Overview of Economic Substantive Due Process

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All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

For approximately the first third of the twentieth century, the Supreme Court applied a doctrine known as economic substantive due process, which recognized “liberty of contract” as an interest protected by the Due Process Clauses of the Fifth and Fourteenth Amendments, to strike down a variety of economic regulations unconstitutional.1 In the years immediately following the adoption of the the Fourteenth Amendment in the late nineteeth century, however, there was little indication of the Due Process Clause’s potential to serve as a substantive restraint on state action.2 Long before the Fourteenth Amendment’s passage, the Court had recognized the Due Process Clause of the Fifth Amendment as a restraint upon the federal government, but only in the narrow sense that a legislature needed to provide procedural “due process” when enforcing law.3

Early invocations of a “substantive” economic due process right were unsuccessful. In the Slaughter-House Cases,4 a group of butchers challenged a Louisiana statute conferring the exclusive privilege of butchering cattle in New Orleans to one corporation. In reviewing the validity of this monopoly, the Court noted that the prohibition against a deprivation of property without due process “has been in the Constitution since the adoption of the Fifth Amendment, as a restraint upon the Federal power.” 5 Nearly all state constitutions, the Court observed, also included a similar restraint on state power.6 In upholding the state law, the Court stated that “under no construction of that provision that we have ever seen, or any that we deem admissible, can the restraint imposed by the State of Louisiana upon the exercise of their trade by the butchers of New Orleans be held to be a deprivation of property within the meaning of that provision.” 7

Four years later, in Munn v. Illinois,8 the Court reviewed the constitutionality of a state law that regulated the maximum rates private companies can charge for transporting and warehousing grain, and again refused to interpret the Due Process Clause as invalidating substantive state legislation. Rejecting contentions that such legislation effected an unconstitutional deprivation of property by preventing the owner from earning a reasonable compensation for its services and by transferring an interest in a private enterprise to the public, Chief Justice Morrison Waite took a broad view of the state’s police power and concluded that states may regulate the use of private property “when such regulation becomes necessary for the common good.” 9 While Chief Justice Waite acknowledged that state legislatures may abuse rate regulation, he emphasized that such possibility is “no argument against its existence,” for the people “must resort to the polls, not to the courts” for protection against abuses by legislatures.10

A year later, in Davidson v. New Orleans,11 the Court similarly upheld a special assessment on certain real estate properties for drainage purposes. Writing for the Court, Justice Samuel Miller counseled against departing from the then-conventional applications of due process but acknowledged the difficulty of arriving at a precise, all-inclusive definition of the clause. “It is not a little remarkable,” he observed, “that while this provision has been in the Constitution of the United States, as a restraint upon the authority of the Federal government, for nearly a century, . . . this special limitation upon its powers has rarely been invoked in the judicial forum or the more enlarged theatre of public discussion.” 12 But only a few years after due process became part of the Constitution as a restraint upon the states through the ratification of the Fourteenth Amendment, he noted, “the docket of this court is crowded with cases in which we are asked to hold that State courts and State legislatures have deprived their own citizens of life, liberty, or property without due process of law.” 13 Justice Miller opined that “no more useful construction could be furnished by this or any other court” than to define “what it is for a State to deprive a person of life, liberty, or property without due process of law.” 14 But such construction, he continued, should be fleshed out “by the gradual process of judicial inclusion and exclusion, as the cases presented for decision shall require, with the reasoning on which such decisions may be founded.” 15

Just six years later, however, in Hurtado v. California,16 the Court indicated it was modifying its views. Justice Stanley Mathews, speaking for the Court, noted that due process under the United States Constitution differed from due process in British common law in that the latter applied only to executive and judicial acts, whereas the former also applied to legislative acts. Consequently, the limits of due process under the Fourteenth Amendment could not be appraised solely in terms of the “sanction of settled usage” under common law.17 The Court then declared that “[a]rbitrary power, enforcing its edicts to the injury of the persons and property of its subjects, is not law” and that the constitutional limits placed on the action of both state and federal governments “are essential to the preservation of public and private rights.” 18 “The enforcement of these limitations by judicial process,” Justice Mathews continued, “is the device of self-governing communities to protect the rights of individuals and minorities.” 19 By this language, the states were put on notice that all types of state legislation, whether dealing with procedural or substantive rights, were now subject to the scrutiny of the Court when questions of essential justice were raised.

