Schechter Poultry Corp. v. United States

295 U.S. 495 (1935), argued 2–3 May 1935, decided 27 May 1935 by vote of 9 to 0; Chief Justice Hughes for the Court. The National Industrial Recovery Act (NIRA), adopted by Congress on 16 June 1933, was the Roosevelt administration's first and major instrument for dealing with the Great Depression. Intended to curb unemployment and stimulate business recovery, the statute was wide ranging. But its principal reliance was upon codes of fair competition, which all industry groups were directed to draw up. Within two years more than 750 NIRA codes had been adopted, covering some twenty‐three million people. The act declared a national emergency and justified congressional action under the Commerce and General Welfare Clauses of the Constitution.

The codes had some positive effects in raising wages, banning unfair practices, and encouraging business morale. But they were hastily drawn, favored big businesses, and encouraged cartels. The drafting of the codes was done by industry groups, and the role of the president was simply to sign them.

The Department of Justice had recognized from the beginning that the regulatory program's constitutionality might well be difficult to establish before the Supreme Court and made a considerable effort to find an appropriate case to take up to the Court for review. These efforts failed, however, and the commercial activity involved in Schechter, considering the issues at stake, was absurdly minor. Certain Brooklyn slaughterhouse operators had been found guilty of violating the wage and hour provisions of their industry's code and, among other offenses, selling an “unfit chicken.” While the poultry was brought in from outside the state, the Schechters were only local operators selling in their immediate area.

The Supreme Court was unanimous in rejecting the government's case for the program. First, Chief Justice Charles Evans Hughes disposed of the contention that the legislation was justified by the national economic emergency. Although the Court had recently accepted the claim that the agricultural emergency had justified mortgage relief for Minnesota farmers in Home Building & Loan Assn. v. Blaisdell (1934), Hughes now held that “extraordinary conditions do not create or enlarge constitutional power” (p. 398).

Hughes's most telling argument, however, was that the statute had unconstitutionally delegated legislative power to the president. Only a few months earlier, in Panama Refining Co. v. Ryan (1935), the Court had declared unconstitutional another section of the NIRA that authorized the president to ban shipment in interstate commerce of oil produced in excess of state quotas. That decision was by vote of 8 to 1; Justice Benjamin N. *Cardozo, dissenting, contended that the law was justified by the economic emergency. But here the statute had given industry groups, with the cooperation of the president, authority to draft regulations covering the entire economic life of the country. “This,” said Cardozo, “is delegation run riot” (p. 553).

Hughes's third count against the statute was that the poultry code involved regulation of local transactions, not interstate commerce properly subject to congressional control. The Court had agreed in earlier cases that local commerce could be regulated by Congress if it had a “direct” effect upon interstate commerce. Though the distinction between “direct” and “indirect” effects had always been difficult to draw. Hughes believed that the difference was “clear in principle” and that the effects here were clearly “indirect.” Cardozo thought that the distinction was less clear but agreed that the connection of Schechter's business with interstate commerce was remote. If a local poultry dealer could be regarded as engaged in interstate commerce, then all limitations on congressional control would disappear.

By 1988 the Schechter decision had been cited in more than seventy Supreme Court cases, nearly always along with Panama Refining on the now discredited delegation issue. As Justice Byron R. White noted in Immigration and Naturalization Service v. Chadha (1983), “restrictions on the scope of the power that could be delegated [have] diminished and all but disappeared” (p. 985). The decision has retained more relevance for its interpretation of the commerce power.

President Franklin D. Roosevelt attacked the Court after the Schechter decision for its “horse and buggy” interpretation of the Constitution, but in fact the National Recovery Administration (NRA) program was collapsing, and the Supreme Court's unanimous ruling rescued the administration from an embarrassing failure. However, the lessons of the NRA were of value in the drafting of later New Deal measures such as the National Labor Relations Act and the Fair Labor Standards Act.

See also Administrative State; Capitalism.

