QUESTION 5 Discuss the main points in the authors' essay, "Legal Formalism and the New Deal Crisis. Be sure to use examples from the essay.ISLATIVE, TAXING, AND SPENDING POWERS le, of regulating commerce within the state, If Con. sail from one port to another, in the same state, the B | From Legal Formalism to the New Deal Crisis | 555 necessarily, incidental to the power expressly granted es no claim of a direct power to regulate the purely state, or to act directly on its system of police. So, if 3 | From Legal Formalism to the on subjects acknowledged to be within its control e subjects, shall adopt a measure of the same charac New Deal Crisis ongress may adopt, it does not derive its authority ver which has been granted, but from some other state, and may be executed by the same means, Al he same measures, or measures scarcely distinguish Chief Justice Marshall's unitary conception of commerce and standard may flow from distinct powers; but this does no for determining Congress's power over commerce-whether com- emselves are identical. Although the means used in merce "extend[s] to or affect[s] other states"-was nationalist. Indeed, etimes approach each other so nearly as to be con- following Gibbons he struck down a Maryland law requiring importers situations in which they are sufficiently distinct to to pay a license fee on the grounds that states could not tax items lity imported through foreign commerce so long as they remained in their "original package." em, presenting the rare and difficult scheme of one ose action extends over the whole, but which pos Gibbons also implied, however, a distinction between Congress's erated powers, and of numerous state governments, power over interstate commerce and that of the states over intrastate e all powers not delegated to the Union, contests commerce. Although holding that Congress's power over commerce rise. Were it even otherwise, the measures taken by "among the several states" is co es" is complete and "cannot stop at the external nts to execute their acknowledged powers, would boundary line of each state, but may be introduced into the interior," scription, and might, sometimes, interfere. This, Chief Justice Marshall also observed, "It is not intended to say that these that the one is exercising, or has a right to exer- words comprehend that commerce which is completely internal, which her. . .. is carried on between man and man in a state, or between different parts censing steamboats] demonstrates the opinion of of the same state, and which does not extend to or affect other states. may be enrolled and licensed, in common with Such a power would be inconvenient, and is certainly unnecessary." re, of course, entitled to the same privileges, and And he added, "Comprehensive as the word 'among' is, it may very ed from navigating waters, and entering port properly be restricted to that commerce which concerns more states ssels, than if they were wafted on their voyage by than one." Hence, "the completely internal commerce of a state," ng propelled by the agency of fire. The one ele Marshall noted, "may be considered as reserved for the state itself." ly used as the other, for every commercial pur- From Marshall's dicta in Gibbons the Court under Chief Justice ws of the Union; and the act of a state inhibiting Roger Taney, who was more sympathetic to claims of states' rights, essel having a license under the act of Congress, developed the interstate-intrastate distinction. In The License Cases, 5 collision with that act. . . . How. (46 U.S.) 504 (1847), Taney suggested two separate, mutually us minds, taking, as postulates, that the powers vernment of the Union are to be contracted, by exclusive commerce powers in noting the existence of "internal or rowest possible compass, and that the original domestic commerce, which belongs to the states, and over which con- stained, if any possible construction will retain gress can exercise no control." Two years later, Justice John McLean well digested, but refined and metaphysical rex further elaborated this view: "All commercial action within the limits premises, explain away the constitution of our of a state, and which does not extend to any other state or foreign coun- nificent structure indeed, to look at, but totally try, is exclusively under state regulation."? entangle and perplex the understanding, as to With the introduction into constitutional law of the interstate- ere before thought quite plain, and induce doubt intrastate commerce distinction, the touchstone for determining the pursue its own course, none would be perceived rly necessary to recur to safe and fundamenta powers of Congress and the states became whether commerce crossed inciples, and, when sustained, to make them the astate line. Not until after the Civil War, however, did Congress actu- ally assert its power over commerce. And in the absence of congres- examined. sional statutes the Court employed the interstate-intrastate distinction556 | CONGRESS: LEGISLATIVE, TAXING, AND SPENDING POWERS to uphold state regulations. In Paul v. Virginia, 8 Wall. (75 U.S.) 160 B | From Legal Formalism to the New Deal Crisis | 557 (1869), for instance, state regulation of interstate insurance company was upheld on the grounds that "issuing a policy of insurance is not nal regulation and, on the other har other hand, to strike down federal regulations transaction of commerce" and insurance contracts "are not articles of and thereby limit the reach of congressional power over commerce. commerce." For example, in Kidd v. Pearson, 128 U.S. 1 (1888), the Court upheld By the late nineteenth century, the interstate-intrastate distinction lowa's ban on the manufacture of liquor as applied to a distillery in the was applied in a formalistic way. This development reflected political state that exported its entire product to other states. In rejecting the changes in the country and in the Court. A new era in government distillery's claim that manufacturing a product sold exclusively out of regulation was inaugurated with the passage of the Interstate Com state constituted interstate commerce, the Court observed, "No dis- merce Act of 1887 and the Sherman Antitrust Act of 1890. The Inter tinction is more popular to the common mind, or more clearly expressed in economic and political literature, than that between manufacturing state Commerce Act created the first regulatory commission in the and commerce. Manufacturing is transformation-the fashioning of United States, the ICC (which was abolished in 1995), and authorized raw materials into a change of form for use. The functions of commerce it to