Landmark Supreme Court Case: Allgeyer v. Lousiana (1897)
Allgeyer v. Louisiana (1897) is the 33rd landmark Supreme Court case, the thirteenth case in the Economics module, featured in the KTB Prep American Government and Civics Series designed to acquaint users with the origins, concepts, organizations, and policies of the United States government and political system. The goal is greater familiarization with the rights and obligations of citizenship at the local, state, national, and global levels and the history of our nation as a democracy. While there is overlap, these landmark cases are separated into cases addressing:
- Foreign Policy
- Science & Technology
- Public Safety
- Death Penalty
- Speech, Press, and Protest
- Criminal Justice
- Politics, Society, Freedom, and Equality
The Supreme Court
The Supreme Court is the highest court in the United States. Article III of the U.S. Constitution created the Supreme Court and authorized Congress to pass laws establishing a system of lower courts. The Constitution elaborated neither the exact powers and prerogatives of the Supreme Court nor the organization of the Judicial Branch as a whole. Thus, it has been left to Congress and to the Justices of the Court through their decisions to develop the Federal Judiciary and a body of Federal law.
The number of Justices on the Supreme Court changed six times before settling at the present total of nine in 1869. Since the formation of the Court in 1790, there have been only 17 Chief Justices* and 102 Associate Justices, with Justices serving for an average of 16 years. On average a new Justice joins the Court almost every two years.
The Supreme Court of the United States hears about 100 to 150 appeals of the more than 7,000 cases it is asked to review every year. That means the decisions made by the 12 Circuit Courts of Appeals across the country and the Federal Circuit Court are the last word in thousands of cases.
Court of Appeals
In the federal court system’s present form, 94 district level trial courts and 13 courts of appeals sit below the Supreme Court. The 94 federal judicial districts are organized into 12 regional circuits, each of which has a court of appeals. The appellate court’s task is to determine whether or not the law was applied correctly in the trial court. Appeals courts consist of three judges and do not use a jury.
The appellate courts do not retry cases or hear new evidence. They do not hear witnesses testify. There is no jury. Appellate courts review the procedures and the decisions in the trial court to make sure that the proceedings were fair and that the proper law was applied correctly.
A court of appeals hears challenges to district court decisions from courts located within its circuit, as well as appeals from decisions of federal administrative agencies. In addition, the Court of Appeals for the Federal Circuit has nationwide jurisdiction to hear appeals in specialized cases, such as those involving patent laws, and cases decided by the U.S. Court of International Trade and the U.S. Court of Federal Claims.
The nation’s 94 trial courts are called U.S. District Courts. At a trial in a U.S. District Court, witnesses give testimony and a judge or jury decides who is guilty or not guilty — or who is liable or not liable. District courts resolve disputes by determining the facts and applying legal principles to decide who is right.
Trial courts include the district judge who tries the case and a jury that decides the case. Magistrate judges assist district judges in preparing cases for trial. They may also conduct trials in misdemeanor cases.
There is at least one district court in each state, and the District of Columbia. Each district includes a U.S. bankruptcy court as a unit of the district court.
Federal courts have exclusive jurisdiction over bankruptcy cases involving personal, business, or farm bankruptcy. This means a bankruptcy case cannot be filed in state court. Bankruptcy Appellate Panels (BAPs) are 3-judge panels authorized to hear appeals of bankruptcy court decisions. These panels are a unit of the federal courts of appeals, and must be established by that circuit. Five circuits have established panels: First Circuit, Sixth Circuit, Eighth Circuit, Ninth Circuit, and Tenth Circuit.
Allgeyer v. Louisiana (1897)
In 1894, the Louisiana legislature passed a statute, “An act to prevent persons, corporations or firms from dealing with marine insurance companies that have not complied with law.” The ostensible purpose of the statute was to prevent fraud by requiring state citizens and corporations to abstain from business with out-of-state marine insurance companies. Compliance with the statute required all out-of-state insurance companies to have an appointed agent within the state.
On October 27, 1894, E. Allgeyer & Co. dispatched mail from New Orleans to the Atlantic Mutual Insurance Company in New York City to insure an international shipment of cotton, at the time in Louisiana, under an open policy that Allgeyer had with the insurance company. On December 21, 1894, the State of Louisiana filed a petition in Orleans Parish court alleging Allgeyer had violated the statute in three counts and sought a cumulative fine of $3,000 (equivalent to $89,000 in 2019). Instead of offering an argument of innocence, Allgeyer challenged the statute on grounds for violating the Due Process Clause of the Fourteenth Amendment of the US Constitution.
The case went to trial, and the parish court entered a judgment for Allgeyer. The Louisiana Supreme Court reversed the decision on appeal for one count and found that the other two counts were not proved. As a result, Allgeyer was fined $1,000 (equivalent to $30,000 in 2019).
Q: Does a Louisiana law prohibiting out-of-state insurance corporations from conducting business in the state without maintaining at least one place of business and an authorized agent in the state violate the Fourteenth Amendment’s Due Process Clause, which protects companies’ liberty to enter into contracts with businesses of their choice?
A: Yes. The Louisiana statute deprived Allgeyer & Company of its liberty without due process under the Fourteenth Amendment.
Unanimous decision ruling:
- States may not prohibit citizens from contracting insurance out of state for acts performed outside the state.
- States may not prohibit citizens from contracting insurance out of state by written communication, even if the property to be insured is within the state.
The Fourteenth Amendment extends broadly to protect individuals from restrictions on their freedom to contract in pursuit of one’s livelihood or vocation. Each potential deprivation of liberty by the state needed to be evaluated on a case-by-case basis. Later cases allowed states greater authority to place restrictions on the freedom to contract.
It was the first case in which the Supreme Court interpreted the word liberty in the Due Process Clause of the Fourteenth Amendment to mean economic liberty. The decision marked the beginning of the Lochner era, during which the Supreme Court struck many state regulations for infringing on an individual’s right to contract. The Lochner era lasted forty years, until West Coast Hotel Co. v. Parrish (1937).
Next Economics Case: Champion v. Ames (1903)
Previous Economics Case: Chicago B&Q Railroad v. Chicago (1897)
Next Case: U.S. v. Wong Ark Kim (1898)