1938: Law

Outstanding Legal Developments.

President Roosevelt's 1937 bill and message to Congress on court reform precipitated a bitter controversy, the effects of which were felt throughout 1938. The message contained a general criticism of the effects upon governmental and private litigation of crowded court calendars and superannuated judges. It made a plea to Congress for a constant systematic addition of younger blood to 'vitalize the courts.' The real purpose of the bill, however, was not mentioned in the message, namely, that it provided a means to adapt our legal forms and our judicial interpretation to the actual present needs of the largest progressive democracy in the modern world. The bill would have enabled the President to appoint six additional Supreme Court Justices, one for each justice over the age of 70. This would have made it possible for the President to obtain a bench which was sympathetic to his program.

The tremendous opposition mustered against the President's proposals compelled him to retreat and to withdraw the bill. Despite this defeat, however, it has become increasingly evident, in recent months, that he has been able to attain many of the underlying objectives of the bill. There has been a considerable re-orientation in the point of view of the court. Thus, many measures which probably would previously have been declared unconstitutional, were found not to be in conflict with the Constitution. This has been due in part to the fact that two members of the former conservative majority of the court, Justices Van Devanter and Sutherland, retired, and were replaced by Senator Hugo Black and Solicitor General Stanley Reed. [Professor Felix Frankfurter of the Harvard Law School was also appointed early in 1939 to take the place of the late Justice Cardozo.]

Changed Orientation of Supreme Court.

The change in the attitude of the Supreme Court was symbolized by its decision in the National Labor Relations Board cases (301 U.S. 1, 49, 58, 103, 142) which involved the constitutionality of the Wagner Act. The former conservative majority of the court would probably have found that the Wagner Act was unconstitutional because the activities sought to be regulated did not directly affect interstate commerce. This was one of the principal factors which enabled the majority of the court to invalidate the Guffey Coal Act in Carter v. Carter Coal Co. (298 U.S. 238). The new majority of the court (which included Hughes and Roberts), however, held the Wagner Act constitutional, stating that since labor disputes directly affected interstate commerce, no constitutional objections could be raised to the Wagner Act. The court also pointed out that the Carter case was 'not controlling here.' With these three words the court turned its back on the position it had taken only a year previously. Attempts to rationalize the shift in the court's point of view by distinguishing the Carter case are futile. The simple truth is that the Supreme Court has suffered a change of heart.

The Judiciary Act.

The President was also able to secure the enactment of the non-controversial portions of the original bill through the passage of the Judiciary Act. One of the chief purposes of the Act was to eliminate the possibility that a Federal statute would be declared unconstitutional in a suit in which the United States was not a party and in which the relationship of the parties was such that a proper presentation of the case for constitutionality was impossible. An illustration of this type of suit is a stockholder's action which is brought solely for the purpose of attacking the constitutionality of particular legislation. The Judiciary Act makes it possible for the United States to intervene in any suit or proceeding 'whenever the constitutionality of any Act of Congress affecting the public interest is drawn in question.' The United States may present evidence and argument upon the question of the constitutionality of the act. The Act also placed restrictions on the granting of injunctions restraining the operation of Federal statutes on the ground of unconstitutionality. These can now only be issued by a bench of three judges, and not by a district court judge, as had been the case previously. The Act permits a direct appeal from the District Court to the Supreme Court in cases where the constitutionality of an Act of Congress is drawn into question.

The Dissents of Justice Black.

Among the out-standing legal phenomena of 1938 are the dissents of Mr. Justice Black. Justice Black took his seat on the bench after considerable outcry which was caused by the allegation that he had been a member of the Ku Klux Klan in the early days of his political career in Alabama. His performance on the bench to date, however, has belied his past connection with the Klan. Justice Black has struck out boldly in a number of dissenting opinions which, if they become the opinions of the Court, may mark a new era in constitutional law. Frequently in the history of the Supreme Court, dissenting opinions have foreshadowed new developments in constitutional law. This has been especially true of the dissenting opinions of the late Justice Holmes. It is not altogether unlikely that some of Justice Black's dissents may have a similar influence.

