Dynamic business law PDF
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Dynamic Business Law Dynamic Business Law NANCY K. K UBASEK Bowling Green State University M. NEIL BROWNE Bowling Green State University DANIEL J. HERRON Miami University ANDREA GIAMPETRO-MEYER Loyola College LINDA L. BARKACS University of San Diego LUCIEN J. D HOOGE Georgia Tech University CARRIE W ILLIAMSON DLA Piper US LLP East Palo Alto, California DYNAMIC BUSINESS LAW Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Copyright © 2012, 2009 by The McGraw-Hill Companies, Inc. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for dis- tance learning. Some ancillaries, including electronic and print components, may not be available to customers outside the United States. This book is printed on acid-free paper. 1 2 3 4 5 6 7 8 9 0 DOW/DOW 1 0 9 8 7 6 5 4 3 2 1 ISBN 978-0-07-337767-4 MHID 0-07-337767-8 Vice president and editor-in-chief: B rent Gordon Editorial director: Paul D ucham Executive editor: John Weimeister Executive director of development: Ann Torbert Development editor: Megan R ichter Editorial assistant: Heather Darr Vice president and director of marketing: Robin J. Zwettler Senior marketing manager: S arah Schuessler Vice president of editing, design, and production: Sesha Bolisetty Senior project manager: Bruce Gin Senior buyer: Carol A. Bielski Designer: Matt Diamond Senior photo research coordinator: Jeremy C heshareck Photo researcher: Jennifer Blankenship Media project manager : J ennifer L ohn Media project manager: C athy L. Tepper Cover design: M att Diamond Interior design: K ay Lieberherr Typeface: 10/12 Times Roman Compositor: Laserwords Private Limited Printer: R. R. Donnelley Library of Congress Cataloging-in-Publication Data D ynamic business law / Nancy K. Kubasek . . . [et al.]. — 2nd ed. p. cm. Includes index. ISBN-13: 978-0-07-337767-4 (alk. paper) ISBN-10: 0-07-337767-8 (alk. paper) 1. Business law—United States. I. Kubasek, Nancy. KF390.B84D96 2012 346.7307—dc22 2010034808 www.mhhe.com About the Authors Nancy K. Kubasek receiv blackjack players. Both are avid ex her J.D. from the University of very day. Toledo College of Law in 1981 and her B.A. from Bowling Green State University in 1978. M. Neil Browne is a senior She joined the BGSU faculty in Teacher pro- fessor in 1988, and became a wling Green full professor in 1993. State University. He received his D uring her tenure at Bowling Green State University, usiness law, legal at the University of Houston, his environment of business, en w, health Ph.D. in economics at the Uni- w, and moral principles. She has published over versity of Texas, and his J.D. 75 w reviews and business jour- from the University of Toledo. He has been a professor nals. Most of her substantiv viron- at Bowling Green for more than four decades. mental questions. She has helped get students involved P rofessor Browne teaches courses in economics in le ve and law, legal research, jurisprudence, ethical rea- been coauthored with students. She has also published soning, critical thinking, and economics at both the undergraduate and graduate levels. He has received recognition as the Silver Medalist National Profes- and ethics. sor of the Year, the Ohio Professor of the Year, and vironmental law text for under- Distinguished Teacher and Master Teacher at Bowl- graduate students, E nvironmental Law, and coauthored ing Green State University, as well as numerous The Legal Environment of Business: A Critical Think- research aw versity and from profes- ing Approach. She has written supplemental materi- sional organizations. His consulting activities with als, such as study guides, test banks, and instructors’ corporate, governmental, and educational institutions manuals. focus on improving the quality of critical thinking in A ctive in many professional organizations, she has those organizations. In addition, he serves as a Rule served as president of the Academy of Legal Stud- 26 expert with respect to the quality of the reasoning ies in Business, the national organization for profes- used by expert witnesses called by the party opponent sors of legal studies in colleges of business. She has in legal actions. also served as president of the Tri-State Academy of P rofessor Browne has published 25 books and over Legal Studies in Business, her regional professional 140 professional articles in la association. economics, sociology, and higher I n her leisure time, she and her husband, Neil Bro Alaska, as well gal policy. gemouth bass in Florida. In addition, the In addition, he is in the midst of writing books about regular participants in polka, waltz, zydeco, and Cajun the power of questionable assumptions in economics, dance festivals in Europe and the United States. For the usefulness of asking questions as a learning strategy, almost 30 years, they have been successful tournament and the deficiencies of legal reasoning. v vi About the Authors Daniel J. Herron is a pro- understand how to work toward teaching excellence. fessor of business legal studies At Loyola College, she serves as a faculty mentor, at Miami University in Oxford, w to encour- Ohio. He received his law degree age students to engage in high-level discussion in from Case W e Uni- class. Professor Giampetro has also written several versity School of Law in 1978 instructors’ manuals for textbooks. In these manu- and is a member of the Ohio als, she strives to provide practical information that and federal bars. He has taught gives teachers ideas about how to engage students in versity, his alma meaningful ways. mater, since 1992, having