Ferguson v. Skrupa DBA Credit Advisors

Petitioner
William M. Ferguson
Respondent
Skrupa DBA Credit Advisors
Petitioner's Claim
That Kansas legislation regulating the business of "debt adjusting" did not constitute a violation of constitutional due process.
Chief Lawyer for Petitioner
William M. Ferguson
Chief Lawyer for Respondent
Lawrence Weigand
Justices for the Court
Hugo Lafayette Black (writing for the Court), William J. Brennan, Jr., Tom C.Clark, Arthur Goldberg, John Marshall Harlan II, William O. Douglas, PotterStewart, Earl Warren, Byron R. White
Justices Dissenting
None
Place
Washington, D.C.
Date of Decision
22 April 1963
Decision
Kansas legislation regulating debt adjusting was held not to be a violation of the Due Process Clause.
Significance
With its decision in Ferguson v. Skrupa DBA Credit Advisors the Supreme Court expressly disavowed its previous practice of assessing the wisdom ofstate legislation regulating economic activity.
The Facts of the Case
Skrupa, a citizen of the state of Kansas, was in business as a "debt adjuster" making payments to a client's creditors for a monthly fee. Concerned that this activity would lend itself "to grave abuses against distressed debtors, particularly in the lower income brackets," the state passed a law restrictingthe practice of debt adjustment to lawyers only. Skrupa filed a suit challenging this regulation. He claimed that his business was a "useful and desirable" one, that his activities were not "inherently immoral or dangerous," and that therefore the business could not be "absolutely prohibited" by the state.
Skrupa scored a victory in district court. A three-judge panel heard all theevidence and ruled that, while Skrupa's business did fall within the scope ofthe law, the act constituted an unreasonable regulation of a lawful business, in violation of the Due Process Clause of the Fourteenth Amendment. The court ordered Kansas to cease enforcing the statute. The state then appealed this decision to the U.S. Supreme Court.
High Court Rules
On 22 April 1963, the Supreme Court issued its decision. A unanimous majorityvoted to overturn the district court's decision. Justice Black penned the opinion of the Court, while Justice Harlan issued a short statement concurringin the judgment. The Court's decision left Kansas "free to decide for itself"whether or not to regulate the debt adjustment business.
In presenting his argument, Justice Black first reviewed the High Court's history with regard to cases involving state regulation of economic activity. "There was a time when the Due Process Clause was used by this Court to strikedown laws which were thought unreasonable," Black wrote, "that is, unwise orincompatible with some particular economic or social philosophy." He concluded that it was time to re-evaluate the Court's policy with regard to judicialreview of legislation. "Under the system of government created by our Constitution," he opined, "it is up to legislatures, not courts, to decide on the wisdom and utility of legislation." For Black, the long-standing Supreme Courtbelief "that due process authorizes courts to hold laws unconstitutional whenthey believe the legislature has acted unwisely has long since been discarded. We have returned to the original constitutional proposition that courts donot substitute their social and economic beliefs for the judgment of legislative bodies, who are elected to pass laws."
Broad Scope for State Legislatures
In deciding this case, Black and his fellow justices explicitly disavowed theCourt's historical role in evaluating "the wisdom, need, or appropriateness"of legislation. While conceding that debt adjustment may in fact have some social utility, Black argued that state legislatures should be given "broad scope to experiment with economic problems." "We conclude that the Kansas Legislature was free to decide for itself that legislation was needed to deal withthe business of debt adjusting," Black concluded. "If the State of Kansas wants to limit debt adjusting to lawyers, the Equal Protection Clause does notforbid it." Justice Harlan concurred in the Court's judgment "on the ground that this state measure bears a rational relation to a constitutionally permissible objective."
Impact
The Supreme Court's decision in Ferguson v. Skrupa was about more thanjust the legality of debt adjusting in the state of Kansas. It put the Courton record as affording states wide latitude to regulate economic activity within their borders. This important shift in direction would affect many subsequent cases.
Related Cases

• Levy v. Louisiana, 391 U.S. 68 (1968).
  
• Kahn v. Shevin, 416 U.S. 351 (1974).