This parallel with Holmes is not mere idle speculation. An interesting instance where the dissenting views of both Black and Holmes finally became the view of the majority of the court was the case of Erie R. R. v. Tompkins, (304 U.S. 64) which expressly overruled Swift v. Tyson (16 Pet. 1, 1842). Since 1842 the Federal courts have followed the rule laid down in Swift v. Tyson that in matters of general jurisprudence they need not apply the common law of the state, but are free to exercise their own independent judgment as to what the law is or should be. The purpose of this rule was to assure a uniformity of law throughout the country. The result, however, has been the contrary. State courts have not followed Federal courts in their interpretations of particular legal doctrines. Federal courts have in many instances differed from state courts. Thus the question of who would prevail in a particular suit was often determined not by the merits of the proceeding, but by whether it was brought in the state or in the Federal courts. The doctrines enunciated by Swift v. Tyson were vigorously attacked by Justice Holmes in Kuhn v. Fairmont Coal Co. (215 U.S. 346, 370) and again in Black and White Taxicab Co. v. Brown and Yellow Taxicab Co. (276 U.S. 518, 530). It was also attacked by Mr. Justice Black in a dissenting opinion in the case of New York Life Insurance Co. v. Gamer (303 U.S. 161).

A little over two months after the decision of New York Life Insurance Co. v. Gamer (supra) the Supreme Court expressly overruled Swift v. Tyson in Erie Railroad Co. v. Tompkins (supra). Brandeis' opinion in this case is an admirable review of the entire question. He traced the origin and history of the rule, its effects and the objections which have been raised against it. He reached the conclusion that the rule should be changed. This change will have a tremendous effect on future Federal litigation. Litigants will no longer be anxious to bring their actions in the Federal courts where the Federal rule, as against the state rule, favors them. There will no longer be a 'Federal rule' unless it is on a Federal question, such as patents. This is bound to lead to greater certainty in the law.

If the majority of the Court were also to follow Mr. Justice Black in his dissent in Connecticut General Life Insurance Co. v. Johnson (303 U.S. 77. 83), the implications for the development of constitutional law would be even more far-reaching than in the Court's reversal on Swift v. Tyson. In the Connecticut case the majority of the Court declared that a tax measured by the premiums on re-insurance contracts made outside the state for the privilege of doing business in the state, was unconstitutional. The Court conceded that the tax would have been proper in another form. Nevertheless, the Court held that due process was violated by the taxation statute. Black, alone in his dissent, first pointed out that states traditionally have the power to place conditions on foreign corporations which may take the form of taxation. He also stated, 'I do not believe the word `person' in the 14th Amendment includes corporations. . . . I believe this Court should now overrule previous decisions which interpreted the 14th Amendment to include corporations.'

This point of view, if adopted by the majority of the Court, would overthrow a doctrine which has been unquestioned since 1886, and which has given the courts extensive control over the acts of legislatures and administrative agencies. The Supreme Court has repeatedly invalidated legislation affecting corporations on the ground that it was 'unreasonable, unjust,' and in violation of the due process clause of the 14th Amendment.

In wishing to withdraw corporations from the safeguards of the 14th Amendment, Justice Black comes out for a strict interpretation of that amendment. He would like the amendment to be limited to situations for which it was intended at the time of its adoption. The acceptance by the Supreme Court of this point of view would make it less likely that the Court would substitute its judgment as to the desirability of a particular statute for the judgment of state legislators, as it has frequently done in the past under the authority of the 14th Amendment.

The Labor Cases.

The labor cases which came before the Supreme Court during the past year definitely show a desire on the part of the Court to provide increased protection for the rights of labor. Having once decided that the Wagner Act was constitutional, the Court has resisted the attempt of employers to whittle away the effectiveness of the Act in subsequent cases. This is illustrated by the Court's action in National Labor Relations Board v. Pennsylvania Greyhound Lines (303 U.S. 261) and in National Labor Relations Board v. Pacific Greyhound Lines (303 U.S. 272). In each of the cases the National Labor Relations Board found that the employer had created, supported and controlled a company union and had recognized it as a bargaining agency of its employees. The National Labor Relations Board ordered the employers to cease these practices and required them to withdraw all recognition from the company union as a collective bargaining agency. The Circuit Court of Appeals held that the Board had exceeded its authority, since it had no jurisdiction to preclude any bargaining agency from gaining recognition prior to a determination of the chosen representatives of a majority of the employees. The Supreme Court, however, recognized that these decisions would nullify the purpose of the Act. Few employees could resist the blandishments of a union already recognized by the employer. The ruling of the NLRB guaranteed that no company union will be accepted as the representative of the employees until it commands the votes of a majority of the employees, obtained after the company has discontinued its aid to and recognition of the union. The Supreme Court therefore reversed the ruling of the Circuit Court of Appeals.

