Deprivation of Liberty: Economic Legislation

Substantive Due Process

Justice Harlan, dissenting in Poe v. Ullman,455 observed that one view of due process, "ably and insistently argued . . . , sought to limit the provision to a guarantee of procedural fairness." But, he continued, due process "in the consistent view of this Court has ever been a broader concept … Were due process merely a procedural safeguard it would fail to reach those situations where the deprivation of life, liberty or property was accomplished by legislation which by operating in the future could, given even the fairest possible procedure in application to individuals, nevertheless destroy the enjoyment of all three… Thus the guaranties of due process, though having their roots in Magna Carta's 'per legem terrae' and considered as procedural safeguards 'against executive usurpation and tyranny,' have in this country 'become bulwarks also against arbitrary legislation."'

Discrimination.—"Unlike the Fourteenth Amendment, the Fifth contains no equal protection clause and it provides no guaranty against discriminatory legislation by Congress."456 At other times, however, the Court assumed that "discrimination, if gross enough, is equivalent to confiscation and subject under the Fifth Amendment to challenge and annulment."457 The theory that was to prevail seems first to have been enunciated by Chief Justice Taft, who observed that the due process and equal protection clauses are "associated" and that "[i]t may be that they overlap, that a violation of one may involve at times the violation of the other, but the spheres of the protection they offer are not coterminous… [Due process] tends to secure equality of law in the sense that it makes a required minimum of protection for every one's right of life, liberty and property, which the Congress or the legislature may not withhold. Our whole system of law is predicated on the general, fundamental principle of equality of application of the law."458 Thus, in Bolling v. Sharpe,459 a companion case to Brown v. Board of Education,460 the Court held that segregation of pupils in the public schools of the District of Columbia violated the due process clause. "The Fifth Amendment, which is applicable in the District of Columbia, does not contain an equal protection clause as does the Fourteenth Amendment which applies only to the states. But the concepts of equal protection and due process, both stemming from our American ideal of fairness, are not mutually exclusive. The 'equal protection of the laws' is a more explicit safeguard of prohibited unfairness than 'due process of law,' and, therefore, we do not imply that the two are always interchangeable phrases. But, as this Court has recognized, discrimination may be so unjustifiable as to be violative of due process."

453 339 U.S. at 111.

454 346 U.S. 137, 140-41, 146, 147, 148, 150, 153 (1953).

455 367 U.S. 497, 540, 541 (1961). The internal quotation is from Hurtado v. California, 110 U.S. 516, 532 (1884). Development of substantive due process is briefly noted, above under "Scope of the Guaranty" and is treated more extensively under the Fourteenth Amendment.

456 Detroit Bank v. United States, 317 U.S. 329, 337 (1943); Helvering v. Lerner Stores Corp., 314 U.S. 463, 468 (1941).

457 Steward Machine Co. v. Davis, 301 U.S. 548, 585 (1937). See also Currin v. Wallace, 306 U.S. 1, 13-14 (1939).

458 Truax v. Corrigan, 257 U.S. 312, 331 (1921). See also Hirabayashi v. United States, 320 U.S. 81, 100 (1943).

459 347 U.S. 497, 499-500 (1954).

460 347 U.S. 483 (1954). With respect to race discrimination, the Court had earlier utilized its supervisory authority over the lower federal courts and its power to construe statutes to reach results it might have based on the equal protection clause if the cases had come from the States. E.g., Hurd v. Hodge, 334 U.S. 24 (1948); Steele v. Louisville & Nashville R.R., 323 U.S. 192 (1944); Railroad Trainmen v. Howard, 343 U.S. 768 (1952). See also Thiel v. Southern Pacific Co., 328 U.S. 217 (1946).

"Although the Court has not assumed to define 'liberty' with any great precision, that term is not confined to mere freedom from bodily restraint. Liberty under law extends to the full range of conduct which the individual is free to pursue, and it cannot be restricted except for a proper governmental objective. Segregation in public education is not reasonably related to any proper governmental objective and thus it imposes on Negro children of the District of Columbia a burden that constitutes an arbitrary deprivation of their liberty in violation of the Due Process Clause."

"In view of our decision that the Constitution prohibits the states from maintaining racially segregated public schools, it would be unthinkable that the same Constitution would impose a lesser duty on the Federal Government."

