The Law School Authority

Ferguson v. Skrupa Case Brief

Summary of Ferguson [df/ants. ] v. Skrupa[PL/ee]
S. Ct. 1963

Demise of Liberty of Contract

Relevant Facts:  The complaint, filed by appellee Skrupa doing business as 'Credit Advisors,' alleged that Skrupa was engaged in the business of 'debt adjusting' as defined by the statute, that his business was a 'useful and desirable' one, that his business activities were not 'inherently immoral or dangerous' or in any way contrary to the public welfare, and that therefore the business could not be 'absolutely prohibited' by Kansas.

Legal Issue(s): Whether the Kansas Legislature was free to decide that legislation was needed to deal with the business of debt adjusting, and that the statute was violative of due process of law or did it deny equal protection of laws to nonlawyers?

Court’s Holding: No

Procedure: The US D Ct violated the due process clause of the 14th  Amendment  enjoined its enforcement. The defendants appealed. Reversed.

Law or Rule(s):   A statute that deprives life, liberty, or property is a  “denial of due process,” unless rationally based on to the health and welfare of the public.

Court Rationale: Under our system of government created by out Constitution, it is up to legislatures, not courts to decide on the wisdom and utility of legislation.  The Kansas legislature was free to decide what legislation was needed to deal with the business of debt adjusting.  Whether the legislation is regulatory or prohibitive is no concern of ours either.

Plaintiff’s Argument: The Act was prohibitory, not regulatory, but that even if construed in part as regulatory it was an unreasonable regulation of a 'lawful business,'

Defendant’s Argument: Debt adjusting lends itself to grave abuses against distressed debtors, particularly in the lower income brackets, and that these abuses are of such gravity that a number of States have strictly regulated 'debt adjusting' or prohibited it altogether.

Twelve other States have outlawed the business of debt adjusting.


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