In Munn v. Illinois (1877), the U.S. Supreme Court found that the state of Illinois could regulate a private industry in the public interest. The Court's decision drew a distinction between state and federal industry regulation.
Case Argued: January 15 and 18, 1876 Decision Issued: March 1, 1877 Petitioner: Munn and Scott, a grain warehouse company in Illinois Respondent: The State of Illinois Key Questions: Can the state of Illinois impose regulations on private business? Does regulating a private industry in the interest of the common good amount to a Fourteenth Amendment violation? Majority: Justices Waite, Clifford, Swaine, Miller, Davis, Bradley, Hunt Dissenting: Justices Field and Strong Ruling: Illinois may set rates and require licenses from grain warehouses. These regulations are designed to aid members of the public by helping them engage in business with a private company. In the mid-1800s, grain was grown in the west and shipped eastward by boat or by train. As railroads expanded to connect regions across the U.S., Chicago became a hub and midpoint for shipping one of the fastest-growing products in the U.S.—grain. In order to store the bushels that were being shipped by train or boat, private investors began building grain warehouses (also known as elevators) alongside railroad tracks and harbors. The grain warehouses in Chicago held 300,000 to one million bushels at one time to keep up with demand. Railways found it impractical to own and operate grain warehouses, even though they were often situated alongside railroad tracks. This allowed private investors to step in to buy and build large grain elevators. In 1871, an association of farmers called the National Grange pressured the Illinois State legislature to set a maximum rate for grain storage. These rates, and other protections won by the farmers, became known as the Granger Laws. Munn and Scott owned and operated private grain stores in Chicago. In January 1972, Munn and Scott set rates for their service that were higher than those allowed under the Granger Laws. The firm was charged and found guilty of exceeding the maximum grain storage cost. Munn and Scott appealed the decision, arguing that Illinois had illegally interfered with their private business. The Due Process Clause of the Fourteenth Amendment states that a government entity shall not deprive someone of life, liberty, or property without due process of law. Were the owners of grain elevators unjustly deprived of property due to the regulations? Can the state of Illinois create regulations that impact private industries within states and across state boundaries? Munn and Scott argued that the state had unlawfully deprived them of their property rights. Central to the concept of owning property is being able to use it freely. In limiting the free use of their grain stores, the state of Illinois had deprived them of their ability to completely control their property. This regulation was a violation of due process under the Fourteenth Amendment, the attorneys argued. The state argued that the Tenth Amendment reserved all rights not granted to the federal government for the states. Illinois had exercised its power to lawfully regulate business in the interest of the public good. The state had not excessively exercised its authority when imposing maximum rates and licensing requirements on warehouse owners. Chief Justice Morrison Remick Waite delivered the 7-2 decision which upheld that state's regulations. Justice Waite noted that there are many circumstances in which private property may be used and regulated for the public good. The Court used a combination of English common law and American jurisprudence, acknowledging that the United States retained a lot of British governing practices post revolution. Justice Waite found that private property, when used publicly, is subject to public regulation. Grain stores are used by the public for the common good and charge farmers a fee for usage. He noted that the fee was similar to a toll. Every bushel of grain pays a "common toll" for its passage through the warehouse. It is difficult to see, Justice Waite pointed out, how fishermen, ferrymen, innkeepers, and bakers must be subject to tolls exacted for the "public good," but owners of grain stores could not. Regulation of private industries used for the common good is not subject to Fourteenth Amendment due process claims, the Court found. With respect to interstate commerce, Justice Waite pointed out Congress had not tried to assert power over the grain stores. It's true that Congress alone can control interstate commerce, he wrote. However, a state like Illinois might take action to protect the public interest, and not interfere with federal control. Additionally, in this situation, grain warehouses participated in interstate commerce no more than a horse and cart would as they traveled between state lines. They are connected by an interstate mode of transportation but are essentially local operations, the Court opined. Justice Waite added that the warehouse owners could not complain that the Illinois legislature enacted laws that affected their business after they built their warehouses. From the beginning, they should have expected some sort of regulation in the interest of the common good. Justices William Strong and Stephen Johnson Field dissented, arguing that forcing a business to obtain a license, regulating business practices, and setting rates were clear intrusions upon property rights without due process of law. These intrusions could not be upheld under the Fourteenth Amendment, the justices argued. Munn v. Illinois drew an important and lasting distinction between interstate commerce, which is the federal government's domain, and domestic commerce, which a state is free to regulate. Munn v. Illinois was considered a win for the National Grange because it upheld the maximum prices they had fought for. The case also stood to represent the U.S. Supreme Court's acknowledgment that the Fourteenth Amendment Due Process Clause could apply to business practices as well as people.
... MR. CHIEF JUSTICE WAITE delivered the opinion of the court. The question to be determined in this case is whether the general assembly of Illinois can, under the limitations upon the legislative power of the States imposed by the Constitution of the United States, fix by law the maximum of charges for the storage of grain in warehouses at Chicago and other places in the State having not less than one hundred thousand inhabitants, 'in which grain is stored in bulk, and in which the grain of different owners is mixed together, or in which grain is stored in such a manner that the identity of different lots or parcels cannot be accurately preserved.' It is claimed that such a law is repugnant— 1. To that part of sect. 8, art. 1, of the Constitution of the United States which confers upon Congress the power 'to regulate commerce with foreign nations and among the several States;' 2. To that part of sect. 9 of the same article which provides that 'no preference shall be given by any regulation of commerce or revenue to the ports of one State over those of another;' and 3. To that part of amendment 14 which ordains that no State shall 'deprive any person of life, liberty, or property, without due process of law, nor deny to any person within its jurisdiction the equal protection of the laws.' We will consider the last of these objections first. … The Constitution contains no definition of the word 'deprive,' as used in the Fourteenth Amendment. To determine its signification, therefore, it is necessary to ascertain the effect which usage has given it, when employed in the same or a like connection. While this provision of the amendment is new in the Constitution of the United States, as a limitation upon the powers of the States, it is old as a principle of civilized government. It is found in Magna Charta, and, in substance if not in form, in nearly or quite all the constitutions that have been from time to time adopted by the several States of the Union. By the Fifth Amendment, it was introduced into the Constitution of the United States as a limitation upon the powers of the national government, and by the Fourteenth, as a guaranty against any encroachment upon an acknowledged right of citizenship by the legislatures of the States. … When one becomes a member of society, he necessarily parts with some rights or privileges which, as an individual not affected by his relations to others, he might retain. 'A body politic,' as aptly defined in the preamble of the Constitution of Massachusetts, 'is a social compact by which the whole people covenants with each citizen, and each citizen with the whole people, that all shall be governed by certain laws for the common good.' This does not confer power upon the whole people to control rights which are purely and exclusively private … but it does authorize the establishment of laws requiring each citizen to so conduct himself, and so use his own property, as not unnecessarily to injure another. … From this source come the police powers, which, as was said by Mr. Chief Justice Taney in the License Cases … 'are nothing more or less than the powers of government inherent in every sovereignty, ... that is to say, ... the power to govern men and things.' Under these powers the government regulates the conduct of its citizens one towards another, and the manner in which each shall use his own property, when such regulation becomes necessary for the public good. … From this it is apparent that, down to the time of the adoption of the Fourteenth Amendment, it was not supposed that statutes regulating the use, or even the price of the use, of private property necessarily deprived an owner of his property without due process of law. Under some circumstances they may, but not under all. The amendment does not change the law in this particular: it simply prevents the States from doing that which will operate as such a deprivation. This brings us to inquire as to the principles upon which this power of regulation rests, in order that we may determine what is within and what without its operative effect. Looking, then, to the common law, from whence came the right which the Constitution protects, we find that when private property is 'affected with a public interest, it ceases to be juris privati only.' This was said by Lord Chief Justice Hale more than two hundred years ago, in his treatise De Portibus Maris … and has been accepted without objection as an essential element in the law of property ever since. Property does become clothed with a public interest when used in a manner to make it of public consequence, and affect the community at large. When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created. He may withdraw his grant by discontinuing the use; but, so long as he maintains the use, he must submit to the control. … From the same source comes the power to regulate the charges of common carriers, which was done in England as long ago as the third year of the reign of William and Mary, and continued until within a comparatively recent period. … Common carriers exercise a sort of public office, and have duties to perform in which the public is interested. … Their business is, therefore, 'affected with a public interest,' within the meaning of the doctrine which Lord Hale has so forcibly stated. But we need not go further. Enough has already been said to show that, when private property is devoted to a public use, it is subject to public regulation. It remains only to ascertain whether the warehouses of these plaintiffs in error, and the business which is carried on there, come within the operation of this principle. … Neither is it a matter of any moment that no precedent can be found for a statute precisely like this. It is conceded that the business is one of recent origin, that its growth has been rapid, and that it is already of great importance. And it must also be conceded that it is a business in which the whole public has a direct and positive interest. It presents, therefore, a case for the application of a long-known and well-established principle in social science, and this statute simply extends the law so as to meet this new development of commercial progress. There is no attempt to compel these owners to grant the public an interest in their property, but to declare their obligations, if they use it in this particular manner. … It is insisted, however, that the owner of property is entitled to a reasonable compensation for its use, even though it be clothed with a public interest, and that what is reasonable is a judicial and not a legislative question. As has already been shown, the practice has been otherwise. In countries where the common law prevails, it has been customary from time immemorial for the legislature to declare what shall be a reasonable compensation under such circumstances, or, perhaps more properly speaking, to fix a maximum beyond which any charge made would be unreasonable. Undoubtedly, in mere private contracts, relating to matters in which the public has no interest, what is reasonable must be ascertained judicially. But this is because the legislature has no control over such a contract. So, too, in matters which do affect the public interest, and as to which legislative control may be exercised … the courts must determine what is reasonable. The controlling fact is the power to regulate at all. If that exists, the right to establish the maximum of charge, as one of the means of regulation, is implied. … We know that this is a power which may be abused; but that is no argument against its existence. For protection against abuses by legislatures the people must resort to the polls, not to the courts. … We come now to consider the effect upon this statute of the power of Congress to regulate commerce. … The warehouses of these plaintiffs in error are situated and their business carried on exclusively within the limits of the State of Illinois. They are used as instruments by those engaged in State as well as those engaged in inter-state commerce … . Incidentally they may become connected with inter-state commerce, but not necessarily so. Their regulation is a thing of domestic concern, and, certainly, until Congress acts in reference to their inter-state relations, the State may exercise all the powers of government over them, even though in so doing it may indirectly operate upon commerce outside its immediate jurisdiction. … |
What important principle was established in the case munn v. illinois?
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