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OTHER KEY PARTS OF THE BILL OF RIGHTS—Of all the other amendments to the
Constitution, only a few come up with any degree of regularity in cases concerning business.
None were written thinking of business; these are simply applications that happen to impact
business.
Right to Bear Arms—Some employers prohibit firearms on company property. Firms must
comply with state or local law on that issue. Oklahoma prohibits employers from preventing
employees from keeping firearms in their personal, locked vehicles on company property.
Unreasonable Searches and Seizure—The Fourth Amendment limits “unreasonable searches
and seizures.” The Supreme Court gives strong protection to closed private property, such as
homes. Business property is also protected, but not as strongly.
Add. Info: Responding to a Search Warrant: Companies often deal with safety inspections, but
state or federal agents may show up with a warrant for a more serious search. Business owners
should know their rights. A warrant should identify the issuing judge, the location of the search,
and the area of search authorized, as well as documents or objects the agents are authorized to
look for. Warrants are issued after the prosecutor has submitted an affidavit that gives the
probable cause that a search will produce evidence of a law violation. Counsel should get a copy
of the affidavit. If there appears is a problem, the judge should be contacted. This does not
always help, because most searches are unannounced. When documents are sought, it may be
possible to negotiate with the agency to make the search process orderly rather than have agents
rifling files. Searches are not public, so the media can be excluded. Company records should be
protected in case the agents lose originals; but there is no right to insist on making copies of
documents taken. If privileged materials are involved, that can be discussed, but if there is not
enough cooperation, the matter should be discussed with the judge. One may videotape the
search process; to help insure the agents use proper procedure and that the process is
memorialized. When a search begins, do not destroy anything without going over it with the
agents, so there can be no claim that evidence was being destroyed. A company should not let
employees be interviewed by a search team without counsel present; the purpose of the search is
not to interview potential witnesses.
Limits on Searches and Inspections—Law enforcement ordinarily can be required to have a
warrant before they may search business property, but some highly regulated businesses do not
fall under this protection.
Warrantless Searches—Of individuals, including mandatory blood, breath and urine tests, may
be imposed on people who work for closely regulated industries where public safety is a major
issue. In New York v. Burger (1987), New York allowed warrantless searches of (state licensed)
auto junkyards so that police could have surprise searches to look for stolen cars and parts.
Burger was arrested during a warrantless search for not having a license to have a junkyard and
for having stolen cars and parts. He moved to suppress the evidence as illegally obtained during
an improper search. The S. Ct. noted that warrantless searches, where legal, may be performed
by regular police, as in this case, or by administrative inspectors, such as OSHA inspectors. The
Court tied the justification for the decision strongly to the problem of stolen cars and the great
loss from that activity.
Add. Info: Increasing Use of Warrants: The number of search warrants issued by federal
magistrates and judges is in the tens of thousands a year. Warrants have become increasingly
popular for use by government prosecutors going after businesses. Increasingly, in various
cases, such as antitrust and billing irregularities, government agents show up with warrants and
clean out large quantities of possibly relevant files and computers that may contain relevant
files.
Gathering Evidence—Improperly gathered evidence, such as evidence gathered without a
warrant when one was needed, may be stricken under the exclusionary rule. Warrantless searches
of persons, including the use of blood, breath and urine tests may be done for employees in
closely regulated industries who are involved in accidents or other problems.
Self-Incrimination—Fifth Amendment protection against self-incrimination has little meaning
for business entities; the Amendment only mentions persons. In Braswell, a person owned and
operated a one man corporation. During an investigation of his activities, he could not refuse to
reveal all information requested, because they were business records.
Add. Case: U.S. v. Felix (Sup. Ct., 1992)--Double Jeopardy is not a common issue for business
entities, but this case may be worth mentioning. Defendant was accused of drug law violations
(manufacturing illegal drugs) in Missouri and Oklahoma and tried in both states on separate
charges but similar evidence.
