Ferguson v. Skrupa

Brief Fact Summary.

A Kansas statute made it a misdemeanor for any person to engage in the business of debt adjusting. It was challenged as a violation of the Due Process Clause of the Fourteenth Amendment.

Synopsis of Rule of Law.

The Court completely abandoned scrutiny and would not look at the wisdom of legislation. 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 three-judge district court panel ruled that the Kansas statute making it a misdemeanor for any person to engage in the business of debt adjusting except as incident to the lawful practice of law in this state was a violation of the Due Process Clause of the Fourteenth Amendment. Debt adjusting was defined as making a contract with a debtor when he pays a certain amount of money to the person engaged in the adjusting and then that person distributes the money to creditors in accordance with a plan.

Issue.

Did the Kansas statute outlawing a person from engaging in debt adjusting violate the Due Process Clause?

Held.

Justice Black opinion.
It is up to the legislatures, not the courts, to decide the wisdom and utility of the legislation. There was a time when the Court would strike down laws, which were thought unreasonable, that is unwise or incompatible with some particular economic or social philosophy. The Due Process Clause was used by the Court to strike down laws, which regulated maximum hours for work in bakeries, outlawing “yellow dog” contracts, and setting minimum wages for women.
The doctrine that prevailed in Lochner, Coppage, Adkins, Burns and similar cases, that due process authorizes courts to hold laws unconstitutional when they believe the legislature has acted unwise, has long since been discarded. 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.
Concurrence. Justice Harlan concurred with the judgment on the ground that this state measure bears a rational relation to a constitutionally permissible objective. See Williamson v. Lee Optical.

Discussion.

Has the Court overcompensated from Lochner and gone too far in the other direction?
Slaughter-House cases: Privileges and Immunities of Fourteenth Amendment only protected privileges and immunities of national citizens, and not the fundamental rights of individuals.
Post Slaughter-House cases: The Due Process Clause of the Fourteenth Amendment incorporates most of the express guarantees of the Bill of Rights and thus protects at least those fundamental rights. Slaughter-House did not involve a right expressly guaranteed in the Bill of Rights.
The United States Constitution restricted government power to interfere with the market ordering and private economic interests of individuals. Private economic interests are protected against certain narrowly defined forms of governmental interference.
Lochner: New York law could not limit the hours of bakers because the Due Process clauses of the Fifth and Fourteenth Amendments protected liberty of contract. The Courts scrutinized the legislative decision and found for themselves that bakers did not need protection.
Nebbia: The start of the decline of Lochner. The Court upheld a scheme for fixing milk prices. They showed deference to the legislature. If the ends are legitimate (within legislative power) then the means are up to the legislature.
United States v. Carolene Products: The Court sustained the Federal prohibition on interstate shipment of filled milk. They were very deferential to Congress and did not look to see if the means were justified.
Williams: The Court hypothesized reasons, which would support the legislatures actions, even though there was no evidence that these reasons in fact motivated the lawmakers.
Ferguson: Now the Court does not look at the wisdom of the legislation. Since 1937 the Court has invalided economic regulatory statutes only if there was a “taking” of property without just compensation or an impairment of contract right.
The doctrine of substantive due process was used to invalidate state laws that arbitrarily and unreasonably regulated economic activity. If the statue was reasonable it was within the state’s police power to regulate the activity. Now such economic regulations will be upheld if it is rationally related to a legitimate government interest. There will be a presumption of constitutionality unless the legislature acted in an arbitrary and irrational way.
The modern standard applies to economic regulations and social welfare regulations so long as “fundamental” constitutional rights are not impinged. When a fundamental right is involved, there is substantially higher level of scrutiny applied. The most important fundamental right in substantive due process cases is the right to privacy.