Economic due Process

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ECONOMIC DUE PROCESS

"Economic due process" is the name given to the doctrine that the Supreme Court used to strike down a variety of economic regulations in the first third of the twentieth century. The core of the doctrine is the conception that the central interest protected by the due process clauses is "liberty of contract." Given that assumption, the Court could not justify economic regulation as a means to redress inequality of bargaining power between contracting parties, such as workers and employers. Moreover, economic legislation that purported to be based on other objectives—such as protecting public health, morals, or safety—was examined by the Court to ensure that the challenged legislation reasonably advanced those objectives.

The doctrine reached its full form in lochner v. new york (1905), where a bare majority of the Court struck down a state law limiting bakery workers' maximum hours to sixty per week. Because the Constitution protected liberty of contract, economic regulation for its own sake was invalid, and thus, a state legislature could not regulate the hours of bakery workers to protect them from exploitation. A "labor law, pure and simple" would be unconstitutional. The hours of workers could be regulated only to protect the interests within the police power—health, safety, welfare, or morality. Even if the legislature passed the law with the stated purpose of protecting workers' health, the Court would still ask whether the law was necessary for that purpose. This inquiry was designed to ensure that the law was not in fact a pretext for forbidden economic regulation.

There were two distinct criticisms of the Lochner decision. One was that the Court did not give sufficient weight to the judgment of the New York legislature that excessive hours of work jeopardized the health of bakery workers. Three of the four dissenting Justices in Lochner conceded that New York could not limit bakers' hours to prevent their economic exploitation. They would, however, have accepted New York's judgment that the measure was necessary to protect health. A more fundamental objection was that the Constitution permitted economic regulation for economic motives. A prophetic solo dissent by Justice oliver wendell holmes, jr. , disagreed with the court's major premise that the constitution protected liberty of contract. he said, "a constitution is not intended to embody a particular economic theory.… it is made for people of fundamentally differing views."

In the three decades that followed, the Court upheld most challenged economic regulations on the ground that they protected public health, safety, or morals. Indeed, in bunting v. oregon (1971) it upheld a law fixing maximum hours for factory workers. However, the Court struck down a significant number of laws that it considered to be interferences with a free market. In adair v. united states (1908) and coppage v. kansas (1915), the Court invalidated laws that outlawed labor contracts forbidding employees to join labor unions. The Court overturned a minimum wage law in adkins v. children ' s hospital (1923) and a law that fixed prices in tyson brother v. banton (1927). And in new state ice company v. liebmann (1932), the Court invalidated a law that limited business entry for businesses that were not public utilities.

The Court abandoned its free-market approach to the due process clause in nebbia v. new york (1934), where it sustained a Depression-era law fixing minimum prices for milk. A bare majority of the Court concluded that a "state may regulate a business in any of its aspects, including the prices to be charged for the products or commodities it sells." Two years later, in morehead v. new york ex rel. tipaldo (1936), the Court unexpectedly invalidated a law setting minimum wages for women workers. That decision was, however, overruled the following year in west coast hotel co. V. parrish (1937). Since 1937, no decision of the Supreme Court has held an economic regulatory measure invalid under the due process clause.

The decision in Nebbia abandoned the idea that business regulation for economic motives was forbidden. During the Lochner era, the Court had decided whether laws were reasonably necessary to promote police-power objectives only because it sought to ensure that the police power was not a subterfuge for economic regulation. Once the Court decided that economic regulation need not be justified by the police power, it might have been concluded that economic regulations are valid whether or not they are reasonable, and occasionally, the Supreme Court has said this. In ferguson v. skrupa (1963), Justice hugo l. black, writing for the Court, said that in rejecting Lochner the Court had abandoned the doctrine "that due process authorizes courts to hold laws unconstitutional when they believe the legislature has acted unwisely."

