Yale Law Journal

A New Jersey insurance agency succeeded in bringing to the Supreme Court of the United States its complaint that a New Jersey statute, prohibiting insurance companies from paying to any local agent commissions in excess of those paid to any other local agent, infringed upon its "liberty" to contract about its affairs in violation of the Fourteenth Amendment. ¹ The complaint was appealing. Agency and principals had agreed upon a 25% commission as "reasonable" within the terms of their contracts. Both desired that the contracts be performed. The only obstacle was that another broker had agreed to accept a 20% commission. The latter made no complaint. Nothing stood in the way of performance of the contract, except the company's reluctance to disobey the statute. Four Justices of the Court ² recognized the obvious infringement of the parties' liberty, recalled the Court's prior insistence that "freedom of contract is the general rule, restraint the exception," and, having been given no grounds to justify the exception in the case before them, concluded, of necessity, that the statute was unconstitutional. But five Justices ³ took seriously what had hitherto come to be meaningless bromides, that the judicial annulment of legislative enactments is, at best, a dangerous business, that the power to that end is to be exercised only in the "clearest" cases, that statutes are not to be annulled unless invalidity is clearly proved by a presentation of the underlying facts which condition constitutionality. Since no "factual foundation of record for overthrowing the statute" was presented, and since it did "not appear upon the face of the statute, or from any facts of which the court must take judicial notice," that evils "did not exist" for which this statute was "an appropriate remedy" "the presumption of constitutionality" had, of necessity, to prevail. ⁴ The long list of cases cited by the four dissenters in which the "general rule" of liberty of contract was used to overthrow legislation even in the face of a factual foundation in favor of validity was simply ignored.