CRS Annotated Constitution
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Substantive Due Process
Justice Harlan, dissenting in Poe v. Ullman,65 observed that one view of due process, “ably and insistently argued . . . , sought to limit the provision to a guarantee of procedural fairness.” But, he continued, due process “in the consistent view of this Court has ever been a broader concept . . . . Were due process merely a procedural safeguard it would fail to reach those situations where the deprivation of life, liberty or property was accomplished by legislation which by operating in the future could, given even the fairest possible procedure in application to individuals, nevertheless destroy the enjoyment of all three. . . . Thus the guaranties of due process, though having their roots in Magna Carta’s ‘per legem terrae’ and considered as procedural safeguards ‘against executive usurpation and tyranny,’ have in this country ‘become bulwarks also against arbitrary legislation.”’
Discrimination.—“Unlike the Fourteenth Amendment, the Fifth contains no equal protection clause and it provides no guaranty against discriminatory legislation by Congress.”66 At other times, however, the Court assumed that “discrimination, if gross enough, is equivalent to confiscation and subject under the Fifth Amendment to challenge and annulment.”67 The theory that was to prevail seems first to have been enunciated by Chief Justice Taft, who observed that the due process and equal protection clauses are “associated” and that “[i]t may be that they overlap, that a violation of one may involve at times the violation of the other, but the spheres of the protection they offer are not coterminous. . . . [Due process] tends to secure equality of law in the sense that it makes a required minimum of protection for every one’s right of life, liberty and property, which the Congress or the legislature may not withhold. Our whole system of law is predicated on the general, fundamental principle of equality of application of the law.”68 Thus, in Bolling v. Sharpe,69 a companion case to Brown[p.1357]v. Board of Education,70 the Court held that segregation of pupils in the public schools of the District of Columbia violated the due process clause. “The Fifth Amendment, which is applicable in the District of Columbia, does not contain an equal protection clause as does the Fourteenth Amendment which applies only to the states. But the concepts of equal protection and due process, both stemming from our American ideal of fairness, are not mutually exclusive. The ‘equal protection of the laws’ is a more explicit safeguard of prohibited unfairness than ‘due process of law,’ and, therefore, we do not imply that the two are always interchangeable phrases. But, as this Court has recognized, discrimination may be so unjustifiable as to be violative of due process.
“Although the Court has not assumed to define ‘liberty’ with any great precision, that term is not confined to mere freedom from bodily restraint. Liberty under law extends to the full range of conduct which the individual is free to pursue, and it cannot be restricted except for a proper governmental objective. Segregation in public education is not reasonably related to any proper governmental objective and thus it imposes on Negro children of the District of Columbia a burden that constitutes an arbitrary deprivation of their liberty in violation of the Due Process Clause.
“In view of our decision that the Constitution prohibits the states from maintaining racially segregated public schools, it would be unthinkable that the same Constitution would impose a lesser duty on the Federal Government.”
“Equal protection analysis in the Fifth Amendment area,” the Court has said, “is the same as that under the Fourteenth Amendment.”71 So saying, the court has applied much of its Fourteenth Amendment jurisprudence to strike down sex classifications in federal legislation,72 reached classifications with an adverse impact upon illegitimates,73 and invalidated some welfare assistance pro[p.1358]visions with some interesting exceptions.74 However, almost all legislation involves some degree of classification among particular categories of persons, things, or events, and, just as the equal protection clause itself does not outlaw “reasonable” classifications, neither is the due process clause any more intolerant of the great variety of social and economic legislation typically containing what must be arbitrary line–drawing.75 Thus, for example, the Court has sustained a law imposing greater punishment for an offense involving rights of property of the United States than for a like offense involving the rights of property of a private person.76 A veterans’ law which extended certain educational benefits to all veterans who had served “on active duty” and thereby excluded conscientious objectors from eligibility was held to be sustainable, it being rational for Congress to have determined that the disruption caused by military service was qualitatively and quantitatively different from that caused by alternative service, and for Congress to have so provided to make military service more attractive.77
“The federal sovereign, like the States, must govern impartially. . . . [B]ut . . . there may be overriding national interests which justify selective federal legislation that would be unacceptable for an individual State.”78 The paramount federal power over immigration and naturalization is the principal example, although[p.1359]there are undoubtedly others, of the national government being able to classify upon some grounds—alienage, naturally, but also other suspect and quasi–suspect categories as well—that would result in invalidation were a state to enact them. The instances may be relatively few, but they do exist.
