Nebbia v. New York
291 U.S. 502 (1934)
Rule of Law:
A state may adopt and enforce economic policies, including price controls, that are reasonably deemed to promote public welfare, so long as the policy is not arbitrary, discriminatory, or demonstrably irrelevant to the legislative purpose.
Facts:
- During the Great Depression of the 1930s, milk prices received by New York farmers fell below the cost of production.
- A New York legislative committee investigated the state's dairy industry and found that destructive competition and unfair trade practices were destabilizing the market.
- The committee concluded that this instability threatened both the economic well-being of dairy farmers and the future supply of milk for consumers.
- In response, the New York Legislature enacted a law in 1933 creating a Milk Control Board with the authority to fix minimum and maximum retail prices for milk.
- The Milk Control Board subsequently issued an order setting the minimum price for a quart of milk sold by a store at nine cents.
- Leo Nebbia, a grocery store proprietor in Rochester, New York, sold two quarts of milk along with a five-cent loaf of bread for a total price of eighteen cents.
- This combined sale effectively priced the milk below the nine-cent minimum mandated by the Board's order.
Procedural Posture:
- Leo Nebbia was prosecuted and convicted in a New York trial court for violating the Milk Control Board's price order.
- At trial, Nebbia asserted that the statute and order violated the Due Process and Equal Protection Clauses of the Fourteenth Amendment.
- Nebbia appealed his conviction to the county court, which affirmed the trial court's judgment.
- Nebbia then appealed to the New York Court of Appeals, the state's highest court, which also affirmed the conviction.
- The U.S. Supreme Court granted certiorari to review the decision of the New York Court of Appeals.
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Issue:
Does a state statute that fixes minimum retail prices for milk, enacted to combat destructive competition and stabilize a key industry, violate the Due Process Clause of the Fourteenth Amendment?
Opinions:
Majority - Mr. Justice Roberts
No. A state statute fixing minimum retail milk prices does not violate the Due Process Clause of the Fourteenth Amendment where the law is not unreasonable, arbitrary, or capricious, and the means selected have a real and substantial relation to the object sought to be attained. The Court rejected the rigid distinction between businesses 'affected with a public interest' and those that are not, holding that this phrase simply means an industry is subject to regulation for the public good under the state's police power. The New York legislature, after a thorough investigation, reasonably concluded that economic conditions in the milk industry threatened the public welfare. Therefore, fixing prices was a rational legislative response to curb destructive competition and ensure a stable milk supply, and it is not the role of the courts to substitute their economic judgment for that of the legislature.
Dissenting - Mr. Justice McReynolds
Yes. A state statute that fixes retail prices for an ordinary commodity like milk constitutes an arbitrary interference with the fundamental right to liberty of contract protected by the Due Process Clause. The milk industry is a private business, not a public utility or one 'affected with a public interest' in the traditional legal sense that would justify such price-fixing. The law is not a permissible regulation but rather 'management, control, dictation,' which deprives individuals of the right to conduct their affairs and sell their property at a price satisfactory to them. The asserted 'emergency' does not justify suspending constitutional guarantees, and the means employed—forcing higher prices on consumers during a surplus—is an unreasonable and arbitrary method of aiding producers.
Analysis:
This landmark decision marked a significant retreat from the Lochner-era doctrine of economic substantive due process, which had strictly protected freedom of contract from state regulation. By abandoning the narrow 'affected with a public interest' test and adopting a more deferential rational basis standard for economic legislation, the Court broadened the scope of permissible state police power. Nebbia signaled the Court's increasing willingness to uphold New Deal-style economic regulations, paving the way for the eventual demise of judicial invalidation of laws based on economic theory, as solidified in cases like West Coast Hotel v. Parrish.
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