Decision: The Court held there may be no second prosecution where the government “to
establish an essential element of an offense charged in that prosecution, will prove conduct that
constitutes an offense for which the defendant has already been prosecuted.” The Double
Cyberlaw: No Right of Privacy in Chat Rooms
Police surveillance of chat rooms to gather information has been upheld; the information is being
distributed in a public place, so right of privacy has been lost.
Just Compensation—Fifth Amendment requires when government takes private property for
public use that the owner be compensated. As long as compensation is paid, there are few
restrictions on takings. Government agencies may be the vehicle by which title to property can
be forced to pass from private party to private party, when the parties themselves could not strike
a deal. Hence, use of eminent domain powers is often used to help put together a land package
for a builder who cannot reach a voluntary agreement with existing land owners. Prices paid are
to be “fair market value.”
Eminent Domain as a Development Aid—Developers often have trouble putting together parcels
of land as they must deal with multiple home owners. So a developer gets a local government to
use the power of eminent domain to put together a land package it wants. Via the government,
land owners are paid fair market value. Should the government be able to force people to sell
against their will as developers get governments to do their bidding.
CASE: Kelo v. City of New London, Conn. (Sup.Ct., 2005)—City forced homeowners to sell
their homes so the property could be used by a private developer for a large new development
that would bring more tax revenue to the city. Homeowners protested up to the Supreme Court.
Decision: The City’s plan does not violate the Constitution. Since the City’s plan will improve
the local economy, it is part of a larger scheme to benefit the public in general.
Questions: 1. The Court upheld the use of eminent domain to further private economic
development. Does this mean any government can force one private land owner to sell so that
another private party who wants the land can get it?
2. Why would government favor such actions since local property owners oppose it?
Governments tend to favor this as it attracts new development that would otherwise pay a higher
price for property or locate elsewhere. Some property owners favor it—such as in the Kelo
situation—some property owners had agreed to sell, but development would not proceed until all
Add. Info.: Post-Kelo Backlash: After Kelo, there was an uproar. About half the states passed
statutes or constitutional amendments to prohibit use of eminent domain for private development
purposes. However, most provide an exception for “blighted” property—which is a barn door
exception. Many condemnations similar to Kelo, such as in Brooklyn to allow construction of a
new basketball arena, have relied on “blighted.” In the Brooklyn area, some “blighted”
property included expensive homes and successful businesses, but they were lumped in with
low-income housing (as if that were a blight) and vacant lots.
Add. Case: Lundell v. Cooperative Power Assn. (Sup. Ct., Minn., 2006)--Beginning in 1980,
the Cooperative Power Association (CPA) leased land from McKinley for a telecommunication
tower. In 2001, McKinley sold the land to Lundell. He objected to CPA subleasing space to
Sprint. The lease said nothing about subleases. After a dispute over the proper use of the leased
land and the payment, CPA petitioned the district court to take title and possession of the land.
Minnesota law allows a condemning authority, when reasonably required, to obtain title to the
property in a “quick take” procedure. The court held for CPA, ruling that it had the power of
eminent domain and could take the property for utility use for the fair market value, which CPA
paid to Lundell. He appealed.
Affirmed. The CPA’s operation of a tower to facilitate the distribution a utility service is a public
purpose. Public purpose for taking of private land through eminent domain is construed broadly.
The need to continue use of the tower to provide a constant supply of electricity is a public
necessity. The decision to end discussions with the property owner after two years was not an
abuse of authority. Quick-take condemnation proceedings were reasonably allowed and do not
constitute an uncompensated taking in violation of the Constitution. Such decisions will be
overturned only when they are clearly arbitrary or unreasonable.
Regulatory Takings—In a 1987 case, Nollan, the S. Ct. struck down a regulatory taking by the
state of California. The state demanded that Nollan, a home owner, give part of his property to
the state in exchange for a building permit. This violated the Fifth Amendment.
