Overruled (9 page)

It was a glowing salute to one of Progressivism's guiding lights. But Holmes would receive a far greater homage over the coming decade as his long campaign on behalf of judicial restraint and majority rule came to be championed by one of the most powerful figures in American history. Franklin Delano Roosevelt entered political life in the shadow of his famous fifth cousin, Theodore, whom he consciously emulated at every step of his career. Like the Rough Rider before him, FDR served as governor of New York and assistant secretary of the Navy, all before finally settling in at the White House, where he adopted Theodore's muscular and nationalistic brand of Progressivism as his own. When it came to his relationship with the courts, however, FDR would finally break the mold, exhibiting an even greater hostility toward the judiciary than his famously pugnacious cousin ever did.

“Bold, Persistent Experimentation”

Franklin Roosevelt had good reason to be wary of the Supreme Court as the New Deal got rolling in 1933. For one thing, not only was
Lochner
still on the books, it had received an unexpected boost in the 1923 case of
Adkins v. Children's Hospital,
in which a majority of the justices struck down a minimum wage law for women from the District of Columbia on the grounds that it violated the right to liberty of contract secured under the Due Process Clause of the Fifth Amendment. (Because D.C. is a federal enclave, the Due Process Clause of the Fourteenth Amendment,
which limits state action, did not apply. The Fifth Amendment's due process limits on federal power, however, did.) “The right to contract about one's affairs is a part of the liberty of the individual protected by this clause,” observed the majority opinion of Justice George Sutherland. That fact “is settled by the decisions of this Court and is no longer open to question.”
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A former Republican senator from Utah, Sutherland was a longtime champion of women's rights
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who had introduced the legislation in the Senate (originally drafted by Susan B. Anthony) that would become the Nineteenth Amendment, which established female suffrage. “In view of the great—not to say revolutionary—changes that have taken place,” Sutherland argued in
Adkins,
referring to that amendment, “we cannot accept the doctrine that women of mature age . . . may be subjected to restrictions upon their liberty of contract which could not lawfully be imposed in the case of men under similar circumstances.”
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Then, in 1932, the Court delivered another significant blow against government regulation. At issue in
New State Ice Co. v. Liebmann
was an Oklahoma statute from 1925 granting a handful of companies the exclusive authority to manufacture, sell, and distribute ice. Under the terms of the law, anyone who wanted to enter the ice business had to first justify their plans to the government by providing “competent testimony and proof showing the necessity for the manufacture, sale or distribution of ice”
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at all proposed locations. In other words, upstart ice vendors faced the unenviable and perhaps impossible task of securing the state's permission to compete against a state-sanctioned ice monopoly.

Oliver Wendell Holmes had retired from the Supreme Court by that point, but Progressive Justice Louis Brandeis, an appointee of President Woodrow Wilson, was still around, and as he saw it, the Court should have let the Oklahoma legislature handle its own internal affairs. “It is one of the happy incidents of the federal system,” Brandeis wrote in dissent, “that a single courageous State may, if its
citizens choose, serve as a laboratory, and try novel social and economic experiments without risk to the rest of the country.”
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Writing for the majority, Justice Sutherland offered a direct rebuttal to Brandeis's dissent. “In our constitutional system,” Sutherland shot back, “there are certain essentials of liberty with which the state is not entitled to dispense in the interests of experiments.”

