Amdt14.S1.4.7.1 Generally

Fourteenth Amendment, Section 1:

All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

States may impose significant regulations on businesses without violating due process. The Constitution does not guarantee the unrestricted privilege to engage in a business or to conduct it as one pleases. Certain kinds of business may be prohibited; and the right to conduct a business, or to pursue a calling, may be conditioned. . . . Statutes prescribing the terms upon which those conducting certain businesses may contract, or imposing terms if they do enter into agreements, are within the State’s competency.1 Still, the fact that the state reserves the power to amend or repeal corporate charters does not support the taking of corporate property without due process of law, as termination of the corporate structure merely results in turning over corporate property to the stockholders after liquidation. 2

Foreign (out-of-state) corporations also enjoy protection under the Due Process Clauses, but this does not grant them an unconditional right to enter another state or to continue to do business in it. Language in some early cases suggested that states had plenary power to exclude or to expel a foreign corporation. 3 This power is clearly limited by the modern doctrine of the negative commerce clause, which constrains states’ authority to discriminate against foreign corporations in favor of local commerce. Still, it has always been acknowledged that states may subject corporate entry or continued operation to reasonable, non-discriminatory conditions. Thus, for instance, a state law that requires the filing of articles with a local official as a prerequisite to the validity of conveyances of local realty to such corporations does not violate due process. 4 In addition, statutes that require a foreign insurance company to maintain reserves computed by a specific percentage of premiums (including membership fees) received in all states, 5 or to consent to direct actions filed against it by persons injured in the host state, are valid. 6

Footnotes

  1.  Jump to essay-1Nebbia v. New York, 291 U.S. 502, 527-28 (1934). See also New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96, 106-08 (1978) (upholding regulation of franchise relationship).
  2.  Jump to essay-2New Orleans Debenture Redemption Co. v. Louisiana, 180 U.S. 320 (1901).
  3.  Jump to essay-3National Council U.A.M. v. State Council, 203 U.S. 151, 162-63 (1906).
  4.  Jump to essay-4Munday v. Wisconsin Trust Co., 252 U.S. 499 (1920).
  5.  Jump to essay-5State Farm Ins. Co. v. Duel, 324 U.S. 154 (1945).
  6.  Jump to essay-6Watson v. Employers Liability Assurance Corp., 348 U.S. 66 (1954). Similarly a statute requiring a foreign hospital corporation to dispose of farm land not necessary to the conduct of their business was invalid even though the hospital, because of changed economic conditions, was unable to recoup its original investment from the sale. New Orleans Debenture Redemption Co. v. Louisiana, 180 U.S. 320 (1901).