Conventional due process doctrine seems to say, however, that economic regulatory legislation might be invalid if sufficiently unreasonable. In Nebbia the Court stated that laws violated due process if they did not have "a reasonable relation to a proper legislative purpose" or if they were "arbitrary." In united states v. carolene products co. (1938), the Court upheld the Filled Milk Act of 1923, which prohibited the shipment of skimmed milk compounded with vegetable oil in interstate commerce. A lower federal court decided that the law lacked rational basis because filled milk was not deleterious to health. The opinion of Justice harlan f. stone said that in the application of the rational basis test, "the existence of facts supporting the legislative judgment is to be presumed, for regulatory legislation affecting ordinary commercial transactions is not to be pronounced unconstitutional unless in the light of the facts made known or generally assumed it is of such a character as to preclude the assumption that it rests upon some rational basis within the knowledge and experience of legislators."

Although the Court, in the Carolene Products case, concluded that the Filled Milk Act did rest on a permissible congressional finding that filled milk was injurious to health, its obiter dicta suggested that the law could be challenged if the facts presented to the lower court proved that the law's lack of wisdom was not debatable: "Where the existence of a rational basis for legislation whose constitutionality is attacked depends upon facts … such facts may properly be made the subject of judicial inquiry, … and the constitutionality of a statute predicated upon the existence of a particular state of facts may be challenged by showing to the court that those facts have ceased to exist."

In one sense, there is no difference between the dictum in Ferguson v. Skrupa—that the due process clause does not permit an inquiry into legislative reasonableness—and the dictum of Carolene Products that suggests the possibility of a trial to show that a law lacks a rational basis. For more than fifty years, Supreme Court decisions, without exception, have upheld all economic regulations challenged under the due process clause.

In another sense, however, the Carolene Products approach has produced a different outcome than would have occurred if the Court had adhered consistently to the Ferguson dictum. Lower courts frequently conduct trials to determine whether laws challenged as a violation of due process are reasonable. Occasionally, lower federal courts decide that state or federal laws lack a rational basis. Although the Supreme Court has uniformly reversed those decisions when appealed, the laws may be effectively invalidated when there is no appeal. For example, in Milnot Co. v. Richardson a lower federal court decided that the Filled Milk Act—the same law sustained in Carolene Products—was unconstitutional because it lacked a rational basis. The federal government, not sympathetic to the objectives of the statute, did not appeal.

A few academic commentators have argued that the Court's withdrawal from judgment in the economic due process area has gone too far. Some have argued that the Court should use the rational basis formula to invalidate laws that have no real purpose except to favor one economic interest at the expense of a competing interest or the public. Indeed, some state courts use the due process clause, or some other provision, in state constitutions in exactly this manner. The Supreme Court, however, has neither acknowledged nor followed that advice. In williamson v. lee optical company (1955), for example, the Court sustained a state law forbidding a dispensing optician to duplicate eyeglasses without a prescription from an optometrist or ophthalmologist. Opticians argued, with some merit, that the law was unnecessary to protect public health and that the legislature's real purpose was to give optometrists and ophthalmologists a monopoly on the sale of eyeglasses. The Court answered that the law might encourage people to have their eyes examined more often, although a more candid answer might have been that it did not matter whether the law was unabashed economic favoritism.

All the Justices appointed in the last fifty years have agreed that the Lochner line of decisions represented an abuse of judicial power. The consensus about economic due process is the starting point of current debate about constitutional law. The point of Justice Holmes's Lochner dissent was that it was irresponsible for Justices to read their own subjective economic preferences into the due process clause. Is it equally an abuse of power to read the due process clause to overturn state legislation that restricts noneconomic liberties? Justice william o. douglas, writing for the Court when it struck down a state ban on birth control devices in griswold v. connecticut (1965), insisted that there was a difference between judging the propriety of laws that "touch economic problems, business affairs or social conditions" and those that involve such personal liberties as "an intimate relation of husband and wife." Justice harry a. blackmun, writing for the Court in roe v. wade (1973), which struck down laws restricting abortion, acknowledged and quoted Holmes's admonition in his Lochner dissent that the Constitution "is made for people of fundamentally differing views, and the accident of our finding certain opinions natural and even familiar, or novel, and even shocking, ought not to conclude our judgment upon the question whether statutes embodying them conflict with the Constitution of the United States." The opinion went on, however, to conclude that the due process clause protects "personal rights that can be deemed "fundamental."

Lochner is a discredited and overruled decision, but its ghost continues to haunt contemporary constitutional law debate.

William Cohen
(1992)