Appellant
Leo Nebbia
Appellee
People of the State of New York
Appellant's Claim
That the government had no power to regulate retail prices for milk sales.
Chief Lawyer for Appellant
Arthur E. Sutherland
Chief Lawyer for Appellee
Henry S. Manley
Justices for the Court
Louis D. Brandeis, Benjamin N. Cardozo, Charles Evans Hughes, Owen Josephus Roberts (writing for the Court), Harlan Fiske Stone
Justices Dissenting
Pierce Butler, James Clark McReynolds, George Sutherland, Willis Van Devanter
Place
Washington, D.C.
Date of Decision
5 March 1934
Decision
The Supreme Court upheld the New York Milk Control Act of 1933.
Significance
Ever since the Munn v. Illinois decision in 1877, the Court had distinguished between public enterprise, which the state may regulate, and privateenterprise, which it may not. With Nebbia, the Court did away with this distinction once and for all.
In 1933, in the midst of the Great Depression, New York State created a MilkBoard, whose job it was to set minimum and maximum retail prices for milk prices. The board fixed nine cents as the price to be charged for a quart of milk. The purpose of this price fixing was to ease the economic hardship being experienced both by retailers and their customers.
Leo Nebbia was the proprietor of a small grocery store in Rochester, New York. He sold two quarts of milk and a 5-cent loaf of bread for 18 cents, as a result of which he was charged with violating the Milk Control Act. After successive appeals to the county court and the New York Court of Appeals failed, Nebbia appealed to the U.S. Supreme Court.
Supreme Court Declares that the State Can Regulate Any Business
In 1877, the Court decided Munn v. Illinois that although there are certain businesses which are immune from state control, those "in which the public has an interest"--in that case, it was grain elevators--are subject to regulation by state governments. One argument advanced against this ruling wasthat state regulatory power was in conflict with the Commerce Clause of Article I, section 8 of the Constitution, which gives Congress the power "To Regulate Commerce . . . among the several States." The other was that state regulation of business was unconstitutional because of the Due Process Clause of the Fourteenth Amendment, which provides: "No state shall . . . deprive any person of life, liberty, or property without due process of law."
This second argument was adopted in an important dissenting opinion written by Justice Stephen J. Field. Field elaborated the argument into a legal theorythat came to be known as "substantive due process," which holds that the Constitution protects certain rights--most notably, property--from all legislative interference. Field's theory proved to be highly influential for the remainder of the nineteenth century and lasted well into the next century. It determined the outcome of most economic issues that came before the Court duringthat period, causing a majority of the justices to vote consistently in support of business interests. In 1885, for instance, the Court denied that the Sherman Anti-Trust Act applied to manufacturing monopolies in United Statesv. E. C. Knight, and ruled that the Sherman Act could be used as a weaponagainst labor unions in In re Debs.
With the onset of the Great Depression, however, it became harder for the justices to support substantive due process, which in effect gave business freerein. The American people were suffering and while the federal government adopted President Franklin Roosevelt's New Deal program of economic reforms, states shaped legislation along the same lines. One such piece of New Deal-inspired state legislation was the New York Milk Control Act of 1934 at issue in Nebbia.
Writing for the Court, Justice Roberts now declared that the state could regulate not just businesses "affected with the public interest," but any economic activity it saw fit to control:
The old substantive due process argument was laid out for the dissent by Justice McReynolds, who maintained that the Due Process Clause of the FourteenthAmendment gave the Supreme Court the authority to uphold any economic legislation it found reasonable and to override any it found unreasonable. McReynolds's dissent was joined by three other justices: Van Devanter, Sutherland, andButler. These four justices tended to vote together as a bloc--particularlyon economic issues. The consistency of their conservative stance caused themto be popularly known as the Four Horsemen, after the Four Horsemen of the Apocalypse, who brought ruin to the land in the last book of the Bible. Often they were joined by one or more of the "swing votes" on the Court to defeat New Deal legislation. Although they lost the debate in Nebbia, it was not until Roosevelt announced his plan to "pack" the Court with justices of hisown choosing that the Four Horsemen permanently lost their clout.
Related Cases
Public Enterprise and Private Enterprise
Private enterprise is any type of economic activity that is undertaken with privately owned capital and with the aim of earning an income for private interests. The capital may be owned by an individual, a partnership, or a corporation. A company which has issued shares of stock is referred to as a "public"company, but it is public only in the sense that anyone can buy shares. Forthe purposes of this discussion, a "public" company is another example of private enterprise.
By contrast, the public sector, though it too takes part in economic undertakings, seldom does so for profit-making purposes. A government typically fundsits activities through taxation or defrays costs by means of a user's toll,as is the case on many highways. There is a considerable gray area between public and private enterprise in joint-venture operations such as airports.
Sources
Scruton, Roger. A Dictionary of Political Thought, second edition. London: Macmillan, 1996.
Leo Nebbia
Appellee
People of the State of New York
Appellant's Claim
That the government had no power to regulate retail prices for milk sales.
Chief Lawyer for Appellant
Arthur E. Sutherland
Chief Lawyer for Appellee
Henry S. Manley
Justices for the Court
Louis D. Brandeis, Benjamin N. Cardozo, Charles Evans Hughes, Owen Josephus Roberts (writing for the Court), Harlan Fiske Stone
Justices Dissenting
Pierce Butler, James Clark McReynolds, George Sutherland, Willis Van Devanter
Place
Washington, D.C.