investigate and regulate the operation of interstate railroads. TH are different. The buying and selling and the transportation incident Sherman Antitrust Act made it illegal for interstate businesses to form thereto constitute commerce." trusts, combinations, or monopolies and authorized the executive United States v. E. C. Knight Company (1895) (see excerpt below) branch to prosecute businesses that formed monopolies and entered into illustrates the Court's use of the production/distribution rule to defeat conspiracies to restrain trade and fix prices. This expansion of congres the congressional power under the commerce clause. In that case, over sional power responded to pressures brought by the Industrial Revolu the forceful dissent of Justice Harlan, the Fuller Court ruled that the tion and a successful national economy. It also registered a new Sherman Antitrust regulation of monopolies did not apply to the coun- conception of the role of the national government in promoting free try's largest sugar-refining company because it viewed the company's pro- dom that had evolved since the Reconstruction Era. At the same time, duction of sugar as a local activity distinctly separate from the industry's industries, railroad companies, and corporations, opposing regulation sugar distribution. The Court later applied the production/distribution rule in defin- by the national government, contended that only states could regular ing the scope of congressional and state regulatory powers over min- their activities; yet, states could not regulate those businesses that oper ing*; fishing, farming, and oil production'; and hydroelectric power. ated in more than one state. Coincidentally, the Court's composition The most extreme use of the rule came in Hammer v. Dagenhart (1918) also changed with the addition of justices who had been corporate (see excerpt below), when a bare majority of the Court struck down lawyers and sympathized with private business interests. In 1888, Melville the Federal Child Labor Act of 1916. A year earlier, in Wilson v. New, Fuller, a successful commercial attorney, was appointed chief justice 243 U.S. 332 (1917), the justices divided 5-4 in upholding employment and joined on the bench by conservative Justices Stephen Field and regulations for railroad workers. However, in Hammer the majority Samuel Miller. He was then followed by others opposed to social change found that Congress impermissibly barred shipment in interstate com- and who embraced laissez-faire capitalism, notably, Justices David Brew merce of goods produced in factories that employed children under (in 1890), Edward White (in 1894), and Rufus Peckham (in 1896).3 fourteen or allowed children between the ages of fourteen and sixteen Between 1887 and 1937, the Court relied on the interstate-intrastat to work more than eight hours a day or more than six days a week. In dichotomy in upholding state regulations and striking down congres his opinion for the majority, Justice Day narrowly read federal power sional legislation as unauthorized under the commerce clause. In doing over commerce to be limited to regulating the means of transportation. so, the Court invented some additional rules for further defining the And he distinguished earlier cases upholding congressional regulation boundaries between state and federal power. One of the most important of lottery tickets, prostitution, and impure food' on the grounds that of these was that between the activities of production, or manufacturing these goods are harmful per se, whereas goods produced by child labor (over which states enjoyed virtually exclusive authority), and those of are harmless. Justice Holmes, writing for the dissenters, rejected the distribution, or commercial transportation (which Congress might regulate). majority's formalistic reasoning and blasted it for reading its own "moral This production/distribution rule enabled the Court, on the one hand, to conceptions" into constitutional law. uphold state regulation or taxation of commercial interests that sought Hammer was extraordinary in challenging congressional authority exemption by claiming their activities were subject only to congressio- and was eventually overruled in United States v. Darby Lumber Company558 | CONGRESS: LEGISLATIVE, TAXING, AND SPENDING POWERS B | From Legal Formalism to the New Deal Crisis | 559 (1941) (see excerpt below). Still, even when a majority of the Court could be mustered to uphold progressive legislation it relied on other formal rules and tests derived from the distinction between interstate U.S. 342 (1914), affirmed an order of the ICC requiring Texas intra- and intrastate commerce. In particular, the Court rationalized federal state rates from Dallas and Houston to be equalized with the interstate regulation on an "effect on commerce" rule, that is, whether an activity rates for travel from Shreveport, Louisiana, to Texas. This was because the interstate rates set by the ICC for transportation from Shreveport within a state had an obvious effect or impact on interstate commerce to Texas were higher than those for intrastate travel set by the Texas so as to justify the exercise of federal power. But applying this rule Railroad Commission. And as a result, Shreveport was economically required the Court to invent various tests for gauging the impact of disadvantaged in competing for trade in Texas. In sustaining federal local activities on interstate commerce. power here, Justice Hughes explained, "Wherever the interstate and One test used to implement the effects rule was whether local active intrastate transactions of carriers are so related that the government of ities were in the stream of commerce. This was the basis for the Court's the one involves the control of the other, it is Congress, and not the rejecting the claim of Chicago stockyard firms, made when challenge State, that is entitled to prescribe the final and dominant rule, for ing federal prosecutions for conspiring to restrain trade, that the pur otherwise Congress would be denied the exercise of its constitutional chase and sale of cattle in Chicago stockyards was not commerce among authority and the State, and not the Nation, would be supreme within the states. As Justice Holmes observed in Swift & Company v. United the national field." States, 196 U.S. 375 (1905): Finally, the Court employed a distinction between direct and indi- red effects on commerce. Note that in E. C. Knight, Chief Justice Fuller Commerce among the states is not a technical legal conception, held that the government cannot forbid the merger of sugar companies but a