Walgreen Co. v. Rullan (First Circuit Court of Appeals) 

This case raises the issue whether a Puerto Rican licensing regime for new retail pharmacies violates the substantive due process clause of the U.S. Constitution.  Regulatory review is effectively triggered when existing pharmacies object to a new pharmacy’s application to locate in a competitive area.  The record establishes that Puerto Rico denies applications only when existing pharmacies oppose them.  Thus, the statute is selectively invoked to shield existing pharmacies from competition.  The lower court held that the regulatory regime was constitutional because it was rationally related to the legitimate purpose of encouraging new pharmacies to locate in remote, “underserved” areas, even though the legislation does not provide pharmacies with any financial incentive or any other reason to locate in these economically undesirable areas.  Substantive due process challenges to economic legislation have been disfavored since the late 1930s, when the Supreme Court became highly deferential to the states’ exercise of their police powers and allowed them to control their own economic affairs with minimal judicial oversight.  NELF filed a brief in support of Walgreens, arguing that rational-basis review should not be “toothless.”  NELF argued that where, as here, a statute insulates a special interest group from economic competition without serving any discernible public purpose, a court should be on its guard to determine whether or not the government’s articulated purposes are a mere pretext for the illegitimate purpose of economic protectionism.  NELF asserted that the selective enforcement of the law, triggered exclusively by the members of the interest group protected by its provisions, exposes the law’s articulated purposes as a pretext for economic protectionism.  The law puts the fox in charge of the hen house.  NELF also argued that lower federal courts in recent decisions have invalidated similar protectionist laws that serve no discernible public purpose.  NELF asserted that the framers of the Constitution contemplated that the judiciary would serve as the necessary check on legislative action that serves only the narrow interests of the few, and no public purpose.  Judicial deference to protectionist, special-interest legislation such as the Puerto Rico statute is inconsistent with the role of the courts that the framers envisioned. Oral argument is scheduled for May 7, 2004.