An important auxiliary weapon in labor's arsenal has been the Norris-LaGuardia Act and state statutes similarly drawn. The chief purpose of these Acts is to prevent the issuance of injunctions in labor disputes before a trial or hearing on the merits. Before these laws were passed, an employer might go into court, obtain a temporary injunction against strikers or pickets, before the merits of the labor dispute were determined, and thereby 'nip in the bud' any attempts to organize his employees or to enforce demands against him.

The effectiveness of the Norris-LaGuardia Act in combatting this situation depends, of course, on whether a court will determine that there is a 'labor dispute' in the case before it, since the Act applies only to cases of 'labor disputes.' The case of Lauf v. Shinner (303 U.S. 323) indicates that the Supreme Court has carried over into the interpretation of the Norris-LaGuardia Act its desire to give labor its due, by a broad interpretation of the term 'labor dispute.' The Court held in that case that the term 'labor dispute' encompassed the situation where the employer had refused to make membership in the union a condition of employment, but had told his employees that they were free to join the union if they wished.*

* An even broader interpretation of the term 'labor dispute' was made in New Negro Alliance v. Sanitary Grocery Co. (303 U.S. 552). The Alliance in this case requested the Company to employ Negroes in a new store which it had opened. Upon its refusal to do so. The Alliance picketed the store, stating that the store did not employ Negroes, and that Negroes should not patronize it. Both the District Court and the Circuit Court of Appeals were of the opinion that this situation did not present a labor dispute within the meaning of the Norris-LaGuardia Act. The Supreme Court held otherwise. It stated that the fact that the labor dispute was 'racial' in origin was immaterial. The removal of race discrimination was as important to those concerned as working conditions and anti-union discrimination.

The Supreme Court has also shown a tendency toward broadening the scope of the Wagner Act through a liberal interpretation of the term 'interstate commerce.' The powers of the NLRB apply only in cases where the concern whose employees seek to invoke the Act is engaged in 'interstate commerce.' By giving a liberal interpretation to the term 'interstate commerce,' the powers of Congress will unavoidably be extended in many other fields besides that of labor legislation. All Federal trade, business, securities and railroad legislation rests upon the power of Congress to regulate interstate commerce. As the definition of interstate commerce becomes wider, the scope of the applicability of this legislation necessarily increases. This inevitably will bring with it increased Federal regulation and centralized control of business and our daily lives.

In the NLRB cases the Supreme Court applied the Wagner Act to a local unit of a large steel corporation which produced on a national scale, a large producer of trailers, and a small clothing manufacturer which was part of a nation-wide industry. Each of these obtained raw materials from other states and sent a large proportion of its products to other states. Each of these was held to be engaged in 'interstate commerce' and therefore came within the purview of the act. In Santa Cruz Fruit Packing Co. v. NLRB (303 U.S. 453) the Court held that the Act covered a packer who shipped 37 per cent of his output into interstate commerce. The product was manufactured, however, almost exclusively from domestic raw materials. Again the court refused to overrule Carter v. Carter Coal Co. (the dissent of Butler and McReynolds chiding it for not doing so), although no real distinction is possible. The burden of the Court's argument was that the necessary effect on commerce was a question of degree; the facts here made out a sufficiently 'direct' and 'substantial' effect to give the Board jurisdiction.

In the case of Consolidated Edison Co. v. NLRB (59 St. Ct. 206), the Court went even further and held that the Wagner Act applied to a large corporation supplying electricity to customers located entirely within New York City. The jurisdiction of the NLRB was based on the fact that the company numbered among its customers three interstate railroads, a number of telephone, telegraph and radio companies, many steamship and interstate ferry piers, etc. If service to these customers were to be interrupted because of industrial strife, the effect upon interstate commerce would be of tremendous importance. The court said, 'It is the effect upon interstate of foreign commerce, not the source of the injury which is the criterion for the Board's jurisdiction.' Thus the effect need no longer be 'direct as required by the Santa Cruz case, so long as it is `substantial.'' Whether or not particular action in the conduct of intra-state enterprises does affect interstate commerce in such a close and intimate fashion as to be subject to Federal control, is left to be determined as individual cases arise.

Public Utility Regulation.

