Nebbia v. New York

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Following is the case brief for Nebbia v. New York, 291 U.S. 502 (1934)

Case Summary of Nebbia v. New York:

  • The New York Legislature created a Milk Control Board, which had the power to fix milk prices to help milk farmers make a living during the Great Depression.
  • Nebbia, a store owner, sold milk at a price lower than the one fixed by the Board.  He was convicted and fined $25.
  • The trial court and N.Y. Court of Appeals rejected Nebbia’s Fourteenth Amendment challenge to the price controls.
  • The U.S. Supreme Court affirmed.  It held that there was no constitutional violation because the price controls were neither discriminatory nor arbitrary, and they furthered the legitimate legislative goal of promoting public welfare.

Nebbia v. New York Case Brief

Statement of the Facts:

In 1933 during the Great Depression, the New York Legislature set up a Milk Control Board.  The Board was given the power to fix a maximum and minimum price that a store owner could charge a customer for milk.  The Legislature created the Board because it recognized that milk was a vital product for the citizens of New York State, and because the kind of competition that was occurring in the milk market due to the Great Depression put milk farmers at a huge disadvantage.

Nebbia, a store owner, violated the law by selling milk to a customer at a price lower than the price fixed by the Milk Control Board.  Nebbia was convicted of the offense and fined $25.

Procedural History:

  • Nebbia, at his trial, claimed that the Milk Control Board’s order fixing the price of milk violated the equal protection and due process clauses of the Fourteenth Amendment.
  • Both the trial court and the New York Court of Appeals rejected Nebbia’s constitutional argument and affirmed his conviction.
  • The U.S. Supreme Court granted certiorari.

Issue and Holding:

Does the U.S. Constitution prohibit a state from fixing the price of milk?  No.

Judgment:

The judgment of the New York Court of Appeals is affirmed.

Rule of Law or Legal Principle Applied:

A state is free to adopt whatever economic policy reasonably promotes the public welfare.  Accordingly, economic laws, such as price controls, do not violate the Constitution if they have a reasonable relationship to a legitimate legislative purpose and are not arbitrary or discriminatory.

Reasoning:

  • The Milk Industry is Already Heavily Regulated

There is no industry, other than the railroad industry, that is regulated in New York as heavily as the milk industry.  There is also no question that milk is a major product in New York State, and that the milk industry has a significant impact on the health and prosperity of the state.  Accordingly, the New York Legislature’s decision to regulate the milk industry through the Milk Control Board is not without precedent.

  • Freedom of Private Contract and Property are Not Unlimited

The freedom to engage in private contracts and negotiate private property without government interference is the general rule.  However, that rule is not without limit.  The government can intervene in such private activity when it believes it must do so to protect and promote the public welfare. If the Legislature concludes that the conditions in an industry show that unrestrained competition is an insufficient safeguard for consumers, produces waste that is harmful to the public, threatens to cut off supply, or even destroys the industry, then government intervention is appropriate.

  • Price Controls Do Not Violate the Constitution if they are Reasonably Related to a Legitimate Legislative Goal

The price controls in this case do not violate the equal protection clause because the controls impact all store owners equally.  In addition, the controls do not violate the due process clause because they are not discriminatory, arbitrary, or irrelevant with regard to the Legislature’s goal of promoting the public welfare.  In sum, the price controls do not violate the U.S. Constitution.

Dissenting Opinion (McReynolds):

Price fixing is beyond the power of the government.  It is not regulation.  Rather, a price control is improper management or control over an industry’s market, which amounts to a deprivation of a person’s fundamental right to conduct business freely in an open market.

Significance:

Nebbia v. New York marks a substantial departure from the Court’s Lochner-era decisions, which were characterized by pro-business decisions that allowed devastating income inequality to continue. Indeed, Nebbia embraced the New Deal policies of the time, giving government a role in protecting or saving those most hurt by the Great Depression.

Student Resources:

https://supreme.justia.com/cases/federal/us/291/502/case.html

https://www.oyez.org/cases/1900-1940/291us502