Substantive Due Process Rediscovered: the Rise and Fall of Liberty of Contract - David N. Mayer

• Publication year: 2009

Substantive Due Process

Rediscovered: The Rise and Fallof Liberty of Contract by David N. Mayer^*

I. Introduction

Perhaps no aspect of modern American constitutional law is as misunderstood as so-called substantive due process, and no period in American constitutional history is as misunderstood as the early twentieth century, when the united States Supreme court applied the Due Process Clauses of the Constitution substantively to protect a right known as "liberty of contract."¹ For a forty-year period² known as the

"Lochner Era" for its best-known Supreme Court decision,³ the Court declared unconstitutional a variety of state and federal laws that abridged a fundamental right of"liberty of contract" protected under the Due Process Clauses of the Fifth and Fourteenth Amendments.⁴ The Court's protection of liberty of contract during the early twentieth century is frequently described as "economic substantive due process,"⁵ both to emphasize the most famous line of Lochner Era decisions—those protecting economic liberty against labor legislation—and to distinguish the Court's application of substantive due process during that era from its use in the modern, post-New Deal Era.⁶

The Lochner Era also has been called the era of "laissez-faire constitutionalism"⁷ because of a popular misconception of what the Supreme Court justices were doing in Lochner and other major liberty of contract decisions—a misconception that originated with Justice Oliver Wendell Holmes's dissenting opinion in Lochner. Justice Holmes characterized the majority's opinion as having been "decided upon an economic theory which a large part of the country does not entertain"—specifically, the laissez-faire philosophy of "Mr. Herbert Spencer's

Social Statics."⁸ Although Justice Holmes's characterization was erroneous—for the majority opinion based its decision neither explicitly nor implicitly upon laissez-faire ideology, whether that of Spencer or some other theorist—his accusation of judicial activism⁹ struck a responsive chord with scholars and political activists who were part of the early twentieth-century "Progressive" movement.¹⁰ Progressive Era scholars and jurists were not neutral in their analysis of liberty of contract. As supporters of the Progressive movement and the new "social legislation"¹¹ it advocated, they were hostile to the individualist philosophy they perceived in the Court's protection of liberty of contract,¹² and their personal hostility to this philosophy colored their criticism of the jurisprudence.¹³ Indeed, some Progressive activists challenged the legitimacy of substantive due process itself, advocating legislation or a constitutional amendment to strip courts of their judicial review powers to enforce the Due Process Clauses ofthe Constitution.¹⁴ So pervasive has been the influence of Justice Holmes's and the Progressive Era activists' characterizations of Lochner and of the Court's liberty of contract jurisprudence generally that the decision in Lochner has been widely condemned as an egregious instance of judicial activism.¹⁵ The Lochner Era has been seen as a time when American judges, motivated by the desire to further the interests of rich capitalists, perverted the original meaning of the Due Process Clauses to engraft a laissez-faire ideology—commonly caricatured as synonymous with the doctrines of "Social Darwinism"¹⁶ —upon the Constitution.¹⁷

Another aspect of the traditional view, inspired by Justice Holmes's criticism of legal formalism,¹⁸ associates the Court's supposed laissez-faire constitutionalism with formalism, or the rather mechanical application of formal rules of law regarded as objective and scientifically discoverable.¹⁹ This formalism contrasts with the "sociological jurisprudence" embraced by Progressive Era scholarship.²⁰

This traditional view so dominates modern scholarship that it has become the orthodoxy of constitutional law casebooks,²¹ constitutional and legal history textbooks,²² constitutional commentaries written by both conservatives and liberals,²³ and even opinions written by Supreme Court justices themselves.²⁴

Although many scholars continue to accept unquestioningly the traditional view's caricature of Lochner and of the Court's protection of liberty of contract during the Lochner Era, in recent decades some important new scholarship has called into question the neo-Holmesian orthodoxy. In reassessing the Lochner Era, revisionist scholars have challenged virtually all the major assumptions upon which it rests: for example, that liberty of contract favored the economic interests of employers and those who were "well-off,"²⁵ that Lochner Era jurists were "Social Darwinists,"²⁶ or that laissez-faire constitutionalism generally was grounded in a mechanical, or for malistic, jurisprudence.²⁷ Most importantly, although disagreeing about the precise origins of liberty of contract, the revisionist scholars basically agree that the orthodox view errs in characterizing the doctrine as, in the words of one scholar, "essentially unprincipled or rooted in extraconstitutional policy preferences for laissez-faire economics."²⁸ Rather, they argue, the doctrine was grounded in well-established constitutional traditions.²⁹

