Louis K. Liggett Co. v. Baldridge, 278 U.S. 105 (1928)

U.S. Supreme Court

Louis K. Liggett Co. v. Baldridge, 278 U.S. 105 (1928) Louis K. Liggett Co. v. Baldridge

No. 34

Argued October 8, 1928

Decided November 19, 1928

278 U.S. 105

APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

Syllabus

1. The business of a foreign corporation is property, and the corporation a "person," within the meaning of the due process and equal protection clauses of the Fourteenth Amendment. P. 278 U. S. 111.

2. A foreign corporation may not be subjected to statutes that are in conflict with the federal Constitution by a state in which it has been permitted to do business. Id.

Page 278 U. S. 106

3. A state statute forbidding any corporation to own a pharmacy or drugstore in addition to those owned at the time of the enactment, unless all of its stockholders are licensed pharmacists, violates the due process clause of the Fourteenth Amendment as applied to a foreign corporation which owned such store under license of the state, and sought to extend its business by acquiring and operating others. P. 278 U. S. 111.

4. Mere stock ownership in a corporation owning and operating a drugstore can have no real or substantial relation to the public health. P. 278 U. S. 113.

5. That the stock of corporations owning and operating chain drugstore is bought and sold on the stock exchanges and must be largely held by person who are not registered pharmacists are facts that may be judicially noticed. Id.

22 F.2d 993 reversed.

Appeal from a decree of the district court, composed of three judges, dismissing the bill whereby appellant drugstore company sought to enjoin the Attorney General and other officers of Pennsylvania, from prosecuting it under an act regulating the ownership of drugstores. The court had previously denied an application for a preliminary injunction.

Page 278 U. S. 108

MR. JUSTICE SUTHERLAND delivered the opinion of the Court.

This appeal brings here for consideration a challenge to the constitutionality of an act of the Pennsylvania legislature approved May 13, 1927, Penna.Stats. Supp. 1928, §§ 9377a-1, 9377a-2, a copy of which will be found in the margin. [Footnote 1] The act provides that every pharmacy or drugstore shall be owned only by a licensed pharmacist, and, in the case of corporations, associations and copartnerships,

Page 278 U. S. 109

requires that all the partners or members thereof shall be licensed pharmacists, with the exception that such corporations as are already organized and existing and duly authorized and empowered to do business in the state and own and conduct drugstores or pharmacies, and associations and partnerships, which at the time of the passage of the act, still own and conduct drugstores or pharmacies, may continue to own and conduct the same.

The appellant is a Massachusetts corporation authorized to do business in Pennsylvania. At the time of the passage of the act, appellant was empowered to own and conduct and owned and thereafter continued to own and operate a number of pharmacies or drugstores at various places within the latter state. After the passage of the act, appellant purchased and took possession of two additional

Page 278 U. S. 110

drugstores in that state and carried on and continues and intends to continue a carry on a retail drug business therein under the title of "drugstore" or "pharmacy," including the compounding, dispensing, preparation, and sale at retail of drugs, medicines, etc. The business was and is carried on through pharmacists employed by appellant and duly registered in accordance with the statutes of the state. All of the members (stockholders) of the appellant corporation are not registered pharmacists, and, in accordance with the provisions of the act, the Pennsylvania state Board of Pharmacy has refused to grant appellant a permit to carry on the business. It further appears that the state Attorney General and the district attorney of the proper county have threatened and intend to and will prosecute appellant for its violation of the act, the penalties for which are severe and cumulative. Suit was brought to enjoin these officers from putting into effect their threats, upon the ground that the act in question contravenes the due process and equal protection clauses of the Fourteenth Amendment. It is clear from the pleadings and the record, and it is conceded, that, if the act be unconstitutional as claimed, appellant is entitled to the relief prayed. Terrace v. Thompson, 263 U. S. 197, 263 U. S. 215; Ex parte Young, 209 U. S. 123.

The court below, composed of three judges, heard the case upon the pleadings, affidavits, and an agreed statement of facts, and rendered a decree denying a preliminary injunction and, upon the agreed submission of the case, a final decree dismissing the bill for want of equity, 22 F.2d 993. The statute was held constitutional upon the ground that there was a substantial relation to the public interest in the ownership of a drugstore where prescriptions were compounded. In support of this conclusion, the court said that medicines must be in the store before they can be dispensed; that what is there is dictated

Page 278 U. S. 111

not by the judgment of the pharmacist, but by those who have the financial control of the business; that the legislature may have thought that a corporate owner in purchasing drugs might give greater regard to price than the quality, and that, if such was the thought of the legislature, the court would not undertake to say that it was without a valid connection with the public interest, and so unreasonable as to render the statute invalid.

