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225 Cards in this Set
- Front
- Back
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often referred to as the fourth branch of government
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administrative agencies
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delegating
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Congress's assigning certain activities to specialized administrative agencies
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enabling statute
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Congress specifies the agency's regulatory mission, organizational structure, procedures, and enforcement powers. process by which administrative agencies are created and receive their powers
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Congress is broad or specific when enacting general statutes?
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broad
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first federal administrative agency, created by Congress in 1887
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Interstate Commerce Commission
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two eras of federal regulatory activity
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passage of regulations aimed at specific industries
passage of legislation aimed at particular activities that could be identified with many industries |
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The Interstate Commerce Commission was created to . . .
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regulate railroad rates
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major criticism of federal agencies
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they tend to lose sight of their public-interest mission over time
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regulatory capture
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when agencies eventually adopt the perspective of the regulated industry
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groups that oppose special interest groups
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consumer-advocate groups
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three agencies established by New Deal
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Securities and Exchange Commission
Federal Communications Commission Civil Aeronautics Board |
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industry-specific regulations were predominate throughout . . .
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the first half of the 20th century
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regulate problems that are not isolated in one particular industry
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economy-wide regulatory agencies
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charged with preventing anticompetitive, unfair, and deceptive practices
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Federal Trade Commission
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governs the organizing and bargaining rights of labor unions in virtually all industries
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National Labor Relations Board
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time period marked by an explosion of legislation designed to correct economy-wide economic and social problems
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1960s and 1970s
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four agencies created in 1960s and 1970s
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Environmental Protection Agency
Consumer Product Safety Commission Equal Employment Opportunity Commission Occupational Safety and Health Administration |
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basic constitutional question regarding legislative function of agencies
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under what conditions is it permissible to allow some government body other than Congress to make laws
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established price setting boards for every major industry to stabilize falling prices and deter cut-throat competition during the Great Depression
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National Industrial Recovery Act (NIRA)
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Schechter Poultry Corp. v. U.S. 1935
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Supreme Court ruled that the NIRA was invalid as an unconstitutional delegation of legislative authority
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Yakus v. United States 1944
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Congress had created Office of Price Administration to set maximum rents and commodities prices to control inflation during WWII
Congress directed that the agency be guided by prices prevailing on a particular date and listed the factors to be considered when deviating from these Supreme Court upheld this delegation as long as sufficient standards were set forth and powers were limited |
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two classifications for administrative agencies
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executive agencies
independent agencies |
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executive agencies
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part of the executive branch, usually placed within the hierarchy of an executive department headed by a cabinet member
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executive agencies are often created by ______ and given most of their powers by _____
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the President, Congress
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heads of executive agencies are appointed by _____ and approved by _____
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the President, Congress
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independent agencies
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created by Congress and given broad powers over regulation in a particular area
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typical independent agency is headed by . . .
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a board or commission whose members are appointed by the President with the advice and consent of the Senate
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heads of executive agencies can be removed . . .
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for any reason
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heads of independent agencies can be removed . . .
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only for cause
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_____ agencies can only have a bare majority from the same political party and have staggered terms
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independent
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independent agencies will never be completely independent because
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their budgets are controlled by Congress
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organizational structure of an agency is provided for in . . .
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the enabling statute
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responsible for the regulation of antitrust, unfair and deceptive trade practices, and product safety
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Federal Trade Commission
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three Bureaus of the FTC
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Bureau of Consumer Protection
Bureau of Competition Bureau of Economics |
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Administrative Procedures Act 1947
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rule book for administrative agencies
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type of enforcement that is legal but considered unfair and harsh
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retroactive
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APA procedures regarding interested parties
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notice to interested parties and in some cases the holding of public hearings
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4 steps of informal rule-making as per APA procedures
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1. agency identifies the need for a rule or regulation and drafts the proposed regulation
2. agency publishes a "Notice of Proposed Rule-Making" in the Federal Register 3. at least 30 day period in which the public can send written comments to the agency, "notice and comment" 4. final draft of the regulation published at least 30 days prior to its effective date |
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3 steps of formal rule-making
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1. "Notice of Proposed Rule-Making" published in the Federal Register at least 30 days before proceedings
2. formal trial-like hearing held 3. agency writes the final draft of the regulation; becomes effective no less than thirty days later |
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vast majority of rule-making is _____
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informal
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formal procedure is used when . . .
