Schechter III
Bill Long 11/17/05
The Basis of the Decision; A Few Facts
Now we are ready to understand the nature of the decision in the Schechter case. Recall that this was a 9-0 decision. When I studied the case in law school, there was a general "boo hiss" attitude toward the Court which decided Schechter. I received the impression that the decision was the result of an group of old men clinging to outmoded doctrines which narrowly and irrationally construed the concept of "interstate commerce." Now that I am more experienced in law, I realize that the reason I was taught not to like Schechter was that the professor and/or text were "New Dealers" or children of the New Deal, and the Schechter decision to them was like waving a red flag before a bull. But, once I began to read the case on my own, to separate myself from the emotional limitations of those who taught me, I realized that it, after all, was a 9-0 decision, and that two great liberals, Cardozo and Brandeis, went along with the decision. So, what's up? This essay reviews the basis of the decision and shows why the decision isn't such a bad one, from the perspective of constitutional law in 1935.
Beginning with the Concurrence
Justice Cardozo, who had come on the Court in 1932, wrote a concurrence, seconded by Justice Stone, which was not quite as harsh as Hughes' majority opinion but which, nevertheless made clear his point. Apart from Justice Jackson, who followed him and Justice Holmes, whose place he took on the Court, Cardozo is perhaps the Court's premier stylist. And so he begins his concurrence:
"The delegated power of legislation which has found expression in this code is not canalized within banks that keep it from overflowing. It is unconfined and vagrant, if I may borrow my own words in an earlier opinion" (295 US at 551, referring to his opinion in the Panama Refining case earlier in the year).
The problem with the statute, in Cardozo's opinion, is that it is a "roving commission to inquire into evils and upon discovery correct them" (Id.). But it is not as if he is unaware of the tenor of the times. Perhaps anticipating the great battle over the Supreme Court which would emerge two years later in response to FDR's "court-packing" plan, Cardozo said:
"But there is another conception of codes of fair competition, their signficance and function, which leads to very different consequences, though it is one that is struggling now for recognition and acceptance."
This new "conception" of a code would not simply eliminate business practices that would be "characterized by general acceptation as oppressive or unfair." Rather, fueled with a positive spirit to promote good business practices, these codes "include whatever ordinances may be desirable or helpful for the well being or prosperity of the industry affected. In that view, the function of its adoption is not merely negative, but positive; the planning of improvements as well as the extirbation of abuses" (295 US at 553). But what is so bad about this? Or, to doll the question up in legalese, 'Of what constitutional infirmity do these codes partake?' We must turn to Chief Justice Hughes' majority opinion to learn the full answer.
The Chief Speaks
The issues in the case which provided the basis for the decision were a series of violations of the poultry code of fair competition by Schechter Poultry, a Brooklyn, NY firm. These violations had mostly to do with selling diseased or undernourished chickens, but also included a smattering of other charges, from violation of the wage and hour provisions of NIRA to a conspiracy charge. The appellate court upheld conviction on about 18 counts (out of 60 originally filed). Now let's move to the "two issues" I said I would discuss.
The Chief Justice framed the issues as follows: (1) improper delegation of Congressional authority; and (2) no violation of the interstate commerce clause. With respect to the former, Hughes closely examined what Congress had authority to delegate and what the NIRA required regarding Congressional delegation. The two big examples of "proper" Congressional delegation known to all in 1935 would have been the setting up of the Interstate Commerce Commission in 1887 and the Federal Trade Commission in 1914. In the former, for example,
"Congress has itself provided a code of laws regulating the activities of the common carriers subject to the act, in order to assure the performance of their services upon just and reasonable terms, with adequate facilities and without unjust discrimination. Congress from time to time has elaborated its requirements, as needs have been disclosed. To facilitate the application of the standards prescribed by the act, Congress has provided an expert body. That administrative agency, in dealing with particular cases, is required to act upon notice and hearing, and its orders must be supported by findings of fact which in turn are sustained by evidence" (295 US at 539).
This is the approved "model" of Congressional delegation. Congress passes a statute which contains a code of laws regulating an industry and then sets up an administrative tribunal/agency, which develops a significant level of expertise, to implement Congressional intent and language by adjudicating cases that come before it. That is, Congress passes laws that establish standards that govern an area of industry or business and then sets up a watchdog agency to make sure that Congress' wishes are observed.
But what happened in Schechter? Congress delegated the power to set up the agency and the standards to two sources: the trade groups and the President. As such it unconstitutionally violated its constitutional mandate to enact the law of the land.
Interstate Commerce
The Court could have stopped right there, but decided also to deal with the issue of whether the selling of the slaughtered chickens by Schechter to retail dealers constituted interstate commerce. The Court concluded that it didn't. Certainly the chickens came into Brooklyn from out of state (or 96% of them did). Certainly there were interestate commerce aspects regarding delivery of chickens. But what was at issue here, the Court determined, is what happened to the chickens after they had "become commingled with the mass of property within the state" and "held solely for local disposition and use" (295 US at 543). Thus, the Court reiterated its long-established reasoning that once movement has stopped and the product comes to rest, interstate commerce is no longer implicated. Nor is it "affected" according to the case law. In order to determine if the selling of slaughtered chickens "affects" interstate commerce, the Court applied its "indirect v. direct" test, which went back to the 19th century. Only the most indirect connection with interstate commerce was here manifest. Thus, on both grounds, the Schechter convictions must be reversed. Congress had no authority to promulgate the NIRA and Schechter's selling of chickens was not interstate commerce.
Conclusion
Most scholars studying the issue have concluded that the codes of fair regulations were already provoking more trouble than they were worth by the time Schechter was handed down in 1935. Yet, no Administration likes to lose, even when it is a 9-0 loss. The defeat rankled New Dealers, and they would look for an opportunity to "get back at" the Court.
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