Businesses Should Have the Right to Make Their Case

Sadly, in cases involving businesses, courts regularly put a thumb on the scales of justice.
May 1, 2013 • Commentary
This article appeared in National Law Journal on May 1, 2013.

Imagine a legal system that presumed you guilty until you prove your innocence. Imagine you not only had to prove the accusations against you false, but also to disprove other, unspecified charges, which prosecutors thought about filing against you but didn’t.

Imagine further that when the trial was over, the judge could decide your fate by inventing his own theory of how you might have committed the crime, and convict you merely because he could imagine that you did wrong.

Finally, imagine that when you tried to prove yourself innocent, the government could force you to stop simply by telling the judge—without any proof—that it thought you were guilty.

Such a nightmare might serve as the plot of an existentialist novel, but it could hardly be called a system of justice. Yet this is just what happens to business owners who seek to defend their right to economic freedom against unreasonable government interference. The U.S. Supreme Court has consistently held that the Constitution protects every person’s right to earn a living against arbitrary government interference. Yet under the antiquated “rational basis test,” whenever entrepreneurs try to protect themselves against unfair economic regulations, judges require them to disprove every conceivable foundation for the challenged law—even when that law is plainly unjust. Judges often uphold discriminatory regulations because the government might have thought those rules were justified—regardless of overwhelming evidence to the contrary.

Worse, judges often dismiss these lawsuits without even allowing business owners to introduce evidence to prove their cases. All the government has to do is say, without evidence, that the law is rational, and the case comes to an end.

These Twilight Zone rules don’t apply in cases that don’t involve businesses or economic transactions; people seeking to protect other kinds of constitutional rights, such as free speech or religious freedom, are given a fair chance to prove their cases, and courts typically provide strong protections for those freedoms. Business owners, by contrast, must fight their way up a steep hill.

Arizona dairyman Hein Hettinga learned that when he went to court to defend himself from a federal law designed to shut down his company. Because he milked his cows and bottled the milk himself, Hettinga was exempt from federal regulations that forbid the sale of milk below certain minimum prices. That exemption enabled Hettinga to sell milk at much cheaper prices than large national dairy conglomerates could, and they didn’t like the competition. They got Congress to pass a law aimed solely at Hettinga’s company, forcing him to raise his prices and squeezing him out of the market.

But when he sued, arguing that singling him out in this way violated his right to due process of law, the court dismissed the case without trial—not on the basis of any evidence, but simply because the government claimed that the law was reasonable. That alone was enough, the judge said, because Hettinga, as a businessman, came within the “rational basis” test; evidence was beside the point. Although he asked the Supreme Court to overrule that decision, the justices ignored his case.

Shortly afterwards, a federal judge in Virginia threw out a lawsuit challenging that state’s outlandish restrictions on the purchase of life‐​saving medical equipment. Dr. Mark Baumel, a Delaware physician, wanted to start a chain of clinics to screen patients for colorectal cancer, a disease that costs 50,000 American lives every year. Yet when he tried to set up a shop in Virginia, he found that the state’s “certificate of need” law makes it illegal to buy the necessary scanning equipment without government permission—and the government won’t give permission if another nearby clinic already has a scanner, even if that clinic doesn’t offer the same screening services.

This restriction is a senseless violation of Dr. Baumel’s right to provide much‐​needed services to his patients. But because he runs a business, his lawsuit challenging the constitutionality of the law fell within the “rational basis” test, and the court dismissed out without discovery or trial. “Even if plaintiffs had evidence that Virginia’s laws do not in fact advance [the state’s] interest,” the judge said, “that fact would be of no moment. “That case is now on appeal.

That’s a clear violation of the rule that courts must presume in favor of plaintiffs when considering motions to dismiss. Even under the “rational basis” standard, someone who files a valid lawsuit should be allowed to prove his or her allegations, and the government should not be free to dismiss the case on its mere say‐​so. Yet in Hettinga’s and Baumel’s cases, judges transformed the rational basis test into a set of magic words that can shut down a lawsuit before the evidence is even introduced.

Courts should be impartial forums, where everyone can at least gets a fair opportunity to voice their arguments. Sadly, in cases involving businesses, courts regularly put a thumb on the scales of justice—expanding government control over our economic choices and depriving business owners of the right to a hearing—all thanks to a “rational basis” theory that is anything but rational.

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