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*Bonus Chapter A

Working within the

Legal Environment

Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

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• Often called the best trial lawyer in the U.S., Boies represented IBM, CBS, Calvin Klein, the New York Yankees and Wachovia.

• Didn’t learn to read until 3rd grade because of a learning disability.

• He now heads his own firm of over 200 lawyers.

ProfileDAVID BOIESBoies, Schiller, and Flexner

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*The Case for Laws

• Laws are a key part of a civilized society, but must change with the times.

• Judiciary -- The branch of government chosen to oversee the legal system through a system of courts.

• The U.S. courts system is organized at the federal, state, and local levels.

The NEED for LAWS

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*The Case for Laws

• Trial courts hear cases of criminal and civil law.

• Appellate courts hear appeals from the losing party at the trial court level.

TYPES of COURT

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*The Case for Laws

• Criminal law defines crimes, establishes punishments, and regulates the investigation and prosecution of people accused of committing crimes.

• Civil law proceedings cover non-criminal acts - marriage, personal injury lawsuits and more.

• Business Law -- Refers to the rules, statutes, codes and regulations that provide a legal framework for the conduct of business.

TYPES of LAW

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*Statutory and Common Law

• Statutory Law -- Includes state and federal constitutions, legislative enactments, treaties of the federal government and ordinances; written law.

• Common Law -- The body of law that comes from decisions handed down by courts; unwritten law.

• Precedent -- Decisions judges have made in previous cases to guide their handling of new cases.

MAJOR AREAS of LAW

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*Administrative Agencies

• Administrative Agencies -- Federal or state institutions and other government organizations with delegated power to create rules and regulations within their given area of authority.

• Examples of Administrative Agencies:

- The Federal Reserve Board

- The Securities and Exchange Commission

- The Equal Employment Opportunity Commission

- The Federal Trade Commission

ADMINISTRATIVE AGENCIES

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*PROGRESS ASSESSMENT

• What’s business law?

• What’s the difference between statutory and common law?

• What’s an administrative agency?

Progress Assessment

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*Tort Law

• Tort -- A wrongful act that causes injury to another person’s body, property or reputation.

• An intentional tort is a willful act that results in injury.

• Negligence -- An unintentional tort that causes harm or injury that was not intended.

WHAT’S TORT LAW?

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*Product Liability

• Product Liability -- Holds businesses liable for harm that results from the production, design, or inadequate warnings of products they market.

• Strict Product Liability -- Liability without regard to fault; a company can be held liable for a defective product even if they didn’t know of the defect.

PRODUCT LIABILITY LAWS

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*Product LiabilityMAJOR

PRODUCT LIABILITY CASES LG2

Company Year Settlement

Ford Motor Company 1978$125 million in punitive damages awarded after a boy was severely burned during a rear end collision

A.H. Robins 1987Dalkon Shield recalled after eight separate punitive damage settlements

Jack In the Box 1993Assessed large damages after a child died of E. coli and others became ill

General Motors 1999Paid $4.8 billion in damages in faulty fuel-tank case

Major Tobacco Firms 2004$130 billion sought by the federal government for smoking cessation programs (settled for $10 billion)

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*Legally Protecting Ideas: Patents, Copyrights and Trademarks

• Patent -- A document that gives inventors exclusive rights to their inventions for 20 years.

PATENTS, COPYRIGHTS, and TRADEMARKS

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• Copyright -- Protects a creator’s rights to materials such as books, articles, photos, paintings, and cartoons.

• A trademark is a legally protected name, symbol, or design that identifies the goods or services of a seller.

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*Legally Protecting Ideas: Patents, Copyrights and Trademarks

• Patent applicants should seek the advice of a lawyer.

• Foreign companies are eligible to file for U.S. patents.

• Patent owners have the right to sell or license the use of their patent to others.

PATENT FACTS

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Source: IFI Patent Intelligence.

U.S. PATENT LEADERS in 2008LG3

Legally Protecting Ideas: Patents, Copyrights and Trademarks

Company # of Patents

IBM 4,186

Samsung 3,515

Canon 2,114

Microsoft 2,030

Intel 1,776

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*Sales Law: The Uniform Commercial Code

• Uniform Commercial Code (UCC) -- A comprehensive commercial law that covers sales laws and other commercial laws.

WHAT’S the UNIFORM COMMERCIAL CODE?

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• The UCC has 11 articles that contain laws covering a wide range of business issues.

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*Warranties

• A warranty guarantees that the product sold will be acceptable for the purpose for which the buyer intends to use it.

• Express Warranties -- Specific representations made by the seller that buyers rely on regarding the goods they purchase.

• Implied Warranties -- Legally imposed on the seller, who implies that a product will conform to the standards of trade.

UNDERSTANDING WARRANTIESLG4

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*Negotiable Instruments

• Negotiable Instruments -- Forms of commercial paper that are transferable among businesses and individuals.