"Equal protection analysis in the Fifth Amendment area, is the same as that under the Fourteenth Amendment."461 So saying, the court has applied much of its Fourteenth Amendment jurisprudence to strike down sex classifications in federal legislation,462 reached classifications with an adverse impact upon illegitimates,463 and invalidated some welfare assistance provisions with some interesting exceptions.464 However, almost all legislation involves some degree of classification among particular categories of persons, things, or events, and, just as the equal protection clause itself does not outlaw "reasonable" classifications, neither is the due process clause any more intolerant of the great variety of social and economic legislation typically containing what must be arbitrary line-drawing.465 Thus, for example, the Court has sustained a law imposing greater punishment for an offense involving rights of property of the United States than for a like offense involving the rights of property of a private person.466 A veterans' law which extended certain educational benefits to all veterans who had served "on active duty" and thereby excluded conscientious objectors from eligibility was held to be sustainable, it being rational for Congress to have determined that the disruption caused by military service was qualitatively and quantitatively different from that caused by alternative service, and for Congress to have so provided to make military service more attractive.467

461 Buckley v. Valeo, 424 U.S. 1, 93 (1976); Weinberger v. Wiesenfeld, 420 U.S. 636, 638 n.2 (1975); Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 214-18 (1995).

462 Frontiero v. Richardson, 411 U.S. 677 (1973); Califano v. Goldfarb, 430 U.S. 199 (1977). But see Rostker v. Goldberg, 453 U.S. 57 (1981); Califano v. Jobst, 434 U.S. 47 (1977).

463 Compare Jiminez v. Weinberger, 417 U.S. 628 (1974) with Mathews v. Lucas, 427 U.S. 495 (1976).

464 Department of Agriculture v. Murry, 413 U.S. 508 (1973). See also Department of Agriculture v. Moreno, 413 U.S. 528 (1973).

465 Richardson v. Belcher, 404 U.S. 78, 81 (1971); FCC v. Beach Communications, 508 U.S. 307 (1993) (exemption from cable TV regulation of facilities that serve only dwelling units under common ownership); Lyng v. Castillo, 477 U.S. 635 (1986) (Food Stamp Act limitation of benefits to households of related persons who prepare meals together). With respect to courts and criminal legislation, see Hurtado v. United States, 410 U.S. 578 (1973); Marshall v. United States, 414 U.S. 417 (1974); United States v. MacCollom, 426 U.S. 317 (1976).

466 Hill v. United States ex rel. Weiner, 300 U.S. 105, 109 (1937). See also District of Columbia v. Brooke, 214 U.S. 138 (1909); Panama R.R. v. Johnson, 264 U.S. 375 (1924); Detroit Bank v. United States, 317 U.S. 329 (1943).

467 Johnson v. Robison, 415 U.S. 361 (1974). See also Schlesinger v. Ballard, 419 U.S. 498 (1975) (military law that classified men more adversely than women deemed rational because it had the effect of compensating for prior discrimination against women). Wayte v. United States, 470 U.S. 598 (1985) (selective prosecution of persons who turned themselves in or were reported by others as having failed to register for the draft does not deny equal protection, there being no showing that these men were selected for prosecution because of their protest activities).

"The federal sovereign, like the States, must govern impartially… [B]ut . . . there may be overriding national interests which justify selective federal legislation that would be unacceptable for an individual State."468 The paramount federal power over immigration and naturalization is the principal example, although there are undoubtedly others, of the national government being able to classify upon some grounds—alienage, naturally, but also other suspect and quasi-suspect categories as well—that would result in invalidation were a state to enact them. The instances may be relatively few, but they do exist.

Congressional Police Measures.—Numerous regulations of a police nature, imposed under powers specifically granted to the Federal Government, have been sustained over objections based on the due process clause. Congress may require the owner of a vessel entering United States ports, and on which alien seamen are afflicted with specified diseases, to bear the expense of hospitalizing such persons.469 It may prohibit the transportation in interstate commerce of filled milk470 or the importation of convict-made goods into any State where their receipt, possession, or sale is a violation of local law.471 It may require employers to bargain collectively with representatives of their employees chosen in a manner prescribed by law, to reinstate employees discharged in violation of law, and to permit use of a company-owned hall for union meetings.472 Subject to First Amendment considerations, Congress may regulate the postal service to deny its facilities to persons who would use them for purposes contrary to public policy.473

468 Hampton v. Mow Sun Wong, 426 U.S. 88, 100 (1976). Thus, the power over immigration and aliens permitted federal discrimination on the basis of alienage, Hampton, supra (employment restrictions like those previously voided when imposed by States), durational residency, Mathews v. Diaz, 426 U.S. 67 (1976) (similar rules imposed by States previously voided), and illegitimacy, Fiallo v. Bell, 430 U.S. 787 (1977) (similar rules by States would be voided). Racial preferences and discriminations in immigration have had a long history, e.g., The Chinese Exclusion Cases, 130 U.S. 581 (1889), and the power continues today, e.g., Dunn v. INS, 499 F.2d 856, 858 (9th Cir.), cert. denied, 419 U.S. 1106 (1975); Narenji v. Civiletti, 617 F.2d 745, 748 (D.C. Cir. 1979), cert. denied, 446 U.S. 957 (1980), although Congress has removed most such classifications from the statute books.