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Congress demands it (like for FDA) or when an adversarial proceeding is expected to generate info that the agency couldn't otherwise assemble
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the greater the impact of the regulation on a specific group, the more ______ the procedure
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formal
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3 types of agency powers
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legislative, enforcement, adjudicatory
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4 methods of agencies gathering information
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voluntary submission
hearings subpoena power physical inspection of business |
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self-reported information is protected against ______
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self-incrimination
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protection against self-incrimination does not apply to
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corporations
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search warrants are required for administrative inspections except for
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closely regulated industries like liquor and firearms
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Colonnade Corp v. United States 1970
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closely regulated businesses (like liquor and firearms) must accept searches as part of the privilege of doing business
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Donovan v. Dewey 1981
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Dewey owned mine and refused to allow the Department of Labor a warrantless inspection
Federal Mine Safety and Health Act authorizes warrantless inspections Supreme Court ruled in favor of Secretary of Labor |
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agencies do not have the power to ______ violators
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imprison
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Dixon v. Love 1977
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levying of a penalty by an agency does not require a pre-determinative hearing in an administrative setting
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if violators refuse to obey agency remedial orders, the agency can . . .
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petition a federal district court to get a court order forcing the violator to comply
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administrative law judge
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an agency employee who adjudicates the controversies
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ALJs are generally very . . .
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independent and unbiased
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typical adjudicative action begins with
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filing of a complaint by the agency or by a private party
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if a compromise remedy cannot be reached between the agency and the alleged violator, the next step is to . . .
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hold a hearing before an ALJ
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adjudication must conform to . . .
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the procedural due process as guaranteed by the Constitution
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defendants in adjudication are permitted counsel, but . . .
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attorneys will not be appointed if they can't afford them
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defendants in adjudication are/are not entitled to trial by jury
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are not
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Atlas Roofing Company, Inc. v. Occupational Safety and Health Review Commission 1977
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petitioner was fined $600 for unsafe working conditions
Supreme court ruled that 7th Amendment's requirement that jury trial is to be preserved in suits at common law did not extend to statutory proceedings |
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in having an ALJ instead of a jury, rules of evidence are stricter/relaxed
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relaxed
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ALJ's decision includes
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findings of fact
conclusions of law recommended disposition |
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losing party in adjudication may reveal to . . .
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review board of the agency
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after all appeals within the agency are exhausted, the losing party can appeal to . . .
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the Circuit Court of Appeals
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decision made by ALJ theoretically sets . . .
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precedent, but can be narrow
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two ways of agency making a rule (adjudication)
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promulgating a regulation
charging an alleged violator and setting precedent |
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judicial review
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an appeal to the appropriate Circuit Court of Appeals
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2 most important aspects of judicial review
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who has the right to a review
the scope of the review |
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appeals are subject to meeting specific requirements of _____ and ______
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timeliness, standing
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timeliness
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the aggrieved party cannot appeal the case until all remedies within the agency have been exhausted, including the appeal to the review board within the agency
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standing
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limits the jurisdiction of the federal courts to actual "cases and controversies"
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standing to sue
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what a party that has a real dispute with the agency is said to have
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typical judicial review of administrative actions involves only . . .