previously taught at the Uni- P rofessor Giampetro has also received the Holmes- versity of W Western Carolina University, the Cardozo Award from the Academy of Legal Studies in Univ ilmington, and Bowl- Business in recognition of excellence in le - ing Green State University. He has been a member of y the Academy of Legal Studies in Business for nearly hav eeping with 25 years and has served as its executiv Loyola College’ av 1991. His research interests focus on law and ethics, pursue themes related to social justice, especially as it employment law, and le . v y have two children, Elisabeth and Linda L. Barkacs received , a daughter-in-law, Amanda, and one her J.D. from the University of San Diego in 1993. She also Ohio, with their two beagles, Max and Missy. has a B.A. in political science from San Diego State University Andrea Giampetro-Meyer and an A.A. in accounting from is chair of the Law & Social alley College. U pon graduating from law Sellinger School of Business & Management at Loyola College bar exam, Professor Barkacs became an associate at a in Maryland. She received her downtown San Diego law firm. During her time with B.S. in business administra- as involv tion from Bowling Green State xual harassment case against the University and her J.D. from erdict. the Marshall-Wythe School of La ge of William & Mary. a professor at USD) started their own law firm special- P rofessor Giampetro’s research focuses primarily izing in business and civil litigation (in both federal on le n yment law cases, and appeals. employment. Her teaching interests They were also involved in numerous mediations and She teaches at all lev ge students gan teaching at USD in 1997 vel business executives. As an educator, Professor Giampetro’ - she has designed and taught numerous courses on law, graduate legal en usiness course and the ethics, and negotiation. She teaches in USD’s under- graduate and graduate programs, including the Master P rofessor Giampetro has earned both national and of Science in Executive Leadership (a Ken Blanchard local aw Hewitt Teaching Award from the Academy of Legal and the Master of Science in Supply Chain Manage- Studies in Business and the Henry W. Rodgers III s study- Distinguished Teacher of the Year Aw yola abroad classes and has traveled extensively throughout College. She has experience helping new teachers Europe, Asia, and South About the Authors vii Professor Barkacs has received numerous awards P for her teaching at USD, including the 2008 USD Out- of law in Washington, D.C., and Denver. standing Undergraduate Business Educator; 2008 and P rofessor Dhooge is the author of three books and 2007 Professor of the Y , USD Senior Class (uni- more than 40 law revie versitywide); 2007 Creative and Innovative Teaching Award, Academy of Education Leadership (national); as well as in Europe and Asia. Professor Dhooge is the and 2009 and 2010 nominee for U.S. Professor of the recipient of numerous research awards given by the Y gie Foundation). Academy of Legal Studies in Business, including six Ralph C. Hoeber Awards granted annually for excel- Group ( www.tbgex v a lence in research. He was designated the outstand- that provides ne ing junior business law faculty member in the United vate sector States by the academy in 2002 and received the Kay w gotiation. Duffy Award for outstanding service in 2005. In gotia- 2003, the University of the P tion. She has been the president, vice president, conference Teacher-Scholar. He was designated as chair Academy of an International Scholar by the Soros Foundation in Legal Studies in Business (www.pswalsb.net). 2006. Professor Dhooge currently serves on the exec- Professor Barkacs currently spends her time teach- utiv Academy of Legal Studies in ing, publishing, consulting for Business and is a past editor-in-chief of the American and doing volunteer work for v vic causes. She Business Law Journal and the Journal of Legal Studies enjoys w Education. A native of Chicago but raised in Denver, Profes- Violet, and Vanessa. sor Dhooge enjoys spending time with his f follo Colorado Rockies professional baseball teams. Lucien J. Dhooge is the faculty director of the Global Executive MBA Program and Carrie Williamson is an is the Sue and John Staton Pro- associate in the intellectual prop- fessor of Law at Georgia Tech Piper University. He teaches interna- US LLP tional trade and commercial law, real estate law, and the legal and ethical environment of business. Hall, University of California A fter completing an undergraduate degree in his- at Berkeley, and her B.A. from versity of Colorado, Professor Dhooge Bowling Green State University. attended the University of Denver College of Law, She has coauthored Practical Business Ethics: A Guide where he received his J.D. in 1983. He received his for a Busy Manager, and six le LL.M. in 1995 from the Georgetown University Law Center and com- use of e y, women’s legal issues, and parative law. Before coming to the University of the patent litigation issues. Preface W are teachers. We play v students. We want them to listen, read, create, and evaluate more effectively as a result of their experience in a business law class. W ve and readable. But the features integrated into the chapters provide its distinctive w Yet the features are also a cohesive unit, contributing both to the liberal education of the students who use this book and to their skills as decision makers in a market economy. , we provide what competing texts deliver, a comprehensive examination of all the relevant questions, concepts, and le usiness law. Our text must