That appellant's business is a property right, Duplex Co. v. Deering, 254 U. S. 443, 254 U. S. 465; Truax v. Corrigan, 257 U. S. 312, 257 U. S. 327, and, as such, entitled to protection against state legislation in contravention of the federal Constitution is, of course, clear. That a corporation is a "person" within the meaning of the due process and equal protection clauses of the Fourteenth Amendment, and that a foreign corporation permitted to do business in a state may not be subjected to state statutes in conflict with the federal Constitution is equally well settled. Kentucky Co. v. Paramount Exch., 262 U. S. 544, 262 U. S. 550; Power Co. v. Saunders, 274 U. S. 490, 274 U. S. 493, 274 U. S. 496-497; Frost Trucking Co. v. R. Comm'n, 271 U. S. 583, 271 U. S. 594 et seq. And, unless justified as a valid exercise of the police power, the act assailed must be declared unconstitutional because the enforcement thereof will deprive appellant of its property without due process of law.

The act is sought to be sustained specifically upon the ground that it is reasonably calculated to promote the public health, and the determination we are called upon to make is whether the act has a real and substantial relation to that end or is a clear and arbitrary invasion of appellant's property rights guaranteed by the Constitution. See Adair v. United States, 208 U. S. 161, 208 U. S. 173-174; Mugler v. Kansas, 123 U. S. 623, 123 U. S. 661. The police power may be exerted in the form of state legislation where otherwise the effect may be to invade rights guaranteed by the Fourteenth Amendment only when such legislation bears

Page 278 U. S. 112

a real and substantial relation to the public health, safety, morals, or some other phase of the general welfare. Here, the pertinent question is: what is the effect of mere ownership of a drugstore in respect of the public health?

A state undoubtedly may regulate the prescription, compounding of prescriptions, purchase and sale of medicines, by appropriate legislation to the extent reasonably necessary to protect the public health. And this the Pennsylvania Legislature sought to do by various statutory provisions in force long before the enactment of the statute under review. Briefly stated, these provisions are: no one but a licensed physician may practice medicine or prescribe remedies for sickness; [Footnote 2] no one but a registered pharmacist lawfully may have charge of a drugstore; [Footnote 3] every drugstore must itself be registered, and this can only be done where the management is in charge of a registered pharmacist; [Footnote 4] stringent provision is made to prevent the possession or sale of any impure drug or any below the standard, strength, quality and purity as determined by the recognized pharmacopoeia of the United States; [Footnote 5] none but a registered pharmacist is permitted to compound physician's prescriptions; [Footnote 6] and finally, the supervision of the foregoing matters and the enforcement of the laws in respect thereof are in the hands of the State Board of Pharmacy, which is given broad powers for these purposes.

It therefore will be seen that, without violating laws the validity of which is conceded, the owner of a drugstore, whether a registered pharmacist or not, cannot purchase or dispense impure or inferior medicines; he cannot,

Page 278 U. S. 113

unless he be a licensed physician, prescribe for the sick; he cannot unless be he a registered pharmacist, have charge of a drugstore or compound a prescription. Thus, it would seem, every point at which the public health is likely to be injuriously affected by the act of the owner in buying, compounding, or selling drugs and medicines is amply safeguarded.

The act under review does not deal with any of the things covered by the prior statutes above enumerated. It deals in terms only with ownership. It plainly forbids the exercise of an ordinary property right and, on its face, denies what the Constitution guarantees. A state cannot, "under the guise of protecting the public, arbitrarily interfere with private business or prohibit lawful occupations or impose unreasonable and unnecessary restrictions upon them." Burns Baking Co. v. Bryan, 264 U. S. 504, 264 U. S. 513. See also Meyer v. Nebraska, 262 U. S. 390, 262 U. S. 399-400; Norfolk Ry. v. Public Serv. Comm'n, 265 U. S. 70, 265 U. S. 74; Pierce v. Society of Sisters, 268 U. S. 510, 268 U. S. 534-535; Weaver v. Palmer Bros. Co., 270 U. S. 402, 270 U. S. 412-415; Fairmont Co. v. Minnesota, 274 U. S. 1, 274 U. S. 9-11.

In the light of the various requirements of the Pennsylvania statutes, it is made clear, if it were otherwise doubtful, that mere stock ownership in a corporation owning and operation a drugstore can have no real or substantial relation to the public health, and that the act in question creates an unreasonable and unnecessary restriction upon private business. No facts are presented by the record, and, so far as appears, none was presented to the legislature which enacted the statute, that properly could give rise to a different conclusion. It is a matter of public notoriety that chain drugstores in great numbers, owned and operated by corporations, are to be found throughout the United States. They have been in operation for many years. We take judicial notice of the fact

Page 278 U. S. 114

that the stock in these corporations is bought and sold upon the various stock exchanges of the country and, in the nature of things, must be held and owned to a large extent by persons who are not registered pharmacists. If detriment to the public health thereby has resulted or is threatened, some evidence of it ought to be forthcoming. None has been produced, and, so far as we are informed, either by the record or outside of it, none exists. The claim, that mere ownership of a drugstore by one not a pharmacist bears a reasonable relation to the public health, finally rests upon conjecture, unsupported by anything of substance. This is not enough, and it becomes our duty to declare the act assailed to be unconstitutional as in contravention of the due process clause of the Fourteenth Amendment.