As the Court expanded the scope of the Due Process Clause over the next twenty years, two strands of reasoning developed to support this expansion. The first was a view advanced by Justice Johnson Field in a dissent in Munn v. Illinois.20 According to Justice Field, the state police power is limited to preventing injury to the “peace, good order, morals, and health of the community.” 21 The second strand, which Justice Joseph Bradley espoused in his dissent in the Slaughter-House Cases,22 tentatively transformed ideas embodying the social compact and natural rights into constitutionally enforceable limitations upon government.23 Under this view, not only were states limited to exercising their police powers to further only those purposes of health, morals, and safety that the Court had enumerated, but states could also only employ means that do not unreasonably interfere with fundamental natural rights of liberty and property.24 As articulated by Justice Bradley, these rights were equated with freedom to pursue a lawful calling and to make contracts for that purpose.25

As more Justices endorsed Justice Bradley’s view,26 and as the laissez-faire approach to economic regulation became dominant,27 the Court also began to deviate from presuming a state statute to be valid unless clearly shown to be otherwise, by examining whether facts justified a particular law.28 In earlier cases such as Munn v. Illinois,29 the Court had upheld state laws by presuming that facts justifing the legislation “actually did exist when the statute now under consideration was passed.” Ten years later, however, in Mugler v. Kansas,30 the Court upheld a statewide anti-liquor law because the Court was aware of the deleterious social effects caused by excessive use of alcoholic liquors,31 thereby establishing precedent for the Court to appraise independently the facts inducing legislatures to enact statutes.32

Mugler was significant because it implied that, unless the Court found facts justifying a state law, the Court would invalidate the law as an improper exercise of the state’s police power because the law lacked a reasonable or adequate relation to promoting public health, morals, or safety.33 The Court used this approach when challenged legislation involved potential governmental interference in economic relations. In these cases, the Court tended to shift the burden of proof from litigants challenging the legislation to the state seeking enforcement.34 Thus, the state had to demonstrate that the Constitution authorized, rather than did not expressly prohibit, a statute that interfered with a natural right of liberty or property. Applying this approach from the turn of the century through the mid-1930s, the Court struck down numerous laws that it saw as restricting economic liberties.

During the Great Depression, however, the laissez-faire approach to economic regulation lost favor to New Deal approaches.35 Thus, in 1934, the Court in Nebbia v. New York36 discarded its prior approach to evaluating economic legislation. The Court’s modern approach is exemplified by its 1955 decision, Williamson v. Lee Optical Co.,37 which upheld a statutory scheme regulating sales of eyeglasses that favored ophthalmologists and optometrists in private professional practice and disadvantaged opticians and those employed by or using space in business establishments. As the Court stated, “[t]he day is gone when this Court uses the Due Process Clause of the Fourteenth Amendment to strike down state laws, regulatory of business and industrial conditions, because they may be unwise, improvident, or out of harmony with a particular school of thought.” 38 “For protection against abuses by legislatures,” the Court emphasized, “the people must resort to the polls, not to the courts.” 39