469 United States v. New York S.S. Co., 269 U.S. 304 (1925).

470 United States v. Carolene Products Co., 304 U.S. 144 (1938); Carolene Products Co. v. United States, 323 U.S. 18 (1944).

471 Kentucky Whip & Collar Co. v. Illinois Cent. R.R., 299 U.S. 334 (1937).

472 E.g., Virginian Ry. v. System Federation No. 40, 300 U.S. 515 (1937); NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937); Railway Employees' Dep't v. Hanson, 351 U.S. 225 (1956); NLRB v. Stowe Spinning Co., 336 U.S. 226 (1949); NLRB v. Mackay Radio & Tel. Co., 304 U.S. 333 (1938).

473 Ex parte Jackson, 96 U.S. 727 (1878); Rowan v. Post Office Dep't, 397 U.S. 728 (1970).

Congressional Regulation of Public Utilities.—Inasmuch as Congress, in giving federal agencies jurisdiction over various public utilities, usually has prescribed standards substantially identical with those by which the Supreme Court has tested the validity of state action, the review of agency orders seldom has turned on constitutional issues. In two cases, however, maximum rates prescribed by the Secretary of Agriculture for stockyard companies were sustained only after detailed consideration of numerous items excluded from the rate base or from operating expenses, apparently on the assumption that error with respect to any such item would render the rates confiscatory and void.474 A few years later, in FPC v. Hope Gas Co.,475 the Court adopted an entirely different approach. It took the position that the validity of the Commission's order depended upon whether the impact or total effect of the order is just and reasonable, rather than upon the method of computing the rate base. Rates which enable a company to operate successfully, to maintain its financial integrity, to attract capital, and to compensate its investors for the risks assumed cannot be condemned as unjust and unreasonable even though they might produce only a meager return in a rate base computed by the "present fair value" method.

Orders prescribing the form and contents of accounts kept by public utility companies,476 and statutes requiring a private carrier to furnish the Interstate Commerce Commission with information for valuing its property477 have been sustained against the objection that they were arbitrary and invalid. An order of the Secretary of Commerce directed to a single common carrier by water requiring it to file a summary of its books and records pertaining to its rates was also held not to violate the Fifth Amendment.478

474 St. Joseph Stock Yards Co. v. United States, 298 U.S. 38 (1936); Denver Union Stock Yards Co. v. United States, 304 U.S. 470 (1938).

475 320 U.S. 591 (1944). The result of this case had been foreshadowed by the opinion of Justice Stone in FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 586 (1942), to the effect that the Commission was not bound to the use of any single formula or combination of formulas in determining rates.

476 A. T. & T. Co. v. United States, 299 U.S. 232 (1936); United States v. New York Tel. Co., 326 U.S. 638 (1946); Northwestern Co. v. FPC, 321 U.S. 119 (1944).

477 Valvoline Oil Co. v. United States, 308 U.S. 141 (1939); Champlin Rfg. Co. v. United States, 329 U.S. 29 (1946).

478 Isbrandtsen-Moller Co. v. United States, 300 U.S. 146 (1937).

Congressional Regulation of Railroads.—Legislation or administrative orders pertaining to railroads have been challenged repeatedly under the due process clause but seldom with success. Orders of the Interstate Commerce Commission establishing through routes and joint rates have been sustained,479 as has its division of joint rates to give a weaker group of carriers a greater share of such rates where the proportion allotted to the stronger group was adequate to avoid confiscation.480 The recapture of one half of the earnings of railroads in excess of a fair net operating income, such recaptured earnings to be available as a revolving fund for loans to weaker roads, was held valid on the ground that any carrier earning an excess held it as trustee.481 An order enjoining certain steam railroads from discriminating against an electric railroad by denying it reciprocal switching privileges did not violate the Fifth Amendment even through its practical effect was to admit the electric road to a part of the business being adequately handled by the steam roads.482 Similarly, the fact that a rule concerning the allotment of coal cars operated to restrict the use of private cars did not amount to a taking of property.483 Railroad companies were not denied due process of law by a statute forbidding them to transport in interstate commerce commodities which have been manufactured, mined or produced by them.484 An order approving a lease of one railroad by another, upon condition that displaced employees of the lessor should receive partial compensation for the loss suffered by reason of the lease485 is consonant with due process of law. A law prohibiting the issuance of free passes was held constitutional even as applied to abolish rights created by a prior agreement whereby the carrier bound itself to issue such passes annually for life, in settlement of a claim for personal injuries.486 A non-arbitrary Interstate Commerce Commission order establishing a non-compensatory rate for carriage of certain commodities does not violate the due process or just compensation clauses as long as the public interest thereby is served and the rates as a whole yield just compensation.487

479 St. Louis S.W. Ry. v. United States, 245 U.S. 136, 143 (1917).

480 New England Divisions Case, 261 U.S. 184 (1923).

481 Dayton-Goose Creek Ry. v. United States, 263 U.S. 456, 481, 483 (1924).

482 Chicago, I. & L. Ry. v. United States, 270 U.S. 287 (1926). Cf. Seaboard Air Line Ry. v. United States, 254 U.S. 57 (1920).