The year 1938 witnessed some interesting developments in the field of public utilities. An array of Supreme Court cases had held, until last year, that in any rate-determination proceeding, the factor of reproduction cost must be regarded as controlling in determining the fair value of utility property. Reproduction cost is the estimated cost of reproducing the existing property of a utility company rendering useful public service, based on prices prevailing at the time of the rate order. The case of Railroad Commission of California v. Pacific Gas & Electric Co. (302 U.S. 388) points out that there is no violation of due process ipso facto because some method other than reproduction cost has been followed. In that case the California Railroad Commission, after receiving evidence as to reproduction cost and rejecting it as unconvincing, used the historical cost method to determine the value of the utility properties as a basis for determining the rates. Although the Supreme Court had previously reversed cases which applied this method, in the Pacific Gas case it held that so long as procedural due process was observed, namely, that a fair hearing was granted, in which interested parties have the 'opportunity, through evidence and argument, to challenge the result,' and so long as the resultant rate was not actually confiscatory, i.e., did not, in fact, provide for a fair return, the Court would not interfere.

This case is important because it permits utility commissions to use a method which can be applied much more readily and quickly than reproduction cost in the fixation of rates. This method also has a firmer basis in actual fact and is much fairer to the rate payer and to the investor than 'reproduction cost,' which was formerly favored by the Supreme Court.

Two important phases of the New Deal, with respect to utilities, were also passed upon by the Supreme Court at the 1937-38 term. One was the validity of PWA loans and grants to municipalities for the construction of electric distribution systems which compete with private power companies. In Alabama Power Co. v. Ickes (303 U.S. 464) the Court held that these companies did not have the right to contest the validity of these loans and grants, because no right of theirs was being invaded. The effect of this decision is to set the PWA free from judicial interference and control to a considerable extent and also to restrict judicial investigation into the Federal spending power. A situation may arise, however, where Federal spending will directly affect the rights of some real or corporate person. In that case the Court will probably be called upon to delimit the power of the Government to spend money. For the present, however, PWA grants and loans to municipalities will doubtless continue.

The other phase of the New Deal concerning utility companies which the Court passed upon was the validity of the registration provisions of the Public Utility Holding Company Act. The case of Electric Bond and Share Co. v. SEC (303 U.S. 419) decided that these provisions requiring every holding company to file with the SEC a detailed statement of the financial structure, inter-company contracts, associate companies, etc. were constitutional and valid. Although the opinion distinctly refrained from passing upon any of the other provisions of this Act, the utilities have apparently decided to go along with the government and have submitted to the provisions of this statute.

Trade Regulation.

The omnipresence of state and Federal government has also made itself felt in the field of trade regulation. Perhaps the most significant event of the past court year in this field was the approval by the Supreme Court of the anti-trust suit brought against the Aluminum Company of America (302 U. S. 230) and the actual beginning of that suit, which is likely to last more than a year.

The suit attacks a strongly-entrenched monopoly. It seeks to have the company dissolved and to require stockholders who also hold stock in its affiliate, Aluminum Limited, to give up their stock holdings in one of the two companies. The suit names 62 defendants, besides the Aluminum Company of America, some of whom are neither officers nor subsidiaries. The ultimate outcome of the suit will bear careful watching. It may be the start of a new era of 'trust busting' under the guidance of Thurman Arnold, Assistant United States Attorney General in charge of anti-trust cases.

Another outstanding example of anti-trust activity during the year was the grand jury investigation conducted in the District of Columbia, which resulted in the indictment of the American Medical Association, four affiliated organizations, their executive officers, and a number of Washington's leading physicians and surgeons, for 'conspiracy in restraint of trade' under the Sherman Anti-Trust Law. The ultimate disposition of this indictment will settle a controversy which has been gathering force during the past few years and will do much to decide the fate of group medical practice on a risk-sharing prepayment basis.

The controversy in Washington arose out of the organization of Group Health Association, Inc., which was designed to give members complete medical and surgical service and hospitalization for 21 days per year, at fixed annual fees. For this purpose, the corporation established a clinic and hospital and hired nurses and doctors. In Washington, as elsewhere in this country, the organized medical profession fought this manifestation of 'socialized medicine.' As the indictment points out:

'Principally for economic reasons and because it has feared, for its members, business competition from the doctors connected with organizations in which doctors engage in group practice on a risk-sharing prepayment basis, defendant American Medical Association, and the individual defendants employed by said defendant association, have adopted and for many years have pursued a policy of opposition to experimentation with such organizations, and have taken affirmative steps to oppose their formation and operation throughout the United States.'