— C. Herman Pritchett

• 295 U.S. 495 (1935)
• Vote: 9–0
• For the Court: Hughes

During the early 1930s President Franklin D. Roosevelt fought the Great Depression by proposing many economic recovery programs. The centerpiece of his efforts was the National Industrial Recovery Act (NIRA) of 1933, managed by the National Recovery Administration (NRA).

Under that law, Congress granted the President authority to approve codes of fair competition for different industries. Drawn up by trade and industry groups themselves, each of these codes included standards of minimum wages and maximum hours of work. Presidential approval of the code for an industry gave that code the force of law.

By 1935 many industries had started to ignore the NIRA. The government decided to bring a test case before the Supreme Court in the hope that a ruling in favor of NIRA codes would encourage industries to accept the codes.

A case involving four brothers who ran a poultry business became a key test of Roosevelt's program. The Schechters bought live poultry outside New York State and sold it in New York City. The government convicted the brothers of violating several provisions of the NIRA live poultry code in order to keep their prices below those of competitors. Prosecutors also charged them with selling thousands of pounds of diseased chickens to a local butcher. The Schechters appealed to the Supreme Court. The press called the suit the “sick chicken case.”

The Issue

The case involved three questions: Did the economic crisis facing the nation justify resorting to the NIRA? Did the Constitution allow Congress to delegate so much power to the President? And did the law come under Congress's power to regulate interstate commerce?

Opinion of the Court

The NIRA lost on all counts. The Supreme Court ruled that the economic problems of the nation did not justify the NIRA. Chief Justice Charles Evans Hughes wrote that “extraordinary conditions do not create or enlarge constitutional power.”

Second, the Court said that under the Constitution only Congress has the power to make laws. If Congress wanted to delegate any of this power to the President, it had to set clear standards to guide the executive branch in making detailed applications of the general law. The NIRA was unconstitutional because, in effect, it gave trade and industry groups unregulated power to create any laws they wanted.

Finally, the Court recognized that although the Schechters bought their poultry in many states, they processed and sold it only in New York. Thus, the Schechters' operation was a local concern not directly affecting interstate commerce, and so it was beyond federal control.

Significance

The decision at first appeared to devastate President Roosevelt's New Deal economic recovery program. But by 1937 the Supreme Court began upholding new laws passed to fulfill New Deal objectives. The National Labor Relations Act of 1935, for example, was upheld by the Court in National Labor Relations Board v. Jones & Laughlin Steel Corp. (1937).

The Schechter case established the principle that in domestic affairs Congress may not delegate broad legislative powers to the President without also outlining clear standards to guide the President in employing these powers. This principle stands today.

Sources

• Frank Freidel, “The Sick Chicken Case,” in Quarrels That Have Shaped the Constitution, edited by John A. Garraty (New York: Harper & Row, 1987)

A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 55 S. Ct. 837, 79 L. Ed. 1570 (1935), is one of the most famous cases from the Great Depression era. The case tested the legality of certain methods used by Congress and President Franklin D. Roosevelt to combat the devastating economic effects of the Depression. After the U.S. Supreme Court declared the methods unconstitutional, Roosevelt publicly scolded the Court and later used the decision as one justification for a controversial plan to stock the Court with justices more receptive of Roosevelt's programs.

At the heart of the Schechter case was legislation passed by Congress in 1933. The National Industrial Recovery Act (NIRA) (48 Stat. 195) was passed in response to the unemployment and poverty that swept the nation in the early 1930s and provided for the establishment of local codes for fair competition in industry. The codes were written by private trade and industrial groups. If the president approved the codes, they became law. Businesses were required to display a Blue Eagle insignia from the National Recovery Administration to signify their compliance with the codes. Typical local codes set minimum wages and maximum hours for workers and gave workers the right to organize into unions and engage in collective bargaining with management. Codes also prescribed fair trade practices, and many codes set minimum prices for the sale of goods.