In fact, Sutherland observed, just one year earlier, in the case of
Near v. Minnesota,
the Court had nullified (with Brandeis's full support) that state's defamation law as a violation of the First Amendment. “In [
Near
] the theory of experimentation in censorship was not permitted to interfere with the fundamental doctrine of the freedom of the press,” Sutherland pointed out. “The opportunity to apply one's labor and skill in an ordinary occupation with proper regard for all reasonable regulations is no less entitled to protection.”
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For FDR, who was fond of justifying his New Deal policies as a response to the public's demands for “bold, persistent experimentation,”
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Sutherland's opinion in
New State Ice Co.
stood as a troubling omen indeed. But then the Supreme Court threw a curveball in 1934 by charting a very different course in yet another test of state regulatory power. The case of
Nebbia v. New York
arose from a 1933 law creating a Milk Control Board to oversee the state's dairy industry. In order to eliminate what it described as the evils of price-cutting, that board set the minimum price of milk throughout the state at nine cents a quart. In Rochester, a grocer named Leo Nebbia ran afoul of the law by selling two quarts of milk and a five-cent loaf of bread for the combined low price of 18 cents. When his case finally reached the U.S. Supreme Court, a five-to-four majority voted against him.

“A state is free to adopt whatever economic policy may reasonably be deemed to promote public welfare, and to enforce that policy by legislation adapted to its purpose,”
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declared the majority opinion of Justice Owen Roberts. Pointing to the Court's 1877 opinion in
Munn
v. Illinois,
which upheld a law setting the storage rates for grain elevators (over the dissent of Justice Stephen Field) on the grounds that the business was “affected with a public interest,”
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Roberts argued that the state of New York had a similar public interest in keeping a tight grip on its dairy industry and the essential foodstuffs it produced. Furthermore, Roberts maintained, so long as “the laws passed are seen to have a reasonable relation to a proper legislative purpose,” the Court should defer to the legislature and assume that “the requirements of due process are satisfied.”
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With the New Deal about to enter its third year, and with several high-profile challenges to federal regulation working their way through the legal system, the question now troubling FDR was whether the Supreme Court would treat his regulatory experiments with the judicial deference of
Nebbia
or with the strict judicial scrutiny of
New State Ice Co.
He got his answer in the spring of 1935. Unfortunately for Roosevelt, it was not the one he was hoping for.

Another
Slaughter-House
Case

When Franklin Roosevelt delivered his first inaugural address on March 4, 1933, he promised to counteract the suffering caused by the Great Depression while also bringing runaway capitalism to heel. “This Nation asks for action, and action now,”
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Roosevelt declared. The centerpiece of his action-packed agenda would be the National Industrial Recovery Act (NIRA) of 1933. Hailed by FDR as “the most important and far-reaching legislation ever enacted by the American Congress,”
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the NIRA represented nothing less than an attempt to centrally plan the bulk of the U.S. economy, relying on the joint cooperation of big business, organized labor, and the federal government to manage economic affairs from top to bottom. The result was more than 500 “codes of fair competition,” with an additional 10,000 administrative orders to give them extra
force. Those codes sought to control everything from wages to prices to the amount of products that could be legally produced or sold. In some cases, whole trades or industries were required to limit their output in order to collectively raise the price of their offerings—in effect, a government-sanctioned cartel. In other instances, the codes reached down to the smallest aspects of local commerce. In Jersey City, New Jersey, for instance, a Hungarian immigrant dry cleaner named Jacob Maged was thrown in jail for three months because he pressed a suit for 35 cents rather than charging the 40-cent minimum set by the New Deal codes.

Meanwhile, in nearby Brooklyn, New York, a small kosher slaughterhouse run by a group of brothers by the name of Schechter ran into their own problems with federal authorities. Among other requirements, the NIRA-promulgated “Code of Fair Competition for the Live Poultry Industry of the Metropolitan Area in and about the City of New York” imposed a strict new rule known as “straight killing.” In essence, it forbade slaughterhouse operators from allowing their customers to pick out their own live animals and have them slaughtered while they waited. In addition to facing charges of “destructive price-cutting,” the Schechter brothers stood accused of allowing “selections of individual chickens taken from particular coops and half-coops.”
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They had put low prices and customer choice before the edicts of the New Deal.

Their case presented two major constitutional issues. First, the Schechters and their lawyers argued that the NIRA represented an illegal delegation of lawmaking power from the legislative to the executive branch. Under the Constitution, Congress makes the laws and the president enforces them. But with the frequent use of executive orders as part of the NIRA, it seemed as if the president was now acting as a lawmaking power unto himself.

