Global Legal Environment of Business CLASS SLIDES

WHAT ARE THE RULES OF THE GAME? BUSINESS SOCIAL RESPONSIBILITIES EACH OF THE FOLLOWING CRITERIA MUST BE SATISFIED: LAW ETHICS & CONDUCT CODES MORALS ECONOMICS DIFFERING VIEWS REGARDING HOW THE ABOVE CRITERIA SHOULD BE SATISFIED: PROFIT MAXIMIZATION (INVISIBLE HAND/AGENCY) MORAL MINIMUM STAKEHOLDER INTERESTS/WELFARE CORPORATE CITIZENSHIP ADVANTAGES? DISADVANTAGES? WHICH BEST FITS THE CURRENT AND FUTURE BUSINESS ENVIRONMENT?

EACH OF THE FOLLOWING CRITERIA MUST BE SATISFIED:

LAW

ETHICS & CONDUCT CODES

MORALS

ECONOMICS

DIFFERING VIEWS REGARDING HOW THE ABOVE CRITERIA SHOULD BE SATISFIED:

PROFIT MAXIMIZATION (INVISIBLE HAND/AGENCY)

MORAL MINIMUM

STAKEHOLDER INTERESTS/WELFARE

CORPORATE CITIZENSHIP

ADVANTAGES? DISADVANTAGES?

WHICH BEST FITS THE CURRENT AND FUTURE BUSINESS ENVIRONMENT?

BSR DEFINITIONS The only responsibility of business Is to increase profits within the rules of the game. versus Profit is what happens when you do everything else right.

SOCIETY'S REGULATIONS OF BUSINESS OPPORTUNITIES AND MEANS All Opportunities Laws Codes of Conduct Morals (Ethics) Economics All Means

The Social Contract THE LAW IS ONLY A MORAL MINIMUM Gov’t Laws Business & Professional Codes of Ethics Moral Values Within Society Normative Ethics: “ Enlightened Self-interest” Qualitative Quantitative Rights Egoism Duties Utilitarianism Society Business Organizations

“ ENLIGHTENED SELF-INTEREST “ ETHICAL PROBLEM ANALYSIS STEPS WHAT ARE THE RELEVANT FACTS? We need to identify the key factors that shape the situation and raise the ethical issues. WHAT ARE THE ETHICAL ISSUES? We need to define the ethical issues and separate them from other non-ethical issues. Some issues may be broad, systemic issues, others may be corporate issues, and others may be personal issues. WHO ARE THE PRIMARY STAKEHOLDERS? In any given situation, it is possible to develop a seemingly endless list of individuals or groups that may be affected by a given business decision. We need to identify the key individuals or groups affected by such a decision. WHAT ARE THE POSSIBLE ALTERNATIVES? We need to identify the viable courses of action that could be taken.

WHAT ARE THE RELEVANT FACTS?

We need to identify the key factors that shape the situation and raise the ethical issues.

WHAT ARE THE ETHICAL ISSUES?

We need to define the ethical issues and separate them from other non-ethical issues. Some issues may be broad, systemic issues, others may be corporate issues, and others may be personal issues.

WHO ARE THE PRIMARY STAKEHOLDERS?

In any given situation, it is possible to develop a seemingly endless list of individuals or groups that may be affected by a given business decision. We need to identify the key individuals or groups affected by such a decision.

WHAT ARE THE POSSIBLE ALTERNATIVES?

We need to identify the viable courses of action that could be taken.

ENLIGHTENED SELF-INTEREST ETHICAL ANALYSIS CONTINUED WHAT ARE THE ETHICS OF THE ALTERNATIVES? We need to evaluate how each alternative affects the stakeholders and determine how ethical each alternative is in view of the different ethical models discussed. Each model raises a different set of questions and should be addressed in evaluating each alternative. Ultimately the decision should satisfy the company’s “enlightened” long-term self-interests. One definition of such “enlightened self-interest” is that an action is morally correct if it increases benefits for owners without unduly or unjustifiably harming other stakeholders, and these benefits are believed to counterbalance the justifiable harms that may ensue. Your recommended decision or action should satisfy each criteria of this definition of “enlightened self-interest.” WHAT ARE THE PRACTICAL CONSTRAINTS? We need to identify the practical factors that may limit the agent’s ability to implement an alternative or that may make some alternative too difficult or too risky. WHAT ACTIONS SHOULD BE TAKEN? After weighing all of these considerations, we need to determine exactly what steps should be taken to implement the selected alternative. It should be understood that reasonable people may disagree about which alternative should be implemented

WHAT ARE THE ETHICS OF THE ALTERNATIVES?

We need to evaluate how each alternative affects the stakeholders and determine how ethical each alternative is in view of the different ethical models discussed. Each model raises a different set of questions and should be addressed in evaluating each alternative. Ultimately the decision should satisfy the company’s “enlightened” long-term self-interests.

One definition of such “enlightened self-interest” is that an action is morally correct if it increases benefits for owners without unduly or unjustifiably harming other stakeholders, and these benefits are believed to counterbalance the justifiable harms that may ensue.

Your recommended decision or action should satisfy each criteria of this definition of “enlightened self-interest.”

WHAT ARE THE PRACTICAL CONSTRAINTS?

We need to identify the practical factors that may limit the agent’s ability to implement an alternative or that may make some alternative too difficult or too risky.

WHAT ACTIONS SHOULD BE TAKEN?

After weighing all of these considerations, we need to determine exactly what steps should be taken to implement the selected alternative. It should be understood that reasonable people may disagree about which alternative should be implemented

Stakeholder Map External Stakeholders

FIDUCIARY DUTIES DIRECTORS, OFFICERS, CONTROLLING OWNERS, AGENTS, EMPLOYEES, PARTNERS AND ********* THESE DUTIES INCLUDE: GOOD FAITH DUE CARE PERFORMANCE GIVING NOTICE OF ALL INFORMATION LOYALTY BUSINESS OPPORTUNITIES CONFLICTS OF INTERESTS COMPETITION MISUSE OF TRADE SECRETS AND OTHER CONFIDENTIAL INFORMATION DUAL AGENCIES OBEDIENCE ACCOUNTING FOR ALL ASSETS PLUS, THEY MUST COMPLY WITH ALL OTHER TERMS OF THEIR EMPLOYMENT CONTRACTS AND RELEVANT LAWS. BREACH CAN RESULT IN: DISCIPLINE OR TERMINATION PERSONAL LIABILITY SHAREHOLDER DERIVIATIVE LAWSUITS & CONVICTIONS, IF ALSO A CRIME BUT, NOT LIABLE WHEN BUSINESS JUDGMENT RULE APPLIES

DIRECTORS, OFFICERS, CONTROLLING OWNERS, AGENTS, EMPLOYEES, PARTNERS AND *********

THESE DUTIES INCLUDE:

GOOD FAITH

DUE CARE PERFORMANCE

GIVING NOTICE OF ALL INFORMATION

LOYALTY

BUSINESS OPPORTUNITIES

CONFLICTS OF INTERESTS

COMPETITION

MISUSE OF TRADE SECRETS AND OTHER CONFIDENTIAL INFORMATION

DUAL AGENCIES

OBEDIENCE

ACCOUNTING FOR ALL ASSETS

PLUS, THEY MUST COMPLY WITH ALL OTHER TERMS OF THEIR EMPLOYMENT CONTRACTS AND RELEVANT LAWS.

BREACH CAN RESULT IN:

DISCIPLINE OR TERMINATION

PERSONAL LIABILITY

SHAREHOLDER DERIVIATIVE LAWSUITS & CONVICTIONS, IF ALSO A CRIME

BUT, NOT LIABLE WHEN BUSINESS JUDGMENT RULE APPLIES

Generally Unless specifically required to advocate a particular party’s position in a dispute, it is useful to take a judicial approach to analyzing problems. In general, this involves trying to recognize and set aside personal biases to issues in order to start from a position of neutrality. Then be omnipartial in trying to understand and empathize with the positions of the parties and other stakeholder groups. Apply the relevant principles or rules rationally as your means to reaching a final conclusion. Specifically for Legal Critical Thinking Problem Analysis Facts: Thoroughly understand the facts, (but do not restate them in a written answer). Do not add facts. However, if you believe that there are relevant, material factual assumptions that can be reasonably made from the information presented, clearly state those assumptions. In cases with multiple defendants, each defendant should generally be analyzed separately from other defendants. Issues: Identify and clearly define each legal issue that must be resolved. All issues that are relevant must be defined and separately analyzed. Place the issues in the order in which they need to be answered. LEGAL PROBLEM ANALYSIS

Generally

Unless specifically required to advocate a particular party’s position in a dispute, it is useful to take a judicial approach to analyzing problems. In general, this involves trying to recognize and set aside personal biases to issues in order to start from a position of neutrality. Then be omnipartial in trying to understand and empathize with the positions of the parties and other stakeholder groups. Apply the relevant principles or rules rationally as your means to reaching a final conclusion.

Specifically for Legal Critical Thinking Problem Analysis

Facts: Thoroughly understand the facts, (but do not restate them in a written answer). Do not add facts. However, if you believe that there are relevant, material factual assumptions that can be reasonably made from the information presented, clearly state those assumptions. In cases with multiple defendants, each defendant should generally be analyzed separately from other defendants.

Issues: Identify and clearly define each legal issue that must be resolved. All issues that are relevant must be defined and separately analyzed. Place the issues in the order in which they need to be answered.

LEGAL PROBLEM ANALYSIS CONTINUED Rules : For each issue, clearly, specifically and completely state the rule or rules that must be applied to resolve the issue. These must include both the rules that the plaintiff/prosecution must prove, as well as those that the defendant can use to defend. Analysis: Apply the relevant rules for each issue to the facts, objectively considering the arguments of all affected parties and the intended purposes of the rules. Decision: Based upon your analysis, clearly state a predicted legal conclusion on each issue identified, and then state your final decision in the problem. Written answers may follow this format, but remember that explaining the key points from your analysis is the most critical part in the evaluation of your answer. Do not emphasize form over substance. It is often more effective and efficient to write answers based upon your analysis, rather than explaining each step of your analysis. You should be thorough, but concise. Complete your analysis before writing an answer. Do not submit “everything, including the kitchen sink” answers that explain what you understand, regardless of its relevance to the problem. Give adequate emphasis to organization, spelling, grammar and visual appearance of your papers. Remember that your analysis supporting a conclusion is more important than the conclusion itself.

Rules : For each issue, clearly, specifically and completely state the rule or rules that must be applied to resolve the issue. These must include both the rules that the plaintiff/prosecution must prove, as well as those that the defendant can use to defend.

Analysis: Apply the relevant rules for each issue to the facts, objectively considering the arguments of all affected parties and the intended purposes of the rules.

Decision: Based upon your analysis, clearly state a predicted legal conclusion on each issue identified, and then state your final decision in the problem.

Written answers may follow this format, but remember that explaining the key points from your analysis is the most critical part in the evaluation of your answer. Do not emphasize form over substance. It is often more effective and efficient to write answers based upon your analysis, rather than explaining each step of your analysis. You should be thorough, but concise. Complete your analysis before writing an answer. Do not submit “everything, including the kitchen sink” answers that explain what you understand, regardless of its relevance to the problem. Give adequate emphasis to organization, spelling, grammar and visual appearance of your papers. Remember that your analysis supporting a conclusion is more important than the conclusion itself.

NORMATIVE ETHICAL REASONING APPROACHES (HOW TO REACH MORAL CONCLUSIONS) QUANTITATIVE OUTCOMES (ENDS) EGOISM UTILITARIANISM QUALITATIVE (MEANS) FUNDAMENTALISM KANTIAN DUTIES RAWLS SOCIAL JUSTICE CONTRACT INDIVIDUAL LIBERTIES AND RIGHTS ADVANTAGES? DISADVANTAGES? WHICH IS THE CORRECT APPROACH? UNIVERSALISM? RELATIVISM? WHICH STAKEHOLDERS TEND TO USE THESE? EXTRATERRITORIALITY?

QUANTITATIVE OUTCOMES (ENDS)

EGOISM

UTILITARIANISM

QUALITATIVE (MEANS)

FUNDAMENTALISM

KANTIAN DUTIES

RAWLS SOCIAL JUSTICE CONTRACT

INDIVIDUAL LIBERTIES AND RIGHTS

ADVANTAGES? DISADVANTAGES?

WHICH IS THE CORRECT APPROACH?

UNIVERSALISM? RELATIVISM?

WHICH STAKEHOLDERS TEND TO USE THESE?

EXTRATERRITORIALITY?