practical one, drawn from the course of business. When under the Sherman Antitrust Act based on the possibility that "trade cattle are sent for sale from a place in one State, with the expecta- or commerce might be indirectly affected." But as with the other tests, tion that they will end their transit, after purchase, in another, and the problem remained how the categories of direct and indirect effects when in effect they do so, with only the interruption necessary to were to be defined in practice. And the Court's rigid definition of them find a purchaser at the stock yards, and when this is a typical, con- when striking down important pieces of President Franklin D. Roose- stantly recurring course, the current thus existing is a current of commerce among the States, and the purchase of the cattle is a velt's program for economic recovery during the Depression precip part and incident of such commerce. rated the crisis over the New Deal. In Schechter Poultry Corporation v. United States, 295 U.S. 495 (1935) ( see excerpt in Ch. 4), Chief Justice Hughes struck down the National The stream of commerce test was subsequently employed in sustaining federal regulation of stockyards and grain and cotton exchanges.' Industrial Recovery Act as an unconstitutional delegation of power. In Another test centered on whether intrastate commerce was so phys addition, he found that the Schechter Corporation in Brooklyn, New cally intermingled or intertwined with interstate commerce as to make it York, was neither engaged in interstate commerce nor part of the stream of commerce. Nor did Schechter's purchase and transportation of chick- impractical to distinguish federal and state regulatory powers. In Southen Railway Co. v. United States, 222 U.S. 20 (1911), the Court upheld federal ens from elsewhere in New York and Pennsylvania to its slaughter- regulations applied to a company carrying on its interstate railroad thre house, where they were sold to local retailers, have a direct effect on cars not equipped with safety couplers, as required under the Safety interstate commerce. Although Hughes did not try further to define Appliance Act, even though these cars were used solely in intrastate direct and indirect effects, he observed that it was "clear in principle" transportation. In Justice Van Devanter's words, "This is so, not because and "a fundamental one, essential to the maintenance of our constitu- Congress possesses any power to regulate intrastate commerce as such tional system. Otherwise," he added, "there would be virtually no limit but because its power to regulate interstate commerce is plenary and con- to the federal power and for all practical purposes we should have a completely centralized government." sequently may be exerted to secure the safety of the persons and property transported therein and of those who are employed in such transporta- One year later in Carter v. Carter Coal Company, 298 U.S. 238 (1936), tion, no matter what may be the source of the dangers which threaten it." the Court split sharply over striking down another piece of New Deal The Shreveport doctrine was yet another test used to justify the exercise legislation, the Bituminous Coal Conservation Act, under which codes of federal power over intrastate commerce. The Shreveport Rate Case, 234 for employment practices were established for the coal industry. This time Justice Sutherland, writing for the majority, endeavored560 | CONGRESS: LEGISLATIVE, TAXING, AND SPENDING POWERS B | From Legal Formalism to the New Deal Crisis | 561 to precisely demark the difference between direct and indirect effects on commerce: over seventy years of age. That would have enabled him to secure a majority on the Court sympathetic to his programs (see "President The word "direct" implies that the activity or condition invoked Roosevelt's Radio Broadcast, March 9, 1937," in Ch. 1). or blamed shall operate proximately-not mediately, remotely, or collaterally-to produce the effect. It connotes the absence of an efficient intervening agency or condition. And the extent of the NOTES effect bears no logical relation to its character. The distinction between a direct and an indirect effect turns, not upon the magni- 1 . Brown v. Maryland , 25 U.S. (12 Wheat.) 419 ( 1827 ) . tude of either the cause or the effect, but merely upon the manner 2. The Passenger Cases, 7 How. 283 (1849). in which the effect has been brought about. If the production by 3. For further discussion, see Benjamin R. Twiss, Lawyers and the Constitution: How one man of a single ton of coal intended for interstate sale and Laissez Faire Came to the Supreme Court (1942); and William F. Swindler, Court and shipment . . . affects interstate commerce indi Constitution in the 20th Century: The Old Legality, 12 Legality, 1889-1932 (Indianapolis: Bobbs- erce indirectly, the effect does not become direct by multiplying the tonnage, or increasing Merrill , 1969 ) . the number of men employed, or adding to the expense or com- 4. United Mine Workers v. Coronado Coal Company, 259 U.S. 344 (1922). plexities of the business, or by all combined. 5 . Champlin Refining Company v. Corporation Commission, 286 U.S. 210 (1932) 6. Utah Power and Light v. Pfost, 286 U.S. 165 (1932). In applying the distinction here, Sutherland further observed: 7. See the discussion and cases cited in section A of this chapter. 8 . Stafford v. Wallace, 258 U.S. 495 (1922 ). Much stress is put upon the evils which come from the struggle between employers and employees over the matter of wages, 9 . Chicago Board of Trade v. Olsen, 262 U.S. 543 (1923); and Allenberg Cotton Com- working conditions, the right of collective bargaining, etc., and pany , Inc. v. Pittman, 419 U.S. 20 ( 1974 ). the resulting strikes, curtailment and irregularity of production and effect on prices; and it is insisted that interstate commerce is SELECTED BIBLIOGRAPHY greatly affected thereby. But . . . the conclusive answer is that the evils are all local evils over which the federal government has no Leuchtenburg, William. The Supreme Court Reborn: The Constitutional Revolution in legislative control. The relation of employer and employee is the Age of Roosevelt. New York: Oxford University Press, 1995. local relation. .. . And the controversies and evils, which it is the Mccloskey , Robert. American Conservativism: In the Age of Enterprise 1865-1910. object of the act to regulate and minimize, are local controversie Cambridge, MA: Harvard University Press, 1951. and evils affecting local work undertaken to accomplish that loca result. Such effect as they may have upon commerce, however extensive