CARROLL v. GREENWICH INSURANCE COMPANY OF NEW YORK
No. 50
SUPREME COURT OF THE UNITED STATES
November 27, 1905
199 U.S. 401
APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF IOWA.
A company lawfully doing business in a State is no more bound by a general unconstitutional enactment than a citizen of that State.
THE facts are stated in the opinion.
Mr. Charles W. Mullan and Mr. Charles A. Clark, for appellant:
Sections 1754, 1755, 1756 and 1757 of the code of Iowa do not violate or infringe
The statute in question extends to and embraces equally all persons and corporations who fall within the classification, and is therefore valid under the state constitution. Parbier v. Con-nolly, 113 U.S. 27; Sutton v. State, 96 Tennessee, 696; Des Moines v. Bolton, 102 N.W. Rep. (Iowa), 1045; State v. Garbroski, 111 Iowa, 496; Iowa Land Co. v. Soper, 39 Iowa, 112; McAunich v. M. & M. R. Co., 20 Iowa, 338; Morris v. Stout, 110 Iowa, 659.
The statute in this case does not contravene any of the provisions of
Nor does it violate or infringe
The Iowa statute does not deprive any person of liberty or property, and does not restrict or abridge the liberty of contract; nor does any provision of such statute in any manner violate or infringe any provision of the
Under the uniformity clauses of the Iowa constitution, a statute prescribing regulations for actions on insurance policies different from those on other contracts is valid. Christie v. Life Ins. Co., 82 Iowa, 360.
A method assessing railway companies different from the method of assessing other taxpayers is not invalid. Central Iowa R. R. Co. v. Board, 67 Iowa, 199. So also as to express and telegraph companies. U. S. Ex. Co. v. Ellison, 28 Iowa, 370.
The statute establishing the liability of railroad companies to employés for negligence of co-employés is valid. McAunich v. M. & M. Ry. Co., 20 Iowa, 338; Deppe v. Ry. Co., 36 Iowa, 52. Also one assessing state banks for taxation differently from national banks. Primghar State Bank v. Rerick, 64 N.W. Rep. 801. And see Martin v. Blattner, 68 Iowa, 286.
This court will follow the construction of the state court in these matters. Chicago &c. R. R. Co. v. Iowa, 94 U.S. 155. See also Field v. Barber Asphalt Co., 194 U.S. 618; Kentucky R. R. Tax Cases, 115 U.S. 321; Hayes v. Missouri, 120 U.S. 68; Magoun v. Ill. &c. Bank, 170 U.S. 283; Gulf &c. Railroad Co. v. Ellis, 165 U.S. 150.
The right of contract may be subjected to restraints demanded by the safety and welfare of the State. St. Louis &c. Ry. v. Paul, 173 U.S. 404; Knoxville Iron Co. v. Harbinson, 183U.S. 13, 22; Smiley v. Kansas, 196 U.S. 447; Chapin v. Brown, 83 Iowa, 156.
The right to contract for a harmful combination is not to be upheld. Northern Securities Co. v. United States, 193 U.S. 197. So as to contracts to suppress competition. Waters-Pierce Oil Co. v. Texas, 177 U.S. 28; National Cotton Oil Co. v. Texas, 197 U.S. 115.
Lochner v. New York, 198 U.S. 45, simply held such restraints did not apply to restrictions upon the occupation and employment of bakers as a class.
As to other occupations, eight-hour laws have been sustained, although they necessarily limited the right of contract. Holden v. Hardy, 169 U.S. 366; Atkin v. Kansas, 191 U.S. 207; see also Mugler v. Kansas, 123 U.S. 623.
Also see laws prohibiting the manufacture and sale of colored oleomargarine, a healthful food product, which remained wholesome after the coloring. Capital City Dairy Co. v. Ohio, 183 U.S. 238; McCray v. United States, 195 U.S. 27.
Nor can the right of contract be sustained as to a combination to injure the business of another. Aikens v. Wisconsin, 195 U.S. 194. See also
A State may impose any restrictions it may see fit upon foreign corporations. Fritts v. Palmer, 132 U.S. 282; Allgeyer v. Louisiana, 165 U.S. 578; Dayton Coal Co. v. Barton, 183 U.S. 23; Farmers’ Ins. Co. v. Dabney, 189 U.S. 301.
And may exclude them altogether unless restrained by some other provision of the Federal Constitution than the Fourteenth Amendment. Silver Horn Co. v. New York, 143 U.S. 305; Ducat v. Chicago, 10 Wall. 410.
The rule sustained in a Case involving right of contract affecting competition under a Texas statute. Waters-Pierce Oil Co. v. Texas, 177 U.S. 28; Nat. Oil Co. v. Texas, 197 U.S. 115.
And see, construing statutes of Missouri and California, regulating insurance, Orient Ins. Co. v. Daggs, 172 U.S. 557; Hooper v. California, 155 U.S. 648.