Second, and arguably most important for the future of the New Deal, the Schechters questioned whether federal lawmakers had the
authority to enact the NIRA in the first place. As justification for the 1933 law, Congress had cited its authority to regulate interstate commerce under the constitutional provision known as the Commerce Clause. According to President Roosevelt and the New Dealers on Capitol Hill, the Great Depression was a national problem that required a national solution. In practice, that meant Congress sometimes needed to manage purely local activities in order to control the larger national marketplace. The Supreme Court would consider both questions when it heard arguments in the case of
Schechter Poultry Corp. v. United States
in May 1935.

“This Business of Centralization”

According to Article One, Section Eight of the U.S. Constitution, Congress possesses the authority “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” According to the Schechter brothers, the federal government overstepped this limited grant of power by trying to regulate the local economic activity occurring inside their Brooklyn slaughterhouse.

To the horror of FDR and his allies, that position ruled the day when the Supreme Court finally delivered its eagerly anticipated decision in the
Schechter
case on the morning of May 27, 1935, soon to be dubbed “Black Monday” by despondent New Deal supporters.

The Supreme Court handed down a total of three opinions that Monday morning, each one unanimous, and each one against the New Deal. First, in an opinion by Justice Louis Brandeis, the Court invalidated
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the 1934 Frazier-Lemke Act, which had modified federal bankruptcy law in order to make it easier for farmers to buy back their farms after foreclosure. Second, in
Humphrey's Executor v. United States,
the Court held that President Roosevelt had exceeded the scope of his authority by firing (for political reasons) a member of the Federal
Trade Commission without senatorial approval. The FTC “cannot in any proper sense be characterized as an arm or an eye of the executive,”
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the ruling held.

But the main event was
Schechter,
and it turned out to be the biggest and most resounding defeat of them all. The National Industrial Recovery Act must be struck down in its entirety, declared the unanimous opinion of Chief Justice Charles Evans Hughes, otherwise “there would be virtually no limit to the federal power, and, for all practical purposes, we should have a completely centralized government.”
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For starters, the act rested on an illegitimate delegation of lawmaking power to the executive. Furthermore, because the slaughter and sale of kosher chickens in Brooklyn had, at best, an entirely indirect impact on interstate commerce, the Commerce Clause offered no constitutional basis for any federal regulation of such activity. “If the commerce clause were construed to reach all enterprise and transactions which could be said to have an indirect effect upon interstate commerce,” Hughes wrote, “the federal authority would embrace practically all the activities of the people, and the authority of the State over its domestic concerns would exist only by sufferance of the federal government.”
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In what many observers took to be a direct rebuke to the president himself, Hughes added, “extraordinary conditions do not create or enlarge constitutional power.”
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When he learned the news, Roosevelt could barely contain his disbelief. “Where was Cardozo? Where was Stone?” he asked his advisers, naming two of the Court's left-leaning members. “What about old Isaiah?”
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he demanded, employing the nickname of Justice Louis Brandeis. All three of those liberal justices had voted against him.

No president likes to lose at the Supreme Court, but Roosevelt seemed to have been uncharacteristically naive about his prospects when it came to the fate of the National Industrial Recovery Act. For one thing, the law had always faced strong criticism from the
Progressive left. The muckraking journalist John T. Flynn, for instance, who had written an economics column for
The New Republic
and authored books with titles like
Trusts Gone Wrong!,
frequently characterized the NIRA as an example of the government climbing into bed with big business. “Curiously,” Flynn would write, “every American liberal who had fought monopoly, who had demanded the enforcement of the anti-trust laws, who had denied the right of organized business groups, combinations and trade associations to rule our economic life, was branded as a Tory and a reactionary [by the New Dealers] if he continued to believe these things.”
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