ENLIGHTENED SELF-INTEREST? APPLIED BUSINESS ETHICS WHY? *LAW NORMALLY IS ONLY THE MORAL MINIMUM *STAKEHOLDERS(THOSE WHO COULD BE AFFECTED OR TAKE AN INTEREST IN A COMPANY'S DECISION) JUDGE COMPANY'S BASED UPON ETHICAL CRITERIA *STAKEHOLDERS' MORAL JUDGMENTS CAN CAUSE ECONOMIC EFFECTS *STAKEHOLDERS" MORAL JUDGMENTS CAN LEAD TO CHANGES IN LAWS BASIC ISSUES *NORMATIVE ETHICS VS. DESCRIPTIVE *DIFFERENT NORMATIVE CRITERIA QUANTITATIVE OUTCOMES UTILITARIANISM EGOISM QUALITATIVE CRITERIA RIGHTS DUTIES JUSTICE ENLIGHTENED SELF-INTEREST USES ALL OF THE ABOVE THROUGH STAKEHOLDERS ANALYSIS OF ALTERNATIVE SOLUTIONS TO A PROBLEM UNIVERSALISM VS. RELATIVISM STAKEHOLDERS OFTEN DIFFER DO NOT VIOLATE CORE HUMAN VALUES NOTE: SOME LAWS ARE GIVEN EXTRATERRITORIAL EFFECT; AND, THERE MAY BE APPLICABLE INTERNATIONAL LAWS

APPLIED BUSINESS ETHICS

WHY?

*LAW NORMALLY IS ONLY THE MORAL MINIMUM

*STAKEHOLDERS(THOSE WHO COULD BE AFFECTED OR TAKE AN INTEREST IN A COMPANY'S DECISION) JUDGE COMPANY'S BASED UPON ETHICAL CRITERIA

*STAKEHOLDERS' MORAL JUDGMENTS CAN CAUSE ECONOMIC EFFECTS

*STAKEHOLDERS" MORAL JUDGMENTS CAN LEAD TO CHANGES IN LAWS

BASIC ISSUES

*NORMATIVE ETHICS VS. DESCRIPTIVE

*DIFFERENT NORMATIVE CRITERIA

QUANTITATIVE OUTCOMES

UTILITARIANISM

EGOISM

QUALITATIVE CRITERIA

RIGHTS

DUTIES

JUSTICE

ENLIGHTENED SELF-INTEREST

USES ALL OF THE ABOVE THROUGH

STAKEHOLDERS ANALYSIS OF ALTERNATIVE SOLUTIONS TO A PROBLEM

UNIVERSALISM VS. RELATIVISM

STAKEHOLDERS OFTEN DIFFER

DO NOT VIOLATE CORE HUMAN VALUES

NOTE: SOME LAWS ARE GIVEN EXTRATERRITORIAL EFFECT; AND, THERE MAY BE APPLICABLE INTERNATIONAL LAWS

GOOGLE QUESTIONS What does “Do No Evil” mean? What form of ethical reasoning did the company use? What form of ethical reasoning did the critics use? Is freedom of expression a universal human moral right? Democracy? What definition of business social responsibility did the company most clearly follow?

What does “Do No Evil” mean?

What form of ethical reasoning did the company use?

What form of ethical reasoning did the critics use?

Is freedom of expression a universal human moral right? Democracy?

What definition of business social responsibility did the company most clearly follow?

Natural Law Rev. Martin Luther King, Jr. Letter from the Birmingham Jail, April 16, 1963 “[T]here are two types of laws: just and unjust laws. . . . A just law is a man-made code that squares with the moral law . . . . An unjust law is a code that is out of harmony with the moral law. . . . An unjust law is a human law that is not rooted in eternal and natural law.”

UN’s UNIVERSAL DECLARATION OF HUMAN RIGHTS Article 19. Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regardless of frontiers. Article 21. 1. Everyone has the right to take part in the government of his country, directly or through freely chosen representatives. The will of the people shall be the basis of the authority of government; this will shall be expressed in periodic and genuine elections which shall be by universal and equal suffrage and shall be held by secret vote or by equivalent free voting procedures

Article 19. Everyone has the right to freedom of opinion and expression;

this right includes freedom to hold opinions without interference and to

seek, receive and impart information and ideas through any media and

regardless of frontiers.

Article 21. 1. Everyone has the right to take part in the government of

his country, directly or through freely chosen representatives.

The will of the people shall be the basis of the authority of government;

this will shall be expressed in periodic and genuine elections which shall

be by universal and equal suffrage and shall be held by secret vote or by

equivalent free voting procedures

US DECLARATION OF INDEPENDENCE “ ********We hold these truths to be self-evident, that all men are created equal, that they are endowed by their creator with certain unalienable rights, that among these are Life, Liberty and the pursuit of Happiness.-- That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed,--That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, *******”

MORE GOOGLE What criteria should managers use in making such business decisions? What are their fiduciary legal duties? What are the “Enlightened Self-Interest” ethical decision making criteria? Did the Google executive’s decision meet these criteria?

What criteria should managers use in making such business decisions? What are their fiduciary legal duties? What are the “Enlightened Self-Interest” ethical decision making criteria? Did the Google executive’s decision meet these criteria?

MORE GOOGLE Could the U.S. legally enact and enforce a law prohibiting U.S. companies from engaging in such activities in other nations? Could a state government, such as Oregon, do so? (See Chapter 5.) Was Google socially responsible?

CONCEPTUAL BASIS FOR LAWS? God? Citizens? Other? (Compare the approaches to ethical reasoning.) CONCEPTUAL BASIS FOR GOVERNMENTS' POWERS? God? People? Other? Constitutions: Creates a government, delegates legal authority and limits the use of that authority. WHAT TYPE OF LEGAL SYSTEM EXISTS? Compare Common Law systems to Civil/Code systems and others. In “common law” systems, how do courts make law? Stare Decisis for judicial precedents Interpreting laws from other branches As an original source of laws Exceptions to Stare Decisis What is the proper role for justices? HOW MANY DIFFERENT SOVEREIGN GOVERNMENTS EXIST? What are the branches of each government and their separate powers? How are conflicts resolved? Executive Judicial Legislative Administrative Agencies How are the powers distributed between them? In Federalist systems: If the state conflicts with national law, which takes precedence? If national law conflicts with international law, which takes precedence? UNDERSTANDING A NATION’S LEGAL ENVIRONMENT: Some basic questions

CONCEPTUAL BASIS FOR LAWS?

God? Citizens? Other? (Compare the approaches to ethical reasoning.)

CONCEPTUAL BASIS FOR GOVERNMENTS' POWERS?

God? People? Other?

Constitutions: Creates a government, delegates legal authority and limits the use of that authority.

WHAT TYPE OF LEGAL SYSTEM EXISTS?

Compare Common Law systems to Civil/Code systems and others.

In “common law” systems, how do courts make law?

Stare Decisis for judicial precedents

Interpreting laws from other branches

As an original source of laws

Exceptions to Stare Decisis

What is the proper role for justices?

HOW MANY DIFFERENT SOVEREIGN GOVERNMENTS EXIST?

What are the branches of each government and their separate powers? How are conflicts resolved?

Executive

Judicial

Legislative

Administrative Agencies

How are the powers distributed between them? In Federalist systems:

If the state conflicts with national law, which takes precedence?

If national law conflicts with international law, which takes precedence?

LAW AND LEGAL SYSTEMS WHAT IS LAW? FUNCTIONS CERTAINTY VS. FLEXIBILITY WHAT ARE THE BASES CONCEPTUALLY FOR LAW? NATURAL LAW POSITIVISTS HISTORICAL SOCIOLOGICAL/REALISTS ECONOMICS EVIDENCE OF THE INFLUENCE OF ALL OF THE ABOVE CAN BE FOUND IN SOCIETY AND ITS LAWS. THE DIFFERENT APPROACHES TO NORMATIVE ETHICAL REASONING ARE REFLECTED IN THE ABOVE .

WHAT IS LAW?

FUNCTIONS

CERTAINTY VS. FLEXIBILITY

WHAT ARE THE BASES CONCEPTUALLY FOR LAW?

NATURAL LAW

POSITIVISTS

HISTORICAL

SOCIOLOGICAL/REALISTS

ECONOMICS

EVIDENCE OF THE INFLUENCE OF ALL OF THE ABOVE CAN BE FOUND IN SOCIETY AND ITS LAWS.

THE DIFFERENT APPROACHES TO NORMATIVE ETHICAL REASONING ARE REFLECTED IN THE ABOVE .

LAW AND LEGAL SYSTEMS Continued WHAT TYPES OF LAWS EXISTS? CONSTITUTIONS LEGISLATIVE: CODES/STATUTES/ORDINANCES EXECUTIVE: INTERNATIONAL TREATIES/CONVENTIONS AND ORDERS JUDICIAL: PRECEDENTS UNDER THE STARE DECISIS PRINCIPLE IN COMMON LAW SYSTEMS ADMINISTRATIVE AGENCIES: RULES OR REGULATIONS and ORDERS IN CASE OF CONFLICTS, WHICH HAVE PRIORITY? LEGAL AND ETHICAL CRITICAL THINKING SET ASIDE PRECONCEIVED BIASES IDENTIFY ALL ISSUES THAT MUST BE RESOLVED IDENTIFY AND OBJECTIVELY UNDERSTAND THE IMPACTS ON STAKEHOLDERS AND THEIR POSITIONS APPLY THE RELEVANT PRINCIPLES RATIONALLY, USING AVAILABLE PRECEDENTS AND EXAMPLES DO NOT LOSE SIGHT OF LAWS’ PUBLIC POLICY PURPOSES

WHAT TYPES OF LAWS EXISTS?

CONSTITUTIONS

LEGISLATIVE: CODES/STATUTES/ORDINANCES

EXECUTIVE: INTERNATIONAL TREATIES/CONVENTIONS

AND ORDERS

JUDICIAL: PRECEDENTS UNDER THE STARE DECISIS

PRINCIPLE IN COMMON LAW SYSTEMS

ADMINISTRATIVE AGENCIES: RULES OR

REGULATIONS and ORDERS

IN CASE OF CONFLICTS, WHICH HAVE PRIORITY?

LEGAL AND ETHICAL CRITICAL THINKING

SET ASIDE PRECONCEIVED BIASES

IDENTIFY ALL ISSUES THAT MUST BE RESOLVED

IDENTIFY AND OBJECTIVELY UNDERSTAND

THE IMPACTS ON STAKEHOLDERS AND THEIR POSITIONS

APPLY THE RELEVANT PRINCIPLES RATIONALLY, USING AVAILABLE PRECEDENTS AND EXAMPLES

DO NOT LOSE SIGHT OF LAWS’ PUBLIC POLICY PURPOSES

Government Structures And Powers Possible Bases?

BASIC DISTRIBUTION OF POWER: Federal: Delegated Limited Separation of Powers with Checks and Balances Supremacy (and Preemption Doctrine) Use Limited by Individual Rights States: Reserved “Police Powers” POWERS TO REGULATE BUSINESSES FEDERAL STATE (COMPARE E.U.) FEDERALISM AS A STRUCTURE:

BASIC DISTRIBUTION OF POWER:

Federal:

Delegated

Limited

Separation of Powers with Checks and Balances

Supremacy (and Preemption Doctrine)

Use Limited by Individual Rights

States:

Reserved “Police Powers”

POWERS TO REGULATE BUSINESSES

FEDERAL

STATE

(COMPARE E.U.)

RESOLVING CONFLICTS Federal vs. State Supremacy Preemption Irreconcilable Conflicts No Unjustified Discrimination against interstate and foreign commerce; or Undue Burdens placed upon such commerce State vs. State U.S. Constitution’s Full Faith and Credit Clause Conflict of Laws Uniform Sate Laws Federal vs. International Sources of International Law Equal Dignity Rule Last in Time (most recently adopted) Nation vs. Nation Comity Conflict of Laws

Federal vs. State

Supremacy

Preemption

Irreconcilable Conflicts

No Unjustified Discrimination against interstate and foreign commerce; or

Undue Burdens placed upon such commerce

State vs. State

U.S. Constitution’s Full Faith and Credit Clause

Conflict of Laws

Uniform Sate Laws

Federal vs. International

Sources of International Law

Equal Dignity Rule

Last in Time (most recently adopted)

Nation vs. Nation

Comity

Conflict of Laws

LIMITS ON GOVERNMENT POWER (Individual Rights and Justice) Purposes Incorporation Doctrine Business Organizations Right to Keep and Bear Arms (2 nd Amendment) D.C. v. Heller QUESTIONS: WHY IS THIS AN IMPORTANT BUSINESS CASE? ON WHAT BASES SHOULD THE SUPREME COURT JUSTICES INDIVIDUALLY DECIDE THIS CASE? PERSONAL MORALS? NATURAL LAW? HISTORY? SOCIOLOGICAL NEEDS? ECONOMICS? OTHER? SHOULD THE JUSTICES FOLLOW JUDICIAL RESTRAINT OR JUDICIAL ACTIVISM? WHY DOES IT MAKE A DIFFERENCE THAT THE U.S. USES A COMMON LAW LEGAL SYSTEM, RATHER THAN A CIVIL LAW LEGAL SYSTEM?

Purposes

Incorporation Doctrine

Business Organizations

Right to Keep and Bear Arms (2 nd Amendment)

D.C. v. Heller QUESTIONS:

WHY IS THIS AN IMPORTANT BUSINESS CASE?

ON WHAT BASES SHOULD THE SUPREME COURT JUSTICES INDIVIDUALLY DECIDE THIS CASE?

PERSONAL MORALS? NATURAL LAW? HISTORY? SOCIOLOGICAL NEEDS? ECONOMICS? OTHER?

SHOULD THE JUSTICES FOLLOW JUDICIAL RESTRAINT OR JUDICIAL ACTIVISM?

