Substantive Due Process, Liberty of Contract, and the States’ Police Power

Judge Raymond Randolph, in a speech to the Federalist Society’s National Lawyer’s Convention on November 11, 2005, had much to say about substantive due process:

. . . Substantive due process is the idea that the Due Process Clause of the 14th Amendment protects rights even if they are not set out specifically in the Constitution.

The Due Process Clause states simply that ““nor shall any State deprive any person of life, liberty, or property, without due process of law.”” Given the theme of this conference, one must ask about the original meaning of these words. The 14th Amendment due process clause is identical to the due process clause in the Fifth Amendment, applicable to the federal government. Two current Justices — you may guess who they are –– think the phrase ““substantive due process”” is an oxymoron. Process means procedure, not substance –– and that is what it meant historically. That the due process clause ever came to apply to legislation, as it did for the first time in the infamous Dred Scott case, is strange enough. What is the process due from a legislature? A quorum? An accurate vote count? There is something else I find quite odd about this concept. In many of the substantive due process cases the Court has stated that ““fundamental liberties”” are protected. Roe v. Wade is an example. Freedom of religion is, by all accounts, a fundamental liberty. Are we to suppose that freedom of religion is a right the state can take away so long as it does so with due process? That would be protecting a civil right in one amendment, the First, only to allow it to be taken away through another.

The Framers were smart people; they could not have intended such an absurdity. And they did not. History shows that the meaning of ““liberty”” as used in the 5th and 14th Amendments is simply freedom from restraint — that is, imprisonment. This explains why the Framers placed the due process clause in the Fifth Amendment, which deals almost entirely with criminal proceedings. Learned Hand, found the historical evidence supporting this interpretation clear beyond — in his words –– any ““reasonable doubt.” Yet the chances of the Supreme Court going back to the original understanding are, I think, slim to none.

But the Fifth Amendment does not deal exclusively with criminal proceedings, the Fourteenth Amendment has nothing to do with criminal proceedings, and both do explicitly prohibit the taking of life, liberty, or property without due process of law. Given the Due Process Clauses of the Fifth and Fourteenth Amendments, it is unconstitutional for a legislature to enact a law that allows a “taking” of liberty or property, unless such a “taking” is specifically authorized by the Constitution.

By the same token, it is unconstitutional for a legislature to enact a law that the Constitution specifically prohibits. Article I, Section 9, of the Constitution says explicitly that “No Bill of Attainder or ex post facto Law shall be passed” by Congress. That’s why the Constitution in Article I, Section 10, says explicitly that “No State shall . . . pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts. . . .”

The Framers (who were very smart people, indeed) understood that obligation of contracts (a.k.a. liberty of contract or freedom of contract) is both a matter of liberty and a matter of property. The Framers understood that legislative interference in contractual arrangements is a deprivation of due process because such interference prevents willing parties from employing their labor or property in the pursuit of otherwise lawful ends. That is, the legislature finds them “guilty” of otherwise lawful actions by forbidding and penalizing those actions.

The concept of substantive due process is in bad odor, in large part (as Wikipedia explains) because it

was first applied by the Supreme Court in a subsection of Dred Scott v. Sandford (1856), though it can be argued that the doctrine dates back to Calder v. Bull (1798). Dred Scott was a slave who claimed that passing into territory where slavery was prohibited destroyed his owner’s property rights over him. The court ruled in three parts. First, it argued that Dred Scott was not a citizen of the United States and therefore he had no right to liberty under the Constitution of 1856 — this argument, now harshly repudiated, is not based on the Due Process clause but did establish that the Court considered Dred Scott to be property. Second, the court argued that no Federal law could exist which per se appropriated property without advance notice and opportunity for judicial review — —this was a Due Process argument. Thus, the decision established lack of procedure violates Due Process just as much an unfair procedure. After the Fourteenth Amendment applied due process restrictions to states, the Supreme Court used this same doctrine to protect a liberty of contract by routinely striking down (such as in Lochner v. New York) those economic and labor regulations which restricted particular economic activities per se without opportunity for judicial review.

Lochner v. New York is the 1905 case in which the Supreme Court struck down a State statute that attempted to impose a maximum-hours limitation on bakers. Lochner is a bête noire to liberals because it triggered a wave of Supreme Court decisions deemed “pro-business” (as if business were an enemy). But Lochner and its offspring were decided rightly because they upheld, as a matter of due process, the Constitution’s explicit guarantee of liberty of contract. As Justice Peckham wrote for the Lochner majority,

[t]he [New York] statute . . . interferes with the right of contract between the employer and employees, concerning the number of hours in which the latter may labor in the bakery of the employer. The general right to make a contract in relation to his business is part of the liberty of the individual protected by the 14th Amendment of the Federal Constitution. Allgeyer v. Louisiana, 165 U.S. 578 , 41 L. ed. 832, 17 Sup. Ct. Rep. 427. Under that provision no state can deprive any person of life, liberty, or property without due process of law. The right to purchase or to sell labor is part of the liberty protected by this amendment. . . .This is not a question of substituting the judgment of the court for that of the legislature. If the act be within the power of the state it is valid, although the judgment of the court might be totally opposed to the enactment of such a law. But the question would still remain: Is it within the police power of the state? and that question must be answered by the court.

The question whether this act is valid as a labor law, pure and simple, may be dismissed in a few words. There is no reasonable ground for interfering with the liberty of person or the right of free contract, by determining the hours of labor, in the occupation of a baker. . . .

It is a question of which of two powers or rights shall prevail,-the power of the state to legislate or the right of the individual to liberty of person and freedom of contract. The mere assertion that the subject relates, though but in a remote degree, to the public health, does not necessarily render the enactment valid. The act must have a more direct relation, as a means to an end, and the end itself must be appropriate and legitimate, before an act can be held to be valid which interferes with the general right of an individual to be free in his person and in his power to contract in relation to his own labor.

