Story Case

The legislature of a newly settled state, having pursued a program of enacting into law all of the most modern ideas of reform, had come to feel the responsibility of providing for all the relations of the citizens. Most of the members were farmers or merchants and had felt the perhaps natural opposition to the system of price fixing generally by professional men, that is lawyers, doctors, architects, etc. They passed a statute prohibiting the fixing of a charge for professional services with relation to the wealth of the client or patient, or his ability to pay, and required that every professional man have a schedule of prices, based upon the amount of time spent or the character of the work done, which schedule he was required to keep at all times open to the inspection of his clients or customers. Departure from this fixed schedule was made an offense and penalized. The doctors of the state, while few in number, were united in their opposition to this law, and by general agreement, refused to comply with it. One of the leading physicians, Dr. Harvey Vernon, having been indicted for violating the law consented to have his case made the test of the law. His defense was prepared by counsel employed by a committee of the organized doctors of the state. Other prosecutions were suspended until the disposition of this test case. It was carried to the Supreme Court of the state, for a decision upon the constitutionality of the law, the doctors urging that it violated the guarantee of the Federal Constitution that no state should deprive any person of liberty or property without due process of law. Is the law invalid, or should the conviction of Dr. Vernon be affirmed?

Ruling Court Case. State Vs. Fairmont Creamery Company Of Nebraska

Volume 153 Iowa Reports, Page 702; Volume 133 Northwestern Reporter, Page 895.

The following statute was passed in Iowa: "Any person, firm, company, association or corporation foreign or domestic, doing business in the state of Iowa and engaged in the business of buying milk, cream, or butter fat for the purpose of manufacture, or of buying poultry, eggs or grain for the purpose of sale or storage, that shall for the purpose of creating a monopoly or destroying the business of a competitor discriminate between different sections, localities, communities, cities or towns of this state by purchasing such commodities at a higher price or rate in one section, locality, community, city, or town than is paid for the same commodity by the same person, firm, company, association or corporation in another section, locality, community, city or town, after making due allowance for the difference, if any, in the grade or quality, and in the actual cost of transportation from the point of purchase to the point of manufacture, sale or storage, shall be deemed guilty of unfair discrimination which is hereby prohibited and declared to be unlawful, but prices made to meet competition in such locality shall not be in violation of this act; and any person, firm, company, association or corporation or any officer, agent, receiver or member of any such firm, company, association or corporation found guilty of unfair discrimination as defined herein, shall be punished as provided in section 5028c of the Supplement to the Code, 1907."

The defendant company was indicted for an offense against this statute, but was acquitted and dismissed. The trial court ruled that the statute was unconstitutional because it was not uniform in its operations but applied only to a few persons and because it was arbitrary and unreasonable. In order to obtain a review of this holding, the state appealed to the Supreme Court.

The courts held that the judgment of the trial court should be reversed and that the law was unconstitutional. Mr. Justice Evans, delivering the opinion of the court, said: "It is not possible to lay down a very definite rule whereby the reasonableness of a statutory classification may be determined. Generally speaking, if a law applies to only a class of persons, the classification must be based upon a substantial distinction which makes one class so different from another as to suggest the necessity of different legislation with respect to it. If the law is general and uniform in its operations upon all persons in the like situation, it is not unreasonable merely because its practical application will be limited to comparatively few persons. The act under consideration applies only to persons engaged in the business of buying milk and cream for purposes of manufacture, and not to those who buy for immediate consumption. Comparatively few persons are within the first class, while a multitude are within the second. But those who buy milk and cream for purpose of manufacture sustain a different relation to the community. The magnitude of their operations, the motive to monopolize, and the ability to create a monopoly are quite manifest, while to the multitude who buy milk for consumption, a monopoly would be quite impossible and its attempt absurd. We are impressed, therefore, that the classification adopted is one that arises quite naturally and that it rests upon a substantial and practical distinction. If it be true that large corporations enter the creamery-business and cover a large territory, including many-purchasing points, and if it be true that they resort to methods which would be deemed morally dishonest and unjust in order to obtain a monopoly of the creamery business in the territory which they so occupy, then a situation is presented which fairly calls for legislative attention. The resulting legislation may not be the best. But a legislative act which is directed against a particular evil is not for that reason alone to be regarded as capricious and arbitrary in its classification."

Ruling Law. Story Case Answer

The power of the state to interfere with the freedom of the individual must be exercised only where such interference is necessary for the welfare of the public. The courts will not decide whether they think the law under consideration is necessary, but it will be enforced if it appears that the legislature might reasonably have thought that it was necessary. If it is a question which might reasonably be settled either way, the court will respect the decision of the legislature. So if the regulation attempted is directed against a source of public injury and is a proper and reasonable method of preventing that injury, it will be held constitutional.

Thus, in the Ruling Court Case, the legislative opinion that it was necessary to curb monopolistic methods in use by the creameries was respected by the court. In the case of State vs. Standard Oil Co., Volume 111 Minnesota Reports, Page 85; Volume 126

Northwestern Reporter, Page 527, a similar statute prohibiting price discrimination by producers, manufacturers, and distributors of petroleum and its products, was held constitutional.

In the Story Case, however, the legislature has attempted a thing that it is very hard to say would be regarded today as reasonably necessary for the public welfare. It has been held that the great danger of cheating and fraud on the part of itinerant peddlers justified the legislature in imposing special requirements and regulations upon them, but it is not here pretended that the public is defrauded by the present system of fixing charges for professional service. The most that appears is that the members of the legislature do not approve of the system, but that is far from enough to justify interference in a matter that is wholly individual in its consequences. Consequently, the law should be held unconstitutional, and Dr. Vernon should be discharged.