WHY DOES IT MAKE A DIFFERENCE THAT THE U.S. USES A COMMON LAW LEGAL SYSTEM, RATHER THAN A CIVIL LAW LEGAL SYSTEM?

MORE LIMITS ON GOVERNMENT POWER Due Process (5 th and 14 th amendments) Property vs. Life and Liberty Procedural “Fairness Prior Notice and Fair Opportunity to be Heard Substantive Fairness Arbitrary, Capricious and unreasonable Test “ Implied Rights,” such as privacy

Due Process (5 th and 14 th amendments)

Property vs. Life and Liberty

Procedural “Fairness

Prior Notice and Fair Opportunity to be Heard

Substantive Fairness

Arbitrary, Capricious and unreasonable Test

“ Implied Rights,” such as privacy

Exxon Shipping v. Baker Compensatory Damages Economic Non-Economic Punitive Damages Due Process Common Law

Compensatory Damages

Economic

Non-Economic

Punitive Damages

Due Process

Common Law

More Limits on Government Powers Equal Protection Similarly Situated? Discriminatory Criteria Applied? Strict Scrutiny Test Intermediate Scrutiny Test Minimal Scrutiny (Rational Basis) Test

Equal Protection

Similarly Situated?

Discriminatory Criteria Applied?

Strict Scrutiny Test

Intermediate Scrutiny Test

Minimal Scrutiny (Rational Basis) Test

More Limits on Government Powers Search and Seizures (4 th Amendment) Probable Cause Search Warrants Exceptions Civil Inspections Intermingled Data

Search and Seizures (4 th Amendment)

Probable Cause

Search Warrants

Exceptions

Civil Inspections

Intermingled Data

LIMITS ON GOVERNMENT POWER (Individual Rights and Justice) Continued Free Speech (1 st Amendment) Purposes Public Policy Speech vs. Commercial Speech vs. Unprotected Speech What is Commercial Free Speech? Time, place or manner v. Content Regulations To be protected commercial speech must be regarding legal products and/or services; and, not be False or Deceptive But, even such commercial speech messages can be regulated, if the government can prove: It has a very important public purpose; That the law has a direct, rational nexus to accomplishing that purpose; and, no effective alternatives that are less restrictive on free speech are available Required Factual Disclosures Freedom and Social Responsibility?

Free Speech (1 st Amendment)

Purposes

Public Policy Speech vs. Commercial Speech vs. Unprotected Speech

What is Commercial Free Speech?

Time, place or manner v. Content Regulations

To be protected commercial speech must be regarding legal products and/or services; and, not be False or Deceptive

But, even such commercial speech messages can be regulated, if the government can prove:

It has a very important public purpose;

That the law has a direct, rational nexus to accomplishing that purpose; and, no effective alternatives that are less restrictive on free speech are available

Required Factual Disclosures

Freedom and Social Responsibility?

EMINENT DOMAIN TAKINGS GOVERNMENT “TAKING” ISSUES: PHYSICAL AND LEGAL TAKINGS DUE PROCESS; PUBLIC PURPOSES; JUST COMPENSATION COMPARE INTERNATIONAL: EXPROPRIATION VS. CONFISCATION REGULATORY TAKINGS JUST COMPENSATION IS DUE, IF NO REASONABLY VIABLE ECONOMIC USES ARE LEGALLY ALLOWED DEVELOPMENT PERMIT EXACTIONS JUST COMPENSATION DUE, IF NO PROVEN NEXUS BETWEEN THE DEVELOPMENT AND PUBLIC HARM, OR THE EXACTION IS NOT REASONABLY PROPORTIONATE TO THE HARM SHOULD A GOVERNMENT HAVE TO COMPENSATE PROPERTY OWNERS ANYTIME A LAW REDUCES THE ECONOMIC VALUE OF THEIR PROPERTY? Oregon’s Measures 37, 39 and 49

GOVERNMENT “TAKING” ISSUES:

PHYSICAL AND LEGAL TAKINGS

DUE PROCESS; PUBLIC PURPOSES; JUST COMPENSATION

COMPARE INTERNATIONAL: EXPROPRIATION VS. CONFISCATION

REGULATORY TAKINGS

JUST COMPENSATION IS DUE, IF NO REASONABLY VIABLE ECONOMIC USES ARE LEGALLY ALLOWED

DEVELOPMENT PERMIT EXACTIONS

JUST COMPENSATION DUE, IF NO PROVEN NEXUS BETWEEN THE DEVELOPMENT AND PUBLIC HARM, OR THE EXACTION IS NOT REASONABLY PROPORTIONATE TO THE HARM

SHOULD A GOVERNMENT HAVE TO COMPENSATE PROPERTY OWNERS ANYTIME A LAW REDUCES THE ECONOMIC VALUE OF THEIR PROPERTY?

Oregon’s Measures 37, 39 and 49

TAKINGS AND RELATED ISSUES Nanz, LLC, operates a successful “Fast Food” franchise restaurant in leased commercial building space in which it has made substantial capital improvements. The city in which this franchise is operated decides in the public interest that certain property, including Nanz’s leased space, due to proximity to sites to be used for hosting the Summer Olympic Games, should be acquired by the city government for purpose of then transferring ownership to the company that bids the highest price to buy the property and redevelop it for commercial purposes. The city acquires the property leased by Nanz and evicts the company from the premises. Nanz, thus, must relocate its Fast Food franchise to a new location. The city, then, transfers ownership of this property to the highest bidding company for commercial redevelopment. Assuming Nanz, LLC, and the “Fast Food” franchisor are U.S. companies, and the city is Chicago, USA, what basic legal rights do the companies possess? 2. What basic legal rights do the companies possess, if the city government is Beijing, China?

TAKINGS AND RELATED ISSUES

Nanz, LLC, operates a successful “Fast Food” franchise restaurant

in leased commercial building space in which it has made substantial

capital improvements.

The city in which this franchise is operated decides in the public

interest that certain property, including Nanz’s leased space, due to

proximity to sites to be used for hosting the Summer Olympic Games,

should be acquired by the city government for purpose of then

transferring ownership to the company that bids the highest price to

buy the property and redevelop it for commercial purposes.

The city acquires the property leased by Nanz and evicts the company

from the premises. Nanz, thus, must relocate its Fast Food franchise

to a new location.

The city, then, transfers ownership of this property to the highest bidding

company for commercial redevelopment.

Assuming Nanz, LLC, and the “Fast Food” franchisor are U.S.

companies, and the city is Chicago, USA, what basic legal rights do the

companies possess?

2. What basic legal rights do the companies possess, if the city government

is Beijing, China?

INTERNATIONAL TRADE REGULATIONS INTERNATIONAL LAW? PUBLIC-applies to governments V. PRIVATE-applies to persons and companies SOURCES- * INTERNATIONAL AND REGIONAL ORGANIZATIONS *NATIONS'TREATIES, CONVENTIONS and Other Agreements Bilateral and multi-lateral *COMMON NATIONAL LAWS *CUSTOMARY *JUDICIAL DECISIONS *SCHOLARS’ WRITINGS NOTE: ALL OF THE ABOVE REQUIRE EXPRESS OR IMPLIED CONSENT OF A NATION FOR IT TO BE BOUND. INTERNATIONAL BUSINESS TRANSACTIONS HOST NATION'S LAWS PARENT NATION'S LAWS (including, "EXTRATERRITORIAILITY") INTERNATIONAL LAWS NOTE: IN A FEDERALIST NATION HOST AND PARENT STATES' LAWS, AS WELL AS LOCAL GOVERNMENT LAWS, MAY ALSO BE RELEVANT

INTERNATIONAL LAW?

PUBLIC-applies to governments V. PRIVATE-applies to persons and companies

SOURCES-

* INTERNATIONAL AND REGIONAL ORGANIZATIONS

*NATIONS'TREATIES, CONVENTIONS and Other Agreements

Bilateral and multi-lateral

*COMMON NATIONAL LAWS *CUSTOMARY

*JUDICIAL DECISIONS

*SCHOLARS’ WRITINGS

NOTE: ALL OF THE ABOVE REQUIRE EXPRESS OR IMPLIED CONSENT OF A NATION FOR IT TO BE BOUND.

INTERNATIONAL BUSINESS TRANSACTIONS

HOST NATION'S LAWS

PARENT NATION'S LAWS (including, "EXTRATERRITORIAILITY")

INTERNATIONAL LAWS

NOTE: IN A FEDERALIST NATION HOST AND PARENT STATES' LAWS, AS WELL AS LOCAL GOVERNMENT LAWS, MAY ALSO BE RELEVANT

WAYS OF CONDUCTING BUSINESS INTERNATIONALLY 1. Export/Import Trading Direct Indirect 2. Licensing Intellectual Property ( and Franchising) Patents Copyrights Trademarks Trade Secrets 3. Direct Investments Branch/Division Subsidiary company formed under host nation’s laws "Joint Venture” with a local company

1. Export/Import Trading

Direct

Indirect

2. Licensing Intellectual Property ( and Franchising)

Patents

Copyrights

Trademarks

Trade Secrets

3. Direct Investments

Branch/Division

Subsidiary company formed under host nation’s laws

"Joint Venture” with a local company

U. S. AND INTERNATIONAL TRADE REGULATIONS: FREE TRADE: Comparative Advantage Economic Theory UNFAIR TRADE: Competition; labor; environment; human rights U.S. Foreign Commerce Clause Federal vs. State Powers Distribution of Federal Powers Export Regulations National Security Economic Import Regulations Tariffs And Other Taxes Quantitative Restrictions Qualitative Standards Unfair Competition Dumping Export Subsidies Intellectual Property Piracy Antitrust Fair Competition Economic Dislocation National Economic Crisis

FREE TRADE: Comparative Advantage Economic Theory

UNFAIR TRADE: Competition; labor; environment; human rights

U.S.

Foreign Commerce Clause

Federal vs. State Powers

Distribution of Federal Powers

Export Regulations

National Security

Economic

Import Regulations

Tariffs And Other Taxes

Quantitative Restrictions

Qualitative Standards

Unfair Competition

Dumping

Export Subsidies

Intellectual Property Piracy

Antitrust

Fair Competition

Economic Dislocation

National Economic Crisis

International Agreements: GATT; EU; NAFTA; CAFTA; and, others World Trade Organization/Regional Unions and Free Trade Areas Sovereign Powers Delegated! Dispute Resolution Government v. Government Companies v. Government? Expanding Trade Coverage Some Basic Principles: ( Common to most trade agreements) Reduce Tariffs Reduce Non-Tariff Barriers (Tariffication Goals) Multilateral versus Bilateral Agreements NTR (formerly MFN) Non-Discrimination National Treatment No Unilateral Retaliation For Violations; File suit instead Query: How can the EU and NAFTA legally exist without violating GATT/WTO?

World Trade Organization/Regional Unions and Free Trade Areas

Sovereign Powers Delegated!

Dispute Resolution

Government v. Government

Companies v. Government?

Expanding Trade Coverage

Some Basic Principles:

( Common to most trade agreements)

Reduce Tariffs

Reduce Non-Tariff Barriers (Tariffication Goals)

Multilateral versus Bilateral Agreements

NTR (formerly MFN)

Non-Discrimination

National Treatment

No Unilateral Retaliation For Violations; File suit instead

Query: How can the EU and NAFTA legally exist without violating GATT/WTO?

GATT Exceptions To General Principles (i.e. Retained Sovereign Powers) Regional Trade Unions And Free Trading Areas Developing Nations Assistance National Emergencies Unfair Trading “ Legitimate” “Internal” Regulations for: Tax Revenue Health Safety Environment Query: How are conflicts between national and international laws to be resolved and by which legal forum?

Regional Trade Unions And Free Trading Areas

Developing Nations Assistance

National Emergencies

Unfair Trading

“ Legitimate” “Internal” Regulations for:

Tax Revenue

Health

Safety

Environment

Query: How are conflicts between national and international laws to be resolved and by which legal forum?

RESOLVING CONFLICTS Federal vs. State Supremacy Preemption Irreconcilable Conflicts No Unjustified Discrimination against interstate and foreign commerce; or Undue Burdens placed upon such commerce State vs. State U.S. Constitution’s Full Faith and Credit Clause Conflict of Laws Uniform Sate Laws Federal vs. International Sources of International Law Equal Dignity Rule Last in Time (most recently adopted) Nation vs. Nation Comity Conflict of Laws

Federal vs. State

Supremacy

Preemption

Irreconcilable Conflicts

No Unjustified Discrimination against interstate and foreign commerce; or

Undue Burdens placed upon such commerce

State vs. State

U.S. Constitution’s Full Faith and Credit Clause

Conflict of Laws

Uniform Sate Laws

Federal vs. International

Sources of International Law

Equal Dignity Rule

Last in Time (most recently adopted)

Nation vs. Nation

Comity

Conflict of Laws

IT'S A NEW BUSINESS DAY. DO YOU KNOW WHERE YOU’RE “DOING BUSINESS?” Domestically and Internationally (i.e. What are some of the legal implications of conducting e-commerce?) Which governments' laws are applicable? (Local counsel needed? For what purposes? Which government branches' laws are relevant?) (Distinguish procedural versus substantive laws.) *If more than one government's substantive laws could be applicable, and they conflict, which will be applied by a court? General Predictive Answer: The laws of the government that has the most significant contacts with, and public policy interests in the dispute. In which governments' courts (or agencies) are we subject to legal action? *Jurisdiction- Subject Matter In personam *Due Process "minimum contacts" (Some other nation’s use a similar rule.) *State Long-Arm Statutes Venue International: Forum non conveniens *Special Issues when a Foreign Government is sued, or its laws challenged? Comity Sovereign Immunity Act of State

Domestically and Internationally

(i.e. What are some of the legal implications of conducting e-commerce?)

