Nebbia+v+New+York+_1934_

Nebbia+v+New+York+_1934_ - .- V‘JL Nebbia v. New York 369...

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Unformatted text preview: .- V‘JL Nebbia v. New York 369 Nebbia v. New York This case also arose out of depression conditions and again appar- ently indicated the Court’s willingness to sustain governmental. intervention in the economy. A 5—4 majority approved a New York law establishing a milk control board with the power to fix retail prices ofymilk. Most importantly, the Court here rejected Chieyc Justice Taft’s rigid categorization of businesses affected with a public interest, as he had specified in the Wolff Packing case in 1923. The majority now held there was no “closed categorgf’ of such businesses, but that government might act where the public interest required intervention. The four dissenters—«the familiar bloc of Justices Van Devanter, McBeynolds, Sutherland, and Butler ——vigorously rejected the idea that this could include price—fixing by government. Justice Roberts delivered the opinion of the Court. The Legislature of New York established, by Chapter 158 of the Laws of 1933, a Milk Control Board with power, among other things, to “fix minimum and maximum‘. . . retail prices to be charged by . . . stores to consumers for consumption off the premises Where sold.” The Board fixed nine cents as the price to be charged by a store for a quart of milk. Nebbia, the proprietor of a grocery store in Roches- ter, sold two quarts and a five cent loaf of bread for eighteen cents; and was convicted for Violating the Board’s order. At his trial he asserted the statute and order contravene the equal protection clause and the due process clause of the Fourteenth Amendment. . . . 291 US. 502 (1934) 370 Depression and Constitutional Crisis: 1933—1936 The . . . serious question is whether the enforcement of [the act] de- nied the appellant the due process secured to him by the Fourteenth Amendment. . . . Under our form of government the use of Property and the making of contracts are normally matters of private and not of public concern. The general rule is that both shall be free of governmental interference. But neither property rights nor contract rights are absolute; for govern- ment cannot exist if the citizen may at will use his property to the detriment of his fellows, or exercise his freedom of contract to work them harm. Equally fundamental with the private right is that of the public to regulate it in the common interest. . . . The milk industry in New York has been the subject of long-standing and drastic regulation in the public interest. The legislative investigation of 1932 was persuasive of the fact that for this and other reasons unre- stricted competition aggravated existing evils, and the normal law of supply and demand was insufficient to correct maladjustments detri- mental to the community. The inquiry disclosed destructive and demoral- izing competitive conditions and unfair trade practices which resulted in retail price—cutting and reduced the income of the farmer below the cost of production. We do not understand the appellant to deny that in these circumstances the legislature might reasonably consider further regulation and control desirable for protection of the industry and the consuming public. That body believed conditions could be improved by preventing destructive price—cutting by stores which, due to the flood of surplus milk, were able to buy at much lower prices than the larger distributors and to sell without incurring the delivery costs of the latter. In the order of which complaint is made the Milk Control Board fixed a price of ten cents per quart for sales by a distributor to a consumer, and nine cents by a store to a consumer, thus recognizing the lower costs of the store, and endeavoring to establish a differential which would be just to both. In the light of the facts the order appears not to be un— reasonable or arbitrary, or without relation to the purpose to prevent ruthless competition from destroying the wholesale price structure on which the farmer depends for his livelihood, and the community for an assured supply of milk. But we are told that because the law essays to control prices it denies due process. Notwithstanding the admitted power to correct existing economic ills by appropriate regulation of business, even though an in- direct result may be a restriction of the freedom of contract or a modifica- tion of charges for services or the price of commodities, the appellant urges that direct fixation of prices is a type of regulation absolutely forbidden. His position is that the Fourteenth Amendment requires us to hold the challenged statute void for this reason alone. The argument runs that the public control of rates or prices is per se unreasonable and Nehbz'a v. New York 371 unconstitutional, save as applied to businesses affected with a public interest; that a business so affected is one in which property is devoted to an enterprise of a sort which the public itself might appropriately undertake, or one whose owner relies on a public grant or franchise for the right to conduct the business, or in which he is bound to serve all who apply; in short, such as is commonly called a public utility; or a business in its nature a monopoly. The milk industry, it is said, possesses none of these characteristics, and, therefore, not being affected with a public interest, its charges may not be controlled by the state. Upon the soundness of this contention the appellant’s case against the statute depends. We may as well say at once that the dairy industry is not, in the accepted sense of the phrase, a public utility. We think the appellant is also right in asserting that there is in this case no suggestion of any monopoly or monopolistic practice. It goes without saying that those engaged in the business are in no way dependent upon public grants or franchises for the privilege of conducting their activities. But if, as must be conceded, the industry is subject to regulation in the public interest, what constitutional principle bars the state from correcting existing maladjustments by legislation touching prices? We think there is no such principle. The due process clause makes no mention of sales or of prices any more than it speaks of business or contracts or buildings or other incidents of property. The thought seems nevertheless to have persisted that there is something peculiarly sacrosanct about the price one may charge for what he makes or sells, and that, however able to regulate other elements of manufacture or trade, with incidental effect upon price, the state is incapable of directly controlling the price itself. This View was negatived many years ago. Mann v. Illinois. . It is clear that there is no closed class or category of businesses affected with a public interest, and the function of courts in the application of the Fifth and Fourteenth Amendments is to determine in each case whether circumstances vindicate the challenged regulation as a reason— able exertion of governmental authority or condemn it as arbitrary or discriminatory. . . . The phrase “affected with a public interest” can, in the nature of things, mean no more than that an industry, for adequate reason, is subject to control for the public good. In several of the decisions of this court‘wherein the expressions “affected with a public interest,” and “clothed with a public use,” have been brought forward as the criteria of the validity of price control, it has been admitted that they are not susceptible of definition and form ‘an unsatisfactory test of the constitutionality of legislation directed at business practices or prices. These decisions must rest, finally, upon the basis that the requirements of due process were not met because the laws were found arbitrary in their operation and effect. But there can be no doubt that upon proper 372 Depression and Constitutional Crisz’s: 1933-1936 occasion and by appropriate measures the state may regulate a business in any of its aspects, including the prices to be charged for the products or commodities it sells. . So far as the requirement of due process is concerned, and in the absence of other constitutional restriction, a state is free to adopt What— ever economic policy may reasonably be deemed to promote public wel- fare, and to enforce that policy by legislation adapted to its purpose. The courts are Without authority either to declare such policy, or, when it is declared by the legislature, to override it. . . . The Constitution does not secure to anyone liberty to conduct his business in such fashion as to inflict injury upon the public at large, or upon any substantial group of the people. Price control, like any other form of regulation, is unconstitutional only if arbitrary, discriminatory, or demonstrably irrelevant to the policy the legislature is free to adopt, and hence an unnecessary and unwarranted interference with individual liberty. . . . ...
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This note was uploaded on 02/21/2012 for the course 512 404 taught by Professor Clemens during the Spring '12 term at Rutgers.

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Nebbia+v+New+York+_1934_ - .- V‘JL Nebbia v. New York 369...

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