The method adopted by the American Medical Association, and its constituent local societies, of enforcing this opposition has been quite simple and, thus far, quite effective. They simply exclude or expel from membership doctors who participate in such organizations as Group Health Association, Inc. This is an effective sanction. Membership in the American Medical Association and in local medical societies carries professional prestige. Many doctors and hospitals deal only with doctors who are members of the A.M.A. Thus, non-members are unable to obtain consultations with specialists, which is often a serious handicap. Also, non-members are unable to attend and treat their patients at well-equipped hospitals. These restraints obviously interfere seriously with the pursuit of his profession by a doctor who has lost or been refused membership in the A.M.A. This pressure compelled one doctor to resign from the Group Health Association and coerced many others into not joining.

In deciding Federal Trade Commission v. Standard Ed. Soc. (302 U.S. 112), the Supreme Court has taken its position with the courts which are seeking to revise the plane of business morality, a judicial effort which has received increasing support in the last few years. This case approved an order of the Federal Trade Commission which forbade the continuation of a practice of selling an encyclopedia with a looseleaf service, under a claim of giving away the encyclopedia to purchasers of the looseleaf service. The opinion, the first written by Justice Black, says that 'the fact that a false statement may be obviously false to those who are trained and experienced does not change its character, nor take away its power to deceive others less experienced. . . . Laws are made to protect the trusting as well as the suspicious.' To permit such practices would be to give 'deception the dignity and standing of truth.' The continued application of these doctrines cannot help but improve the 'morals of the market place.'

On June 22, 1938, the President signed the Chandler Act, which went into effect on September 22. This bill deals with bankruptcy and corporate reorganizations. The provisions relating to bankruptcy embody a revision of the entire Bankruptcy Act. They represent the result of five years' work by various representatives of bar associations, law schools, referees in bankruptcy and credit associations. The changes are designed mainly to improve the draftsmanship of the Bankruptcy Act and to strengthen certain sections, particularly those relating to partnerships, compositions and extensions, preferences, liens, fraudulent conveyances, discharges and criminal acts. Chapter X of the Chandler Act provides some of the recommendations of the Securities Exchange Commission with respect to changes in Section 77B of the Bankruptcy Act, dealing with corporate reorganizations. These recommendations were the result of six studies conducted by the Commission.*

* Chapter X requires the appointment of a disinterested trustee in all cases of corporate reorganization where the liquidated indebtedness is $250,000 or more and grants the court discretion to appoint such a trustee where the indebtedness is less than $250,000.

The trustee has the primary responsibility for drawing up a plan of reorganization. This plan must be approved by the court before security holders vote on it. Except by special permission of the court, acceptances of the plan may not be solicited until it has been approved. Where the scheduled indebtedness is $3,000,000 or more, the judge must submit the proposed plan of reorganization to the SEC for investigation and advisory report. The court may also obtain such a report where the indebtedness is less than $3,000,000. In any case, however, the SEC is entitled to receive notice of all important steps in the reorganization proceedings. It may also, with the approval of the judge, intervene in reorganization proceedings.

New York State Constitutional Amendments.

Among the notable legal developments in the states was the New York Constitutional Convention. The new State Constitution proposed by this convention was embodied in nine separate proposals which were voted on by the voters at the November 1938 election. The voters approved the grade-crossing, housing, labor, social welfare, transit unification and omnibus proposals, and disapproved the re-apportionment, judiciary and end-of-proportional representation articles.

The Grade-crossing amendment was designed to expedite the commencement of grade-crossing elimination projects. It makes 15 per cent the maximum share which the railroads must bear for all grade-crossing elimination work. This is a considerable reduction from the former requirement of 50 per cent.

The housing article contains a broad general grant of power to the Legislature to provide for housing and slum clearance by such means as it deems wise. It empowers the Legislature to incur a state debt of $300,000,000 for housing and slum clearance loans to municipalities, public housing authorities and limited dividend corporations, to grant subsidies not exceeding $1,000,000 a year, out of current revenues, and to authorize municipalities to contract debts for housing and slum-clearance purposes not exceeding 2 per cent of their assessment rolls, outside of any other debt limit. Residence in these projects is restricted to persons of low income as defined by law, with preference to those who formerly lived in the cleared area.

The sixth amendment covers the rights of labor. It declares that labor is not a commodity nor an article of commerce; that employees have the right to organize and to bargain collectively through representatives of their own choosing; and that the eight-hour day, five-day week and prevailing rate of wage are to be adhered to on all public works contracts, except in an emergency.

The social welfare amendment eliminates any doubt that the state may use its funds for public relief and similar welfare purposes. It also permits state money to be used for protection, by insurance or otherwise, against the hazards of unemployment, sickness and old age, and for the education and support of people with physical handicaps, children and the needy sick.