Add. Case: MacPherson v. Dept. of Admin. Services (Sup. Ct., Ore., 2006)--Oregon voters
approved a statute by ballot in the 2004 election. It requires the government to compensate
landowners for reductions of real property fair market value due to land use regulations or to
modify, remove, or not apply such regulations. Opponents of the measure sued to have it stricken
as in violation of the federal and state constitutions on numerous grounds. A state trial court
judge struck down the measure and an appeal was made to the Oregon high court.
Decision: Reversed and remanded. The measure is constitutional. There is no unconstitutional
limitation placed on the government's exercise of power to regulate land use. The Constitution
Add. Case: Dolan v. City of Tigard (Sup. Ct., 1994)--Plumbing store owner Florence Dolan
applied for permit to double the size of her store and pave its parking lot; construction plan was
consistent with city zoning. Permit was granted on condition that she dedicate one-sixth of her
property for a public greenway and for a pathway along a creek that was supposed to reduce
traffic congestion (the city asserted).
Decision: This was an illegal uncompensated taking; in some circumstances, such as to prevent
flooding, some private land dedication may be required, but here the purpose of the land grab
Add. Case: Lucas v. South Carolina Coastal Comm. (Sup. Ct., 1992)--The issue was whether
the state must pay a property owner who was prohibited from building a house on his beachfront
property that had been zoned for such construction; thereby rendering the land essentially
valueless. To avoid a taking that must be compensated, there must be a substantial “nexus”
between the restriction and the end advanced to justify it.
Decision: The Court found no such nexus between the construction prohibition and the state’s
justifications of protecting the public’s ability to see the beach, preventing beach congestion, and
providing more beach access. The dissenters would have found for the state, holding that
Add. Case: Bormann v. Board of Kossuth Co. (Sup. Ct., Iowa, 1998)--Several property
owners contested Iowa’s “right to farm” statute that allowed county boards to designate land
officially as agricultural areas, thereby giving the owners of such land immunity from nuisance
suits for noise, odor, dust, wastes, or fumes from raising crops or livestock. Such designation
triggered application of statutory immunity. (Note: such suits normally come from the expansion
of hog farms and other stinky operations.)
Decision: The statute is an unconstitutional taking of property in violation of the 5th Amendment.
“The state cannot regulate property so as to insulate the users from potential private nuisance
claims without providing just compensation to persons injured by the nuisance.... We recognize
Right to Trial—Sixth and Seventh Amendment right to trial by jury in criminal and in common
law cases does not apply to civil cases. Since many violations of regulations involve civil
charges only, there is no right to jury trial.
Excessive Fines—Eight Amendment prohibition of “no excessive fines” does not apply to large
punitive damage awards against business defendants so long as proper procedure was followed
in state or federal court.
FOURTEENTH AMENDMENT—Fourteenth Amendment has been used to extend federal
constitutional guarantees to the states, especially on the basis of the due process clause and the
equal protection clause, both of which protect persons and businesses from diminished
constitutional protections at the hands of state governments. Bringing suit under the Amendment
is usually done via Section 1983 of Ch. 41 USC. It provides broad language for a wide range of
suits, allowing injunctive relief if needed.
Due Process—Concerns the substance of legislation that could violate constitutional guarantees.
States may not infringe on fundamental liberty interests without narrowly tailoring the
infringement to serve a compelling state interest. Due process is also violated when state action
shocks notions of fairness and human dignity.
CASE: Fresenius Medical Care Holdings v. Tucker (11th Cir., 2013)—Florida law prohibits
doctors from referring patients for services to businesses in which they have a financial interest.
Doctors contested the constitutionality of the law as in violation of due process.
Decision: A rational basis standard is applied to laws that do not infringe upon a fundamental
right. Under this standard, the law need only be shown to be rationally related to the legislature’s
interest in keeping health care costs under control. Even if the law is ineffective, it is not
irrational.
Questions: 1. Is there an ethical issue when physicians own firms they refer patients to?
