Morey v. Doud

• Decision Date: 24 June 1957
• Docket Number: No. 475,475
• Citation: 1 L.Ed.2d 1485,77 S.Ct. 1344,354 U.S. 457
• Parties: Lloyd MOREY, Auditor of Public Accounts of the State of Illinois, Latham Castle, Attorney General of the State of Illinois, and Benjamin S. Adamowski, State's Attorney of Cook County, Illinois, Appellants, v. George W. DOUD et al., Doing Business as Bondified Systems, et al
• Court: U.S. Supreme Court

354 U.S. 457

77 S.Ct. 1344

1 L.Ed.2d 1485

Lloyd MOREY, Auditor of Public Accounts of the State of Illinois, Latham Castle, Attorney General of the State of Illinois, and Benjamin S. Adamowski, State's Attorney of Cook County, Illinois, Appellants,

v George W. DOUD et al., Doing Business as Bondified Systems, et al.

No. 475.

Argued April 24, 1957.

Decided June 24, 1957.

Mr. William C. Wines, Asst. Atty. Gen. of Illinois, Chicago, Ill., for appellants.

Mr. G. Kent Yowell and John J. Yowell, Chicago, Ill., for appellees.

Mr. Justice BURTON delivered the opinion of the Court.

This case concerns the validity of a provision in the Illinois Community Currency Exchanges Act, as amended,¹ excepting money orders of the American Express Company from the requirement that any firm selling or issuing money orders in the State must secure a license and submit to state regulation. The objection raised is that this exception results in a denial of equal protection of the laws, guaranteed by the Fourteenth Amendment to the Constitution of the United States, to those who are subjected to the requirements of the Act. For the reasons hereafter stated, we hold that the Act is invalid as applied to them because of this discriminatory exception.

The appellees in this case are Doud, McDonald and Carlson, partners doing business as Bondified Systems and Derrick, their agent. The partnership has an exclusive right to sell 'Bondified' money orders in Illinois, directly or through agents.² It contemplates selling these money orders in Illinois through agents principally engaged in operating retail drug or grocery stores. Derrick is the proprietor of a drug store in Illinois and operates a 'Bondified' agency in that store.

Fearing enforcement against them of the provisions of the Act, these four individuals instituted this suit in the United States District Court for the Northern District of Illinois against the appellants, who are the Auditor of Public Accounts of the State of Illinois, the Attorney General of that State, and the State's Attorney of Cook County. The complaint alleged that the Act violated the Equal Protection Clause of the Fourteenth Amendment in that it unlawfully discriminated against the complainants and in favor of the American Express Company. An injunction against the enforcement of the Act was sought. Since the complaint attacked the validity of a state statute under the Constitution of the United States, the case was heard by a three-judge District Court, pursuant to 28 U.S.C. §§ 2281, 2284, 28 U.S.C.A. §§ 2281, 2284.

After hearing evidence, the District Court dismissed the complaint on the ground that it lacked jurisdiction to determine the constitutional question in the absence of an authoritative determination of that question by the Supreme Court of Illinois. Doud v. Hodge, 127 F.Supp. 853. On appeal, this Court held that the District Court erred in dismissing the case for lack of jurisdiction, and remanded it to the District Court. 350 U.S. 485, 76 S.Ct. 491, 100 L.Ed. 577.

On remand, the District Court considered on the merits the evidence previously heard, and unanimously held that the Act violated the Equal Protection Clause and that appellees were entitled to the relief sought. 146 F.Supp. 887.³ The decree enjoined appellants from enforcing the Act against appellees so long as they engage only in the business of issuing and selling money orders. The case came here on direct appeal under 28 U.S.C. § 1253, 28 U.S.C.A. § 1253, and we noted probable jurisdiction. Morey v. Doud, 352 U.S. 923, 77 S.Ct. 224, 1 L.Ed.2d 159.

During the early 1930's, the closing of many banks in the Chicago area led to the development of simple banking facilities called currency exchanges. The principal activities of these exchanges were the cashing of checks for a fee and the selling of money orders. The fact that many of these exchanges went into business without adequate capital and without sufficient safeguards to protect the public resulted in the enactment of the Illinois Community Currency Exchanges Act in 1943.