Justice Holmes, in his famous dissent in Lochner, said that “[t]he 14th Amendment does not enact Mr. Herbert Spencer’s Social Statics.” Social Statics (as Wikipedia explains) is a “conception of social justice, which emphasized the responsibility of the individual for their [sic] nature and actions.” Holmes, in other words, preferred a paternalistic government, as opposed to the government of liberty and individual responsibility clearly intended by the Framers.

But Lochner — properly understood — is not about enacting Mr. Spencer’s Social Statics, nor (as usually charged) is it about achieving a certain “pro-business” result through “judicial activism.” Lochner is about honoring the Constitution’s explicit guarantee of liberty of contract, and about ensuring that that guarantee is not vitiated by legislative overreaching. It is a violation of due process when a legislature deprives citizens of liberty or property by enacting laws forbidden by the Constitution. And that, in essence, is what the Lochner Court said.

To underscore my point, I quote from an article by Richard Epstein in The Heritage Guide to the Constitution (pp. 171-5):

What is clear . . . is that in the antebellum period the Obligation of Contract Clause was the only open-ended federal constitutional guarantee that applied to the states. . . .

Everyone conceded that the clause applied to ordinary contracts between private persons, including partnerships and corporations. . . .

. . . At this point, one way to read the clause is to hold that its prohibitions are prospective but are not absolute. The state may later the rules governing future contracts only in ways that offer just compensation to all contracting parties in the form of greater and stability in their contractual obligations. The three legislative reforms that arose most frequently in the early debates — a statute of frauds, a statute of limitations, and recording acts — are all measures that meet this standard.

By refusing to give the clause any prospective role, Ogden [1827] opened the gateway to partisan legislation that limited the ability of some parties to contract without imposing similar restrictions on their economic competitors. . . .

Liberty of contract nevertheless survived Ogden, for 107 years. The Court upheld it in Bronson v. Kinzie (1843). According to The Oxford Guide to United States Supreme Court Decisions (Oxford University Press, 1999, p. 33),

Chief Justice Roger B. Taney held that [a] legislative attempt to modify the terms of [an] existing mortgage was an unconstitutional impairment of the obligation of contract. Taney agreed that a state could alter the remedies available to enforce past as well as future contracts. He nonetheless emphasized that such changes could not materially impair the rights of creditors. In broad language Taney extolled the virtue of the Contract Clause: “It was undoubtedly adopted as part of the Constitution for a great and useful purpose. It was to maintain the integrity of contracts, and to secure their faithful execution throughout this Union.”

The Oxford Guide continues, however, by outlining the death of liberty of contract:

The Court long adhered to the Bronson rule, invalidating state laws that interfered with contractual rights in the guise of regulating remedies. The decision was effectively superseded, however, by Home Building and Loan Association v. Blaisdell (1934), in which the justices ruled that contracts were subject to the reasonable exercise of state police power.

Just what is “reasonable exercise of state police power”? In Home Building and Loan Association, according to Chief Justice Hughes, writing for the Court, it is this:

We come back, then, directly, to the question of impairment. As to that, the conclusion reached by the court here seems to be that the relief [from mortgage foreclosures] afforded by the [Minnesota] statute does not contravene the constitutional provision because it is of a character appropriate to the emergency and allowed upon what are said to be reasonable conditions.

That is, the Court simply decided to uphold a Minnesota statute that altered the terms of a contract because it wanted to do so, not because it had constitutional authority for doing so. The Constitution doesn’t forbid States to impair contracts except in emergencies or to exercise their “policing power.” No, the Constitution flatly forbids States to impair contracts.

As for States’ so-called police power, an article at FindLaw tells this tale:

[I]deas embodying the social compact and natural rights, which had been espoused by Justice Bradley in his dissent in the Slaughter-House Cases, 43 had been transformed tentatively into constitutionally enforceable limitations upon government. 44 The consequence was that the States in exercising their police powers could foster only those purposes of health, morals, and safety which the Court had enumerated, and could employ only such means as would not unreasonably interfere with the fundamentally natural rights of liberty and property, which Justice Bradley had equated with freedom to pursue a lawful calling and to make contracts for that purpose. 45

So having narrowed the scope of the state’s police power in deference to the natural rights of liberty and property, the Court next proceeded to read into the concepts currently accepted theories of laissez faire economics, reinforced by the doctrine of Social Darwinism as elaborated by Herbert Spencer, to the end that ”liberty,” in particular, became synonymous with governmental hands-off in the field of private economic relations. In Budd v. New York, 46 Justice Brewer in dictum declared: ”The paternal theory of government is to me odious. The utmost possible liberty to the individual, and the fullest possible protection to him and his property, is both the limitation and duty of government.” …

To the State was transferred the task of demonstrating that a statute interfering with the natural right of liberty or property was in fact ”authorized” by the Constitution, and not merely that the latter did not expressly prohibit enactment of the same.

In 1934 the Court in Nebbia v. New York 52 discarded this approach to economic legislation, and has not since returned to it. The modern approach was evidenced in a 1955 decision reversing a lower court’s judgment invalidating a state statutory scheme regulating the sale of eyeglasses to the advantage of ophthalmologists and optometrists in private professional practice and adversely to opticians and to those employed by or using space in business establishments.

In a single year (1934) the Supreme Court demolished liberty of contract and created out of whole cloth what amounts to an unlimited “police power” for the States — liberty and property be damned.

It is long past time for a return to the substantive due process epitomized by Lochner, that is, a defense of constitutionally guaranteed liberties against legislative usurpations of those liberties.

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