The Schechter Poultry Corporation, owned and operated by Joseph, Martin, Alex, and Aaron Schechter, was in the business of selling chickens at wholesale. The corporation purchased some of the poultry from outside the state of New York. It bought the poultry at markets and railroad terminals in New York City and sold the poultry to retailers in the city and surrounding environs. In April 1934 President Roosevelt approved the code of fair competition for the live poultry industry of the New York City metropolitan area (Live Poultry Code). In July 1934 the Schechters were arrested and indicted on sixty counts of violating the Live Poultry Code. The indictment included charges that Schechter Poultry had failed to observe the minimum wage and maximum hour provisions applicable to workers and that it had violated a provision of the Live Poultry Code prohibiting the sale of unfit chickens. The case became popularly known as the Sick Chicken case.

The Schechters pleaded not guilty to the charges. At trial, the Schechters were convicted on eighteen counts of violating the Live Poultry Code and two counts of conspiring to violate the Live Poultry Code. An appeals court affirmed their convictions, but the U.S. Supreme Court agreed to hear their appeal.

The Schechters presented several arguments challenging the Live Poultry Code. According to the Schechters, the code system of the NIRA was an unconstitutional abdication of the legislative power vested in Congress by Article I, Section 1, of the U.S. Constitution. The Schechters argued further that their intrastate wholesale business was not subject to congressional authority under the Commerce Clause of Article I, Section 8, Clause 3, of the Constitution and that the procedures for enforcing the NIRA codes violated the Due Process Clause of the Fifth Amendment.

In support of the Live Poultry Code, the federal government argued that the code was necessary for the good of the nation. According to the government, the Live Poultry Code ensured the free flow of chickens in interstate commerce. This kept chicken prices low and helped ease, however slightly, the financial burden on the general public. The government also argued that it was within the power of Congress to enact the NIRA regulatory scheme that gave rise to the Live Poultry Code because codes such as the Live Poultry Code applied only to businesses engaged in interstate commerce.

The Court unanimously disagreed with the federal government. Under the Commerce Clause, Congress had the power to regulate commerce between the states, not intrastate commerce. The power to enact legislation on intrastate commerce was reserved to the states under the Tenth Amendment to the Constitution. According to the Court, the business conducted by the Schechters was decidedly intrastate. Their business was licensed in New York, they bought their poultry in New York, and they sold it to retailers in New York. Because it was intended to reach intrastate businesses like Schechter Poultry, the Live Poultry Code regulated intrastate commerce, and it was therefore an unconstitutional exercise of congressional power. The Court reversed the Schechters' convictions and declared the Live Poultry Code unconstitutional.

The Schechter decision was decided around the same time as other, similar Supreme Court decisions striking down federal attempts to address the economic crises of the Depression. However, the Schechter decision was a particularly troublesome setback for the Roosevelt administration. The NIRA was the centerpiece of Roosevelt's plan to stabilize the national economy (the New Deal), and the government's loss in the Sick Chicken case marked the end of the NIRA and its fair trade codes. Less than one week after the Schechter decision was announced, Roosevelt publicly condemned the Court. Roosevelt declared that the Court's "horse-and-buggy definition of interstate commerce" was an obstacle to national health.

Roosevelt's remarks were controversial because they appeared to cross the line that separated the powers of the executive branch from those of the judicial branch. Nevertheless, they sparked a national debate on the definition of interstate commerce, the role of the U.S. Supreme Court, and the limits of federal power. Several citizens and federal legislators began to propose laws and constitutional amendments in an effort to change the makeup of the Supreme Court. At first, Roosevelt refused to back any of the plans, preferring instead to wait and see if the Court would reconsider its stand and reverse the Schechter holding. After the Supreme Court delivered another series of opinions in 1936 that nullified New Deal legislation, Roosevelt began to push for legislation that would modify the makeup of the Court. In 1937 the Supreme Court began to issue decisions upholding New Deal legislation. Congress never enacted Roosevelt's so-called court-packing plan.

See: Federalism.

