Comprehensive Notes on Economic Due Process, Property, and Eminent Domain

Federalist No. 51 and the Madisonian Framework

• James Madison discusses the necessity of checks and balances in Federalist No. 51, stating: ‐‐Ambition must be made to counteract ambition. The interest of the man must be connected with the constitutional rights of the place.‐‐

• In explaining the inherent flaws of human nature, Madison writes that government is the ‐‐greatest of all reflections on human nature.‐‐

• He posits a famous hypothetical: ‐‐If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.‐‐

• The ‐‐great difficulty‐‐ identified in framing a government administered by men over men is two-fold: first, the government must be enabled to control the governed; second, the government must be obliged to control itself.

The Philosophical and Legal Foundations of Property

• James Madison asserts that the primary end of government is to protect property ‐‐of every sort.‐‐

• He defines a ‐‐just government‐‐ as one that impartially secures to every individual whatever is their own.

• Private property is established as a cornerstone of the republican ideal.

• The notes reference John Locke, highlighting the theory that labor and work may be properly ‐‐owned‐‐ by the individual.

• There exists an ‐‐antinomy,‐‐ or seeming contradiction, between vested property rights and the state’s police power.

• The government's job is to protect property ownership and the freedom of contract; the ultimate goal of liberty is defined as the ability to enjoy the fruit of one’s labor.

Privileges and Immunities Under Article IV and the 14th Amendment

• Article IV, Section $2$ mandates: ‐‐The citizens of each state shall be entitled to all privileges and immunities of citizens in the several states.‐‐

• This clause prohibits states from discriminating against out-of-state residents regarding economic liberties and civil rights.

• The $14th$ Amendment was added to clarify that Privileges or Immunities (P or I) applied to fundamental substantive rights, raising debates over the distinction between national and state citizenship.

• Congress retains the power to make uniform rules under Article IV.

• Corfield v. Coryell ($1823$): This U.S. Circuit Court for the Eastern District of Pennsylvania case examined whether a New Jersey act preventing out-of-state residents from raking oysters violated Article IV. The court found that while fundamental rights exist, they are not absolute. The term ‐‐tenant in common‐‐ was used to describe fisheries.

• The $14th$ Amendment established the Due Process (DP), Equal Protection (EP), and Privileges or Immunities (P or I) clauses to protect the economic and civil rights of all citizens, including newly freed slaves.

The Slaughter-house Cases ($1873$)

• Background: Louisiana enacted a law restricting New Orleans slaughterhouse operations to a single corporation, which received a charter downstream. For a duration of $25$ years, no other locations were permitted for animal slaughter, and existing businesses were to be closed.

• Arguments: Appellants argued the monopoly violated their right to practice their trade, constituted ‐‐involuntary servitude‐‐ under the $13th$ Amendment, and abridged privileges or immunities while denying equal protection and due process under the $14th$ Amendment.

• Holding ($5-4$): The Court held that the $13th$ and $14th$ Amendments had a narrow intent focused on granting equality to former slaves. The $14th$ Amendment P or I clause did not guarantee equal economic privileges to all citizens; it only protected rights within the federal purview.

• Dissent: Argued the $14th$ Amendment should incorporate common-law doctrine and be interpreted broadly, extending beyond the context of the Civil War.

• Impact: The decision effectively defeated the claim that the $14th$ Amendment applied the Bill of Rights to the states. This led the judiciary to shift toward the Equal Protection and Due Process clauses to protect liberties. The narrow view from this case is no longer considered valid by modern courts.

Judicial Philosophies and the Evolution of Due Process

• The transition from judicial restraint to activism was marked by several key cases.

• Munn v. Illinois ($1877$): The Court ruled that the legislature has the power to regulate private property when it is used for the public interest, stating: ‐‐When property is affected with a public interest, it ceases to be juris privati only.‐‐

• Chicago, Milwaukee, St. Paul R.R. Co. v. Minnesota ($1890$): The Court asserted that state-legislated railroad rates are subject to federal judicial review, signaling a shift toward judicial activism via the Due Process clause.

Economic Due Process and the Lochner Era

• Lochner v. New York ($1905$): New York limited the work week for bakers to $60$ hours. The Court struck this down, defining a ‐‐right to contract‐‐ under the ‐‐liberty‐‐ of the $14th$ Amendment Due Process clause, despite it not being explicitly mentioned.

• Holmes Dissent: Justice Holmes argued that in a democracy, the state could and should regulate general welfare under its police powers.

• Shift: For three decades, the Court resisted state regulation of contracts, but this trend ended in the $1950s$ as government regulation of the economy became standard.

• Punitive Damages: Recent cases show the Court checking arbitrary awards:   * BMW v. Gore: A plaintiff awarded $‐‐‐‐‐‐4,000$ in compensatory and $‐‐‐‐‐‐2,000,000$ in punitive damages saw the award reversed.   * State Farm v. Campbell: An award of $‐‐‐‐‐‐1,000,000$ compensatory and $‐‐‐‐‐‐145,000,000$ punitive was reversed as ‐‐excessive, arbitrary, and unreasonable.‐‐

Substantive Due Process and Civil Liberties

• Buck v. Bell ($1928$): The Court upheld forced sterilization, with Justice Holmes writing: ‐‐It is better for the world if, instead of waiting to execute degenerate offspring for crime or to let them starve for their imbecility, society can prevent those who are manifestly unfit from continuing their kind.‐‐

• Modern Substantive DP issues include gay rights, the right to die, and marriage.

The 5th Amendment and Eminent Domain

• Text: ‐‐…nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.‐‐

• Eminent Domain factors:   * Also termed ‐‐Condemnation‐‐ or ‐‐Expropriation.‐‐   * It is an inherent power of government.   * Clark v. Nash ($1905$): Addressed the expansion of ‐‐public use‐‐ to include a private irrigation ditch.   * Horne v. Department of Agriculture ($2015$): The government ordered raisin farmers to surrender $47\%$ of their crops to ‐‐stabilize the raisin market.‐‐ The Court ruled that personal property and real property are treated the same; such a ‐‐taking‐‐ requires the government to pay fair market value.

Defining Public Use and Just Compensation

• Berman v. Parker ($1954$): A unanimous decision that prioritized aesthetics and blight removal over pure economics, showing heavy ‐‐deference to legislature.‐‐

• Kelo v. City of New London ($2005$): Clarified that ‐‐public use‐‐ is synonymous with ‐‐public purpose.‐‐

• Just Compensation details:   * Calculated as Fair Market Value (FMV).   * No interest is typically paid unless there is a ‐‐taking in fact‐‐ (prepayment).   * Valuation includes both tangible and intangible benefits lost by the owner.   * Governed in California by Rules of Evidence sections $\text{810 to 824}.$

Modern Definitions of Takings

• Taking classification includes formal condemnation and ‐‐inverse condemnation‐‐ (a de facto taking via regulation).

• Factors for regulatory takings:   * Economic impact and ‐‐reasonable investment-backed expectations.‐‐   * Government-ordered physical intrusions.   * Whether the regulation substantially advances a legitimate government interest.   * Whether the regulation denies the owner all economically viable use.   * Whether the regulation single out an individual to pay for what should be a public burden.

• Note: No compensation is paid for temporary regulations.