Ferguson v. Skrupa
372 U.S. 726 (1963)
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Rule of Law:
The Due Process Clause of the Fourteenth Amendment does not authorize courts to invalidate state economic regulations on the grounds that they are unwise or improvident. State legislatures have broad power to legislate against business practices they find to be injurious to the public welfare, and courts will not sit as a 'superlegislature' to weigh the wisdom of such legislation.
Facts:
- Skrupa, doing business as 'Credit Advisors', was engaged in the business of 'debt adjusting' in Kansas.
- Skrupa's business consisted of making contracts with debtors whereby they would pay him a certain amount of money periodically.
- In exchange for a fee, Skrupa would then distribute this money among the debtor's specified creditors according to an agreed-upon plan.
- The State of Kansas enacted a statute making it a misdemeanor for any person to engage in the business of debt adjusting.
- The Kansas statute created an exception, allowing debt adjusting to be performed as an incident to the lawful practice of law.
- Skrupa was not a lawyer and was therefore prohibited by the statute from operating his business.
Procedural Posture:
- Skrupa filed a complaint in a three-judge U.S. District Court for the District of Kansas against state officials, seeking to enjoin the enforcement of the Kansas debt adjusting statute.
- Skrupa alleged that the statute violated the Due Process Clause of the Fourteenth Amendment.
- The District Court heard evidence from both parties regarding the utility and potential abuses of the debt adjusting business.
- The District Court, with one judge dissenting, held that the Kansas statute was an unreasonable regulation of a lawful business that violated the Due Process Clause, and it enjoined the state from enforcing the law.
- The state officials (appellants) filed a direct appeal of the District Court's judgment to the Supreme Court of the United States.
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Issue:
Does a state statute that prohibits the business of 'debt adjusting' for a fee, except as an incident to the lawful practice of law, violate the Due Process or Equal Protection Clauses of the Fourteenth Amendment?
Opinions:
Majority - Mr. Justice Black
No. The Kansas statute does not violate the Fourteenth Amendment. The doctrine that the Due Process Clause authorizes courts to hold laws unconstitutional when they believe the legislature has acted unwisely has long been discarded. The Court has returned to the proposition that courts do not substitute their social and economic beliefs for the judgment of legislative bodies. States have the power to legislate against injurious practices in their commercial affairs, and it is up to the legislature, not the courts, to decide on the wisdom and utility of such legislation. The Equal Protection Clause is not violated by the exception for lawyers because the state could rationally conclude that debt adjusting requires legal advice that nonlawyers cannot provide, and this classification is not an 'invidious discrimination'.
Concurring - Mr. Justice Harlan
No. Concurring in the judgment, the state statute is constitutional because the measure bears a rational relation to a constitutionally permissible objective. The proper standard of review is the rational basis test articulated in cases like Williamson v. Lee Optical Co.
Analysis:
This case effectively serves as the final repudiation of the Lochner v. New York era of economic substantive due process. It solidifies the Court's post-New Deal shift toward extreme deference to legislative judgments in the field of economic regulation. By explicitly stating its refusal to act as a 'superlegislature,' the Court cemented the rational basis test as the controlling standard for evaluating economic laws under the Due Process and Equal Protection Clauses. This decision makes it nearly impossible to challenge an economic regulation on the grounds that it is an 'unreasonable' or 'arbitrary' interference with the liberty to contract.
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