The Federal Court in equity has jurisdiction to pass upon the validity of a statute claimed to be void as in violation of the Constitution, when the enforcement of such statute will create a multiplicity of suits or cause great and irreparable injury, and herein an action of this character is not an action against the State. Osborn v. United States Bank, 9 Wheaton, 738; Pennoyer v. McConnaughy, 140 U.S. 1; Scott v. Donald, 165 U.S. 58; Hutchinson v. Beckham, 118 Fed. Rep. 399.
Corporations equally with individuals may invoke the aid of the Federal Constitution, because they are persons within the meaning of the
The Iowa statutes especially providing for foreign corporations doing business in Iowa are
The legislature of a State, under the guise of protecting public interests, may not arbitrarily interfere with private business, or impose unusual and unnecessary restrictions upon lawful occupations. Lawton v. Steele, 152 U.S. 133; Allgeyer v. Louisiana, 165 U.S. 578; Lochner v. New York, 198 U.S. 45; State v. Kreutzberg, 90 N.W. Rep. 1098 (Wis.).
Under the guise of police regulation the rights of persons
Reasonable contracts in restraint of trade are not void or against public policy. This is especially true where the subject of the contract is not a prime necessity or staple of commerce. Oregon Nav. Co. v. Winsor, 20 Wall. 64; Fowle v. Park, 131 U.S. 88; Chicago Railway Co. v. Pullman Co., 139 U.S. 79; Northern Securities Co. v. United States, 193 U.S. 197; Smiley v. Kansas, 196 U.S. 447; Central Shade Roller Co. v. Cushman, 143 Massachusetts, 353; Herriman v. Menzies, 115 California, 16; Manchester & L. R. R. v. Concord, 20 Atl. Rep. 385.
Issuing policies or contracts of insurance is not commerce. Paul v. Virginia, 8 Wall. 168, 183; Nathan v. Louisiana, 8 How. 73; Insurance Co. v. Massachusetts, 10 Wall. 566; Doyle v. Insurance Co., 94 U.S. 535; Philadelphia Fire Ass‘n. v. New York, 119 U.S. 110; Queen Insurance Co. v. State, 86 Texas, 250.
For cases in which legislation has been held to be in contravention of the Fourteenth Amendment of the Constitution of the United States where the classification has been one of arbitrary selection, and where the liberty of contract has been arbitrarily and without just cause invaded, see cases cited supra and Cooley‘s Const. Lim., 5th ed., 484-486; 6th ed., pp. 481-483; Cotting v. Kansas City Stock Yards, 183 U.S. 79; Connelly v. Sewer Pipe Co., 184 U.S. 540; State v. Haun, 61 Kansas, 146; Frorer v. People, 141 Illinois, 171; State v. Goodwill, 33 W. Va. 179; State v. Fire Creek Coal Co., 33 W. Va. 188; State v. Loomis, 115 Missouri, 307, 315; Godcharles v. Wigeman, 113 Pa. St. 431, 437; Dibrell v. Morris Heirs, 15 S. W. Rep. 87; Republic Iron & Steel Co. v. State, 66 N. E. Rep. (Ind.) 1006; Vanzunt v. Waddell, 2 Yerger, 260, 270; Millett v. People, 117 Illinois, 294; Harding v. People, 160 Illinois, 459; Eden v. People, 161 Illinois, 296; Chicago v. Netcher, 183 Illinois, 104; Bailey v. People, 190 Illinois, 28; Johnson v. Railway, 43 Minnesota, 222; Sutton v. State, 96 Tennessee, 696; State v. Garbroski, 111 Iowa, 498; State v. Jackman, 42 L. R. A. 438 (N. H.); S. &.amp; N. Alabama Ry. v. Morris, 65 Alabama, 193, 199; Chicago & St. L. Ry. v. Moss, 60 Mississippi, 641; Wilder v. Chicago & West Mich. Ry., 70 Michigan, 382; St. Louis Railway v. Williams, 49 Arkansas, 492; San Antonio Railway v. Wilson, 19 S. W. Rep. 910; Wallace v. Railway, 94 Georgia, 732; Street v. Varney Electrical Co., 61 L. R. A. 155; Rodgers v. Color, 166 N. Y. 1.
MR. JUSTICE HOLMES delivered the opinion of the court.