Which governments' laws are applicable?

(Local counsel needed? For what purposes?

Which government branches' laws are relevant?)

(Distinguish procedural versus substantive laws.)

*If more than one government's substantive laws could be applicable, and they conflict, which will be applied by a court?

General Predictive Answer: The laws of the government that has the most significant contacts with, and public policy interests in the dispute.

In which governments' courts (or agencies) are we subject to legal action?

*Jurisdiction-

Subject Matter

In personam

*Due Process "minimum contacts" (Some other nation’s use a similar rule.)

*State Long-Arm Statutes

Venue

International: Forum non conveniens

*Special Issues when a Foreign Government is sued, or its laws challenged?

Comity

Sovereign Immunity

Act of State

IT'S A NEW BUSINESS DAY. DO YOU KNOW WHERE YOU’RE “DOING BUSINESS?” Continued Are ADRs Available? Private settlement contracts? Third Party Assistance--Mediation? Third Party Legally Binding Decisions--Arbitration? Are they enforceable? Advantages? Disadvantages? To what extent is judicial review for legal errors available? Judgments (Agency orders and decisions) ADRs Can a dispute's judicial resolution be legally enforced? Practically? An ADR resolution? In other government's courts? U.S. Constitution's "Full Faith and Credit" Clause Internationally- If required by a treaty or Convention Otherwise it is discretionary under comity, considering reciprocity, due process and whether it would violate a court’s own government’s law or public policy.

Are ADRs Available?

Private settlement contracts?

Third Party Assistance--Mediation?

Third Party Legally Binding Decisions--Arbitration?

Are they enforceable?

Advantages? Disadvantages?

To what extent is judicial review for legal errors available?

Judgments

(Agency orders and decisions)

ADRs

Can a dispute's judicial resolution be legally enforced? Practically? An ADR resolution?

In other government's courts?

U.S. Constitution's "Full Faith and Credit" Clause

Internationally-

If required by a treaty or Convention

Otherwise it is discretionary under comity, considering reciprocity, due process and

whether it would violate a court’s own government’s law or public policy.

BHOPAL CASE QUESTIONS WERE THE COMPANIES’ (UCIL; UCC; Dow) DECISIONS, STARTING WITH THE DECISION ON HOW TO CONDUCT BUSINESS IN INDIA, SOCIALLY RESPONSIBLE? SHOULD THE COMPANIES HAVE OPERATED BY STANDARDS ABOVE THOSE REQUIRED BY INDIA’S LAWS? BY UNIVERSAL SAFETY STANDARDS? HOW HAVE THE COMPANIES BEEN NEGATIVELY IMPACTED BY THEIR DECISIONS ECONOMICALLY?

WERE THE COMPANIES’ (UCIL; UCC; Dow) DECISIONS, STARTING WITH THE DECISION ON HOW TO CONDUCT BUSINESS IN INDIA, SOCIALLY RESPONSIBLE?

SHOULD THE COMPANIES HAVE OPERATED BY STANDARDS ABOVE THOSE REQUIRED BY INDIA’S LAWS? BY UNIVERSAL SAFETY STANDARDS?

HOW HAVE THE COMPANIES BEEN NEGATIVELY IMPACTED BY THEIR DECISIONS ECONOMICALLY?

MORE BHOPAL INDIA IS A MEMBER OF THE WTO, AND THUS LEGALLY OBLIGATED TO FOLLOW GATT RULES. GENERALLY, HOW DO GATT RULES, AS ENFORCED THROUGH THE WTO, LEGALLY IMPACT A MEMBER NATION’S SOVEREIGN AUTHORITY TO MAKE AND ENFORCE ITS OWN ENVIRONMENTAL, HEALTH AND SAFETY LAWS?

INDIA IS A MEMBER OF THE WTO, AND THUS LEGALLY OBLIGATED TO FOLLOW GATT RULES. GENERALLY, HOW DO GATT RULES, AS ENFORCED THROUGH THE WTO, LEGALLY IMPACT A MEMBER NATION’S SOVEREIGN AUTHORITY TO MAKE AND ENFORCE ITS OWN ENVIRONMENTAL, HEALTH AND SAFETY LAWS?

BHOPAL THE ASSIGNED ARTICLE EXPLAINS THAT VICTIMS OF THE DISASTER FILED SUIT AGAINST UNION CARBIDE CORPORATION (UCC) IN THE U.S. COURTS. WOULD INTERNATIONAL LAW, INDIA’S LAWS OR U.S. LAWS BE APPLIED TO DETERMINE WHETHER UCC WAS LEGALLY LIABLE? DID THE U.S. COURTS HAVE JURISDICTION TO DECIDE THIS CASE? HOW COULD A US COURT’S JUDGMENT FOR MONETARY DAMAGES IN A CASE LIKE THIS BE ENFORCED?

THE ASSIGNED ARTICLE EXPLAINS THAT VICTIMS OF THE DISASTER FILED SUIT AGAINST UNION CARBIDE CORPORATION (UCC) IN THE U.S. COURTS.

WOULD INTERNATIONAL LAW, INDIA’S LAWS OR U.S. LAWS BE APPLIED TO DETERMINE WHETHER UCC WAS LEGALLY LIABLE?

DID THE U.S. COURTS HAVE JURISDICTION TO DECIDE THIS CASE?

HOW COULD A US COURT’S JUDGMENT FOR MONETARY DAMAGES IN A CASE LIKE THIS BE ENFORCED?

BHOPAL *THE ASSIGNED ARTICLE EXPLAINS THAT THE VICTIMS’ LAWSUIT AGAINST UCC WAS DISMISSED FROM THE U.S. COURTS AND LATER FILED IN INDIA’S COURTS. CAN INDIA’S COURTS HAVE JURISDICTION OVER UCC TO DECIDE THIS CASE? WOULD INTERNATIONAL LAW, INDIA’S LAWS OR U.S. LAWS BE APPLIED TO DETERMINE WHETHER UCC WAS LEGALLY LIABLE? HOW COULD AN INDIAN COURT’S JUDGMENT FOR MONETARY DAMAGES IN A CASE LIKE THIS BE ENFORCED?

*THE ASSIGNED ARTICLE EXPLAINS THAT THE VICTIMS’ LAWSUIT AGAINST UCC WAS DISMISSED FROM THE U.S. COURTS AND LATER FILED IN INDIA’S COURTS.

CAN INDIA’S COURTS HAVE JURISDICTION OVER UCC TO DECIDE THIS CASE?

WOULD INTERNATIONAL LAW, INDIA’S LAWS OR U.S. LAWS BE APPLIED TO DETERMINE WHETHER UCC WAS LEGALLY LIABLE?

HOW COULD AN INDIAN COURT’S JUDGMENT FOR MONETARY DAMAGES IN A CASE LIKE THIS BE ENFORCED?

LEGAL DISPUTES Prevention Business Goals Legal Audit for Risks Enlightened Self-Interest Ethical Analyses for Social Responsibilities can help predict future legal issues Litigation Advantages Disadvantages Types of Alternative Dispute Resolution (ADR) Advantages and Disadvantages Private Settlement Contract Private Settlement with Third Party Assistance Mediations Mini-trials Criminal Plea Bargains Private Resolution by Third Party Decision Arbitration "Rent-A-Judge" Others

Prevention

Business Goals

Legal Audit for Risks

Enlightened Self-Interest Ethical Analyses for Social Responsibilities can help predict future legal issues

Litigation

Advantages

Disadvantages

Types of Alternative Dispute Resolution (ADR)

Advantages and Disadvantages

Private Settlement Contract

Private Settlement with Third Party Assistance

Mediations

Mini-trials

Criminal Plea Bargains

Private Resolution by Third Party Decision

Arbitration

"Rent-A-Judge"

Others

DISPUTE RESOLUTION Attorneys' Roles Advisor Planning to Minimize Risks Negotiating Litigating Privileged Communications

Attorneys' Roles

Advisor

Planning to Minimize Risks

Negotiating

Litigating

Privileged Communications

Adversarial System Basic Procedural Steps Procedural Due Process Pleadings Due Process Notice Discovery Trial Due Process Fair Hearing Appeals Enforcement Civil Litigation

Adversarial System

Basic Procedural Steps

Procedural Due Process

Pleadings

Due Process Notice

Discovery

Trial

Due Process Fair Hearing

Appeals

Enforcement

MANAGING LEGAL RISKS Contract clauses - Choice of Law Choice of Forum Arbitration/Other ADRs Choice of Language Choice of Currency Enforcement: Payment/Performance Security or Collateral Others to Allocate Risks and Benefits Force Majuere Contingency Clauses

Contract clauses -

Choice of Law

Choice of Forum

Arbitration/Other ADRs

Choice of Language

Choice of Currency

Enforcement: Payment/Performance Security or Collateral

Others to Allocate Risks and Benefits

Force Majuere

Contingency Clauses

SUBSTANTIVE LAW (DISTINGUISH PROCEDURAL LAW) SUBSTANTIVE LAW DEFINES LEGAL RIGHTS/INTERESTS AND THE LEGAL DUTIES WE HAVE TO PROTECT THEM. CRIMINAL LAW FOCUSES ON SOCIETY’S RIGHTS & INTERESTS. CIVIL LAW FOCUSES ON PRIVATE ONES. IN LITIGATION ONE PARTY HAS THE BURDEN OF PROVING THAT SPECIFIC ALLEGED RIGHTS WERE VIOLATED BY A BREACH OF LEGAL DUTY. (IN THE U.S. THE ACCUSER HAS THIS BURDEN AND THE PROOF MUST MEET THE REQUIRED STANDARD.) PLAINTIFF/PROSECUTION’S PRIMA FACIE CASE: LEGAL DUTY OWED LEGAL DUTY BREACHED ACTUALLY AND PROXIMATELY CAUSING HARM TO A LEGAL RIGHT OR INTEREST DEFENDANT’S RESPONSES: REBUT ANY ELEMENT OF THE PRIMA FACIE CASE ALLEGE AND/OR PROVE AN AFFIRMATIVE DEFENSE FOR ANY SUBSTANTIVE LAW UNDERSTANDING THE ABOVE ALLOWS ONE TO BETTER UNDERSTAND THE BALANCE BEING STRUCK BETWEEN LEGAL RIGHTS AND DUTIES

(DISTINGUISH PROCEDURAL LAW)

SUBSTANTIVE LAW DEFINES LEGAL RIGHTS/INTERESTS AND THE LEGAL DUTIES WE HAVE TO PROTECT THEM.

CRIMINAL LAW FOCUSES ON SOCIETY’S RIGHTS & INTERESTS.

CIVIL LAW FOCUSES ON PRIVATE ONES.

IN LITIGATION ONE PARTY HAS THE BURDEN OF PROVING THAT SPECIFIC ALLEGED RIGHTS WERE VIOLATED BY A BREACH OF LEGAL DUTY. (IN THE U.S. THE ACCUSER HAS THIS BURDEN AND THE PROOF MUST MEET THE REQUIRED STANDARD.)

PLAINTIFF/PROSECUTION’S PRIMA FACIE CASE:

LEGAL DUTY OWED

LEGAL DUTY BREACHED

ACTUALLY AND PROXIMATELY CAUSING

HARM TO A LEGAL RIGHT OR INTEREST

DEFENDANT’S RESPONSES:

REBUT ANY ELEMENT OF THE PRIMA FACIE CASE

ALLEGE AND/OR PROVE AN AFFIRMATIVE DEFENSE

FOR ANY SUBSTANTIVE LAW UNDERSTANDING THE ABOVE ALLOWS ONE TO BETTER UNDERSTAND THE BALANCE BEING STRUCK BETWEEN LEGAL RIGHTS AND DUTIES

Crimes and Torts Compare: Purposes Sanctions Standards of Proofs Analytical Approach : Plaintiffs/Prosecution’s Prima Facie Cases: Crimes Torts Actus Reus Legal Duty owed that Mens Rea was breached Causation Causing: Actual/Direct (or substantial) and Proximate Harm Society Harm to Legal Rights of Plaintiff Defendant’s: Rebuttal Affirmative Defenses

Compare:

Purposes

Sanctions

Standards of Proofs

Analytical Approach :

Plaintiffs/Prosecution’s Prima Facie Cases:

Crimes Torts

Actus Reus Legal Duty owed that

Mens Rea was breached

Causation Causing: Actual/Direct (or substantial) and Proximate

Harm Society Harm to Legal Rights of Plaintiff

Defendant’s:

Rebuttal

Affirmative Defenses

CONCEPTS OF LEGAL FAULT AND RESPONSIBILITY (TO PROTECT SOCIETY’S AND PRIVATE PARTIES’ LEGAL RIGHTS AND INTERESTS) INTENTIONAL ACTS-- PURPOSEFUL KNOWING RECKLESS HYBRIDS NEGLIGENCE-- GROSS ORDINARY SLIGHT STRICT LIABILITY FOR-- ULTRAHAZARDOUS ACTIVITIES DEFECTIVE PRODUCTS THAT ARE UNREASONABLY DANGEROUS MARKET SHARE/INDUSTRY-WIDE LIABILITY (LIMITED ADOPTION TODAY) JOINT AND SEVERAL LIABILITY VICARIOUS LIABILITY FOR EMPLOYEES AND AGENTS=(RESPONDEAT SUPERIOR) RESPONSIBLE CORPORATE OFFICER DOCTRINE SUCCESSOR AND OWNER LIABILITY NO FAULT WORKERS’ COMPENSATION *REMEMBER THAT TO UNDERSTAND SUBSTANTIVE LAWS AND ANALYZE CASES ONE MUST PRECISELY KNOW WHAT THE PLAINTIFF IS REQUIRED TO PROVE AND HOW DEFENDANTS CAN RESPOND. EVERY SUBSTANTIVE LEGAL RULE HAS COMPONENT ELEMENTS WHICH MUST BE PROVEN.