Decree reversed.

[Footnote 1]

"Section 1. Every pharmacy or drugstore shall be owned only by a licensed pharmacist, and no corporation, association or copartnership shall own a pharmacy or drugstore, unless all the partners or members thereof are licensed pharmacists; except that any corporation organized and existing under the laws of the commonwealth or of any other state of the United States, and authorized to do business in the commonwealth, and empowered by its charter to own and conduct pharmacies or drugstores, and any association or copartnership which at the time of the passage of this act, still owns and conducts a registered pharmacy or pharmacies or a drugstore or drugstores in the commonwealth may continue to own and conduct the same; but no other or additional pharmacies or drugstores shall be established, owned, or conducted by such corporation, association, or copartnership unless all the members or partners thereof are registered pharmacists; but any such corporation, association, or copartnership, which shall not continue to own at least one of the pharmacies or drugstores theretofore owned by it, or ceases to be actively engaged in the conduct of a pharmacy, shall not be permitted thereafter to own a pharmacy or a drugstore unless all of its partners or members are registered pharmacists, and except that any person, not a licensed pharmacist, who at the time of the passage of this act, owns a pharmacy or a drugstore in the commonwealth, may continue to own and conduct the same, but shall not establish or own any additional pharmacy or drugstore, or if he or she ceases to operate such pharmacy or drugstore, shall not thereafter own a pharmacy or drugstore, unless he or she be a registered pharmacist, and except that the administrator, executor, or trustee of the estate of any deceased owner of a registered pharmacy or drugstore, may continue to own and conduct such pharmacy or drugstore during the period necessary for the settlement of the estate: Provided, that nothing in this section shall be construed to prevent or affect the ownership, by other than a registered pharmacist, of a store or stores wherein the sale or manufacture of drugs or medicines is limited to proprietary medicines and commonly used household drugs, provided such commonly used household drugs are offered for sale or sold in packages which have been put up ready for sale to consumers by pharmacists, manufacturing pharmacists, wholesale grocers, or wholesale druggists. . . ."

"Section 2. Any person, copartnership, or corporation violating the provisions of this act shall be guilty of a misdemeanor and, upon conviction thereof, shall be sentenced to pay a fine of not more than one hundred dollars. Each day any such pharmacy is owned contrary to the provisions of this act shall be considered a separate offense."

[Footnote 2]

Pa.St.1920, § 16779.

[Footnote 3]

Pa.St.1920, §§ 9323, 9327.

[Footnote 4]

Pa.St. Supp. 1928, § 9329a-2.

[Footnote 5]

Pa.St.1920, § 9337; Pa.St. Supp. 1928, § 9339.

[Footnote 6]

Pa.St.1920, §§ 9317, 9323.

MR. JUSTICE HOLMES.

A standing criticism of the use of corporations in business is that it causes such business to be owned by people who do not know anything about it. Argument has not been supposed to be necessary in order to show that the divorce between the power of control and knowledge is an evil. The selling of drugs and poisons calls for knowledge in a high degree, and Pennsylvania, after enacting a series of other safeguards, has provided that, in that matter, the divorce shall not be allowed. Of course, notwithstanding the requirement that, in corporations hereafter formed, all the stockholders shall be licensed pharmacists, it still would be possible for a stockholder to content himself with drawing dividends and to taken no hand in the company's affairs. But obviously he would be more likely to observe the business with an intelligent eye than a casual investor who looked only to the standing of the

Page 278 U. S. 115

stock in the market. The Constitution does not make it a condition of preventive legislation that it should work a perfect cure. It is enough if the questioned act has a manifest tendency to cure, or act least to make the evil less. It has been recognized by the professions, by statutes, and by decisions, that a corporation offering professional services is not placed beyond legislative control by the fact that all the services in question are rendered by qualified members of the profession. See People v. Title Guarantee & Trust Co., 227 N.Y. 366; Tucker v. New York State Board of Pharmacy, 217 N.Y.S. 217, 220; Matter of Cooperative Law Co., 198 N.Y. 479; People v. Merchants' Protective Corporation, 189 Cal. 531; New Jersey Photo Engraving Co. v. Carl Schonert & Sons, 95 N.J.Eq. 12; Hodgen v. Commonwealth, 142 Ky. 722.

But for decisions to which I bow, I should not think any conciliatory phrase necessary to justify what seems to me one of the incidents of legislative power. I think however that the police power, as that term has been defined and explained, clearly extends to a law like this, whatever I may think of its wisdom, and that the decree should be affirmed.

Of course, the appellant cannot complain of the exception in its favor that allows it to continue to own and conduct the drugstores that it now owns. The Fourteenth Amendment does not forbid statutes and statutory changes to have a beginning, and thus to discriminate between the rights of an earlier and those of a later time. Sperry & Hutchinson Co. v. Rhodes, 220 U. S. 502, 220 U. S. 505.

MR. JUSTICE BRANDEIS joins in this opinion.