Petitioner
E. Allgeyer & Co.
Respondent
State of Louisiana
Petitioner's Claim
That states do not have the right to pass legislation that deprives citizensof their Fourteenth Amendment rights to due process and equal protection.
Chief Lawyer for Petitioner
Branch K. Miller
Chief Lawyer for Respondent
M. J. Cunningham
Justices for the Court
David Josiah Brewer, Henry Billings Brown, William Rufus Day, Melville WestonFuller, Horace Gray, John Marshall Harlan I, Rufus Wheeler Peckham (writingfor the Court), George Shiras, Jr., Edward Douglass White
Justices Dissenting
None
Place
Washington, D.C
Date of Decision
1 March 1897
Decision
Found in favor of Allgeyer and reversed a lower court ruling by finding thatdue process guarantees protect Allgeyer's right to purchase insurance from Atlantic Mutual of New York.
Significance
The ruling established that states cannot enact laws depriving citizens of their Fourteenth Amendment due process and equal protection rights. Expanding the interpretation of "liberty," the Court held that the term includes the right to enter into any contracts considered proper, necessary, and essential among other rights not identified before. The decision greatly expanded the concept of substantive due process and restricted state powers to regulate business activities for the next 40 years.
Ratification of the Fourteenth Amendment in 1868 guaranteed due process protection from state laws. The amendment reads in part that no state "shall . . .deprive any person of life, liberty, or property without due process of law." The meaning of "liberty" and "property" in the Due Process Clause became the subject of later Supreme Court rulings. Under due process, the Court generally assessed whether procedures required by state laws were reasonable and not arbitrary. This line of inquiry focused solely on the way laws were applied, not so much the subject of the laws themselves. However, the intent of state laws began to attract attention as well, as demonstrated in Butchers' Union Co. v. Crescent City Co. (1884). In that case, the Court ruled that aperson had liberty to freely choose an occupation.
The Regulation of Business
Regarding business activities, before the latter part of the nineteenth century the Supreme Court commonly used the Constitution's Commerce Clause or Contracts Clause to overrule what it determined arbitrary and unreasonable interference with the freedom to establish business contracts. However, usually thefederal government allowed states to rather freely regulate commerce withintheir borders. In the 1890s, as trade greatly expanded nationally and internationally, states increasingly passed laws designed to protect their citizensand businesses. The Louisiana legislature passed Act No. 66 of 1894 prohibiting individuals and corporations from contracting with marine insurance companies who did not conform with Louisiana law. The penalty for disobeying the law was a fine of $1000 for each offense paid to charity.
E. Allgeyer & Co., located in New Orleans, was a cotton exporter who soldto companies in Great Britain and greater Europe. They shipped the sold cotton from the port of New Orleans to foreign ports. On 27 October 1894, Allgeyer mailed an insurance certificate in New Orleans to Atlantic Mutual InsuranceCompany of New York for the purchase of $200,000 of insurance. The AtlanticMarine had no agent or place of business in the state of Louisiana at the time. The letter notified Atlantic Mutual that 100 bales of cotton had been shipped to foreign ports. In reaction, the state of Louisiana filed suit againstAllgeyer in December of 1894 claiming that they violated Act No. 66. The state sought a $3000 fine for three alleged violations of the act.
Consistent with previous case law on the subject, Allgeyer responded that ActNo. 66 was unconstitutional by depriving them of property without due process of law. In addition, they were not given equal protection of the laws in violation of the constitutions of both Louisiana and the United States. Allgeyer asserted that since its business partner, Atlantic Mutual, was a New York corporation with an office in the state of New York, the insurance contract was in the state of New York, not Louisiana. In fact, the initial open contractwas signed in New York City. Allgeyer further argued that the U.S. Constitution protected the general right to execute contracts in other states.
The district court held that a state can impose conditions on companies operating businesses within its borders. Companies must comply with those conditions or violate the law. In addition, Article 236 of the Louisiana Constitutionprohibited out-of-state insurance companies from conducting business in thestate unless they have a place of business and an authorized agent in the state. Because the Allgeyer contract was considered legal in New York, it was inLouisiana as well. The moment the letter was mailed while still in New Orleans the cotton was legally insured. In addition, the court observed that at the time of mailing the contract, the 100 bales of cotton were in the state ofLouisiana. To not have violated the law, New York citizens conducting business in another state must pay a license and employ an authorized agent in thatstate. However, the court asserted the case was not really about the contractitself, but the constitutional rights of Louisiana's citizens. Therefore, the trial court rejected Louisiana's argument, found Act No. 66 an unconstitutional restriction, and ruled in favor of Allgeyer.
