Slaughter-Housing Economic Liberty

Sparsely-populated Chelan County in central Washington has already had an outsized influence on our nation’s constitutional history.  That influence could grow larger still if the U.S. Supreme Court takes up the latest case arising from this outpost in the Cascades.

In 1937, Chelan County resident Elsie Parrish won a decision that today is commonly regarded as the end of the “Lochner era”—that jurisprudential period when the Supreme Court provided robust protection for economic rights through the doctrine of substantive due process.  Resort to that much-maligned doctrine was necessitated by the Court’s earlier decision in the Slaughter-House Cases, which held that the primary constitutional bulwark of economic rights—the Privileges or Immunities Clause of the Fourteenth Amendment—does not protect a natural right to economic liberty.  If such a right was to be protected, it would have to be through some other source.  Lochner found that source in substantive due process, and for the first three decades of the twentieth century, the Court routinely relied on that doctrine to strike down economic regulations.

That ended with Elsie Parrish’s case.  Elsie, a hotel chambermaid in Wenatchee, the Chelan County seat, sued when the hotel refused to pay her in accordance with Washington’s minimum-wage statute.  The hotel defended itself by arguing that the statute infringed its liberty of contract and was unconstitutional under the Lochner line of cases.  After a switch in the voting propensity of Justice Owen Roberts—the famous “switch in time that saved nine”—the Supreme Court rejected that argument, bringing the Lochner era to a close.

Regardless of one’s thoughts on minimum-wage laws or the West Coast Hotel v. Parrish decision, there is no doubting that this little wage dispute from Chelan County fundamentally altered the course of American constitutional law.  The protections afforded economic rights during the Lochner era came to a screeching halt, and government’s reach into economic affairs quickly metastasized.

Which brings us back to Chelan County.  Jim and Cliff Courtney are fourth-generation residents of Stehekin, a remote community at the far end of Lake Chelan—a 55-mile-long lake that the federal government has designated a “navigable water of the United States.”  Like their great-grandparents who settled this area, Jim and Cliff are quintessential bootstrap entrepreneurs.  Because Stehekin is accessible only by boat or plane, they want to provide a ferry service along Lake Chelan so that more people can enjoy the natural beauty and outdoor activities of the area their family has called home for so long.

The Courtneys have been trying to launch this service since 1997, but at every turn they have been thwarted by a nearly-century-old, government-imposed monopoly.  In 1927, Washington imposed a “certificate of public convenience and necessity” requirement for ferry service on the lake.  This requirement is an anticompetitive condition that turns the ordinary rules of business on their head.  It forces entrepreneurs like Jim and Cliff to either obtain the existing ferry operator’s permission to compete or prove to the government, in a trial-like proceeding, that the existing ferry operator is not providing “reasonable and adequate service” and that a new service is necessary.  The existing ferry operator gets to participate in that proceeding and protest the new service.

Not surprisingly, since the certificate requirement was imposed, Washington has granted one—and only one—certificate for ferry service on Lake Chelan.  The same company has held it since 1929.

Jim and Cliff filed a federal constitutional challenge to the certificate requirement in October 2011.  The requirement and resulting monopoly, they argued, violate the Privileges or Immunities Clause of the Fourteenth Amendment.  That clause was adopted in the wake of the Civil War to protect the newly-freed slaves, whose economic rights were still being trampled by Southern states.  Unfortunately, in the Slaughter-House Cases, the Supreme Court held that the clause does not protect a general, natural right to economic liberty.  But the Court stressed that the clause does protect certain narrower rights of national citizenship.  The Court enumerated some of those rights, many of which have an economic dimension.  They include the “right to use the navigable waters of the United States”—the very right Jim and Cliff wish to exercise.

Despite Slaughter-House’s recognition of this right, the district court dismissed the Courtneys’ lawsuit, and the Ninth Circuit affirmed.  Turning a blind eye to history, the Ninth Circuit held that the rights the Privileges or Immunities Clause protects are, with one exception, non-economic and that, therefore, the “right to use the navigable waters of the United States” is merely a “right to navigate” them—not to use them in economic activity.

The Courtneys have petitioned for certiorari, and the Supreme Court will consider the petition on May 29.  A coalition of the nation’s foremost Privileges or Immunities Clause scholars has submitted an amicus brief urging the Court to grant certiorari.  The brief undertakes a thorough review of the clause’s history and convincingly demonstrates the errors of the Ninth Circuit’s interpretation.

“The Ninth Circuit’s removal of economic activity from the scope of the Clause cannot be reconciled with history demonstrating that economic freedom lay at the provision’s core,” the brief argues.  “Slaughter-House never suggested that economic activity was excluded from the scope of the[] national privileges or immunities” recognized in that case, and the history of the clause “flatly contradicts the Ninth Circuit’s refusal to apply the right to ‘use’ navigable federal waters to [the Courtneys’] intended use of the waters for economic activity.”  As the brief somewhat humorously, but nonetheless pointedly, observes, “[t]he framers of the Privileges or Immunities Clause did not act to secure the right to ‘use’ the navigable waters only for yacht racing, sport fishing, or pleasure cruises.”

The Courtneys’ case presents the perfect opportunity for the Court to recognize the economic concerns that motivated the Privileges or Immunities Clause without having to overrule the underlying holding of Slaughter-House.  As the scholars’ amicus brief notes, it “provides a particularly appropriate vehicle to begin, in a cautious and restrained fashion, the process of placing judicial interpretation of the Privileges or Immunities Clause on a proper historical foundation.”

And that brings us back to Elsie Parrish.  Seventy-seven years ago, her case from out-of-the-way Chelan County ended what many consider the judicial error of the Lochner era.  Lochner, however, only came about because of an earlier error:  Slaughter-House.  It may be another case from Chelan County that begins the process of correcting the earlier error—not in the sudden, up-ending fashion of Elsie Parrish’s case, but with a measured first step.

The author is a senior attorney at the Institute for Justice, which represents the Courtney brothers in Courtney v. Danner (No. 13-1064).

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More by | Michael Bindas Michael Bindas , Law.com Contributor
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