483 Assigned Car Cases, 274 U.S. 564, 575 (1927).

484 United States v. Delaware & Hudson Co., 213 U.S. 366, 405, 411, 415 (1909).

485 United States v. Lowden, 308 U.S. 225 (1939).

486 Louisville & Nashville R.R. v. Mottley, 219 U.S. 467 (1911).

487 Baltimore & Ohio R.R. v. United States, 345 U.S. 146 (1953).

Occasionally, however, regulatory action has been held invalid under the due process clause. An order issued by the Interstate Commerce Commission relieving short line railroads from the obligation to pay the usual fixed sum per day rental for cars used on foreign roads for a space of two days was held to be arbitrary and invalid.488 A retirement act which made eligible for pensions all persons who had been in the service of any railroad within one year prior to the adoption of the law, counted past unconnected service of an employee toward the requirement for a pension without any contribution therefor, and treated all carriers as a single employer and pooled their assets, without regard to their individual obligations, was held unconstitutional.489

Taxation.—In laying taxes, the Federal Government is less narrowly restricted by the Fifth Amendment than are the States by the Fourteenth. The Federal Government may tax property belonging to its citizens, even if such property is never situated within the jurisdiction of the United States,490 and it may tax the income of a citizen resident abroad, which is derived from property located at his residence.491 The difference is explained by the fact that protection of the Federal Government follows the citizen wherever he goes, whereas the benefits of state government accrue only to persons and property within the State's borders. The Supreme Court has said that, in the absence of an equal protection clause, "a claim of unreasonable classification or inequality in the incidence or application of a tax raises no question under the Fifth Amendment…"492 It has sustained, over charges of unfair differentiation between persons, a graduated income tax,493 a higher tax on oleomargarine than on butter,494 an excise tax on "puts" but not on "call,"495 a tax on the income of business operated by corporations but not on similar enterprises carried on by individuals,496 an income tax on foreign corporations, based on their income from sources within the United States, while domestic corporations are taxed on income from all sources,497 a tax on foreign-built but not upon domestic yachts,498 a tax on employers of eight or more persons, with exemptions for agricultural labor and domestic service,499 a gift tax law embodying a plan of graduations and exemptions under which donors of the same amount might be liable for different sums,500 an Alaska statute imposing license taxes only on nonresident fisherman,501 an act which taxed the manufacture of oil and fertilizer from herring at a higher rate than similar processing of other fish or fish offal,502 an excess profits tax which defined "invested capital" with reference to the original cost of the property rather than to its present value,503 an undistributed profits tax in the computation of which special credits were allowed to certain taxpayers,504 an estate tax upon the estate of a deceased spouse in respect of the moiety of the surviving spouse where the effect of the dissolution of the community is to enhance the value of the survivor's moiety,505 and a tax on nonprofit mutual insurers although such insurers organized before a certain date were exempt inasmuch as a continuing exemption for all insurers would have led to their multiplication to the detriment of other federal programs.506

488 Chicago, R.I. & P. Ry. v. United States, 284 U.S. 80 (1931).

489 Railroad Retirement Bd. v. Alton R.R., 295 U.S. 330 (1935). But cf. Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 19 (1976).

490 United States v. Bennett, 232 U.S. 299, 307 (1914).

491 Cook v. Tait, 265 U.S. 47 (1924).

492 Helvering v. Lerner Stores Co., 314 U.S. 463, 468 (1941). But see discussion of "Discrimination" supra.

493 Brushaber v. Union Pac. R.R., 240 U.S. 1, 24 (1916).

494 McCray v. United States, 195 U.S. 27, 61 (1904).

495 Treat v. White, 181 U.S. 264 (1901).

496 Flint v. Stone Tracy Co., 220 U.S. 107 (1911).

Retroactive Taxes.—It has been customary from the beginning for Congress to give some retroactive effect to its tax laws, usually making them effective from the beginning of the tax year or from the date of introduction of the bill that became the law.507 Application of an income tax statute to the entire calendar year in which enactment took place has never, barring some peculiar circumstance, been deemed to deny due process.508 "Taxation is neither a penalty imposed on the taxpayer nor a liability which he assumes by contract. It is but a way of apportioning the cost of government among those who in some measure are privileged to enjoy its benefits and must bear its burdens. Since no citizen enjoys immunity from that burden, its retroactive imposition does not necessarily infringe due process, and to challenge the present tax it is not enough to point out that the taxable event, the receipt of income, antedated the statute."509 A special income tax on profits realized by the sale of silver, retroactive for 35 days, which was approximately the period during which the silver purchase bill was before Congress, was held valid.510 An income tax law, made retroactive to the beginning of the calendar year in which it was adopted, was found constitutional as applied to the gain from the sale, shortly before its enactment, of property received as a gift during the year.511 Retroactive assessment of penalties for fraud or negligence,512 or of an additional tax on the income of a corporation used to avoid a surtax on its shareholder,513 does not deprive the taxpayer of property without due process of law.