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questions of law
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de novo review
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the court examines the issue as if the agency had not yet acted, so the court is not bound by the agency's findings of fact
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arbitrary or capricious
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the standard for appeal used when scrutinizing an informal rule-making procedure, since there is no record of evidence to be examined
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substantial evidence test
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appellate courts decide if the agency decision was made based on a substantial piece of evidence, may be far less than majority
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4 typical questions of law involved in judicial review
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agency procedures
sufficient justification for agency actions erroneous interpretation of enabling statute whether action was within authority of enabling statute |
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who oversees the activities of agencies operating within a particular expertise
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committees within Congress
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limitation on agency power besides Congress, judicial review, and President
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interest groups
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Congress has/has not generally required agencies to consider the costs and benefits of the rules they promulgate
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has not
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American Textile Manufacturers Institute, Inc. v. Donovan 1981
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Supreme Court held that the statutory language requiring OSHA to promulgate standards necessary to control health hazards "to the extent feasible" did not mean that OSHA was required to conduct a cost-benefit analysis
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Federal Crop Insurance Corporation v. Merrill 1947
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Merrill reseeded some land with wheat and bought insurance. drought destroyed crops. agency refused to pay because an agency regulation exempted reseeded crops. Merrill sued because he didn't know of the regulation and said the gov't agent gave him false info
Supreme Court ruled that not knowing of the regulation was not an adequate argument |
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Freedom of Information Act (FOIA) of 1966
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requires federal agencies to make agency information available to any person
exceptions: trade secrets, national security |
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Government in the Sunshine Act of 1976
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requires that agencies headed by two or more people appointed by the President hold "every portion of every meeting" in the open and subject to public observation
agency may, by majority vote, decide to close the meeting due to an exception day-to-day activities of agency personnel not subject to Act |
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Regulatory Flexibility Act of 1980
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whenever a new regulation will have a "substantial impact upon a substantial number of small entities," the agency must conduct a flexibility analysis, measuring the costs that the rule will impose on small businesses and considering alternatives
agency must alert small businesses about forthcoming regulations |
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Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996
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permits Congress to review federal regulations for at least 60 days prior to their effective date
additional time and additional forum for opponents to present arguments requirements must be explained in plain English businesses can recover legal expenses from the gov't when an agency imposes excessive fines or penalties created National Enforcement Ombudsman within Small Business Administration to rate agencies based on comments from small businesses |
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sunset laws
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require periodic review of many laws and regulations to ensure they have not outlived their usefulness
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deregulation of certain types of activities began during the ______ and continued into the_____
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Carter Administration, Reagan and Bush Administrations
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most of the deregulation activity has focused on _________ regulations
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industry-specific
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Federal Pure Food and Drug Act of 1906
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started federal regulation of food and drug
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Food and Drug Administration (FDA)
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created in 1927 and given authority to administer the 1906 Federal Pure Food and Drug Act
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3 acts administered by the FDA
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Federal Food, Drug, and Cosmetic Act of 1938
Drug Amendments of 1962 portions of the Fair Packaging and Labeling Act of 1962 |
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nutrition information must include
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caloric, protein, carbohydrate, and fat content
percent of US Recommended Daily Dietary Allowance for protein and nineteen vitamins and minerals |
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Fair Packaging and Labeling Act of 1962
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required all consumer products in interstate commerce to be honestly and informatively labeled
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what prompted Food, Drug, and Cosmetic Act of 1938
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~100 deaths from the marketing of a new drug
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Food, Drug, and Cosmetic Act of 1938
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provided the FDA with additional powers to regulate the quality of drugs and prohibited the marketing of new drugs until granted FDA approval
designated certain drugs as prescription |
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Kefauver-Harris Amendment of 1962
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required the FDA to approve drugs not only on the basis of their safety but also on the basis of their proven effectiveness for the purpose sold
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to whom does pharmaceutical companies apply for approval of human clinical testing of drugs
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the FDA
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Family Smoking Prevention and Tobacco Control Act of 2009
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FDA can ban certain labels such as low tar or low nicotine claims
outlaws flavoring that the gov't feels has been used to lure teens into smoking orders lowering of nicotine levels gov't regulation of what goes into cigs, ingredients must be public FDA regulation of advertising of cigs |
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National Commission on Product Safety
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bipartisan, created in 1967 to investigate the adequacy of state law in protecting consumers from unreasonable risks caused by "hazardous products"
reported that market adjustments to unsafe products did not provide the incentives necessary to protect consumers adequately |
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Consumer Product Safety Act (CPSA)
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enacted in 1972 in response to National Commission on Product Safety's report
first direct control of product safety by the federal gov't applies only to consumer products |
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Consumer Product Safety Act did not cover consumer products . . .