it may be, is secondary and indirect. An increase in the greatness of the effect adds to its importance. It does not alter its character. United States v. E. C. Knight Company 156 U.S. I, IS S.CT. 249 (1895) This rigid use of the direct and indirect effects test provoked a sharp dissent from Justice Cardozo who, along with Justices Brandeis and Stone, maintained that Congress's commerce power was "as broad a The Sherman Antitrust Act of 1890 made it illegal for businesses to the need that evokes it." contract, combine, or conspire to create a trust or monopoly for The Court's striking down important New Deal legislation in the purpose of restraining free trade and monopolizing interstate Schechter and Carter Coal Company resulted in a major confrontation or foreign commerce. The American Sugar Refining Company, between it and the country. President Roosevelt, after winning a land- which already controlled a majority of the sugar-refining compa- slide reelection in 1936, was embittered by the invalidation of his pro- nies in the United States, subsequently purchased stock in and grams. And he responded by proposing judicial reforms that would arranged to control four other companies, including E. C. Knight. expand the size of the Court to fifteen. His "Court-packing plan" called The American Sugar Refining Company would thereby control for the appointment of a new member of the Court for every justice over 98 percent of the country's sugar-refining business. The Department of Justice sought a court order forbidding the stock562 | CONGRESS: LEGISLATIVE, TAXING, AND SPENDING POWERS B | From Legal Formalism to the New Deal Crisis | 563 safe and other arrangements made by E. C. Knight, the American Sugar Refining Company, and three other Philadelphia firms. I give power in any case is an expression of its will that the subject shall be contended that the companies had conspired and entered into com- wee from restrictions or impositions upon it by the several states, and if a binations in restraint of trade in violation of the Sherman Antitrust low passed by a state in the exercise of its acknowledged powers comes into Act. But lower federal courts denied relief, holding that the com- conflict with that will, the congress and the state cannot occupy the post- panies were engaged in manufacturing, not interstate commerce tion of equal opposing sovereignties, because the constitution declares its and hence not subject to the anti-trust regulations. The govern' supremacy, and that of the laws passed in pursuance thereof; and that which ment thereupon appealed to the Supreme Court. is not supreme must yield to that which is supreme. "Commerce undoubt- edly is traffic," said Chief Justice MARSHALL, "but it is something more; The Court's decision was 8-1, and the majority's opinion was it is intercourse. It describes the commercial intercourse between nations announced by Chief Justice Fuller. Justice Harlan dissented. and parts of nations in all its branches, and is regulated by prescribing rules for carrying on that intercourse." That which belongs to commerce is within the jurisdiction of the United States, but that which does not belong to Chief Justice FULLER delivers the opinion of the Court. commerce is within the jurisdiction of the police power of the state. . . . The argument is that the power to control the manufacture of refined By the purchase of the stock of the four Philadelphia refineries with sugar is a monopoly over a necessary of life, to the enjoyment of which by shares of its own stock the American Sugar Refining Company acquired a large part of the population of the United States interstate commerce is nearly complete control of the manufacture of refined sugar within the indispensable, and that, therefore, the general government, in the exercise United States. The bill charged that the contracts under which these pur- of the power to regulate commerce, may repress such monopoly directly, chases were made constituted combinations in restraint of trade, and that in and set aside the instruments which have created it. But this argument can- entering into them the defendants combined and conspired to restrain the not be confined to necessaries of life merely, and must include all articles of trade and commerce in refined sugar among the several states and with for general consumption. Doubtless the power to control the manufacture of a eignnations, contrary to the act of Congress of July 2, 1890. given thing involves, in a certain sense, the control of its disposition, but this is a secondary, and not the primary, sense; and, although the exercise of The relief sought was the cancellation of the agreements under which the stock was transferred, the redelivery of the stock to the parties respec- that power may result in bringing the operation of commerce into play, it does not control it, and affects it only incidentally and indirectly. Com- tively, and an injunction against the further performance of the agreements merce succeeds to manufacture, and is not a part of it. The power to regu- and further violations of the act. . . . late commerce is the power to prescribe the rule by which commerce shall The fundamental question is whether, conceding that the existence of be governed, and is a power independent of the power to suppress mono- a monopoly in manufacture is established by the evidence, that monopoly poly. But it may operate in repression of monopoly whenever that comes can be directly suppressed under the act of congress in the mode attempted within the rules by which commerce is governed, or whenever the transac- by this bill. tion is itself a monopoly of commerce. It cannot be denied that the power of a state to protect the lives, health, It is vital that the independence of the commercial power and of the and property of its citizens, and to preserve good order and the public police power, and the delimitation between them, however sometimes morals, "the power to govern men and things within the limits of its dominion," is a power originally and always belonging to the states, no perplexing, should always be recognized and observed, for, while the one surrendered by them to the general government, nor directly restrained by furnishes the strongest bond of union, the other is essential to the preser- the constitution of the United States, and essentially exclusive. The relief of vation of the autonomy of the states as required by our dual form of gov- the citizens of each state from the burden of monopoly and the evils result- emnment; and acknowledged evils, however grave and urgent they may ing from the restraint of