497 National Paper Co. v. Bowers, 266 U.S. 373 (1924).

498 Billings v. United States, 232 U.S. 261, 282 (1914).

499 Steward Machine Co. v. Davis, 301 U.S. 548 (1937); Helvering v. Davis, 301 U.S. 619 (1937).

500 Bromley v. McCaughn, 280 U.S. 124 (1929).

501 Haavik v. Alaska Packers' Ass'n, 263 U.S. 510 (1924).

502 Alaska Fish Co. v. Smith, 255 U.S. 44 (1921).

503 LaBelle Iron Works v. United States, 256 U.S. 377 (1921).

504 Helvering v. Northwest Steel Mills, 311 U.S. 46 (1940).

505 Fernandez v. Wiener, 326 U.S. 340 (1945); cf. Coolidge v. Long, 282 U.S. 582 (1931).

506 United States v. Maryland Savings-Share Ins. Corp., 400 U.S. 4 (1970).

507 United States v. Darusmont, 449 U.S. 292, 296-97 (1981).

508 Stockdale v. Insurance Companies, 87 U.S. (20 Wall.) 323, 331, 332 (1874); Brushaber v. Union Pac. R.R., 240 U.S. 1, 20 (1916); Cooper v. United States, 280 U.S. 409, 411 (1930); Milliken v. United States, 283 U.S. 15, 21 (1931); Reinecke v. Smith, 289 U.S. 172, 175 (1933); United States v. Hudson, 299 U.S. 498, 500- 01 (1937); Welch v. Henry, 305 U.S. 134, 146, 148-50 (1938); Fernandez v. Wiener, 326 U.S. 340, 355 (1945); United States v. Darusmont, 449 U.S. 292, 297 (1981).

An additional excise tax imposed upon property still held for sale, after one excise tax had been paid by a previous owner, does not violate the due process clause.514 Similarly upheld were a transfer tax measured in part by the value of property held jointly by a husband and wife, including that which comes to the joint tenancy as a gift from the decedent spouse515 and the inclusion in the gross income of the settlor of income accruing to a revocable trust during any period when the settlor had power to revoke or modify it.516

Although the Court during the 1920s struck down gift taxes imposed retroactively upon gifts that were made and completely vested before the enactment of the taxing statute,517 those decisions have recently been distinguished, and their precedential value limited.518 In United States v. Carlton, the Court declared that "[t]he due process standard to be applied to tax statutes with retroactive effect . . . is the same as that generally applicable to retroactive economic legislation"- retroactive application of legislation must be shown to be "'justified by a rational legislative purpose."'519 Applying that principle, the Court upheld retroactive application of a 1987 amendment limiting application of a federal estate tax deduction originally enacted in 1986. Congress' purpose was "neither illegitimate nor arbitrary," the Court noted, since Congress had acted "to correct what it reasonably viewed as a mistake in the original 1986 provision that would have created a significant and unanticipated revenue loss." Also, "Congress acted promptly and established only a modest period of retroactivity." The fact that the taxpayer had transferred stock in reliance on the original enactment was not dispositive, since "[t]ax legislation is not a promise, and a taxpayer has no vested right in the Internal Revenue Code."520

509 Welch v. Henry, 305 U.S. 134, 146-47 (1938).

510 United States v. Hudson, 299 U.S. 498 (1937). See also Stockdale v. Insurance Companies, 87 U.S. (20 Wall.) 323, 331, 341 (1874); Brushaber v. Union Pac. R.R., 240 U.S. 1, 20 (1916); Lynch v. Hornby, 247 U.S. 339, 343 (1918).

511 Cooper v. United States, 280 U.S. 409 (1930); see also Reinecke v. Smith, 289 U.S. 172 (1933).

512 Helvering v. Mitchell, 303 U.S. 391 (1938).

513 Helvering v. National Grocery Co., 304 U.S. 282 (1938).

514 Patton v. Brady, 184 U.S. 608 (1902).

515 Tyler v. United States, 281 U.S. 497 (1930); United States v. Jacobs, 306 U.S. 363 (1939).

516 Reinecke v. Smith, 289 U.S. 172 (1933).

517 Untermyer v. Anderson, 276 U.S. 440 (1928); Blodgett v. Holden, 275 U.S. 142 (1927), modified, 276 U.S. 594 (1928); Nichols v. Coolidge, 274 U.S. 531 (1927). See also Heiner v. Donnan, 285 U.S. 312 (1932) (invalidating as arbitrary and capricious a conclusive presumption that gifts made within two years of death were made in contemplation of death).

