Interpreting the U.S. Constitution Regarding Limitations on Economic Regulation

By the end of June the U.S. Supreme Court should issue its decisions on the constitutionality of the federal Affordable Health Care Act and the Arizona immigration law. These cases involve important issues requiring the interpretation of the U.S. Constitution.

These cases and recent commentaries by Supreme Court Justice Antonin Scalia, columnist George Will, two judges on the U.S. Court of Appeals for the D.C. Circuit and a law professor reveal another important issue of legitimate federal power that is bubbling below the surface: what should be the constitutional standard for review of federal and state regulation of economic activities under the Fifth and Fourteenth Amendments to the U.S. Constitution.

U.S. Supreme Court Justice Antonin Scalia

Justice Scalia

A new bookReading Law: The Interpretation of Legal Texts –by U.S. Supreme Court Justice Antonin Scalia and Bryan A. Garner discusses the general approach to such interpretation used by the Justice. It comes with this disclaimer: “The views expressed in this book are those of the authors as legal commentators. Nothing in this book prejudges any case that might come before the [U.S.] Supreme Court.”

The book is a series of short essays on principles or canons of statutory and constitutional construction that supposedly guide judges and lawyers. The book, however, does make telling comments on issues in the pending health care and immigration cases.

One of the central precedents advanced by the Obama Administration for the constitutional validity of the Affordable Care Act is a 1942 Supreme Court case, Wickard v. Filburn, 317 U.S. 111 (1942), which held that a farmer’s cultivation of wheat for his own consumption affected interstate commerce and, therefore, could be regulated by the federal government under the Commerce Clause of the U.S. Constitution that grants (in Article 1, Section 8) Congress the power “To regulate Commerce . . . among the several States. . . .”  The new Scalia-Garner book, however, says the Court in the Wickard case “expanded the Commerce Clause beyond all reason.”

Another canon says that “a federal statute is presumed to supplement rather than displace state law.” In other words, Congress must make express any intent to displace or preempt state law. This relates to the pending case about the Arizona immigration law. The main argument for its unconstitutionality is preemption of state law regarding immigration by federal law.

The book also says, “A statute presumptively has no extraterritorial application.” Again this is a presumption and thus requires Congress to make explicit any intention for a statute to have extraterritorial application. This relates to a case to be reargued next term on whether the federal Alien Tort Statute of 1789 applies to alleged foreign human rights violations. A related issue is whether corporations may be held liable under that statute.

Another canon is “Words must be given the meaning they had when the text was adopted.” Moreover, for Justice Scalia, as he writes in the book and in many judicial opinions, it is the words of the text under consideration that must be at the center of legal inquiry. Other sources and values — the intentions of those who wrote the words or the consequences of a given interpretation — are, in his opinion, illegitimate.

Columnist George Will

George Will

 George Will in his recent column, “Unleash the high court” lambasts a recurrent theme in many Supreme Court cases that express deference to the choices of the democratically-elected legislative and executive branches. Similarly Mr. Will criticizes George Romney’s presidential campaign website for saying that federal judges should “leave the governance of the nation to elected representatives.” Will argues that “judicial deference to elected representatives can be dereliction of judicial duty.”

Will specifically targets the Supreme Court’s decision in the Slaughterhouse Cases, 16 Wallace 36 (1873), regarding the “privileges or immunities” clause of Section 1 of the 14th amendment to the U.S. Constitution that was ratified in 1868. That provision is as follows:

  • 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.” (Emphasis added.)

At issue in the Slaughterhouse Cases was whether a Louisiana statute that granted one firm a monopoly of the slaughterhouse business in New Orleans and banned already established competitors was valid under the “privileges or immunities” clause, and the Court held, 5 to 4, that it was constitutional.

The Court in the Slaughterhouse Cases reached this conclusion after it had determined that there was a distinction between U.S. citizenship and state citizenship and that this clause of the 14th Amendment only protected the former. Such U.S. citizenship privileges or immunities, according to the Court in this case, included the right of a citizen “to come to the seat of the government to assert any claim he may have upon that government;” the “right of free access to its seaports;” and the right “to demand the care and protection of the Federal government over his life, liberty, and property on the high seas, or within the jurisdiction of a foreign government.” But they did not include the right to engage in a business.

The Slaughterhouse Cases also rejected the claims that the Louisiana statute violated the “due process” clause and the “equal protection” clauses of the 14th amendment.

According to George Will, the decision in the Slaughterhouse Cases was a “still-reverberating mistake . . . [by taking] a cramped view of the 14th Amendment’s protection of Americans’ “privileges or immunities,” saying these did not include private property rights, freedom of contract and freedom from arbitrary government interference with the right to engage in enterprise.” This led, he says, in the 1930s to the Court’s formally declaring economic rights to be inferior to ‘fundamental’ rights. As a result, according to Will, the Slaughterhouse Cases “begot pernicious judicial restraint — tolerance of capricious government abridgements of economic liberty.”

Circuit Judges Brown and Santelle

Chief Judge Sentelle & Judge Brown

George Will’s call for “unleashing” the Supreme Court was made more explicit in an astonishing concurring opinion in April of this year by two judges on the U.S. Court of Appeals for the D.C. Circuit–Judge Janice Rogers Brown and Chief Judge David Bryan Sentelle— in Hettinga v. United States.

In that case the appellate court, 3-0, affirmed the dismissal of a complaint alleging that a federal statute subjecting large milk producers-handlers to financial contributions to a fund for payments to producers violated the Fifth Amendment to the Constitution’s due process and implied equal protection provisions. Following Supreme Court precedents, as the circuit court was required to do, the latter’s per curiam opinion stated the governing legal principle as follows:

  • “We grant statutes involving economic policy a “strong presumption of validity.” FCC v. Beach Commc’ns, Inc., 508 U.S. 307, 314 (1993). A statutory classification that “neither proceeds along suspect lines nor infringes fundamental constitutional rights must be upheld against equal protection challenge if there is any reasonably conceivable state of facts that could provide a rational basis for the classification.” Id. at 313. “Where there are plausible reasons for Congress’ action, our inquiry is at an end.” Id. at 313–14. The challenger bears the burden of showing that the statute is not a rational means of advancing a legitimate government purpose. See Bd. of Trs. of the Univ. of Ala. v. Garrett, 531 U.S. 356, 367 (2001).”

The appellate court then found that the challenged federal statute did have the requisite rational basis and, therefore, was constitutional.

The concurring opinion that was authored by Judge Brown and joined by Chief Judge Sentelle said that no other result was possible in light of the Supreme Court precedents. They then went on to suggest that the Supreme Court should overturn its large body of cases holding that economic regulations were subject to a rational basis test and return to the Lochner-era when there was strict judicial scrutiny of such regulations. The concurring opinion said:

  • “America’s cowboy capitalism was long ago disarmed by a democratic process increasingly dominated by powerful groups with economic interests antithetical to competitors and consumers. And the courts, from which the victims of burdensome regulation sought protection, have been negotiating the terms of surrender since the 1930s.”
  • “First the Supreme Court allowed state and local jurisdictions to regulate property, pursuant to their police powers, in the public interest, and to “adopt whatever economic policy may reasonably be deemed to promote public welfare.” Nebbia v. New York, 291 U.S. 502, 516 (1934). Then the Court relegated economic liberty to a lower echelon of constitutional protection than personal or political liberty, according restrictions on property rights only minimal review. United States v. Carolene Products Co., 304 U.S. 144, 152–53 (1938). Finally, the Court abdicated its constitutional duty to protect economic rights completely, acknowledging that the only recourse for aggrieved property owners lies in the “democratic process.” Vance v. Bradley, 440 U.S. 93, 97 (1979). “The Constitution,” the Court said, “presumes that, absent some reason to infer antipathy, even improvident decisions will eventually be rectified by the democratic process and that judicial intervention is generally unwarranted no matter how unwisely we may think a political branch has acted.” Id.
  • “As the dissent predicted in Nebbia, the judiciary’s refusal to consider the wisdom of legislative acts—at least to inquire whether its purpose and the means proposed are “within legislative power”—would lead to only one result: “[R]ights guaranteed by the Constitution [would] exist only so long as supposed public interest does not require their extinction.” 291 U.S. at 523. In short order that baleful prophecy received the court’s imprimatur. In Carolene Products (yet another case involving protectionist legislation), the court ratified minimalist review of economic regulations, holding that a rational basis for economic legislation would be presumed and more searching inquiry would be reserved for intrusions on political rights. 304 U.S. at 153 n.4. . . .”
  • “The practical effect of rational basis review of economic regulation is the absence of any check on the group interests that all too often control the democratic process. It allows the legislature free rein to subjugate the common good and individual liberty to the electoral calculus of politicians, the whim of majorities, or the self-interest of factions. See Randy E. Barnett, Restoring the Lost Constitution: The Presumption of Liberty 260 (2004).
  • “The hope of correction at the ballot box is purely illusory. . . . Rational basis review means property is at the mercy of the pillagers. The constitutional guarantee of liberty deserves more respect—a lot more.”

The third circuit judge on the panel in Hettinga, Judge Thomas B. Griffith, filed his own concurring opinion to announce that he did not join the concurring opinion of Judge Brown and Chief Judge Sentelle “with its spirited criticism of the Supreme Court’s long-standing approach to claims of economic liberty. Although by no means unsympathetic to their criticism nor critical of their choice to express their perspective, I am reluctant to set forth my own views on the wisdom of such a broad area of the Supreme Court’s settled jurisprudence that was not challenged by the petitioner.” (Emphasis added.)

As of the close of business on June 19th, the Supreme Court website did not report the filing of a petition for certiorari in the Hettinga case. But keep watching for such a petition and for the Court’s ruling thereon. If it grants the petition, be on guard. 

Supreme Court Interpretation of Constitutional Restraints of Federal and State Economic Regulations

Will’s article and, to a lesser extent, the Brown and Sentelle concurring opinion jump over an important period of our constitutional history.

Starting in 1905 in the U.S. Supreme Court used the “due process” clause of the 14th amendment to invalidate numerous state statutes regulating various aspects of economic activity. An early leading example of this jurisprudence was Lochner v. New York, 198 U.S. 45 (1905), that held a New York statute limiting the hours of labor in bakeshops to be unconstitutional. This approach continued into the early 1930s when the Court held various New Deal statutes unconstitutional until the conflict between the Court and President Roosevelt’s New Deal legislation reached a head in early 1937 with a presidential proposal for reorganizing the federal judiciary by appointing additional judges when an incumbent reached his 70th birthday (the so-called “Court-packing” proposal).

This proposal never went anywhere, but the Court suddenly changed course by upholding various federal and state economic regulations. This was the so-called “switch in time that saved nine.” Important cases in this reversal of course by the Supreme Court were West Coast Hotel  Co. v. Parrish, 300 U.S. 379 (1937) and United States v. Caroline Products Co., 304 U.S. 144 (1938). In West Coast Hotel, the Court, 5 to 4, upheld a state minimum wage law and overruled a contrary decision from 1923 (Adkins v. Children’s Hospital of D.C., 261 U.S. 525 (1923)). In Caroline Products, it upheld the constitutionality of a federal statute prohibiting certain milk from being shipped in interstate commerce because it was supported by substantial public-health evidence and was not arbitrary or irrational. The latter case also explained that regulations of economic activity would be subject to a “rational basis” review while restrictions on more fundamental rights would be subject to a higher level of scrutiny. Presumably George Will was referring to Caroline Products as the 1930s decision that, in his opinion, dastardly relegated economic rights to an inferior position to fundamental rights.

Another case in this new Supreme Court direction was Palko v. Connecticut, 302 U.S. 329 (1937), although it did not involve economic rights. Instead this case held that a state statute permitting the prosecution to take appeals from lower courts in criminal cases did not violate the 14th Amendment. This conclusion followed from the Court’s decision that this Amendment did not protect all of the rights set forth in the first eight amendments to the U.S. Constitution, but only to those “implicit in the concept of ordered liberty” and those principles of justice “so rooted in the traditions and conscience of our people to be ranked as fundamental.”