trade among such citizens was left with the states appear to be, had better be borne, than the risk be run, in the effort to sup- to deal with, and this court has recognized their possession of that power press them, of more serious consequences by resort to expedients of even doubtful constitutionality. even to the extent of holding that an employment or business carried on by private individuals, when it becomes a matter of such public interest and It will be perceived how far-reaching the proposition is that the power importance as to create a common charge or burden upon the citizen, in of dealing with a monopoly directly may be exercised by the general gov- other words, when it becomes a practical monopoly, to which the citizen is emment whenever interstate or international commerce may be ultimately compelled to resort, and by means of which a tribute can be exacted from affected. The regulation of commerce applies to the subjects of commerce, the community-is subject to regulation by state legislative power. On the and not to matters of internal police. Contracts to buy, sell, or exchange other hand, the power of congress to regulate commerce among the several goods to be transported among the several states, the transportation and its states is also exclusive. The Constitution does not provide that interstate instrumentalities, and articles bought, sold, or exchanged for the purposes commerce shall be free, but, by the grant of this exclusive power to regu- of such transit among the states, or put in the way of transit, may be regu- late it, it was left free, except as Congress might impose restraints. Therefore it has been determined that the failure of Congress to exercise this exclus lated; but this is because they form part of interstate trade or commerce. The fact that an article is manufactured for export to another state does not of itself make it an article of interstate commerce, and the intent of the564 | CONGRESS: LEGISLATIVE, TAXING, AND SPENDING POWERS B | From Legal Formalism to the New Deal Crisis | 565 manufacturer does not determine the time when the article or product passes from the control of the state and be ate and belongs to commerce. .. . Contracts, combinations, or conspiracies to control domestic enterprise and the autonomy of the states preserved. In this view I entirely concur. to manufacture, agriculture, mining, production in all its forms, or to raid Undoubtedly, the preservation of th ation of the just authority of the states is an object or lower prices or wages, might unquestionably tend to restrain external of deep concern to every lover of his country. . . . But it is equally true that well as domestic trade, but the restraint would be an indirect result, howey the preservation of the just authority of the general government is essential inevitable, and whatever its extent, and such result would not necessarily as well to the safety of the states as to the attainment of the important ends determine the object of the contract, combination, or conspiracy. . for which that government was ordained by the people of the United States; Slight reflection will show that, if the national power extends to all and the destruction of that authority would be fatal to the peace and well- contracts and combinations in manufacture, agriculture, mining, and other being of the American people. . . . "It would seem to be indisputable that no combination of corporations productive industries, whose ultimate result may affect external commerce comparatively little of business corporations and affairs would be left for or individuals can, of right, impose unlawful restraints upon interstate trade, whether upon transportation or upon such interstate intercourse and traffic state control. is precede transportation, any more than it can, of right, impose unreason- It was in the light of well-settled principles that the act of July 2, 1890 able restraints upon the completely internal traffic of a state. The supposition was framed. Congress did not attempt thereby to assert the power to deal cannot be indulged that this general proposition will be disputed. If it be with monopoly directly as such; or to limit and restrict the rights of corpo. true that a combination of corporations or individuals may, so far as the rations created by the states or the citizens of the states in the acquisition power of Congress is concerned, subject interstate trade, in any of its stages, control, or disposition of property; or to regulate or prescribe the price of to unlawful restraints, the conclusion is inevitable that the constitution has prices at which such property or the products thereof should be sold; or to failed to accomplish one primary object of the Union, which was to place make criminal the acts of persons in the acquisition and control of property commerce among the states under the control of the common government which the states of their residence or creation sanctioned or permitted. of all the people, and thereby relieve or protect it against burdens or restric Aside from the provisions applicable where congress might exercise munic- tions imposed, by whatever authority, for the benefit of particular localities ipal power, what the law struck at was combinations, contracts, and con- or special interests. . . . spiracies to monopolize trade and commerce among the several states or The power of Congress covers and protects the absolute freedom of with foreign nations; but the contracts and acts of the defendants related such intercourse and trade among the states as may or must succeed manu- exclusively to the acquisition of the Philadelphia refineries and the business facture and precede transportation from the place of purchase. This would of sugar refining in Pennsylvania, and bore no direct relation to commerce seem to be conceded, for the court in the present case expressly declare that between the states or with foreign nations. The object was manifestly pri- "contracts to buy, sell, or exchange goods to be transported among the sev- vate gain in the manufacture of the commodity, but not through the con- eral states, the transportation and its instrumentalities, and articles bought trol of interstate or foreign commerce. It is true that the bill alleged that the sold, or exchanged for the purpose of such transit among the states, or put in the way of transit, may be regulated, but this is because they form part of products of these refineries were sold and distributed among the several interstate trade or commerce." Here is a direct admission-one which the states, and that all the companies were engaged in trade or