INTENTIONAL ACTS--

PURPOSEFUL

KNOWING

RECKLESS

HYBRIDS

NEGLIGENCE--

GROSS

ORDINARY

SLIGHT

STRICT LIABILITY FOR--

ULTRAHAZARDOUS ACTIVITIES

DEFECTIVE PRODUCTS THAT ARE UNREASONABLY DANGEROUS

MARKET SHARE/INDUSTRY-WIDE LIABILITY

(LIMITED ADOPTION TODAY)

JOINT AND SEVERAL LIABILITY

VICARIOUS LIABILITY FOR

EMPLOYEES AND AGENTS=(RESPONDEAT SUPERIOR)

RESPONSIBLE CORPORATE OFFICER DOCTRINE

SUCCESSOR AND OWNER LIABILITY

NO FAULT

WORKERS’ COMPENSATION

*REMEMBER THAT TO UNDERSTAND SUBSTANTIVE LAWS AND ANALYZE CASES ONE MUST PRECISELY KNOW WHAT THE PLAINTIFF IS REQUIRED TO PROVE AND HOW DEFENDANTS CAN RESPOND. EVERY SUBSTANTIVE LEGAL RULE HAS COMPONENT ELEMENTS WHICH MUST BE PROVEN.

Law Of Agency Distinguish between the following relationships: Independent Employee Agent Some of the ramifications are: Liability, Taxes and Insurance “ Vicarious” Liability generally for: Torts Crimes Contracts I.C. N N N E Y Y N A Y Y Y Agent’s Authority to Contract: Actual Apparent To avoid personal liability on contracts, agents should: Act within actual authority Fully disclose agency capacity and principal's identity.

CONCEPTS OF LEGAL FAULT AND RESPONSIBILITY DEFENSES & SPECIAL ISSUES HOW MAY A PLAINTIFF BE HELPED BY PROVING: NEGLIGENCE PER SE RES IPSA LOQUITUR HOW CAN A DEFENDANT BE HELPED BY PROVING: CONTRIBUTORY NEGLIGENCE COMPARATIVE NEGLIGENCE OR FAULT ASSUMPTION OF THE RISK HOW SHOULD LEGAL RESPONSIBILITIES BE ALLOCATED? IS THERE ANY LIMIT TO THE AMOUNT OF PUNITIVE DAMAGES THAT CAN BE AWARDED? SHOULD DAMAGES BE LIMITED? COMPENSATORY/ECONOMIC & NON-ECONOMIC + CONSEQUENTIAL NON-ECONOMIC SHOULD CERTAIN INDUSTRIES RECEIVE SPECIAL PROTECTION? MEDICAL FAST FOOD GUN ALL?

HOW MAY A PLAINTIFF BE HELPED BY PROVING:

NEGLIGENCE PER SE

RES IPSA LOQUITUR

HOW CAN A DEFENDANT BE HELPED BY PROVING:

CONTRIBUTORY NEGLIGENCE

COMPARATIVE NEGLIGENCE OR FAULT

ASSUMPTION OF THE RISK

HOW SHOULD LEGAL RESPONSIBILITIES BE ALLOCATED?

IS THERE ANY LIMIT TO THE AMOUNT OF PUNITIVE DAMAGES THAT CAN BE AWARDED?

SHOULD DAMAGES BE LIMITED?

COMPENSATORY/ECONOMIC & NON-ECONOMIC +

CONSEQUENTIAL

NON-ECONOMIC

SHOULD CERTAIN INDUSTRIES RECEIVE SPECIAL PROTECTION?

MEDICAL

FAST FOOD

GUN

ALL?

SOME BUSINESS COMPETITION TORTS FRAUD/MISREPRESENTATION (PLUS, RICO ACTS) INTENTIONAL INTERFERENCE WITH CONTRACTS AND BUSINESS RELATIONSHIPS TRADE DISPARAGEMENT & Libel (AND, DEFAMATION/PRIVACY) REAL AND PERSONAL PROPERTY TORTS TRADE SECRETS PRIVACY/PUBLICITY RIGHTS CYBER TORTS & ISP LIABILITY

FRAUD/MISREPRESENTATION (PLUS, RICO ACTS)

INTENTIONAL INTERFERENCE WITH CONTRACTS AND

BUSINESS RELATIONSHIPS

TRADE DISPARAGEMENT & Libel (AND, DEFAMATION/PRIVACY)

REAL AND PERSONAL PROPERTY TORTS

TRADE SECRETS

PRIVACY/PUBLICITY RIGHTS

CYBER TORTS & ISP LIABILITY

REPUTATION AND GOODWILL DEFAMATION AND TRADE DISPARAGEMENT TORTS FALSE STATEMENTS OF “FACT” REQUIRED! TRUTH AS A DEFENSE PUBLIC OFFICIALS AND FIGURES HAVE TO PROVE ACTUAL MALICE (INTENT) COMPARE PRIVACY/PUBLICITY ISPs LIABILITY? TRADE DISPARAGEMENT— LIBEL SLANDER

FALSE STATEMENTS OF “FACT” REQUIRED!

TRUTH AS A DEFENSE

PUBLIC OFFICIALS AND FIGURES HAVE TO PROVE ACTUAL MALICE (INTENT)

COMPARE PRIVACY/PUBLICITY

ISPs LIABILITY?

TRADE DISPARAGEMENT—

LIBEL

SLANDER

FRAUD AND RELATED LAWS FRAUD= intentional false representations of fact; justifiable reliance; causation of harm Misrepresentation=unintentional Can also violate other civil and criminal laws, such as RICO Acts and Securities Failure to disclose facts when there is a duty to disclose can be fraud today. LANHAM ACT PROHIBITS FALSE OR DECEPTIVE CLAIMS REGARDING GOODS AND SERVICES IN ADDITION TO TRADEMARK INFRINGEMENT COMPARATIVE ADVERTISING IS ALLOWED THOUGH FTC ACT PROHIBITS FALSE OR DECEPTIVE AND UNFAIR TRADE PRACTICES

Product Liability Relevant Sources of Law Torts Contract Warranties Federal/ State Statutes and Agency Rules Possible Parties:

Relevant Sources of Law

Torts

Contract Warranties

Federal/ State Statutes and Agency Rules

Possible Parties:

Potential Legal Defects: Government Product Safety Standards (and negligence per se); Federal preemption of state laws? Seller’s Factual Representations (Fraud; Misrepresentation; and Warranties) Torts: Intentional; Negligence; Strict Liability Design Manufacturing * Warnings/Instructions

Government Product Safety Standards (and negligence per se); Federal preemption of state laws?

Seller’s Factual Representations (Fraud; Misrepresentation; and Warranties)

Torts: Intentional; Negligence; Strict Liability

Design

Manufacturing

* Warnings/Instructions

Product Liability Cont. Fraud/ Warranties Misrepresentation Neg. S/L Market Share II’s Case Duty owed Breached Directly & Proximately causing Harm ‘ s Rebuttal &/or Affirmative Defenses Remember: Vicarious Joint & Several (Criminal liability may exist too.) Also, Consumer Protection Laws: Safety Standards & Disclosures

Fraud/

Warranties Misrepresentation Neg. S/L Market Share

II’s Case

Duty owed

Breached

Directly

&

Proximately causing

Harm

‘ s Rebuttal &/or

Affirmative

Defenses

Remember: Vicarious

Joint & Several

(Criminal liability may exist too.)

Also, Consumer Protection Laws: Safety Standards & Disclosures

Contract Warranties Definition Types – Express Implied-in-Fact Implied-in-Law Merchantability Fitness for a Particular Purposes Title Non-Infringement of IP Seller’s Defenses – Misuse/Abuse/Negligence Privity Puffing Limitations of Remedies Disclaimers Notices Magnusson-Moss Federal Warranty Act For Consumer Goods

Definition

Types –

Express

Implied-in-Fact

Implied-in-Law

Merchantability

Fitness for a Particular Purposes

Title

Non-Infringement of IP

Seller’s Defenses –

Misuse/Abuse/Negligence

Privity

Puffing

Limitations of Remedies

Disclaimers

Notices

Magnusson-Moss Federal Warranty Act

For Consumer Goods

Business & the Environment CAN FREE COMPETITIVE MARKETS SELF-REGULATE TO ADEQUATELY PROTECT THE ENVIRONMENT? ARE GOVERNMENT REGULATIONS THE BEST ALTERNATIVE? IF SO, WHAT IS THE BEST APPROACH? COMMAND AND CONTROL GOVERNMENT SUBSIDIES TAX INCENTIVES MARKET INCENTIVES WHAT IS THE PROPER LEGAL STANDARD? BEST AVAILABLE TECHNOLOGY BAT ECONOMICALLY FEASIBLE TO USE MAXIMUM ACHIEVABLE CONTROL TECHNOLOGY SHOULD GOVERNMENT ISSUE PERMITS TO POLLUTE? SHOULD COMPANIES BE ABLE TO SELL UNUSED POLLUTION CREDITS ? DO PLANTS, OTHER ANIMALS AND THE NATURAL ENVIRONMENT HAVE INDEPENDENT MORAL RIGHTS TO EXISTENCE? LEGAL RIGHTS? HOW MUCH SHOULD PRIVATE PROPERTY OWNERS HAVE TO PAY TO ACHIEVE A PUBLIC GOOD?

CAN FREE COMPETITIVE MARKETS SELF-REGULATE TO ADEQUATELY PROTECT THE ENVIRONMENT?

ARE GOVERNMENT REGULATIONS THE BEST ALTERNATIVE?

IF SO, WHAT IS THE BEST APPROACH?

COMMAND AND CONTROL

GOVERNMENT SUBSIDIES

TAX INCENTIVES

MARKET INCENTIVES

WHAT IS THE PROPER LEGAL STANDARD?

BEST AVAILABLE TECHNOLOGY

BAT ECONOMICALLY FEASIBLE TO USE

MAXIMUM ACHIEVABLE CONTROL TECHNOLOGY

SHOULD GOVERNMENT ISSUE PERMITS TO POLLUTE?

SHOULD COMPANIES BE ABLE TO SELL UNUSED POLLUTION CREDITS ?

DO PLANTS, OTHER ANIMALS AND THE NATURAL ENVIRONMENT HAVE INDEPENDENT MORAL RIGHTS TO EXISTENCE? LEGAL RIGHTS?

HOW MUCH SHOULD PRIVATE PROPERTY OWNERS HAVE TO PAY TO ACHIEVE A PUBLIC GOOD?

EXAMPLES OF LEGISLATIVE ENVIRONMENTAL STANDARDS Typically an agency is directed to enact specific rules to comply with the statutorily mandated standards. EXAMPLES: CLEAN AIR ACT: Maximum Achievable Control Technology CLEAN WATER ACT: Best Available Control Technology, economically and technologically feasible NOISE POLLUTION: Best Available Technology economically within reason WHICH OF THE ABOVE SETS THE HIGHEST STANDARD FOR ENVIRONMENTAL PROTECTION? SHOULD THERE BE JUST ONE STANDARD?

Typically an agency is directed to enact specific rules to comply with the statutorily mandated standards.

EXAMPLES:

CLEAN AIR ACT: Maximum Achievable Control Technology

CLEAN WATER ACT: Best Available Control Technology, economically and technologically feasible

NOISE POLLUTION: Best Available Technology economically within reason

WHICH OF THE ABOVE SETS THE HIGHEST STANDARD FOR ENVIRONMENTAL PROTECTION?

SHOULD THERE BE JUST ONE STANDARD?