Congressional Police Measures.—Numerous regulations of a police nature, imposed under powers specifically granted to the Federal Government, have been sustained over objections based on the due process clause. Congress may require the owner of a vessel entering United States ports, and on which alien seamen are afflicted with specified diseases, to bear the expense of hospitalizing such persons.79 It may prohibit the transportation in interstate commerce of filled milk80 or the importation of convict–made goods into any State where their receipt, possession, or sale is a violation of local law.81 It may require employers to bargain collectively with representatives of their employees chosen in a manner prescribed by law, to reinstate employees discharged in violation of law, and to permit use of a company–owned hall for union meetings.82 Subject to First Amendment considerations, Congress may regulate the postal service to deny its facilities to persons who would use them for purposes contrary to public policy.83
Congressional Regulation of Public Utilities.—Inasmuch as Congress, in giving federal agencies jurisdiction over various public utilities, usually has prescribed standards substantially identical with those by which the Supreme Court has tested the validity of state action, the review of agency orders seldom has turned on constitutional issues. In two cases, however, maximum rates prescribed by the Secretary of Agriculture for stockyard companies were sustained only after detailed consideration of numerous items excluded from the rate base or from operating expenses, apparently on the assumption that error with respect to any such item would render the rates confiscatory and void.84 A few years later, in FPC v. Hope Gas Co.,85 the Court adopted an entirely dif[p.1360]ferent approach. It took the position that the validity of the Commission’s order depended upon whether the impact or total effect of the order is just and reasonable, rather than upon the method of computing the rate base. Rates which enable a company to operate successfully, to maintain its financial integrity, to attract capital, and to compensate its investors for the risks assumed cannot be condemned as unjust and unreasonable even though they might produce only a meager return in a rate base computed by the “present fair value” method.
Orders prescribing the form and contents of accounts kept by public utility companies,86 and statutes requiring a private carrier to furnish the Interstate Commerce Commission with information for valuing its property87 have been sustained against the objection that they were arbitrary and invalid. An order of the Secretary of Commerce directed to a single common carrier by water requiring it to file a summary of its books and records pertaining to its rates was also held not to violate the Fifth Amendment.88
Congressional Regulation of Railroads.—Legislation or administrative orders pertaining to railroads have been challenged repeatedly under the due process clause but seldom with success. Orders of the Interstate Commerce Commission establishing through routes and joint rates have been sustained,89 as has its division of joint rates to give a weaker group of carriers a greater share of such rates where the proportion allotted to the stronger group was adequate to avoid confiscation.90 The recapture of one half of the earnings of railroads in excess of a fair net operating income, such recaptured earnings to be available as a revolving fund for loans to weaker roads, was held valid on the ground that any carrier earning an excess held it as trustee.91 An order enjoining certain steam railroads from discriminating against an electric railroad by denying it reciprocal switching privileges did not violate the Fifth Amendment even through its practical effect was to admit the electric road to a part of the business being adequately handled by the steam roads.92 Similarly, the fact that a rule concerning the allot[p.1361]ment of coal cars operated to restrict the use of private cars did not amount to a taking of property.93 Railroad companies were not denied due process of law by a statute forbidding them to transport in interstate commerce commodities which have been manufactured, mined or produced by them.94 An order approving a lease of one railroad by another, upon condition that displaced employees of the lessor should receive partial compensation for the loss suffered by reason of the lease95 is consonant with due process of law. A law prohibiting the issuance of free passes was held constitutional even as applied to abolish rights created by a prior agreement whereby the carrier bound itself to issue such passes annually for life, in settlement of a claim for personal injuries.96 A non–arbitrary Interstate Commerce Commission order establishing a non–compensatory rate for carriage of certain commodities does not violate the due process or just compensation clauses as long as the public interest thereby is served and the rates as a whole yield just compensation.97
Occasionally, however, regulatory action has been held invalid under the due process clause. An order issued by the Interstate Commerce Commission relieving short line railroads from the obligation to pay the usual fixed sum per day rental for cars used on foreign roads for a space of two days was held to be arbitrary and invalid.98 A retirement act which made eligible for pensions all persons who had been in the service of any railroad within one year prior to the adoption of the law, counted past unconnected service of an employee toward the requirement for a pension without any contribution therefor, and treated all carriers as a single employer and pooled their assets, without regard to their individual obligations, was held unconstitutional.99