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already covered by other regulatory agencies
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Consumer Product Safety Commission (CPSC)
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established by Consumer Product Safety Act
consists of 5 members appointed by President for staggered 7 year terms appoints 15-member Product Safety Advisory Council has established 13 field offices around the country most activities fall under one of two areas: information collection and dissemination, setting and enforcement of product safety standards |
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Injury Information Clearinghouse
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established by CPSC
collects and analyzes consumer-product injury reports |
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National Electronic Injury Surveillance System
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a computerized record compilation system that accumulates consumer-product injury data from hospitals across the nation
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CPSC can require manufacturers to . . .
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keep records, supply the CPSC with info regarding safety, and furnish the CPSC with notice and description of any new consumer products before making them public
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CPSC may conduct . . .
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hearings regarding consumer safety
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two strategies the CPSC may use when dealing with a high risk product
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disseminate the info to the public
take action to force correction of the problem or remove the product from the market |
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the CPSC is authorized to develop and issue . . .
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consumer product safety standards for all products covered by the CPSA
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two types of product safety standards issued by CPSC
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performance standards
labeling standards |
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performance standards
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specify minimum performance criteria
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labeling standards
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typically require the placement of warning labels on products
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if testing reveals that there is a hazard of injury, illness, or death, the CPSC is required to . . .
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issue a standard
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product safety research may be performed by . . .
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CPSC or by outside consultants
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CPSC may petition ______ for an order to seize an unsafe product
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the appropriate federal district court
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basic test for judicial review of a CPSC mandatory product safety standard
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standard must be "reasonably necessary" to eliminate the unreasonable risk
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first area of gov't intervention to correct the market failure caused by information problems where the solution has involved gov't intervention to such an extent that it does not allow consumers to make a choice
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the setting of product safety standards by the CPSC
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6 factors for picking the appropriate form of business entity
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ease of operation - set up costs and difficulty of operation
desired length of existence of the business personal liability taxation ease of sale of business ease of raising capital |
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three major types of business entities
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sole proprietorship
partnership corporation |
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new form of business entity that is becoming popular
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limited liability company
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sole-proprietorship
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oldest and simplest business entity; no formalities for creating or special rules/regulations to follow on the operation
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in a sole proprietorship, the owner has ______ liability
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unlimited
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partnership
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a joint operation with several owners
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partners have _____ liability in the partnership
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unlimited
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least favorite of the 3 major historical forms of business entities
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partnership
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most popular form of business entities for large businesses
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corporation
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most popular (in number) type of business
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sole proprietorship
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corporation
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a separate legal entity created by state statue and taxed separately
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double taxation
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big disadvantage of the corporate form. corporation is taxed and so is any income dispersed to shareholders
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limited liability
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major advantage of corporation, liability of owners is limited to the extent of their investment
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Limited Partnership (LP)
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created by state statue and requires a filing of documents to create. is in part like a partnership and in part like a corporation
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Certificate of Limited Partnership
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what partners must file to create a limited partnership
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two classes of partners necessary to an LP
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general partners
limited partners |
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general partner
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has unlimited liability
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limited partner
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only an investor, prohibited from taking part in the management of the LP
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limited partner is liable for . . .
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the LP debts and obligations up to the amount of his investment
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Closely Held Corporations/family corporations/close corporations/privately held corporaions
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shares are normally held by a small number of people that are personally known to each other or by one family; not traded in the public market; generally operated like a sole-proprietorship or partnership
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publicly held corporations
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stock is traded on one of the stock exchanges
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some states allow closely held corporations to . . .
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depart from some corporation requirements
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a closely held corporation can be owned by as few as . . .
