Constitutional Law II
Economic Substantive Due Process
Overview of Economic Rights
Original Text
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Art. I - Contracts Clause
Art. VI – Survivability of Debts
Slavery clauses
Taxing clauses
5th Amendment
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Takings Clause
Due Process Clause
14th Amendment
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Charles Beard:
protection of
property &
wealth was a
major impetus
for the Const.
Protected via
judicial review
of state & fed’l
economic
regulations
Due Process Clause
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The Due Process Clauses
5th/14th Amds:
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“No person shall .. be deprived of life, liberty,
or property, without due process of law”
Liberty:
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voluntary economic relationships?
Property:
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natural law definition of property rights? Ш
Due Process:
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Procedural: fair hearings/procedures
Substantive: sufficient reason
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Magna Carta
Ш
John by the Grace of God King of England … to his
Archbishops, Bishops, Abbots, Earls, Barons,
Justices, Foresters, Sheriffs, Stewards, servants
and to all his Officials and Loyal Subjects, Greeting.
For the better ordering of our Kingdom …
No free man shall be seized or imprisoned or stripped
of his rights or possessions or outlawed or exiled or
deprived of his standing in any other way nor will we
proceed with force against him or send others to do so
except by the lawful judgement of his equals or by the
law of the land.
full text
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Content of Due Process
What does “due process
of law” mean?
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Fair process (procedure)
 Executive branch – must
enforce laws fairly, evenly
 Legislative – laws must
provide notice, fair forum
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Fair reasons (substance)
 Legislature – laws must be
justified (necessary?)
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Early Cases
Murray v. Hoboken Land (1855)
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5th Amd Due Process clause applied to all
branches of federal gov’t (not just executive),
But had procedural content only
Dred Scott v. Sandford (1856)
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Due Process had substantive content as well
 Missouri Compromise, releasing slaves in free states,
deprived masters of “property” without due process
Slaughterhouse Cases (1872)
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Miller: No substantive restraint on state power
Field/Bradley: laws can be arbitrary both in
procedural and substantive ways
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The Rise of Laissez-Faire
Ш
Laissez-faire, laissez-passer
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French: "let things be, let them pass“
 Adam Smith: free market economics
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Economic theory against gov’t regulation
 Social Darwinism (“survival of the fittest”)
 Popularized in late 19th Century by Herbert Spencer
Loan Association v. Topeka (1874)
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City tax exceeded the police power
 Note: no specific constitutional prohibition
Munn v. Illinois (1876)
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Rejects SDP attack to price regulation
 sufficiently imbued with public interest as to justify law
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Mugler v. Kansas (1887)
Declaring “limits beyond which legislation
cannot rightfully go”
 Courts must look at “the substance of things”
 Economic Substantive Due Process era begins
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Smyth v. Ames (1898)
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Regulated rates must be based on fair value
 i.e., provide same returns as market pricing
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In setting this constitutional standard, the Court
is making economic policy – i.e., legislating
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Allgeyer v. LA
(1879)
Due Process “Liberty” includes:
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not just freedom from physical restraint
freedom to enjoy all faculties in any lawful way
 i.e., liberty of contract (economic relationship)
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What is the source of this “liberty” right?
 constitutional text (contracts clause)?
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Art. I, § 10: “No state shall … pass any … law impairing
the obligation of contract.”
To counter state relief laws for (rich) debtors, which
federalists thought would discourage foreign investments
 external sources?
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Liberty of Contract
Natural Rights Theory
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St. Thomas Acquinas (13th C)
 Natural Theology (eternal law)
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Social Contact Philosophy (16th-18th C)
 Hobbes, Locke, Rousseau
 “Natural Law”
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Declaration of Independence (1776)
We hold these Truths to be self-evident, that all Men
are created equal, that they are endowed, by their
Creator, with certain unalienable Rights, that among
these are Life, Liberty, and the Pursuit of Happiness
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Liberty of Contract
Natural Rights Theory
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Ogden v. Saunders (1827, Marshall, dissenting)
“on tracing the right to contract, and the obligations
created by contract, to their source, we find them to
exist anterior to, and independent of society, we may
reasonably conclude that those original and preexisting principles are, like many other natural rights,
brought with man into society; and, although they may
be controlled, are not given by human legislation?”