This Act and its amendments provide a comprehensive scheme for the licensing and regulation of currency exchanges. The operation of a community currency exchange without a license is made a crime. § 32. An applicant for a license must submit specified information and pay an investigation fee of $25. § 34. A license cannot be issued unless the State Auditor determines that its issuance will 'promote the convenience and advantage of the community in which the business of the applicant is proposed to be conducted * * *.' § 34.1.⁴ A surety bond of between $3,000 and $25,000, and an insurance policy of between $2,500 and $35,000 must be filed. §§ 35, 36. An annual license fee of $50 is required. § 44.

A licensed exchange must maintain a minimum of $3,000 available in cash for the uses and purposes of its business, plus an amount of liquid funds sufficient to pay on demand all outstanding money orders issued. § 37. Each exchange must be an entity, financed and conducted as a separate business unit, and not conducted as a department of another business. No community currency exchange 'hereafter licensed for the first time shall share any room with any other business, trade or profession nor shall it occupy any room from which there is direct access to a room occupied by any other business, trade or profession.' § 38. Only one place of business may be maintained under one license, although more than one license may be issued to a licensee. § 43. Annual financial reports must be submitted and the State Auditor has a duty to investigate each exchange at least once a year. A fee of $20 must be paid for each day or part thereof of investigation. § 46.

The following definition of a 'community currency exchange' is crucial to this case:

"Community currency exchange' means any person, firm, association, partnership or corporation, except banks incorporated under the laws of this State and National Banks organized pursuant to the laws of the United States, engaged at a fixed and permanent place of business, in the business or service of, and providing facilities for, cashing checks, drafts, money orders or any other evidences of money acceptable to such community currency exchange, for a fee or service charge or other consideration, or engaged in the business of selling or issuing money orders under his or their or its name, or any other money orders (other than United States Post Office money orders, American Express Company money order(s), Postal Telegraph Company money orders, or Western Union Telegraph Company money orders), or engaged in both such businesses, or engaged in performing any one or more of the foregoing services.' (Emphasis supplied.) § 31.⁵

As the activities of appellees concededly come within this definition of a 'community currency exchange,' the partnership and its druggist agent are subject to the licensing and regulatory provisions of the Act. Consequently, since the Act bars the sale of money orders as a part of another business, the partnership is precluded from establishing outlets for the sale of 'Bondified' money orders in drug and grocery stores, and Derrick is unable to secure a license for the sale of those money orders in his store. § 38. Even if the partnership establishes outlets which are not a part of other businesses, those outlets will be licensed to sell 'Bondified' money orders only if they show that the 'convenience and advantage of the community' in which they propose to do business will be promoted by the issuance of licenses to them. § 34.1. Finally, any 'Bondified' outlets will each have to pay the specified licensing and inspection fees and each will have to secure the required surety bond and insurance policy.

The American Express Company, on the other hand, because its money orders are excepted, is relieved of these licensing and regulatory requirements, and appears to be exempt from any regulation in Illinois. The American Express Company, an unincorporated joint stock association organized in 1868 under the laws of the New York, conducts a world-wide business which includes the sale of money orders. It sells money orders in Illinois in substantially the same manner as is contemplated by the 'Bondified' partnership, through authorized agents located in drug and grocery stores. Since American Express money orders are not subject to the Act, they are sold legally in those stores as a part of their business. American Express outlets may be established without regard to the 'convenience and advantage' of the community in which they operate. Finally, those outlets need not pay licensing and inspection fees nor file surety bonds and insurance policies with the State.

In determining the constitutionality of the Act's application to appellees in the light of its exception of American Express money orders, we start with the established proposition that the 'prohibition of the Equal Protection Clause goes no further than the invidious discrimination.' Williamson v. Lee Optical of Oklahoma, 348 U.S. 483, 489, 75 S.Ct. 461, 465, 99 L.Ed. 563. The rules for testing a discrimination have been summarized as follows:

'1. The equal protection clause of the Fourteenth Amendment does not take from the State the power to classify in the adoption of police laws, but admits of the exercise of a wide scope of discretion in that regard, and avoids what is done only when it is without any reasonable basis and therefore is purely arbitrary. 2. A classification having some reasonable basis does not offend against that clause merely because it is not make with mathematical nicety or because in practice it results in some inequality.

3. When the classification in such a law is called in question, if any state of facts reasonably can be conceived that would sustain it, the existence of that state of facts at the time the law was enacted must be assumed. 4. One who assails the...