Ferguson v. Skrupa

LOCATION: Skrupa's business

DECIDED BY: Warren Court (1962-1965)

CITATION: 372 US 726 (1963)
ARGUED: Mar 20, 1963
DECIDED: Apr 22, 1963

Facts of the case

A Kansas statute made it a misdemeanor to enter into contracts for "debt adjusting" (a practice in which a debtor agrees to pay a monthly fee to an adjustor who then makes payments to the debtor's creditor). Skrupa was in business as a "Credit Advisor" and engaged in this practice. A lower court held that the Kansas statute was an "unreasonable regulation of a lawful business" and struck it down.


Did the Kansas regulation of debt adjusting violate the Due Process Clause of the Fourteenth Amendment?

Media for Ferguson v. Skrupa

Audio Transcription for Oral Argument - March 20, 1963 in Ferguson v. Skrupa

Earl Warren:

No. 111 William M. Ferguson the Attorney General for the State of Kansas, et al Appellants versus Frank G. Skrupa.o

Attorney General Ferguson.

William M. Ferguson:

Mr. Chief Justice, may it please the Court.

This case involves the constitutionality of a Kansas Statute making it a misdemeanor to engage in the business of debt adjusting for a fee.

Statute has a proviso that the provisions of this act shall not apply to those situations involving debt adjusting as herein defined, incurred incidentally in the lawful practice of law in the state.

I might say to the court that debt adjusting is an activity, a business activity wherein the debtor turns the portion of his earnings over to the debt adjustor and is usually as a result of solicitation by advertising or some other means.

Then the adjustor distributes to the creditors of the debtor who will agree to the plan and the adjustor charges a fee and it is usually based upon the total amount of the debt.

Now this is a criminal statute, misdemeanor, and the statute does not affect those that charge no fee.

This case was brought in the Federal District Court, in the District of Kansas asking for an injunction and for declaratory judgment.

Action was brought against the Sedgwick County, county attorney and the Attorney General State of Kansas as Defendants.

Temporary restraining orders were issued and then there was an order for three-judge court.

The Wichita Bar Association filed an application to intervene on behalf of the state and it was granted.

There was a hearing and then a decision by the three-judge court, two-to-one, Judge Stanley dissenting, declared that the law violated due process and is unconstitutional.

I call the Court's attention to the decision, it's found on page 126 of the transcript, the court below said that the grounds upon which this action is predicated or that the act is void because it violates and infringes Plaintiff's rights guaranteed by the Due Process Clause of Fourteenth Amendment of the United States Constitution.

The Court in its conclusion of law concluded that, the act in question is prohibitory and not regulatory, but went on to say that even if it's construed as regulatory, it is unreasonable, unwarranted regulation of a lawful businesses and therefore constitutes a violation of the rights claimed as guaranteed by Due Process Clause in the Fourteenth Amendment.

The only question here involves measuring of this statute against the Due Process Clause of the Fourteenth Amendment.

How many states have got this statute on their books?

William M. Ferguson:

There are 13 states that have similar statutes.

Seven have regulatory statute, Your Honor.

Two of those 13 are purporting, they are formed to be regulatory, but are in fact prohibitory.

They are West Virginia and Ohio.

Potter Stewart:

And this is the criminal statute?

William M. Ferguson:

This is the criminal statute.

Potter Stewart:

So there are only two others, two other criminal statutes?

William M. Ferguson:

No, no.

Potter Stewart:

Are there more?

William M. Ferguson:

There are 12 others.

Potter Stewart:

Criminal statutes.

William M. Ferguson:

Yes [Inaudible]

William J. Brennan, Jr.: