Topic 6: Economic Rights and Liberties

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Topic 6 Economic Rights and Liberties

• Economic SDP, the Contracts Clause, the Takings
  Clause
• (also revisiting IV.2 PI, the DCC and the
  Commerce Power)

2
The Rights Definitional Problem, Again

• By reference to the individuals conduct in
  isolation?
• Or by reference to a limitation on state power in
  a particular zone of state action?

3
Previous Brushes With Economic Rights

• An example of economic rights exhibiting more of
  a sense of personal conduct?
• Privileges and Immunities of IV.2 (the right to
  work in a common calling) and the Privileges or
  Immunities of U.S. citizenship noted in the 14th
  Amendment and Saenz
• An example of economic rights exhibiting more of
  a sense of a limit on state action?
• the Dormant Commerce Clause

4
Due Process

• Suggests procedural scrutiny are the methods of
  governmental action fair?
• In the aftermath of the Slaughter-House Cases, a
  bigger role for DP dawned (even though SDP was
  rejected as an alternative theory in that case)
• We saw it in the incorporation cases that held
  states to respect fundamental constitutional
  rights, beginning about 1903 formally
• During the same period, SDP emerges

5
The Early Near-Hits

• Munn, 1876 (states price caps challenged on DP
  grounds, but upheld)
• Railroad Commission Cases, 1886 (states rr rate
  regulation challenged on DP grounds, but upheld)
• Mugler, 1887 (states prohibition of alcohol
  sales challenged on DP grounds, but upheld)

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The Earliest Teeth in Economic SDP

• Chicago, Milwaukee and St. Paul Railway, 1890
  states railroad rate regulation struck as
  violating DP
• Allgeyer, 1897 states rule that an outside
  companys letter to someone regarding that
  citizens contract made outside the state amounts
  to doing business in the state, struck as
  violating DP

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Lochner, 1905

• Case striking New Yorks 10-hour limit on bakers
  workdays
• Holmes dissents on SOP judicial deference to
  legislature
• Harlan dissents on federalism grounds federal
  deference to the states

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Some Lochner-Era Highlights

• Coppage, 1915 no protection of unions
  (following the Adair case of 1908 finding the
  same result against the federal government)
• Muller, 1908 maximum hours provision for women
  upheld aberration?
• Adkins, 1923 minimum wage law for women struck
• Weaver, 1926 consumer protection law struck

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The Demise of Lochner

• Nebbia, 1934 price controls for milk upheld
• West Coast Hotel, 1937 Roberts switches votes
  to uphold minimum wage law for women

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The Post-Lochner World

• Carolene Products, 1938 upholding federal
  filled milk prohibition
• Footnote 4s window to the future after Lochner
  there may be a narrower scope for the
  presumption of constitutionality when legislation
  appears on its face to be within a specific
  prohibition of the Constitution, such as those of
  the first ten Amendments, when incorporated.
  more exacting judicial scrutiny for
  restrictions on political processes like voting,
  info, political organizations, assembly. Also
  more exacting review for statutes directed at
  particular religious . . . or racial minorities
• Or more searching judicial inquiry in the wake
  of prejudice against discrete and insular
  minorities tending seriously to curtail the
  operation of those political processes ordinarily
  to be relied on to protect minorities

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Economic Regulation Post-Lochner

• Williamson v. Lee Optical, 1948 mere rational
  basis review appropriate even for apparently
  protectionist regulation
• In other words, look for legitimate state purpose
• Coupled with means reasonably related to
  achieving that purpose

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A Revival of Economic SDP?

• Gore, 1996 state cannot order exorbitant
  punitive damages consistently with SDP
• In evaluating the constitutionality of punitive
  damage awards, consider degree of
  reprehensability, disparity between actual harm
  and punishment, and awards in comparable cases
• State Farm, 2003 (supplement) disparity between
  punitives and actual damages set at something
  less than a factor of 10

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The Latest Wrinkle Philip Morris

• In a 2007 tobacco case (5-4) involving punitive
  damages in the area of 100 times compensatory
  damages, the Supreme Court remanded the case not
  on the disparity issue, but on the question of
  whether Defendant was being punished for conduct
  relating to parties not before the Court
• Does this mean that Alioto and Roberts (in the
  majority here) are cool to a revival of economic
  SDP?

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The Contracts Clause

• Art I, Section 10 No State shall . . . pass any
  . . . Law impairing the obligation of Contracts.
• Framers intent to ensure that
  pre-constitutional debts be perpetuated after the
  new constitution was adopted
• But was expanded pre-Lochner (pre-1905) to limit
  state economic regulation
• Lochner made it largely superfluous
• Lochners demise brings it back into focus . . .

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An Overview of the Doctrine

• Does a contract already exist?
• Has it been impaired?
• How substantial is the impairment in light of the
  parties actual expectations, core exchange,
  economic return, and regulatory setting?
• Assuming a contract has been impaired to some
  degree of substantiality, is the states
  justification for its action in light of its core
  reserved police powers legit, and is means
  reasonable?

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Home Building Loan v. Blaisdell, 1934

• Same term as the Nebbia case signaling an end to
  SDP with respect to economic liberty of contract
  . . .
• Does a states impairment of mortgage obligations
  violate the Contracts Clause?
• Held, no . . .
• Less than fully substantial impairment, coupled
  with strong state justification

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Energy Reserves Group, 1983

• An example of a typical Contract Clause case with
  the result that a states natural gas price
  regulation scheme is upheld . . .

18
Allied Structural Steel, 1978Hiccup or Serious
Indigestion?

• An unusual instance in which a states law
  (regarding forced vesting of pension benefits
  against a job-exporting employer) is struck . . .

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U.S. Trust v. New Jersey, 1977

• An example of one of the two main types of
  situations in which the government is itself a
  party to a contract . . .
• Where the state is acting as a private
  contracting party with relatively pure financial
  interests at stake, its impairments will get
  heightened scrutiny
• Contrast cases in which the state via contract is
  giving away basic police powers . . .

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Taking Stock of Economic Rights

• Commerce Clause limited stomach for restraining
  unbridled federal economic reg
• DCC and Article IV PI relatively more interest
  in restraining the states from their instincts
  toward economic protectionism
• 14th Amendment P or I unfulfilled promise of
  protecting U.S. citizens in economic, other ways
• Lochner a failed experiment in SDP as a basis
  for limiting economic regulation reviving?
• Contracts clause 100 years full, 100 empty

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And Now, the Takings Clause

• Text . . . nor shall private property be taken
  for public use without just compensation.
• What is the significance of its placement in the
  5th Amendment (addressing personal rights)
  instead of in Article I (addressing congressional
  powers)?
• Note This was the first right incorporated
  against the states in 1897. Was it therefore
  among the most fundamental of personal rights?
• If so, its also-ran status today is ironic . . .

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The Big Picture Why Are Takings So Rarely Found
Compensable?

• Consider the basic trilogy of rights found
  pre-constitutionally, in the original
  constitution (5th Amendment), and in the 14th
  Amendment after the Civil War life, liberty and
  property
• Note the illogic of the protection of life and
  liberty on the same plane as property if property
  can include human life (i.e., slavery)
• Jefferson acknowledged what would later be the
  Constitutions original sin when, in the
  Declaration of Independence, he substituted
  pursuit of happiness for property

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The Black-Letter Elements of a Taking

• Is there . . .
• (1) a taking (in either the possessory or
  regulatory senses)?
• (2) of property?
• (3) for a public use?
• (4) for which just compensation is lacking?

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Is There a Possessory Taking When the
Encroachment is Minor?

• Loretto, 1982 cable wire placement in an
  apartment building?
• Held, yes, even a modest physical encroachment on
  property is a taking (especially in light of the
  fact that payments for the right had been made
  prior to the law prohibiting such payments)
• Could a city achieve the result of
  no-rent-for-running-cable-wire without
  characterizing it as a taking?

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Does a Billboard Amortization Law Take the
Billboard?

• Most states hold no, it is personalty and retains
  value
• But Georgia is in a minority, holding Private
  property is the antithesis of Socialism or
  Communism.  Indeed, it is an insuperable barrier
  to the establishment of either collective system
  of government. . . . The thoughtless, the
  irresponsible, and the misguided will likely say
  that this court has blocked the effort to
  beautify and render our highways safer.  But the
  actual truth is that we have only protected
  constitutional rights by condemning the
  unconstitutional method to attain such desirable
  ends, and to emphasize that there is a perfect
  constitutional way which must be employed for
  that purpose.  State Highway Department v.
  Branch, 152 S.E.2d 372 (Ga. 1966), reaffirmed in
  Lamar v. City v Albany, 389 S.E.2d 216 (Ga. 1990)

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Is there a taking when regulation (not utter
displacement of the owner) burdens property
rights?

• Penn Coal v. Mahon, 1922 the first recognized
  regulatory taking case (Justice Holmes for the
  Court) if regulation goes too far it will be
  recognized as a taking
• But note Brandeis in a dissent that comes true
  the concept of a regulatory taking is so
  potentially significant that one can predict very
  limited application of the concept

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Is there a taking when government acts to avert
ecological danger?

• Miller v. Schoene, 1928 a governmental order to
  cut trees to prevent tree disease held NO taking
• The follow-up question Does classification as a
  taking depend on the urgency and seriousness of
  the governments concern?
• Might the possibility of global warming mean that
  a prohibition against, say, coal mining would not
  be a taking of an existing coal mine?

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Whats the test for whether theres been a
taking by government?

• Connollys calculus (1986)
• Could the complaining property owner have
  expected regulation?
• How extensive is the governments regulation?
• What is the practical effect on the propertys
  value to the owner?
• Weigh the three factors to find an answer . . .

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Does historical, cultural or aesthetic regulation
constitute a taking?

• Penn Central, 1978 Does a law prohibiting
  exploitation of the development rights over Grand
  Central station amount to a taking?
• Held, no one can live as a property owner of a
  historic site with regulations against its
  alteration without letting that history deprive
  the owner of that site of a real present value

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Is a Short-Term Taking a Taking?

• Lucas, 1992 sacrifice of all economically
  beneficial use of property, even for a limited
  time, does constitute a taking
• Blackmun in dissent Today the Court launches a
  missile to kill a mouse. Overstated?

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The Lucas Property Since Then
32
Is zoning a taking?

• A perhaps-more-meaningful and broadly instructive
  case from the 1920s, the Village of Euclid
• Zoning is NOT a taking
• Hugely important result
• See Harvard Prof. Ed Glaesers studies on whether
  zoning may be responsible for soaring housing
  prices despite ample land overall

33
Is a Development Condition a Taking?

• In Dolan (1994), the Dolans wanted to expand
  their store, and the city sought land for a bike
  path as a condition for approving the expansion

34
New Rules on Development Conditions Nexus
Proportionality

• Nollan and Dolan together stand for the rule that
  there must be an essential nexus between the
  public interest and the condition, and some rough
  proportionality between them
• The Dolans claimed to have been willing to sell
  the land for 14,000 for the path, but ended up
  accepting 1.4 million from the city to settle

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Can a Taking Occur Even if the Owner Bought After
the Reg?

• Palazzolo (2001) involved another problem with
  beachfront development
• The Court held that a buyer who might know of the
  potentially problematic can still challenge it as
  a taking

36
On second thought, maybe no missile . . .
Tahoe-Sierra

• Tahoe-Sierra, 2003 a 32-month moratorium on
  development of property held not permanent and
  not a taking compensating for delays would
  render routine governmental processes
  prohibitively expensive or hasty

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Is the taking one of Property?

• Phillips, 1998 interest on IOLTA funds is
  property
• But see Brown, 2003 taking IOLTA funds causes
  no loss
• Do you have a property right in your legal
  education?
• The Court of Appeals of NY assumed that Susan M.
  did by the time of her second year . . .

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Is the taking for a Public Use?

• Hawaii Housing v. Midkiff, 1984 forced transfers
  of land, from lessors to lessees, so to reduce
  concentration of Hawaiian land ownership that was
  a holdover from pre-state times, held to be a
  public use
• A court must be convinced of a palpable
  impossibility of the use being for the public
  good to find a violation of the use clause

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Must the taking substantially advance the
public interest?

• Lingle, 2005 Hawaii limited the amount of rent
  an oil company could charge a dealer
• Held not to be a taking, and that there is no
  requirement that the taking substantially
  advance any public interest claimed

• Governor Lingle and a Hawaiian Chevron Station

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Is Use of the Eminent Domain Power for Private
Development a Public Use?

• Kelo, 2005
• New London CT gave the eminent domain power to a
  development authority to prepare a large parcel
  to attract Pfizer
• Held, such a use is public

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State Responses to Kelo

• States are free to interpret their own takings
  clauses separately, as in Michigan (the Poletown
  case) Florida banned redevelopment takings
• Congress also considered bills like H.R. 3405
  (stripping federal funds from states that would
  take property from one private citizen and give
  to another) and passed Georgia Representative
  Gingreys resolution expressing grave
  disapproval of Kelo

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Georgias Responses

• A few states (like Georgia) have chosen to
  restrict their own eminent domain powers through
  law changes
• First through a 2006 statute limiting definition
  of blight as a reason for
• Then through a 2006 constitutional amendment
  (requiring that the power be exercised by elected
  officials, not unelected authorities, and for
  public use)
• But Georgia in 2007 considered a grant of broad
  eminent domain to a utility for a natural gas
  line to blow through the state

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Without Just Compensation?

• Measured how? On the basis of the land
  pre-development (ex ante), or in light of the
  development (ex post)?
• Held, measure at the value to the former holder
  at the time of the taking . . . (ex ante former
  holder rule) and ignore the development value
• San Remo (2005) no standing to assert takings
  claims until state ultimately refuses compensation

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The Trend in Takings Jurisprudence

• Return to status quo
• No takings revolution will likely occur
• Another potential constitutional device for the
  elevation of economic rights and for restraint
  on regulation with economic impacts remains of
  only marginal significance

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Next Topic, Next Week Equal Protection, Part 1

• How did the Slaughterhouse Cases, the rise and
  fall of Lochnerism, and then, the Carolene
  Products footnote, all lead to the discovery of a
  rich new vein of constitutional rights -- the
  right to be treated equally by the government?