There can be—the physician may have an incentive, even if unintended, of referring too many
patients for services or, even when patients need services, not sending them to another firm that
2. Suppose the physicians were right and that lobbyists for competitor firms helped obtain
passage of a law that benefited them in a way that causes patients to pay more for service than
they might get from a physician-owned service provider. Would that change the outcome?
According to the court, not necessarily. Legislatures have broad discretion to limit competition
within a state. All states have laws that reduce competition in assorted services and professions,
Add. Case: Pro’s Sports Bar & Grill v. City of Country Club Hills (7th Cir., 2010)—Pro’s got
a Class A liquor license from the city that let Pro’s stay open until 2 AM weekdays and 3 AM on
weekends. The next year the city council, without a vote, decided to cut the closing hours by 2.5
hours, which killed business. Owners of Pro’s sued and the district court issued a temporary
injunction against enforcement, finding a violation of due process. City appealed.
Decision: Affirmed. Property may not be taken by the state without due process. Loss of a valued
license—a protected property right--requires due process—cause and a hearing, not an
off-the-cuff decision by the council. IL law requires municipalities to record official acts—here
Add. Case: Philip Morris USA v. Williams (S.Ct. 2007)—Williams died from smoking, his
widow sued Philip Morris which made his cigarettes, claiming the company tricked him into
thinking smoking was safe. The jury awarded $821,000 compensatory and $79.5 million
punitives. Oregon high court upheld. Philip Morris appealed.
Decision: Vacated and remanded. Due Process forbids a state to use punitive damage awards to
punish a defendant for injuries to parties not related to the case. That is, the damages were not
Add. Case: Cooper Industries v. Leatherman Tool Group (Sup. Ct., 2001)--Leatherman
successfully sued Cooper for Trademark infringement. The jury awarded $50,000 in
compensatory damages and $4.5 million in punitive damages. The verdict was appealed to the
Supreme Court.
Decision: Reversed. The Due Process Clause was violated because there was “grossly
Add. Case: BMW of North America v. Gore (Sup. Ct., 1996)--Gore bought a new BMW that
had been, unknown to him until pointed out, repainted due to damage during shipment. BMW’s
policy was that cars with minor damage (less than 3% of sale price) would be sold as new
without explanation of what was done. He sued for compensatory damages ($4,000 for lower
value of car) and was awarded $4 million punitive damages (1,000 BMWs times $4,000 per car
sold under similar circumstances to Gore’s car). Alabama supreme court cut punitives to $2
million.
Decision: Amount of punitive damages held to violate the Due Process Clause because it was
“grossly excessive” compared to the interests of the state in deterring such behavior. Courts
must consider the “enormity of the offense” in punitive damage cases and the ratio of the
Add. Info—Any Limits on Regulation? In Natl. Paint & Coating Assn. v. Chicago, the 7th
circuit upheld a city of Chicago regulation banning the sale of spray paint in city limits to try to
reduce graffiti on public surfaces. The court noted that the regulation did not discriminate
against interstate commerce in a way that attempts to assist local businesses to their competitive
advantage. Any competitive disadvantage would be local—dealers who could not sell certain
products. The paint makers asserted their due process rights had been violated, but this was
rejected because there is no “fundamental right” to own spray paint and the sellers are
corporations, which are not due as high a level of constitutional due process protection as are
persons. The law is supported by a rational basis and does not violate equal protection
principles.
Equal Protection—Fourteenth Amendment equal protection clause prohibits states from
violating the right of people to be treated equally under the law. This rarely arises in business
cases, although some state taxing and regulatory schemes have been held to violate equal
protection because they were not consistent in their application; the laws themselves were fine,
the application of the laws was discriminatory against some parties.
CASE: Corey Airport Services v. Clear Channel Outdoor (11th Cir., 2012)—Corey lost a bid to
provide advertising displays at the Atlanta airport. Corey sued, contending that the City
conspired with the winner, Clear Channel, to deprive Corey of its equal protection rights. Jury
held for Cory. Defendants appealed.
