The Rise and Fall of Economic Substantive Due Process

The Rise and Fall of Economic Substantive Due Process: Overview

Long before the passage of the 14th Amendment, the due process clause of the Fifth Amendment was recognized as a restraint upon the Federal Government, but only in the narrow sense that a legislature needed to provide procedural "due process" for the enforcement of law.58 Although individual justices suggested early on that particular legislation could be so in conflict with precepts of natural law as to render it wholly unconstitutional,59 the potential of the due process clause of the 14th Amendment as a substantive restraint on state action appears to have been grossly underestimated in the years immediately following its adoption.60

58 The conspicuous exception to this was the holding in the Dred Scott case that former slaves, as non-citizens, could not claim the protections of the clause. Scott v. Sandford, 60 U.S. (19 How.) 393, 450 (1857).

59 See, e.g., Calder v. Bull, 3 U.S. (3 Dall.) 386, 388 (1798) ("[a]n act of the legislature (for I cannot call it a law) contrary to the first great principles of the social compact, cannot be considered a rightful exercise of legislative authority").

60 In the years following the ratification of the 14th Amendment, the Court often observed that the due process clause "operates to extend . . . the same protection against arbitrary state legislation, affecting life, liberty and property, as is offered by the Fifth Amendment," Hibben v. Smith, 191 U.S. 310, 325 (1903), and that "ordinarily if an act of Congress is valid under the Fifth Amendment it would be hard to say that a state law in like terms was void under the Fourteenth," Carroll v. Greenwich Ins. Co., 199 U.S. 401, 410 (1905). See also French v. Barber Asphalt Paving Co., 181 U.S. 324, 328 (1901). There is support for the notion, however, that the proponents of the 14th Amendment envisioned a more expansive substantive interpretation of that Amendment than had developed under the Fifth Amendment. See AKHIL REED AMAR, THE BILL OF RIGHTS 181-197 (1998).

Thus, early invocations of "substantive" due process were unsuccessful. In the Slaughter-House Cases,61 discussed previously in the context of the Privileges or Immunities Clause,62 a group of butchers challenged a Louisiana statute conferring the exclusive privilege of butchering cattle in New Orleans to one corporation. In reviewing the validity of this monopoly, the Court noted that the prohibition against a deprivation of property without due process "has been in the Constitution since the adoption of the Fifth Amendment, as a restraint upon the Federal power. It is also to be found in some forms of expression in the constitution of nearly all the States, as a restraint upon the power of the States… We are not without judicial interpretation, therefore, both State and National, of the meaning of this clause. And it is sufficient to say that under no construction of that provision that we have ever seen, or any that we deem admissible, can the restraint imposed by the State of Louisiana upon the exercise of their trade by the butchers of New Orleans be held to be a deprivation of property within the meaning of that provision."

Four years later, in Munn v. Illinois,63 the Court reviewed the regulation of rates charged for the transportation and warehousing of grain, and again refused to interpret the due process clause as invalidating substantive state legislation. Rejecting contentions that such legislation effected an unconstitutional deprivation of property by preventing the owner from earning a reasonable compensation for its use and by transferring an interest in a private enterprise to the public, Chief Justice Waite emphasized that "the great office of statutes is to remedy defects in the common law as they are developed… We know that this power [of rate regulation] may be abused; but that is no argument against its existence. For protection against abuses by legislatures the people must resort to the polls, not to the courts."

61 83 U.S. (16 Wall.) 36, 80-81 (1873).

62 See Privileges or Immunities Clause

63 94 U.S. 113, 134 (1877).