WESTER CLIMATE INITIATIVE 7 Western States and 4 Canadian Provinces 1/5 US Economy and 2/3 of the Canadian 2012 Cap is Imposed By 2020 Reduce Emissions 15 % Below 2005 Levels Many Sources Regulated 10 % of Permits will be Auctioned, While the Rest will be Granted. Too Little? Rather than Reducing Emissions Fully, Off-Sets can be Used for Almost Half the Otherwise Required Reductions Market Trading of Authorized Emissions will be Allowed

Toxic Chemicals & Hazardous Wastes RCRA Cradle-to –Grave Permits CERCLA “ Superfund” Potentially Responsible Parties Generators Haulers Disposal site operators Site Owners Creditors? Strict liability No Individual Actual Causation Need be Proven Joint and Several Liability Defenses Act of God Act of War Act of Third Party, if - No contractual relationship and Due Diligence Prevention Environmental Audits Don’t become a site owner/operator or successor

RCRA

Cradle-to –Grave Permits

CERCLA

“ Superfund”

Potentially Responsible Parties

Generators

Haulers

Disposal site operators

Site Owners

Creditors?

Strict liability

No Individual Actual Causation Need be Proven

Joint and Several Liability

Defenses

Act of God

Act of War

Act of Third Party, if

- No contractual relationship

and Due Diligence

Prevention

Environmental Audits

Don’t become a site owner/operator or successor

Definitions Purposes Compare and Contrast U.S. with International Approaches TRIPS/GATT: WTO Basic Types: Copyrights Trademarks (+ Publicity(& Privacy) Patents (Utility + Design; & Trade Dress Tort) Trade Secrets

Definitions

Purposes

Compare and Contrast U.S. with International Approaches

TRIPS/GATT: WTO

Basic Types:

Copyrights

Trademarks (+ Publicity(& Privacy)

Patents (Utility + Design; & Trade Dress Tort)

Trade Secrets

INTELLECTUAL PROPERTY BASICS IP Rights are still defined primarily by each nation's laws and Enforcement Nation's IP Laws still vary considerably in practice Through GATT, TRIPS and other international agreements there are concerted efforts internationally TO: Increase IP Legal Rights Harmonize Those Rights Among Nations Improve Enforcement BUT, substantial differences still exist The EU Systems are developing systems to secure IP rights in all member nations with one application

IP Rights are still defined primarily by each nation's laws and Enforcement

Nation's IP Laws still vary considerably in practice

Through GATT, TRIPS and other international agreements there are concerted

efforts internationally

TO:

Increase IP Legal Rights

Harmonize Those Rights Among Nations

Improve Enforcement

BUT, substantial differences still exist

The EU Systems are developing systems to secure IP rights in all member nations

with one application

Patents Design vs. Trade Dress Tort Petty vs. Utility = new, genuine, useful and non-obvious Variants? US issues only to individual inventors, whereas others often issue to companies US issues to the first to invent, while others issue to the first to apply US allows public disclosure or use for one year prior to application, while many others require absolute novelty at the time of application US has kept applications confidential unless and until patents are issued, while others publicly disclose applications and invite public comment, but the U.S. is changing to similar disclosure procedures. US excludes few categories of inventions, whereas some others do, such as drugs and medical procedures US does not require a patent be used; others often do so require Effects of the Paris Convention/TRIPS/GATT

Design vs. Trade Dress Tort

Petty vs. Utility = new, genuine,

useful and non-obvious

Variants?

US issues only to individual inventors, whereas others often issue to companies

US issues to the first to invent, while others issue to the first to apply

US allows public disclosure or use for one year prior to application, while many others require

absolute novelty at the time of application

US has kept applications confidential unless and until patents are issued, while others publicly

disclose applications and invite public comment, but the U.S. is changing to similar disclosure

procedures.

US excludes few categories of inventions, whereas some others do, such as drugs and medical procedures

US does not require a patent be used; others often do so require

Effects of the Paris Convention/TRIPS/GATT

What is protected? When does an infringement occur? What is a fair use? First-Sale Doctrine? Does the law apply on-line? Betamax to Napster to Grokster What are the effects of the Berne Convention? Effects of the DMCA? Effects of the NET Act? Copyrights

What is protected?

When does an infringement occur?

What is a fair use?

First-Sale Doctrine?

Does the law apply on-line?

Betamax to Napster to Grokster

What are the effects of the Berne Convention?

Effects of the DMCA?

Effects of the NET Act?

Trade Secrets What is protected? Compare to patents and copyrights How are these rights obtained and enforced? How can they be lost? Federal Espionage Act Internationally, the legal recognition and enforcement of these rights tends to be weaker

What is protected?

Compare to patents and copyrights

How are these rights obtained and enforced?

How can they be lost?

Federal Espionage Act

Internationally, the legal recognition and enforcement of these rights tends to be

weaker

Scope of Counterfeiting $16 billion counterfeit goods in Chinese market (1998) Today 15-20% of total sales Lead exporter, 67% of U.S. Customs IP seizures (2004) U.S. losses $2.5-3.8 billion; Multi-national $24-150 million Consumer Goods Luxury brands Service chains Sports products

$16 billion counterfeit goods in Chinese market (1998)

Today 15-20% of total sales

Lead exporter, 67% of U.S. Customs IP seizures (2004)

U.S. losses $2.5-3.8 billion; Multi-national $24-150 million

Consumer Goods

Luxury brands

Service chains

Sports products

VSL vs. Yves Saint Laurent Shanghai

Georgi Amoni vs. Giorgio Armani Shanghai

KFG vs. KFC Shanghai

Lucky and Xingbake vs. Starbucks Beijing

Pama, Kuma, Tuna and Fuma vs. Puma Beijing

Wandanu & dasaci vs. adidas Beijing

Trademarks (& Trade Dress) What Is Protected? Why? How are those rights attained? What cannot be protected? When does infringement occur? How does a "dilution" case differ from an infringement case? Internationally, legal recognition and enforcement tends to be more varied than patents and copyrights. Domain Name Conflicts: How resolved? Anti-Cybersquatting Act? Bad Faith

What Is Protected?

Why?

How are those rights attained?

What cannot be protected?

When does infringement occur?

How does a "dilution" case differ from an infringement case?

Internationally, legal recognition and enforcement tends to be more varied than patents and copyrights.

Domain Name Conflicts: How resolved?

Anti-Cybersquatting Act? Bad Faith

Publicity and Privacy Rights What is protected? Name + Likeness + ? For how long? Why? How? When is unauthorized use legally permissible? Can these be trademarks? Domain Name Conflicts? Anti-Cybersquatting Act?

What is protected?

Name + Likeness + ?

For how long?

Why?

How?

When is unauthorized use legally permissible?

Can these be trademarks?

Domain Name Conflicts?

Anti-Cybersquatting Act?

STRATEGIC USES OF INTELLECTUAL PROPERTY Defensive Enforcing the Bundle of Rights Self-Help and Technology Building Barriers Around Own IP Containing the Competition Offensive Licensing Out Licensing In Cross Licensing Patent Trolling Coordinate All Relevant IP for the Value Proposition Place in the Public Domain

HUMAN RESOURCES CONTRACTS: INTELECTUAL PROPERTY AND OTHER ISSUES INDEPENDENT CONTRACTORS vs. EMPLOYEES vs. AGENTS? REIMBURSEMENT OF TRAINING/EDUCATION EXPENSES COVENANTS NOT TO COMPETE NONDISCLOSURE AGREEMENT NON-SOLICITATION/EMPLOYEE RAIDING INVENTIONS /PATENTS ASSIGNMENT “ WORK FOR HIRE” For TMs, COPYRIGHTS & TRADE SECRETS THIRD PARTY & PRIOR EMPLOYER INFORMATION TERM: AT-WILL/INDEFINITE v. JUST CAUSE?

INDEPENDENT CONTRACTORS vs. EMPLOYEES vs. AGENTS?

REIMBURSEMENT OF TRAINING/EDUCATION EXPENSES

COVENANTS NOT TO COMPETE

NONDISCLOSURE AGREEMENT

NON-SOLICITATION/EMPLOYEE RAIDING

INVENTIONS /PATENTS ASSIGNMENT

“ WORK FOR HIRE” For TMs, COPYRIGHTS & TRADE SECRETS

THIRD PARTY & PRIOR EMPLOYER INFORMATION

TERM: AT-WILL/INDEFINITE v. JUST CAUSE?

ANTITRUST LAW Definition Purposes History Federal v. State Laws International Differences Generally Enforcement-- Government Criminal Civil Private Lawsuits Exemptions include ‑ - Unions Farmers Cooperatives Highly Regulated Industries State Closely Regulated Industries 1 st Amendment Joint Activities Baseball Extraterritoriality

Definition

Purposes

History

Federal v. State Laws

International Differences Generally

Enforcement--

Government

Criminal

Civil

Private Lawsuits

Exemptions include ‑ -

Unions

Farmers Cooperatives

Highly Regulated Industries

State Closely Regulated Industries

1 st Amendment Joint Activities

Baseball

Extraterritoriality

Basics of Primary Federal Laws Key Analytical Concepts Rule of Reason v. Per Se Violations Relevant Competitive Market ‑ Product/Services Geographic Types of Restraints ‑ Concerted v. Unilateral Horizontal v. Vertical v. Conglomerate Distribution Channels ‑ M1 M2 M3 D1 D2 R1 R2 R3

Key Analytical Concepts

Rule of Reason v. Per Se Violations

Relevant Competitive Market ‑

Product/Services

Geographic

Types of Restraints ‑

Concerted v. Unilateral

Horizontal v. Vertical v. Conglomerate

Distribution Channels ‑

M1 M2 M3

D1 D2

R1 R2 R3

SHERMAN ACT Goods and Services Affecting Interstate Commerce Section 1 Any contract combination or conspiracy (i.e., concerted action) in restraint of trade is illegal if: Unreasonably restricts competition (Rule of Reason) in the relevant competitive market. Costs > Benefit But, some concerted actions are Per se unreasonable restraints on competition. Section 2 Covers concerted or unilateral action that involves Monopolization of any line of Commerce + General Intent to Monopolize + Monopolistic Market Power Attempts to monopolize any line of commerce - Specific (Bad Faith) Intent to Monopolize - Dangerous Probability of Success

Goods and Services Affecting Interstate Commerce

Section 1 Any contract combination or conspiracy

(i.e., concerted action) in restraint of trade is illegal if:

Unreasonably restricts competition

(Rule of Reason) in the relevant

competitive market.

Costs > Benefit

But, some concerted actions are Per se

unreasonable restraints on competition.

Section 2 Covers concerted or unilateral action

that involves Monopolization of any

line of Commerce

+ General Intent to Monopolize

+ Monopolistic Market Power

Attempts to monopolize any line of

commerce

- Specific (Bad Faith) Intent to

Monopolize

- Dangerous Probability of Success

CLAYTON ACT Applies to Specified Activities in Interstate Commerce that have a Reasonable Probability of Substantially Lessening Competition or Tending Towards the Creation of a Monopoly (the "Prohibited Effect") in the Relevant Competitive Market. Prohibited Activities include: Section 2 (A.K.A. Robinson ‑ Patman Act)- Prohibits Price Discrimination in the Sale of Goods to different Competing Buyers Who Intend to Resell in their Business, when the goods are of Like Grade or Quality and could have the Prohibited Effect , Unless the Different Prices are Caused by Changes in the Market Justified by the Differences in the costs of manufacturing, sale or delivery between buyers The Result of a Good Faith Attempt to Meet a Competitor's Prices

Applies to Specified Activities in Interstate Commerce that have a Reasonable Probability of Substantially Lessening Competition or Tending Towards the Creation of a Monopoly (the "Prohibited Effect") in the Relevant Competitive Market.

Prohibited Activities include:

Section 2 (A.K.A. Robinson ‑ Patman Act)-

Prohibits Price Discrimination in the Sale of Goods to different Competing Buyers Who Intend to Resell in their Business, when the goods are of

Like Grade or Quality and could have the Prohibited Effect , Unless the Different Prices are

Caused by Changes in the Market

Justified by the Differences in the costs of manufacturing, sale or delivery between buyers

The Result of a Good Faith Attempt to Meet a Competitor's Prices

CLAYTON ACT Section 3 ‑ Prohibits Tying and Exclusive Dealing contracts that could have the Prohibited Effect Tying v. Exclusive Dealing Section 7 ‑ Prohibits Acquisitions and Mergers that could have the Prohibited Effect Horizontal v. Vertical v. Conglomerate HHI Notice Requirements Section 8 ‑ Prohibits Interlocking Directorates for certain competitors.

Section 3 ‑

Prohibits Tying and Exclusive Dealing contracts that could have the Prohibited Effect

Tying v. Exclusive Dealing

Section 7 ‑

Prohibits Acquisitions and Mergers that could have the Prohibited Effect

Horizontal v. Vertical v. Conglomerate

HHI

Notice Requirements

Section 8 ‑

Prohibits Interlocking Directorates for certain competitors.

FTC ACT The FTC Possesses the Delegated Authority to Prohibit Unfair Methods of Competition. Covers Activities Not Prohibited by the Sherman or Clayton Acts, but which nonetheless could cause substantial harm to Competition. The FTC also is Empowered to Protect Consumers from – Unfair Business Practices Deceptive Business Practices False Capacity to ‑ be Deceptive

The FTC Possesses the Delegated Authority to Prohibit Unfair Methods of Competition.

Covers Activities Not Prohibited by the Sherman or Clayton Acts, but which nonetheless could cause substantial harm to Competition.