Decision: There must be a violation of equal protection for a claim to exist. There must be an
identifiable group that is discriminated against to have a claim under the Equal Protection
Questions: 1. Would Corey have had a chance of making this claim if the firm were minority
owned and the others were not?
No, unless racial animus could be shown. The fact of being minority alone would not be enough;
2.Regardless of what happened here, many government contracts are given to firms that are
politically favored. Does this case indicate there is no equal protection claim in such instances?
It does so indicate. If one could show corruption in the form of a payoff, then there would likely
Add. Case: Reget v. City of La Crosse (7th Cir., 2010)—Reget owned a body shop in La Crosse
for many years. A city ordinance required junked cars to be behind a fence. Reget never built a
fence and received citations. Over the years, there were many fights between Reget and the city.
Eventually, the city decided to rezone where his business was located, which would force it to
move. Reget claimed he was picked on by the city and sued for violation of equal protection. The
district court dismissed the suit. Reget appealed.
Decision: Affirmed. A claim of equal protection must show that similarly situated individuals
were treated differently with no rational basis for the treatment. Reget is a class of one. He fails
Add. Case: Club Italia Soccer and Sports Organization v. Charter Township of Shelby,
Mich. 6th Cir., 2006)—The town wanted a company to develop a soccer facility and accepted a
proposal from a builder for that. Club Italia complained it had not been allowed a chance to bid
on the job, so the town allowed bids three more weeks. Club Italia could not get a bid prepared
in that time, so the job went to the original bidder. Club Italia sued for violation of Due Process.
Decision: In such cases a plaintiff must how it was deprived of a protected liberty or property
interest and that such deprivation occurred without due process of law. There was no loss of a
Add. Case: Adarand Constructors v. Pena (Sup. Ct., 1995)--Adarand sued to contest the
constitutionality of a federal government minority set-aside contracting program. Adarand lost a
bid despite being low bidder and contended the program violated the Equal Protection clause.
Decision: The Equal Protection clause requires consistency in the application of law. Such
Add. Case: Northeastern Fla. Chapter of the Assoc. General Contractors of America v.
Jacksonville, Fla. (Sup. Ct., 1993)--A Jacksonville ordinance required that 10% of funds spent
on city contracts be set aside annually for minority business enterprises. Contractors who did
not qualify under the ordinance alleged that it violated the Equal Protection Clause by
preventing them from competing for the work.
Decision: The Court held that it was possible for there to be injury in fact, so the right of the
Add. Case: Albiero v. City of Kankakee (7th Cir., 2001)--Albiero, the owner of rental property,
sued the City of Kankakee for placing a large sign in front of his property that read: SLUM
PROPERTY! It listed him as the owner of the property and noted that it was not in compliance
with city code and blighted the neighborhood. A city ordinance allowed such signs to be placed
on property that was not in compliance with city regulations and was the subject of numerous
citations and complaints by neighbors. The city had placed about 20 such signs on various
property, removing them when they came into compliance with the building code. Albiero
contended that the city’s action violated his right to equal protection because he had been
singled out for retaliation due to prior disputes with the city. The trial court dismissed his suit;
he appealed.
Decision: Affirmed. A plaintiff may bring an equal protection claim as a “class of one” where he
alleges that he has been intentionally treated differently from others similarly situated, and that
there is no rational basis for the difference in treatment. This could include a claim that a
Add. Case: Village of Willowbrook v. Olech (Sup. Ct., 2000)--Homeowner Olech asked the
Village to connect her property to the municipal water supply. The Village agreed to provide
water service if Olech granted it a 15-foot easement, which was done. Olech sued, claiming that
the demand of the easement violated the Equal Protection Clause because the demand was
irrational and arbitrary and in retaliation for an earlier dispute between Olech and the Village.
The district court dismissed the suit for failure to state a claim. The appeals court reversed. The
Village appealed.
