Studied by 3 people
Looks like no one added any tags here yet for you.
How have contracts been defended?
Contract clause, Article 10 - “No state shall pass any law impairing the obligation of contracts”
disappear from jurisprudence b/c industrial revolution AND congress regulating more frequently
Liberty of contract through the 14th amendment - right to “life, liberty, and property,” need due process of law to revoke
Just compensation through the 5th amendment (incorporated to states)
“nor shall private property be taken for public use without just compensation”
Property background
private property is not mentioned in the Constitution, only in the 5th Amendment
SC became a defender of property rights and economic liberty within a generation of the Constitution
Fletcher v. Peck (1810) first made the Contract Clause apply to public contracts (i.e. the government)
limited state powers, said states can’t renege on a contract.
The contract clause is not absolute, states still retain police powers (health, safety, good order, comfort, general welfare of the community).
Lochner v. New York (1905)
Vote: 5-4
Facts: Joseph Lochner was found guilty and fined $50 for violating an 1897 New York law prohibiting employers from having their employees work more than sixty hours per week in a baker. The NY legislature commissioned a study to find out most dangerous professions, and baking was one of them. Lochner’s conviction was affirmed by two state courts and he applied for a writ of error from the Supreme Court.
Holding: Yes. A state law prohibiting employers from having their employees work more than 60 hours a week in a bakery is in violation of the due process clause of the 14th Amendment.
Opinion (J. Peckham):
(1) State police powers allow the state to prohibit contracts that are injurious to safety, health, morals, and general welfare of the public.
(2) Algeyer v. Louisiana established liberty of contract through the due process clause of the 14th Amendment.
(3) There are other ways to protect bakers besides regulating their hours.
Dissent (J. Holmes):
(1) This case is decided upon an economic theory, not the Constitution of the United States.
(2) The majority opinion is a perversion of the word “liberty” in the 14th Amendment. There is no liberty of contract.
Dissent (J. Harlan):
(1) The law was enacted to protect the physical well-being of those who work in the bakery.
Note: Holmes charged that the court had become a super-legislature in overseeing economic regulation. The majority was criticized for making instead of interpreting law; most judicial employees at this time were ex-corporate lawyers, so they believe in laissez-faire.
Comment: Court attempted to draw a line between police powers and advancing the interests of particular groups. Struck down a few hundred laws through liberty of contract reasoning. This resulted in an unregulated econ zone b/c state blocked through Lochner and national gov can’t come in b/c narrow reading commerce → Great Depression.
Resolved when Roberts changed sides after FDR threatened to pack the courts
West Coast Hotel v. Parrish (1937)
Vote: 5-4
Facts: Elsie Parish, West Coast Hotel Company employee, sued to recover the difference between her wage and the minimum wage of $14.50 per 48-hour week as set by the State of Washington. In 1913, Washington legis passed legislation to protect the health and welfare of women and minors by setting a minimum wage. The trial court denied Parrish’s claim, but the Washington Supreme Court reversed the decision. The West Coast Hotel Company appealed to the Supreme Court, arguing the law ran afoul of the Fourteenth Amendment’s due process clause.
Holding: A state law mandating a minimum wage for women and children does not violate the 14th Amendment’s due process clause.
Opinion (Chief Justice Hughes):
(1) The Constitution does not mention freedom of contract.
(2) The court has not answered the distinction between minimum wage and maximum work hours.
(3) Workers deserve a living wage and taxpayers should not have to pay it.
(4) Adkins v. Children’s Hospital (struck down D.C.’s min wage) is overruled.
Dissent (J. Sutherland):
(1) The job of the Court is to interpret the Constitution, not amend it.
(2) The Adkins precedent was affirmed many times, does not make sense to overrule it.
Note: some speculated that Roberts switched sides due to FDR’s court packing plan, but Roberts switched his vote two months before FDR announced his plan.
Comment: This was part of the Court’s abandonment of the liberty of contract and substantive due process, creating a virtual abdication of judicial supervision of economic regulations.
Kelo v. City of New London, CT (2005)
Vote: 5-4
Facts: State and local officials wanted to revitalize New London and its Fort Trumbull area. The New London Development Corporation (NLDC) was enlisted to help the city. They planned to attract new businesses and recreation to the area, specifically through Pfizer’s new research facility. The NLDC negotiated the purchase of most real-estate in the area. Failed negotiations received condemnation proceedings. Susette Kelo and other homeowners sued New London, claiming the taking of their property, even with just compensation, violated the “public use” restriction in the 5th Amendment because the land would be used for economic development, not public purpose. A trial court filed a restraining order against the city, appellate reversed, Supreme granted review.
Holding: A city’s decision to take property for the use of economic development satisfies the “public use” requirement of the 5th Amendment.
Opinion (J. Stevens):
(1) Private takings of land do not satisfy the public use requirement (Hawaii v. Midkiff).
(2) Targeting a blighted area for redevelopment is appropriate (Berman v. Parker).
(3) “Public use” means “public purpose,” not use by the public.
(4) The city has invoked a state statute that specifically authorizes eminent domain to promote econ development.
(5) Debates of the wisdom, amount, or character of takings are not to be carried out in federal courts.
Dissent (J. O’Connor):
(1) A law that takes property from A and gives to B cannot be considered a rightful exercise of legis authority, even in the name of economic development.
(2) Where is the line between public and private use?
(3)There are three categories of takings.
sovereign may transfer private property to public ownership.
transfer to private parties for the public’s use.
public purpose—needs to be revisited for the first time in 20 years.
(4) Susette Kelo’s home is not a source of social harm.
Dissent (J. Thomas):
(1) The Court should use its intrusive judicial review to protect “discrete and insular minorities” through the Public Use Clause.
Note: Justice Kennedy wrote courts should still exercise review to ensure governments do not use eminent domain to simply reward/advance interests of businesses and powerful private interests.
Comment: Pfizer backed out and New London is still economically troubled. 46 states now prohibit economic development takings. Courts may decide one thing and state laws enacted in response → spark cultural conversation.
