Friday, August 21, 2020

Supreme Court of Pennsylvania on Modern Economic Liberty

Sara Ladd managed short-term vacation rental properties for property owners in the Poconos. Just one problem: Ladd does not have a real estate broker's license, which is required by the Real Estate Licensing and Registration Act (RELRA). So, Ladd sought declaratory judgment and an injunction on the basis that RELRA is unconstitutional (at least as applied to her). 

The Commonwealth Court dismissed her case. But, the Supreme Court of Pennsylvania recently reversed (Ladd v. Real Estate Commission) and held that Ladd had made out a colorable claim and could proceed with her case.

Under federal law, courts barely protect economic liberty at all. Fourteenth Amendment economic liberty (right to earn a living) cases are decided under the rational basis test. Contrary to its name, the government need not establish that the basis for the law is rational, and can even win based on a justification that was never the basis for the law. Instead:

[A] statute restricting an economic liberty, like the right to earn a living, is presumed constitutional and a plaintiff is required to rebut every conceivable basis, whether or not it is in the record, to support the law.

But, state actors are not just bound by a federal constitution. States have their own constitutions. Article I, Section 1 of the Pennsylvania Constitution expressly provides:

All men are born equally free and independent, and have certain inherent and indefeasible rights, among which are those of enjoying and defending life and liberty, of acquiring, possessing and protecting property and reputation, and of pursuing their own happiness.

Pennsylvania courts apply something called the Gambone rational basis test, which is a heightened version of the federal rational basis test:

The Gambone Court held a law restricting social and economic rights, like the right to pursue a lawful occupation, “must not be unreasonable, unduly oppressive or patently beyond the necessities of the case, and the means which it employs must have a real and substantial relation to the objects sought to be attained.”

In Ladd, the Supreme Court of Pennsylvania concluded that RELRA appeared unconstitutional as applied to Ladd. The Court provided extensive analysis but seemed particularly persuaded by the fact that:

  • Almost none of the hundreds of hours of required training had any relation to Ladd's activities; and
  • RELRA includes exceptions for unlicensed people in comparable situations (ex. property managers employed by apartment owners).
In a vigorous dissent, Justice Wecht invoked the legend of the Lochner Era (which is not necessarily the reality of the Lochner Era, but I'll save that for another day). 

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