The FTC also is Empowered to Protect Consumers from –

Unfair Business Practices

Deceptive Business Practices

False

Capacity to ‑ be Deceptive

HUMAN RESOURCES: BASIC LEGAL OPTIONS INDEPENDENT CONTRACTORS EMPLOYEES AGENTS HOW DO YOU KNOW WHICH ONE IS BEING USED? WHAT ARE THE LEGAL DIFFERENCES? WHICH OF THESE OWE FIDUCIARY DUTIES? WHEN IS THE EMPLOYER/PRINCIPAL VICARIOUSLY LIABLE? CRIMES TORTS CONTRACTS PRINCIPAL-AGENT RELATIONSHIPS FORMATION: EXPRESS, IMPLIED-IN- FACT AND IMPLIED-IN-LAW PRINCIPAL'S RIGHTS, DUTIES AND LIABILITIES? CREATING AN AGENT'S "APPARENT AUTHORITY” AGENT'S RIGHTS, DUTIES AND LIABILITIES? MAKING CONTRACTS: HOW TO AVOID PERSONAL LIABILITY AS AN AGENT? FULLY DISCLOSE PRINCIPAL'S IDENTITY AND AGENCY CAPACITY TO MAKE THE CONTRACT; SATISFY FIDUCIARY AND OTHER LEGAL DUTIES; AND, ONLY MAKE CONTRACTS WITHIN ACTUAL AUTHORITY. DON'T CONTRACT UNDER "APPARENT AUTHORITY."

INDEPENDENT CONTRACTORS

EMPLOYEES

AGENTS

HOW DO YOU KNOW WHICH ONE IS BEING USED?

WHAT ARE THE LEGAL DIFFERENCES?

WHICH OF THESE OWE FIDUCIARY DUTIES?

WHEN IS THE EMPLOYER/PRINCIPAL VICARIOUSLY LIABLE?

CRIMES

TORTS

CONTRACTS

PRINCIPAL-AGENT RELATIONSHIPS

FORMATION: EXPRESS, IMPLIED-IN- FACT AND IMPLIED-IN-LAW

PRINCIPAL'S RIGHTS, DUTIES AND LIABILITIES? CREATING AN AGENT'S "APPARENT AUTHORITY”

AGENT'S RIGHTS, DUTIES AND LIABILITIES?

MAKING CONTRACTS: HOW TO AVOID PERSONAL LIABILITY AS AN AGENT?

FULLY DISCLOSE PRINCIPAL'S IDENTITY AND AGENCY CAPACITY TO MAKE THE CONTRACT; SATISFY FIDUCIARY AND OTHER LEGAL DUTIES; AND, ONLY MAKE CONTRACTS WITHIN ACTUAL AUTHORITY. DON'T CONTRACT UNDER "APPARENT AUTHORITY."

FIDUCIARY DUTIES DIRECTORS, OFFICERS, CONTROLLING OWNERS, AGENTS, EMPLOYEES, PARTNERS AND ********* THESE DUTIES INCLUDE: GOOD FAITH DUE CARE GIVING NOTICE OF ALL INFORMATION LOYALTY BUSINESS OPPORTUNITIES CONFLICTS OF INTERESTS COMPETITION MISUSE OF TRADE SECRETS AND OTHER CONFIDENTIAL INFORMATION DUAL AGENCIES OBEDIENCE ACCOUNTING FOR ALL ASSETS PLUS, THEY MUST COMPLY WITH ALL OTHER TERMS OF THEIR EMPLOYMENT CONTRACTS AND RELEVANT LAWS. BREACH CAN RESULT IN: DISCIPLINE OR TERMINATION PERSONAL LIABILITY SHAREHOLDER DERIVIATIVE LAWSUITS CONVICTIONS, IF ALSO A CRIME BUT, NOT LIABLE WHEN BUSINESS JUDGMENT RULE APPLIES

DIRECTORS, OFFICERS, CONTROLLING OWNERS, AGENTS, EMPLOYEES, PARTNERS AND *********

THESE DUTIES INCLUDE:

GOOD FAITH

DUE CARE

GIVING NOTICE OF ALL INFORMATION

LOYALTY

BUSINESS OPPORTUNITIES

CONFLICTS OF INTERESTS

COMPETITION

MISUSE OF TRADE SECRETS AND OTHER CONFIDENTIAL INFORMATION

DUAL AGENCIES

OBEDIENCE

ACCOUNTING FOR ALL ASSETS

PLUS, THEY MUST COMPLY WITH ALL OTHER TERMS OF THEIR EMPLOYMENT CONTRACTS AND RELEVANT LAWS.

BREACH CAN RESULT IN:

DISCIPLINE OR TERMINATION

PERSONAL LIABILITY

SHAREHOLDER DERIVIATIVE LAWSUITS CONVICTIONS, IF ALSO A CRIME

BUT, NOT LIABLE WHEN BUSINESS JUDGMENT RULE APPLIES

EMPLOYMENT CONTRACTS REVIEW NON-COMPETITION, NON-DISCLOSURE AND INTELLECTUAL PROPERTY CLAUSES PREVIOUSLY DISCUSSED FREEDOM TO CONTRACT AND RESPONSIBILITY FOR SELF- INTERESTS STILL APPLY, BUT ******* HOWEVER, THERE ARE INCREASING REQUIRED LEGAL CONTRACT TERMS THAT CONSTRAIN FREEDOM TO CONTRACT, PRIMARILY TO PROTECT EMPLOYEE INTERESTS EXAMPLES: ALSO, NOTE THE RIGHT OF EMPLOYEES TO FORM UNIONS AND COLLECTIVELY BARGAIN FOR THE TERMS AND CONDITIONS OF EMPLOYMENT. EMPLOYERS MUST BARGAIN IN GOOD FAITH WITH UNIONS. WHEN CAN AN EMPLOYER TERMINATE AN EMPLOYEE? CONTRACTS ARE PRESUMED TO BE “AT-WILL” BUT, THIS CONCEPT HAS INCREASING EXCEPTIONS, AGAIN PRIMARILY TO PROTECT EMPLOYEES IN OTHER INDUSTRIALIZED NATIONS EMPLOYEES TEND TO HAVE EVEN GREATER PROTECTIONS THAN IN THE U.S.

REVIEW NON-COMPETITION, NON-DISCLOSURE AND INTELLECTUAL PROPERTY CLAUSES PREVIOUSLY DISCUSSED

FREEDOM TO CONTRACT AND RESPONSIBILITY FOR SELF- INTERESTS STILL APPLY, BUT *******

HOWEVER, THERE ARE INCREASING REQUIRED LEGAL CONTRACT TERMS THAT CONSTRAIN FREEDOM TO CONTRACT, PRIMARILY TO PROTECT EMPLOYEE INTERESTS

EXAMPLES:

ALSO, NOTE THE RIGHT OF EMPLOYEES TO FORM UNIONS AND COLLECTIVELY BARGAIN FOR THE TERMS AND CONDITIONS OF EMPLOYMENT. EMPLOYERS MUST BARGAIN IN GOOD FAITH WITH UNIONS.

WHEN CAN AN EMPLOYER TERMINATE AN EMPLOYEE?

CONTRACTS ARE PRESUMED TO BE “AT-WILL”

BUT, THIS CONCEPT HAS INCREASING EXCEPTIONS, AGAIN PRIMARILY TO PROTECT EMPLOYEES

IN OTHER INDUSTRIALIZED NATIONS EMPLOYEES TEND TO HAVE EVEN GREATER PROTECTIONS THAN IN THE U.S.

Employment Contracts Freedom of Contract But today employers are limited by: Workers’ Compensation OSHA O.A.S.D.I. ERISA Social Security Unemployment Medicare F.L.S.A. Davis Bacon Walsh-Healy Union-Management Laws And Others

Freedom of Contract

But today employers are limited by:

Workers’ Compensation

OSHA

O.A.S.D.I.

ERISA

Social Security

Unemployment

Medicare

F.L.S.A.

Davis Bacon

Walsh-Healy

Union-Management Laws

And Others

Discipline and Termination “ At-Will” Contracts Limitations Today – Express Contracts Unions Government Personnel Policies Implied Contracts Personnel Practices Wrongful Discharge Tort Violates Laws Violates Public Policy Statutes

“ At-Will” Contracts

Limitations Today –

Express Contracts

Unions

Government

Personnel Policies

Implied Contracts

Personnel Practices

Wrongful Discharge Tort

Violates Laws

Violates Public Policy

Statutes

EMPLOYMENT DISCRIMINATION In regards to human resources, what are management’s essential decision making functions? What criteria should be used for these decisions? Why? Ethically? What is the message for managers? Federal v. State Laws Government v. Individual Enforcement Types of Illegal Discrimination Disparate Treatment Disparate Impact

In regards to human resources, what are management’s essential decision making functions?

What criteria should be used for these decisions?

Why? Ethically?

What is the message for managers?

Federal v. State Laws

Government v. Individual Enforcement

Types of Illegal Discrimination

Disparate Treatment

Disparate Impact

EMPLOYMENT DISCRIMINATION Cont. Plaintiff’s Prima Facie Case Illegal Discriminatory Criteria? (Title VII; Age; ADA) Defendant’s Rebuttal or Affirmative Defenses Bona Fide Occupational Qualification--Disparate Treatment Customer and fellow employee preferences? Affirmative Action Government v. Private Employers Business Necessity--Disparate Impact International cases? Statutory Bona Fide Seniority Bona Fide Merit Pay

Plaintiff’s Prima Facie Case

Illegal Discriminatory Criteria? (Title VII; Age; ADA)

Defendant’s Rebuttal or Affirmative Defenses

Bona Fide Occupational Qualification--Disparate Treatment

Customer and fellow employee preferences?

Affirmative Action

Government v. Private Employers

Business Necessity--Disparate Impact

International cases?

Statutory

Bona Fide Seniority

Bona Fide Merit Pay

SEXUAL HARASSMENT What are the types? Quid Pro Quo Hostile or Offensive--To Whom? Liability for Whom? Supervisors Co-Workers Non-Employees Effects of Policies, Procedures and Enforcement

AMERICANS WITH DISABILITIES (AND, 09/08 AMENDMENTS) What is a qualifying disability? Loosened for Remedial Purposes of the Act “ Substantially Limits” for EEOC to Define, but mitigating measures, including natural and learned ones, generally are not to be considered, while episodic and remission conditions as active are to be considered. “ Major Life Activities” of the individual now also include bodily functions. “ Record of” has not changed “ Regarded As” expanded to more clearly protect from myths, fears and stereotypes, but short term and minor impairments not covered. Reasonable Accomodations, but no undue burdens or alterations of essential functions.

Some HR Management Lessons Perceived Unfair Treatment is Often the Trigger Complaints are Expensive Even If Dismissed Treat People As You Would Want Everyone To Act (Kant) Treat People as the Ends, Not Means (Kant) Try to Know What Makes People Successful in Particular Positions Try To Use Validated Measures of Success Criteria Be Fair and Objective; and, Document Reasons!

Business Organizations Compare and Contrast The Different Legal Forms Generally Across The Following Questions. S/Regular Basic Types SP GP LP LLP LLC P.C. Corp Franchises Basic Factors 1. How formed and maintained? 2. Management structure, duties and liabilities? 3. Owners’ rights, duties and liabilities? 4. How are income and losses taxed? 5. Financing options?

Compare and Contrast The Different Legal Forms Generally Across The Following Questions.

S/Regular

Basic Types SP GP LP LLP LLC P.C. Corp Franchises

Basic Factors

1. How formed

and maintained?

2. Management

structure, duties

and liabilities?

3. Owners’

rights, duties

and liabilities?

4. How are

income and

losses taxed?

5. Financing

options?

CORPORATIONS LEGAL FORMATION AND MAINTENANCE ISSUES BEFORE THE STATE ISSUES THE CERTIFICATE— PROMOTERS AND LIABILITIES CRIMES TORTS CONTRACTS UNLESS THE CONTRACT PROVIDES OTHERWISE, A PROMOTER IS PERSONALLY LIABLE, UNLESS AND UNTIL THERE IS AN ASSIGNMENT TO THE COMPANY AND A NOVATION AGREEMENT IS ACCEPTED BY ALL PARTIES. SUBSCRIPTION AGREEMENTS BY POTENTIAL INVESTOR OWNWERS IMPROPER OR IMCOMPLETE FORMATION— DE JURE DE FACTO ESTOPPEL BUT, INCREASINGLY PROMOTERS AND OWNERS CAN HAVE PERSONAL LIABILITY FOR COMPANY ACTS PRIOR TO QUALIFYING AS DE JURE.

ISSUES BEFORE THE STATE ISSUES THE CERTIFICATE—

PROMOTERS AND LIABILITIES

CRIMES

TORTS

CONTRACTS

UNLESS THE CONTRACT PROVIDES OTHERWISE,

A PROMOTER IS PERSONALLY LIABLE, UNLESS AND UNTIL THERE IS AN ASSIGNMENT TO THE COMPANY AND A NOVATION AGREEMENT IS ACCEPTED BY ALL PARTIES.

SUBSCRIPTION AGREEMENTS BY POTENTIAL INVESTOR OWNWERS

IMPROPER OR IMCOMPLETE FORMATION—

DE JURE

DE FACTO

ESTOPPEL

BUT, INCREASINGLY PROMOTERS AND OWNERS CAN HAVE PERSONAL LIABILITY FOR COMPANY ACTS PRIOR TO QUALIFYING AS DE JURE.