Taxation.—In laying taxes, the Federal Government is less narrowly restricted by the Fifth Amendment than are the States by the Fourteenth. The Federal Government may tax property belonging to its citizens, even if such property is never situated within the jurisdiction of the United States,100 and it may tax the income of a citizen resident abroad, which is derived from property located at his residence.101 The difference is explained by the fact that pro[p.1362]tection of the Federal Government follows the citizen wherever he goes, whereas the benefits of state government accrue only to persons and property within the State’s borders. The Supreme Court has said that, in the absence of an equal protection clause, “a claim of unreasonable classification or inequality in the incidence or application of a tax raises no question under the Fifth Amendment. . . .”102 It has sustained, over charges of unfair differentiation between persons, a graduated income tax,103 a higher tax on oleomargarine than on butter,104 an excise tax on “puts” but not on “call,”105 a tax on the income of business operated by corporations but not on similar enterprises carried on by individuals,106 an income tax on foreign corporations, based on their income from sources within the United States, while domestic corporations are taxed on income from all sources,107 a tax on foreign–built but not upon domestic yachts,108 a tax on employers of eight or more persons, with exemptions for agricultural labor and domestic service,109 a gift tax law embodying a plan of graduations and exemptions under which donors of the same amount might be liable for different sums,110 an Alaska statute imposing license taxes only on nonresident fisherman,111 an act which taxed the manufacture of oil and fertilizer from herring at a higher rate than similar processing of other fish or fish offal,112 an excess profits tax which defined “invested capital” with reference to the original cost of the property rather than to its present value,113 an undistributed profits tax in the computation of which special credits were allowed to certain taxpayers,114 an estate tax upon the estate of a deceased spouse in respect of the moiety of the surviving spouse where the effect of the dissolution of the community is to enhance the value of the survivor’s moiety,115 and a tax on nonprofit mutual insurers although such insurers organized before a certain date were exempt inas[p.1363]much as a continuing exemption for all insurers would have led to their multiplication to the detriment of other federal programs.116
Retroactive Taxes.—It has been customary from the beginning for Congress to give some retroactive effect to its tax laws, usually making them effective from the beginning of the tax year or from the date of introduction of the bill that became the law.117 Application of an income tax statute to the entire calendar year in which enactment took place has never, barring some peculiar circumstance, been deemed to deny due process.118 “Taxation is neither a penalty imposed on the taxpayer nor a liability which he assumes by contract. It is but a way of apportioning the cost of government among those who in some measure are privileged to enjoy its benefits and must bear its burdens. Since no citizen enjoys immunity from that burden, its retroactive imposition does not necessarily infringe due process, and to challenge the present tax it is not enough to point out that the taxable event, the receipt of income, antedated the statute.”119 A special income tax on profits realized by the sale of silver, retroactive for 35 days, which was approximately the period during which the silver purchase bill was before Congress, was held valid.120 An income tax law, made retroactive to the beginning of the calendar year in which it was adopted, was found constitutional as applied to the gain from the sale, shortly before its enactment, of property received as a gift during the year.121 Retroactive assessment of penalties for fraud or negligence,122 or of an additional tax on the income of a corporation used to avoid a surtax on its shareholder,123 does not deprive the taxpayer of property without due process of law.
An additional excise tax imposed upon property still held for sale, after one excise tax had been paid by a previous owner, does not violate the due process clause.124 Similarly upheld were a transfer tax measured in part by the value of property held jointly[p.1364]by a husband and wife, including that which comes to the joint tenancy as a gift from the decedent spouse125 and the inclusion in the gross income of the settlor of income accruing to a revocable trust during any period when the settlor had power to revoke or modify it.126
Supplement: [P. 1364, substitute for last paragraph in section:]
Although the Court during the 1920s struck down gift taxes imposed retroactively upon gifts that were made and completely vested before the enactment of the taxing statute,30 those decisions have recently been distinguished, and their precedential value limited.31 In United States v. Carlton, the Court declared that “[t]he due process standard to be applied to tax statutes with retroactive effect . . . is the same as that generally applicable to retroactive economic legislation”— retroactive application of legislation must be shown to be “justified by a rational legislative purpose.” 32 Applying that principle, the Court upheld retroactive application of a 1987 amendment limiting application of a federal estate tax deduction originally enacted in 1986. Congress’ purpose was “neither illegitimate nor arbitrary,” the Court noted, since Congress had acted “to correct what it reasonably viewed as a mistake in the original 1986 provision that would have created a significant and unanticipated revenue loss.” Also, “Congress acted promptly and established only a modest period of retroactivity.” The fact that the taxpayer had transferred stock in reliance on the original enactment was not dispositive, since “[t]ax legislation is not a promise, and a taxpayer has no vested right in the Internal Revenue Code.” 33