Schechter Poultry Corp. v. United States
Supreme Court of the United States
Argued May 2 and 3, 1935 Decided May 27, 1935
Full case name: A. L. A. Schechter Poultry Corporation, et al. v. United States Citations: 295 U.S. 495; 55 S. Ct. 837; 79 L. Ed. 1570; 1935 U.S. LEXIS 1088; 1935 Trade Cas. (CCH) P55,072; 2 Ohio Op. 493; 97 A.L.R. 947 Prior history: Defendants convicted, 8 F.Supp. 136 (E.D.N.Y. 1934); affirmed in part, reversed in part, 76 F.2d 617 (2d Cir. 1935); cert. granted, 295 U.S. 723 (1935)
Holding
Section 3 of the National Industrial Recovery Act was an unconstitutional delegation of legislative power to the Executive, and was not a valid exercise of congressional Commerce Clause power. Second Circuit Court of Appeals affirmed in part, reversed in part.
Court membership
Chief Justice: Charles Evans Hughes Associate Justices: Willis Van Devanter, James Clark McReynolds, Louis Brandeis, George Sutherland, Pierce Butler, Harlan Fiske Stone, Owen Josephus Roberts, Benjamin N. Cardozo
Case opinions
Majority by: Hughes Joined by: Van Devanter, McReynolds, Brandeis, Sutherland, Butler, Roberts Concurrence by: Cardozo Joined by: Stone
Laws applied
U.S. Const. art. I; U.S. Const. amend. X; 15 U.S.C. § 703 (1933) (National Industrial Recovery Act § 3)

A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935) was a decision by the Supreme Court of the United States that invalidated regulations of the poultry industry promulgated under the authority of the National Industrial Recovery Act of 1933. These included price and wage fixing, as well as requirements regarding a whole shipment of chickens, including unhealthy ones, which has led to the case becoming known as "the sick chicken case." Also encompassed in the decision were NIRA provisions regarding maximum work hours and a right of unions to organize. The ruling was one of a series which overturned elements of President Franklin D. Roosevelt's New Deal legislation between January 1935 and January 1936, until the Court's intolerance of economic regulations shifted with West Coast Hotel Co. v. Parrish, 300 U.S. 379 (1937). The National Industrial Recovery Act allowed local codes for fair trade to be written by private trade and industrial groups. The President could choose to give some codes the force of law. The Supreme Court's opposition to an active government role caused Roosevelt to attempt to pack the Court with judges that were in favor of the New Deal.

There were originally sixty charges against Schechter Poultry, which were reduced to eighteen charges plus charges of conspiracy by the time the case was heard by the U. S. Supreme Court.

Among the eighteen charges against Schechter Poultry were "the sale to a butcher of an unfit chicken" and the sale of two uninspected chickens.

Chief Justice Hughes wrote for a unanimous Court in invalidating the industrial "codes of fair competition" which the NIRA enabled the President to issue. The Court held that the codes violated the constitutional separation of powers as an impermissible delegation of legislative power to the executive branch. The Court also held that the NIRA provisions were in excess of congressional power under the Commerce Clause.

The Court distinguished between direct effects on interstate commerce, which Congress could lawfully regulate, and indirect, which were purely matters of state law. Though the raising and sale of poultry was an interstate industry, the Court found that the "stream of interstate commerce" had stopped in this case--Schechter's slaughterhouses bought chickens only from intrastate wholesalers and sold to intrastate buyers. Any interstate effect of Schechter was indirect, and therefore beyond federal reach.

Though many considered the NIRA a "dead statute" at this point in the New Deal scheme, the Court used its invalidation as an opportunity to impose limits on congressional power, for fear that it could otherwise reach virtually anything that could be said to "affect" interstate commerce and intrude on many areas of legitimate state power.

Justice Cardozo's concurring opinion clarified that a spectrum approach to direct and indirect effects is preferable to a strict dichotomy. Cardozo felt that in this case, Schechter was simply too small a player to be relevant to interstate commerce.

This narrow reading of the Commerce Clause was later disavowed by the Court, which began to read congressional power more expansively in this area. However, more recent cases such as United States v. Lopez, 514 U.S. 549 (1995) perhaps signal a growing inclination in the Court to once again impose limits on its scope.

External links

• Full text of the decision courtesy of Findlaw.com

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