1: For a discussion of the economic substantive due process as applied to federal actions, see Amdt14.S1.6.2.1 Overview of Economic Substantive Due Process.
2: In the years following the Fourteenth Amendment’s ratification, the Supreme Court often observed that the Due Process Clause “operates to extend . . . the same protection against arbitrary state legislation, affecting life, liberty and property, as is offered by the Fifth Amendment,” Hibben v. Smith, 191 U.S. 310, 325 (1903), and that “ordinarily if an act of Congress is valid under the Fifth Amendment it would be hard to say that a state law in like terms was void under the Fourteenth,” Carroll v. Greenwich Ins. Co., 199 U.S. 401, 410 (1905). See also French v. Barber Asphalt Paving Co., 181 U.S. 324, 328 (1901). There is support for the notion, however, that the proponents of the Fourteenth Amendment envisioned a more expansive substantive interpretation of that Amendment than had developed under the Fifth Amendment. See Akhil Reed Amar, The Bill of Rights 181–197 (1998).
3: The conspicuous exception to this was the holding in the Dred Scott case that former slaves, as non-citizens, could not claim the protections of the clause. 60 U.S. (19 How.) 393, 450 (1857)
4: 83 U.S. (16 Wall.) 36 (1873).
5: Id. at 80–81.
6: Id.
7: 83 U.S. (16 Wall.) at 80–81.
8: 794 U.S. 113, 134 (1877).
9: Id. at 124.
10: Id. at 134.
11: 96 U.S. 97, 103–04 (1878).
12: Id. at 104.
13: Id.
14: Id.
15: Id.
16: 9110 U.S. 516, 528, 532, 536 (1884).
17: See id. at 528.
18: Id. at 536.
19: Id.
20: 94 U.S. 113, 141–48 (1877).
21: Id. 94 U.S. 145–46.
22: 83 U.S. (16 Wall.) 36, 113–14, 116, 122 (1873).
23: See Loan Ass’n v. Topeka, 87 U.S. (20 Wall.) 655, 662–63 (1875) (noting that “[t]here are . . . rights in every free government beyond the control of the State” and “limitations on [governmental power] which grow out of the essential nature of all free governments,” and that the social compact “could not exist” without such “[i]mplied reservations of individual rights” ).
24: See id.
25: See Slaughter-House Cases, 83 U.S. (16 Wall.) 36, 116, 122 (1873) (Bradley, J., dissenting) ( “This right to choose one’s calling is an essential part of that [fundamental] liberty which it is the object of government to protect; and a calling, when chosen, is a man’s property right. . . . A law which prohibits a large class of citizens from adopting a lawful employment, or from following a lawful employment previously adopted, does deprive them of liberty as well as property, without due process of law.” ).
26: See Budd v. New York, 143 U.S. 517, 551 (1892) (Brewer, J., dissenting) (declaring “[t]he paternal theory of government” to be “odious” and expressing the view that “[t]he utmost possible liberty to the individual, and the fullest possible protection to him and his property, is both the limitation and duty of government” ).
27: See Dobbs v. Jackson Women’s Health Org., No. 19-1392, slip. op 44 (U.S. June 24, 2022) (Kagan, J., dissenting) (noting the “laissez-faire approach” to economic regulation that had dominated prior to the Great Depression).
28: See Fletcher v. Peck, 10 U.S. (6 Cr.) 87, 128 (1810).
29: 94 U.S. 113, 123, 182 (1877).
30: 123 U.S. 623 (1887).
31: Id. at 662. ( “We cannot shut out of view the fact, within the knowledge of all, that the public health, the public morals, and the public safety, may be endangered by the general use of intoxicating drinks; nor the fact . . . that . . . pauperism, and crime . . . are, in some degree, at least, traceable to this evil.” ).
32: The following year the Court, addressed an act restricting sales oleomargarine, of which the Court could not claim a like measure of common knowledge, briefly retreated to the doctrine of presumed validity, declaring that “it does not appear upon the face of the statute, or from any of the facts of which the Court must take judicial cognizance, that it infringes rights secured by the fundamental law.” Powell v. Pennsylvania, 127 U.S. 678, 685 (1888).
33: See Mugler, 123 U.S. at 662–63.
34: See Amdt14.S1.6.2.2 Liberty of Contract and Lochner v. New York.
35: See Dobbs v. Jackson Women’s Health Org., No. 19-1392, slip. op 44 (U.S. June 24, 2022) (Kagan, J., dissenting) (noting that after the Great Depression brought “unparalleled economic despair” and “undermined . . . the assumption that a wholly unregulated market could meet basic human needs,” the “laissez-faire approach” “was recognized everywhere outside the Court to be dead” (internal quotations omitted)).
36: 291 U.S. 502 (1934).
37: 348 U.S. 483 (1955).
38: Id. at 488.
39: Id. The Court generally applies a “hands-off” standard of judicial review, whether of congressional or state legislative efforts to structure and accommodate the burdens and benefits of economic life. Such economic regulation is generally accorded the traditional presumption of validity and “upheld absent proof of arbitrariness or irrationality on the part of Congress.” Duke Power Co. v. Carolina Env’t Study Grp., 438 U.S. 59, 83–84 (1978). That the accommodation among interests which the legislative branch has struck “may have profound and far-reaching consequences . . . provides all the more reason for this Court to defer to the congressional judgment unless it is demonstrably arbitrary or irrational.” Id. See also Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 14–20 (1976); Hodel v. Indiana, 452 U.S. 314, 333 (1981); New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96, 106–08 (1978); Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 124–25 (1978); Brotherhood of Locomotive Firemen v. Chi., Rock Island & Pac. R.R., 393 U.S. 129 (1968); Ferguson v. Skrupa, 372 U.S. 726, 730, 733 (1963).