However, the Court has treated differently gift taxes imposed retroactively upon gifts that were made and completely vested before the enactment of the taxing statute,127 at least in part on the basis that such imposition unfairly treats a taxpayer who could have altered his behavior to avoid the tax if it could have been anticipated by him at the time the transaction was effected. Also, a conclusive presumption that gifts made within two years of death were made in contemplation of death was condemned as arbitrary and capricious, even with respect to subsequent transfers.128
Deprivation of Property: Retroactive Legislation.—Federal regulation of future action, based upon rights previously acquired by the person regulated, is not prohibited by the Constitution. So long as the Constitution authorizes the subsequently enacted legislation, the fact that its provisions limit or interfere with previously acquired rights does not ordinarily condemn it. The imposition upon coal mine operators, and ultimately coal consumers, of the liability of compensating former employees, who had terminated work in the industry before passage of the law, for black lung disabilities contracted in the course of their work, was sustained by the Court as a rational measure to spread the costs of the employees’ disabilities to those who had profited from the fruits of their labor.129 Legislation readjusting rights and burdens is not unlawful solely because it upsets otherwise settled expectations, but it must take account of the realities previously existing, i.e., that the danger may not have been known or appreciated, or that actions might have been taken in reliance upon the current state of the law; therefore, legislation imposing liability on the basis of deterrence or of blameworthiness might not have passed muster. The Court has applied Turner Elkhorn in upholding retroactive applica[p.1365]tion of pension plan termination provisions to cover the period of congressional consideration, declaring that the test for retroactive application of legislation adjusting economic burdens is merely whether “the retroactive application . . . is itself justified by a rational legislative purpose.”130
Rent regulations were sustained as applied to prevent execution of a judgment of eviction rendered by a state court before the enabling legislation was passed.131 For the reason that “those who do business in the regulated field cannot object if the legislative scheme is buttressed by subsequent amendments to achieve the legislative end,” no vested right to use housing, built with the aid of FHA mortgage insurance for transient purposes, was acquired by one obtaining insurance under an earlier section of the National Housing Act, which, though silent in this regard, was contemporaneously construed as barring rental to transients, and was later modified by an amendment which expressly excluded such use.132 An order by an Area Rent Director reducing an unapproved rental and requiring the landlord to refund the excess previously collected, was held, with one dissenting vote, not to be the type of retroactivity which is condemned by law.133 The application of a statute providing for tobacco marketing quotas, to a crop planted prior to its enactment, was held not to deprive the producers of property without due process of law since it operated, not upon production, but upon the marketing of the product after the act was passed.134
In the exercise of its comprehensive powers over revenue, finance, and currency, Congress may make Treasury notes legal tender in payment of debts previously contracted135 and may invalidate provisions in private contracts calling for payment in gold coin,136 but rights against the United States arising out of contract[p.1366]are more strongly protected by the due process clause. Hence, a law purporting to abrogate a clause in government bonds calling for payment in gold coin was invalid,137 and a statute abrogating contracts of war risk insurance was held unconstitutional as applied to outstanding policies.138
The due process clause has been successfully invoked to defeat retroactive invasion or destruction of property rights in a few cases. A revocation by the Secretary of the Interior of previous approval of plats and papers showing that a railroad was entitled to land under a grant was held void as an attempt to deprive the company of its property without due process of law.139 The exception of the period of federal control from the time limit set by law upon claims against carriers for damages caused by misrouting of goods, was read as prospective only because the limitation was an integral part of the liability, not merely a matter of remedy, and would violate the Fifth Amendment if retroactive.140
Bankruptcy Legislation.—In acting pursuant to its power to enact uniform bankruptcy legislation, Congress has regularly authorized retrospective impairment of contractual obligations,141 but the due process clause (by itself or infused with takings principles) constitutes a limitation upon Congress’ power to deprive persons of more secure forms of property, such as the rights secured creditors have to obtain repayment of a debt. The Court had long followed a rule of construction favoring prospective–only application of bankruptcy laws, absent a clear showing of congressional intent,142 but it was not until 1935 that the Court actually held unconstitutional a retrospective law. Struck down by the Court was the Frazier–Lemke Act, which by its terms applied only retrospectively, and which authorized a court to stay proceedings for the foreclosure of[p.1367]a mortgage for five years, the debtor to remain in possession at a reasonable rental, with the option of purchasing the property at its appraised value at the end of the stay. The Act offended the Fifth Amendment, the Court held, because it deprived the creditor of substantial property rights acquired prior to the passage of the act.143 However, a modified law, under which the stay was subject to termination by the court and which continued the right of the creditor to have the property sold to pay the debt, was sustained.144