Louisiana appealed the case to the state supreme court, which reversed the decision and ruled in favor of the state. The court based its opinion on the fact that Allgeyer, while in the state of Louisiana, insured cotton located inthe state with an out-of-state insurance company. Since the cotton was insured the instant Allgeyer mailed the letter, Act No. 66 applied.
The Louisiana Supreme Court, in addressing the broader issue of liberty, wrote,
Liberty to Contract
By a unanimous decision, the Court reversed the Louisiana Supreme Court's decision and ruled Act No. 66 unconstitutional. With various rulings already addressing the Fourteenth Amendment's meaning of liberty, Justice Peckham, writing for the Court, extended the meaning of liberty to include
Peckham relied on a precedent recently set in Hooper v. State of California (1895). Hooper recognized that states had legal authority to prohibit out-of-state insurance companies from doing business within their borders. It also held that citizens had rights under the Fourteenth Amendment to contract with anyone they chose for insurance. States could not deprive a citizen that right to contract. The key difference between Hooper and Allgeyer's situation was that a contract had been signed in the state of California with a company not licensed to do business in that state. Peckham found that Allgeyer had only sent a notification in the mail to Atlantic Mutual. Theactual business transaction of signing a open contract had occurred earlier in New York. As written, Peckham observed that Allgeyer did violate Louisiana's Act No. 66. However, the Louisiana law inappropriately interfered with Allgeyer's liberty by restricting their right to purchase insurance for propertywith whom they chose. Neither Allgeyer nor Atlantic Mutual were in violationof the Louisiana constitution since Atlantic Mutual was not conducting business in the state.
Peckham, in discussing the Fourteenth Amendment, explained,
Impact
The Allgeyer decision marked a decrease in state powers and increasedfederal oversight over state activities. For the first time, the Court expanded the view of "liberty" by extending the Due Process Clause to protect businesses against state regulation. The clause, originally intended following theCivil War to protect personal rights, replaced the Commerce Clause as key inprotecting commercial activity. Specifically, Allgeyer recognized theright to make contracts free of state regulation. Such an application of substantive due process concepts protected businesses from governmental intrusion into certain economic and property interests. The decision was further reinforced in Lochner v. New York (1905), striking down a New York state law setting maximum hours for bakers.
Allgeyer began a 40-year period noted for striking down as "arbitrary"various forms of state economic legislation. This trend continued until theNew Deal era of the 1930s when the Court changed course again and more freelyrecognized reforms and regulations passed by states during the economic recovery from the Great Depression of 1929. Substantive due process later becameapplied to personal civil rights freedoms in the 1960s. By the 1990s, rightsto privacy, marriage, and to bear children, though not mentioned in the firstten amendments to the Constitution, were identified by the courts as fundamental freedoms. The period of more limited state powers continued until the 1990s, when a swing back to strengthening states' rights occurred.
Related Cases
Rufus Wheeler Peckham
Rufus Wheeler Peckham (1838-1909) served on New York's supreme court and court of appeals before being nominated to the Supreme Court by Grover Clevelandin 1895. Peckham is considered to be one of most level-headed justices to have served on the Supreme Court, often handing down opinions contrary to his own political persuasion. Many of his opinions contributed to the development of the political principles that are the foundation for American government. Some of the cases in which Peckham handed down influential opinions include: United States v. Trans-Missouri Freight Association; Hopkins v. United States; Addyston Pipe and Steel Company v. United States; and Maxwell v. Dow.
Ironically, Peckham is best known for an opinion he handed down which, in retrospect, was widely considered a misinterpretation of the Fourteenth Amendment. Peckham wrote the majority opinion for Lochner v. New York (1905),a case which challenged the ten-hour work day for laborers. Peckham's decision allowed individuals to make arrangements to work beyond the ten hours per day permitted by law. Justice Oliver Wendell Holmes took issue with the decision, in a now famous dissenting opinion, arguing that the Fourteenth Amendmentwas not designed to promote radical individualism at the expense of social and economic justice.
Sources
Webster's American Biographies, Springfield, MA: G. & C. Merriam Co., 1974.
E. Allgeyer & Co.
Respondent
State of Louisiana
Petitioner's Claim
That states do not have the right to pass legislation that deprives citizensof their Fourteenth Amendment rights to due process and equal protection.
Chief Lawyer for Petitioner
Branch K. Miller
Chief Lawyer for Respondent
M. J. Cunningham
Justices for the Court
David Josiah Brewer, Henry Billings Brown, William Rufus Day, Melville WestonFuller, Horace Gray, John Marshall Harlan I, Rufus Wheeler Peckham (writingfor the Court), George Shiras, Jr., Edward Douglass White
Justices Dissenting
None
Place
Washington, D.C
Date of Decision
1 March 1897
Decision
Found in favor of Allgeyer and reversed a lower court ruling by finding thatdue process guarantees protect Allgeyer's right to purchase insurance from Atlantic Mutual of New York.