Decision: Affirmed. The purpose of the equal protection clause is to secure every person within
the State’s jurisdiction against intentional and arbitrary discrimination, whether imposed by
express terms of a statute or by its improper execution through its agents. An equal protection
Discussion Question
The courts have held for many years that the Fifth Amendment is not violated when one must
report to the IRS any income from illegal activities, such as drug dealing. The taxation of income
is legitimate, and individuals do not have the right to hide income from the government. To hide
income, even from illegal activities like drug dealing, is a violation of the federal tax code, which
can lead to a felony conviction. If one reports illegal activities to the government, then one has
exposed oneself to investigation for those activities. Clearly, this is a trap for individuals engaged
in illegal activities, and is a common method of prosecuting people who are engaged in illegal
activities, but the courts have consistently held that this does not violate the Fifth Amendment.
Just because this is a no win situation for the individual engaged in illegal activities does not
mean that one has the right to evade either federal taxes or evade the possibility of prosecution
for engaging in illegal activities.
Case Questions
1. The law was upheld as proper under the Commerce Clause. The decision was simple—lottery
2. The Supreme Court struck down the Iowa statute as a violation of the commerce clause.
While Iowa has a valid interest in highway safety, it may not impede interstate commerce. Here
the evidence was that the cost to trucking companies, and hence the impact on interstate
3. (answer on Internet for students) The tax was upheld. Referring to that case in a later (1922)
decision, the court said “the discretion of Congress in the exercise of its constitutional powers to
levy excise taxes could not be controlled or limited by the courts because the latter might deem
4. The tax was upheld. Severance taxes on natural resources are legitimate, even if the resource
leaves the state. The tax rate may have been high, but it was not discriminatory; it applied to coal
5. (answer on Internet for students) The tax (actually called a milk pricing order) was
unconstitutional. The law was designed to benefit local producers of milk by creating a tariff-like
barrier that was imposed on out-of-state competitors. Although the MA dairies also paid the tax,
they got their money, and more, back. If MA wants to tax its citizens to subsidize its dairies, that
6. Reversed and remanded. Signs are speech protected by the First Amendment. An ordinance is
a prior restraint when it subjects protected speech to government regulation before the speech
7. (answer on Internet for students) The Supreme Court struck down the city’s discriminatory
treatment of publications. There must be a “reasonable fit” between its interests in safety and
esthetics and the means used to serve those interests. Since the newsracks ordered removed were
8. The surprise, warrantless inspections were upheld as constitutional because propane gas is a
closely regulated industry for safety purposes. Because of the rational regulation scheme,
participants in the industry have reduced expectations of privacy. The search plan was specific as
9. (answer on Internet for students) The Court of Appeals affirmed a contempt ruling against
Wild and ordered him to produce the records of his company. A corporation does not have Fifth
10. (answer on Internet for students) The U.S. Supreme Court reversed the West Virginia
Supreme Court of Appeals (where the vote was 3-2 in favor of the coal company). The Court
Ethics Question
As the S. Ct. held (1978) in Marshall v. Barlow’s, warrantless searches of businesses by
inspectors violate constitutional rights (unless the firm is in a closely regulated industry, as later
cases have ruled). For an manager to require an inspector to go obtain a warrant would exercise a
Essay Case Question and Answer:
A church owned land in a rural area that it used as a recreation area for disabled children. A fire
destroyed vegetation in the area, allowing flooding to occur. To protect public safety, the county
adopted an ordinance prohibiting any new building in the area until it determined what to do. The
The Court ordered the church be paid compensation for the loss of use of its property. The
county could temporarily suspend building in such an event, but six years was far too long to be
Internet Assignment
Cornell University Law School, U.S. Constitution Annotated:
www.law.cornell.edu/anncon/
FindLaw, U.S. Constitution:
www.findlaw.com/casecode/constitution
Constitution Finder:
confinder.richmond.edu/
The National Archives:
www.archives.gov/
If you go to these sites, you will see they all contain materials related to the Constitution,
including scholarly material in annotations. The texts of the constitutions of many of the
countries of the world are also available on the Internet.