Also important in the Court’s new direction was the previously discussed Wickard v. Filburn, 317 U.S. 111 (1942), which upheld a federal statute establishing a wheat-marketing quota system that included wheat consumed on the same farm. It thereby repudiated an old distinction in the law between direct and indirect effects on interstate commerce. This case–the one criticized by Justice Scalia–made it clear that the Court would uphold the federal regulation of any economic activity, no matter how local, if it could have a demonstrable effect on interstate commerce.

This interpretation of the 14th Amendment as applied to economic regulations has now been followed for roughly 75 years in a huge body of cases in the Supreme Court and other U.S. courts.

As discussed in a prior post, in the mid-1970s I relied upon this well established body of law in a successful defense of an acquisition of an Iowa bank by an out-of-state bank holding company at about the same time that the Supreme Court upheld the constitutionality of a New Orleans ordinance that only allowed two push-cart vendors in the French Quarter of that city.

Given this long-established and firmly embedded interpretation of the Constitution, I was astounded to discover the George Will column and the concurring opinion in Hettinga calling for obliteration of this large body of law.  I also was startled to read a commentary by David Bernstein, the George Mason University Foundation Professor at the George Mason University School of Law:”There is virtual unanimity among modern conservative and libertarian scholars that the broadening of federal power during the New Deal era resulted from mistaken Supreme Court decisions.”

Prof. Geoffrey Stone

Such a position seems to me to be contrary to the principle of starie decisis. As stated by Geoffrey Stone, the Edward H. Levi Distinguished Service Professor of Law at the University of Chicago (my alma mater), “Stare decisis is, after all, the bedrock principle of the rule of law. Not only does it promote stability and encourage judges to decide cases based on principle rather than on a preference for one or another of the parties before them, but it also serves importantly to reduce the politicization of the Court. It moderates ideological swings and preserves both the appearance and the reality that the Supreme Court is truly a legal rather than a political institution.”

Chief Justice          John Roberts
Justice Samuel Alito

Indeed, in the infamous Citizens United v. Federal Election Commission case from 2010 that overruled a prior Supreme Court case regarding election financing, Chief Justice Roberts submitted a concurring opinion that was joined by Justice Samuel Alito solely “to address the important principles of judicial restraint and stare decisis implicated in this case.” After this concurring opinion reviewed the reasons for starie decisis, it quoted earlier Supreme Court decisions that said the principle was not an “inexorable command” or a “mechanical formula of adherence to the latest decision.” Otherwise, Chief Justice Roberts (and Justice Alito) said, “minimum wage laws would be unconstitutional.” Here, Chief Justice Roberts cited with approval West Coast Hotel Co. v. Parrish’s overruling of Adkins v. Children’s Hospital of D.C.

Presumably that would at least make it more difficult for Roberts and Alito now to overrule 75 years of Supreme Court case law on the constitutionality of economic regulations and to hold, explicitly or implicitly, that West Coast Hotel was an erroneous decision.

I, therefore, was somewhat relieved to read Professor Bernstein’s further observation that “there is less unanimity on what to do about it [the belief by some legal scholars that the rational basis standard for review of economic regulations was erroneous]. One school of thought, represented by former Judge Robert Bork and Judge Ralph Winter of the U.S. Court of Appeals for the Second Court, says it is too late to rely on the judiciary to reverse the centralizing trend of modern government. Winter claims that the unraveling of the modern Leviathan must be done through the political process, because it would be too disruptive to society and to the economy for judges to strike down federal programs wholesale. And, because judges must act on principle, they cannot pick and choose which laws to declare unconstitutional. Richard Epstein argues that, at least on the margins, the Supreme Court can still restrain national economic regulation. He thinks “that it is possible to make incremental changes by principled adjudication.”

Conclusion

In a subsequent post I will review other theories of interpreting the Constitution.In the meantime, I invite comments correcting, amplifying or contesting the assertions in this post.

 

 

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dwkcommentaries

As a retired lawyer and adjunct law professor, Duane W. Krohnke has developed strong interests in U.S. and international law, politics and history. He also is a Christian and an active member of Minneapolis’ Westminster Presbyterian Church. His blog draws from these and other interests. He delights in the writing freedom of blogging that does not follow a preordained logical structure. The ex post facto logical organization of the posts and comments is set forth in the continually being revised “List of Posts and Comments–Topical” in the Pages section on the right side of the blog.

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