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one stockholder
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normally transfer of shares in a closely held corporation is
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severely limited
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S corporation
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a closely held corporation allowed by the IRS to avoid double taxation as well as some other tax benefits and still have limited liability
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5 qualifications for S corporation
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1. corporation must be domestic, under laws of states or territories of US
2. shareholders can only be individuals with certain exceptions like estates or trusts 3. corp can have no more than 100 shareholders who must all agree on S corporation status 4. only one class of shareholders 5. shareholders can not be non-resident aliens |
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Professional Corporation (PC)
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another type of closely held corporation
normally available to professionals like attorneys, doctors, dentists, and accountants shareholders of PC can be insulated form liability based on the tortuous acts of their fellow professionals if malpractice is NOT involved and from the liability arising from the contractual liability of their fellow professionals |
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where was the first Limited Liability Company created and when
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Germany in the 1800s
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first US state to enact a true LLC statute in 1997
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Wyoming
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Texas passed its first LLC statute in
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1991
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Limited Liability Company (LLC)
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taxed like a partnership but limited liability
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Uniform Limited Liability Act of 1996 (ULLCA)
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created by the National Conference of Commissioners on Uniform Laws in an effort to stop inconsistencies between states regarding LLC laws
has been adopted by very few states and is widely criticized |
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how long can an LLC exist
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forever
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Revised Uniform Limited Liability act (RULLCA)
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revised from ULLCA by National Conference of Commissioners on Uniform Laws in 2006
no one has adopted it yet |
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Articles of Organization (Articles of Formation in Texas)
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must be filed to create an LLC, filed with the Secretary of State in Texas
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6 thing the Articles of Organization must contain
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1. name of LLC, normally has to include some form of "LLC"
2. period of duration, can be perpetual 3. purpose of LLC 4. address and name of the registered agent 5. statement on managers, if any, and their names and addresses. if no managers, names and addresses of initial members (owners) 6. name and address of each organizer of LLC |
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organizer
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the people who organize the LLC and can be future members or professionals hired to organize LLC
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Certificate of Organization
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issued by state official, attached to Articles of Organization, marks start of LLC's existence
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owners of the LLC are called
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members
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number of members can be from
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1 to infinity
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members can be . . .
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individuals, corporations, or other LLCs
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Operating Agreement/Company Agreement in Texas/Company Regulations
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members of LLC can enter into this, can be oral or in writing, governs internal affairs of LLC and relations among members, managers, and officers
usually can only be amended w/ consent of all members specifies division of income, how membership is transferred, what happens in case of dissolution, etc |
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member-managed
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LLC is governed by members of LLC
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manager-managed
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one or more persons who may or may not be members are designated as officers to do whatever the managers direct them to do as long as it is within parameters of Operating Agreement and state law
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manager can be person or
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corporation or other LLC
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in manager-managed LLC, the members . . .
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no longer have right to govern LLC
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dissolution of the LLC occurs (5 ways)
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end of fixed period, often 30 years
with occurrence of specified events in the operation agreement or Articles of Incorporation action of members to dissolve LLC when LLC has no members entry of a decree of judicial dissolution |
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winding up
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when an LLC is dissolved and the creditors are paid first, then the members
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Articles of Dissolution
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filed after winding up process of LLC
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Certificate of Dissolution
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issued by state, terminates LLC
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6 advantages of LLC
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limited liability
easier to operate than a corporation shareholder meetings, board meetings, and required minutes of a corp generally not required can be taxed like a partnership or LLC can opt to be taxed like a corp if that is more advantageous flexibility in management (member-managed v. manager-managed) no limit on number or who/what can be members |
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LLCs are under
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state law
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4 examples of types of businesses that are barred from using the LLC business form
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state banks insured by FDIC
joint stock associations certain foreign entities insurance companies |
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some tax advantages available to partnerships and corps are not available to . . .
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LLCs
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due to the relative newness, the body of law on LLCs is very . . .
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limited
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LLCs have some _____ tax consequences
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negative
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LLCs advantages outweigh/don't outweigh disadvantages
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outweigh
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Limited Liability Partnership (LLP)
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created like a partnership because it is a partnership but has the tax advantages of the partnership, no double taxation, profits are distributed to the partners who pay the tax, limits personal liability of partners
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first state to create LLP and when
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Texas in 1991
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LLP was first used only by
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professionals
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LLPs are creatures of _____ law
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state
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LLPs were created to . . .
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avoid some of the earlier tax problems of the LLCs, which no longer exist
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partners in LLPs still have unlimited liability if . . .