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Lochner v. NY
(1905)
NY law sets maximum work hours (bakeries)
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Qu. 1: Does the law interfere with the “liberty”
rights of either the employer or the employee?
Qu. 2: If so, is the law reasonable (satisfy DP)?
 Not all interferences are unconstitutional; only
arbitrary ones
Whose liberty rights are being protected?
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Bakery employees?
 Why shouldn’t workers have the right to work long
hours in substandard conditions, if they want to?
 Labor laws “seriously cripple the ability of the
laborer to support himself and his family”
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Vincenzo, age 15, and
Angelo, age 11, work
the 5 pm to 5 am shift
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Lochner v. NY
(1905)
Is this interference (w/ liberty of K) justified?
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i.e., does the state have a sufficiently strong
justification?
Public Health
Employee Health
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Asymmetry in economic
power occurs naturally.
Economic restructuring
is per se unnatural.
“We think this law is not
within the police power, and is invalid”
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Lochner v. NY
(1905)
Scrutiny of Ends:
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Were the state’s goals impermissible?
 Public health, worker health, worker welfare?
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Who decides?
Scrutiny of Means:
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Assuming legitimate goals, how well must the
law promote them?
 The law “must have a more direct relation” than this
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Who decides (if the law actually attains its ends)?
Strict Scrutiny vs. Rational Basis
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Lochner v. NY
(1905)
Harlan Dissent:
 Worker welfare is a legitimate end
 Worker health is promoted by this law
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Does Harlan disagree with SDP?
Holmes Dissent:
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Does Holmes disagree with SDP?
 Liberty of K has become “a shibboleth”
 Cannot be used to overrule majority opinion
 14th Amd does not codify Laissez-Faire or H.Spencer
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Laws must be upheld unless “unreasonable”
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The Lochner Era
Muller v. Oregon (1908)
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Maximum hours for female laundry workers
 Why is this law reasonable (const’l) but Lochner not?
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Women’s physical structure and maternal functions need
more state protection (we judicially know that)
Women are not (economic/political) equals to men
Overruled by Adkins v. Children’s Hosp. (1923)
Coppage v. Kansas (1915)
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State law forbidding “yellow dog contracts” Ш
 interferes with employee’s freedom of choice
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DP clauses in 5th & 14th are treated the same
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Lochner Era in Decline
Nebbia v. NY (1934)
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Price control for milk (minimum prices)
Milk has long been a regulated industry
 “Affected with the public interest”
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Legislature might reasonably conclude further
regulation was necessary
This law is not unreasonable or arbitrary
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“State is free to adopt whatever economic
policy may reasonably be deemed to promote
public welfare”
Is this the end of Lochner? Or
Who determines? does Ct. simply approve of law?
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West Coast Hotel v. Parrish (1937)
Mimimum wage law for women
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Invalidated in Adkins v. Children’s Hospital
Revisiting whole idea of liberty of contract
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Not absolute; subject to police power
New standard of review
Examination of ENDS
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Protection of women is a legitimate end
As is equalizing bargaining strength
Examination of MEANS
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Legislature is entitled to reach own conclusions
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West Coast Hotel v. Parrish (1937)
What causes Court to change 180 degrees?
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Roosevelt’s Court packing plan
Must£prove the
non-existence of
Great depression
“constitutional
 Laissez faire simply didn’t work
out
facts”
Who has burden of proof under new test?
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Challenger
What must state show to sustain the law?
 “while no factual brief has been presented, there is
no reason to doubt that the state of Washington has
encountered [these] social problems”
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Presumption of constitutionality
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Who is Justice Roberts?