In Davidson v. New Orleans,64 Justice Miller also counseled against a departure from these conventional applications of due process, although he acknowledged the difficulty of arriving at a precise, all-inclusive definition of the clause. "It is not a little remarkable," he observed, "that while this provision has been in the Constitution of the United States, as a restraint upon the authority of the Federal government, for nearly a century, and while, during all that time, the manner in which the powers of that government have been exercised has been watched with jealousy, and subjected to the most rigid criticism in all its branches, this special limitation upon its powers has rarely been invoked in the judicial forum or the more enlarged theatre of public discussion. But while it has been part of the Constitution, as a restraint upon the power of the States, only a very few years, the docket of this court is crowded with cases in which we are asked to hold that state courts and state legislatures have deprived their own citizens of life, liberty, or property without due process of law. There is here abundant evidence that there exists some strange misconception of the scope of this provision as found in the Fourteenth Amendment. In fact, it would seem, from the character of many of the cases before us, and the arguments made in them, that the clause under consideration is looked upon as a means of bringing to the test of the decision of this court the abstract opinions of every unsuccessful litigant in a State court of the justice of the decision against him, and of the merits of the legislation on which such a decision may be founded. If, therefore, it were possible to define what it is for a State to deprive a person of life, liberty, or property without due process of law, in terms which would cover every exercise of power thus forbidden to the State, and exclude those which are not, no more useful construction could be furnished by this or any other court to any part of the fundamental of law. But, apart from the imminent risk of a failure to give any definition which would be at once perspicuous, comprehensive, and satisfactory, there is wisdom . . . in the ascertaining of the intent and application of such an important phrase in the Federal Constitution, by the gradual process of judicial inclusion and exclusion, as the cases presented for decision shall require …"

64 96 U.S. 97, 103-04 (1878).

A bare half-dozen years later, however, in Hurtado v. California,65 the Justices gave warning of an impending modification of their views. Justice Mathews, speaking for the Court, noted that due process under the United States Constitution differed from due process in English common law in that the latter only applied to executive and judicial acts, while the former additionally applied to legislative acts. Consequently, the limits of the due process under the 14th Amendment could not be appraised solely in terms of the "sanction of settled usage" under common law. The Court then declared that "[a]rbitrary power, enforcing its edicts to the injury of the persons and property of its subjects, is not law, whether manifested as the decree of a personal monarch or of an impersonal multitude. And the limitations imposed by our constitutional law upon the action of the governments, both state and national, are essential to the preservation of public and private rights, notwithstanding the representative character of our political institutions. The enforcement of these limitations by judicial process is the device of self-governing communities to protect the rights of individuals and minorities, as well against the power of numbers, as against the violence of public agents transcending the limits of lawful authority, even when acting in the name and wielding the force of the government." By this language, the States were put on notice that all types of state legislation, whether dealing with procedural or substantive rights, were now subject to the scrutiny of the Court when questions of essential justice were raised.

What induced the Court to overcome its fears of increased judicial oversight and of upsetting the balance of powers between the Federal Government and the states was state remedial social legislation, enacted in the wake of industrial expansion, and the impact of such legislation on property rights. The added emphasis on the due process clause also afforded the Court an opportunity to compensate for its earlier nullification of much of the privileges or immunities clause of the Amendment. Legal theories about the relationship between the government powers and private rights were available to demonstrate the impropriety of leaving to the state legislatures the same ample range of police power they had enjoyed prior to the Civil War. In the meantime, however, the Slaughter-House Cases and Munn v. Illinois had to be overruled at least in part.

65 110 U.S. 516, 528, 532, 536 (1884).

About twenty years were required to complete this process, in the course of which two strands of reasoning were developed. The first was a view advanced by Justice Field in a dissent in Munn v. Illinois,66 namely, that state police power is solely a power to prevent injury to the "peace, good order, morals, and health of the community."67 This reasoning was adopted by the Court in Mugler v. Kansas,68 where, despite upholding a state alcohol regulation, the Court held that "[i]t does not at all follow that every statute enacted ostensibly for the promotion of [public health, morals or safety] is to be accepted as a legitimate exertion of the police powers of the state." The second strand, which had been espoused by Justice Bradley in his dissent in the Slaughter-House Cases,69 tentatively transformed ideas embodying the social compact and natural rights into constitutionally enforceable limitations upon government.70 The consequence was that the States in exercising their police powers could foster only those purposes of health, morals, and safety which the Court had enumerated, and could employ only such means as would not unreasonably interfere with fundamental natural rights of liberty and property. As articulated by Justice Bradley, these rights were equated with freedom to pursue a lawful calling and to make contracts for that purpose.71

66 94 U.S. 113, 141-48 (1877).

