V. Constitutional Law of Property

V. Constitutional Law of Property

A. Property and Economic Regulation

1. Early cases

Calder v. Bull

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  When Morrison died, his will stated that Mr. and Mrs. Bull were to be the beneficiaries.
  
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  Due to some problems with the will, the Bulls were denied an inheritance by a Connecticut Probate Court.
  
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  Instead, the Court gave the money to a guy named Calder.
  
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  The Bulls attempted to appeal the decision more than a year and a half later, but they found that under State law, the Statute of Limitations for filing an appeal was 18 months, so they lost their chance to appeal.
  
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  The Bulls persuaded the Connecticut legislature to change the law, which enabled them to successfully appeal the case.
  
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  On appeal, the Court reversed and gave the inheritance to the Bulls. Calder appealed.
  
  • 
    Calder argued that the Connecticut legislation a violation of Article 1, Section 10 of the Constitution, which prohibits ex post facto laws.
    
    • 
      Ex post facto means that the act took place before the law changed, and so the act can't be judged by the new law.
      
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      In this case, Calder argued that the principle of ex post facto meant that even if Connecticut changed the Statute of Limitations, the courts couldn't retroactively apply it to the Bull's case.
      
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  The US Supreme Court found for the Bulls.
  
  • 
    US Supreme Court found that the Connecticut legislation was not an ex post facto law.
    
  • 
    The Court distinguished criminal rights from private rights, arguing that restrictions against ex post facto laws were not designed to protect citizens' contract rights.
    
  • 
    The Court found that while all ex post facto laws are retrospective, all retrospective laws are not necessarily ex post facto. Even "vested" property rights are subject to retroactive laws.
    

Lochner v. New York

U.S. 1905 (S-5 p. 5)

Law: A law that affects freedom of contract is unconstitutional if it is not reasonably related to a legitimate purpose of protecting public health. Before an act can be held to be valid which interferes with the general right of an individual to contract in relation to his own labor, the act must have a direct relation to the health and welfare of the employee, as a means to an end, and the end itself must be appropriate and legitimate. The general right to make a contract in relation to one’s business is an individual liberty protected by the Fourteenth Amendment.

Facts: The state of New York enacted a statute forbidding bakers to work more than 60 hours a week or 10 hours a day.

Dissent (Harlan): The liberty to contract is subject to reasonable police regulations. Statutes falling within the States’ police powers should be reviewed under a rational basis test, with a presumption that the state is acting properly, and with the burden on the challenger to rebut that presumption by showing the law is not rationally related to state police powers.

Dissent (Holmes): The word ‘liberty’ in the fourteenth amendment does not invalidate a statute unless it reasonably can be said that the statute infringes fundamental principles of our people and our law. This law is clearly related to public health and ought to be upheld. The Constitution was not intended to embody a particular economic view and is not a document about economic philosophy.

Coppage v. Kansas

U.S. 1915 (S-5 p. 11)

Law: Legitimate exercises of the state police power could restrict freedom of contract, but there was no relationship here between the statute's purpose and the state's police-power goal.

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  Employment relations are the same as a contractual arrangement.
  
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  Both contracting parties have the right to terminate the employment ‘at-will’ for any reason. At the onset, the employee has the choice to refuse employment if union membership is more valued than the position offered.
  
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  Mary Anne: This is the “high point of the Lochner Era.” Freedom of Contract and Property consummate their love
  

Facts: A Kansas law banned employment agreements that barred employees from joining a labor union. Coppage, an employer, fired an employee who refused to sign an agreement with such a bar. Coppage was charged and convicted of violating the Kansas law. He appealed.

2. The Due Process Cases

Nebbia v. New York

U.S. 1934 (S-5 p. 25)

Law: Property rights and contract rights are not absolute in nature and may be subject to limitations. The production and distribution of milk is a paramount industry of the state and largely affects the health and prosperity of its people. Since the price controls were not “arbitrary, discriminatory, or demonstrably irrelevant” to the policy adopted by the legislature to promote the general welfare, it was consistent with the Constitution.

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  Consistent with Lochner: maintains need for reasonable connection between police power and public interest
  
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  Break from Lochner: Shift in tone, does not second-guess wisdom of legislation
  
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  Break from Coppage: Admits that property/contract rights are not absolute
  
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  NB: This is before FDR’s court-packing proposal; already seeing a shift
  

Facts: To combat the effects of the Great Depression, New York adopted a Milk Control Law in 1933 which established a board empowered to set a minimum retail price for milk. The minimum price for milk was set at 9 cents per quart. Nebbia, the owner of a grocery store, sold two quarts of milk and a 5-cent loaf of bread for 18 cents.

Dissent: This statute not only interferes arbitrarily with the rights of the little grocer to conduct his business, but it also takes away the liberty of twelve million consumers to buy a necessity of life in an open market.

West Coast Hotel v. Parrish

U.S. 1937 (S-5 p. 29)

Law: The Constitution does not speak of the freedom of contract. It speaks of liberty broadly and allows for restraints on liberty subject to due process of law (here passing law through legislature). Employers and employees are not always equally "free" in negotiating contracts, since employees often are constrained by practical and economic realities.

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  This was found to be especially true in the case of women.
  
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  The state is justified in adopting such legislation to protect the rest of the community from the burden of supporting economically disadvantaged workers.
  
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  NB: First case that signals the end of the Lochner Era -- Court not substituting its judgment for that of legislature
  

Facts: Washington instituted a state minimum wage for women and minors. Elsie Parrish, an employee of the West Coast Hotel Company, received sub-minimum wage compensation for her work. Parrish brought a suit to recover the difference between the wages paid to her and the minimum wage fixed by state law.
Culmination of the Property/Due Process cases:

Ferguson v. Skrupa

U.S. 1963 (S-5 p. 33)

Almost complete deference to the legislature. Lowers bar to arbitrariness.

Law: It is up to the legislatures, not the courts, to decide the wisdom and utility of the legislation. Courts do not substitute their social and economic beliefs for the judgment of the legislative bodies that are elected to pass laws. The Kansas Legislature was free to decide for itself that legislation was needed to deal with the business of debt adjusting. Any arguments in favor of debt adjusting are properly addressed to the legislature, not to the courts.

Facts: A Kansas statute made it a misdemeanor to enter into contracts for "debt adjusting" (a practice in which a debtor agrees to pay a monthly fee to an adjustor who then makes payments to the debtor's creditor). Skrupa was in business as a "Credit Advisor" and engaged in this practice. A lower court held that the Kansas statute was an "unreasonable regulation of a lawful business" and struck it down.

Comment: Repudiation of former practice in which Court would use DPC to strike down laws, which were thought unreasonable or incompatible with some particular economic or social philosophy. See cases such as Lochner, Coppage, etc.

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  NOTE: Holmes is quoted in this case saying that state legislature can do whatever they want “unless it is restrained by some express prohibition in the Constitution.” MAG notes that in Lochner, Holmes had a different standard: “fundamental principles as they have been understood by the traditions of our people and law” -- the Lochner formulation theoretically opens the door to restraint of laws even if not expressly unconstitutional.
  

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