Deprivation of Property: Retroactive Legislation.—Federal regulation of future action, based upon rights previously acquired by the person regulated, is not prohibited by the Constitution. So long as the Constitution authorizes the subsequently enacted legislation, the fact that its provisions limit or interfere with previously acquired rights does not ordinarily condemn it. The imposition upon coal mine operators, and ultimately coal consumers, of the liability of compensating former employees, who had terminated work in the industry before passage of the law, for black lung disabilities contracted in the course of their work, was sustained by the Court as a rational measure to spread the costs of the employees' disabilities to those who had profited from the fruits of their labor.521 Legislation readjusting rights and burdens is not unlawful solely because it upsets otherwise settled expectations, but it must take account of the realities previously existing, i.e., that the danger may not have been known or appreciated, or that actions might have been taken in reliance upon the current state of the law; therefore, legislation imposing liability on the basis of deterrence or of blameworthiness might not have passed muster. The Court has applied Turner Elkhorn in upholding retroactive application of pension plan termination provisions to cover the period of congressional consideration, declaring that the test for retroactive application of legislation adjusting economic burdens is merely whether "the retroactive application . . . is itself justified by a rational legislative purpose."522

518 Untermyer was distinguished in United States v. Hemme, 476 U.S. 558, 568 (1986), upholding retroactive application of unified estate and gift taxation to a taxpayer as to whom the overall impact was minimal and not oppressive. All three cases were distinguished in United States v. Carlton, 512 U.S. 26, 30 (1994), as having been "decided during an era characterized by exacting review of economic legislation under an approach that 'has long since been discarded."' The Court noted further that Untermyer and Blodgett had been limited to situations involving creation of a wholly new tax, and that Nichols had involved a retroactivity period of 12 years. Id.

519 512 U.S. 26, 30 (1994) (quoting Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 16-17 (1976)). These principles apply to estate and gift taxes as well as to income taxes, the Court added. 512 U.S. at 34.

520 512 U.S. at 33.

521 Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 14-20 (1976). But see id. at 38 (Justice Powell concurring) (questioning application of retroactive cost-spreading).

Rent regulations were sustained as applied to prevent execution of a judgment of eviction rendered by a state court before the enabling legislation was passed.523 For the reason that "those who do business in the regulated field cannot object if the legislative scheme is buttressed by subsequent amendments to achieve the legislative end," no vested right to use housing, built with the aid of FHA mortgage insurance for transient purposes, was acquired by one obtaining insurance under an earlier section of the National Housing Act, which, though silent in this regard, was contemporaneously construed as barring rental to transients, and was later modified by an amendment which expressly excluded such use.524 An order by an Area Rent Director reducing an unapproved rental and requiring the landlord to refund the excess previously collected, was held, with one dissenting vote, not to be the type of retroactivity which is condemned by law.525 The application of a statute providing for tobacco marketing quotas, to a crop planted prior to its enactment, was held not to deprive the producers of property without due process of law since it operated, not upon production, but upon the marketing of the product after the act was passed.526

522 Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 730 (1984). Accord, United States v. Sperry Corp., 493 U.S. 52, 65 (1989) (upholding imposition of user fee on claimants paid by Iran-United States Claims Tribunal prior to enactment of fee statute). Concrete Pipe & Products v. Construction Laborers Pension Trust, 508 U.S. 602, 636-41 (1993) (imposition of multiemployer pension plan withdrawal liability on an employer is not irrational, even though none of its employees had earned vested benefits by the time of withdrawal). In Eastern Enterprises v. Apfel, 524 U.S. 498 (1998), the challenge was to a statutory requirement that companies formerly engaged in mining pay miner retiree health benefits, as applied to a company that had placed its mining operations in a wholly owned subsidiary three decades earlier, before labor agreements included an express promise of lifetime benefits. In a fractured opinion, the justices ruled 5-4 that the scheme's severe retroactive effect offended the Constitution, though differing on the governing clause. Four of the majority justices based the judgment solely on takings law, while opining that "there is a question" whether the statute violated due process as well. The remaining majority justice, and the four dissenters, viewed substantive due process as the sole appropriate framework for resolving the case, but disagreed on whether a violation had occurred.

523 Fleming v. Rhodes, 331 U.S. 100, 107 (1947).

524 FHA v. The Darlington, Inc., 358 U.S. 84, 89-91, 92-93 (1958). Dissenting, Justices Harlan, Frankfurter, and Whittaker maintained that under the due process clause the United States, in its contractual relations, is bound by the same rules as private individuals unless the action taken falls within the general federal regulatory power.

525 Woods v. Stone, 333 U.S. 472 (1948).

526 Mulford v. Smith, 307 U.S. 38 (1939). An increase in the penalty for production of wheat in excess of quota was valid as applied retroactively to wheat already planted, where Congress concurrently authorized a substantial increase in the amount of the loan that might be made to cooperating farmers upon stored "farm marketing excess wheat." Wickard v. Filburn, 317 U.S. 111 (1942).