67 "It is true that the legislation which secures to all protection in their rights, and the equal use and enjoyment of their property, embraces an almost infinite variety of subjects. Whatever affects the peace, good order, morals, and health of the community, comes within its scope; and every one must use and enjoy his property subject to the restrictions which such legislation imposes. What is termed the police power of the State, which, from the language often used respecting it, one would suppose to be an undefined and irresponsible element in government, can only interfere with the conduct of individuals in their intercourse with each other, and in the use of their property, so far as may be required to secure these objects. The compensation which the owners of property, not having any special rights or privileges from the government in connection with it, may demand for its use, or for their own services in union with it, forms no element of consideration in prescribing regulations for that purpose." 94 U.S. at 145-46.

68 123 U.S. 623, 661 (1887).

69 83 U.S. (16 Wall.) 36, 113-14, 116, 122 (1873).

70 Loan Association v. Topeka, 87 U.S. (20 Wall.) 655, 662 (1875). "There are . . . rights in every free government beyond the control of the State… There are limitations on [governmental power] which grow out of the essential nature of all free governments. Implied reservations of individual rights, without which the social compact could not exist …"

71 "Rights to life, liberty, and the pursuit of happiness are equivalent to the rights of life, liberty, and property. These are fundamental rights which can only be taken away by due process of law, and which can only be interfered with, or the enjoyment of which can only be modified, by lawful regulations necessary or proper for the mutual good of all… This right to choose one's calling is an essential part of that liberty which it is the object of government to protect; and a calling, when chosen, is a man's property right… A law which prohibits a large class of citizens from adopting a lawful employment, or from following a lawful employment previously adopted, does deprive them of liberty as well as property, without due process of law." Slaughter-House Cases, 83 U.S. (16 Wall.) 36, 116, 122 (1873) (Justice Bradley dissenting).

Having narrowed the scope of the state's police power in deference to the natural rights of liberty and property, the Court proceeded to incorporate into due process theories of laissez faire economics, reinforced by the doctrine of Social Darwinism (as elaborated by Herbert Spencer). Thus, "liberty" became synonymous with governmental non-interference in the field of private economic relations. For instance, in Budd v. New York,72 Justice Brewer declared in dictum: "[t]he paternal theory of government is to me odious. The utmost possible liberty to the individual, and the fullest possible protection to him and his property, is both the limitation and duty of government."

Next, the Court watered down the accepted maxim that a state statute must be presumed to be valid until clearly shown to be otherwise, by shifting focus to whether facts existed to justify a particular law.73 The original position could be seen in earlier cases such as Munn v. Illinois,74 where the Court sustained legislation before it by presuming that such facts existed: "For our purposes we must assume that, if a state of facts could exist that would justify such legislation, it actually did exist when the statute now under consideration was passed." Ten years later, however, in Mugler v. Kansas,75 rather than presume the relevant facts, the Court sustained a statewide anti-liquor law based on the proposition that the deleterious social effects of the excessive use of alcoholic liquors were sufficiently notorious for the Court to be able to take notice of them.76 This opened the door for future Court appraisals of the facts which had induced the legislature to enact the statute.77

