SCHECHTER POULTRY CORP. v. UNITED STATES 295 U.S. 495 (1935)

After the decision in this case, striking down the national industrial recovery act, a conservative gave thanks that the Constitution still stood, while a liberal wondered whether it stood still. The Supreme Court's "horse and buggy" interpretation, as President franklin d. roosevelt called it, imperiled the power of the United States to control any part of the economy that the Court regarded as subject to the exclusive control of the states. Chief Justice charles evans hughes, for the Court, first held the statute void because it improperly delegated legislative powers. Private business groups might frame codes governing their industries as long as NRA officials approved and the president promulgated them. Hughes said the president's discretion was "unfettered," and even Justice benjamin n. cardozo, who had dissented in panama refining co. v. ryan (1935), separately concurred and spoke of "delegation running riot." Improper delegation [of power] could have been rectified by new legislation, but the Court also held the act unauthorized by the commerce clause, leaving the impression that labor matters and trade practices were beyond the scope of congressional power unless in interstate commerce or directly affecting it.

The government argued that although Schechter sold only in the local market, its business was in the stream of commerce. Ninety-six percent of the poultry sold in New York City came from out of state. Hughes rejected that argument by ruling that the flow of interstate commerce had ceased, because the poultry had come to a permanent rest in the city: it was sold locally and did not again leave the state. The government also invoked the shreveport doctrine, arguing that even if the commerce here were local, it had so close and substantial a relationship to interstate commerce that its federal regulation was necessary to protect interstate commerce. Schechter's preferential trade practices, low wages, and long hours, in violation of the poultry code, enabled it to undersell competitors, diverting the interstate flow of poultry to its own market, injuring interstate competitors, and triggering a cycle of wage and price cutting that threatened to extend beyond the confines of the local market. This entire line of reasoning, Hughes said, proved too much. It laid the basis for national regulation of the entire economy, overriding state authority. It also ignored the fundamental distinction between direct and indirect effects upon interstate commerce. What that distinction was Hughes did not explain, but he asserted that Schechter's violations of the code only indirectly affected interstate commerce and therefore stood beyond national reach. Even Cardozo, joined by Justice harlan fiske stone, declared that "to find immediacy or directness here is to find it almost everywhere."

Schechter temporarily ended national regulation of industry and allowed Roosevelt to blame the Court, even though the NRA's code programs were cumbersome, unpopular, and scheduled for political extinction. The Court's views of the commerce clause made no substitute constitutionally feasible.

Leonard W. Levy
(1986)