Without violation of the due process clause, the sale of collateral under the terms of a contract may be enjoined, if such sale would hinder the preparation or consummation of a proposed railroad reorganization, provided the injunction does no more than delay the enforcement of the contract.145 A provision that claims resulting from rejection of an unexpired lease should be treated as on a parity with provable debts, but limited to an amount equal to three years rent, was held not to amount to a taking of property without due process of law, since it provided a new and more certain remedy for a limited amount, in lieu of an existing remedy inefficient and uncertain in result.146 A right of redemption allowed by state law upon foreclosure of a mortgage was unavailing to defeat a plan for reorganization of a debtor corporation where the trial court found that the claims of junior lienholders had no value.147
Right to Sue the Government.—A right to sue the Government on a contract is a privilege, not a property right protected by the Constitution.148 The right to sue for recovery of taxes paid may be conditioned upon an appeal to the Commissioner and his refusal to refund.149 There was no denial of due process when Congress took away the right to sue for recovery of taxes, where the claim for recovery was without substantial equity, having arisen from the[p.1368]mistake of administrative officials in allowing the statute of limitations to run before collecting a tax.150 The denial to taxpayers of the right to sue for refund of processing and floor stock taxes collected under a law subsequently held unconstitutional, and the substitution of a new administrative procedure for the recovery of such sums, was held valid.151 Congress may cut off the right to recover taxes illegally collected by ratifying the imposition and collection thereof, where it could lawfully have authorized such exactions prior to their collection.152
Congressional Power to Abolish Common Law Judicial Actions.— Similarly, it is clearly settled that “[a] person has no property, no vested interest, in any rule of the common law.”153 It follows, therefore, that Congress in its discretion may abolish common law actions, replacing them with other judicial actions or with administrative remedies at its discretion. There is slight intimation in some of the cases that if Congress does abolish a common law action it must either duplicate the recovery or provide a reasonable substitute remedy.154 Such a holding seems only remotely likely,155 but some difficulties may be experienced with respect to legislation that retrospectively affects rights to sue, such as shortening or lengthening statutes of limitation, and the like, although these have typically risen in state contexts. In one interesting decision, the Court did sustain an award of additional compensation under the Longshoremen’s and Harbor Workers’ Compensation Act, made pursuant to a private act of Congress passed after expiration of the period for review of the original award, directing the Commission to review the case and issue a new order, the challenge being made by the employer and insurer.156
Deprivation of Liberty: Economic Legislation.—The proscription of deprivation of liberty without due process, insofar as substantive due process was involved, was long restricted to invoca[p.1369]tion against legislation deemed to abridge liberty of contract.157 The two leading cases invalidating federal legislation, however, have both been overruled, as the Court adopted a very restrained standard of review of economic legislation.158 The Court’s “hands–off” policy with regard to reviewing economic legislation is quite pronounced.159
Supplement: [P. 1358, add to n.75 following Richardson v. Belcher citation:]
FCC v. Beach Communications, 508 U.S. 307 (1993) (exemption from cable TV regulation of facilities that serve only dwelling units under common ownership).
Supplement: [P. 1365, add to n.130:]
Concrete Pipe & Products v. Construction Laborers Pension Trust, 508 U.S. 602, 636–41 (1993) (imposition of multiemployer pension plan withdrawal liability on an employer is not irrational, even though none of its employees had earned vested benefits by the time of withdrawal). In Eastern Enterprises v. Apfel, 524 U.S. 498 (1998) , the challenge was to a statutory requirement that companies formerly engaged in mining pay miner retiree health benefits, as applied to a company that had placed its mining operations in a wholly owned subsidiary three decades earlier, before labor agreements included an express promise of lifetime benefits. In a fractured opinion, the justices ruled 5 to 4 that the scheme’s severe retroactive effect offended the Constitution, though differing on the governing clause. Four of the majority justices based the judgment solely on takings law, while opining that “there is a question” whether the statute violated due process as well. The remaining majority justice, and the four dissenters, viewed substantive due process as the sole appropriate framework for resolving the case, but disagreed on whether a violation had occurred.
Supplement: [P. 1366, add to n.138:]
The Court has addressed similar issues under breach of contract theory. United States v. Winstar Corp., 518 U.S. 839 (1996) .
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