Schechter Poultry Corp. v. United States

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