commerce with settled doctrines of this court justify-that contracts to buy, and the pur- the several states and with foreign nations; but this was no more than to say chasing of goods to be transported from one state to another, and transport that trade and commerce served manufacture to fulfill its function. Sugar tation, with its instrumentalities, are all parts of interstate trade or commerce. was refined for sale, and sales were probably made at Philadelphia for con- Each part of such trade is then under the protection of Congress. ... sumption, and undoubtedly for resale by the first purchasers throughout In my judgment, the citizens of the several states composing the Union Pennsylvania and other states, and refined sugar was also forwarded by the are entitled of right to buy goods in the state where they are manufactured, companies to other states for sale. Nevertheless it does not follow that an or in any other state, without being confronted by an illegal combination attempt to monopolize, or the actual monopoly of, the manufacture was an whose business extends throughout the whole country, which, by the law attempt, whether executory or consummated, to monopolize commerce, everywhere, is an enemy to the public interests, and which prevents such even though, in order to dispose of the product, the instrumentality of buying, except at prices arbitrarily fixed by it. I insist that the free course commerce was necessarily invoked. There was nothing in the proofs to indicate any intention to put a restraint upon trade or commerce, and the of trade among the states cannot coexist with such combinations. When I fact, as we have seen, that trade or commerce might be indirectly affected, speak of trade I mean the buying and selling of articles of every kind that are recognized articles of interstate commerce. Whatever improperly was not enough to entitle complainants to a decree. obstructs the free course of interstate intercourse and trade, as involved in the buying and selling of articles to be carried from one state to another, Justice HARLAN, dissenting may be reached by congress under its authority to regulate commerce among The court holds it to be vital in our system of government to recognize the states. The exercise of that authority so as to make trade among the states and give effect to both the commercial power of the nation and the in all recognized articles of commerce absolutely free from unreasonable or police powers of the states, to the end that the Union be strengthened. illegal restrictions imposed by combinations is justified by an express grant of power to congress, and would redound to the welfare of the whole country.566 | CONGRESS: LEGISLATIVE, TAXING, AND SPENDING POWERS B | From Legal Formalism to the New Deal Crisis | 567 I am unable to perceive that any such result would imperil the autonomy of the states, especially as that result cannot be attained through the action of any one state . .. . Justice DAY delivers the opinion of the Court. To the general government has been committed the control of com mercial intercourse among the states, to the end that it may be free at all [The power [to regulate commerce] is one way to control the means times from any restraints except such as congress may impose or permit for by which commerce is carried on, which is directly the contrary of the the benefit of the whole country. The common government of all the assumed right to forbid commerce from moving and thus destroying it as to people is the only one that can adequately deal with a matter which directly particular commodities. But it is insisted that adjudged cases in this court establish the doctrine that the power to regulate given to Congress inci- and injuriously affects the entire commerce of the country, which concern dentally includes the authority to prohibit the movement of ordinary com- equally all the people of the Union, and which, it must be confessed, can modities and therefore that the subject is not open for discussion. The cases not be adequately controlled by any one state. Its authority should not be demonstrate the contrary. They rest upon the character of the particular so weakened by construction that it cannot reach and eradicate evils that subjects dealt with and the fact that the scope of governmental authority, beyond all question, tend to defeat an object which that government state or national, possessed over them is such that the authority to prohibit entitled, by the constitution, to accomplish. "Powerful and ingenious is as to them but the exertion of the power to regulate. minds," this court has said, "taking, as postulates, that the powers expressly The first of these cases is Champion v. Ames, 188 U.S. 321 [1903], the granted to the government of the Union are to be contracted by construct so-called Lottery Case, in which it was held that Congress might pass a law tion into the narrowest possible compa le compass, and that the original powers of having the effect to keep the channels of commerce free from use in the the states are retained, if any possible construction will retain them, may, by transportation of tickets used in the promotion of lottery schemes. In Hipolite a course of well-digested but refined and metaphysical reasoning, founded Egg Co. v. United States, 220 U. S. 45 [1911]. This court sustained the power on these premises, explain away the constitution of our country, and leave of Congress to pass the Pure Food and Drug Act, which prohibited the It, a magnificent structure, indeed, to look at, but totally unfit for use. They introduction into the states by means of interstate commerce of impure may so entangle and perplex the understanding as to obscure principles foods and drugs. In Hoke v. United States, 227 U. S. 308 [1913], this court which were before thought quite plain, and induce doubts where, if the sustained the constitutionality of the so-called "White Slave Traffic Act," mind were to pursue its own course, none would be perceived." Gibbons v. whereby the transportation of a woman in interstate commerce for the pur- Ogden, 9 Wheat. 