Significance
The ruling established that states cannot enact laws depriving citizens of their Fourteenth Amendment due process and equal protection rights. Expanding the interpretation of "liberty," the Court held that the term includes the right to enter into any contracts considered proper, necessary, and essential among other rights not identified before. The decision greatly expanded the concept of substantive due process and restricted state powers to regulate business activities for the next 40 years.
Ratification of the Fourteenth Amendment in 1868 guaranteed due process protection from state laws. The amendment reads in part that no state "shall . . .deprive any person of life, liberty, or property without due process of law." The meaning of "liberty" and "property" in the Due Process Clause became the subject of later Supreme Court rulings. Under due process, the Court generally assessed whether procedures required by state laws were reasonable and not arbitrary. This line of inquiry focused solely on the way laws were applied, not so much the subject of the laws themselves. However, the intent of state laws began to attract attention as well, as demonstrated in Butchers' Union Co. v. Crescent City Co. (1884). In that case, the Court ruled that aperson had liberty to freely choose an occupation.
The Regulation of Business
Regarding business activities, before the latter part of the nineteenth century the Supreme Court commonly used the Constitution's Commerce Clause or Contracts Clause to overrule what it determined arbitrary and unreasonable interference with the freedom to establish business contracts. However, usually thefederal government allowed states to rather freely regulate commerce withintheir borders. In the 1890s, as trade greatly expanded nationally and internationally, states increasingly passed laws designed to protect their citizensand businesses. The Louisiana legislature passed Act No. 66 of 1894 prohibiting individuals and corporations from contracting with marine insurance companies who did not conform with Louisiana law. The penalty for disobeying the law was a fine of $1000 for each offense paid to charity.
E. Allgeyer & Co., located in New Orleans, was a cotton exporter who soldto companies in Great Britain and greater Europe. They shipped the sold cotton from the port of New Orleans to foreign ports. On 27 October 1894, Allgeyer mailed an insurance certificate in New Orleans to Atlantic Mutual InsuranceCompany of New York for the purchase of $200,000 of insurance. The AtlanticMarine had no agent or place of business in the state of Louisiana at the time. The letter notified Atlantic Mutual that 100 bales of cotton had been shipped to foreign ports. In reaction, the state of Louisiana filed suit againstAllgeyer in December of 1894 claiming that they violated Act No. 66. The state sought a $3000 fine for three alleged violations of the act.
Consistent with previous case law on the subject, Allgeyer responded that ActNo. 66 was unconstitutional by depriving them of property without due process of law. In addition, they were not given equal protection of the laws in violation of the constitutions of both Louisiana and the United States. Allgeyer asserted that since its business partner, Atlantic Mutual, was a New York corporation with an office in the state of New York, the insurance contract was in the state of New York, not Louisiana. In fact, the initial open contractwas signed in New York City. Allgeyer further argued that the U.S. Constitution protected the general right to execute contracts in other states.
The district court held that a state can impose conditions on companies operating businesses within its borders. Companies must comply with those conditions or violate the law. In addition, Article 236 of the Louisiana Constitutionprohibited out-of-state insurance companies from conducting business in thestate unless they have a place of business and an authorized agent in the state. Because the Allgeyer contract was considered legal in New York, it was inLouisiana as well. The moment the letter was mailed while still in New Orleans the cotton was legally insured. In addition, the court observed that at the time of mailing the contract, the 100 bales of cotton were in the state ofLouisiana. To not have violated the law, New York citizens conducting business in another state must pay a license and employ an authorized agent in thatstate. However, the court asserted the case was not really about the contractitself, but the constitutional rights of Louisiana's citizens. Therefore, the trial court rejected Louisiana's argument, found Act No. 66 an unconstitutional restriction, and ruled in favor of Allgeyer.
Louisiana appealed the case to the state supreme court, which reversed the decision and ruled in favor of the state. The court based its opinion on the fact that Allgeyer, while in the state of Louisiana, insured cotton located inthe state with an out-of-state insurance company. Since the cotton was insured the instant Allgeyer mailed the letter, Act No. 66 applied.
The Louisiana Supreme Court, in addressing the broader issue of liberty, wrote,
There is in the statute an apparent interference with the liberty of defendants in restricting their rights to place insurance on property of their own whenever and in what company they desired, but in exercising thisliberty they would interfere with the policy of the state that forbids insurance companies which have not complied with the laws of the state from doingbusiness within its limits. Individual liberty of action must give way to thegreater right of the collective people in the assertion of well-defined policy, designed and intended for the general welfare.The state supreme court found Allgeyer guilty of one violation of Act No. 66 and assessed afine of $1,000. Allgeyer appealed to the U.S. Supreme Court, who agreed to hear its case.