In the disagreement about the precise origins of liberty of contract, two distinct schools of thought have emerged within revisionist scholarship. One school, emphasizing substantive due process, traces the origins of liberty of contract to a variety of sources in early American constitutional thought: among them, the "original meaning" of the Due Process Clauses of the Fifth and Fourteenth Amendments,³⁰ as well as the "free labor" ideology of the antislavery movement and nineteenth-century Republican Party.³¹ The other school, de-emphasizing substantive due process, traces the origins of liberty of contract instead to a hostility against "special," or "class," legislation deeply ingrained in Anglo-American law and political theory.³² Whatever they see as the roots of liberty of contract—whether in traditional, substantive uses of due process or in constitutional prohibitions of class legislation—the revisionist scholars nevertheless agree that rather than engaging in judicial activism on behalf of a laissez-faire ideology, judges in the Lochner Era were merely enforcing traditional constitutional limits on the police power.

Taking a fresh look at the Supreme Court's liberty of contract jurisprudence in light of its historical antecedents, this Article argues that the revisionist consensus is indeed correct: the orthodox view of the Lochner Era is fundamentally flawed in a number of respects. Indeed, this Article argues that the orthodox view is wrong about virtually all its assumptions, which were based on myths originally propounded by Progressive Era scholars and which have been perpetuated by modern scholars.

One of the most important of these myths is that early twentieth-century judges who protected liberty of contract did so by engaging in a form of judicial activism, specifically by inventing substantive due process and using it to create new constitutional protections for liberty. What this myth about so-called laissez-faire constitutionalism ignores is the long history of substantive due process protections for liberty and property rights—a body of law concerning constitutional limits on government police powers that was well-established by the late nineteenth century. Moreover, laissez-faire constitutionalism truly is a misnomer, for judicial protection of liberty of contract never involved doctrinal application of libertarian, or laissez-faire, principles. Rather, the Court during the Lochner Era was merely enforcing these traditional constitutional limits on the scope of the police power.

Part II, the major part of this Article, examines the historical foundations of liberty of contract, tracing the roots of the doctrine to two lines of precedents in early American constitutional law: first, the protection of economic liberty and property rights through substantive due process or equivalent constitutional provisions; and second, the limitation of state police powers through the enforcement of certain written and unwritten constitutional rules. As Part II.C shows, the addition of the Fourteenth Amendment made it possible for courts to use the Constitution to protect individual economic liberty and property rights against state legislation and, therefore, to limit state police powers.

Part III examines the Supreme Court's protection of liberty of contract in its heyday, during the first third of the twentieth century. Part III.A analyzes the standard of review used by the Court in protecting liberty of contract. Rather than doing what Justice Holmes accused the majority of doing in Lochner—reading laissez-faire principles, such as Herbert Spencer's law of equal freedom, into the Constitution—the Justices instead were merely following a general presumption in favor of liberty that could be rebutted by a showing of a valid exercise of the police power in one of several recognized categories that were exceptions to the general rule favoring liberty. Part III.B surveys the Court's major liberty of contract decisions. Part III.B.1 focuses on economic liberty, not only the most familiar line of decisions, including Lochner v. New York³³ and Adkins v. Children's Hospital of the District of Columbia,³⁴ but also other important aspects of economic liberty. Part III.B.2 surveys other less familiar decisions, showing the Court's protection of liberty in its many other facets, including the protection of privacy rights and the prohibition of racial classifications. This part of the Article shows that what the courts protect today as "the right to privacy" really is the last vestige of liberty of contract jurisprudence. Part III.B.3 discusses a significant case from the early twentieth century in which the Supreme Court struck down a mandatory racial segregation...