Nebbia v. New York 1934

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Nebbia v. New York 1934

Appellant: Leo Nebbia

Appellee: State of New York

Appellant's Claim: That New York's Milk Control Act of 1934 violated the Fourteenth Amendment's Due Process Clause by unconstitutionally restricting business decisions.

Chief Lawyer for Appellant: Arthur E. Sutherland

Chief Lawyer for Appellee: Henry S. Manley

Justices for the Court: Louis D. Brandeis, Benjamin N. Cardozo, Charles Evans Hughes, Owen Josephus Roberts, Harlan Fiske Stone

Justices Dissenting: Pierce Butler, James Clark McReynolds, George Sutherland, Willis Van Devanter

Date of Decision: March 5, 1934

Decision: Ruled in favor of New York by finding that the state of New York had acted under its police powers in the best interest of its citizens.

Significance: The ruling established that any business activity could be subject to state regulation. The decision ended the longstanding distinction between businesses considered operating for the public good which could be regulated, and those not of direct public interest which could not be regulated. The decision marked the beginning of greater state government regulation of private economic activities.

"T he powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." So reads the Tenth Amendment to the U.S. Constitution in its entirety. The amendment was written and adopted as part of the Bill of Rights in 1791 to soothe states' rights proponents during formation of the U.S. government.

Originally, the Articles of Confederation written in 1781 gave almost all governmental powers to the states with few to the federal government. The nation was a loose union of sovereign (politically independent) states. But in only a few years, it became evident that growth of the young nation, particularly business growth and economic development, needed consistency in rules and protection that only a strong central government could provide.

Delegates to the Constitutional Convention met in 1787 to correct this problem. After intense debate between supporters of a strong central government and proponents of states rights, a governmental structure with a strong central government was selected. With a great distaste for strong central governments lingering in the country following political battles and war with the British government, the first ten constitutional amendments were written to protect citizens and the states from potentially oppressive national government powers. The Tenth Amendment reserved all powers to the states that were not clearly given to the federal government.

Can States Regulate Business?

The Constitution established a governmental system based on the idea of federalism, in which power is split between a central federal government and the various states. However, the exact line between the powers of the federal and state governments was not precisely defined. Each would control certain areas. Early on, the Court recognized a broad police power (general authority) of states to protect its citizens and regulate business activities. Falling back on the Tenth Amendment the Court ruled in Mayor of New York v. Miln (1837) that a state had "undeniable and unlimited jurisdiction over all persons and things within its territorial limits . . . where the jurisdiction is not surrendered or restrained by the Constitution of the United States." But by the mid-nineteenth century as the industrialization (growth of big business) expanded, the Court became increasingly protective of property rights and took a narrower view of the state's power to regulate business. Use of the term "property" includes a person's business.

In a key 1877 decision supporting a state's police power over economic matters, the Court held in Munn v. Illinois that those business "in which the public has an interest," such as community agricultural grain storage structures, are subject to police power through state regulation. Other businesses are not. However, the "public interest" doctrine proved perplexing when applied in later cases as courts found difficulty in consistently identifying exactly what businesses held sufficient public interest.

Opponents to any state regulation of business argued such restrictions deprived people of their property rights by violating the Fourteenth Amendment's Due Process Clause. The clause states, "No state shall . . . deprive any person of life, liberty, or property without due process of law." Acceptance of this viewpoint grew and became known as "substantive due process" Substantive due process means that the Constitution protects certain rights, including property rights, from governmental interference. States became largely restricted from using police power over economic activity. Through the late nineteenth century and early twentieth century, this legal idea dominated many court decisions. The Court consistently ruled in favor of business interests when economic issues were involved.

Hard Times

With the collapse of the U.S. stock market in October of 1929, the nation entered a desperate economic period. Millions of people were out of work and many turned to the government for relief. The pro-business orientation of the Supreme Court became very unpopular, particularly with President Franklin D. Roosevelt (1933–1945) who was trying to lead the efforts for social and economic change. In the early 1930s, both the federal and state governments began taking action to control prices to ease the economic hardships. The state of New York created a Milk Board to set prices for milk. The resulting emergency legislation was the Milk Control Act of 1934 which set nine cents as the price to be charged for a quart of milk.

Grocer Leo Nebbia

Leo Nebbia owned and operated a small grocery store in Rochester, New York. One day Nebbia sold a quart of milk for more than nine cents. As a result he was charged with violating the Milk Control Act. Nebbia, claiming New York had no legal authority to control milk prices, lost his case in the county court and again before the New York Court of Appeals. He next appealed to the U.S. Supreme Court which agreed to hear his case.

Writing for the Court's majority on a close 5-4 vote, Justice Josephus O. Roberts revised the earlier Munn decision. He ruled that states could regulate all businesses, not just those businesses having public interest. Roberts wrote,

[I]n the absence of other constitutional restriction, a state is free to adopt whatever economic policy may reasonably be deemed to promote public welfare, and to enforce that policy by legislation adapted to its purpose. The courts are without authority . . . when it is declared by the legislature, to override it.

Roberts held that states could regulate for the public good any business activity as long as the regulation was reasonable and effective. He wrote that a state "may regulate a business in any of its aspects, including the prices to be charged for the products . . . it sells." Therefore, the New York act did not violate the constitution and Nebbia was appropriately convicted of violating it.

So ended the domination of substantive due process ideas over court decisions concerning economic issues. In dissent, Justice James C. McReynolds still held on to the claim that the Due Process Clause gave the Supreme Court all the authority it needed to override any legislation restricting economic activity that it found unreasonable.

The Rise of Police Power Over Business

McReynolds, along with the other three dissenting justices in the case, Van Devanter, Sutherland, and Bulter, were highly unpopular for their very politically conservative views toward protecting businesses from government interference and regulation. Soon they lost their clout under pressure from Roosevelt and the public. The Court, supporting Roosevelt's programs for recovery, allowed more government regulation of business. Importantly, in 1937 in West Coast Hotel Co. v. Parrish the Court upheld the power of the federal government to regulate economic activities in states.

By the end of World War II (1939–1945), the federal government had become the dominant power in the U.S. governmental system. The Court's emphasis switched from property rights and business issues to issues of protecting individual civil rights from police power.

STATE POLICE POWER

T hough not specifically mentioned in the U.S. Constitution, "police power" is a recognized general legal authority that states hold to govern their citizens, lands, or natural resources. Courts widely use the concept when considering the limits of state authority over its citizen's activities, or when establishing the line between federal and state regulation. Traditionally, the two main constitutional restrictions on the state use of police power has been the Commerce Clause and the Contract Clause. Only the federal government, not the states, can regulate interstate commerce, and state laws cannot interfere with private contractual relationships. Likewise, the right to freedom of expression and right to privacy are seen as primary limitations to state police powers.

Through the twentieth century, states have been given broader police power authority in protecting public health and safety, morals, and business activity. An early example of the Court recognizing state police power for public safety was by upholding a Massachusetts law requiring everyone to be vaccinated against certain disease. Police power was also recognized in the landmark ruling of Euclid v. Ambler Realty Co. (1926). The decision upheld a local government's power to establish zoning laws which allow certain kinds of activities in certain parts of the community. Despite its broad acceptance, police power continues to be a legal concept that cannot be precisely defined.