In the exercise of its comprehensive powers over revenue, finance, and currency, Congress may make Treasury notes legal tender in payment of debts previously contracted527 and may invalidate provisions in private contracts calling for payment in gold coin,528 but rights against the United States arising out of contract are more strongly protected by the due process clause. Hence, a law purporting to abrogate a clause in government bonds calling for payment in gold coin was invalid,529 and a statute abrogating contracts of war risk insurance was held unconstitutional as applied to outstanding policies.530

The due process clause has been successfully invoked to defeat retroactive invasion or destruction of property rights in a few cases. A revocation by the Secretary of the Interior of previous approval of plats and papers showing that a railroad was entitled to land under a grant was held void as an attempt to deprive the company of its property without due process of law.531 The exception of the period of federal control from the time limit set by law upon claims against carriers for damages caused by misrouting of goods, was read as prospective only because the limitation was an integral part of the liability, not merely a matter of remedy, and would violate the Fifth Amendment if retroactive.532

527 Legal Tender Cases (Knox v. Lee ), 79 U.S. (12 Wall.) 457, 551 (1871).

528 Norman v. Baltimore & Ohio R.R., 294 U.S. 240 (1935).

529 Perry v. United States, 294 U.S. 330 (1935).

530 Lynch v. United States, 292 U.S. 571 (1934). See also De La Rama S.S. Co. v. United States, 344 U.S. 386 (1953). Notice that these kinds of cases are precisely the ones that would be condemned under the contract clause, even under the relaxed scrutiny now employed, if the action were taken by a State. E.g., United States Trust Co. v. New Jersey, 431 U.S. 1 (1977). "Less searching standards" are imposed by the Due Process Clauses than by the Contract Clause. Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 733 (1984). Also, statutory reservation of the right to amend an agreement can defuse most such constitutional issues. Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41 (1986) (amendment of Social Security Act to prevent termination by state when termination notice already filed). The Court has addressed similar issues under breach of contract theory. United States v. Winstar Corp., 518 U.S. 839 (1996).

531 Noble v. Union River Logging R.R., 147 U.S. 165 (1893).

532 Danzer Co. v. Gulf R.R., 268 U.S. 633 (1925).

Bankruptcy Legislation.—In acting pursuant to its power to enact uniform bankruptcy legislation, Congress has regularly authorized retrospective impairment of contractual obligations,533 but the due process clause (by itself or infused with takings principles) constitutes a limitation upon Congress' power to deprive persons of more secure forms of property, such as the rights secured creditors have to obtain repayment of a debt. The Court had long followed a rule of construction favoring prospective-only application of bankruptcy laws, absent a clear showing of congressional intent,534 but it was not until 1935 that the Court actually held unconstitutional a retrospective law. Struck down by the Court was the Frazier-Lemke Act, which by its terms applied only retrospectively, and which authorized a court to stay proceedings for the foreclosure of a mortgage for five years, the debtor to remain in possession at a reasonable rental, with the option of purchasing the property at its appraised value at the end of the stay. The Act offended the Fifth Amendment, the Court held, because it deprived the creditor of substantial property rights acquired prior to the passage of the act.535 However, a modified law, under which the stay was subject to termination by the court and which continued the right of the creditor to have the property sold to pay the debt, was sustained.536

Without violation of the due process clause, the sale of collateral under the terms of a contract may be enjoined, if such sale would hinder the preparation or consummation of a proposed railroad reorganization, provided the injunction does no more than delay the enforcement of the contract.537 A provision that claims resulting from rejection of an unexpired lease should be treated as on a parity with provable debts, but limited to an amount equal to three years rent, was held not to amount to a taking of property without due process of law, since it provided a new and more certain remedy for a limited amount, in lieu of an existing remedy inefficient and uncertain in result.538 A right of redemption allowed by state law upon foreclosure of a mortgage was unavailing to defeat a plan for reorganization of a debtor corporation where the trial court found that the claims of junior lienholders had no value.539

533 E.g., Hanover National Bank v. Moyses, 186 U.S. 181, 188 (1902); Continental Illinois Nat'l Bank & Trust Co. v. Chicago, R.I. & P. Ry., 294 U.S. 648, 673- 75 (1935).

534 Holt v. Henley, 232 U.S. 637, 639-40 (1914). See also Auffm'ordt v. Rasin, 102 U.S. 620, 622 (1881).

535 Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555 (1935).