The implications of Mugler were significant, as it carried the inference that unless the Court found by judicial notice the existence of justifying fact, it would invalidate a police power regulation as bearing no reasonable or adequate relation to the purposes to be subserved by the latter—namely, health, morals, or safety. Interestingly, the Court found the rule of presumed validity quite serviceable for appraising state legislation affecting neither liberty nor property, but for legislation constituting governmental interference in the field of economic relations, especially labor-management relations, the Court found the principle of judicial notice more advantageous. In litigation embracing the latter type of legislation, the Court would also tend to shift the burden of proof, which had been with litigants challenging legislation, to the State seeking enforcement. Thus, the State had the task of demonstrating that a statute interfering with a natural right of liberty or property was in fact "authorized" by the Constitution, and not merely that the latter did not expressly prohibit enactment of the same. As will be discussed in detail below, this approach was utilized from the turn of the century through the mid 1930s to strike down numerous laws which were seen as restricting economic liberties.

72 143 U.S. 517, 551 (1892).

73 See Fletcher v. Peck, 10 U.S. (6 Cr.) 87, 128 (1810).

74 94 U.S. 113, 123, 182 (1877).

75 123 U.S. 623 (1887).

76 123 U.S. at 662. "We cannot shut out of view the fact, within the knowledge of all, that the public health, the public morals, and the public safety, may be endangered by the general use of intoxicating drinks; nor the fact . . . that . . . pauperism, and crime . . . are, in some degree, at least, traceable to this evil."

77 The following year the Court, confronted with an act restricting the sale of oleomargarine, of which the Court could not claim a like measure of common knowledge, briefly retreated to the doctrine of presumed validity, declaring that "it does not appear upon the face of the statute, or from any of the facts of which the Court must take judicial cognizance, that it infringes rights secured by the fundamental law." Powell v. Pennsylvania, 127 U.S. 678, 685 (1888).

As a result of the Depression, however, the laissez faire approach to economic regulation lost favor to the dictates of the New Deal. Thus, in 1934, the Court in Nebbia v. New York78 discarded this approach to economic legislation. The modern approach is exemplified by the 1955 decision, Williamson v. Lee Optical Co.,79

which upheld a statutory scheme regulating the sale of eyeglasses which favored ophthalmologists and optometrists in private professional practice and disadvantaged opticians and those employed by or using space in business establishments. "The day is gone when this Court uses the Due Process Clause of the Fourteenth Amendment to strike down state laws, regulatory of business and industrial conditions, because they may be unwise, improvident, or out of harmony with a particular school of thought… We emphasize again what Chief Justice Waite said in Munn v. Illinois, 94 U.S. 113, 134, 'For protection against abuses by legislatures the people must resort to the polls, not to the courts."'80 The Court did go on to assess the reasons which might have justified the legislature in prescribing the regulation at issue, leaving open the possibility that some regulation might be found unreasonable.81 More recent decisions have limited this inquiry to whether the legislation is arbitrary or irrational, and have abandoned any requirement of "reasonableness."82

78 291 U.S. 502 (1934).

79 348 U.S. 483 (1955).

80 348 U.S. at 488.

81 348 U.S. at 487, 491.

82 The Court has pronounced a strict "hands-off" standard of judicial review, whether of congressional or state legislative efforts to structure and accommodate the burdens and benefits of economic life. Such legislation is to be "accorded the traditional presumption of constitutionality generally accorded economic regulations" and is to be "upheld absent proof of arbitrariness or irrationality on the part of Congress." That the accommodation among interests which the legislative branch has struck "may have profound and far-reaching consequences . . . provides all the more reason for this Court to defer to the congressional judgment unless it is demonstrably arbitrary or irrational." Duke Power Co. v. Carolina Environmental Study Group, 438 U.S. 59, 83-84 (1978). See also Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 14-20 (1976); Hodel v. Indiana, 452 U.S. 314, 333 (1981); New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96, 106-08 (1978); Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 124-25 (1978); Brotherhood of Locomotive Firemen and Engineers v. Chicago, R.I. & P. R.R., 393 U.S. 129, 143 (1968); Ferguson v. Skrupa, 372 U.S. 726, 730, 733 (1963).

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Last modified: June 9, 2014