Lecture 43 Economic Substantive Due Process Part 2: Development: The Window Opens

This lecture We continue through development of substantive due process Pages 633-642

Munn v. Illinois (1877) Munn v. Illinois (1877) Background Social Darwinism is gaining some footholds- government should only be neutral Chicago was the clear agricultural capital of the country remember prior case? Grain made its way in large amounts to Chicago storage was big business Munn and Scott had lots of grain storage, but were rather dishonest in their business practices high fees, mixing grain types, and price fixing The State stepped in to provide for boards to regulate, including setting maximum rates Munn and Scott were charged and convicted under the law and fined $100 They challenged the constitutionality of the law

Munn v. Illinois- II Question Arguments Did the state imposed rates on grain elevator storage violate the owners Equal Protection and Due Process under the 14th Amendment? Arguments For Munn and Scott (strike down the law) Grain storage is part of interstate and foreign commerce, so states cannot regulate it The law encroaches on private property rights under the due process clause The police power is not for control of wages or prices This is not a public utility The law unreasonably and arbitrarily deprives the company of its freedom to carry on business activities

Munn v. Illinois- III Arguments For the State of Illinois (uphold the law) These are regulations applying to local business, not interstate or foreign commerce Within intrastate commerce, states have a right to regulate and inspect grain in public warehouses There is no deprivation they owner may use his property how he wishes Food is so important it should be allowed to be regulated more than other industries

Munn v. Illinois- IV Chief Justice Waite rules for a 7-2 Court He notes the word deprive is not in the Constitution When property is devoted to a public use it is subject to public regulation So when it involves the public good, states do have regulatory power Property affecting the public interest Grain storage is for public use, so it is subject to state regulation Business Affected Public Interest Doctrine He did not close the door on economic substantive due process This opens the door for those areas not subject to that language

Munn v. Illinois- V Justice Field dissented Joined by Strong He feels this gives states “unrestrained license to legislative will” He feels this is against private property rights Regulating the price of storage violates the property rights of Munn Forcible dispossession to make him accept less than he wanted The restriction devalues his property in value There is no cause for this regulation

Mugler v. Kansas (1887) Mugler v. Kansas (1887) Involved a challenge to the manufacture and sale of liquor But it said that “not every statute enacted ostensibly for the promotion of the public interest is to be accepted as a legitimate exertion of the police powers of a state” There were limits to the state’s regulatory powers If a statutes purports to regulate public health, morals or safety has no connection to those, it is the duty of the Court to adjudge There Court says it has the power to decide what a reasonable exercise of state power really is

Chicago, Milwaukee, & St. Paul Railway v. Minnesota (1890) The Court strikes down a law on due process grounds A Minnesota law set up a commission to set equal and reasonable rates for railroad transportation of goods and warehouse storage The railroad refused to abide by a ruling of the commission The Minnesota Supreme Court ruled against the company Minnesota loses on multiple grounds No judicial review of the commission decision Under the Mugler standard, it was depriving the company of its property by not allowing for judicial review of the commission This meant the judiciary decided it would interject itself further This leads to more charges of judicial activism

Allgeyer v. Louisiana (1897) Background A Louisiana law prohibited citizens and corporations from doing business with out of state insurance companies unless they complied with a specific set of requirements One requirement was they had to establish a place of business within the state and have an authorized agent in the state The purpose was to prevent fraud Allgeyer purchases maritime insurances from an out of state company It covers goods shipped from New Orleans to European ports No employee of the out of state company ever entered Louisiana and all transactions took place by mail and telegraph Allgeyer was fined for violation of the act He challenges the constitutionality of it

Allgeyer v. Louisiana- II Question Does the Louisiana law violate the Fourteenth Amendment's due process clause which, according to Allgeyer and Company, protects its liberty to enter into contracts with businesses of its choice? Arguments For Allgeyer This regulation is an invasion of liberty This violates the due process clause by preventing him from making a lawful transaction No business was conducted in the state, so it has no regulatory authority Prohibiting the use of mail violates the authority of the federal government to create a postal system

Allgeyer v. Louisiana- III Arguments For Louisiana The contract did take place in Louisiana Police powers give the state the authority to enforce conductions on out of state corporations as to their conduct To question police powers of a state would be to question its sovereignty The 14th Amendment does not apply because this is Louisiana using its police powers to protect the state from fraudulent out of state practices

Allgeyer v. Louisiana- IV Justice Peckham rules for a unanimous Court Louisiana loses the case The state violated the 14th Amendment by depriving the company of its liberty without due process of law He focuses on the meaning of the word liberty it will now be linked with substantive due process A person has a right to contract for things like insurance without state interference The company had a right to perform this act This law was not reasonable It goes further to merge the freedom to contract with substantive due process State regulations are not so exalted after this case

Next lecture We go the roller coaster section Pages 642-654 Focus on Lochner