Owen Josephus Roberts
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Appointed by Hoover
 Abandoned the Four Horsemen
 Joined the Three Musketeers
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“the switch in time that saved nine”
John Glover Roberts Ш
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Hedgepeth v. WMATA (2004)
 Upholding arrest of 12-yr old for
eating a french fry in DC Metro
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Bloch v. Powell (2003)
 Denial of pension to foreign service
employee does not deny DP property
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US v. Carolene Products
(1938)
Federal prohibition on “filled milk” (skim milk)
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DP clause of 5th amd treated same as 14th
How strong is the presumption of
constitutionality?
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“the existence of facts supporting the
legislative judgment is to be presumed”
“whether any state of facts either known or
which could reasonably be assumed
affords support for it.”
What is left of the Lochner era?
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US v. Carolene Products
(1938)
Justice Stone’s famous footnote 4
“There may be narrower scope for operation of the
presumption of constitutionality when legislation
appears on its face to be within a specific prohibition of
the Constitution, such as those of the first ten
amendments, which are deemed equally specific when held
to be embraced within the Fourteenth.”
“It is unnecessary to consider now whether legislation
which restricts those political processes which can
ordinarily be expected to bring about repeal of undesirable
legislation, is to be subjected to more exacting judicial
scrutiny under the general prohibitions of the Fourteenth
Amendment than are most other types of legislation.”
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US v. Carolene Products
(1938)
“Nor need we enquire whether similar considerations
enter into the review of statutes directed at particular
religious, or racial minorities: whether prejudice
against discrete and insular minorities may be a
special condition, which tends seriously to curtail the
operation of those political processes ordinarily to be
relied upon to protect minorities, and which may call for a
correspondingly more searching judicial inquiry.”
Stone’s dichotomous standards of review
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Strict Scrutiny -> specific constitutional prohibition
& impediments to political redress
Rational Basis -> all other cases
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Williamson v. Lee Optical
(1955)
OK law requires optical prescriptions
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even to fix glasses or replace frames
Isn’t this special interest legislation?
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Maybe, but Ct. would need to know a lot about
optics to decide if law was reasonable.
a “law need not be in every respect logically
consistent with its aims to be constitutional”
Extreme deference:
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it is for legislatures, not courts, to balance the
advantages and disadvantages of econ. legis.
Econ SDP is dead. Long live SDP
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Ferguson v. Skrupa
(1963)
Kansas prohibits practice of debt adjusting
What result during Lochner era?
What result now?
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Fall 2006
“Whether the legislature takes for its textbook
Adam Smith, Herbert Spencer, Lord Keynes, or
some other is no concern of ours”
What if it takes Karl Marx?
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SDP Revival – Punitive Damages
State Farm v. Campbell
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(2003)
Ins. Co. wrongly withholds payment on claim
Jury finds bad faith and award punitives
Kennedy: grossly excessive awards are an
arbitrary deprivation of property w/o DP
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What test can court develop w/o substituting
its own economic policy for the legislature’s?
Scalia/Thomas (dissent); Ginzburg (dissent)
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Fall 2006
SDP “insusceptible of principled application”
Legislatures can cure abuses in pun. damages
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SDP Revival – Punitive Damages
Kennedy test: Whether punitives violate
SDP depend upon
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Degree of reprehensibility (of tortious conduct)
 physical harm worse than economic harm
 culpability of tort feasor (compare mens rea)
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Disparity between actual and punitive damages
 no rigid benchmarks, but
 2-digit multipliers probably unconstitutional
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Difference between jury award & civil penalty
 Punitive damages are not a substitute for crim law
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which carries additional procedural safeguards
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SDP Revival – Punitive Damages
BMW v. Gore (1996)
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State can only promote own interest, can’t
punish for nationwide misbehavior
Compare excessive punishments imposed
on corps to those imposed on individuals
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Does 5th Amd Due Process provide more
explicit protection that 8th Amd?
Death Penalty for corporations?
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Should Merck Pharmaceuticals be executed for
murder of patients with Vioxx?
 By revoking its charter and seizing its assets?
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