid conflicts of interest and should uphold the integrity of the arbitration process as spelled out in codes of ethics. Hearing Procedure  The hearing is normally a closed-door proceeding conducted like a trial but without a trial’s restrictive procedural rules. The Award  After the hearing the arbitrator reaches a decision, called an award.  The arbitrator makes an award based on application of law to the evidence presented.  Besides deciding if one party owes the other party cash, goods, or something else, the arbitrator decides how the parties will split their fee and the administrative fees. Appealing the Award