Date of Decision
5 March 1934
Decision
The Supreme Court upheld the New York Milk Control Act of 1933.
Significance
Ever since the Munn v. Illinois decision in 1877, the Court had distinguished between public enterprise, which the state may regulate, and privateenterprise, which it may not. With Nebbia, the Court did away with this distinction once and for all.
In 1933, in the midst of the Great Depression, New York State created a MilkBoard, whose job it was to set minimum and maximum retail prices for milk prices. The board fixed nine cents as the price to be charged for a quart of milk. The purpose of this price fixing was to ease the economic hardship being experienced both by retailers and their customers.
Leo Nebbia was the proprietor of a small grocery store in Rochester, New York. He sold two quarts of milk and a 5-cent loaf of bread for 18 cents, as a result of which he was charged with violating the Milk Control Act. After successive appeals to the county court and the New York Court of Appeals failed, Nebbia appealed to the U.S. Supreme Court.
Supreme Court Declares that the State Can Regulate Any Business
In 1877, the Court decided Munn v. Illinois that although there are certain businesses which are immune from state control, those "in which the public has an interest"--in that case, it was grain elevators--are subject to regulation by state governments. One argument advanced against this ruling wasthat state regulatory power was in conflict with the Commerce Clause of Article I, section 8 of the Constitution, which gives Congress the power "To Regulate Commerce . . . among the several States." The other was that state regulation of business was unconstitutional because of the Due Process Clause of the Fourteenth Amendment, which provides: "No state shall . . . deprive any person of life, liberty, or property without due process of law."
This second argument was adopted in an important dissenting opinion written by Justice Stephen J. Field. Field elaborated the argument into a legal theorythat came to be known as "substantive due process," which holds that the Constitution protects certain rights--most notably, property--from all legislative interference. Field's theory proved to be highly influential for the remainder of the nineteenth century and lasted well into the next century. It determined the outcome of most economic issues that came before the Court duringthat period, causing a majority of the justices to vote consistently in support of business interests. In 1885, for instance, the Court denied that the Sherman Anti-Trust Act applied to manufacturing monopolies in United Statesv. E. C. Knight, and ruled that the Sherman Act could be used as a weaponagainst labor unions in In re Debs.
With the onset of the Great Depression, however, it became harder for the justices to support substantive due process, which in effect gave business freerein. The American people were suffering and while the federal government adopted President Franklin Roosevelt's New Deal program of economic reforms, states shaped legislation along the same lines. One such piece of New Deal-inspired state legislation was the New York Milk Control Act of 1934 at issue in Nebbia.
Writing for the Court, Justice Roberts now declared that the state could regulate not just businesses "affected with the public interest," but any economic activity it saw fit to control:
[I]n the absence of other constitutional restriction, a state is free to adopt whatever economic policy may reasonably be deemed to promote public welfare, and to enforce that policy bylegislation adapted to its purpose. The courts are without authority either to declare such policy, or when it is declared by the legislature, to overrideit.
The old substantive due process argument was laid out for the dissent by Justice McReynolds, who maintained that the Due Process Clause of the FourteenthAmendment gave the Supreme Court the authority to uphold any economic legislation it found reasonable and to override any it found unreasonable. McReynolds's dissent was joined by three other justices: Van Devanter, Sutherland, andButler. These four justices tended to vote together as a bloc--particularlyon economic issues. The consistency of their conservative stance caused themto be popularly known as the Four Horsemen, after the Four Horsemen of the Apocalypse, who brought ruin to the land in the last book of the Bible. Often they were joined by one or more of the "swing votes" on the Court to defeat New Deal legislation. Although they lost the debate in Nebbia, it was not until Roosevelt announced his plan to "pack" the Court with justices of hisown choosing that the Four Horsemen permanently lost their clout.
Related Cases
- Munn v. Illinois, 94 U.S. 113 (1877).
- In Re Debs, 158 U.S. 564 (1895).
- Northern Securities Co. v. United States, 193 U.S. 197 (1904).
- Buchanan v. Warley, 245 U.S. 60 (1917).
- Block v. Hirsh, 256 U.S. 135 (1921).
- Adkins v. Children's Hospital, 261 U.S. 525 (1923).
- Meyer v. Nebraska, 262 U.S. 399 (1923).
- Near v. Minnesota, 283 U.S. 697 (1931).
Public Enterprise and Private Enterprise
Private enterprise is any type of economic activity that is undertaken with privately owned capital and with the aim of earning an income for private interests. The capital may be owned by an individual, a partnership, or a corporation. A company which has issued shares of stock is referred to as a "public"company, but it is public only in the sense that anyone can buy shares. Forthe purposes of this discussion, a "public" company is another example of private enterprise.
By contrast, the public sector, though it too takes part in economic undertakings, seldom does so for profit-making purposes. A government typically fundsits activities through taxation or defrays costs by means of a user's toll,as is the case on many highways. There is a considerable gray area between public and private enterprise in joint-venture operations such as airports.
Sources
Scruton, Roger. A Dictionary of Political Thought, second edition. London: Macmillan, 1996.
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