address the power and authority of constitutions, statutes, case law, and treaties as sources of law. Together the various elements of what we call “the law” mak ture of the market exchange process. irms, workers, financial institutions, and asset owners will do as the etplace. W be k et exchanges would grind to a halt. Business law provides these guarantees Market decisions are made in a context—a persistently changing context. The law, in w technologies and business practices bring new disputes over rights and responsibilities in a business setting. Future b wl- edge of existing business law vely to new le ver the course of their careers. We are excited about the contents of our features and want to explain the function of usiness. A. COMPARING THE LAW OF OTHER COMPARING THE LAW OF OTHER COUNTRIES COUNTRIES BOXES - The Supreme Court in Japan et. Each the Law of Other Countries boxes. Because so many market decisions are made in an international context, learners need to familiarize them- selves with the likelihood that a particular legal principle essential to doing business in one country may not be appropriate in other countries. The Comparing the Law of Other es provide heightened aw w unique the la ” ver relevant law in all jurisdictions where their market decisions have legal implications. W e believ aluable lessons about U.S. business law by contrasting the concepts of our business la viii Preface ix trading partners. We typically use Canada, Japan, China, Russia, Mexico, and the Euro- pean Union for our comparisons because modern business managers will more likely be B. E-COMMERCE BOXES A central feature of modern business E-COMMERCE A ND THE LAW decisions is new technology cally the rapid spread of electronic commerce. This development has cre- The Sliding-Scale Standard for Internet Transactions ated ne ties that were unforeseeable until very recently. Our initial approach was to con- stood by itself. But the more we thought about that approach and lis- tened to our reviewers, we decided to place E-Commerce boxes in most of our chapters, as well as to inte vant chapters. By this infusion approach, we think we can best con asiv ence of this new, complicating aspect of business decisions. C. CONNECTING not auth zed ice on beh of the company, and th ld not nd any ve TO THE CORE motion w s order The b xperi- enced by students, can easily be seen ” 1 ely to as a collection of silos, with each silo, ve alled off in per from the others with its own special y conduct b language and issues. But successful www.mhhe.com/kubasek2e. ve i n personam v geographic re in personam b ognition that decision makers should 1 Rio Pr 284 F.3d 1007 (2002). take advantage of the interrelatedness of the v ve home the point that con- eting, management, and economics are closely linked to concepts and dilemmas in business law. The study of business law is best seen as a foundational component of the larger study of business administration. This feature for the second edition has been placed on the Web site assigned to . D. CRITICAL THINKING A fter each case in the book, we have pro ev valuate the con- ey issue in the chapter. W ing approach that has been developed and used in classrooms in man We do x Preface not just repeatedly urge students to “think critically.” Instead, we describe for them what is meant by that phrase in the context of business law. We include this step-by-step approach in Appendix 1A at the end of Chapter 1. ant to emphasize CRITICAL THINKING ETHICAL DECISION MAKING how to evaluate legal reasoning. E. ETHICAL REASONING eholder interests in ev et decision. Business ethics should never be an afterthought or some thing f y y must. Instead, business ethics is what provides the social legitimacy for markets, what dis- tinguishes markets from the life of the jungle. et decisions are calculating and w vide social borders that elevate those decisions above simple greed and egoism. E thical discussion focuses on the basic observation that we are socially and globally interdependent as entrepreneurs, asset owners, workers, businesspeople, and consumers. Our inescapable contact with one another requires that our aspirations be defined, at least O ur text has several ethical reasoning possibilities in each chapter. But for the reader to make use of this emphasis requires a practical step-by-step approach. In other words, our students need more than just a discussion about values or ethics. They need to have some sense that the discussion is headed somewhere. They want to know, “How will my behavior be any more ethical after I hav cussions?” Our text answers their question. Chapter 2 pro xplanation of our approach—an approach that students can use on a regular basis. The language and organization of our model of ethical reasoning ast-paced busi- ness world. It pushes stak et decisions, where they belong, and does so in a manner that is both powerful and doable without becoming tedious. Business ethics are the guidelines we use to shape the world we want to create. As such, they provide guidance for the kind of business behavior we want to reinforce. After each case e usiness law by asking a question derived from the practical approach to business ethics developed in Chapter 2. Because we w eholder interests as ha ve The second edition has been substantially revised to update the case law and case prob- lems at the end of each chapter. Also, we have greatly expanded the exhibits in the book to mak ve highlighted the legal principles and learning objectiv e the text more user-friendly.
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