Legal Environment Test 1

gcannon007's version from 2016-02-19 00:46

Section 1

Question Answer
horizontal separation of powerjudicial-executive-legislative
vertical separation of powerFederal – State
Supremacy clauseFederal law preempts state law
Exclusive jurisdictiononly the federal gov’t may regulate. (bankruptcy, patents)
purpose of 10th amendment Powers not specifically given to the federal government are reserved to the states and the people
contract clauseDoesn’t apply to federal gov’t; Feds can impair contracts, prohibits states from modifying the terms of existing valid contracts, and limited exceptions for emergencies
privileges and immunities clause A state may not discriminate in favor of its own residents, exception: state may discriminate to protect a substantial state interest (e.g. out-of-state tuition), and protecting citizens from competition is not a substantial state interest
full faith and credit clause States must recognize the official acts of other states (judgments are enforceable across state lines) Doesn’t apply to modifiable decrees in equity (e.g. child custody)
Commerce clauseForeign commerce: only the federal gov’t can regulate, Interstate commerce: federal government can regulate an activity if it impacts interstate commerce, Local businesses: fed. Gov’t can regulate if there is some connection to interstate commerce.
extent states can regulate interstate commerceStates can regulate if there is not an “undue burden” on interstate commerce, States cannot discriminate against out-of-state businesses, State taxation of interstate commerce requires “nexus” (a connection to the services provided by the state)
establishment clauseGov’t can neither promote nor discourage religion Gov’t interaction with religion is permissible if: Interaction has a secular purpose & does not advance or hinder religion & There is not excessive entanglement (School prayer, Sunday closing laws, Nativity Scenes, 10 Commandment displays)
free exercise clausePerson cannot be punished for religious beliefs. Religious practices may be regulated by the gov’t if there is a “compelling state interest”, Most difficult test for state to pass, State must show it is protecting some extremely important interest (Human sacrifice, polygamy)
types of unprotected speechObscenity, Child Pornography, False/Misleading Commercial Speech, Defamation, Advocating the violent overthrow of the gov’t, Speech that is a “clear and present danger”, and “fighting words”
freedom of associationGov’t cannot punish solely for association with group and State cannot compel membership in any group
extent gov can regulate offensive speechGov’t may use content-neutral restrictions (Reasonable time, place, and manner requirements, Parade permits, zoning laws, manner of speech rules)
rule for administrative searchesdone by governmental agencies, Warrant may be required, Doesn’t require showing of probable cause Exception: Warrantless searches of highly-regulated industries are permitted
right of privacy“Right to be left alone”, Some areas of life cannot be regulated by the state, Parameters of right are undefined (right to die, privacy in the workplace)
procedural due processBefore the government can take action, the party must receive notice and an opportunity for a hearing
substantive due processHistorically, gave court the power to rule on the “wisdom” of legislation, Used by Sup. Ct. to strike down New Deal legislation
privilege against self incriminationApplies only to criminal cases, Not available to corporations, partnerships, LLCs, Doesn’t apply to business records (tax returns)
eminent domain of the 5th amendment Right of the government to take private property for a public purpose, Government must pay just compensation for taking, Regulation of the use of property is not a “taking” (zoning and land use regs)
due process clause of 14th amendmentExtended the Bill of Rights to the States after the Civil War
3 tests to analyze gov discrimination1. strict scrutiny (race and fundamental rights 2. quasi-strict scrutiny (gender, legitimacy 3. Rational basis (weight, height, age marital status)

Section 2

Question Answer
blue sky lawsState regulation of sale of securities. Only applies to intrastate transactions
securities act of 1933deals with initial offerings of securities
securities act of 1934deals with secondary sales of securities
exempt securitesGovernment securities, Short-term notes (9 months or less), Securities of: Nonprofits, Financial institutions, Common carriers, Stock splits/dividends
exempt transactionsIntrastate Offerings: Issuer is domiciled in state, At least 80% of sales are in the state, At least 80% of the proceeds will be used in the state, All buyers are state residents, Securities can’t be sold for 9 months
accredited investorPerson with net worth of $1,000,000 or more, Person with income of $200,000 or more in last 2 years, Legal entities with assets of at least $5,000,000 in assets, Insiders (officers and directors), Institutional investors
due diligencereasonable steps taken by a person in order to satisfy a legal requirement
reporting requirement under 1934 actPublicly traded companies must file: Form 10-K annually, Form 10-Q quarterly, Form 8-K for material changes
provisions of Sec. 10(b) and 10b-5Antifraud rules, Fraud is defined broader than in common law, Includes fraudulent statements and material omissions
holding in Texas gulf sulphurAn insider with material nonpublic information must “disclose or abstain.”
insider for purpose of sec. 10(b)A person who owes a fiduciary duty to the shareholders, and uses inside information for personal gain
determining if someone is a tippeeA person who receives inside information from an insider, the insider breached his/her fiduciary duty in disclosing the information, and the tippee knew or should have known of the breach of duty
statutory insiders for purpose of sec. 16Applies to insiders who are officers, directors or shareholders, own 10% or more of the stock, prohibits buying and selling or selling and buying shares within a 6-month period, they don’t have to show insider information, and profits are forfeited to the corporation
short-swing profitsrestricts officers and insiders of a company from making short-term profits at the expense of the firm

Section 3

Question Answer
horizontal restraints under Sherman actagreements between competitors at the same level (e.g. retailer – retailer)
vertical restraints under Sherman actAgreements between parties at different levels (e.g. retailer – manufacturer)
monopolizing under sec 2 of Sherman act> 70% market share: conclusive monopoly power < 25% market share: conclusive no monopoly power
Robinson-Patman actProhibits Price Discrimination
primary line injuryInjury to a competitor (A & B compete in Region 1, but not Region 2)
secondary line injuryInjury to a Customer (Seller sells to WalMart for 2.50 and to Mom&Po for 3)
tertiary line injuryInjury to an indirect customer through a wholesaler (Seller sells to wholesalers that supply WalMart and Mom&Pop)
defenses to suit under the ActVolume Discounts- Only works if all of the discount is explained through actual cost savings, Changing Conditions- Obsolescence, end of season etc, Meeting the Competition- Only works if the competition is not engaged in price discrimination
types of mergersHorizontal, Vertical (backward and forward), market extension, and conglomerate
Herfindahl-Hirschman indexMethod to analyze the effects of a proposed merger
theories used to challenge mergershorizontal- co. has too much market share, Vertical- closes out a market for customer or supplier, market extension and conglomerate- unfair advantage and create a new product rather than acquiring
clayton's act provision on interlocking directorates No interlocking directorates. A director cannot serve on boards of competitors
FTC role in regulating competitionPromote competition by insuring it is fair Protect consumers and Agency issues trade practice rules
exemptions to antitrust lawsLabor unions, agriculture cooperatives, insurance (under state law), foreign trade, Pro baseball, regulated industries, lobbying of trade associates

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