This is a bill brought by a number of fire insurance companies, incorporated in States other than Iowa, to enjoin the auditor of that State from enforcing
By section 1754, “It shall be unlawful for two or more fire insurance companies doing business in this State, or for the officers, agents or employés of such companies, to make or enter into any combination or agreement relating to the rates to be charged for insurance, the amount of commissions to be allowed agents for procuring the same, or the manner of transacting the fire insurance business within this State; and any such company, officer, agent or employé violating this pro-
The bill sets forth the necessity for every insurance company to gather all the experience available into one mass and to analyze and classify it scientifically in order to ascertain the true value of risks, and that it will add greatly to the expense if each company is required to employ a separate person to do the work. It charges, upon information and belief, that if the plaintiffs attempt to combine their experience and to employ the same person to analyze it, the auditor will summon them and revoke their authority to do business in the State. It further alleges that the plaintiffs desire not only to do what has been stated for their guidance in establishing rates, but to agree what classes of risks are non-insurable, how various risks shall be classified, and as to other matters relating to the manner of doing business. It repeats the charge, upon information and belief, that if the plaintiffs proceed in this manner the auditor will order an examination and revoke their licenses, and prays for an injunction against enforcing in any manner the above-mentioned sections of the Iowa Code. The Circuit Court considered that the statute was not invalid under the constitution of Iowa, but held that the prohibitions of agreements as to the amount of commissions to be allowed, or as to the manner of transacting the fire insurance business in the State, were contrary to the Fourteenth Amendment. While waiving a discussion of the clause against combinations
We assume, for purposes of decision, that the bill means that the auditor threatens and intends to enforce the act in case the plaintiffs do what they desire to do, and that if § 1754 is contrary to the Constitution of the United States, a proper case for an injunction is made out. Osborn v. Bank of the United States, 9 Wheat. 738, 839, 840. See Cleveland v. Cleveland City Ry. Co., 194 U.S. 517, 531; Detroit v. Detroit Citizens’ Street Ry. Co., 184 U.S. 368, 378. We assume further that the position of the plaintiffs is not affected by the fact that they are foreign corporations. The act is in general terms, and hits all insurance companies. If it is invalid as to some, it is invalid as to all. United States v. Ju Toy, 198 U.S. 253, 262, 263. That the requirements of the act might have been made conditions to foreign companies doing business in the State, Fidelity Mutual Life Ins. Co. v. Mettler, 185 U.S. 308, Waters-Pierce Oil Co. v. Texas, 177 U.S. 28, is immaterial, since, as we understand the statute, the legislature did not attempt to reach the result in that way. A company lawfully doing business in the State is no more bound by a general unconstitutional enactment than a citizen of the State. W. W. Cargill Co. v. Minnesota, 180 U.S. 452.
We pass to the question upon which the Circuit Court decided the case, namely, the constitutionality of § 1754, the only section which we find it necessary to consider. Whatever may be thought of the policy of such attempts, it cannot be denied in this court, unless some of its decisions are to be overruled, that statutes prohibiting combinations between possible rivals in trade may be constitutional. The decisions concern not only statutes of the United States, Northern Securities Co. v. United States, 193 U.S. 197, Swift & Company v. United States, 196 U.S. 375, but also state laws of similar import. Smiley v. Kansas, 196 U.S. 447; National Cotton Oil Co. v. Texas, 197 U.S. 115.
At the argument before us more special reasons were assigned. It was pressed that there is no justification for the particular selection of fire insurance companies for the prohibitions discussed. With regard to this it should be observed, as is noticed by the appellees, that a general statute of Iowa prohibits all contracts or combinations to fix the price of any article of merchandise or commodity, or to limit the quantity
If the legislature of the State of Iowa deems it desirable artificially to prevent, so far as it can, the substitution of combination for competition, this court cannot say that fire insurance may not present so conspicuous an example of what that legislature thinks an evil as to justify special treatment. The imposition of a more specific liability upon life and health insurance companies was held valid in Fidelity Mutual Life Insurance Co. v. Mettler, 185 U.S. 308. See also Missouri Pacific Ry. Co. v. Mackey, 127 U.S. 205; Orient Insurance Co. v. Daggs, 172 U.S. 557; Otis v. Parker, 187 U.S. 606; Home Life Insurance Co. v. Fisher, 188 U.S. 726, 727.
But it is said that, however it may be as to some regulations of fire insurance, these, or at least the last two of them, forbidding agreements as to agents’ commissions and the manner of transacting business, are not to be justified. In order to make this out the scope of the provisions was exaggerated both in the argument and in the bill. The bill seems to assume that the statute forbids insurance companies to obtain and use each other’s experience, or to employ the same person to work up the results. It does not. It simply forbids an agreement be-
The argument before us very properly was rested on the Fourteenth Amendment. Therefore it is unnecessary to discuss the other objections suggested in the bill.
Although we have conceded that the bill makes a case for an injunction if its premises are true, it cannot be understood to charge that the auditor will go further than to enforce the act as properly construed. The allegations upon information and belief, which we have stated, probably mean no more than that the plaintiffs reasonably suppose that the auditor will do his duty. They are pressed to the verge when they are taken to set forth a threat to do that. They certainly do not show that he threatens to do more.
Decree reversed.
Mr. Justice Harlan, concurring.
It is clear from the averments of the bill that the insurance companies had not, prior to the institution of this suit, made any combination or agreement, among themselves, relating to the rates to be charged for insurance or to the amount of com-
As, however, the court considered the case upon the merits, it is appropriate to say that I concur with the court in holding that the section of the statute which is assailed is not invalid.