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

2. This lecture
We continue through development of substantive due process
Pages

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

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