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the partner is directly involved in wrongful activity or had knowledge or notice of it and failed to take reasonable steps to correct it
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an LLP is created by
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registering with the appropriate state official
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LLP name must include
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some form of "LLP"
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LLP must file _____ reports with the ____ to maintain its status as an LLP
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annual, state
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each year, each partner must . . .
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pay a fee
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partners do not have to ________ like the organizers in the LLC
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be listed on the registration
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LLP is a __________ and can be sued for the actions of one or more of its partners
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separate entity
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the _________ can be reached to satisfy any judgment against the partnership
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partnership assets
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state law normally requires LLP partnerships to maintain __________ or have _______ available in case of judgment against it
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liability insurance, separate funds
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in a REGULAR partnership, each partner has _____ and _________ liability
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joint
sevarable |
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in an LLP, all of the partners can take part in the ________ of the LLP without incurring ___________
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management, unlimited liability
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LLPs are largely _______ by LLCs
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overshadowed
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Limited Liability Limited Partnership (LLLP)
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a type of limited partnership that tries to combine the LP form with the LLP form
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in an LLLP, the general partner and limited partner both have
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limited liability
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so far use of LLLPs is . . .
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relatively limited
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corporate governance
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involves constraining and controlling managerial misincentives so that the corporation is governed in the best interest of the shareholders
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shares of stock in large corporations are typically sold in . . .
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organized securities markets, such as the NY Stock Exchange, the American Stock Exchange, and NASDAQ
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first major corporations
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trading companies established by the larger European colonial powers to exploit far-off lands, such as East India Company or Hudson Bay Company
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first major corps had to be granted by _______ and charters typically limited them to ______ business purposes
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legislature, narrow
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most large enterprises were organized as
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unincorporated joint stock companies, essentially limited partnerships
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first general incorporation law
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passed by Connecticut legislature in 1837, gave anyone who met certain basic requirements the right to incorporate
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corporations began to dominate commercial activity
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later in the 19th century
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two most important factors motivating the growth of the corporate form of organization were
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invention of steam engine
railroad |
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in 1764 James Watt began a series of experiments that culminated in the creation of the
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steam engine
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in the beginning of 19th century, steam engine was used to develop
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steam-powered locomotive
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in the US, each corporation is organized under
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the general incorporation law of a state
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once the organization has complied with simple filing procedures and paid required fees, it is granted a
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corporate charter
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a firm incorporated in one state may / may not operate in any other state
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may
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the law of the _____ state always governs the internal relations of the firm
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chartering
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bylaws are submitted when
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the org files its initial incorporation papers
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corporation is governed by
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articles of incorporation and bylaws
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shareholders' 2 most important rights
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right to vote in election of directors and certain corporate decisions
right to file derivative lawsuits against the management of the corp on behalf of the corp |
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elections in corps take place at
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shareholder meetings
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shareholders who are unable to attend the meeting can vote by
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proxy
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proxy
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a written authorization by the shareholder, on a form typically provided by the corporation, designating an agent to vote on the shareholder's behalf
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proxy solicitation is regulated by
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federal securities laws
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principal method of voting corporate shares in US
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by proxy
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Securities Exchange Act of 1934
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regulates the manner in which proxies are solicited
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Berle and Mean's assertion
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corporate managers use the proxy machinery to maintain control that rightly belongs to the shareholders
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1934 Securities Exchange Act and Securities Exchange Commission require a ______ whenever proxies are being solicited
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proxy statement
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proxy statements contain
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information about the nominees for the board of directors when an election is scheduled, explains consequences of a vote on a contested matter, sometimes identifies the interest of the party soliciting the proxy
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proxy contests
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non-members of the incumbent management team can take control of the corporation by convincing shareholders to vote for their slate of directors
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SEC rules require that the incumbents
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mail the insurgents' proxy solicitation for them or provide the insurgents with the shareholder mailing list
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violation of proxy solicitation rules gives rise to
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a private cause of action
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SEC rules require corporation to send shareholders
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notification of the shareholders' meeting and an agenda
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shareholders have right to make ______ at shareholders' meetings
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proposals
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