Liberty of Contract
The Issue:  Does the Constitution create a right for individuals to enter into contracts on terms of their own choosing?

Lochner v. New York (1905)
Nebbia v. New York (1934)
Williamson v. Lee Optical (1955) 

With its 1905 decision in the case of Lochner v. New York, the Supreme Court embarked upon one of the most controversial courses in its history.  Over the next three decades, the Court would strike down numerous attempts by state governments to improve working conditions or protect consumers, all under the guise of a liberty found in the Due Process Clause of the Fourteenth Amendment, the "liberty of contract."  The term "substantive due process" is often used to describe the approach first used in Lochner--the finding of liberties not explicitly protected by the text of the Constitution to be impliedly protected by the liberty clause of the Fourteenth Amendment. In the 1960s, long after the Court repudiated its Lochner line of cases, substantive due process became the basis for protecting personal rights such as the right of privacy, the right to maintain intimate family relationships, etc. 

Beginning in the 1930s, the Court backed away from substantive due process in the context of economic regulation in cases such as Nebbia v. New York.  The trend toward increasing deference to state regulation of economic matters continued, until by the time of Williamson v. Lee Optical in 1955, the Court had essentially given up entirely the task of reviewing economic regulation under the Due Process Clause.  Today, the Court will uphold as against a due process challenge any economic regualtion that a legislature might rationally conclude would advance a legitimate interest (the so-called "RATIONAL BASIS TEST"), even if the legislature was most likely motivated by illegitimate reasons (such as simply paying back an industry that contributed substantially to their election campaigns).   

Caskets Anyone?

A shopper in a Chicago Costco reads information
about the retailer's six models of caskets.  (Photo: Nam Y. Huh (AP))
Although challenges to state economic regulation have had little success at the Supreme Court level since Williamson, better luck is sometimes had in the lower federal courts.  For example, in Craigmiles v Giles, 312 F 3rd 220 (2002), the Sixth Circuit struck down a Tennessee law, pushed by that state's funeral directors, that prohibited anyone not having a state funeral director's license from selling caskets to state customers at "the time of need."  The Court saw the law as economic protectionism (designed to limit price competition from national discount chains such as Costco) that failed to meet even the deferential rational basis test.  On the other hand, a nearly  identical Oklahoma law was upheld by the Tenth Circuit in Powers v Harris (8/23/2004).  The Tenth Circuit concluded the law was "rationally related to the legitimate state interest of intrastate industry protection." 



James McReynolds

Willis Van Devanter

Four conservative justices (the so-called "Four Horseman of the Apocalypse") insisted that the Constitution protected the "liberty of contract" and helped to strike down numerous pieces of economic legislation (including minimum wage laws and FDR's "New Deal" programs) in the 1920s and early 1930s.  All four justices dissented in Nebbia v New York (1934), when the tide turned in favor of upholding economic legislation.

The Due Process Clause:
No State shall...deprive any person of life, liberty, or property, without due process of law.

Joseph Lochner
Historical Background of the Lochner Case
In New York in the late 1800s, bakers were paid by the day, not by the hour.  ($2 per day was a typical wage.)  Unsurprisingly, bakers favored shorter work days, as they assumed that they would continue to receive their current pay levels whether they worked 10 hours or they worked 14 hours.  They also believed that long work hours increased their risk of developing various lung diseases.  A bill, supported by bakers, to reduce the workday for bakers to 10 hours was narrowly defeated in the New York Assembly in 1887.  By the mid-1890s, larger bakeries in New York were unionized and generally adopted 60-hour work weeks.  The large bakeries, however, faced competition from smaller bakeries which demanded longer hours from their employees (the employees often were required to sleep in or near the bakeries).  While unionized bakers continued to lobby for a ten-hour law, a muckraking New York Press reporter published stories about unsanitary conditions in smaller bakeries, including accounts of finding open sewers and cockroaches on baking utensils.  A state factory inspector's report confirmed findings of unsanitary conditions and led to growing public support for a law regulating bakeries.  The Bakeshop Act of 1897, approved unanimously but challenged in the Lochner case, included sections regulating sanitary conditions (e.g., no sleeping in a bake room) and a section strongly supported by the baker's union, establishing the 60-hour maximum hour maximum work week for bakers.
Utica bakery owner Joseph Lochner had a longstanding dispute with the baker's union.  Union officials persuaded state factory inspectors to file a complaint against Lochner for employing a baker named Aman Schmitter for more than sixty hours in one week.  At a trial in February 1903, Lochner offered no defense, was found guilty of violating the Bakeshop Act and sentenced to pay a fine of $50.  Lochner appealed, arguing the law was unconstitutional.


1. Would the Lochner Court likely have recognized a constitutional right to contract to sell drugs or sexual services? Why not?  What result if a state had attempted to limit the hours that coal miners could work underground? 
2. Do you find it surprising that three years after Lochner a unanimous Court upheld an Oregon law setting a maximum number of hours that female employees might work?
3. Look closely at Justice Holmes dissent in Lochner.  Why might Judge Richard Posner have characterized the Holmes dissent as "the best Supreme Court opinion ever written"?
4..  What factors might have contributed to the Court's backing away from the Lochner line of cases in the 1930s?
5.  Some have argued that by the time of Williamson the Court had gone too far in the direction of deference to state judgments about economic matters.  Do you agree?  Should the Court insist that the justifications offered in litigation to support economic legislation at least plausibly be the justifications that motivated legislators to enact the law in question?
6.  Is protecting the economic interests of a state industry (such as the interest of funeral directors in having a monopoly on the sale of "time-of-need" caskets) a legitimate state interest?

Oliver Wendell Holmes
The 14th Amendment does not enact Mr. Herbert Spencer's Social Statics.... Some of these laws embody convictions or prejudices which judges are likely to share. Some may not. But a Constitution is not intended to embody a particular economic theory, whether of paternalism and the organic relation of the citizen to the state or of laissez faire.  It is made for people of fundamentally differing views, and the accident of our finding certain opinions natural and familiar, or novel, and even shocking, ought not to conclude our judgment upon the question whether statutes embodying them conflict with the Constitution of the United States.
--From the dissent of Oliver Wendell Holmes in Lochner v New York (1905)

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