Liberty to Contract
By a unanimous decision, the Court reversed the Louisiana Supreme Court's decision and ruled Act No. 66 unconstitutional. With various rulings already addressing the Fourteenth Amendment's meaning of liberty, Justice Peckham, writing for the Court, extended the meaning of liberty to include
the right of the citizen to be free in the enjoyment of all his faculties; to be free to use them in all lawful ways; to live and work where he will; to earn his livelihood by any lawful calling; to pursue any livelihood or avocation; and for that purpose to enter into all contracts which may be proper, necessary, and essential.
Peckham relied on a precedent recently set in Hooper v. State of California (1895). Hooper recognized that states had legal authority to prohibit out-of-state insurance companies from doing business within their borders. It also held that citizens had rights under the Fourteenth Amendment to contract with anyone they chose for insurance. States could not deprive a citizen that right to contract. The key difference between Hooper and Allgeyer's situation was that a contract had been signed in the state of California with a company not licensed to do business in that state. Peckham found that Allgeyer had only sent a notification in the mail to Atlantic Mutual. Theactual business transaction of signing a open contract had occurred earlier in New York. As written, Peckham observed that Allgeyer did violate Louisiana's Act No. 66. However, the Louisiana law inappropriately interfered with Allgeyer's liberty by restricting their right to purchase insurance for propertywith whom they chose. Neither Allgeyer nor Atlantic Mutual were in violationof the Louisiana constitution since Atlantic Mutual was not conducting business in the state.
Peckham, in discussing the Fourteenth Amendment, explained,
The `liberty' mentioned in that amendment means, not only the right of the citizento be free from the mere physical restraint of his person, as by incarceration, but the term is deemed to embrace the right of the citizen to be free in the enjoyment of all his faculties; to be free to use them in all lawful ways;to live and work where he will; to earn his livelihood by any lawful calling; to pursue any livelihood or avocation; and for that purpose to enter into all contracts which may be proper, necessary, and essential to his carrying out to a successful conclusion the purposes above mentioned.Peckham struck down Act No. 66 as unconstitutional and concluded Allgeyer was freeto contract with Atlantic Mutual.
Impact
The Allgeyer decision marked a decrease in state powers and increasedfederal oversight over state activities. For the first time, the Court expanded the view of "liberty" by extending the Due Process Clause to protect businesses against state regulation. The clause, originally intended following theCivil War to protect personal rights, replaced the Commerce Clause as key inprotecting commercial activity. Specifically, Allgeyer recognized theright to make contracts free of state regulation. Such an application of substantive due process concepts protected businesses from governmental intrusion into certain economic and property interests. The decision was further reinforced in Lochner v. New York (1905), striking down a New York state law setting maximum hours for bakers.
Allgeyer began a 40-year period noted for striking down as "arbitrary"various forms of state economic legislation. This trend continued until theNew Deal era of the 1930s when the Court changed course again and more freelyrecognized reforms and regulations passed by states during the economic recovery from the Great Depression of 1929. Substantive due process later becameapplied to personal civil rights freedoms in the 1960s. By the 1990s, rightsto privacy, marriage, and to bear children, though not mentioned in the firstten amendments to the Constitution, were identified by the courts as fundamental freedoms. The period of more limited state powers continued until the 1990s, when a swing back to strengthening states' rights occurred.
Related Cases
- Butchers' Union Co. v. Crescent City Co., 111 U.S. 746 (1884).
- Hooper v. State of California, 155 U.S. 648 (1895).
- Lochner v. New York, 198 U.S. 45 (1905).
Rufus Wheeler Peckham
Rufus Wheeler Peckham (1838-1909) served on New York's supreme court and court of appeals before being nominated to the Supreme Court by Grover Clevelandin 1895. Peckham is considered to be one of most level-headed justices to have served on the Supreme Court, often handing down opinions contrary to his own political persuasion. Many of his opinions contributed to the development of the political principles that are the foundation for American government. Some of the cases in which Peckham handed down influential opinions include: United States v. Trans-Missouri Freight Association; Hopkins v. United States; Addyston Pipe and Steel Company v. United States; and Maxwell v. Dow.
Ironically, Peckham is best known for an opinion he handed down which, in retrospect, was widely considered a misinterpretation of the Fourteenth Amendment. Peckham wrote the majority opinion for Lochner v. New York (1905),a case which challenged the ten-hour work day for laborers. Peckham's decision allowed individuals to make arrangements to work beyond the ten hours per day permitted by law. Justice Oliver Wendell Holmes took issue with the decision, in a now famous dissenting opinion, arguing that the Fourteenth Amendmentwas not designed to promote radical individualism at the expense of social and economic justice.
Sources
Webster's American Biographies, Springfield, MA: G. & C. Merriam Co., 1974.
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