1 [1824]. pose of prostitution was forbidden. ... In each of these instances the use of inter e use of interstate transportation was nec- essary to the accomplishment of harmful results. In other words, although the power over interstate transportation was to regulate, that could only be accomplished by prohibiting the use of the facilities of interstate commerce Hammer v. Dagenhart to effect the evil intended. This element is wanting in the present case. The thing intended to be 247 U.S. 251, 38 S.CT. $29 (1918) accomplished by this statute is the denial of the facilities of interstate com- merce to those manufacturers in the states who employ children within the prohibited ages. The act in its effect does not regulate transportation among The Federal Child Labor Act of 1916 forbade the shipment in inter- the states, but aims to standardize the ages at which children may be state commerce of goods produced in factories employing children employed in mining and manufacturing within the states. The goods shipped under the age of fourteen or allowing children between ages four are of themselves harmless. The act permits them to be freely shipped after teen and sixteen to work more than eight hours a day, at night, or thirty days from the time of their removal from the factory. When offered for more than six days a week. Roland Dagenhart, the father of for shipment, and before transportation begins, the labor of their produc- two minor sons who worked in a cotton mill in North Carolina tion is over, and the mere fact that they were intended for interstate com- sought in federal district court an injunction against W. C. Ham- merce transportation does not make their production subject to federal mer, a United States attorney, from enforcing the act. The distric control under the commerce power. . . . The making of goods and the judge granted the injunction on the ground that the legislation was mining of coal are not commerce, nor does the fact that these things are to unconstitutional. The government, then, appealed to the Supreme be afterwards shipped, or used in interstate commerce, make their produc- tion a part thereof. . .. Court, which granted review and struck down the Federal Child Over interstate transportation, or its incidents, the regulatory power of Labor Act. The Court's decision was 5-4, and the majority's opinion was Congress is ample, but the production of articles, intended for interstate commerce, is a matter of local regulation. announced by Justice Day. Dissent was by Justice Holmes, who was If it were otherwise, all manufacture intended for interstate shipment joined by Justices Mckenna, Brandeis, and Clarke. would be brought under federal control to the practical exclusion of the authority of the states, a result certainly not contemplated by the framers of568 | CONGRESS: LEGISLATIVE, TAXING, AND SPENDING POWERS B | From Legal Formalism to the New Deal Crisis | 569 employments. Business, done in such states may be at an economic disad vantage when compared with states which have no such regulations; surely, this fact does not give Congress the power to deny transportation in inter- state commerce to those who carry on business where the hours of labor and the rate of compensation for women have not been fixed by a standard in use in other states and approved by Congress. The grant of power to Congress over the subject of interstate com merce was to enable it to regulate such commerce, and not to give it author ity to control the states in their exercise of the police power over local trade and manufacture. The grant of authority over a purely federal matter was not intended to destroy the local power always existing and carefully reserved to the states in the Tenth Amendment to the Constitution. ... In interpreting the Constitution it must never be forgotten that the nation is made up of states to which are entrusted the powers of local govern- ment. And to them and to the people the powers not expressly delegated to the national government are reserved. . . . The power of the states to regulate their purely internal affairs by such laws as seem wise to the local authority is inherent and has never been surrendered to the general government. . . . To sustain this statute would not be in our judgment a recognition of the lawful exertion of congressional authority over interstate commerce, but would sanction an invasion by the federal power of the control of a matter purely local in its character, and over which no authority has been delegated to Congress in conferring the power to regulate commerce among the states. . . . For these reasons we hold that this law exceeds the constitutional authority of Congress. It follows that the decree of the District Court must Children working a loom in Macon, Georgia, about 1910. The conditions led to be Affirmed. Congress's passage of the Child Labor Act, which the Supreme Court struck down in Hammer v. Dagenhart (1918). (Library of Congress, Prints & Photographs Division, Justice HOLMES, dissenting. National Child Labor Committee Collection, LC-DIG-nclc-01581.) [If an act is within the powers specifically conferred upon Congress, it seems to me that it is not made any less constitutional because of the indirect the Constitution when they vested in Congress the authority to regulate effects that it may have, however obvious it may be that it will have those commerce among the States. . effects, and that we are not at liberty upon such grounds to hold it void. It is further contended that the authority of Congress may be exerted The first step in my argument is to make plain what no one is likely to to control interstate commerce in the shipment of child-made goods dispute-that the statute in question is within the power expressly given to because of the effect of the circulation of such goods in other states where Congress if considered only as to its immediate effects and that if invalid it the evil of this class of labor has been recognized by local legislation, and the is so only upon some collateral ground. The statute confines itself to pro- right to thus employ child labor has been more rigorously restrained that hibiting the carriage of certain goods in interstate or foreign commerce. in the state of production. In other words, that the unfair competition, thu Congress is given power to regulate such commerce in unqualified terms. engendered, may be controlled by closing the channels of interstate com It would not be argued today that the power to regulate does not include merce to manufacturers in those states where the local laws do not me the power to prohibit. Regulation means the prohibition of something, and what Congress deems to be the more just standard of other states. when interstate commerce is the matter to be regulated I cannot doubt that There is no power vested in Congress to require the states to exercise the regulation may prohibit any part of such commerce that Congress sees their police power so as to prevent possible unfair competition. Many cause fitto forbid. At all events it is established by the Lottery Case and others that may co-operate to give one state, by reason of local