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New State Ice Co. v. Liebmann

United States District Court · Constitutional Law

Constitutional LawDue ProcessPolice PowerPublic Utility RegulationFourteenth Amendmentdue processpolice powerpublic business

Facts

The defendant sought to enter the ice manufacturing and distribution business in Oklahoma City and had purchased a site and begun constructing buildings for that purpose. Before he completed the plant, existing ice companies in the city, which the court found had practically a monopoly there, sued to stop him from entering the business. They relied on a 1925 Oklahoma act declaring the manufacture, sale, and distribution of ice to be a public business and requiring a license from the Corporation Commission before anyone could engage in it. The court found that in actual operation the statute tended to destroy competition and perpetuate monopoly in many cities and towns.

Issue

May the state, by simply declaring all ice manufacturing and distribution to be a public business and requiring a license from the Corporation Commission, subject that private business to utility-type control and exclude a person from entering it? More specifically, is the validity and scope of such regulation conclusively determined by the legislature's declaration, or is it a question for the court?

Rule

The legislature does not have power, by mere ipse dixit, to make a business public in name when in fact and essential nature it is private. Whether a business is a public utility or otherwise affected with a public use, and whether the regulation imposed is reasonable and necessary rather than arbitrary and oppressive, are questions of law for the court; the state may regulate abuses such as monopoly, but may not arbitrarily require permission to enter an honest private occupation.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Nevada enacts a statute declaring all neighborhood laundries in Reno to be a "public service industry" and requiring anyone who wants to open a laundry to obtain a certificate from the State Service Board. The board may deny a certificate whenever it concludes that existing laundries already provide enough service. Maya Ortiz leases a storefront and buys equipment, but established laundries sue to stop her from opening without a certificate.

How should a court most likely rule on Maya's constitutional challenge to the statute as applied to her?

Explanation. The majority rule is that a legislature may not by mere declaration convert a business private in its essential nature into a public utility or business affected with a public use. Courts decide as a matter of law whether the business is truly public in nature and whether the regulation is reasonably necessary rather than arbitrary and oppressive. A licensing regime that conditions entry into an ordinary private occupation on prior governmental permission, especially where officials may deny entry because existing firms are sufficient, unlawfully carries the power to exclude a person entirely from the occupation.