536 Wright v. Vinton Branch, 300 U.S. 440 (1937). The relatively small modifications that the Court accepted as making the difference in validity, and the fact that subsequently the Court interpreted the statute so as to make smaller the modifications, John Hancock Mut. Life Ins. Co. v. Bartels, 308 U.S. 180, 184 & n.3 (1939); Wright v. Union Central Ins. Co., 311 U.S. 273, 278-79 (1940), has created differences of opinion with respect to whether Radford remains sound law. Cf. Helvering v. Griffiths, 318 U.S. 371, 400-01 & n.52 (1943) (suggesting Radford might not have survived Vinton Branch).

537 Continental Illinois Nat'l Bank & Trust Co. v. Chicago, R.I. & P. Ry., 294 U.S. 648 (1935).

538 Kuchner v. Irving Trust Co., 299 U.S. 445 (1937).

539 In re 620 Church Street Corp., 299 U.S. 24 (1936). In the context of Congress' plan to save major railroad systems, see Regional Rail Reorganization Act Cases, 419 U.S. 102 (1974).

Right to Sue the Government.—A right to sue the Government on a contract is a privilege, not a property right protected by the Constitution.540 The right to sue for recovery of taxes paid may be conditioned upon an appeal to the Commissioner and his refusal to refund.541 There was no denial of due process when Congress took away the right to sue for recovery of taxes, where the claim for recovery was without substantial equity, having arisen from the mistake of administrative officials in allowing the statute of limitations to run before collecting a tax.542 The denial to taxpayers of the right to sue for refund of processing and floor stock taxes collected under a law subsequently held unconstitutional, and the substitution of a new administrative procedure for the recovery of such sums, was held valid.543 Congress may cut off the right to recover taxes illegally collected by ratifying the imposition and collection thereof, where it could lawfully have authorized such exactions prior to their collection.544

Congressional Power to Abolish Common Law Judicial Actions.—Similarly, it is clearly settled that "[a] person has no property, no vested interest, in any rule of the common law."545 It follows, therefore, that Congress in its discretion may abolish common law actions, replacing them with other judicial actions or with administrative remedies at its discretion. There is slight intimation in some of the cases that if Congress does abolish a common law action it must either duplicate the recovery or provide a reasonable substitute remedy.546 Such a holding seems only remotely likely,547 but some difficulties may be experienced with respect to legislation that retrospectively affects rights to sue, such as shortening or lengthening statutes of limitation, and the like, although these have typically risen in state contexts. In one interesting decision, the Court did sustain an award of additional compensation under the Longshoremen's and Harbor Workers' Compensation Act, made pursuant to a private act of Congress passed after expiration of the period for review of the original award, directing the Commission to review the case and issue a new order, the challenge being made by the employer and insurer.548

540 Lynch v. United States, 292 U.S. 571, 581 (1934).

541 Dodge v. Osborn, 240 U.S. 118 (1916).

542 Graham & Foster v. Goodcell, 282 U.S. 409 (1931).

543 Anniston Mfg. Co. v. Davis, 301 U.S. 337 (1937).

544 United States v. Heinszen & Co., 206 U.S. 370, 386 (1907).

545 Second Employers' Liability Cases, 223 U.S. 1, 50 (1912). See also Silver v. Silver, 280 U.S. 117, 122 (1929) (a state case).

Deprivation of Liberty: Economic Legislation.—The proscription of deprivation of liberty without due process, insofar as substantive due process was involved, was long restricted to invocation against legislation deemed to abridge liberty of contract.549

The two leading cases invalidating federal legislation, however, have both been overruled, as the Court adopted a very restrained standard of review of economic legislation.550 The Court's "hands-off" policy with regard to reviewing economic legislation is quite pronounced.551

546 The intimation stems from New York Central R.R. v. White, 243 U.S. 188 (1917) (a state case, involving the constitutionality of a workmen's compensation law). While denying any person's vested interest in the continuation of any particular right to sue, id. at 198, the Court did seem twice to suggest that abolition without a reasonable substitute would raise due process problems. Id. at 201. In Duke Power Co. v. Carolina Envtl. Study Group, 438 U.S. 59, 87-92 (1978), it noticed the contention but passed it by because the law at issue was a reasonable substitute.

547 It is more likely with respect to congressional provision of a statutory substitute for a cause of action arising directly out of a constitutional guarantee. E.g., Carlson v. Green, 446 U.S. 14, 18-23 (1980).

548 Paramino Co. v. Marshall, 309 U.S. 370 (1940).

549 See "Liberty of Contract" heading under Fourteenth Amendment, infra.

550 Adair v. United States, 208 U.S. 161 (1908), overruled in substance by Phelps Dodge Corp. v. NLRB, 313 U.S. 177 (1941); Adkins v. Children's Hospital, 261 U.S. 525 (1923), overruled by West Coast Hotel Co. v. Parrish, 300 U.S. 379 (1937).

551 E.g., United States Railroad Retirement Board v. Fritz, 449 U.S. 166 (1981); Schweiker v. Wilson, 450 U.S. 221 (1981).

Pages: 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22