laws or conditions, an have followed it that a law is not beyond the regulative power of Congress economic advantage over others. The commerce clause was not intended merely because it prohibits certain transportation out and out. Champion v. to give to Congress a general authority to equalize such conditions. In some Ames, 188 U.S. 321 [1903]. So I repeat that this statute in its immediate of the states laws have been passed fixing minimum wages for women, in operation is clearly within the Congress's constitutional power. others the local law regulates the hours of labor of women in various The question then is narrowed to whether the exercise of its otherwise constitutional power by Congress can be pronounced unconstitutional570 | CONGRESS: LEGISLATIVE, TAXING, AND SPENDING POWERS C | From the New Deal Crisis to the Administrative State | 571 because of its possible reaction upon the conduct of the States in a matter upon which I have admitted that they are free from direct control. I should have thought that that matter had been disposed of so fully as to leave no seems to me entirely constitutional for Congress to enforce its understand room for doubt. I should have thought that the most conspicuous decision of this Court had made it clear that the power to regulate commerce and other constitutional powers could not be cut down or qualified by the fact Justice MCKENNA, Justice BRANDEIS, and Justice CLARKE concur in this opinion . State. that it might interfere with the carrying out of the domestic policy of any The manufacture of oleomargarine is as much a matter of State regula- tion as the manufacture of cotton cloth. Congress levied a tax upon the C | From the New Deal Crisis to compound when colored so as to resemble butter that was so great as obvi ously to prohibit the manufacture and sale. In a very elaborate discussion the the Administrative State present CHIEF JUSTICE excluded any inquiry into the purpose of an act which apart from that purpose was within the power of Congress. years ago a tax on state banks, the obvious purpose and actual effect of .. Fifty which was to drive them, or at least their circulation, out of existence, was A groundswell of opposition to the Court was emerging in the coun- sustained, although the result was one that Congress had no constitutional try by February 5, 1937, when President Roosevelt sent his "Court- power to require. The Court made short work of the argument as to the packing plan " to Congress. Besides Schechter and Carter Coal, the Court of the National Industrial Recovery Act purpose of the Act. "The Judicial cannot prescribe to the Legislative Depart- had struck down provisions of the ments of the Government limitations upon the exercise of its acknowledge in Panama Refining Co. v. Ryan, 293 U.S. 388 (1935); a railroad retire- powers." Veazie Bank v. Fenno, 8 Wall. [75 U.S.] 533 [1869]. ... ment program in Railroad Retirement Board v. Alton Railroad Co., 295 The notion that prohibition is any less prohibition when applied to U.S. 330 ( 1935 ); and a sc ; and a scheme for farm subsidies under the Agricul- things now thought evil I do not understand. But if there is any matter tural Adjustment Act in United States v. Butler, 297 U.S. 1 (1936).' In upon which civilized countries have agreed-far more unanimously than they have with regard to intoxicants and some other matters over which addition, a New York minimum wage law for women was overturned this country is now emotionally aroused-it is the evil of premature and by a 5-4 vote in Morehead v. New York ex rel. Tipaldo, 298 U.S. 587 excessive child labor. I should have thought that if we were to introduce (1936).2 The only significant New Deal legislation sustained (5-4) was our own moral conceptions where in my opinion they do not belong, this that dealing with eliminating the gold standard and devaluation of the was preeminently a case for upholding the exercise of all its powers by the dollar.' The constitutionality of crucial New Deal programs was thus United States. in doubt and for the Court to still rule on the National Labor Relations But I had thought that the propriety of the exercise of a power admit- Act (or Wagner Act), the Social Security Act, and the Public Utility ted to exist in some cases was for the consideration of Congress alone and Holding Company Act. that this Court always had disavowed the right to intrude its judgment upon questions of policy or morals. It is not for this Court to pronounce While the Senate Judiciary Committee considered FDR's proposal when prohibition is necessary to regulation if it ever may be necessary-to for expanding the Court in the spring of 1937, Senator Burton Wheeler, say that it is permissible as against strong drink but not as against the prod an opponent of the plan, at the suggestion of Justice Brandeis, asked uct of ruined lives. Chief Justice Hughes if he would send a letter to the committee indi- The Act does not meddle with anything belonging to the States. The cating what the justices thought about their workload and whether more may regulate their internal affairs and their domestic commerce as they like. But when they seek to send their products across the State line they are justices were needed. On March 21, Hughes responded with a skill- no longer within their rights. If there were no Constitution and no Congress fully crafted letter implying that all the justices opposed the plan. their power to cross the line would depend upon their neighbors. Under the (Hughes in fact talked only with Van Devanter and Brandeis; Cardozo Constitution such commerce belongs not to the States but to Congress to and Stone later strongly disapproved of his actions and would have regulate. It may carry out its views of public policy whatever indirect effect they may have upon the activities of the States. Instead of being encountered refused to sign the letter.) Immediately, Wheeler proclaimed that the by a prohibitive tariff at her boundaries the State encounters the public pol- Court was "unanimous with reference to the letter of the Chief Jus- icy of the United States which it is for Congress to express. The public policy tice" and used the letter to mobilize opposition. of the United States is shaped with a view to the benefit of the nation as a More dramatically on March 29, the Court voted 5-4 to uphold whole. ... The national welfare as understood by Congress may require a different attitude within its sphere from that of some self-seeking State. It Washington state's minimum wage law in West Coast Hotel Company v. Parrish, 300 U.S. 379 (1937) (excerpted in Ch. 9 and in Vol. 2, Ch. 3)