• Four conditions for using negotiable instruments:

1. They must be written and signed by the maker or drawer.

2. Be made payable on demand or at a certain time.

3. Be made payable to the bearer.

4. Contain an unconditional promise to pay a specified amount.

NEGOTIABLE INSTRUMENTSLG4

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*Contract Law

• Contract -- A legally enforceable agreement between two or more parties.

• Contract Law -- Specifies what constitutes a legally enforceable agreement.

• Breach of Contract -- When one party fails to follow the terms of a contract.

CONTRACT LAWLG5

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*Contract Law

• A contract is legal and binding when:

1. An offer is made

2. There’s a voluntary acceptance of the offer

3. Both parties give consideration

4. Both parties are competent

5. The contract covers a legal act

6. The contract is in the proper form

CONTRACT REQUIREMENTSLG5

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*Contract Law

• If a contract is breached the following may be ordered:

- Specific performance

- Payment of damages

- Discharge of obligation

BREACHED CONTRACTSLG5

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*PROGRESS ASSESSMENT Progress

Assessment

• What’s the purpose of the Uniform Commercial Code (UCC)?

• Compare express and implied warranties.

• What are the four elements of a negotiable instrument specified in the UCC?

• What are the six conditions for a legally binding contract? What could happen if it’s breached?

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*The History of Antitrust Legislation

• The Clayton Act prohibits:

- Exclusive dealing

- Tying contracts

- Interlocking directorates

The CLAYTON ACT of 1914

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*The History of Antitrust Legislation

• The Federal Trade Commission Act of 1914 created the FTC and prohibits unfair methods of competition in commerce.

• The Wheeler Lea Amendment gave the FTC additional control over false and misleading ads.

• The Robinson-Patman Act of 1936 prohibits price discrimination and applies to buyers and sellers.

ANTITRUST LEGISLATIONLG6

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*The History of Antitrust Legislation

HISTORY of HIGH PROFILE ANTITRUST CASES

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Case Year Outcome

U.S. v. Standard Oil 1911 Standard Oil broken into 34 companies

U.S. v. American Tobacco

1911 American Tobacco split into 16 companies

U.S. v. E. I. du Pont de Nemours

1961 DuPont ordered to divest its 23% ownership in General Motors

U.S. v. AT&T 1982 Settled after Ma Bell spun off into regional companies

U.S. v. Microsoft 2000 Microsoft ordered to halt prior anticompetitive practices

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*Laws to Protect Consumers

• Consumerism -- A social movement that seeks to increase and strengthen the rights and powers of buyers in relationship to sellers.

• The Consumer Product Safety Commission provides information concerning consumerism and consumer protection.

CONSUMER PROTECTIONSLG6

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Source: Federal Trade Commission, www.ftc.gov.

Laws to Protect Consumers

NUMBER of IDENTITY THEFT COMPLAINTS

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*Tax Laws

• Taxes -- The way federal, state, and local governments raise money.

• Some forms of taxes:

- Income taxes

- Property taxes

- Sales taxes

- Excise taxes

TAXES

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Source: National Conference of State Legislators.

Tax LawsSIN TAXESState Tax Rates per Pack of Cigarettes

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State Rate per Pack

New York $2.75

New Jersey $2.58

Massachusetts $2.51

Rhode Island $2.46

Washington $2.03

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Source: IRS, Statistics of Income 2008, www.irs.gov.

Tax LawsDO the RICH PAY TAXES?

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Taxpayers % of Total Taxes

Top 1% 40% of total taxes

Top 5% 60% of total taxes

Top 25% 86% of total taxes

Top 50% 97% of total taxes

Bottom 50% 3% of total taxes

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*Bankruptcy Laws

• Bankruptcy -- The legal process by which a person, business, or government entity, unable to meet financial obligations, is relieved of those debts by a court.

• Options of declaring bankruptcy:

- Chapter 7: Straight bankruptcy

- Chapter 11: Reorganization

- Chapter 13: Repayment plan

BANKRUPTCY LAWS

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*Tax LawsGOING, GOING, GONE

Bankruptcies of 2008-2009LG8

• Circuit City

• KB Toys

• Linens ‘n Things

• Steve & Barry’s

• Mrs. Field’s Cookies

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*Bankruptcy Laws

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How ASSETS are DIVIDED in BANKRUPTCY

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*Deregulation vs. Regulation

• Deregulation -- The government withdraws certain laws and regulations that seem to hinder competition.

DEREGULATING COMMERCE

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• Deregulation efforts were active in:

- The airline industry

- Telecommunication

- Some public utilities

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HAMBURGER REGULATIONS Deregulation vs. Regulation

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*PROGRESS ASSESSMENT Progress

Assessment

• What’s the purpose of antitrust law?

• Describe bankruptcy provisions under Chapters 7, 11, and 13.

• What’s deregulation? Give examples of successful and unsuccessful deregulation.

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