SHAREHOLDERS (AND OTHER OWNWERS) RIGHTS— FINANCIAL & TAXES MANAGEMENT PARTICIPATION ACCESS TO INFORMATION DERIVIATIVE LAWSUITS DUTIES— DUE CARE FOR SELF-INTEREST BUT, CONTROLLING SHAREHOLDERS AND OTHER OWNERS TODAY HAVE SOME FIDUCIARY DUTIES TO OTHER OWNERS. LIABILITIES— SUBSCRIPTIONS WATERED STOCK ILLEGAL DIVIDENDS PERSONAL ILLEGAL ACTS COMPARE PC AND LLP PIERCING THE VEIL

RIGHTS—

FINANCIAL & TAXES

MANAGEMENT PARTICIPATION

ACCESS TO INFORMATION

DERIVIATIVE LAWSUITS

DUTIES—

DUE CARE FOR SELF-INTEREST

BUT, CONTROLLING SHAREHOLDERS AND OTHER OWNERS TODAY HAVE SOME FIDUCIARY DUTIES TO OTHER OWNERS.

LIABILITIES—

SUBSCRIPTIONS

WATERED STOCK

ILLEGAL DIVIDENDS

PERSONAL ILLEGAL ACTS

COMPARE PC AND LLP

PIERCING THE VEIL

MANAGEMENT AND GOVERNANCE COMPARE AND CONTRAST THE CLOSE CORPORATION, PC AND LLP TO REGULAR CORPORATIONS. CORPORATIONS— BOARD OF DIRECTORS— AUTHORITY FIDUCIARY DUTIES AUDIT COMMITTEES AND SOX OFFICERS— AUTHORITY FIDUCIARY DUTIES SOX INTERNAL CONTROL SYSTEM AND FINANCIAL STATEMENTS BUSINESS JUDGMENT RULE CPA AUDITORS LEGAL COUNSEL

COMPARE AND CONTRAST THE CLOSE CORPORATION, PC AND LLP TO REGULAR CORPORATIONS.

CORPORATIONS—

BOARD OF DIRECTORS—

AUTHORITY

FIDUCIARY DUTIES

AUDIT COMMITTEES AND SOX

OFFICERS—

AUTHORITY

FIDUCIARY DUTIES

SOX INTERNAL CONTROL SYSTEM AND FINANCIAL STATEMENTS

BUSINESS JUDGMENT RULE

CPA AUDITORS

LEGAL COUNSEL

OWNERS’ LIABILITY UNLIMITED SOLE PROPRIETORS, GENERAL PARTNERS, JOINT VENTURERS AND GENERAL PARTNERS IN A LIMITED PARTNERSHIP LIMITED LIMITED PARTNERS IN A LIMITED PARTNERSHIP AND ALL OWNERS IN THE LLP, LLC, PC, S CORPORATION AND REGULAR CORPORATION FORMS. ( NOTE THAT FOR ALL THESE FORMS STATE APPROVAL IS NEEDED; PLUS, EACH MUST REGISTER IN EVERY STATE WHERE BUSINESS IS ROUTINELY CONDUCTED AS A FOREIGN BUSINESS ENTITY.) EXCEPTIONS: 1) LIMITED PARTNERS WHO PARTICIPATE IN DAILY MANAGEMENT 2) "PIERCING THE VEIL" DOCTRINE WHEN AN OWNER MISUSES OR ABUSUES THE FORM TO CAUSE OTHERS TO BE MISLED AS TO THE COMPANY'S ASSETS 3) WHEN ONE COMPANY OWNS OR CONTROLS ANOTHER IN SUCH A MANNER THAT THE OTHER COMPANY IS THE ALTER EGO OF THE CONTROLLING COMPANY (i.e. SOMETIMES PARENT- SUBSIDIARY CORPORATION AND FRANCHISOR- FRANCHISEE RELATIONSHIPS WILL BE SUBJECT TO THIS ALTER EGO RULE)

UNLIMITED

SOLE PROPRIETORS, GENERAL PARTNERS, JOINT VENTURERS AND GENERAL PARTNERS IN A LIMITED PARTNERSHIP

LIMITED

LIMITED PARTNERS IN A LIMITED PARTNERSHIP AND ALL OWNERS IN THE LLP, LLC, PC, S CORPORATION AND REGULAR CORPORATION FORMS.

( NOTE THAT FOR ALL THESE FORMS STATE APPROVAL IS NEEDED; PLUS, EACH MUST REGISTER IN EVERY STATE WHERE BUSINESS IS ROUTINELY CONDUCTED AS A FOREIGN BUSINESS ENTITY.)

EXCEPTIONS: 1) LIMITED PARTNERS WHO PARTICIPATE IN DAILY MANAGEMENT

2) "PIERCING THE VEIL" DOCTRINE WHEN AN OWNER MISUSES OR ABUSUES THE FORM TO CAUSE OTHERS TO BE MISLED AS TO THE COMPANY'S ASSETS

3) WHEN ONE COMPANY OWNS OR CONTROLS ANOTHER IN SUCH A MANNER THAT THE OTHER

COMPANY IS THE ALTER EGO OF THE CONTROLLING COMPANY (i.e. SOMETIMES PARENT- SUBSIDIARY CORPORATION AND FRANCHISOR- FRANCHISEE RELATIONSHIPS WILL BE SUBJECT TO THIS ALTER EGO RULE)

Business Organizations External Financing Debt Convertible Equity S-T & L-T & Preferred STK. Common STK. Unsecured Secured L.P.,G.P. & J.V. “ Securities” Regulations: Full Disclosure Filings Insider Trading Think “Fiduciary Duties"

External Financing

Debt Convertible Equity

S-T & L-T & Preferred STK. Common STK.

Unsecured Secured L.P.,G.P. & J.V.

“ Securities” Regulations: Full Disclosure

Filings

Insider Trading

Think “Fiduciary Duties"

Securities Regulations What is a security? Includes “Investment Contacts” Regulatory Purposes Federal v. State Regulations State “Merit Review” The Parties and Federal Laws Securities Exchange Act of 1934 Securities Act of 1933 Company Issues To Investors Investors Through Underwriters or Directly Firm Commitments Best Efforts

What is a security?

Includes “Investment Contacts”

Regulatory Purposes

Federal v. State Regulations

State “Merit Review”

The Parties and Federal Laws

Securities Exchange Act of 1934

Securities Act of 1933

Company Issues To Investors Investors

Through Underwriters or Directly Firm Commitments

Best Efforts

Securities Act Of 1933 Initial Issuances/Primary Market General Requirements Full and truthful disclosure of all material information By filing Registration Statement and Prospectus with SEC Unless qualify for a Securities Exemption Transaction Exemption Intrastate Small Offerings Private Placements Resale Restrictions And comply with each state’s regulations Liability Criminal Civil Investor Lawsuits Issuer Strictly Liable Individuals Liable for Lack of Due Diligence

Initial Issuances/Primary Market

General Requirements

Full and truthful disclosure of all material information

By filing Registration Statement and Prospectus with SEC

Unless qualify for a

Securities Exemption

Transaction Exemption

Intrastate

Small Offerings

Private Placements

Resale Restrictions

And comply with each state’s regulations

Liability

Criminal

Civil

Investor Lawsuits

Issuer Strictly Liable

Individuals Liable for Lack of Due Diligence

Securities Exchange Act of 1934 Applicability – Primary Market too, but focus on Secondary Market SEC Created General Requirements – If  $10 million assets +  500 equity owners or securities traded on exchanges. Then, file registration statement with SEC and provide continuing updates fully and truthfully disclosing all material information And, no fraud under section 10b and rule 10b-5 “ Intent” must be proven Insider Trading – Definition Purposes Sanctions

Applicability –

Primary Market too, but focus on Secondary Market

SEC Created

General Requirements –

If  $10 million assets +  500 equity owners

or securities traded on exchanges.

Then, file registration statement with SEC and provide continuing updates fully and truthfully disclosing all material information

And, no fraud under section 10b and rule 10b-5

“ Intent” must be proven

Insider Trading –

Definition

Purposes

Sanctions

Insider Trading Approaches – Section 16b Short-Swing Trading Section 10b Anti-Fraud Section 14e Mergers and Acquisitions  10% Shareholders Corporation Directors Officers Employees Agents Alter Egos, Family, Friends Independent Contractors 1.Lawyers 2. CPA 3. Bankers

Approaches –

Section 16b Short-Swing Trading

Section 10b Anti-Fraud

Section 14e Mergers and Acquisitions

 10% Shareholders

Corporation

Directors

Officers

Employees Agents

Takeovers Proxies – SEC disclosure Tender Offers – Williams Act > 5% registration filed to publicly disclose State restrictions on hostile takeovers Management defenses against hostile takeovers & Fiduciary Duties

Proxies –

SEC disclosure

Tender Offers –

Williams Act

> 5% registration filed to publicly disclose

State restrictions on hostile takeovers

Management defenses against hostile takeovers

& Fiduciary Duties

SARBANES-OXLEY ACT: A Few Highlights WHO? Primarily public companies, CPA firms that audit public companies and securities firms providing analysts and investment banking services. What? Provide additional, more specific legal rules defining managers fiduciary and other legal duties to serve their owners’, clients’, customers’ and the public’s best interests; increase government oversight and enforcement; and, impose enhanced civil and criminal sanctions. When? This Act became law in response to the Enron, Arthur Andersen, WorldCom and other major financial scandals, and was recently upheld constitutionally by a federal court in the first major case charging a CEO and his company with violations. Why? Managers of major public companies, CPA firms that audit them and securities firms breached their fiduciary duties and committed fraud, negligence, securities violations and other illegal acts to advance their self-interests, but costing stakeholders 500 billion dollars or more, and ultimately leading to criminal sanctions and civil liabilities for themselves and their firms. How? Some examples include the following: Public companies must disclose whether they have codes of ethics and audit for compliance; have an audit committee of the directors which is independent of executives and has members with finance expertise; report material off-balance sheet losses; have their CEO and CFO personally certify financial statements; not make personal loans to directors and officers; require their CEO and CFO to repay bonuses received for years when the company must restate earnings due to non-compliance with the Act; and, not allow tampering with evidence once an investigation has started. The SEC can bar individuals from being a director or executive for committing securities fraud. CPA firms are subject to a new SEC Public Company Accounting Oversight Board that has the power to establish accounting rules, inspect CPA firms for compliance and impose sanctions for intentional or reckless violations; must separate audit divisions from other services; must rotate the lead partners on public audit firms periodically; and, no employee who worked on an audit can go to work for the client within one year. Securities firms must separate their securities analysts from influence by the investment banking and other divisions. And so much more.

WHO? Primarily public companies, CPA firms that audit public companies and securities firms providing analysts and investment banking services.

What? Provide additional, more specific legal rules defining managers fiduciary and other legal duties to serve their owners’, clients’, customers’ and the public’s best interests; increase government oversight and enforcement; and, impose enhanced civil and criminal sanctions.

When? This Act became law in response to the Enron, Arthur Andersen, WorldCom and other major financial scandals, and was recently upheld constitutionally by a federal court in the first major case charging a CEO and his company with violations.

Why? Managers of major public companies, CPA firms that audit them and securities firms breached their fiduciary duties and committed fraud, negligence, securities violations and other illegal acts to advance their self-interests, but costing stakeholders 500 billion dollars or more, and ultimately leading to criminal sanctions and civil liabilities for themselves and their firms.

How? Some examples include the following:

Public companies must disclose whether they have codes of ethics and audit for compliance; have an audit committee of the directors which is independent of executives and has members with finance expertise; report material off-balance sheet losses; have their CEO and CFO personally certify financial statements; not make personal loans to directors and officers; require their CEO and CFO to repay bonuses received for years when the company must restate earnings due to non-compliance with the Act; and, not allow tampering with evidence once an investigation has started. The SEC can bar individuals from being a director or executive for committing securities fraud.

CPA firms are subject to a new SEC Public Company Accounting Oversight Board that has the power to establish accounting rules, inspect CPA firms for compliance and impose sanctions for intentional or reckless violations; must separate audit divisions from other services; must rotate the lead partners on public audit firms periodically; and, no employee who worked on an audit can go to work for the client within one year.

Securities firms must separate their securities analysts from influence by the investment banking and other divisions.

And so much more.

SARBANES-OXLEY ACT: A Few Highlights LONG-TERM COSTS: Some researchers have estimated the costs to be $1.4 trillion. Will the benefits exceed such costs? OTHER BURDENS: Costs and questionable benefits for small and mid-cap firms. Foreign listed firms and their foreign auditors must comply. QUERY: WHY WERE THE RECENT FINANCIAL FIRMS FAILURES A SURPRISE TO SO MANY?

LONG-TERM COSTS: Some researchers have estimated the costs to be $1.4 trillion.

Will the benefits exceed such costs?

OTHER BURDENS:

Costs and questionable benefits for small and mid-cap firms.

Foreign listed firms and their foreign auditors must comply.

QUERY: WHY WERE THE RECENT FINANCIAL FIRMS FAILURES A SURPRISE TO SO MANY?