This article was necessary to clarify a state policy with respect to the use of credit and money for relief purposes which has been in effect since 1930. It also empowers the legislature to meet, as they arise, the social and economic problems involved in unemployment, sickness and old age, by choosing the method best designed for the particular purpose.

The amendment on transit unification provides that New York City may become indebted to the extent of $315,000,000, outside its constitutional debt limit, for the purpose of effecting a unification of the city's transit facilities, now privately owned.

The omnibus amendment includes changes which involve practically every article of the Constitution. A number of these are non-controversial; some repeal obsolete provisions; many are of especial interest, such as the provision permitting wiretapping by court order and the provision permitting the Legislature to provide a system of permanent registration.

The proposed amendments not approved were concerned with reapportionment,* the judiciary† and with the prohibition of proportional representation. ††

* This amendment sought to re-district New York City, principally, and to apply a formula whereby area would be the first consideration in determining representation, thereby penalizing unnecessarily all growing cities. It also sought to extend the term of state senator from two to four years.

† The judiciary article sought, among other things, to create a new judicial district for Nassau and Suffolk Counties. It also provided for judicial review, on the facts and the law, of decisions of administrative bodies.

†† The prohibition of proportional representation was intended to abolish the method of election of Councilman in New York City, which had been adopted by a vote of 2 to 1 in 1937, and would have prohibited its use elsewhere in the state.

Conflict over Grand Jury Investigations in Pennsylvania.

A conflict arose in Pennsylvania between the governor and the legislature, on the one hand, and a local district attorney, court and grand jury, on the other, over the jurisdiction of the grand jury to investigate the acts of state officials. A number of bills sponsored by Governor Earle were passed by the Pennsylvania Legislature, which were designed to hinder Grand Jury investigations of state officials. Under the authority of one of these statutes, a legislative committee sought to suspend a grand jury investigation which was then in progress, pending the outcome of its own investigation. The Pennsylvania Supreme Court, however, declared this statute unconstitutional on the ground that it was an improper inference that the grand jury, which was an arm of the court (see in re Investigation by the September 1938 Dauphin County Grand Jury). This attempt to curb the grand jury probably was an important factor in Governor Earle's failure to be elected United States Senator at the last election.

'End of the Emergency.'

One of the most intriguing cases decided in the state courts in the past year was that of First Trust Co. v. Smith (134 Neb. 84). Nebraska, in 1933, enacted a typical mortgage moratorium statute which was extended for two years in 1935 and again in 1937. When the defendant sought to invoke the 1937 statute, the court, one judge dissenting, held that the moratorium statute was now unconstitutional since the emergency which had previously made it valid had ended. This is the first instance of a court reaching such a decision in a case involving a mortgage moratorium. The ending of the moratorium, however, may recreate the very evil which the moratorium was designed to remedy. Most farmers are likely to prefer to lose their property in foreclosure, but remain on it as tenants, rather than jeopardize their general credit by a Frazier-Lemke petition in bankruptcy. And present low land values prevent adequate refinancing of mortgages through the Farm Credit Administration. It is doubtful, therefore, whether other courts will follow the lead of the Nebraska court.

State Participation in Business Enterprises.

Another case with tremendous implications is Albritton v. City of Winona (178 So. 799). This case, decided in Mississippi, held that a statute authorizing municipalities to issue bonds to defray the cost of building factories which were to be leased to private operators or operated by the municipalities in the absence of suitable lessees, did not violate the due process clause of either the state or Federal Constitution. The preamble to the statute pointed out that Mississippi was in an inferior position industrially to that of other states and that the Act would result in putting many people to work and would lead to a utilization of the state's natural resources. The opinion justifies the position of the court on the ground that public necessity permits the state and its political subdivisions to enter the industrial field. Furthermore, the method adopted is reasonably related to attaining certain ends which the legislature might reasonably regard to be desirable. Therefore, it is not violative of due process. Nor is there any point in calling this law socialism, since that is an 'ambiguous and ill-defined word' which has been used to brand every 'intervention of any consequence by the state and national governments in the economic and social life of the citizen.' The statute clearly provides that the proposed industries shall be operated on 'such terms and conditions and with such safeguards as will best promote and protect the public interest.'

On the basis of the reasoning adopted in this case, there is little telling where the line may be drawn which limits state participation in business enterprises. Whether the case means that the state may go into any business where such a business is reasonably calculated to a desired end — that of improving the economic well-being of the community — remains to be seen. If it does, the result will certainly be a new departure in American conceptions of the relation between government and business. See also MEDICAL JURISPRUDENCE.